UCB's (UCBJF) CEO Roch Doliveux on Q2 2014 Results - Earnings Call Transcript

Jul.30.14 | About: UCB S.A. (UCBJF)

UCB S.A. (OTCPK:UCBJF) Q2 2014 Results Earnings Conference Call July 30, 2014 8:00 AM ET

Executives

Roch Doliveux - CEO

Jean-Christophe Tellier - CEO-Elect

Detlef Thielgen - EVP and CFO

Analysts

Richard Park - Deutsche Bank

Peter Welford - Jefferies & Company

Unidentified Corporate Participant

Hello, good morning, good afternoon and good evening. This is UCB with its Half Year Results Call. You are very welcome to listen to the introduction to the half year results by Dr. Doliveux, our CEO; Jean-Christophe Tellier, our CEO-Elect, Detlef Thielgen, CFO and Iris Low-Friedrich, the Chief Medical Officer.

I’m happy to hand over to Roch now. Thank you very much.

Roch Doliveux

Thank you. Good afternoon, good morning to all of you and welcome to UCH first-half year 2014 results call. So if I summarize this first half of 2014 clearly UCB’s performance was solid to say the least and we are also pleased about our pipeline delivery, both early and late stage. So I’m just pausing because the slides don't follow the technology. Here we are. So the menu of this afternoon, I am sure you've taken the time of the pause to read all the Safe Harbor and disclaimer on the forward-looking statement and the menu of this call is after one more slide that I’ll share with you. I'll hand over to Jean-Christophe, UCB CEO-Elect and who will present in more details the results and the achievement of the first half year and just to remind you that I'll hand over the helm to Jean-Christophe on January 1, 2015 and then Detlef we'll continue with more deep dive on the financial performance, R&D will be updated by Iris and then JC will conclude before we take your questions.

And our half year performance clearly confirms even more, UCB's growth prospects. As you know we are focused in delivering superior and sustainable value to patients and in turn that delivers superior and sustainable value to shareholders. And the way we do that is driving five priorities, growing CDN, fast forwarding emerging market and Japan, advancing our late stage pipeline and bring it closer to patients and bringing breakthrough medicines to the clinic while we increase our profitability to reach peer level.

I'll let JC now go through these priorities in more details.

Jean-Christophe Tellier

Thank you, Roch. Good morning and good afternoon. So you have here a little bit more detail around our five priorities and yes it has been a good first half of the year with our growth path across our five priorities moving on.

Our core products seems to have the impact neutral for first as realized solid growth of 25% in all geographies with in all the cases a very good and strong end market demand. We have also entered into a strategic collaborations in dermatology with Dermira and this will expand access of CGR to a new patient population suffering from psoriasis.

On the second pillar of our growth strategy and priority you see here some decline in the emerging market. The reason behind is allergy. Without allergy the growth would have been [inaudible], the season and some environments in China in particular explain that. On the other hand Japan is continuing to perform very well. We have here 17% growth at constant rate with a very dynamic growth in particularly for Cimzia and Neupr with more than double the sales versus last year. But also for Keppra it was growing at 66%.

Roch mentioned it and Iris will comment on that, our late stage pipeline is now getting closer to the patient. We have as you may have remember last week as expected, published the results of Phase III of brivaracetam and we are really pleased with the results.

At the same time the early stage pipeline has progressed according to plan with two new medical moving to Phase II and one to Phase I. And then last but not least you have seen in the results that our underlying profitability grew significantly despite the ForEx exchange effect and this is the effects and the outcome of the constant and rigorous resource allocations to ensure more impacts of our values investment.

Now if we are moving in a little bit more detail in our key four products, Cimzia, Vimpat and Neupr our main drivers and Keppra let's see a little bit more in detail what are this results for each of them. Cimzia first here, you see Cimzia with EUR 353 million for the first half. Cimzia is now our first product for UCB and with 30% of growth it's also our first product in terms of growth. U.S., Europe and Japan with our partner, Astellas are the most contributors of this growth which is also fueled by new indication that you see in the bottom of the slide both in U.S. and in Europe.

This acceleration of the growth is mainly also due to a very strong end demand market performance. You see on the right hand side of this slide the growth in terms of share it's TRX share of the U.S. and patient share for Europe, so not really comparable and on the left hand side you see the growth compared to the market. So better and deeper penetration in their class for Cimzia in first half.

Vimpat our second growth driver, Vimpat is for patient suffering from partial-onset seizure continued on its growth trajectory in the first six months of 2014 with a growth at 17%. Here you see that European growth has been very solid and 25% while the U.S. which represents the majority of sales grew 17% due to a different mix of channels during first half of the year. But the underlying end market performance here also is very positive as you can see here we have a very good regular and very solid trends in TRX growth.

Our last growth driver Neupr is third pillar of the growth for Parkinson’s disease patients and restless legs syndrome continued with growth of 27% in the full year [general] markets. Here the main growth contributors come from the U.S. where the products have been only launched in 2012 and Europe and Japan with Otsuka continued the growth pattern. Neupr also is benefiting from end demand. You see here the very positive trends in Europe in terms of TDX. On TRX in the U.S. the trend is steady with some kind of positive effects but we have had in this market in particular the generics are mainly our competitor there and that's the reason of the less dynamic here.

So all-in-all very solid first half of the year, good growth for all three key products that confirmed our expected peak sales for at least EUR 3.1 billion with a split of Cimzia reaching at least 1.5, Vimpat 1.2 and Neupr 0.4. But the second also good news apart from the growth of our key core products is the performance of the Keppra franchise which still remains very important one with EUR 339 million during the first half of the year despite competition of generics in Europe and in the U.S.

The decline at constant trade as you can see here is only 2% which means less than EUR 10 million with decline in Europe and U.S. compensated almost by the very strong steady and solid performance in Japan where Keppra has been the most successful launched in Japan in the anti-[pyretic] with a gross of 66%. And so we confirm that Keppra will continue be for UCB a sizable franchise going forward.

So from the topline perspective solid growth of our growth drivers, good resistance of Keppra in a nutshell this is how the first half of the year was for us. And you remember that on top of that we had our agreement with Biogen Idec that we continue to strengthen our position in emerging markets while Japan is becoming more and more our third pillar in terms of growth from a geography standpoint.

And with that, I will now handover now to Detlef.

Detlef Thielgen

Thank you very much and hello everybody. If you like I am green on this performance light and this is a good day to have and I am quite pleased about the performance of the company in the first half of the year. Good revenue growth towards EUR 1.757 billion, 10% in constant rate, 6% in actual rates. Here I want to say two things. First of all when you look to the growth let’s also have in mind the first-half of 2013 was not -- and therefore we see an impact here. Second that I would like you to consider is that also in other revenues there have been some payments from AIB and Sanofi and you will see some of these going forward and we will have [inaudible] on that. So all-in-all a very nice growth with some factors to keep in mind.

What’s comes on top of that is that cost management has been good. We have been as you would expect with the progress in our pipeline, invested in R&D 25.4% of revenues, which is very close to our guidance and therefore is what we were expecting. We have been seeing lower SG&A cost in generally especially in marketing and selling and Jean-Christophe said it already and it’s very important to keep in mind we have been doing a lot of effort and you have heard that again and again over the last few years a lot of effort to drive really efficiency and put in the investment where it has the highest impact and trying to use infrastructure and get the investment into productive areas. And this and also the lack of having substantial launches in the first-half of the year that has given us the opportunity to show this good cost development, which brings us to a very nice recurring EBITDA of EUR 391 million, up 29% in extra 40% in constant grade and the net profit of EUR 113 million, up 66% in actual and 100% in constant rate.

The tax rates were 30% was very close to our guidance, so no surprises there and the core earnings are already on good path to come to our guidance as discussed was EUR 1.22. When we look into the net sales I think enough has been said about Cimzia and Vimpat Neupr and Keppra we heard about and you see that with [inaudible] of the weakness of allergy in this half year you see in Metadate the positive developments mainly driven by methylphenidate the [Consortum] generic where we have had a good half year without new competitors coming in and we see overall what you would expect with a mature product portfolio, some declines so no major surprises there too and no major surprises are always making me happy.

Looking into the P&L we just see what I had already described in revenues. You see that other revenues don’t seem to be too much different but the composition is different and if you are more interested at least take a look into our financial statements explanations that are also on the back. But the main issues that we can see is that costs in all categories doing very well except of R&D and here I am happy that we are doing more investment because we see the results and that is what at the end counts.

In terms of recurring EBITs with EUR 274 million, nice number nice increase and please take a look to amortization which has dropped roughly 11% and this is due to the fact that some of the acquired products now are running out of their amortization periods. When we then look into below the line there is not too much to say. You would expect there is some more restructuring expenses especially when you see some efficiencies in the cost lines as we discussed before.

The one thing to point out to remind you on, although I think you will have it mind is the impairment charges here EUR 26 million but behind that is EUR 35 million of tozadenant related impairment when we handed back the product to Biotie.

In terms of net financial expenses, slightly lower as expected after the conversion of the convertible bond and income taxes, in line with what we are guiding. One thing to point, just for your interest and I tried to make it as easy as possible. We have accounting treatment now both for restated for 2013 and 2014, we have given clear guidance of the differences. For you one number to take in mind for the future is below the net profit what is attributable to UCB shareholders. That is really the number that you should focus on, because all the other ones are consolidated companies that the FX are of temporary nature and it’s good to know that. And for accounting treatment you need to know that but if you are looking to performance and that is what is going also in core EPS that is the line attributable to UCB shareholders.

Which brings me exactly to this and you see here that this is exactly the case in how we achieved the EUR 1.22. Like to point out that there is more shares due to the conversions of the bond. So higher number of the shares and the very nice increase on the core EPS that looks okay.

If we go to our debt maturity this is also a very nice slide. First of all you saw public cash that we hold in the [inaudible] do they do that and with the low interest rates it’s a very relevant question. But then you look into the reimbursements and you see that we will need the cash towards the end of this year to reimburse our debt which then means after the conversions of the convertible that for 2014, 2015 the job is done, 2016 will be taken care of in time. And with that we have a very nice long term debt maturity schedule also with nicely sized billets that we believe can easily be taken care of the operating cash flow in these years.

And therefore we feel good in terms of our situation how to take care of the debt, as we all know that was increase of profitability towards 2017. We expect also to take care of that.

Looking in to net debt, if you want to make it very easy you take the net debt at the end of the year you would use it by the conversion proceeds that we are getting and you put the dividend on top of that and everything else is netting more or less out. So not a lot of substantial improvement but and this is very important to know when we look in to free cash flow generation this first half of the year has been very strong and is I would hope a good indicator for what we see coming in the next few years with increasing profitability.

So brings us all to the end in terms of our outlook, we confirm our outlook. We expect that in the second half of the year due to timing of launches, for example mono-therapy but also for some clinically studies we will see some more operational expenses, still showing a nice growth which should allow us to stay within our guidance for the full year and I think this is now moving then to the interesting parts. Well a lot of this R&D money has been going in the R&D update and I think it will be a nice update to give Iris.

Iris Low-Friedrich

Yeah. Thank you very much, Detlef. And good morning and good afternoon to all of you. We have substantial progress in our pipeline everywhere and so it’s indeed a very happy moment in trying to update you on the progress of UCB’s clinical stage development pipeline.

Of course we had two special highlights. The Phase III results with brivaracetam in partial-onset seizures, and the substantial progress in our early stage pipeline where we will have two efforts in Phase II development and two molecules progressing in Phase I development. What's going on otherwise in the pipeline, I am happy to confirm today that the Phase III program with epratuzumab in systemic lupus erythematosus has been fully recruited and so we can confirm today that results will be available during the first half of 2015. With Romosozumab we are progressing with the program in osteoporosis in post-menopausal women and again I can confirm that the first results will be available in the first half of 2016.

We have so far only talked about osteoporosis in post-menopausal women but as you are aware this is a universal issue and one in five men beyond the age of 55 is at risk of encountering an osteoporosis fracture in his lifetime. So very significant issue also for the male population and so together with our partner Amgen we have decided that we will start another study now in osteoporotic men and try to have results available in time for the submission of a broad osteoporosis claim.

So we are trying to live up to equality. We are not only looking after women, we are also looking after men suffering from osteoporosis. The study has started. It will be a one year trial in round about 230 men with bone mineral density as the primary endpoint,

So good progress and good additions also to the Romosozumab program. And then again as indicated before we have two of our molecules progressing to Phase II in the space of immunology so two highly differentiated efforts which will potentially provide benefit to patients suffering from immune diseases. And then of course you're already aware of our CD40 ligand antibody which is moving towards the finalization of Phase I in the indication systemic lupus erythematosus. We expect results in the second half of this year. And then we have progressed another biological UCB 7665 again for the treatment of immune disorders into Phase I.

So what you see now is really the fruit of all of the efforts of our colleagues in discovery research which are reaching the clinical stage and which provide us ample opportunity to give relief to patients suffering from immunological diseases.

Of course we need to talk today about brivaracetam. Last week we had a very happy moment in time with very solid statistically highly significant and clinically very meaningful results of the last Phase III trial with brivaracetam in partial-onset seizures. And you are all aware that brivaracetam has a very comprehensive development program and it’s quite unique in the space of epilepsy.

We will have a very robust database to be submitted to regulatory authorities more than 3,000 patients have been exposed during Phase II and Phase III development. This adds up to about 6,000 years of patient exposure and we have individual patients who have been treated with brivaracetam for eight years and longer. So in today's regulatory environment such a substantial database gives very valuable information on safety and efficacy and is an asset in itself.

You’ll also remember that we have already a completed Phase III program with brivaracetam. We have talked about this over the years and the completed program gave us one positive study? It gave us a supportive study that was indeed fulfilling in fact positive, namely supporting the existing evidence and we had one study that did not meet its primary endpoint. And as we have laid out to you we did extensive analysis, we learnt our lessons and that's part of our culture. We really want to learn lessons and we implemented them in the now completed study and that has yielded in a very successful Phase III study outcome.

So the focus today is really on the study to the right an [old 1358] which is the largest study ever done in partial onset seizure. We have covered 768 patients in this study with a very broad age range from 16 to 18 years. Treatment duration in the primary study was 12 weeks and of course we have been looking at the efficacy and safety of two doses of brivaracetam, 100 and 200 milligram versus placebo. The patient population recruited in this study was a very severe patient population.

The International League Against Epilepsy has defined patients who tried at least two anti-epilepsy drugs and are still not well controlled as treatment resistant and if we apply this criteria more than 80% of the patients in this study who are treatment resistant. And to give a little bit more color to the severity of the patient population about 50% of patients had to try five and more anti-epileptics before they enrolled into this study, again gives you an impression of how desperate this patient population is and again what we have seen in this severe patient population is clinically very meaningful results, highly statically significant and as such very robust.

I would like to remind you that for these epilepsy development programs we have to operate with different end points. There is the end point of medium percent seizure reduction that’s relevant for your FDA and there’s the end point of responder rate which is the one required by the European Medicines Agency and the study we are discussing today were set up to serve both endpoints and again both statically significantly positive in a very robust way and so we have now the foundation to progress towards submissions in both major regions in the U.S. and in Europe.

So if I can summarize the headline results for brivaracetam, again please in mind it’s a very comprehensive program, one of the largest Phase III’s ever conducted in epilepsy and with a very, very solid foundation in terms efficacy and safety results. Remember please that we had enrolled a very refractory patient population with 50% of patients being resistant to more than five anti-epileptic drugs before as not being by well controlled. We talked about statistically significant and clinically relevant top line results. So we talked about a very robust study and again just to add to the information we have also observed seizure freedom again which tells you about the meaningful improvement in this severe patient population.

On the safety profile of brivaracetam in [inaudible] has always been very benign and this has been confirmed in the recent studies again everything very successful here. And as always we will move to submission to the regulatory authorities as quickly as possible and that’s currently planned for early 2015 and we will disclose the result to the scientific medical community at coming later conferences.

And you all are very familiar with our [inaudible] epilepsy of patients and how they treated and controlled and brivaracetam for sure provides treatment options for those patients who are uncontrolled despite numerous anti-epileptic drugs or for those who need more than one anti-epileptic drug to be controlled. So great promise and of course next step is now reaching out to key regulatory authorities to gain approval.

And then let me share with you my excitement about the progress of our early stage pipeline and it’s a very unique combination of outstanding science. So all the molecules that we are progressing there address very novel, very innovative mechanism of actions and we pair this exciting science with diseases of unmet medical need and we have many patients still suffering and are in need of new therapeutic option and this is what makes you the early stage pipeline so exciting. It’s really great science in combination with the opportunity to address major patient needs.

You are aware of our alliance with Sanofi where we jointly discover and develop small molecules which have identical mechanisms to biologics and that will give us an opportunity of course to provide new opportunities for the treatment of a very wide range of immune mediated diseases, so exciting opportunities. And then let me repeat because it's so nice I have to say it again. We're now in the very happy state where we have two compounds progressing in Phase I, you know the anti [inaudible] antibody in the systemic lupus erythematosus. We now progress also another biologic that's very suitable for the treatment of a variety of immunological diseases to Phase I.

And then we have two efforts that have either moved into Phase II or are about to move into Phase II, one if again a biologic where we have already initial proof-of-concept data and that's now progressing very well in a firm Phase II study and we have a small molecule that completed Phase I and that will start Phase II in early 2015. So I hope you see that we are very well positioned also in the future to bring relief to patients with diseases of the immune system. The theme for us has always been delivery. I am very happy to confirm today that we continue to deliver. And with that I hand back to Jean-Christophe

Jean-Christophe Tellier

Thank you very much, Iris and thank you for sharing this great news. It's always a very important moment as you can imagine for any company when we arrive at the moment where we disclosed the Phase III result and when we discover that what the data has to tell us and we are very pleased with what brivaracetam Phase III results are telling us today and more news to come with better and deeper analysis of this result. But it's - now epilepsy is an area where there is still a very huge medical need and so it's a great news for patients that they know that they maybe able to benefit from a new [placebos] available to them.

So in a nutshell the positive results of brivaracetam as well as the positive advancement on the early stage pipeline associated with solid growth of the first half of the year is -- and improvements of the profitability are the main points of our first half of the year results. That's really a good news for patients because that's will strengthen our commitment, leveraging these different priorities and growth drivers to continue to deliver superior and sustainable value for patients and for shareholders which is our commitment to the patients and to the community. And with that I would like to open to Q&A.

Question-and-Answer Session

Unidentified Corporate Participant

Thank you very much Jean-Christophe. So we're now ready for question-and-answer session.

Operator

Ladies and gentlemen we will now begin our Q&A session. (Operator Instructions). And our first question is from [Pater Fradope]. Please go ahead. Your line is open.

Unidentified Analyst

Hi. It's [Peter] here from Citi. A few questions Iris and a big picture question for JC. Iris on briva, the tone of the press release last week and obviously what you've been saying on the call suggests the data you have in house are a lot stronger than you're expecting. Now given there was no superior efficacy or safety data versus Keppra could you just remind us how you intend to position the product by given the data you're seeing? And then would you just speak a little more to 5857, I think the PI3 Kinase, 7665 and when did [inaudible] you're developing with Sanofi might enter the clinic? And then very lastly for JC, I mean could you make some general comments on the outlook of pricing in the U.S. in markets such as TNF, epilepsy et cetera? Investors increasingly are getting twitchy given the developments they are seeing predominantly at the moment in primary care markets like respiratory and diabetes but I want to get a sense from your perspective whether you're seeing any dark clouds on the horizon in terms of fundamental changes in the pricing structure in the U.S.? Thanks.

Iris Low-Friedrich

Thank you very much, Peter. Let me start to comment on brivaracetam. As you mentioned, we don't have any comparative data with other epileptic drugs and so the study was placebo-controlled and as such we cannot make any comparative statements. And I know that you understand that.

We are very happy with the results. I think I brought that across because what we have seen is really strong efficacy and we are seeing this efficacy in a particularly refractory patient population. So it’s a combination of both effects that we had enrolled really a quite desperate treatment-resistant population and that we have seen very good results. And I think this is as far as we can go at this point in time. Positioning and everything else will evolve and will be shared with you at the right point in time. Right now the focus is really on deeper understanding of the data and getting ready for submission.

On UCB7665 again I can only reiterate a small molecule, I have mentioned PI3K delta inhibition as the mechanism of action. I can only confirm that. And it’s progressing now in Phase I, there is not much more to say about this.

Jean-Christophe Tellier

And if I may build on your last part of the questions about the environment in U.S. in particularly if we see some changes in the pricing policy now and for the future, may be just a couple of points here, Peter. The first one is that it’s true that the current environment in the U.S. is changing and there is more and more either from sales perspective or from a provider’s perspective. There is more focus about the real value that you can deliver and to better connect the price with the value which for us reinforce our commitment for the future and to continue to deliver superior sustainable value for the patients to really concentrate on the differentiation and ability to put on the market solution that are clearly differentiated that we can then provide access for.

In the meantime we are doing everything we can in order to continue to improve our coverage for our products which are all so far very positive. So far no big issues short term, long term it’s data and differentiation that will make the difference.

Iris Low-Friedrich

And Peter, it’s Iris again. I apologize I need to correct myself. We were talking about UCB5857, the new chemical entity that completed Phase I and that’s about to start Phase II. And again you mentioned the PI3K delta mechanism. And the Phase II studies are currently in the planning stage to start in early 2015. And you had also asked about when do we expect the first molecules coming from the collaboration with Sanofi, when do we expect them to reach the clinic. That’s very difficult to predict. These are molecules that are currently in the discovery stage and again I think as we all know very hard to predict when they will reach the clinic because lot of things can change with every new data point that we see.

Unidentified Analyst

Great. Thanks.

Unidentified Corporate Participant

Can we have the next question please? We are very sorry. Apparently there is a network issue delaying the questions. Just give us two seconds to get the fix. We apologize if you wouldn’t mind to put your questions during the chat, so we could take it up until we can fix the line issue. Apologize for the inconvenience.

There is a question from [Juan Kepler] from KBC saying that the strong result for the first half 2014 why don't we increase the guidance for 2014 full year.

Jean-Christophe Tellier

Juan, we all would love to do that but as you know us we'll try to stay realistic and give you a good picture. As I mentioned earlier we expect that due to the timing of some of the costs we will see some additional costs coming in the second half. There is also in terms of methylphenidate the uncertainty of an additional competitor that we take into consideration at this time and that's gives us a good belief that the numbers that we are presenting today and confirming today is a very realistic picture based on the starting point after first half of the year.

Unidentified Corporate Participant

Thank you. Any further question we have backstage. There is one question from [inaudible] from UBS saying that we see a sequential decline in Vimpat revenues and based on consensus expectations for the year he assumes that Vimpat needs to grow 40% second half over first half. Do we think that such a growth would be realistic? Vimpat in his projection should grow 40% second half over first half 2014.

Jean-Christophe Tellier

Well as you've seen, first of all in terms of -- of Vimpat for the second half of the decade which is the guidance that we have for the 1.2 we think that there is nothing in the current trend that justify for us to change that and we are still very confident that we will be able to reach this number.

As you know from a growth standpoints there is different component of growth. The first one is the in demand market and on that trend we are very positive and remain positive and as you have seen it’s a steady growth. There is two other components on Vimpat that we will build on, one is geography. We are entering into Phase III in Asia and we're expecting to launch Vimpat in Japan. That’s also why the growth in the years to come will accelerate and more closer to us now we have the monotherapy in the U.S. and you know that that U.S. is 73% of the overall market so it's an important element here as mono-therapy, as Iris just mentioned it is 50% of the marketplace.

So the long run is there and trend has remained positive, new indications and new geographies will add to Vimpat dynamism, you have relatively softness in the U.S. is the channels mix, that explain the difference between very strong TRX growth and the net sales growth.

Jean-Christophe Tellier

Thank you and he continues with a second question stating that there is a steep decline in selling and marketing which appears to correlate with the decline in Vimpat. Don’t you think this could mean you have cut marketing and selling too strong?

Jean-Christophe Tellier

I'll take that if the correlation would be correct than this would be really something to worry about but I can promise you that it is not. We feel that we are resourcing our core products very, very well but we are also reallocating funds from infrastructure but also from lessor important product, mature products into this and we are not spending anything where we don’t believe that we are making a higher impact and at this moment in time we are spending the money that is needed to drive the good long term performance of Vimpat where we need it. So we don’t see any correlation between that reduction of marketing and selling cost and Vimpat’s development because if that would be case you should see the same with some of the other products and we are not seeing that, so just that you have a good feeling that we already attentive to these trends and would use all opportunity to grow profitably if that is possible because we have very good results. No reason to push forward, if you have something better to investment than we have proven in the last year, I think that we always have reallocated to investment that drives growth instead of preferring always to drive to the bottom-line and that is the case also in this half year.

Unidentified Corporate Participant

And I have another question for you Detlef coming from [Ricardo Lovi] Credit Suisse, what underlying tax rate shall we expect for full year ’14 and ’15? And second, R&D spend was EUR 890 million in ’13 how should we think about it for the next couple of years.

Detlef Thielgen

You know I would reiterate our guidance of in the short run around 25% of R&D and then in the longer-run we’ll have to see how that develops. There should be a slight decrease on a broader absolute basis but that is nothing new. So, I would just reiterate that in terms of 2014-2015 in general we don’t expect any changes of our general statement of the tax rate. As you have seen in the last years’ there is ups and downs which are mainly driven by one time and temporary nature, very difficult to predict and therefore if you want to model correctly I think if you stay in the high 20’s in your model this is the safest bet that we can offer.

Operator

Thank you very much. Apologies for the inconvenience. We are live again. (Operator Instructions). And our next question if we haven’t done that already is from Richard Park, Deutsche Bank. Please go ahead. Your line is open.

Richard Park - Deutsche Bank

Hi, can you hear me okay?

Jean-Christophe Tellier

Yeah, we can.

Richard Park - Deutsche Bank

Okay, great. Yeah, just a few question firstly on Vimpat, I know you talked about sales going through different channels in the U.S. I am wondering if you can clarify that, just wanted to know are you still contracting changes or inventory impacts, it looks like the sales haven’t been seeing any benefit from U.S. price increases in recent quarters? And then on brivaracetam just want to push you a little more on the to give us some kind of sense of the magnitude of the seizure frequency reduction, I just wondered if that had kind of 20% to 30% level that you would seeing be as clinically relevant. I am just wondering if you say an incremental benefit with higher dose.

And then my third question and this could be just be many things -- the core EPS calculation, I am a little bit confused about my understanding was that the IFRS spend would mean that minority interest would be consolidated in the depressed core EPS but it looks like there is no non-controlling interest charges are being added back to get to core EPS I am a little bit confused I wondered if you could clarify that and give us some guidance on what that number will be going forward?

Jean-Christophe Tellier

I will take the last one, the easiest way to deal with that is going with -- starting from the number that is acceptable to UCB shareholders, because what this consolidation does it is taking results that are not within the UCB Group and is conciliating it into the UCB Group statement. So if you want to really see the share that UCB has then you go to the number of UCB, attributable to UCB shareholders and that is also a number that we're starting from. So this is the real correct results. If for example these project financing elements would not be there anymore which can happen at a certain moment in time, you would be left with a $137 million for this half year as the right number to start from and this is true also today because this is purely accounting based and not performance-based.

Richard Park - Deutsche Bank

Okay.

Iris Low-Friedrich

On brivaracetam, Richard I ask for your understanding that we will not go deeper in the disclosure of any numbers today. I stated repeatedly that in our perspective the results with brivaracetam for both doses are clinically relevant and so I can't go any further at this stage. And again please understand.

Richard Park - Deutsche Bank

Okay. Thank you.

Jean-Christophe Tellier

And about the Vimpat channel mix in the U.S. so as you know [ability] is a disease where the percentage of early patients are important, which mean that the channel mix in the U.S. and when Vimpat is growing the percentage of patients covered by different channels may explain from year to another some kind of difference between TRX growth and net sales growth.

In terms of pricing we had a 9.9% price increase in January. That was the listed price you know that because of channel mix, just a very limited part of this price increase are in the net price. And you -- I ask also you to understand that we don't disclose the difference in that metrics. And inventory was a non-issue here. So it's really from our perspective the channel mix that explains that.

Richard Park - Deutsche Bank

Okay, great. Can I just have one follow-up and sorry again just to push Detlef from that core EPS calculation explanation, because if I remember back to when you gave guidance that was materially below where consensus core EPS was at the time and the explanation was that the IFRS 10 impact would negatively impact core EPS but now I am seeing that those charges have been added back so I’m still a bit confused?

Detlef Thielgen

The elimination of this entire thing is playing a role there. I think if you want to leave the confusion than perhaps I’ll try to be very clear now today so that we can leave the confusion behind and if I caused it I am very sorry about that. But what you can just go with is and I think that is probably what we have been talking about that in the different lines things are growing in and out you would see an impact on that.

Now that we have this line UCB attributable we can overcome this directly because it's giving you already the right number to start with, otherwise we would have had to add back and forth which we're not doing any more. So I think that is probably where the confusion came in.

So going forward that's mainly for ourselves, just going -- starting from the attributable to UCB shareholders number and we are on the right track.

Richard Park - Deutsche Bank

Okay. So, can you give us some guidance about what the difference will be between the net profit attributable to UCB versus the net profit for the next couple of years because I know there’s some costs that you talked about just wonder if you give us a feeling for the magnitude of that?

Detlef Thielgen

So, it's very difficult to say in timeframes because it’s also having success dependency but when you look into this year I think overall at the end of the year we are ending up with $15 million to $20 million of difference between that so.

Richard Park - Deutsche Bank

Okay, great. Thank you.

Detlef Thielgen

And there you see also that it's shifting tremendously from half year to half year or quarter-to-quarter and therefore very difficult to follow. And coming back to my recommendation to just use this new line that is so much more of importance to have an easy entry into your core EPS calculation.

Richard Park - Deutsche Bank

Perfect, thank you.

Operator

Thank you very much. And our next question is from Peter Welford with Jefferies. Please go ahead. Your line is open.

Peter Welford - Jefferies & Company

Hi, yeah, thanks for taking my questions. I have got two, just going to brivaracetam a minute I wondered if you could give a comment on the fact I think this is already stated, the obviously 1358 recent trail a very positive results we have with the two higher doses and I think I’m right in saying that the trial had also investigated the 100 milligrams, the 1252 trail was somewhat equivocal. I wonder therefore if you could address how you could have approach regulators with the dosing and the optimum regimen given that you have got if you like one trial for each of these in the low and high dose and how you sort of see the best doses being positioned in the filings?

And then just secondly returning to the [industry profit] I guess following on the five different question to you could you sort of describe over the longer-term how this number could evolve so what sort of rough timeframe two, three, five years should we see that number declining to zero once these non-controlling entities are unwound? Thank you.

Iris Low-Friedrich

You know thank you very much Peter and I can start with the brivaracetam question and as we have discussed before the brivaracetam program was designed for reduced range between 50 and 200 milligram and we clearly have 100 milligram as kind of an emerging anchor dose in this regiment and I would leave it with that for today. Again I can only [inaudible] with the medical -- frankly it’s a [community] for us when we release the results at an upcoming medical conference but let me reiterate that we are very confident that we have the appropriate dosing for range for brivaracetam identified.

Jean-Christophe Tellier

Coming back to the development of the different models we expect based on the current portfolio of corporate financing that we have in, that this will be in our number roughly until 2020. We expect that from the development of the impact it might increase depending on success in the next few years a bit and then in later years diminish again.

Peter Welford - Jefferies & Company

Okay, that’s great. Thank you.

Jean-Christophe Tellier

You are welcome.

Unidentified Corporate Participant

Okay. Iris we have a question from [Dennis Arumba] from Barclays, asking that UCB4940 apparently on clinicaltrials.gov is being tested in psoriatic arthritis. Could you discuss the rationale for this and the context of -- seems we have recent approval for indication and how about this molecule be positioned or differentiated versus Cimzia.

Iris Low-Friedrich

Yeah, Dennis thank you a great question. So we are learning from our Cimzia experience and have known before that there is huge unmet medical need in spondyloarthritis including psoriatic arthritis and as you know we are trying to serve patients in need of better treatment. The mechanism will be 4940 indicates that we might have an opportunity here really to add to the treatment arm for psoriatic arthritis and we are exploring this. As you know Phase III trial hypothesis generating trails so will know more in the end of this study but again definitely an indication where there is major unmet medical needs still.

Unidentified Corporate Participant

Thank you Iris. The second question from Danny is for Detlef. Can you please provide the split of sales between Metadate CD and the generic version, I am not going to pronounce that name in the first-half of 2014?

Detlef Thielgen

If I recall it correctly we had EUR 61 million from methylphenidate, the Concerta generic and 5% from Metadate.

Unidentified Corporate Participant

Thank you. And the third one from Danny please can you comment on the price benefit for Cimzia in the United States during the first-half and what was the underlying prescription demand?

Jean-Christophe Tellier

So we had, for Cimzia we had 9.9% growth listed in terms of price in demand in Cimzia were very strong. As I said and as I mentioned it’s the in-demand is correlated to two main things. The first one is that we had a very good trend in generics in our new indication as well as our rates. Just as a reminder you know that we have also in the U.S. an [administration] formulation that is not captured by IMS and which may explain here and there the discrepancy that you have. But both are very dynamic today from an internal perspective.

Unidentified Corporate Participant

Next question is coming from [Yander Cap] with KBC and it’s for Jean-Christophe, U.S. generic business, what is long term strategy for this unit? And given current M&A climate have you received offers for this unit?

Jean-Christophe Tellier

So I take that question as it is reporting to me. I think we have mentioned before that this is not a core business. That has not changed but it is a great enabler. And yes, we are following very closely what we see in the market place in terms of consolidation, valuations are up and that is a point that needs to be considered. At the same time as I said this is an enabler and we will only let go of this enabler when we believe that it’s a right time and the right value. And we have over the years always been contacted by different parties to be asked whether it is now the right time et cetera. And when it’s the right time we will told as soon as we can.

Unidentified Corporate Participant

A follow-up question to Juan to actually Iris. For brivaracetam do you have data on how the product is doing when combined with Vimpat? Can you comment and/or do you plan combination studies? Do you have data on other formulations like IV or syrups to include in the submission package in 2015?

Iris Low-Friedrich

Yeah. Thank you very much. I’ll start with the last question. Yes, the expectation is that the submission will cover different dosage forms, tablet, IV and syrups that we provide complete offering to our patients. We have no explicit combination studies with Vimpat at this stage. We know that in terms of mechanism both should be good combinations and potentially resulting in additive efficacy. But again we have no specific combination studies. We will see from the results of studies 1358 that some patients might have been on concomitant Vimpat again further analyses to follow.

Unidentified Corporate Participant

And other formulation?

Iris Low-Friedrich

Other formulations, IV, syrup and tablet will be part of the initial submission to have a complete offering for patients and physicians at the time point of initial launch.

Unidentified Corporate Participant

Thank you. One question from [Emmanuel from Amundi]. She would like to know if you mentioned some cost shifting to the second half on the marketing and selling, what would that be the marketing and selling lines or so you mentioned some cost shift from second half, would that be the selling and marketing line and so selling and marketing to sales ratio seems particularly low in the first half 2014?

Detlef Thielgen

So it will be both from what we expect and take it with the caution because as always timing and that can play out again. But what we expect today is that we will see both on the marketing and selling but also on the R&D line an increase in cost.

Unidentified Corporate Participant

And as a follow up question on that point Detlef from [Charles Cooper], could you please add more color on where the selling and marketing cost savings come from? And can you confirm that does not reflect reduce commercial spend on CDM?

Detlef Thielgen

Yeah. In general I can confirm that, that we are fully resourcing our core product and when we talk about where is it coming from I give you a tangible example. We have been organizing our European operations a while back in countries. Then two years ago in nine areas and now in six areas. And as you can imagine there is dilution of overhead cost that is coming with that. We are using some of this dilution to reallocate to better purpose. And some of that flows through. And when the situation where you have nothing that you have to do more like there is no launch in a geography or not a new indication and you are having these efficiencies then this has shown the effect that you are seeing in the first half.

Unidentified Corporate Participant

Thank you. Sorry, apologies again for the technical issue. But it looks like we have answered all questions we can see here. Yeah, there is one question from [Richard] on Neupr progress just wondering if you have plans or has to already initiated a defense of those patents?

Roch Doliveux

I’ll take that otherwise I have the feeling that I’m getting useless, which is maybe a good feeling to have as we are getting closer to January 1. So we feel very strongly about the patent that we have some issues in the past which we transformed these issues into opportunities and we are able to strengthen even more our patent and we defend our patent vigorously.

Unidentified Corporate Participant

So thank you. Again apologize for the technical issues. It looks like that we have answered. It goes without saying the lines are open with the investor relation team. So please come through by email or phone if we have queue out there. Sorry for this. And thank you very much. Have a good evening.

Jean-Christophe Tellier

Thank you all for your interest in UCB and great questions. And I am really pleased with this first half year for UCB with solid performance and pipeline delivery both early and late stage.

Operator

Ladies and gentlemen, thank you very much for cooperating in this conference call. Apologies for the technical inconvenience. This call has been concluded. You may now disconnect your lines.

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