UCB SA (OTCPK:UCBJF) Q2 2020 Earnings Conference Call July 27, 2020 8:00 AM ET

Company Participants

Antje Witte – Vice President Investor Relations

Jean-Christophe Tellier – Chief Executive Officer and Executive Director

Iris Löw-Friedrich – Chief Medical Officer

Emmanuel Caeymaex – Executive Vice President and Head, Immunology Patient Value Unit

Charl Van Zyl – Executive Vice President of Neurology Solutions & Head of EU/International

Sandrine Dufour – Chief Financial Officer and Executive Vice President

Conference Call Participants

Operator

Ladies and gentlemen, welcome to the UCB Half Year 2020 Conference Call and video webcast. During this call, let me remind you that all participants will be in listen-only mode. [Operator Instructions] Please note that this conference call will be recorded and that a replay of the video webcast will be available later today on UCB’s website in the Investors section.

I am pleased to hand over to Ms. Antje Witte, Head of Investor Relations, who will be the moderator of this conference. Ms. Witte, the floor is yours.

Antje Witte

Thank you very much, Good day to you. Welcome to our new format of our half year results 2020. We have representatives of the senior executive committee here for you to answer your questions. First, we have a presentation prepared. Please note that these presentations and the following Q&A session is covered by our existing Safe Harbor and disclaimer slide, which you can see here hopefully on the screen. As this is a new format, we kindly ask you to state your questions either by email as just mentioned or via the question and answer section on the panel of your webcast. And please keep yourself to three questions so that we have space for everybody. Thank you very much.

And I would now like to hand over to Jean-Christophe Tellier, our CEO.

Jean-Christophe Tellier

Thank you, Antje. And good morning, good afternoon. It’s a pleasure to welcome you on our webcast. As Antje has said, this is a new format. So hopefully it will allow you to ask all of the questions that you want and making sure that we have these interactions as much as possible valuable for you.

This is the agenda for this webcast. I would like to start with the new name that you see on this slide, Sandrine, our new CFO that my pleasure to introduce to you. Sandrine joined us July 1, so I think it’s almost fourth week now being with us. And she is already part of this call and we feel like she is now a very warm and welcome part of the organization and we’re looking forward to continue to engage with Sandrine.

You have seen her resume and Sandrine background in finance is pretty impressive. She has been the CFO for Proximus for the last five years and before that she was with SFR and Vivendi when she held various leadership positions both in France and the US covering finance and strategy, innovations and being exposed to digital transformation as you can see all of qualities and experiences that in the current environment is very precious to have. And on top of that she started as a financial analyst.

So for those of you, you will find with someone who understand what you need and gets also. So it’s really our pleasure to have Sandrine with us. And I’m really – feel very privileged to have her in the team right now. But before hearing from Sandrine, you will get some update on our pipeline with – clinical pipeline with Iris. And then Emmanuel and Charl will cover both respectively, our Immuno franchises and Neurology franchises.

But let’s get started with the overall overview of what we have shared with you this morning. And as you have seen, we are very pleased with our ability to continue to grow despite very uncertain times and the resilience of the portfolio during the pandemic have been translated into an ability to continue to grow 9% at constant exchange rate with revenues gaining up to EUR2.5 billion – reaching EUR2.6 billion during this first half.

The pandemic has been a disruption for all of us. I think it’s fair to say that during this time we had to look at four different features for us. One was making sure that our employees were safe and well supported. The reason for that is that you cannot really fulfill your missions and try to engage continuity of care for the patients if you are not able to operate in the best possible way.

So that was really the first focus.

And being disciplined towards how to engage and safe measure and to rotate people, to ensure the continuity of critical tasks such as productions or research have allow us to ensure the continuity of care and which was really the second pillar of what we were doing during the COVID-19 pandemic, keeping the patients at the heart of everything we do, and making sure that all the patients could get the product and the treatment they needed in order to avoid them to be exposed to an additional risk on top of the risk of the pandemic.

And I’m happy to report that, during the first six months of the year all patients would have been able to continue to get care and to get the access to the drug that they needed. We were able to increase support to patients where it would have been possible. The third element was really supporting our communities. It started, of course, with local communities and where we have our presence commercially by helping the unfinanced [ph]. It’s continued by making sure that where we have more significant presence, we were engaging with government and health authorities to see how we can help and I just would like to illustrate that with a few elements.

One was, for example, here in Belgium, the ability to transform a part of our platform and brain to do some testing, agnostic of COVID, even though we’re not equipped for doing that at the beginning, we recalibrate our PCR machines, and we were able to positively answer to the government here in three weeks by refocusing our material testing, calibrating, validating with the government, and starting to test the patience here in Belgium within three weeks.

We also re-focus some of our manufacturing sites to produce at the beginning hydroalcoholic gel when it was missing. So just a few examples of what we have been able to support our communities making sure that we can take care better of the patients, victims of the pandemic. But the final element of that was the creation of other funds that we want to dedicate to vulnerable people facing the potential issues of being infected and suffering from the pandemic. And last but not least, despite the fact that we are not involved and we are not involved into diagnostic testing normally into vaccine.

We have been able to join global forces to help the science to progress and to accelerate the potential solution that as an industry, we want to deliver to communities and through partnerships with academics, with Biotech’s or being able to offer some of our capabilities for testing and for engineering through CMCs and monoclonal antibodies, we’ve been able to help also there. Last but not least, we review our portfolio to see if some of our products could be helpful. And Zilucoplan the product that we have acquired from Ra Pharma are now tested in the ARDS disease, potentially here in Belgium and also in the UK. And finally, we are part of the US R&D COVID communities to try to see how we can help.

So you can see that during the COVID-19 pandemic, through these activities on the four pillars, which could be perceived as something that come on top, actually, for us came as something which was very consistent with our patient value strategy. Because when we say we want to create value for patients, of course, we want to create value for patient first, through our ability to innovate, to develop our portfolio, to potentially acquire new molecule, accelerate the differentiation of our pipeline.

We want also to make sure that the patients have the best possible experience and making sure that when they are facing the pandemic, we are able to help them to face these new situation, while being treated with all patients that use our product and also making sure that they continue to have access and we think that these patient value strategy which start with a better connectivity’s between the patients and the science is an illustration of what we want to achieve in anytime and particularly for the future. We want to be a sustainable company.

We need to connect all of these with an ability to improve our impact on environment, continue to provide access and ensure the well-being of all people also. And this is really what we have started that you can see that in the next slide, which we have started on our strategic part in 2015, which we are now moving into the second phase which is Accelerate & Expand, accelerate, meaning accelerating our ability to deliver new medicines for patients and to potentially expand into new categories of patients population that we want to serve. And we are doing a good progress.

And I think when you look at the deliverables for the first half of the year, on all of the different pillars and I have highlighted you can see here that we have been very active despite the pandemic. First, the solidity of core product brands. But don’t forget that we’ve also launched new two products, Evenity in Europe have been launched in the middle of the pandemic and have just starting, and Nayzilam were been launched in December ’19. So it’s the first year of the product in the US.

We’ve also strengthened our pipeline and strengthened our ability through research and development to differentiate our pipeline. You see here on this slide, the new acquisition Zilucoplan and Staccato Alprazolam, as well as the different Phase III program where we are – we have started or continued during this semester. But I would like to illustrate that for me, all of that is also part of the strategy through innovations, reduce the risk and build strong platform for future growth. The pipeline have been increased by new products, Ra Pharma and Engage. The ability to differentiate has been more demonstrated by the Phase III results that we have been able to publish like the Bimekizumab result that you have seen last week.

And I’m sure that the rest of this year we’ll comment of that. But the ability to very quickly and in a sustainable way we are able to completely clean the skin of psoriatic patients versus a standard of care what we have demonstrated last week with the BE RADIANT survey study after the three other study before are unprecedented. And then we continue of course to focus on where we want to deliver by making sure that we are divesting drugs that are less important for our portfolio and you see here with Niferex and Alprostadil that most recent divestment.

But also very innovative deal, a promotion deal that we have done with Ferring to make sure that our US [indiscernible] operational people are really focusing on rheumatology and dermatology and leave behind the GI that will be now taken care by Ferring. So you see all of that. A very good illustration of our strategy in the first half that not only illustrate the strategy, but continue to strongly deliver on our promises.

And with this now I would like to hand over to Iris that will comment a little bit more on our clinical portfolio areas.

Iris Löw-Friedrich

Yeah, thank you very much Jean-Christophe and greetings to all. Indeed, I would like to take you on a tour of our clinical stage pipeline, which is growing and progressing. Actually, it has grown now to 10 assets in clinical stage development, which is unprecedented in UCBs history and it is progressing [indiscernible] unprecedented impact of the pandemic. And I’m very grateful to our teams who have demonstrated resilience, who have invested tremendous effort and who have innovated [indiscernible] plan to ensure that we keep our clinical studies going and that we have an impactful restart of our clinical recruitment activities since early June. This digitalized, heavily [indiscernible] telemedicine, home nursing visits, just to name a few innovations that we have implemented throughout.

So let me walk you through the details of our pipeline we start with Bimekizumab. And you’ll see in the first line, submission in psoriasis in summer 2020. I’m very pleased to share with you that our marketing authorization application for the European Union and our biologic license application for the United States have gone into EMA and FDA earlier this month. Typically, we would share with you the filing of our regulatory dossier. So the acceptance by the regulatory authorities, and we will do that with a press release when the moment comes most likely in September this year.

But I thought as we got together today, it’s unique opportunity to enjoy this very delightful moment of the submissions that went in. I’m also pleased to report to you that the ongoing Phase III programs with Bimekizumab, and don’t forget we’re talking about six very large comprehensive Phase III studies for the ongoing Phase III programs with Bimekizumab remain on track. We continue to recruit patients living with psoriatic arthritis with axial spondyloarthritis and with hidradenitis suppurativa and we are very confident that we will deliver the top line results according to the original pre-pandemic timelines.

Today, I can share with you for the first time UCB validated timeline for Zilucoplan, the complement C% inhibitor that joined our pipeline through the acquisition of Ra Pharma. The myasthenia gravis Phase III trial will report top line results end of 2021. And that’s a result of our internal assessment, and of course, some impact by the pandemic. We continue to expect top line results from the proof of concept study in immune-mediated necrotizing myopathy in the end of first half of 2021.

Our Rozanolixizumab development program in myasthenia gravis was affected by the pandemic. When we recruited for our FcRn inhibitor, we were really hit in the early stages, very vulnerable stages of enrollment when the pandemic started. And we have also run the study in geographies where we had an extended impact of the lockdown. You can imagine that we’re working very hard to remedy these consequences. But I think it’s fair and accurate if we announce the top line results will only become available in the first quarter of 2022.

Again, we will do everything we can to make up for this delay, but this is the reality reflective of the pandemic impact. However, I’m very pleased to report to you that the Phase III program with Rozanolixizumab in immune thrombocytopenia will read out according to the original timelines in the second half of 2022. And the same applies to the proof of concept study in CIDP, where we expect results in the first half of 2021.

Dapirolizumab our CD40 ligand inhibitor developed for the systemic lupus erythematosus is about to initiate the Phase III program and this is why we can now say with confidence for you the top line results which are expected in early 2024. Staccato Alprazolam is the latest addition to our epilepsy portfolio, and has truly the opportunity to change the way how epilepsies are treated by interrupting an ongoing single seizure very rapidly.

Staccato Alprazolam came to us with the acquisition of Engage Therapeutics and has completed Phase II with a successful end of Phase II meeting with FDA. However, we still need to engage with other regulatory authorities around the globe. And there’s work packages that need to be delivered before the asset is Phase III ready. That’s why we forecast Phase III with Staccato Alprazolam to start in the second half of 2021.

UCB0107 is our Tau antibody which we developed in progressive supranuclear palsy. And as you all know, PSP is a very severe and ultimately lethal movement disorder. There’s no treatment option available for these patients. And so innovation is in high demand. Thankfully, FDA has engaged with us in work on creating and accelerates co-creation with the agency, a very robust novel endpoint that will combine function and survival.

And so we have an opportunity to really launch our Phase III program with our Tau antibody in PSP with an endpoint that will set a new standard in this area of innovation in such dire need. Due to the work on the endpoint with the agency and due to the pandemic impact Phase III will start in second quarter 2021.

And then you see that we have also noted four projects that are going through Phase I. This indicates to you that our Phase I units are up and running, again, which is good news. And it also indicates to you that there’s a constant flux of potentially differentiated new molecules, from our colleagues in research into the pipeline, leading as I said earlier, to 10 molecules now in clinical stage development.

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You will have to allow me to dwell a little bit longer on Bimekizumab. You have seen the BE VIVID results before and I cannot resist to ask you to enjoy them again. Bimekizumab has been consistent in three dimensions of its performance. What you see is a very rapid onset of efficacy. You see a depth of efficacy that is remarkable with 85% of patients achieving PASI 90 after only six weeks, and then it has a duration – durability of efficiency that is outstanding. We are seeing more than 60% of patients achieving PASI 100 and maintaining this complete skin clearance throughout the study duration.

And as you have seen last Friday, the saga of Bimekizumab continues and we have again had the read out of a very important study. BE RADIANT has demonstrated that Bimekizumab is superior to Secukinumab, Cosentyx on all primary and all pre-specified endpoints. So again, a clinically very meaningful result and very consistent with what we have shared with you before. So we now have a huge package of Bimekizumab data that is tremendously relevant, showing superiority over three competitors Adalimumab, Ustekinumab and now also Secukinumab.

However, I have to admit that whenever we talk about Bimekizumab efficacy, we do it in terms of numbers and graphs and that’s quite abstract. Please let me share with you how this efficacy actually translates into the lives of patients. You see here a series of photographs from a study participant on Bimekizumab in one of our clinical trials. On the left side, the picture gives you a very good impression what a serious devastating skin disease psoriasis is. You’ll see the sick, scaly erythematous plaques.

They are very often ichi, bleeding, painful and I think it’s very obvious, this is a stigmatising disease. Vast areas of the body, not only the back that you see on this picture are covered with the skin erosions. This patient then received Bimekizumab and after a single dose at week four, you see already a very profound improvement of the skin that would be equivalent to a PASI 75 response. And after only a single further dose at week eight, this patient had almost clear skin, PASI 90 response. Well, this is what we mean when we talk about rapid skin clearance.

And then if you go to the two pictures on the right, you see what the lasting response mean. This patient achieved PASI 100 complete skin clearance at week 16. And this tremendous response was maintained throughout the course of the study, until and including week 52. And I ask you to compare the picture on the right with the complete clear skin with the picture on the list at baseline before Bimekizumab. And I think it illustrates to you that skin clearance, complete skin clearance is what ultimately patients should aspire because this is the freedom from symptoms. This is the state that removes the stigma from the disease. And that’s ultimately desirable and with Bimekizumab, we have shown that a high proportion of patients can achieve complete skin clearance in the long-term.

And with that, I hand over to my colleague Emmanuel Caeymaex, who will talk more about delivery of patient value.

Emmanuel Caeymaex

Thank you, Iris and good afternoon, good morning everyone, so no better introduction to discuss how our immunology solutions have been contributing significantly to UCBs Accelerate & Expand phase in the first half of this year. We’re focused on serving those patients who can most benefit from our differentiated offerings. And for Cimzia, this has meant resilient performance and market share gains in the first half of this year in the United States and in international markets.

For Evenity, we’ve had some favorable access related developments in the first half of this year, some pre-reimbursement use as well after the COVID-19 lock downs eased and Jean will comment tomorrow on the performance in US and in Japan, where they are the territory commercial leads. We’ve strengthened and de-risked our late stage immunology pipeline to a significant extent with Bimekizumab, demonstrating the straight superiority to the three most recent psoriasis market leaders, on endpoints that matter to patients, payers and physicians at all key time points investigators.

And beyond Bimekizumab in psoriasis, we now have six Phase III indications or programs running, each aiming for clinically meaningful innovation in meeting patient needs. I would like to point out that indeed Dapirolizumab is moving into Phase III as a first in class anti-CD40 ligand agent and after the failure of Stelara, the high unmet need in lupus is persisting and we’re very pleased to be partnered with Biogen with this program.

We haven’t spoken much in the past about Zilucoplan in a type of auto-immune myopathy that is characterized by severe proximal muscle weakness and myofiber necrosis. The point here is that complement activation drives muscle necrosis and disease – the first foray with such a mode of action in this rare disease. And more broadly, the acquisition of Ra Pharma expands our option space in immunology to meet patient needs that grow beyond neuroinflammation and with applications across many specialties, including rheumatology, dermatology, as well as acute care and shared care is not uncommon for some of those disorders across the various specialties.

And finally, as mentioned earlier, we’re very pleased to have entered into a co-promotion agreement with Ferring, a company that shares many if not all of our values for the co-promotion of Cimzia Crohn’s in the US. I think it will benefit everyone with augmented support to gastroenterologists and their patients and will enable us to focus our commercial efforts on rheumatology with a large non-radiographic axSpA opportunity, as well as dermatology as we prepare for the Bimekizumab launch.

So when it comes to Bimekizumab, we did set and actually have achieved our target product profile. And we set it with the competitive nature of this market in mind. So we’ve been pursuing unique outcomes. And we’ll go for the best possible experience for patients. And we’ll start engaging to ensure access for those patients that will most benefit. I think you’ve seen this slide before. Clearly in diseases where there’s overlapping pathobiology and a lot of comorbidities, it is important to offer a solution that caters to a large spectrum of these potential comorbidities.

In addition, Iris has illustrated the speed of onset as measured by PASI 75 response at week four, the depth of response at week 16 with completely clear skin in a majority of patients across our programs and the durability of this effect. So with this, we feel that there’s a very strong clinical foundation to offer a transformative experience to psoriasis patients. And I must say that we’re also very pleased with the way our every eight weeks dosing regimen has been performing in studies so far.

So we’ve been building out access capabilities, are entering into prior information exchange meetings with US payers and are preparing the health technology assessment submissions worldwide. We have been expanding our current dermatology footprint and continue to attract very strong dermatology leadership talent across the world. But of course, another question is how are we going to supply Bimekizumab and with the substantial de-risking of this molecule and the advances of multiple monoclonal antibodies in our pipeline, we have decided to invest in mammalian technical developments and have started the construction of a large-scale mammalian drug substance manufacturing facility in Belgium.

It will supply Bimekizumab to markets from 2024 onwards, as part of a multi sourcing strategy. The facility will be digital ready and minimize environmental footprints and the integration with our bio pilot in Belgium will ensure short lead times to tech transfer and thereby accelerate the bringing of our future medicines to patients.

Now, moving over to our market of assets Cimzia grew as you saw by 7% at constant rates. This is all volume growth. Overall, across the world net prices have been stable. Whilst the COVID-19 pandemic has costed us a few points of growth in Europe and the US, we are very pleased with the fundamentals. We continue to beat the TNF market growth despite the availability of TNF biosimilars. And especially in the United States, we’ve had particularly strong rheumatology growth and performance, driven by our non-radiographic axSpA indication, but also by improvements in benefit verification, making this process as seamless as possible for patients and physicians.

The US prefilled syringe and the lyophilized formulation have both grown by about 10%. And the in-office injection markets and our share in that market continue to grow significantly. In fact, we have 20% growth in the first quarter versus last year. The second quarter was flat, which thinking about what’s happened is a good result. And we’ve seen a very strong recovery in June, after a slow month of April and May. In terms of the prefilled syringe, rheumatology is very strong, as you’ve heard I’m sure, with other companies reporting recently. The dermatology segment has been impacted more than the rheumatology one and I guess dermatology is somewhere in the middle.

In international markets, we’re continuing to grow with substantial market share gains. I think it’s fair to say that the plus 5% growth that one you’re seeing here is probably a slight under representation of the true growth. And this is due to late last year shipments to our partner in Japan to deliver the product with the existing labels before our indication approval for psoriasis and PsA. So that’s about EUR10 million, which otherwise would have showed up here.

In Europe, the slow growth is not a surprise. We actually had some price erosion which compensated for volume growth and of course, with COVID-19 hitting certain markets hard, we’ve had a little slow down, but we are confident that in Europe, hospitals and physician systems are now organized to treat patients and to see the new patients that perhaps haven’t had the opportunity for treatment initiation or switches.

So, let me perhaps say a word about the indications and of course, you saw that psoriasis is starts becoming an important growth contributor for Cimzia, but across the world the women of childbearing age segment has continued to grow as well medical guidelines continue to back up the utility of Cimzia and a more modern way to envisage the care of women of childbearing age with autoimmune disorders and this is also supporting the continued growth of Cimzia in rheumatoid arthritis for example.

So finally, a quick word on Evenity, so you remember that about only 20% of patients with an osteoporotic fracture receive any type of treatment post fracture. And fractures in postmenopausal women are five times more likely. So those women are five times more likely to suffer a fracture within a year after a first break. And these can be life altering events. So our efforts together with our partners Amgen, are as much about leading in and expanding the bone forming market segments, as about supporting advanced care for patients with severe osteoporosis who have suffered a recent osteoporotic fracture.

UCB has invested in making this happen at a global scale with our partners, together with the International Osteoporosis Foundation, Oxford University. And this is through a program which is called Capture the Fracture Partnership. And together we aim for 25% reduction in hip and vertebral fractures by 2025 and so this partnership is up and running and working well with many centers adopting its recommendations.

In 2020, our focus in Europe is on gaining access with Evenity. And we’re very pleased with the recognition of value that has come about with the German Health Technology Assessments, IQWiG, which has indicated considerable added benefit for Evenity in this specific population. So this now needs to be translated with AGBA reimbursement approval in the months to come. In addition, we’ve had Sweden become the first country in Europe to approve reimbursement for Evenity, again recognizing the value that this asset can bring to society.

In addition, we’ve received approval for Evenity for a Swissmedic in the first week of July. So we’re pleased to see that the picture in Europe is completing. Of course, it’s been a virtual launch largely, since this was first introduced in March. We’ve been leveraging remote education and interactions. And teams have now re-initiated in person visits. And the response to Evenity is very positive in Germany. There’s a good understanding of the label. And so we’re bullish about the prospects of Evenity in Europe. Again, Amgen will commence on the US and Japan tomorrow.

So in conclusion, for the first half in immunology, I would say first of all strong fundamentals for Cimzia growth towards our 2 billion peak sales targets over the years to come, positive signs for Evenity in Europe. We’ve achieved our target product profile for Bimekizumab, which has triggered actions in the area of supply and of course market and launch readiness decisions. And our pipeline of immunology programs have been moving forward with the inclusion of several potential first in class and best in class solutions.

And with this, it’s my pleasure to hand over to Charl.

Charl Van Zyl

Thank you, Emmanuel. And good morning, good afternoon to everyone. And I would like to just start by making a quick couple of opening remarks. First of all, despite the challenges that the industry has faced, we have acted very fast and I’m obviously very pleased and proud of our teams, that we’ve been able to deliver a very strong and resilient performance in the first half of this year with our underlying performance of our epilepsy brands. You will also see through the presentation that we have significantly diversified our pipeline, of course, in neurology with very strong potential for growth in the space of neuroinflammation.

So I would characterize our first half performance really as a resilient performance and one that we feel very confident about as we go forward for the remainder of the year. So as you see in the slide, we are firmly in our acceleration expansion phase. And on the left-hand side, you see our four key epilepsy assets that have consistently delivered. What is important to know here are these are trusted brands in epilepsy that serve a very broad number of needs for patients from pediatric patients, to older patients, to patients with comorbidity or patients that require treatment for seizure classes, like in the case of Nayzilam. So therefore based on those trusted brands and the consistent performance we see across a number of geographies, we feel very confident that we are able to continue that performance through the remainder of the year.

If we could just go back to the previous slide, I just want to make some quick comments on our diversified pipeline, as you would have heard from my colleagues and also from Jean-Christophe, our acquisitions, of course, have been very important to fortify the epilepsy pipeline in the mid-term, and of course, accelerate our emphasis into neuroinflammation into rare diseases with the acquisition of Zilucoplan. So with those elements and the combined focus on the Phase IIU programs we feel we have a very strong position beyond the LOE of Vimpat to continue building on top of epilepsy a very strong expansion into neuroinflammation as well.

If we then go to the next slide, just to go a little deeper into the performance, as I mentioned, it’s a very resilient performance across a number of geographies and across all the assets, notably Vimpat at 16% and Briviact at 40%. Of course, this year also, launching Nayzilam into seizure clusters has been an important addition for high unmet need area in the US. And we see a constant and stable performance of Keppra in the background to continue to support this growth. On the right hand side of the slide, you see our constant focus on expanding the label we have of our key assets Vimpat and Briviact and of course, with Nayzilam now we have a very strong offering there, as I mentioned, for addressing an area where there is no treatment today, which is seizure clusters.

Now if we go a bit further, I want to make some comments on the next slide to our – as I mentioned, we fortified our epilepsy pipeline through the acquisition of Staccato Alprazolam. In this case we are really addressing a much larger patient population. Most patients are well controlled, but they do have breakthrough seizures, which often lead to an emergency event or potentially hospitalization.

With Staccato we have in our hands now a rapid profile of a molecule that is rapid acting, essentially 30 seconds to two minutes or rapid acting short duration and in a very convenient delivery device that really puts control back in the hands of the patients and caregivers. So we see this as an important solution for the future. Really a paradigm shift in treatment where we can move to more on demand treatment and really put control back in the hands of the patient so they can live the life they would like to live. So with this we will continue as Iris has mentioned into a Phase III program in the second half of ’21.

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If we then go to the next slide, I really want to conclude here with just a couple of quick comments, again, to emphasize how important we see the future for epilepsy that we have a comprehensive portfolio as I mentioned that continues to serve a wide range of needs for patients. But we’re also thinking longer term investing in digital solutions for patients so that there’s more seamless interaction between patients and healthcare professionals in the sense of greater patient experience, leading to better disease management and better outcomes for patients. So this is an area we will continue as leaders to develop further.

And of course, through our science and our better understanding of the innovation, we also aim to address very specific solutions for disease modification. So when you look at epilepsy, our ambition remains unwavered to continue to lead in the space in the long-term and building on top of this foundation, as we’ve mentioned, an opportunity now to continue to expand in the space of neuroinflammation with our two very strong assets in Zulicoplan and Rozimab to find new vectors of growth, of course for UCB in neurology.

So with that, it’s my pleasure to hand over to Sandrine and also to give Sandrine a warm welcome to the UCB team. Thank you, Sandrine.

Sandrine Dufour

I thought again with the mic, maybe it’s better. So thank you, Charl. Good morning. Good afternoon. It’s my pleasure for this first meeting with you to present you this good financials and I’m joining a company which is in good state, which has shown over the past years sustainable growth both top and bottom-line growth and the first half results, performance continue in line with this past trend. We have a solid foundation in place to accelerated growth in the coming years.

So you see on the right part of the chart that this growth was driven by the continued positive and resilient performance of UCBs product portfolio and I think it’s important to highlight that there has been no disruption in the supply chain or the production and the company was able to maintain for patients the availability and access to the medicine.

Now looking at the financials on the next slide, just starting with the net sales, the double digit growth of net sales in the first half was driven by the resilience UCB product portfolio, as I’ve just mentioned, with two medicines which were added in December 2019, the launch of Nayzilam and starting in March 2020, Evenity with the first European launch.

Marketing and selling expenses, increase was driven by launches and pre-launch activities, Cimzia in non-radiographic azSpA in the US and the launches in China and Japan. Nayzilam, launched in December in the US and Evenity launched in Europe in March, but as well launch preparation expenses for Bimekizumab for the treatment of psoriosis.

Looking at R&D expenses, this include for the first time, the R&D expenses for the Ra Pharma development program, but as well, the termination costs for a total amount of EUR38 million of the project at Padsevonil. But it also includes high investments in the UCB progressing pipeline with five late stage assets.

So all in all, we ended up with an EBITDA – adjusted EBITDA on revenue ratio of 30%. And, by the way, you will have noted that we have changed the terminology of our performance metric into adjusted EBITDA. It’s following the guidelines of ESMA, the European Security and Market Authorities and it is simply a change in terminology. It’s not a change of methodology.

Tax rate is at 15% in line with guidance and our profit evolution reflects the one-time expensive M&A activity with Ra Pharma and Engage Therapeutics activities. So all in all core EPS is at EUR2.77.

Now, looking at the next slide on evolution of cash flow and debts, you can see that cash flow from continuing operations was solid and grew versus last year with nice trends over the past years, and on the right part of the chart, you can see that the Ra Pharma acquisition increased the level of our net debt, which was at EUR1.9 billion at the end of June. And the net debt to adjusted EBITDA ratio is at a healthy level of one to three times.

Now regarding our guidance, moving to the next slide, we confirm our 2020 outlook. Of course, we will continue to closely follow the evolving COVID-19 pandemic to assess the potential near and midterm challenges. But based on our current assessments, we remain confident in the fundamental underlying demand for our products and the prospects for the long-term growth.

We confirm 2020 financial targets and we confirm the midterm guidance for 2022 with a 31% adjusted EBITDA revenue ratio. We confirm as well the peak sales for Cimzia, Vimpat, Briviact and Neupro.

And with this, let me hand over back to Jean-Christophe for concluding our presentations ahead of opening the floor to questions.

Jean-Christophe Tellier

Thank you. Thank you very much, Sandrine. My last slide, before really the closing is just a reminder of where we are in the deliverables of what we committed to deliver with you for 2020. And as you can see, we are very pleased with where we stand after the first half of the year with a lot of achievements that already have been done after the first six months. The Phase III starting lupus for Dapirolizumab will be in the very near future and then we also waiting for the finding acceptance of Bimekizumab in psoriasis and in Phase III. So you see a lot of things that have already been achieved and we are in a good – very confidence to deliver on the two other elements for the rest of the year.

So allow me to close with maybe a slide which is quite unusual in our financial presentation. But considering what we have been through as an industry, as a team, as people, for all of us in the last six months, I would really like to give a big thank you to all of our colleagues at UCB. There have been a lot of challenges, but there has been also a lot of amazing accomplishments during the first six months of the year. Changing habits, working from home in a completely remote way, continue to ensure patient delivery, transforming part of our manufacturing site into diagnostic science being able to do much more and beyond what was demanding, but trying to go to the extra mile.

And you can see all of these faces have done that with a big smile. So I really would like to thank them. We had a hash tag, which was strongertogether during the pandemic. We’re transforming that strongerthanever now that we are moving into the next phase, but I think that none of the result that you have seen with my colleagues previously would have been able to be there without the individual and collective engagements of all of our colleagues at UCB.

So with that, I would like to close the presentations and hand over to Antje for the Q&A session. Thank you.

Question-and-Answer Session

A – Antje Witte

Thank you very much. Thank you for sending in your questions and we have quite a long list already, if I may start with Wimal Kapadia from Bernstein. That’s going to Emmanuel I would say. How do UCB see – how does UCB see the potential for Bimekizumab across the three indications? Clearly psoriasis is ahead, but PsA and axSpA will also be key. How does management view the potential of the joint indications longer term? And what indications do you expect to see greater sales contribution?

Emmanuel Caeymaex

Thank you. Thank you for this very good and relevant question. So perhaps first we should think about prevalence and about the size of these opportunities. So a simple way to think about it is that psoriatic arthritis, axial spondyloarthritis and hidradenitis, taken together, might near in terms of patient numbers and market size the opportunity in psoriasis long-term. However, there’s less choices in hidradenitis, in axSpA and to an extent in psoriatic arthritis than psoriasis, so we will enter into a market that will be less competitive than the psoriasis market today. But like psoriasis, the results we’ve shown so far in our Phase IIb studies, as well as in our HS proof of concept study, our results where Bimekizumab provides a particularly deep response to a relatively high number of patients. And so we really have a best in disease opportunity in those three indications where the relevance of IL-17A and IL-17F cytokines is suggested. So I think it’s a little early to start talking about forecasts and sight of indications, but clearly with those three indications being less competitive and together nearing the size of the psoriasis market, I would venture to say that taken together, there’s a chance there that’s provided our Phase III results, confirm our Phase II and proof of concept results that Bimekizumab could derive a significant portion of its sales in those three new indications.

Antje Witte

Thank you very much. The next question is from Jean-Jacques Le Fur from Bryan Garnier and it’s going to Charl. Now, Ra Pharma is fully integrated. How do you view the future for Rozanolixizumab?

Charl Van Zyl

Thank you for that question. And first of all, the way we look at specifically the treatment in this case for myasthenia gravis is that you need multiple mode of action to be able to fully treat the condition and having a C5 complement inhibitor, in this case Zulicoplan, as well as an anti-FcRn in the case of Rozimab make perfect sense to treat different stages of the level of control of the patients. So we see Zulicoplan and then C5 inhibitor as being important to maintain a certain control and a convenient daily dosing. Whereas we see anti-FcRn playing an important role in this case Rozimab in really treating the acute phase and therefore avoiding the invasive situation with IVIg in the hospital setting by taking that to the home setting for the patient. So we see both coexist very strongly. And of course, our development programs are very much mirroring our ambition to develop both in the space and also potentially in other patient populations as we go forward.

Antje Witte

Thank you very much. Jean-Christophe, Peter Verdult from Citi is asking you, can you share your thoughts on the various US strike price – sorry, US drug price proposals being made. Reference pricing could be particularly bad for your immunology franchise. So I’m interested to see what you perceive to be the feasible reform and worst-case scenario.

Jean-Christophe Tellier

Thank you, Peter for this good, but very difficult question. So as you know, last Friday, we had these publications of these four executive orders around drug pricing in the US. It was made Friday evening US time. The one that you refer to which is the international Price Index and the reference to what is named the most favored nation was signed last Friday, but the administration have yet released the text. So we are a little bit in the interim situation, let’s put it that way. There has been a delay that has been mentioned until August 24, to try to see how these could be implemented with the request for partners to jump in and potentially to make some additional recommendation there. And as well as CMS and Seema Verma indicated the Medicare Part B would be implemented and would be impacted by this. So it has been months that we knew that something around these elements would be there.

Now, there are two elements that I would like to share with you. First one, it’s about the clarity of the content. These executive orders have been released for some of them with a very high level mentioned, but it’s not yet clear how that will be implemented. So we are still in the process of better understanding how it would work. And the second element is reduce the timing. We’re already in end of July, beginning of August with an elections coming in November, it’s not really clear how much time the administration will have to put these executive orders in action. However, we know that these questions of drug pricing across the different geographies is on the table and likely will stay. What I can say that for our part is what it is for all of – most of our colleagues, what we want is in pharmaceutical industry focusing on innovation, we want a few things.

One, we want to be part of the solution. So we want to be associated in all the different discussions to try to see how we can make innovations affordable for the patient. Two, we want to make sure that there is a recognition of the value which is created. And three, we want to make sure that all of that allow the patients to access for the long-term. So I think that as long as we can engage the different stakeholders into these conversations, as long as we can participate to this conversation, I think and as long as innovations will be recognized, I think we’ll always be there to try to make sure that the future can give a place for innovations in the best possible way.

Antje Witte

And if I may, I continue Jean-Christophe, the full year guidance, as left unchanged, implies kind of a step down during the second half. Could you please a little bit elaborate on the guidance being kept unchanged?

Jean-Christophe Tellier

Yeah. Sure. We think that it’s more reasonable at the current period to maintain the guidance as it is. It’s not really a moment where we can try to evaluate the first half and then multiply by two and then evaluate what would be the second half of the year. I think that there is a lot of complexity also in the first half, we had been a bit of a stoking effect at the beginning of the second quarter, we have some destocking effect in the end when the economy was reopened in European market, for example, and as well as the US. So we are very pleased with the strong demand. And so that’s the reason why I think what you see is a performance for the first half of the year is supporting by this demand. However, we don’t know exactly what the second half of the year would reserve and would unfold in terms of resurgence of cases. And so we think that during these periods of time, it’s more appropriate to suppose and to confirm the guidance versus doing other commitments.

Antje Witte

And then Peter continues on Evenity and he’s also asking you to answer this, but you might decide otherwise. He says, he’s looking at nice ramping of Evenity and doctors he’s speaking to our comfortable returning to Evenity in an inpatient – in a patient that has previously received a 12-month treatment. So he wants to know a little bit about our peak sales expectations for Evenity and how big the opportunity could be.

Jean-Christophe Tellier

Well, I can get started and Emmanuel, please feel free to add because I’m very happy to answer these questions Peter. I’m not sure that you would be happy with my answer, but because we will not comment on peak sales, but what I’m happy with is that you mentioned that physicians – because it’s the same message that we got that physicians are very comfortable in prescribing Evenity and are very pleased with the results. If you remember this is always have been our stand, we always have been very impressed by the ability of Evenity to deliver strong results. It’s also unprecedented if you look at the speed by which we are able with these products for also protect patients and [indiscernible]. We are happy to see that the patients and the physicians recognize that. I think the time will tell how we can continue to evolve and develop the life cycle in terms of re-dosing. But so far, the first insight that we get are very positive. There is no reasons in a sense to not to explore further, which you have mentioned, which is when would be the best time to re-dose. So we are looking at that right now, but from a timing perspective – but from a content perspective, we are very pleased. Emmanuel, I don’t know if you want to add something if you want?

Emmanuel Caeymaex

Yeah, to the extent that I can give a number here, there’s not that much to add. But I think the important point that you’re raising is that Evenity is a one-year treatment, which potentially could be repeated. We will see in the future and data must be accumulated. But it’s a lot about expanding the market right. There’s enormous unmet need. And today very few patients actually benefit from any treatment at all. And when it is treatment, usually it’s not a bone builder. So that is why Amgen and ourselves, together with external partners are investing in ensuring that post-menopausal, women with a recent fracture get access to a different kind of care than what is being provided today.

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Antje Witte

And if I may, Emmanuel, I have a second question on Evenity, this time from Richard Vosser, JP Morgan. How do you see the Evenity launch in Europe? Please, could you give us an update on the uptake and how you are working through the Impact of COVID-19?

Emmanuel Caeymaex

Yes, thank you for this question. So first we – for a large uptake, we first have to ensure that the product is funded. And so that is well on its way in Germany, as you heard before. In the UK, the COVID-19 situation has upended the calendar with NICE a little bit and so we’re still in discussions with NICE to understand exactly when this review will take place. And in the south of Europe, this is progressing as per plan, but as you know, it takes a little more time than in other countries. So right now, what we have as uptake is relatively limited in the sense that there is no funding and that we launched in March. So essentially, we are re-launching and we’ve really been out in the field since June now. The reaction to the product, the understanding of how to use it is very good in Germany. So we have very good feedback. But at the same time, Germany is a market where today the bone builder market is really miniscule. So I think it’s a bit early to answer your question, but qualitatively, it is very good. And we are working together with Amgen that are established with Prolia in Europe. And this means that we can also rely on a partner with existing relationships and the ability to interact remotely with physicians that they have been knowing for years. So let’s agree that we will look at this again, after we have our full year results. That will be a time where reimbursement will have been obtained and more time on the field for our people. Thank you.

Antje Witte

Thank you, Emmanuel. And Richard Vosser has two more questions for Jean-Christophe, could you describe what you think there might have been in first half 2020 in patient level stocking for Vimpat and Cimzia and whether you think this might unwind into second half. And second, the COVID-19 pandemic doesn’t seem to have much of impact on your revenues in the first half and yet your guidance implies a slowdown in sales. Please, could you highlight the risks you see in the second half that could impact your sales growth?

Jean-Christophe Tellier

Sorry, thank you, Richard, for that. We have seen a little bit of stocking for certain drugs during the first – end of the first quarter beginning of the second quarter. We think that all of that is phasing out right now. Initially, it was probably linked to the fact that the patients didn’t wants to go to the hospital. And so it was more in geographies where patients needs to go to the hospital to get your drugs, we have seen that, for example, in the beginning in China, which is also the reason why we have been very diligent to try to provide alternative distributions of drugs in China and going into quickly digital distribution to help the patients not to go to the hospital or the physician. We have seen in certain areas where private offices were closed. And so that was a little bit of an impact there. So we have seen a little bit of that in the first half of the year. But this is mainly phasing out right now. So once again, the region of the second half is, you don’t know what’s the geographic expansions would be and how big the second waves will be and how disrupted that would be. So I think that once again, I think that we will see what the volume will be as an impact on the Second half.

Now more fundamentally, I think we have seen three elements during the first half of the year. First of all, as you can imagine, we are focusing on diseases which are chronic diseases and are not changing the evolutions during a pandemic or during a lockdown. So there was a fundamental need for the patients to continue to be treated. And that has helped us because we are not in [indiscernible] of treatment or treatment that can be easily stopped. So that have been very – it has been helpful. What we have seen is a decrease of access for new patients. And so new patients potentially have decreased because patients have maybe waited longer to go to the physicians or prefer to stay at home. So we have seen a decrease of the new patients and that has been in particularly more impactful for drugs, which has been launched recently.

So drugs where the growth is related to acquisitions of new patients or where indications have been launched recently, so the ability to get these new patients was a little bit less. That was compensated by two other factors. One, would be there was less switches because as the patients went less to the physicians, we have seen less switches from a drug to another one. And also a bit of compliance for the patients most likely because the patients were more – wanted to reduce the risk and were more engaged to their treatments and didn’t want to stop their treatment, so on one side a little bit less of new patients, on the other side a little bit more of compliance and a little bit less of switches that was the reason of the first half of the year. As I said previously, we feel that there is still a lot of things that can occur in the second half of the year in a lot of different geographies. So we prefer more reasonable to not change the guidance from the time being.

Antje Witte

Okay, thank you very much. And the next two questions are for Iris. Diana Na from Goldman Sachs is asking about Zulicoplan, the Phase II trial in COVID-19 patients, about our rationale to start this and how we see Zulicoplan having a potential benefit in these patients? And when of course, can we expect the full clinical data on this one? The second question Iris is from Varun Mittal [ph]. Congratulations on the BE RADIANT results. And please remind us on the filing plans for Bimekizumab in both US and Europe.

Iris Löw-Friedrich

Yeah, thank you. And again, thank you for asking about the Phase II study with Zulicoplan in COVID-19 related to acute respiratory distress syndrome. The rationale is that the more knowledge about this specific type of respiratory distress syndrome has become available, the more it became clear that microthrombi and the microangiopathy play an important role there. And this is where complement inhibition might be a relevant mechanism of action. So the rationale to embark in these studies is driven by the mechanism of action of Zulicoplan. We are running two proof of concept studies. They are sponsored by academic and government institutions. And, of course, it’s hard to predict the recruitment rates and when the data will become available, because this is dependent on the numbers of patients in the participating sites at this stage in Belgium and in the UK. And of course, it’s good for patients, the fewer need intensive care and the less patients we can recruit, so really can’t predict any timing for the data.

And then Varun on your question about Bimekizumab submission in psoriasis, as I mentioned, we have submitted our dossier to US FDA and to the European Medicines Agency, covering the psoriasis indication. We expect the filing, so the acceptance by the regulators after the initial validation step, the latest in September this year. Thank you.

Antje Witte

Thank you, Iris. And if I may I continue two gentlemen have also questions for you. The first one from the Wimal Kapadia, Bernstein, For Rozimab, how do you see the delay in trial impacting given your main competitor will be already on the market? Will that be a little bit tougher for UCB to gain traction? And the second, in the same direction, that’s why I took the liberty to bundle it from Jean-Jacques Le Fur from Bryan Garnier. How do you view the Phase III results of argenx drug? Do you think argenx put the bar high for the future Phase III results of Zulicoplan?

Iris Löw-Friedrich

Yeah, very good questions, thank you. So as you know, we are developing Rozimab in myasthenia Gravis with a special view of those patients who suffer an exacerbation of their underlying disease and who might otherwise require IVIg or plasmapheresis, which are quite cumbersome procedures. As such, we are quite pleased that the restart of our Phase III trial in myasthenia was quite successful. We have recruited quite a number of patients since early June. And from that experience, I cannot expect or extrapolate that we will have any difficulties in the recruitment to come and delivering our results, according to the timelines that we have shared with you.

With regard to the question about the Phase III for Zulicoplan and whether the bar for efficacy has gone high, let me please comment briefly on the mechanism of action of Zulicoplan, which is not a CRN blockage that was Rozimab – Zulicoplan is a complement inhibitor. And if you think about what complement does, I think you realize that you have a very important mechanism of action in our hands, because complement binds to certain auto antibodies that are relevant in myasthenia Gravis. And together a complement plus these antibodies cause the – through the membrane tech complex caused the destruction of the muscular part of the neuromuscular junction, so quite deep morphological damage that is induced to complement. Zulicoplan can block complement effectively. We have shown this in Phase II. And so the expectation is that we will have a very profound efficacy and this is much needed. As you know, patients with generalized myasthenia gravis these days have only corticosteroids and immuno suppressants as their base medication. And this is where we think Zulicoplan will be, if it keeps its promises of course we need to show this in Phase III, will be quite in an important and highly relevant therapeutic evolution, so no concerns. Thank you.

Antje Witte

Thank you very much. The next question is from Charles Pitman from Redburn and goes to Emmanuel. Could you please talk about your preferred expected dosing of Bimekizumab given the strong every eight-week readout? Do you see dosing regimen as a particular area of commercial concern? And how do you plan to take share from competitors that offer longer treatment holidays? Could manufacturing capacity be a limiting factor during the early launch phase, given such strong data?

Emmanuel Caeymaex

Thank you for those very positive questions, I would say. So in terms of dosing there is a difference between dosing frequency and actual drug holidays. So for now, no psoriasis medicine has really demonstrated that drug holiday can be taken. And what we’re talking about is the relative benefit to patients, physicians and payers of having every two week, every month, every two months or every three months dosing, which essentially are the options across IL-17s and IL-20s and to an extent TNX as well. I think – so of course, the regulator’s will decide in discussion with us what the ultimate dosing regimen will be for Bimekizumab in maintenance. We are pleased with the data that have been produced so far with every eight weeks dosing regimen because first of all, it’s potentially more convenient.

But secondly, it also signals that the mode of action of the drug enables that which was perhaps a little bit counterintuitive for observers in this marketplace that really categorized the IL-17s as needing very frequent dosing compared to the IL-23s. So just as a reminder, every eight weeks would be similar to Tremfya and potentially also to Mirikizumab, which shared comparative data with the Cosentyx recently. So we’re pleased with this, but it’s still early days. In terms of manufacturing, we have a multi sourcing strategy. So therefore, we have no concerns when it comes to the ability to supply and of course, if the every eight week dosing regimen would be part of our label somehow, this would also mean that less product volume would need to be administered to patients long-term to achieve the results that Iris has shared with us.

Antje Witte

And yeah, I have the last two questions and they go to Jean-Christophe I think, you might want to delegate. The first one is from Wimal Kapadia, Bernstein. How do we – how do you think about the cost lines during the patent expiry is? Will you be able to take out costs over you need to invest into the product launches? And the second one is also from Wimal. Please share your thoughts on the higher unemployment rates in the United States. And what impact the commercial to Medicaid switch could have on your outlook given your mature product portfolio.

Jean-Christophe Tellier

Well, thank you very much for these questions. So as you know, we will face some loss of exclusivity impact for Vimpat in ’22, which I think you are mainly referring to versus the ability to launch the new product in these current phases. So as you have seen, we have started to invest in the preparation of these launches right now. And so we are we are very confident that we would be able to continue to prepare these launches and then launch these products, get new growth engine and being able to move from this current phase to the next phase in a sustainable way. We will – definitely will have an impact on the year of the 12 months following the loss of exclusivity because it’s the nature of the market. But we are confident we’ll be able to absorb that into restart to growth quickly after that.

On the unemployment rate in the US, you have seen a lot of liability and volatility in these numbers. Rates have increased in May very quickly and then reduce in June also very quickly. So I think we need to have a little bit more time to see what will remain and how many patients will have to transfer from commercials to Medicaid that could have an impact of course for all of the other drugs. In the meantime, there is also some support system to maintain for certain times, certain patients onto the commercial streams that could also limit the negative impact on that. So the volatility, but also the reactivity of the employment market in the US is a factor that we are continuing to look at.

Antje Witte

If I may a very last question Jean-Christophe, from Drew Walton, Credit Suisse. Can you help us on the level of local currency marketing spend? This was plus 12% in the first half 2020 at a time when you were not able to spend as much as you might want to on sales force visits et cetera. Now you are looking to get ready for Bimekizumab, is this the sort of growth we should expect going forward.

Jean-Christophe Tellier

Yeah, thank you for the questions. Yes, definitely we will have some increase into R&D and marketing and sales in the near future. So that was the issue. Remember the reason why we already guided you in the fact that we most likely will not be able to maintain the level of profitability that we had deliver in the last couple of years. Our commitment is to come back to this 31% of profitability in 2021. But in the time between you can expect some more investments in marketing and sales as well as research and developments because of the strength of our pipeline and portfolio and the continuation of the preparation of the launch. However, we also benefiting some level of synergies because the preparation of Bimekizumab launch will also leverage capabilities that we have already in rheumatology and dermatology and so we will be able to get to certain products. Well, for the past, we have just one product. So there will be also some benefit out of that. But you can continue to think of us as preparing the launches and continuing to decrease the pipeline with quite a lot of Phase III, which as you know, the one that costs the most and so we are phasing that in the coming years. Thank you.

Antje Witte

Thank you very much. We have gone through the list of questions and of course we’re at the end of the allocated time. So I’m very thankful for all your participation. I wish you a good summer and please stay safe and well. Take care.

Operator

Ladies and gentlemen, this conference call and webcast is now finished. Thank you for joining and have a good day.



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