Accounting Policies
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CONTENTS Supervisory Board and Board of Management . 4 The Supervisory Board’s report. 7 Art or therapy . 10 A step in the right direction. 14 Natural considerations . 16 Focus on Parkinson’s disease . 18 A product with potential . 20 It’s all about prevention . 22 Lundbeck’s products . 24 Lundbeck worldwide . 26 The Lundbeck Foundation Research Prize . 28 Summary for the Group 1987-1996 . 30 Comments on the accounts . 32 Financial comments . 36 Accounting policies . 38 Profit & loss account . 41 Balance sheet, assets. 42 Balance sheet, liabilities . 43 Statement of sources and application of funds . 44 Signatures of the Supervisory Board and the Board of Management . 45 Auditors’ report. 45 Notes . 46 Integrated therapy . 59 Front cover: Lundbeck sponsors several popular travelling exhibitions of art created by psychiatric patients. We have chosen to show some of these works in this year’s annual report. Concerning the connection between art H. Lundbeck A/S’s annual general and psychiatry, readers are referred to meeting will be held at Valby Hallen the article ”Art or Therapy” on page 10. at 3pm on 16.5.1997. 2 SPECIALISTS IN PSYCHIATRY PIONEERS IN NEUROLOGY As a specialist, one must constantly At the same time, Lundbeck is main- seek knowledge - deep, thorough and taining and developing the research on extensive knowledge. Lundbeck does which its activities are founded. We that. We are specialists in psychiatry, must have the ability and the will to with everything that implies in the way explore the complex biochemical reac- of advantages and obligations. tions that take place in the central nervous system (CNS). That calls for Lundbeck has long been internationally both creativity and courage. We must recognised for its work to improve the also constantly add to our theoretical quality of psychiatric treatment in close and practical ballast in order to be able collaboration with psychiatrists and to translate research results into effec- other health-care professionals. We tive pharmaceutical products. have developed more effective drugs with fewer side-effects; in cooperation In focusing on the central nervous with our partners in the health sector, system, Lundbeck has become not just we have introduced quality manage- a specialist in psychiatry, but also a ment concepts to promote individual pioneer in neurology. We believe that it therapies on the basis of integrated is a combination of specialised know- health, social and financial considera- ledge and creative dynamism that leads tions; and we have tried to improve the to major breakthroughs in the treat- situation of psychiatry by providing ment of psychiatric and neurological funding for a range of research and diseases. development projects. As a specialist in psychiatry, Lundbeck places the devel- Erik Sprunk-Jansen opment of pharmaceuticals into a President broader perspective - for the benefit of both patients and their families and employees in the health sector. Anita Derksen, 96 x 72 cm. 3 SUPERVISORY BOARD Arne V. Jensen (Chairman) Jørgen Fakstorp (Vice-Chairman) Lars Bruhn Henrik Hertz Bent Jakobsen Sven Dyrløv Madsen Birgit Bundgaard Rosenmeier (Elected by employees) Jan Gottliebsen (Elected by employees) Torben Skarsfeldt (Elected by employees) 4 BOARD OF MANAGEMENT Erik Sprunk-Jansen President Eva Steiness Executive Vice President Research and Development Senior Vice President: Vice Presidents: Ole Antonsen Ib D. Christoffersen Ole Moestrup Commercial Operations Corporate Finance Strategic Marketing Harald Conradi-Larsen Carl-Emil R. Sandberg Subsidiaries Production & Logistics Jacques Mascaro Søren H. Vogelsang Regulatory Affairs, Danish Operations Pharmacovigilance & Quality 5 2,400 Net turnover 2,326 Net turnover 2,200 (DKKm) 2,000 1,800 1,853 1,600 1,400 1,330 1,200 1,000 934 800 768 600 400 200 0 1992 1993 1994 1995 1996 1,000 25% Profit before research and Profit before research 900 22.5% and development costs development costs 800 (DKKm) 19% 20% Research and development costs 700 17.5% 641 Operating profit 17% 600 14% 15% 14% 14% 12.5% 500 449 Reserach and development 400 10% 322 332 costs as % of turnover 310 7.5% 300 253 202 204 200 184 181 186 5% 133 150 100 2.5% 54 30 0 0% 1992 1993 1994 1995 1996 2,400 Capital structure Non-interest-bearing debt 2,200 (DKKm) 451 2,000 Interest-bearing debt 1,800 404 Provisions 1,600 585 Capital and reserves 1,400 490 341 139 1,200 259 224 102 1,000 201 82 800 108 128 31 48 1,153 600 939 828 400 721 739 200 0 1992 1993 1994 1995 1996 6 THE SUPERVISORY BOARD’S REPORT For these reasons, the Supervisory Board recommends to the General Meeting that DKK 5.7 million of H. Lundbeck A/S’s profit for the year of DKK 217.6 DEVELOPMENT OF STRATEGY million be paid to the employees in the ALLIANCES parent company as profit sharing and The rules of play for pharmaceutical that DKK 211.9 million be transferred to Recognising that critical mass is essen- companies have changed radically in the reserves. tial in the present competitive situation, the last few years. The sharper focus Lundbeck attaches importance to stra- on health costs, the trend towards con- tegic alliances. In the USA, we have centration, shorter product life cycles, established alliances that will mean and increased competition are realities rapid development and marketing of to which every company has to adjust. Cipramil®/Seropram® and in North and SALES South America. The USA launch of In those same years, Lundbeck has Cipramil®/Seropram® is planned for adjusted its business strategy to the The 26% improvement in turnover was mid-1998 through Forest Laboratories new market situation with the aim of due primarily to the continued success Inc. consolidating and developing its posi- of Cipramil®/Seropram®, which has tion as a leading European supplier of given Lundbeck a leading position in psychopharmacological drugs and of the market for antidepressants. This establishing a platform for positioning product is the Group’s greatest success. Sales - breakdown by product itself within neurology. With this, Sales are still growing - compared with Lundbeck is seeking to strengthen its 1995 they have grown by more than niche position and to broaden its focus 50% - and are expected to continue on CNS to include psychiatry and the doing so because the product was only pioneering field of neurology. introduced in the big European markets, the U.K., France and Italy, in 1995. In 1996, Cipramil®/Seropram® was mar- keted in six new countries, including Germany, Spain and Ireland. In all, it RESULT FOR THE YEAR has now been registered in 49 countries. Lundbeck has achieved strong growth 1996 was also the year in which Serdo- in the last few years, and 1996 was no lect®/Serlect® was approved for mar- Cipramil®/Seropram® 53% exception. Turnover amounted to DKK keting in 13 EU countries after a record- Other antidepressants 9% 2,326 million, a 26% improvement on breaking development time of only six Serdolect®/Serlect® 2% 1995. The pre-tax profit amounted to years. Serdolect®/Serlect® belongs to Other antipsychotics 22% DKK 311 million, 36% up on 1995. The the new generation of antipsychotic Other turnover 14% post-tax profit was DKK 219 million, drugs, which have fewer side-effects against DKK 153 million in 1995, than the classic antipsychotic drugs on including a minority interest in the the market. Serdolect®/Serlect® will be joint venture Promonta-Lundbeck. given a broad launch in 1997. Sales - breakdown by market The result is very satisfactory, particu- Lundbeck’s established products are larly in view of Lundbeck’s growth, still doing well. That applies particu- which requires an enormous input of larly to the antipsychotic products resources. The growth in the Group Fluanxol®/Depixol® and Cisordinol®/ made great demands on all the em- Clopixol® in depot form. ployees in the past year and could not have been achieved without their com- Lundbeck now has active sales subsidi- mitted input and willingness to adapt aries throughout Western Europe with to change. the exception of Portugal. In 1996, we established subsidiaries in Slovenia and Latvia. However, the rate of expansion was reduced in 1996 because we had Europe 90% achieved our aim of making Europe our Outside Europe 10% home market. The challenge in the im- mediate future is to ensure continued progress in the big European markets and at the same time to expand our activities in Eastern Europe. 7 2,400 Average number of employees Outside Denmark 2,200 2,000 Denmark 1,800 1,600 770 1,400 593 1,200 395 1,000 250 800 245 600 952 1,059 728 810 400 642 200 0 1992 1993 1994 1995 1996 300 24% Capital expenditure Capital expenditure 281 275 22% (DKKm) 250 20% 19% 225 18% Capital expenditure as 15% 231 200 15% 16% % of net turnover 15% 175 14% 203 150 12% 145 141 125 10% 10% 100 8% 75 6% 50 4% 25 2% 0 0% 1992 1993 1994 1995 1996 1,200 Cash and securities Cash and 1,100 securities (DKKm) 1,000 Interest-bearing 900 net cash 800 700 655 600 554 472 500 445 404 400 337 276 300 248 200 64 100 70 0 1992 1993 1994 1995 1996 8 THE SUPERVISORY BOARD’S REPORT The development of Serdolect®/Serlect® Our research and development activities for the American market has taken place are concentrated on depression, psy- in cooperation with Abbott Laboratories chosis, dementia, epilepsy and Parkin- Inc., which has made a very significant son’s disease. Further activities have contribution to the project. In Japan, been initiated with the aim of getting PROSPECTS FOR 1997 the drug is being developed for the panic disorder included in the indica- local market in cooperation with tions for Cipramil®/Seropram®.