Annual Report 1998 Contents Supervisory Board and Board of Management 2 It’s all about people 3 Preface 4 Group financial highlights 1994-1998 5 Report 1998 6 Six-year summary for the Group 1993-1998 14 Comments on the accounts 16 Accounting policies 26 Profit & Loss Account 31 Balance Sheet 32 Cash Flow Statement 34 Signatures of Supervisory Board and Board of Management 35 Auditors’ Report 35 Notes to the Accounts 36 Environmental Report 56 Human Resource Management 64 Research and Development 66 Success in the USA 70 Lundbeck’s position in the global market 72 Lundbeck’s products 74 Lundbeck worldwide 76 www.lundbeck.com 78 The Lundbeck Foundation’s Award for Outstanding Research 80 H. Lundbeck A/S Tel: +45 3630 1311 H. Lundbeck A/S Annual General Meeting will be held on 29 April 1999 at 3pm at Valby Hallen. 9 Ottiliavej Fax: +45 3630 1940 DK-2500 Copenhagen - Valby e-mail: [email protected] Denmark Reg. no. 22.472 Contents Supervisory Board and Board of Management 2 It’s all about people 3 Preface 4 Group financial highlights 1994-1998 5 Report 1998 6 Six-year summary for the Group 1993-1998 14 Comments on the accounts 16 Accounting policies 26 Profit & Loss Account 31 Balance Sheet 32 Cash Flow Statement 34 Signatures of Supervisory Board and Board of Management 35 Auditors’ Report 35 Notes to the Accounts 36 Environmental Report 56 Human Resource Management 64 Research and Development 66 Success in the USA 70 Lundbeck’s position in the global market 72 Lundbeck’s products 74 Lundbeck worldwide 76 www.lundbeck.com 78 The Lundbeck Foundation’s Award for Outstanding Research 80 H. Lundbeck A/S Annual General Meeting will be held on 29 April 1999 at 3pm at Valby Hallen. Supervisory Board Arne V. Jensen Lars Bruhn Flemming Lindeløv (Chairman) (Vice-Chairman) Henrik Hertz Bent Jakobsen Sven Dyrløv Madsen Jan Gottliebsen Birgit Bundgaard Torben Skarsfeldt (Elected by employees) Rosenmeier (Elected by employees) (Elected by employees) Board of Management Erik Sprunk-Jansen President & CEO Flemming Juul Jensen Executive Vice President Commercial Operations Claus Bræstrup Executive Vice President Research & Development Senior Vice Presidents: Ole Antonsen Harald Conradi-Larsen Stefan D. Buch Licensing Division Human Resource Management Corporate Finance Lars Bang Stig Løkke Pedersen Hans Henrik Munch-Jensen Supply Operations Corporate Affairs Corporate Communications & Engineering Lundbeck is a specialist in research, develop- Thanks to the high quality of our products, Our role in that connection is to develop ment, production and marketing of drugs for Lundbeck is today an internationally well more effective drugs with fewer side-effects, treatment of diseases of the central nervous established and respected company whose to work for greater acceptance of psychiatric system. activities are all characterised by quality, diseases and, especially, to help disseminate creativity and high ethical standards. knowledge globally of the latest treatment Respect is not something one gets but concepts. something one earns. It is of vital importance for Lundbeck to improve the quality of life of people suffering from psychiatric and neurological diseases. We do so in close co-operation with psychiatrists and neurologists. It’s all about people 3 Preface Lundbeck’s coming flotation is the culmina- The real breakthrough came at the end However, 1998 also brought tion of the very considerable development of of the 1980s, when Cipramil® was approved some disappointments the company in the past 10 years. The basis for sale – first in Denmark and later in 66 of this development has been – and remains countries around the world. In a very surprising move, the Dutch author- – a focused strategy of concentrating the ities decided in November to suspend Group’s research resources on the develop- In step with the constantly growing inter- marketing permission for Lundbeck’s ment of new and innovative pharmaceuticals national success, Lundbeck has in the past antipsychotic drug Serdolect®. The reason for treatment of diseases of the central 10 years increased the number of its sub- given was that Serdolect® was suspected nervous system (CNS). So although, inter- sidiaries from nine in 1987 to 30 today. of causing serious cardiac problems for a nationally, Lundbeck is only a small pharma- The Group thus now has its own subsidiaries very small group of schizophrenic patients. ceutical company, the Group is among the in all European countries, Australia, New Zea- world leaders within CNS research. land, South Africa and Canada. The Dutch initiative led to several other European countries following suit, and on 26 As a result of our success, the Group has November Lundbeck decided to withdraw increased its turnover in the last 10 years USA entry in 1998 Serdolect® temporarily in all countries in from DKK 524 million in 1987 to DKK 3.2 order to give the European health authorities billion in 1998, while the pre-tax profit in The Group achieved its first-ever approval in time to analyse the many scientific studies the same period has increased from DKK the USA for a product preparation in 1998. and reports on Serdolect® prepared by inter- 9 million to DKK 446 million in 1998. In cooperation with Forest Laboratories, our national, independent experts – cardiologists, strategic partner in the USA, we achieved epidemiologists and psychiatrists. Ever since the mid-1950s the Group has the approval of US Food and Drug Admini- been centred on research. The constant focus stration (FDA) for Cipramil®. The preparation Regardless of the fact that Serdolect® in on research and development has enabled is being marketed in the USA under the Lundbeck’s opinion is a good and safe drug Lundbeck to develop and market a substan- name Celexa®. for treatment of schizophrenia, the ongoing tial number of new and innovative drugs for arbitration process could result in the drug treatment of psychiatric diseases. Sales began on 1 September with a sales being withdrawn from the market. force of 1,500 medical representatives. In as little as four months, Celexa® achieved a market share of 4.3% of new prescriptions, making it one of the most successful intro- ductions on the American market for several years. In 1998 Lundbeck entered into strategic cooperation with Forest Laboratories. This agreement and the launch of Celexa® in the USA represent a milestone in the history of Lundbeck. We now have a solid footing in the world’s largest and most attractive single market, where – thanks to our partner’s unique knowledge of the market - we have ensured ourselves an effective sales channel. 4 Year 2000 under control All decentralised systems will be tested and systems will not be able to cope with the analysed by the end of the first half of 1999. change. There is much talk at the present time about the coming millennium and the associated We have contacted all our main suppliers But I am convinced that year 2000 will be computer problems. and been assured by them that their systems a challenge for Lundbeck, not a problem. are year 2000 compliant. A challenge which I am sure will be tackled At Lundbeck, thanks to a timely and effective successfully by Lundbeck’s many skilled and “Year 2000 project”, our central IT systems Although Lundbeck in this way has taken all loyal employees around the world. have already all been analysed, updated and possible measures to protect the company made year 2000 compliant. against the technical consequences of the turn of the millenium, we evidently cannot Erik Sprunk-Jansen issue any guarantee that a few peripheral President Key figures for the Group1994 -1998 1994 1995 1996 1997 1998 1998 DKKm EURm* Net turnover 1,336 1,849 2,324 2,662 3,231 433 Research and development costs 189 257 334 433 619 83 Operating profit 174 223 337 441 384 52 Profit after tax 112 166 237 297 313 42 Total assets 1,536 2,032 2,452 2,756 2,981 400 Capital and reserves 887 1,020 1,257 1,515 1,777 238 Cash flow from operating and investing activities -28 -174 60 226 414 56 Capital investments, gross 219 284 224 188 272 36 % Net profit ratio 13.0 12.1 14.5 16.5 11.9 11.9 Return on assets 20.4 24.2 24.3 26.0 26.4 26.4 Return on equity 13.1 16.4 20.8 21.3 18.7 18.7 Solvency ratio 57.5 50.0 51.1 54.8 59.5 59.5 DKK Earnings per share ** 19.73 28.27 42.93 53.44 55.82 7.48 Dividend per share ** 0.00 4.00 0.00 6.36 8.18 1.10 5 Cash flow per share ** 34.85 18.76 50.16 74.07 123.80 16.60 Net asset value per share ** 160.49 184.76 227.69 274.76 322.40 43.22 Average number of employees 1,205 1,545 1,829 2,003 2,286 *) Converted to “EUR exchange rate” per 31 December 1998 at 745.94. **) Calculation based on DKK 20 shares. Definitions ref. page 15. Report 1998 The year’s result The pre-tax profit rose to DKK 446 million As a consequence of the agreement between from DKK 438 million in 1997 – an increase Forest and Lundbeck to collaborate on the The rapid expansion of the Lundbeck Group of 2%. development of three Lundbeck products, in recent years continued in 1998. Turnover Lundbeck received a payment of DKK 219 for the year amounted to DKK 3.2 billion The profit for 1997 was affected by non- million in 1998. The amount covers costs – up 21% on 1997.