42 show that actual emissions have been reduced. Accordingly, the higher figures for Valby reflect a new calculation method and not an increase in emissions. As for wastewater emissions, the total consumption of energy and water did not deviate substantially from 2004. However, there are some local variations, most notably the (5%) reduction in energy consumption at Valby relative to 2004. This reduction is attributable to increasingly energy-efficient buildings and technology and to the fact that our employees have become more energy conscious. Lundbecks Valby headquarters represent about half of the companys total energy consumption. To further reduce energy consumption at our headquarters, meters have been installed in all buildings so that our employees can monitor the daily consumption. In the autumn of 2005, we held a number of after-work meetings to encourage energyconscious behaviour and remind everyone how they can help to reduce energy consumption on a busy workday. We will continue on this work in 2006. Health and safety statistics 2003-2005 2003 2004 2005 Lost time accidents Registered near-misses Indicator for prevention accidents: Near-misses per registered lost time accident Number of lost workdays per accident Frequency of accidents: Number of lost time accidents per million hours of work 19 41 2.2 8.1 4.53 32 78 2.4 9.7 8.83 25 160 6.4 9.0 7.19 methodology of involving managers and employees was developed and tested at the chemical production facility at Lumsås. In 2005, we launched a project at Valby with the same objective, leading to the development of new initiatives for active involvement of managers and employees in the fields of research and development, production and service. The activities involved more than 280 managers and employees. We posted a satisfactory trend in health and safety incidents in 2005. However, Lundbecks view is that any accident is one too many, so the objective of reducing the number of accidents and focusing on nearmisses will continue in 2006. Improved working environment One of the prerequisites for a healthy and safe working environment is constant attention to reducing risks and preventing accidents. The number of accidents at Lundbeck in recent years has been on a level with the industry average. For 2005, our target was to reduce the number of lost time accidents relative to 2004, and we achieved that goal. The number of lost time accidents fell from 32 to 25 in 2005, and most of the lost time accidents were less serious. Another target was to reduce the frequency of accidents, in other words to reduce the number of lost time accidents per million hours of work compared with 2004. As appears from the table, we also achieved this goal in 2005. The prevention of accidents requires reflection on the part of our managers and employees. In recent years, Lundbeck has improved the system for following up on accidents. Among other things, we have facilitated the process in which employees register near-misses, and this allows us to solve the problems before they develop. To retain this focus, in 2005 Lundbeck pursued the goal of registering at least five near-misses per registered lost time accidents. As appears from the table, we achieved this goal for 2005 by a wide margin. This indicator for the prevention of accidents has shown a positive trend in recent years. Obviously, it is paramount that we use and disseminate the accumulated knowledge. In 2004, Lundbeck took part in a project under the auspices of Industriens Branchearbejdsmiljøråd (a board that advises industry on matters related to health and safety), in which a Safety first ­ also in construction projects Lundbecks constantly developing business involves a large number of construction projects at our sites. The safety of the construction workers is important to Lundbeck and we therefore help them by providing information and guidance and by lending out safety equipment. In 2005, Lundbeck introduced a new safety movie at our Valby headquarters to ensure that all external builders are aware that safety is a top priority at Lundbeck before they start working at one of our sites. In recent years, we have witnessed a positive safety trend for our external contractors. Nevertheless, a tragic accident occurred at a construction site at Lundbeck in Valby, resulting in the death of a construction worker. After this accident, we actively teamed up with our contractors to further increase focus on safety among their employees. Efficient strategy The strategy for Lundbecks health, safety and environment initiatives for the period 2005 to 2010 has been successfully implemented. All targets defined for 2005 were met. The activities involved employees and managers from all areas of our business, leading to environmental gains and enhancing the working environment for our employees. ANNUAL REPORT 2005 We improve the quality of life for those suffering from psychiatric and neurologi 2005 IN BRIEF Financial ratios DKKm Revenue by geography, DKKm 9,070 1,782 2,170 1,589 7.11 2.10 20 4 CONTENTS Overskrift Financial performance Financial forecast and targets Europe ­ Lundbecks large Lundbeck Annual Report 05 2-3 5 lundbeck.com Financial figures in Excel On Lundbecks website you 6 Financial performance in 2005 2005 was an eventful and financially satisfactory year for Lundbec Lundbeck Annual Report 05 4-5 7 1,488 million, corresponding to 16% of revenue. Depreciation and 8 lundbeck.com Annual reports going back 10 years In 1996, Lundbeck generated revenue of DKK 2,326 Lundbeck Annual Report 05 6-7 9 Financial forecast and targets Lundbeck deviates from previously 10 lundbeck.com Partner relationship Lundbeck collaborates with a number of partners both in the fi Lundbeck Annual Report 05 8-9 11 Europe ­ Lundbecks largest business area Revenue from our Europ 12 ! Facts on Cipralex® Cipralex® is the third-most prescribed original antidepressant in Europe. L Lundbeck Annual Report 05 10 - 11 13 14 Since CHMPs (Committee for Medicinal Products for Human Use, under EMEA) temporary suspension of Lundbeck Annual Report 05 12 - 13 15 The US market ­ a strategic opportunity Representing 45% of 16 Lexapro® website Forest Laboratories has set up a website for everyone who wishes to know more a Lundbeck Annual Report 05 14 - 15 17 A market share of 22.5% makes Zoloft® the current market lea 18 ! Partnership with Merck Lundbeck formed its alliance with Merck in February 2004 to develop and Lundbeck Annual Report 05 16 - 17 19 Under the terms of the agreement, Lundbeck will start buildi 20 International Markets ­ long-term potential Revenue from markets outside Europe and the USA ­ I Lundbeck Annual Report 05 18 - 19 21 In 2005, the International Markets were characterised by inc 22 ! Ebixa® for specialists Lundbeck has prepared a special website for GPs and specialists who wis Lundbeck Annual Report 05 20 - 21 23 Conditions in International Markets The protection of intell 24 Developing new pharmaceuticals Lundbecks long-term goal is to become the worlds leader in the f Lundbeck Annual Report 05 22 - 23 ! CNSforum Read more about research and development in drugs in 26 Bifeprunox is a new compound (a D2 and 5-HT1A partial agonist) in phase III clinical development Lundbeck Annual Report 05 24 - 25 27 lundbeck.com Research literature Lundbecks employees have au 28 Launched pharmaceuticals in the market First Approved, registration no of countries 2001 82 Com Lundbeck Annual Report 05 26 - 27 29 Corporate governance Control is good, trust is better The p 30 Corporate governance Corporate governance at Lundbeck On 6 October 2005, the Copenhagen Stock E Lundbeck Annual Report 05 lundbeck.com Position on corporate governance Lundbecks Supervisory Board 32 Supervisory Board Flemming Lindeløv Chairman Elected at the 1998 General Meeting Born 20 August Lundbeck Annual Report 05 30 - 31 33 Remuneration of and shares held by members of the Supervisor 34 Remuneration of and shares held by members of the Executive Management Remuneration paid to the Lundbeck Annual Report 05 32 - 33 35 Organisation 36 Risk management In the individual business units, Lundbeck takes a systematic approach to monit Lundbeck Annual Report 05 34 - 35 37 4. Risks associated with foreign currency, interest rate and 38 Developing global competencies Human resources (HR) play a key strategic role at Lundbeck. Duri Lundbeck Annual Report 05 36 - 37 ! Lundbeck sought after Lundbecks HR department received almost 40 International career Lundbeck has subsidiaries and representative offices in 55 countries around Lundbeck Annual Report 05 38 - 39 41 New health, safety and environment strategy successfully imp 42 show that actual emissions have been reduced. Accordingly, the higher figures for Valby reflect Lundbeck Annual Report 05 40 - 41 43 Other initiatives enhanced efficiency in Lundbecks health, s 44 A Strategy for Health, Safety & Environment Read more about Lundbeck Health, Safety & En Lundbeck Annual Report 05 42 - 43 45 Overview of strategic objectives 2005-2010, target status 20 46 Lundbeck Annual Report 05 44 - 45 47 Focus on creating shareholder value Lundbecks shares are li 48 ! Annual General Meeting Lundbecks Annual General Meeting will be held on 24 April 2006 at 4 pm Lundbeck Annual Report 05 46 - 47 49 Releases from H. Lundbeck A/S in 2005 No. Date 50 lundbeck.com Archive of financial information The Lundbeck website provides announcements to the FINANCIAL REPORT 2005 51 2 Summary for the Group 2001-2005 Income statement (DKKm) Revenue Profit before research and devel Lundbeck Annual Report 05 12 - 13 50 - 51 3 Share data Average number of shares (millions) Earnin 4 Lundbeck Annual Report 05 12 - 13 52 - 53 5 Income statement for the year ended 31 December 2005 6 Balance sheet at 31 December 2005 Assets Parent 2004 DKKm Parent 2005 DKKm Notes Group 2005 D Lundbeck Annual Report 05 12 - 13 54 - 55 7 Balance sheet at 31 December 2005 Equity and liabilit 8 Statement of changes in equity at 31 December 2005 Group 2004 Equity at 31.12.2003 Effect of IFR Lundbeck Annual Report 05 12 - 13 56 - 57 9 Statement of changes in equity at 31 December 2005 Pa 10 Lundbeck Annual Report 05 12 - 13 58 - 59 58 11 Cash flow statement for the year ended 31 Decembe 12 Note 1 1. Accounting policies The annual report of H. Lundbeck A/S is presented in accordance w Lundbeck Annual Report 05 60 - 61 13 carrying amount of investments in subsidiaries and equity at 14 Note 1 The consolidated financial statements are prepared by adding together uniform items and Lundbeck Annual Report 05 62 - 63 15 Derivative financial instruments Forward exchange contracts 16 Note 1 Research and development costs Research and development costs comprise expenses incurred Lundbeck Annual Report 05 64 - 65 17 protected by intellectual property rights, the maximum amort 18 Note 1 Investments in associates in the consolidated financial statements Investments in associ Lundbeck Annual Report 05 66 - 67 19 Share-based incentive programmes in which employees receive 20 Notes 1-3 Debt Mortgage debt and debt to credit institutions are recognised at the time of the Lundbeck Annual Report 05 68 - 69 21 2. Revenue Parent 2004 DKKm Parent 2005 DKKm Group 2005 DKKm 22 Note 3 3. Staff costs, continued Employees Parent 2004 Parent 2005 Group 2005 Group 2004 1,985 Lundbeck Annual Report 05 12 - 13 70 - 71 23 3. Staff costs, continued Warrant scheme for the Exe 24 Notes 3-4 3. Staff costs, continued Share price based plan for employees in foreign subsidiarie Lundbeck Annual Report 05 12 - 13 72 - 73 25 3. Staff costs, continued Executive Management Numbe 26 Notes 5-7 5. Audit fees Parent 2004 DKKm Parent 2005 DKKm Group 2005 DKKm Group 2004 DKKm 1.7 Lundbeck Annual Report 05 12 - 13 74 - 75 27 7. Tax on profit for the year Parent 2004 DKKm Paren 28 Note 8 8. Property, plant and equipment and intangible assets Group Land and buildings DKKm Pla Lundbeck Annual Report 05 12 - 13 76 - 77 29 Goodwill DKKm Patent rights DKKm Product rights DK 30 Note 8 8. Property, plant and equipment and intangible assets, continued Parent Land and buildi Lundbeck Annual Report 05 12 - 13 78 - 79 31 Goodwill DKKm Patent rights DKKm Product rights DK 32 Notes 8-9 8. Property, plant and equipment and intangible assets, continued Goodwill impairmen Lundbeck Annual Report 05 12 - 13 80 - 81 33 9. Investments in subsidiaries, continued Share of 34 Notes 10-11 10. Investments in associates 2005 Parent Parent Accumulated revaluation/ impairmen Lundbeck Annual Report 05 12 - 13 82 - 83 35 10. Investments in associates, continued Financial h 36 Notes 12-15 12. Inventories Parent 2004 DKKm Parent 2005 DKKm Group 2005 DKKm Group 2004 DKKm Lundbeck Annual Report 05 12 - 13 84 - 85 37 15. Provisions for pensions and similar liabilities 38 Notes 15-16 15. Provisions for pensions and similar liabilities, continued Furthermore, the Gro Lundbeck Annual Report 05 12 - 13 86 - 87 39 16. Provision for deferred tax Group Temporary diffe 40 Notes 16-18 16. Provision for deferred tax, continued Parent Temporary differences between asse Lundbeck Annual Report 05 12 - 13 88 - 89 41 17. Other provisions Parent 2004 DKKm Parent 2005 DK 42 Note 18 18. Mortgage and bank debt, continued Group Weighted average effective interest rate Fi Lundbeck Annual Report 05 12 - 13 90 - 91 43 18. Mortgage and bank debt, continued Parent 2004 DK 44 Notes 19-21 19. Treasury shares Parent and Group Shares of DKK 5 nom. Number Nominal value DKKm Lundbeck Annual Report 05 12 - 13 92 - 93 45 20. Contractual obligations, continued Other purchas 46 Note 22 22. Financial instruments Currency risks Net forward exchange contracts outstanding for Lundbeck Annual Report 05 12 - 13 94 - 95 47 22. Financial instruments, continued Trading part Ma 48 Note 22 22. Financial instruments, continued Credit risks The primary financial instruments sho Lundbeck Annual Report 05 12 - 13 96 - 97 49 22. Financial instruments, continued Interest rate r 50 Notes 23-24 23. Related parties Lundbecks related parties are - The companys principal sharehol Lundbeck Annual Report 05 12 - 13 98 - 99 51 23. Related parties, continued Transactions and bala 52 Notes 25-28 25. Earnings per share 2005 2004 Profit for the year (DKKm) Minority interests (DK Lundbeck Annual Report 05 100 - - 13 12 101 53 27. Working capital changes Parent 2004 DKKm Paren 54 Management statement We have today presented the annual report of H. Lundbeck A/S for 2005. The Lundbeck Annual Report 05 102 - - 13 12 103 55 Auditors report To the shareholders of H. Lundbec Lundbeck worldwide Parent company Denmark H. Lundbeck A/S Synthesis factories Denmark H. Lundbeck Design: Bysted A/S Photo: Thomas Busk Print: Quickly Tryk A/S March 2006 The specialist in psychiatry and pioneer in neurology H. Lundbeck A/S Ottiliavej 9 DK-2500 Copenhag