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Profit before tax was DKK 926 million, while profit after tax and minority shareholders was DKK 616 million, or twice as much as in 1998. Investments Total net investments increased from DKK 267 million in 1998 to DKK 461 million in 1999. Investments were made in both tangible assets with the primary purpose of expanding the companys research and production capacity, and in financial assets. As a consequence of the cooperation agreements made, Lundbeck considers it an opportunity also to invest in its business partners. In 1999, the company therefore invested DKK 86 million in Cephalon, Inc., corresponding to 1.0 million shares or approx. 3% of Cephalons share capital. Cash flows Lundbeck focuses on ensuring a high cash flow from operating activities to be able to invest in the continuing expansion of the company. Lundbecks cash flow from operating activities went up DKK 155 million to DKK 836 million in 1999. Capital and reserves As a result of the profit for the year (DKK 616 million) and the revenue resulting from the public offering and the issue of employee shares (DKK 514 million), capital and reserves totalled DKK 2.9 billion at year-end 1999 against DKK 1.8 billion at year-end 1998. Dividend The Supervisory Board proposes to the general meeting of shareholders distribution of a dividend of DKK 2.25 per share to the shareholders, or DKK 130 million. The distribution rate relative to the profit after tax is 21.1%, which is in accordance with the companys dividend policy to distribute dividend at a rate of between 15 and 25% each year. Objectives and strategy Lundbeck was floated on the Copenhagen Stock Exchange on 18 June 1999 following a successful sale of 20% of the companys shares to national and international investors. The flotation of Lundbeck is a natural step in the companys continued expansion. As a consequence of the flotation, Lundbeck was afforded yet another possibility of acquiring capital for continued growth. In addition, the flotation has contributed to raising the profile of Lundbeck nationally and internationally. In the prospectus, which was prepared and published in connection with the flotation, Lundbeck presented its strategy for the next few years: Continued focus on CNS research, continued expansion and strengthening of research activities, increased in-licensing and active Life Cycle Management efforts to defend Cipramils market position. Continued focus on CNS Lundbeck aims to be a world leader within research and marketing of integrated treatment concepts for psychiatric and neurological diseases. Lundbeck is today the only pharmaceutical company concentrating its research resources on the development of new and innovative pharmaceuticals for treatment of diseases of the central nervous system (CNS). Traditionally, Lundbeck has been focusing primarily on the psychiatric field. Lundbecks strategy is to maintain its focus on research and development of drugs for treatment of psychiatric diseases, while at the same time extending its focus also to include pharmaceutical preparations for treatment of neurological diseases. The neurological field is characterised by a large number of unfilled needs; and Lundbeck will, based on its core competencies with brain research, be able to achieve far-reaching synergy effects within not only research and development, but also within marketing and sales of innovative neurological drugs. Expansion of research Another strategic aim pursued by Lundbeck is to continuously expand the companys research activities to be able to market a new and innovative phamaceutical preparation every third or fifth year globally. Such an ambitious aim requires allocation of considerable resources to research, both financial and human. Accordingly, research and development costs increased in 1999 to a level, which the management considers to be the optimum allocation. Costs now account for approx. 20% of the turnover. Against this background, Lundbeck applies relatively more resources towards research and development than the pharmaceutical industry on average. Combined with the fact that the company concentrates its research resources on CNS, Lundbeck, despite its size, has in fact a research budget that measures up to even very large enterprises efforts within the CNS field. Lundbeck intends to enter into agreements on research and development collaboration with other pharmaceutical and biotechnological enterprises in the next few years. In 1999, Lundbeck entered into a number of research and development agreements, with, among others, Cephalon, Inc., Teva Pharmaceuticals Industries Ltd. and Novo Nordisk A/S. Considerable human resources were allocated to research in 1999. Lundbecks research activities were strengthened during the year through the employment of nearly 100 researchers and technicians and through the establishment of two new biological research divisions. Lundbeck carried out major expansions of its research facilities, and new facilities for pharmacological research were put into operation in the first quarter of 1999. Construction of new facilities for medicinal chemistry research was initiated in the second quarter of 1999, and the facilities will become operational in the second quarter of 2000. Lastly, Lundbecks agreement with Novo Nordisk A/S on the establishment of a common library of chemical substances to be used for High Throughput Screening has made Lundbeck able to operate on a high international standard in this technological field as well. Strengthened in-licensing Throughout a number of years, the pharmaceutical industry has been characterised by an increasing degree of cooperation, partly between established pharmaceutical enterprises, and partly between biotechnical and pharmaceutical enterprises. In 1999, Lundbeck enterered into six licensing agreements ranging from pre-clinical projects to products in phase III. In-licensing of new projects and products will ­ besides contributing to maintaining Lundbecks rapid growth ­ strengthen the scope of the companys product portfolio and 8 Report Annual Report 1999 1999 was both an eventful and a successful year for H. Lundbeck A/S. The years biggest event was the Supervisory Board Arne V. Jensen (Chairman) Flemming Lindeløv Lars Bruhn (Vice-Chairman) Henrik He Board of Management Erik Sprunk-Jansen President & CEO Flemming Juul Jensen Executive Vice Pres Contents The basis of our activities Group financial highlights 1995-1999 Report 1999 An Essay on T Acalypha wilkesiana (East Indies). Copperleaf is a foliage plant that is related to the common Poins The basis of our activities The basis of our activities is the brain and its functions ­ and the dis Report 1999 Significant events in the financial year The substantial growth in recent years resultin Profit for the year (DKKm) 650 600 550 500 450 400 350 300 250 200 150 100 50 0 1995 1996 Profit for Profit before tax was DKK 926 million, while profit after tax and minority shareholders was DKK 616 Research and development costs (DKKm) 900 800 700 600 500 400 300 200 100 0 1995 1996 1997 1998 1999 Today, manufacturers of generic products are allowed to market and sell generic Cipramil® in a numbe Income from Celexa® (DKKm) 800 700 600 500 400 8% 300 200 100 0 1996 1997 1998 1999 6% 4% 2% 0 9% 18 Agaricus bisporus (Europe). The Portobello mushroom is an ordinary, brown garden mushroom that is gr expressions, their peculiar qualities. Memory can think of a name. But for recollection the name is Even in dreams, we seek meaning and coherence through the stories of the dream. There are dreams tha Oreocereus doelzianus (The Andes). The hairs protect the cactus against the cold and the strong morn It seems to me that more than memory and recollection it is the ethical impulse that makes the human A multitude of nuances in language speak of fundamental moods that derive from the brain. Mood, humo Fucus serratus. Serrated wrack. A form of brown alga. Common in Danish waters. 18 Readers who do not share Kierkegaards religious view of life can nevertheless not get away from Kier Research and Development thus strengthened our total development portfolio in 1999, partly through p Rebutia heliosa (Bolivia). A rather hardy, conical cactus that has adapted to great heights and a ha progress with the aim of uncovering new molecular mechanisms involved in the development of depressi Development portfolio Compound Almotriptan S-enantiomer Rasagiline TV 1203 Siramesine Gaboxadol Lu 3 Cipramil® prevents depression Lundbeck has carried out two studies of the prophylactic effect of Cip The patients were then randomised ­ in accordance with a code ­ for double-blind treatment with eith Citalopram benefits society Depression is a severe disease that results in a massive loss of working Alocasia odora (tropical Asia). Green foliage plant. Grown for its appearance. and 60 years of age, Fucus serratus. Serrated wrack. A form of brown alga. Common in Danish waters. Lundbeck on the worl Despite the growing use of antidepressants, the market will be affected in the years ahead by the ex In the 1960s, treatment of anxiety was revolutionised with the introduction of benzodiazepines, whic prove diagnosis of the disease. It is estimated that, within any given year, around 25% of patients Hibiscus (tropical plant). Better known in Denmark as the Hawaii flower. The beautiful stamens can b Lundbecks products Antidepressants Cipramil®/Seropram®/Cipram®/Celexa®/Sepram® (citalopram) Indicati Brassica oleracea. Better known as red cabbage. An edible cultivated plant that has been known since Growth in a good environment Lundbeck regards it as vital that fast growth and continuous improvemen Accounts Accounts Accounts Summary for the Group 1993-1999 Profit and loss account (DKKm) Net turnover Profit before research Ratios Net profit ratio (%) Return on assets (%) Return on equity (%) R&D costs as a percentage Comments on the accounts Accounting policies The Accounts have been prepared in accordance with Int In addition, Lundbeck expected a profit before tax above DKK 900 million, which is consistent with t Comments on the accounts Costs Lundbecks total costs, exclusive of financial items and tax, were DK DKK 7 million in 1999, against a net loss of DKK 2 million in 1998. Net currency income included in Comments on the accounts Cash flow Lundbecks cash flow from operating activities amounted to DKK 83 The Supervisory Board proposes distribution of a dividend of DKK 2.25 per share, or DKK 130 million. Comments on the accounts Incentive plans Three new incentive plans were introduced at Lundbeck in c The company has authorisation to grant 500,000 options. On 17 June 1999, the company purchased 500,0 Comments on the accounts Managing financial risks Lundbecks growing internationalisation through th Foreign currency risk Foreign currency exposure is a result of Lundbecks international activities. U Accounting policies General The annual accounts and the consolidated accounts have been prepared in Tax The parent company is jointly taxed with the two Danish and some of the foreign subsidiaries. Th Accounting policies Public loans and grants State development loans with a forgivable clause are re The net revaluation of shareholdings in subsidiaries is taken to the reserve for net revaluation acc Accounting policies Cash flow statement The consolidated cash flow statement is presented according Profit and loss account for the year ended 31 December 1999 Parent Company 1998 DKKm 2,095.5 702.5 Balance sheet at 31 December 1999 Assets Parent Company 1998 DKKm 15.7 25.7 41.4 503.8 168.6 113.7 Balance sheet at 31 December 1999 Liabilities Parent Company 1998 DKKm 110.0 205.9 1,457.3 45.0 1,8 Cash flow statement for the year ended 31 December 1999 Group 1999 DKKm 862.3 153.0 - 4.0 1,011.3 9 Signatures Copenhagen, 29 Februrary 2000 The Supervisory Board and the Board of Management have tod Notes 1. Net turnover Parent company 1998 DKKm 281.4 1,490.9 253.1 70.1 2,095.5 1999 DKKm 308.8 1,7 2. Staff costs - continued Incentive plans: In 1999, the company introduced a share option plan for Notes 3. Writedowns and provisions for Serdolect® Parent company 1998 DKKm 1999 DKKm The years writ 5. Audit fees Parent company 1998 DKKm 1999 DKKm Deloitte & Touche: Auditing services Non-auditi Notes 6. Financial items, net Parent company 1998 DKKm 49.3 5.1 43.7 12.8 110.9 18.9 8.4 23.9 4.8 2 7. Tax on the profit for the year Parent company 1998 DKKm 131.6 - 2.2 1999 DKKm 154.0 1.4 Current t Notes 8. Intangible and tangible fixed assets Group Product rights DKKm Purchase price at 1.1.1999 Land and buildings DKKm 687.8 1.8 - 0.8 194.7 5.3 878.2 171.9 0.2 43.5 4.2 211.4 666.8 Plant and ma Notes 9. Shares in subsidiaries Total DKKm Book value at 1.1.1999 Adjustment due to changed account 9. Shares in subsidiaries - continued Currency Nominal capital `000 200 1,000 200 400 5 60 500 5,000 Notes 10. Other shareholdings and other receivables Parent company Other shareholdings DKKm 9.6 94. 13. Capital and reserves Group Share capital DKKm Capital and reserves at 1.1.1998 Adjustment due to Notes 13. Capital and reserves - continued Parent company Share capital Share premium Reserve for n 14. Provisions for pensions and similar commitments Group The majority of the employees of the Group Notes 15. Provisions for deferred tax Group Temporary differences between calculations for accounti 15. Provisions for deferred tax - continued Parent company Temporary differences between statements Notes 16. Other provisions Group Share options for Group management and key employees DKKm Provisio 17. Long term debt Parent company 1998 DKKm 20.1 1999 DKKm 15.9 Mortgage debt due after five years 1 Notes 19. Contractual obligations Rental and leasing obligations Lundbeck has commitments amounting 20. Contingent liabilities Letters of intent The parent company has issued letters of intent to subs Notes 21. Financial derivatives Currency risk Net forward exchange contracts outstanding at 31 Dece 21. Financial derivatives - continued Interest rate risk The interest rate risk has been calculated Notes 22. Related party transactions Lundbeck defines related parties as: - The companys principal 24. Earnings per share (EPS) Earnings per share (EPS) is calculated as: (profit after tax and minori Shareholder Information Market value 1999 The allotment of shares in connection with the flotation Salvinia natans (tropical/subtropical plant) and Lemna (worldwide). Floating water ferns and duckwee Lundbeck worldwide For further information please see our homepage: www.lundbeck.com The UK Region Photos Thomas Grøndahl, Rigmor Mydtskov, et al. Design and production CreaVision A/S Reproduction No H. Lundbeck A/S 9 Ottiliavej DK-2500 Copenhagen - Valby Denmark Tel: +45 3630 1311 Fax: +45 3630 19