Today, manufacturers of generic products are allowed to market and sell generic Cipramil® in a number of European countries, provided that the processing method applied does not violate any of the many process patents held by Lundbeck. Lundbeck is not at the present time aware that any patent applications for the registration of generic Cipramil® have been filed. Against this background, Lundbeck does not anticipate any generic Cipramil® on the market until the end of 2000 or later. It is Lundbecks strategy to optimise the life cycle of Cipramil® in order to maintain and increase the turnover and market potential of the product as much as possible until such time when the company will launch a new and innovative product, which is to take place in connection with the global introduction of the S-enantiomer in 2002. Lundbeck is going to extend and optimise the life cycle of Cipramil® through focus on the markets in which the patent is in force longest and on the markets in which the company believes the product has most potential. This will also take place through approval of new indications and, finally, through continuous filing of new process patents for the protection of the production process. In a situation where the patent protection of a product such as Cipramil® will soon be discontinued, a number of enterprises will, one way or the other, make attempts to circumvent Lundbecks rights in order to be able to market and sell generic Cipramil®. It is Lundbecks policy to bring any such attempts before the courts of law, as Cipramil® in Lundbecks opinion in a number of areas ­ via a vast number of very complex patents and intellectual property rights ­ is protected against generic competition beyond the date at which the patent expires. Sale of Celexa® in USA Cipramil® is sold and marketed in USA by Forest Laboratories under the name of Celexa®. Celexa® was introduced in USA in September 1998. At the end of 1999, the market share held by Celexa® was 11% of first prescriptions for new SSRIs and 9% of all prescriptions for new SSRIs, making it the most successful introduction ever of an antidepressant in USA. Forest Laboratories has entered into a co-promotion agreement with Warner-Lambert, which has just been taken over by Pfizer. As Pfizer already have a product competing with Celexa®, Forest Laboratories is presently negotiating a termination of the agreement with Warner-Lambert. As a result, Forest Laboratories has already expanded its sales force from 850 to 1,425 sales people. Termination of Forest Laboratories cooperation with Warner-Lambert is therefore not expected to have any adverse impact on Celexa® sales in the US market. Serdolect® The marketing permission with regard to Lundbecks antipsychotic pharmaceutical Serdolect® is still suspended due to the European health authorities having doubts as to the safety of the product. At a meeting on 23 June 1999, the European health authorities discussed the matter and subsequently informed Lundbeck that the suspension of Serdolect® would be extended by another 12 months. In this period, Lundbeck is going to complete certain studies for purposes of further clarifying Serdolects safety profile. The company still finds that it is impossible to predict when, if ever, Serdolect® may again be marketed. New incentive plans To ensure that Lundbecks management and employees are focused on creating added value for the shareholders of the company, the company introduced an executive share option plan and issued employee shares in 1999. The executive share option plan comprises the Group management, managers in subsidiaries in Denmark and abroad as well as other key employees. The plan runs for a five-year period and comprises 45 executives. The options are earned by one-third a year over a period of three years, the first portion to be exercised in August 2000. The exercise price will correspond to the initial offering price (DKK 175 per share) plus a yield element of 10% per annum. In December 1999, all employees were offered employee shares. Employees in the Danish companies were granted shares, whereas employees in the foreign subsidiaries were offered a similar plan. The employee shares were offered at a price of DKK 52.50 per share. 97.8% of the Danish employees subscribed for shares in Lundbeck, while 93.5% of the foreign employees joined the foreign plan. In June 1999, Lundbeck purchased 500,000 of its own shares to secure and implement the share option plan. The cost of the shares was DKK 88 million. In the fourth quarter of 1999, the company purchased 185,000 of its own shares at a total cost of DKK 50 million to establish the foreign employee share plan. Environment Lundbeck aims globally to comply with the rules for Responsible Care® acceded to by CEFIC, although at least to act in conformity with the individual countries legislation in this area. Unproblematic year 2000 transition Since 1997, Lundbeck has been making preparations in order to ensure an unproblematic transition to year 2000. This end was attained, as the millennial change did not result in any significant problems for Lundbeck in Denmark or in the foreign subsidiaries. The total cost of Lundbecks year 2000 project did not exceed DKK 20 million in the period. The euro In 1998, Lundbeck adopted a euro strategy, according to which the subsidiaries in the euro countries will convert to the euro by 1 January 2001. The parent company will not convert to euro, unless Denmark joins the EMU cooperation. Prospects for 2000 Lundbeck expects sales of Cipramil® to continue to perform positively in 2000. The major European markets in France, Italy, Germany, Spain and the UK and in the two overseas countries Canada and Australia are expected to account for more than 70% of the growth. 10 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