Comments on the accounts Accounting policies Lundbecks accounts have been presented in accordance with the International Accounting Standards (IAS), and the accounting policies applied are consistent with those of the previous year. In 1998, IAS 14 concerning segment information was applied for the first time. Lundbeck will adjust its future accounting policies as new IAS standards become operative. Bond portfolio Lundbecks securities management is intended to ensure that the Groups liquid funds produce the best possible return without exposing the company to any unnecessary risk. In1998, the companys benchmark for the bond portfolio was bonds with a maturity of three years. Due to this focus, the portfolio has been maintained even during periods of major interest rate fluctuations. This has prevented inexpedient conversions in response to price movements which were already past. The amount placed in Danish bonds averaged DKK 622 million, producing a total return of DKK 48 million, including market value adjustments corresponding to a rate of return of 7.8% p.a. The modified interest rate risk expressed in terms of the BPV (Basis Point Value) indicates the expected price change on an interest rate increase of 1 percentage point. At year-end 1998, the BPV was 5.0, corresponding to an increase of 0.9 compared with the beginning of the year. An interest rate increase of 1 percentage point would lead to a reduction in the value of the portfolio of approx DKK 30 million. In 1998, the amount placed in the money market was on average DKK 149 million. The total interest income was DKK 6 million corresponding to a yield rate of 4.2% p.a. Loan portfolio The company has a number of loan facilities and loan offers which together with the companys cash and bond portfolio constitute the companys cash reserve. In 1998, the major part of the Groups loan portfolio was based on relatively short-term CIBOR-based (Copenhagen-Inter-BankOffered-Rate) loans because the intention was to repay most of the companys loans. Thus the largest mortgage credit loan of DKK 346 million and a small bank loan of DKK 9 million have been repaid. The Groups 20year loan is a fixed rate serial loan with a term to maturity of 13 years and a nominal interest rate of 5.7%. The nominal outstanding debt and the market value amount to DKK 28.7 million and DKK 30.7 million respectively. Lundbeck has a mortgage credit loan offer equal to an amount of DKK 346 million, ie DKK 295 million relating to 20year loans and DKK 51 million relating to 10-year loans. This offer was made on 31 December 1998 and is applicable for one year at a time. Short-term borrowing was favourable due to the relatively low short-term interest rate. The total financing cost was kept at a level below 4.8% p.a. Shareholders With reference to section 28A of the Danish Companies Act, it is disclosed that The Lundbeck Foundation, Ottiliavej 9, DK-2500 Valby, owns 100% of the share capital. Managing financial risks Lundbeck considers cash flow optimisation and currency and interest rate management to be an integral part of the overall financial management and continued in 1998 its efforts to optimise the Groups cash management. To ensure stability in the efforts to control interest rate and currency risks Lundbeck decided in 1998 to establish benchmarks, against which risk management is measured. The positive results will be used in connection with an expansion of the system in 1999. 22 Annual Report 1998 Contents Supervisory Board and Board of Management Its all about people Preface Group financial high Supervisory Board Arne V. Jensen (Chairman) Lars Bruhn (Vice-Chairman) Flemming Lindeløv Henrik Board of Management Erik Sprunk-Jansen President & CEO Flemming Juul Jensen Executive Vice Pres Lundbeck is a specialist in research, development, production and marketing of drugs for treatment o Preface Lundbecks coming flotation is the culmination of the very considerable development of the co Year 2000 under control There is much talk at the present time about the coming millennium and the a Report 1998 The years result The rapid expansion of the Lundbeck Group in recent years continued in Investments Capital investments in 1998 amounted to DKK 272 million. The biggest single investment w Sales ­ breakdown by product Partnerships In 1995, Lundbeck entered into an agreement with Forest L A decision has been made to build a new, 3,500 m2 building for Medicinal Chemistry Research. The bui Employees The average number of full-time employees in the Group rose by 283 in 1998 to a total of 2 Through organic growth and strategic measures, Lundbeck will continue building up a global network f The level of investment is expected to be higher in 1999 than in previous years. To meet the growing Accounts Summary for the Group 1993-1998 Profit and loss account (DKKm) Net turnover Profit before R&D co Ratios Net profit ratio (%) Return on assets (%) Return on equity (%) R&D costs as a percentage Comments on the accounts General The strong growth in turnover, which has characterised Lundbeck for Turnover (DKKm) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Cipramil®/Seropram®/Celexa® Serdolect®/Se Comments on the accounts Costs Total production, distribution and administration costs went up by 20 of using this drug and the compiled data in connection with a registration of the product for the in Comments on the accounts Cash flow (DKKm) 700 600 500 400 300 200 100 0 -100 -200 -300 -400 Cash fl Promonta Lundbeck Arzneimittel GmbH & Co. In 1994, H. Lundbeck A/S entered into an agreement wit Comments on the accounts Accounting policies Lundbecks accounts have been presented in accordance wi Currency risk The currency policy sets out the framework for the use of financial instruments, hedgi Comments on the accounts The incoming currency cash flows of H. Lundbeck A/S and its Danish subsidia Credit risk The principal financial instruments shown in the balance sheet are trade debtors, securi 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 Administration costs Administration costs comprise salaries for the management a Financial fixed assets Shareholdings in subsidiaries are stated in the parent companys accounts acco Profit and loss account for the year ended 31 December 1998 Parent company 1997 DKKm 1,720.3 619.2 2 Balance sheet at 31 December 1998 Assets Parent company 1997 DKKm 23.7 20.1 43.8 503.7 159.8 109.9 6 Balance sheet at 31 December 1998 Liabilities Parent company 1997 DKKm 110.0 77.7 1,323.5 1,511.2 19 Cash flow statement for the year ended 31 December 1998 Group 1998 DKKm 384.3 189.9 227.5 801.7 71.4 Signatures Copenhagen, 22 March 1999 The Supervisory Board and the Board of Management have today co Notes 1 Net turnover Parent company 1997 DKKm 289.8 1,306.3 58.0 66.2 1,720.3 26.5 25.5 1998 DKKm 28 Supervisory Board and Board of Management: Total fees to the parent companys Supervisory Board for t Notes 3 Writedowns and provisions in connection with Serdolect® Parent company 1997 DKKm 75.0 75.0 1 5 Audit fees Parent company 1997 DKKm 1998 DKKm Deloitte & Touche: Audit Fees for services other Notes 7 Financial items, net Parent company 1997 DKKm 34.8 2.5 30.6 12.1 80.0 20.6 7.1 34.6 23.2 0.7 8 Tax on the profit for the year Parent company 1997 DKKm 49.7 - 0.1 - 2.4 56.2 37.8 141.2 54.2 1998 Notes 9 Intangible and tangible fixed assets Group: Product rights DKKm Purchase prices at 1.1.1998 Land and buildings DKKm 656.1 - 0.9 - 2.6 35.3 0.1 687.8 139.2 32.8 0.1 171.9 515.9 Technical plant Notes 10 Shares in subsidiaries Total DKKm Book value at 1.1.1998 Capital contribution Declared divi 10 Shares in subsidiaries - continued Net asset value at 31.12.1998 DKKm H. Lundbeck A/S, Norway H. Notes 11 Other shareholdings and other receivables Parent company Other shareholdings Receivables fr 13 Capital and reserves Group: Share capital DKKm Capital and reserves at 1.1.1997 Adjustment due to Notes 14 Provisions for pensions and similar commitments Group: Most of the Groups employees are cov 15 Provisions for deferred tax Group: Temporary differences between calculations for accounting and Notes 15 Provisions for deferred tax - continued Parent company: Temporary differences between calcu 16 Other provisions Parent company 1997 DKKm 1998 DKKm 31.9 Provision for possible winding up of ong Notes 19 Contractual obligations Rentals and leasing obligations Lundbeck has commitments amounting 20 Contingent liabilities Letters of intent The parent company has issued letters of intent to subsi Notes 22 Segment information Primary segments: The company is only engaged in the business segment D 23 Adjustments Group: 1998 DKKm 123.9 15.1 50.9 189.9 1997 DKKm 107.4 2.4 109.8 Depreciation Increa Environmental report The Managements declaration To Lundbeck internal and external openness about th Environmental policy Our environmental policy, which guides all our activities, contains five pillar In the following we summarise Lundbecks environmental performance. Details of our activities at Valb The core of the management system is the systematic approach, which is applied to the continual effo In the EU, attention is being paid to the fate of drug residues in the environment. Under the auspic Lundbecks activities and production sites Research & development Chemical production: Lumsås and Net turnover (DKKm) 3,000 2,500 2,000 1,500 1,000 500 0 1994 1995 1996 1997 1998 The rapid growth e Solvent emission to the atmosphere Tonnes 120 100 80 60 40 20 0 1995 1996 1997 1998 Waste water 1,0 Human Resource Management Lundbeck wishes to provide an attractive and inspiring working environment 65 Research and Development Lundbeck aims to be a world leader within research and development of integ As a result of our targeted action within selected fields of research, we are today members of the i New paths to new pharmaceuticals In the last few years the selection of pharmaceutical candidates ha 69 Success in the USA In 1998 citalopram was successfully launched on the American market under the nam Sales of Celexa® since the introduction in September 1998 Number of new prescriptions 40,000 35,000 Lundbecks position in the global market The situation in the pharmaceutical market In 1997 the globa 73 Lundbecks products Lundbecks research is concentrated on the development of new and improved pharmac Lundbecks products Antidepressants Cipramil®/Seropram®/Cipram®/Celexa® (citalopram) Indication: depr Lundbeck worldwide For further information please see our homepage: www.lundbeck.com Parent company Hungary Lundbeck Hungary Ltd. Ireland Lundbeck (Ireland) Limited Italy Lundbeck Italia S.p.A. Latvia www.lundbeck.com 78 From electronic visiting card to active information channel In a world in which hardware is standard The Lundbeck Foundations Award for Outstanding Research The Lundbeck Foundations Award for Outstandi In the past 12 years, the Lundbeck Foundation research prize has been awarded to: 1987 P.V. Petersen Photos: Thomas Grøndahl, et al. Design and production: CreaVision Reproduction: Wilken Repro Printed H. Lundbeck A/S 9 Ottiliavej DK-2500 Copenhagen - Valby Denmark Tel: +45 3630 1311 Fax: +45 3630 19 Environmental report 1998 Lundbeck, Valby This report is part of the Lundbeck Groups environmental r Address H. Lundbeck A/S 9 Ottiliavej DK-2500 Copenhagen-Valby Telephone: +45 3630 1311 Company profi Soil contamination has been ascertained in connection with several building activities. Considerable Environmental performance This part is an account of Lundbecks activities at Valby in 1998. To cover The production gives rise to emission of solvents to the atmosphere and the waste water, but the maj Environmental index The environmental index expresses the environmental impact (i.e. resource consum Raw materials The consumption of raw materials in the pharmaceutical bulk production amounted to 204 Ventilation exhaust air from dust generating processes passes through absolute filters prior to emis Waste The 1998 chemical waste volume totalled 121 tonnes, which is 35% higher than in 1997. The rise Test animals The use of test animals is based on requirements from the public health authorities. An Environmental data Production (million packs) Raw materials for production (tonnes) Active pharmaceu Environmental report 1998 Lundbeck, Lumsås This report is part of the Lundbeck Groups environmental Address H. Lundbeck A/S 182 Oddenvej, Lumsås DK-4500 Nykøbing Sjælland Telephone: +45 5932 1171 Comp areas, the drawing up of targets and action plans, and the integration of health, safety and environ Environmental performance This part is an account of Lundbecks activities at Lumsås in 1998. To cove In relation to the output the production of active pharmaceutical ingredients requires a large numbe Water The water consumption at the Lumsås site totals 129,000 m3. Of this almost 115,000 m3 was raw Raw materials The consumption of raw materials amounted to 2,750 tonnes out of which 25 tonnes were During 1998 one breach of the regulatory limit values occurred. The average value for atmospheric em Waste water m 3 Waste Index: 1992=100 120 100 80 60 40 20 0 Chemical waste Tonnes 3,000 2,500 2,00 Noise The site has both mobile and fixed noise sources such as ventilation systems, compressors and Environmental data Production (equivalent tonnes) Raw materials consumption (tonnes) Organic solvent Environmental report 1998 Lundbeck, Seal Sands This report is part of the Lundbeck Groups environmen Address Lundbeck Pharmaceuticals Ltd. Seal Sands, Middlesbrough Cleveland TS2 1UB England Telephone: Environmental performance This part is an account of Lundbecks activities at Seal Sands in 1998. To In relation to the output the production of active pharmaceutical ingredients requires a large numbe The total energy consumption increased in 1998. However relative to production the consumption shows Atmospheric emission Solvents mainly deriving from filtration, drying and distillation processes con Chemical waste Chemical waste amounted to 1,248 tonnes, out of which around 30% were recycled to ena