Accounting policies General The annual accounts and the consolidated accounts have been prepared in accordance with the Danish Company Accounts Act, current Danish accounting guidelines, current International Accounting Standards (IAS), and the requirements otherwise imposed by the Copenhagen Stock Exchange on the presentation of accounts for listed companies. The accounts are presented in accordance with the standards applicable to the financial year 1998 and IAS 1 (revised 1997) and IAS 14 (revised 1997), which will enter into force for financial years starting after 1 July 1998. IAS 14 (revised 1997) concerning segment information are applied for the first time in 1998. To facilitate the reading of the accounts, some of the information required by the IAS has been included in the comments on the accounts, which in this context are regarded as an integral part of the annual accounts and the consolidated accounts. The accounting policies applied are consistent with those of last year. A few linguistic amendments have been made in the description of accounting policies, which has also been made more clear on some points. The consolidated accounts are prepared on the basis of the accounts of the parent company and the subsidiaries, which are all prepared in accordance with the Groups accounting policies. The consolidated accounts are prepared by adding up items of a uniform nature. In the consolidation, intercompany income and expenses, intercompany shareholdings, balances and dividends as well as unrealised gains and losses on transactions between the consolidated companies are eliminated. Account is taken of deferred tax on these eliminations. In the consolidated accounts, the book value of the parent companys shareholdings in the subsidiaries has been set off against the parent companys share of the net asset value at the time of acquisition, calculated at the market value of assets and liabilities. If the cost exceeds the share of the net asset value thus computed, the difference is shown as Group goodwill in the balance sheet. Group goodwill is written off systematically through the profit and loss account based on an individual assessment of the economic life of the asset, with a maximum of 20 years. So far no Group goodwill has been recorded in connection with the acquisition of subsidiaries. Newly acquired subsidiaries are included in the profit and loss account from the date of acquisition. Subsidiaries sold or wound up are included up to the time of sale or winding up. Comparative figures are not restated for newly acquired or sold businesses. Foreign currencies Transactions denominated in foreign currencies are translated by using standard rates which essentially reflect the exchange rates ruling at the transaction date. Exchange rate differences arising between the rate at the transaction date and the rate at the date of payment are included in the profit and loss account as financial items. Balances denominated in foreign currencies are translated at the exchange rates ruling at the balance sheet date. Forward contracts and other derivative financial instruments are stated in the balance sheet at market value. Both realised and unrealised exchange rate differences are included in the profit and loss account as financial items. Non-monetary assets, including Group goodwill, acquired in foreign currencies are translated at the exchange rates ruling at the time of acquisition. All foreign subsidiaries are regarded as integral entities, which means that the transactions are dealt with as if they had been executed in the parent company. For consolidation purposes, the accounts of foreign subsidiaries are translated according to an adapted temporal method. Profit and loss account items are translated at the average exchange rates ruling during the year as these essentially reflect the exchange rates ruling at the transaction date. Exchange rate differences arising from the translation of both the balance sheets and the profit and loss accounts of the foreign entities are included in the Groups profit and loss account as financial items. Consolidation The consolidated accounts comprise H. Lundbeck A/S (the parent company) and companies (subsidiaries) controlled by the parent company. Control is achieved where the parent company directly or indirectly holds more than 50% of the voting rights or is otherwise able to exercise or actually exercises a controlling influence. A list of the subsidiaries is shown in note 10. 26 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