During the last few years, the pharmaceutical industry has undergone marked changes, resulting in a much tougher competitive climate. The public health authorities in large parts of the world strive increasingly to reduce overall health costs. At the same time, competition intensifies because of new technologies introduced at an ever-faster rate. In addition, the requirements to the development of new pharmaceuticals have increased while development costs continue to rise. Despite the increasingly tough competitive climate, Lundbeck has worked in recent years with the vision, based on an evaluation of the companys core competence, of being among the leading suppliers of pharmaceuticals in psychiatry and neurology. In 1997, Lundbeck continued improving its ability to identify and develop new pharmaceuticals for psychiatry and neurology. This was achieved through effective project management with constant focus on innovation and efficiency, including measures such as implementing combinatory chemistry and strengthening the clinical development organisation. Lundbecks research is thus directed towards some of the most promising areas in the pharmaceutical industry. With its focus on psychiatry and neurology, Lundbeck is in a position to maintain continued growth of turnover and profit. Authorisation to market Cipramil®/ Seropram® for treating panic disorders was obtained in Denmark, Finland, Estonia, Czech Republic, UK, France, Norway, Belgium and Italy. Positive, free cash flow of more than DKK 200 million. Clinical Phase I studies with a substance for treating dementia were concluded with very satisfactory results, and Phase II studies were commenced. Clinical Phase I studies with substances for treating panic disorder and Parkinsons disease were commenced. EPOS (the European Post-marketing Observational Serdolect®/Serlect® project) was launched at the end of the year. It includes an epidemiological study of schizophrenic patients. Comprising 12,000 patients at 400 centres in 13 countries, it will be the largest study of its kind. FDA approval of the production facility at Seal Sands (England). In October, work started on the construction of an 8,400 m2 building for Pharmacological Research in Valby. The building is expected to be ready at the beginning of 1999. Lundbeck International Psychiatric Institute was established in January. Its task is to develop and host training programmes, seminars and symposia. 1997 was also the year when Lundbecks new antipsychotic drug, Serdolect®/Serlect®, was introduced in a number of European markets. Serdolect®/Serlect® has the advantage of being more effective and having fewer sideeffects than the substances normally used. Unfortunately, it has been affected by the current discussion concerning the tendency of certain drugs to cause heart problems in some patients. Lundbeck has put forward criteria for selecting patients for treatment, and the treatment of patients is closely monitored. Internationally recognised specialists regard Serdolect®/Serlect® as the product of the future for treating schizophrenia. They believe that the ongoing discussion will slow therapy development and create unnecessary fear in an already exposed group of patients. For Lundbeck, this discussion results in a slower penetration of the European market. The years result Lundbeck has experienced strong growth in the last few years. This was maintained in 1997, but at a lower rate of increase in turnover. Turnover in 1997 amounted to DKK 2,662 million, 15% up on 1996. Profit before tax rose by 28% - from DKK 342 million in 1996 to DKK 438 million in 1997. Profit after tax and minority interests amounted to DKK 294 million, compared with DKK 236 million in 1996. The profit of the year was affected by an extraordinary write-down of Serdolect®/ Serlect® stocks by DKK 75 million. This is due to an expected short-term negative effect on the sales of Serdolect®/Serlect® resulting partly from the decision by Abbott Laboratories, Inc. to withdraw the application for registration in the American market and partly from the above-mentioned slower market penetration in Europe; the lower sales will lead to some of the stock passing its sellby date, thus becoming unsellable. The writedown reduces the profit after tax for 1997 by DKK 50 million. The profit after tax for the year was affected positively by disposal of the product rights to Ketogan® and Bleomycin® for DKK 51 million. This disposal is an element of the Groups strategy of focusing on its core business; products outside the CNS area are divested. The years result is very satisfactory considering Lundbecks growth situation, which is extremely resource-consuming for what is, in a global context, a small company. In 1997, great demands were made on our employees, and the result is due to their dedicated efforts and adaptability. Important events in 1997 Application for registration of Cipramil®/ Seropram® in the USA was filed in May, in collaboration with Forest Laboratories, Inc. Marketing authorisation is expected to be granted in mid-1998. Application was filed in December for registration of Serdolect®/Serlect® in Sweden, France and a number of countries in Central and Eastern Europe and overseas. 13 Contents Supervisory Board and Board of Management A clear vision The way forward A continuously dev Supervisory Board Arne V. Jensen (Chairman) Jørgen Fakstorp (Vice-Chairman) Lars Bruhn Henrik He Board of Management Erik Sprunk-Jansen President Eva Steiness Executive Vice President Research an Georgios Peros, Abstract, 1990 A clear vision Lundbeck has a clear vision. We intend to become one The way forward Strategy is planning - the ability to see where we are, where we are going and how A visionary goal Our goal is to become one of the worlds leading companies in the treatment of psych A continuously developing organisation Lundbeck is a continuously developing company. Growing inter Group structure The Lundbeck Foundation H. Lundbeck A/S Synthesis factories Region Scandinavia &am The pharmaceutical industry Market conditions in the pharmaceutical industry In 1996, the global ph K. Nathanael, Sunset, 1997 Sales and marketing The sales figure for 1997 places Lundbeck as one of Lundbecks products Lundbecks research and development activities are concentrated on developing new Koprianos, Town, 1996 Lastly, Lundbeck has a promising substance under development for treatment of The Supervisory Boards Report Net turnover (DKKm) 3,000 2,662 Net turnover 2,500 2,000 1,500 1,000 During the last few years, the pharmaceutical industry has undergone marked changes, resulting in a The Supervisory Boards Report Average number of employees 2,500 Subsidiaries Parent companies 2,000 At the annual general meeting on 16 May 1997, the employee bonus/profit distribution scheme that had The Supervisory Boards Report Lundbeck International Psychiatric Institute As a specialist in psych Spyros Loukidis, Windows, 1995 17 Environmental Report The Managements Declaration Lundbeck regards openness about the companys healt Environmental Report 1997 In 1997, Lundbeck continued developing a health, safety and environmental Environmental Report Lundbeck - general Lundbeck has its headquarters, with its management, adminis K. Fyra, Abstract, 1994 The first steps in the process are often carried out in Seal Sands, while t Environmental Report Summary of the Groups environmental status Below a short summary is given of t the waste water, while the remaining approx. 1,200 tonnes are sent to a special chemical waste dispo The Lundbeck International Psychiatric Institute The Lundbeck International Psychiatric Institute Ex ment, education of patients and their families, and Quality Management within psychiatric treatment. Art can overcome prejudices In Greece, as in many other countries, the general attitude to psychiat Giannis Papadakis, Abstract, 1997 Strengthening local collaboration The exhibitions are held in col PsychiatryLink an Internet introduction http://www.psychiatrylink.com will give you the possibility Lundbeck presents http://www.psychiatrylink.com The development of the first version of Lundbecks ne EPOS EPOS: European Post-marketing Observational Serdolect®/Serlect® project: increasing our unders Giannis Pachis, Excommunication, 1997 Unlike controlled clinical trials, the EPOS project has been My dream changes from colour to black and white Depression is about the worst thing anyone can exper The pieces fall into place That was the start of a life with changing psychopharmacological drugs, a Lundbeck worldwide Parent company H. Lundbeck A/S Ottiliavej 9 DK-2500 Copenhagen - Valby Tel: +45 Slovenia Lundbeck Pharma AS Presernova 1 (2. nadstropje) SLO-2000 Maribor Tel/Fax: +386 62 221 943 R The Lundbeck Foundation Award for Outstanding Research The Lundbeck Foundation, which makes substant V. Kafivas, Garden, 1996 Accounts 37 Summary for the Group 1993-1997 Profit and loss account (DKKm) Net turnover Profit before R&D c Key figures Average number of employees Average number of shares (million)*) Earnings per share (DKK Comments on the accounts Profit for the year In 1997, profit developed positively. Profit for the y The limited effect of the policy changes in 1997 is due to the movement in the size and composition Comments on the accounts Under the changed accounting policies, the results of foreign subsidiaries At the end of 1997, Lundbecks new antipsychotic drug, Serdolect®/Serlect®, had been launched in 10 E Comments on the accounts Other operating income, net Other operating income, net, amounted to DKK 8 In 1997, capital investments totalled DKK 188 million against DKK 224 million in 1996. As in 1996, t Financial comments General In 1997, the Lundbeck Groups financial income and expenses were affected The Groups loans on mortgage credit-like terms at 31 December 1997 Outstanding debt CIBOR-based loan Financial comments At the present moment it is very likely that Italy, Spain and Portugal will also Lundbecks exchange rate index (1988 = 100) 104 102 100 98 96 94 92 90 88 (Jan.) 89 90 91 92 93 94 95 Accounting policies General The annual accounts and the consolidated accounts have been prepared in The consolidated accounts are prepared on the basis of the accounts of the parent company and the su Accounting policies Provision is made in the balance sheet for the present value of plans which are The cost of new buildings and erection by the company of its own technical installations and machine Profit and loss account for the year ended 31 December 1997 Parent company 1996 DKKm 1,411.1 503.6 Per share ratios (DKKm) 150 137 Net asset values Cash flow 125 100 80 82 114 Earnings per share Balance sheetat Assets Parent company 1996 DKKm 18.0 9.6 27.6 386.1 140.4 101.5 146.6 774.6 95.4 5. Balance sheetat Liabilities Parent company 1996 DKKm 110.0 56.1 1,086.2 1,252.3 1997 DKKm 110.0 77. Statement of sources and application of funds for the year ended 31 December 1997 Group Notes Oper Signatures Copenhagen, 12 March 1998 The Supervisory Board and the Board of Management have today c Notes to the profit and loss account 1 Net turnover Parent company 1996 DKKm 263.0 874.7 176.9 96.5 Production, distribution, administration, and research and development costs incl. depreciation etc. Notes to the profit and loss account 4 Other operating income Parent company 1996 DKKm 3.1 3.1 1997 6 Tax on the profit for the year Parent company 1996 DKKm 1.3 0.8 1997 DKKm 49.7 - 0.1 Tax due on th Notes to the balance sheet 7 Intangible and tangible fixed assets Group: Research and development c Land and buildings DKKm Technical plant and machinery DKKm Other fixtures and fittings, tools and Notes to the balance sheet 8 Shares in subsidiaries Total DKKm Book value at 1.1.1997 Adjustment du 8 Shares in subsidiaries - continued Net asset value at 31.12.1997 DKKm H. Lundbeck A/S, Norway H. L Notes to the accounts 9 Other shareholdings and other receivables Parent company Other shareholding 11 Capital and reserves Group 1996: Share capital DKKm Capital and reserves at 1.1.1996 Adjustment d Notes to the accounts 11 Capital and reserves - continued Parent company 1996: Share capital Revalu 12 Provisions for pensions Group: The Group operates with two types of pension plans: defined contri Notes to the accounts 13 Provisions for deferred tax Group: Temporary differences between calculati 13 Provisions for deferred tax - continued Parent company: Temporary differences between calculation Notes to the accounts 15 Contractual obligations Rentals and leasing obligations Lundbeck has commi Notes to statement of sources and applicational funds 17 Adjustments Group: 1997 DKKm Depreciation e Michalis Manolopoulos, Landscape, 1997 Lundbecks new logo Lundbeck has introduced a new logo that clearly expresses our identity, vision an