COMMENTS ON THE ACCOUNTS CHANGES IN ACCOUNTING POLICIES With effect from the annual accounts for 1996 a change has been made in the policies for valuation of the Groups loan and bond portfolio and of the holding of forward exchange contracts. This change must be seen in the light of the fact that in 1995 Lundbeck decided to focus on interest-bearing net cash, which is an important key figure in Lundbecks financial management. Balance sheet liabilities were thus divided into interest-bearing and noninterest-bearing debt according to a new principle. The continuation of this division is the background for the change of principle for the 1996 accounts, under which the Groups loan and bond portfolio as well as the holding of forward exchange contracts are stated at the price ruling at the balance sheet date. The purpose of this change is to eliminate the asymmetry which has so far existed in connection with the valuation of the Groups interest-bearing assets and liabilities. This change in policy permits an accrual of the financial items in the individual financial years in accordance with a mark to market calculation, as unrealised gains on the bond portfolio are now included at the same time as the loan portfolio is adjusted to market value. In this area, the Lundbeck Group has thus started using a more objective valuation policy. Unrealised gains and, as previously, unrealised losses pertaining to the Groups financial instruments under financial items are now included in the profit and loss account. This policy - which is new for Danish non-financial undertakings - means that the result of the management of interest-bearing net cash is reflected in the profit and loss account. The comments on the statement of sources and application of funds include further details as to how interest-bearing net cash is included in the financial management. The effect of the change in accounting policies on the profit and loss account is shown in the table below. The effect on the profit and loss account for 1995 is taken directly to capital and reserves at the beginning of 1996. Another consequence of the changed accounting policies is that at the beginning of 1995 capital and reserves was increased by DKK 1.2 million, so that the accumulated net effect of the change in the accounting policies is a reduction in capital and reserves by DKK 4.8 million at the beginning of 1996. solidated profit and loss account of using the prices ruling at the transaction date, cf. Accounting Standard No. 9, is without significance for the assessment of the individual items in the profit and loss account and of the profit and loss account as a whole. The statement of sources and application of funds is modified in relation to Accounting Standard No. 11, as this statement focuses on key figures for interest-bearing net cash, which is a central key figure in the Groups financial management. The years change in interest-bearing net cash appears as a subtotal before change in interestbearing debt. TURNOVER In 1996, the Lundbeck Group achieved a turnover of DKK 2.326 billion, which corresponds to the expectations for the year. Seen in relation to 1995, this is an increase of 26%. This increase is principally due to a continued positive development in sales of the Groups antidepressant Cipramil®/Seropram®, which increased by 52% in 1996. In all markets, sales have developed favourably. In the new markets, ie the UK, France, Spain, Germany, Italy and Norway, into which Cipramil®/ Seropram® was introduced in the second half of 1995 and in 1996, sales have increased by more than DKK 200 million compared with the previous year. In the other markets, where the product has been marketed for some years, the positive development has continued with an increase in sales of 27% in relation to 1995. At the end of 1996, Lundbecks new antipsychotic Serdolect®/Serlect® was registered in 13 EU countries. In 1996, sales of Serdolect®/Serlect® amounted to DKK 38 million, the majority being sales to Abbott Laboratories Inc., Lundbecks partner on the American market. Sales of Lundbecks established products have increased by 3% compared with 1995. The continued increase in the number of markets for the established products has thus set off the declines in price in some markets as well as competition from new products. OTHER COMMENTS ON ACCOUNTING POLICIES The profit and loss accounts for foreign subsidiaries are translated into Danish kroner at the rates of exchange ruling at the balance sheet date in accordance with the accounting policies applied so far. As it appears from note 6 to the annual accounts, the effect on the con- Effect on the profit and loss account of the change in the accounting policies Amounts in DKKm Discontinued depreciation in connection with capitalised capital loss on mortgage loan Unrealised profit on forward exchange contracts, charged to revenue Effect of adjustment at market price in connection with mortgage debt Effect of adjustment at market price in connection with securities Effect on tax on the profit for the year Effect on the profit and loss account after tax 1996 +0.5 +0.3 -0.8 +2.9 -0.9 +2.0 1995 +0.4 +0.1 -10.1 +1.0 +2.6 -6.0 32 CONTENTS Supervisory Board and Board of Management . . . . . . . . . . . . . . . . . . . . 4 The Sup SPECIALISTS IN PSYCHIATRY PIONEERS IN NEUROLOGY As a specialist, one must constantly seek knowledge 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 and 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Net turnover (DKKm) 1,853 2,326 THE SUPERVISORY BOARDS REPORT DEVELOPMENT OF STRATEGY The rules of play for pharmaceutical companies 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Average number of employees Outs THE SUPERVISORY BOARDS REPORT The development of Serdolect®/Serlect® for the American market has tak ART OR THERAPY In 1988 a group of Dutch psychiatrists formed the Art & Psychiatry Foundation arr Art & Psychiatry Foundation is therefore to question the concept art and serve as a mediator bet THE VALUE OF CREATIVE THERAPY In spite of the lack of scientific studies of creative therapy, both p and the methods we employ. For me it is important to keep wondering, says Dr. de Groot. In this way, A STEP IN THE RIGHT DIRECTION Professor Norman Sartorius, President of the World Psychiatric Associa opment of a part of the national mental health programme in which Lundbeck and Grenlandsaksjonen wil NATURAL CONSIDERATIONS We have a major responsibility for the internal and external environment in c changes without taking the necessary precautions, and the knowledge that a defective filter or an ov FOCUS ON PARKINSONS DISEASE Lundbeck works in two main areas. For this reason we describe ourselves refers to various theories about heredity, environmental impacts, head trauma, side-effects of drugs A PRODUCT WITH POTENTIAL There is broad agreement that the development of specific serotonin-reuptak and on their family and social relations. In fact, the quality of life of patients with phobias is j ITS ALL ABOUT PREVENTION In 1993, Lundbeck, working in close cooperation with some of the worlds lea Preclinical tests show that preparations like Serdolect®/Serlect® do not affect the part of the brai LUNDBECKS PRODUCTS Lundbeck specialises in the development of new and better drugs for the treatment In April 1997, we sold the rights to Ketogan® and Ketodur® to Searle Scandinavia (a division of Mons LUNDBECK WORLDWIDE Lundbecks head office is situated in Valby, near the centre of Copenhagen. It hou Norway H. Lundbeck A/S P.O. Box 361 Lysaker torg 10, N-1324 Lysaker Tel: +47 6753 5372 Fax: +47 6753 THE LUNDBECK FOUNDATION AWARD FOR OUTSTANDING RESEARCH H. Lundbeck A/S is fully owned by the Lundbec ACCOUNTS SUMMARY FOR THE GROUP 1987-1996 Profit and loss account (DKKm) Net turnover Profit before R&D co Key figures Average number of employees Net profit ratio before R&D costs (%) Net profit ratio ( COMMENTS ON THE ACCOUNTS CHANGES IN ACCOUNTING POLICIES With effect from the annual accounts for 199 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Turnover (DKKm) Cipramil®/Sero COMMENTS ON THE ACCOUNTS 100% 90% 80% 70% 60% 18 26 20 22 23 36 35 34 33 Cost structure (%) 28 Pro 450 400 350 300 250 200 150 100 50 0 -50 -100 -150 Cash flow (DKKm) 281 282 231 191 203 164 145 98 FINANCIAL COMMENTS GENERAL The Lundbeck Groups financial income and expenses in 1996 were influenced Lundbecks cash flows in foreign currencies in 1996 were concentrated around SEK, FRF, FIM and DEM bl ACCOUNTING POLICIES GENERAL The annual accounts and the consolidated accounts have been prepared in THE BALANCE SHEET INTANGIBLE FIXED ASSETS Intangible fixed assets are stated at cost less accumulate Win Van Niel, Daoux Rex, bronze, 35 x 25 x 8 cm. 40 PROFIT AND LOSS ACCOUNT PARENT COMPANY 1995 DKKm 1,042.8 469.1 157.3 160.8 255.6 221.2 12.7 5.9 41.2 BALANCE SHEET AT 31 DECEMBER ASSETS PARENT COMPANY 1995 DKKm 21.0 11.0 32.0 312.3 97.2 112.2 114.0 6 BALANCE SHEET AT 31 DECEMBER LIABILITIES PARENT COMPANY 1995 DKKm 110.0 14.7 25.5 785.1 935.3 1996 D STATEMENT OF SOURCES AND APPLICATION OF FUNDS GROUP 1996 DKKm 310.8 5.0 84.3 400.1 -47.2 -78.4 78.0 SIGNATURES Copenhagen, 24 April 1997 THE Erik Sprunk-Jansen President BOARD OF MANAGEMENT Ib D. NOTES 1 NET TURNOVER PARENT COMPANY 1995 DKKm 282.2 760.6 1,042.8 1996 DKKm 263.0 1,150.7 1,413.7 De Production, distribution, administration, and research and development costs include depreciation et NOTES 4 FINANCIAL ITEMS, NET PARENT COMPANY 1995 DKKm 44.4 1.4 30.4 2.8 79.0 43.4 5.5 8.8 57.7 21.3 6 FOREIGN CURRENCY TRANSLATION OF SUBSIDIARIES PROFIT AND LOSS ACCOUNTS AT THE EXCHANGE RATE RULING NOTES 7 INTANGIBLE AND TANGIBLE FIXED ASSETS GROUP: Research and Leasehold INTANGIBLE development im 7 INTANGIBLE AND TANGIBLE FIXED ASSETS - CONTINUED PARENT COMPANY: Research and Leasehold INTANGIBLE NOTES 8 SHARES IN SUBSIDIARIES Total Purchase price 84.8 4.1 -115.5 145.8 88.9 56.1 -3.2 39.5 -18.7 8 SHARES IN SUBSIDIARIES - CONTINUED Specified as follows: Equity value at 31.12.1996 DKKm 1.6 57.0 NOTES 9 OTHER SHAREHOLDINGS AND OTHER RECEIVABLES PARENT COMPANY Other shareholdings 4.5 1.6 -0.7 5. 11 PROVISIONS FOR DEFERRED TAX Timing differences between amounts as stated in the accounts and as c NOTES 13 DEBT PARENT COMPANY 1995 DKKm 378.2 27.7 141.7 547.6 10.3 11.7 22.0 569.6 18.2 84.5 0.0 50. 14 CHANGE IN INTEREST-BEARING DEBT GROUP 1996 DKKm Proceeds in connection with the raising of intere Marjanne Voolstra, Eerste berg, acrylic paint on paper, 100 x 70 cm. 58 INTEGRATED THERAPY When disease strikes, it is not just a case of a fault in the works that has to b The story of Lundbecks logo is rather unusual. It goes back to the 1930s and Paris, where Grete Lund