2012 ANNUAL REPORT
Grete Lundbeck
THE LUNDBECK FOUNDATION – AN ACTIVE INDUSTRIAL FOUNDATION Hans Lundbeck founded the company H. Lundbeck in 1915. In 1954, his widow, Grete Lundbeck, established the Lundbeck Foundation and transferred her shares in H. Lundbeck to the Foundation as the couple had no heirs. H. Lundbeck soon commenced activities relating to the sale of pharmaceuticals, and focus was quickly directed onto research into and the sale of antipsychotics. Today, H. Lundbeck is a world leader in the development and sale of drugs for the treatment of brain disorders. H. Lundbeck was listed on the Copenhagen Stock Exchange in 1999, and the Foundation owns 70% of the company. In 1989, the Lundbeck Foundation acquired its second subsidiary, and today owns 42% of ALK, global leader in allergy vaccines. In 2011, the Lundbeck Foundation acquired its third subsidiary, Falck, in which the Foundation holds 57% of the shares. Falck is a leading international rescue and assistance company. In addition to the three subsidiaries, the Foundation owns and manages a portfolio of securities worth approx. DKK 11 billion via Lundbeckfond Invest, as well as a portfolio of biotech investments managed by Lundbeckfond Ventures. In 2012, the Foundation launched Lundbeckfond Emerge – a strategic initiative aimed at accelerating the commercialisation of early-stage scientific projects through investment and direct project participation. Over the years, the Lundbeck Foundation has made grants to independent research in biomedical and natural sciences with ties to Denmark. The amounts involved have increased significantly in recent years, and in 2012 reached DKK 482 million.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
CONTENTS
Overview of the Lundbeck Foundation
2
2012 – A year of investment
3
Governance, CSR and Risks
6
Grant-making activities - Regular grants - Personal grants - Strategic grants - Teaching and communicating science and research - Lundbeckfond Lectures - Lundbeckfond Emerge
8 11 13 18 21 22 24
Commercial activities - H. Lundbeck - ALK - Falck - Lundbeckfond Invest - Lundbeckfond Ventures
26 28 30 32 34 37
Financial statements the Lundbeck Foundation Group Parent foundation financial statements the Lundbeck Foundation
41 103
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
70%
Grant activities DKK 482 mio.
Global leader within treatment of brain diseases Revenue DKK 14,802 mio.
Bridges scientific invention to incorporation
Global leader in allergy vaccines
42% (69%)
Revenue DKK 2,345 mio. Investmensts in biotech companies 12 companies in portfolio
International leader within assistance and emergency services
57%
Portfolio investments in stocks, bonds, etc. Value DKK 10,989 mio.
Revenue DKK 11,504 mio.
Note: The Lundbeck Foundation owns 42% of the shares in ALK and 69% of the capital after the deduction of treasury shares.
GROUP KEY FIGURES
Financial highlights in accordance with IFRS (DKK million) Revenue Operating pro f it be fo re s p ec i a l i tem s N et fi na nc ia l ite m s
2012
2011
2010
2009
2008
28,675 23,602 16,927 15,594 13,381 2,729
4 ,16 5
3, 513
2, 877
2,448
827
-374
1,0 83
1, 301
-1,783
Lundb e c k Fo undatio n’s s h a re of p rof i t for t h e yea r b efore sp eci al i tems
2, 24 3
1, 815
2, 880
2,756
-608
Lu ndb e c k Fo undatio n' s s h a re of p rof i t for t h e yea r
2,066
1, 614
2, 880
2,756
-608
Grants awarded during the year
482
504
384
340
328
Dividends f ro m s ubs id i a r i es
499
537
4 41
335
477
4 37
4 , 537
178
5,133
129
2, 4 26
1, 563
9 89
1, 47 1
1,427
Investm e nts in a cquis it i on s Investm e nts in pro pe rt y, p l a n t a n d eq u i p m en t a n d i n t a n g i b l e asset s Equ ity
27,928 26 , 332 25, 9 67 22,399 19,774
Lu ndb e c k Fo undatio n's s h a re of eq u i t y
24,033
22,551
2 1 , 39 6
18, 574
1 6 , 37 1
To tal a ss e ts
50, 219
47, 4 59
34 ,732
32,109
23,588
Net we a lth
26 , 893
28,736
28, 519
26 ,138
27,657
Key figures
2012
2011
2010
2009
2008
Revenue growth
21. 5% 39. 4 % 8. 5% 16 . 5% 4.4%
Operating pro f it m a rgi n
9. 5%
1 7. 6 %
20. 8%
18. 4 %
18.3%
Ret urn o n e quity be fo re s p ec i a l i tem s
9. 6 %
8. 3%
14 . 4 %
15. 8%
-3.6%
28,0 49
15, 875
7, 314
7,0 4 8
6,67 1
Avera ge num be r o f e m p l oyees
2
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
2012 – A YEAR OF INVESTMENT 2012 was a year of investment for the Lundbeck Foundation as its three subsidiaries H. Lundbeck, ALK and Falck all focused on investing in new products and new markets. In its first full year of substantial in-house asset management, Lundbeckfond Invest reported one of its best returns ever, outperforming the benchmark. Lundbeckfond Ventures invested in five new companies with activities in ground-breaking technologies such as stem cell-based therapy and gene therapy, and Lundbeckfond Emerge made its first investment. The Foundation maintained last year's high level of grants, awarding DKK 482 million to Danish biomedical and natural science research. The objective of the Lundbeck Foundation is to pursue industrial activities and provide grants. Grete Lundbeck, who established the Lundbeck Foundation, did not prioritise one activity over the other in the Foundation's statues, and the Foundation has continued to pursue this duality. Through monitoring and competent feedback, the Foundation seeks to be a supportive and active owner of its three subsidiaries to encourage their optimum development. The return from the subsidiaries and Lundbeckfond Invest is used partly for consolidation, partly for supporting independent research in biomedical and natural sciences of the highest international standards with the aim of making a difference for people's health and lives.
Commercial activities The Lundbeck Foundation Group's total revenue grew by 21% from DKK 23.6 billion in 2011 to DKK 28.7 billion in 2012, primarily owing to the consolidation of Falck. The Group recorded an operating profit before special items in 2012 of DKK 2,729 million, which was a good deal lower than in 2011 due to the patent expiry of H. Lundbeck's pharmaceutical Lexapro® in the US. The Foundation's share of the profit for the year before special items of DKK 2,243 million represented a substantial increase on the year before (DKK 1,815 million). The increase was attributable to the strong financial performance of Lundbeckfond Invest, while there was a decline in the combined profits of the subsidiaries. The financial performance is considered satisfactory. H. Lundbeck The year 2012 was influenced partly by the lapse of H. Lundbeck's blockbuster antidepressant Lexapro® in the US, partly by the company's extensive investment in future product launches and product development. Exclusive of Lexapro®, H. Lundbeck achieved strong results in 2012 reporting a 6% revenue increase on the back of decent progress in the portfolio of new products. In December, H. Lundbeck announced that the company had resolved to invest further in product launches and development. Specifically, this involves the launch of the three products Selincro® for alcohol abuse, Abilify Maintena® for schizophrenia and the antidepressant Brintellix®, all of which are expected to be launched in 2013
and 2014. Furthermore, H. Lundbeck has decided to complete the development of a new Alzheimer's product, which has demonstrated successful Phase II results. As a result of these initiatives, H. Lundbeck abandoned its previously announced earnings targets for 2013 and 2014. The fact that earnings exclusive of Lexapro® were up demonstrates that the core business has improved sufficiently to finance the ongoing investment in product innovation and new product launches. In 2012, H. Lundbeck completed a major restructuring of its European sales force, and this is expected to lead to cost savings in the years ahead, where focus will be retained on streamlining the organization. Including Lexapro® sales in the US, revenue fell from DKK 16,007 million to DKK 14,802 million, and profit from operations declined from DKK 3,393 million to DKK 1,647 million. The operating profit did not decline by as much as revenue from Lexapro® in the US, which was reduced from DKK 2,535 million to DKK 575 million. Profit for the year was DKK 1,107 million (DKK 2,282 million). H. Lundbeck reported a satisfactory underlying performance. ALK ALK had a challenging year in 2012, facing difficult conditions in many markets. The company's performance was also affected by the launch of its own Jext® adrenaline auto-injector, which replaced a previously inlicensed product. In spite of this, ALK was able to retain the 2011 revenue level (DKK 2,348 million), reporting revenue of DKK 2,345 million in 2012. Vaccine sales, which have seen strong growth in recent years, were stagnant due to cost reductions in a number of key European markets, including Germany, Italy and Spain. ALK retained a high level of R&D activity in 2012. Merck, ALK's US partner, announced strong results from its pivotal studies with ALK's tablet products against grass pollen and ragweed allergy. Operating profit before special items fell to DKK 118 million (DKK 299 million), primarily due to higher R&D and restructuring expenses. Net profit before special items fell to DKK 54 million (DKK 200 million). In 2012, the Lundbeck Foundation continued to buy ALK shares and now holds a total stake of 42% (69% of the votes). Falck Falck continued on its positive growth track, lifting revenue by 13% to DKK 11,504 million (DKK 10,193 million). The improvement was based primarily on strong results in Emergency,
3
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
but Falck also reported growth in Assistance, Healthcare and Training. In addition to organic growth of 7.6%, Falck strengthened its international profile in 2012 through acquisitions in countries such as the US and Kazakhstan. Falck has confirmed its ambitious growth targets, and in 2012 the company launched a number of strategic initiatives to ensure that it will reach its goal of lifting revenue to DKK 20 billion over the course of five to eight years. Such initiatives will include sales promotion campaigns, extension of the existing business areas and a reorganisation.
primarily because of the depreciation of H. Lundbeck's shares following the profit warning announced in December 2012.
Falck reported an 8% increase in operating profit before special items from DKK 980 million in 2011 to DKK 1,059 million in 2012. Organic growth represented a moderate share of the operating profit. Profit for the year before special items was DKK 541 million, an increase on DKK 519 million in 2011.
Regular grants Regular grants are based on project applications in the fields of biomedical and natural science as well as teaching and educational projects. In 2012, DKK 223 million was awarded to regular grants, of which DKK 175 million was for biomedical projects, DKK 25 million was for natural science projects and DKK 23 million was for teaching and educational projects.
Lundbeckfond Invest In 2012, Lundbeckfond Invest finished implementing the strategy from 2011 of establishing active in-house management of the portfolio combined with cost-efficient index mandates. The efforts produced very encouraging results with positive returns in all asset classes – particularly strong results in inhouse managed equity and credit classes. Invest has focused primarily on non-cyclical, global blue-chip companies and performs in-depth analyses prior to any investment. On equities managed in-house, Invest generated a return of 35% (by comparison the global equity benchmark rose by 14%) and credit managed in-house generated a return of 22% (by comparison the global credit benchmark rose by 16%). In 2012, Lundbeckfond Invest reported a return far outperforming the benchmark. This is also reflected in the profit for the year, which amounted to DKK 1,280 million, against a loss of DKK 72 million in 2011. This translates into a total timeweighted return of 13.1%, which is highly satisfactory. At the end of the year, Lundbeckfond Invest had a portfolio of approximately DKK 11 billion under management. Lundbeckfond Ventures Lundbeckfond Ventures is a leading international investor and partner to the biotech industry. In 2012, Lundbeckfond Ventures invested in five new companies with activities in gene therapy for advanced heart failure, the development of diagnostic and prognostic tests for intestinal and metabolic disorders, stem cell therapy for the treatment of acute renal injury, oncolytic virus for the treatment of colorectal cancers and testing of a specific antibody for the treatment of Graves Orbitopathy, an autoimmune eye disorder afflicting a small proportion of patients suffering from the metabolic disorder Graves Disease. At the end of 2012, the portfolio counted a total of twelve companies, and Lundbeckfond Ventures supports and works actively with these companies to secure a positive return. Equity and net wealth As a combined effect of developments in the Group's operations, the Foundation's share of consolidated equity rose from DKK 22,551 million to DKK 24,033 million after grants. However, the Foundation's net wealth calculated at fair value fell from DKK 28,736 million in 2011 to DKK 26,893 million in 2012,
4
Grants The Foundation awarded grants of DKK 482 million, retaining the high level from 2011. The Foundation's grants can generally be divided into four categories: Regular, personal and strategic grants and Lundbeckfond Emerge.
Personal grants The Foundation's personal grants are awarded to scientists and teachers at different career levels in recognition of extraordinary commitment and dedication. Personal grants amounted to DKK 123 million in 2012, marking an increase in this area. For example, the number of Lundbeckfond Fellowships was increased from seven to eight, each worth DKK 10 million. Strategic grants For a number of years, the Foundation has supported innovative research in strategic areas. Strategic grants amounted to DKK 120 million in 2012. The three major strategic grants of the year were partly a continuation of the Foundation's dedication to psychiatric research, partly an extension of the Foundation's wish to contribute to the internationalisation of Danish research. Collaborating with the Danish Council for Independent Research, the Foundation has been instrumental in establishing a Danish EMBL node (European Molecular Biology Laboratories), a leading European basic research organisation. The Danish EMBL node will be based at Aarhus University, where a number of groups have been formed. Non-Danish team leaders will become affiliated with the project. Together with TrygFonden and the Region of Southern Denmark, the Foundation has set up a five-year project aimed at strengthening and providing evidence for the non-medical treatment of alcohol dependence. The research project seeks to identify the types of treatment with the best effect on alcoholics, including older alcoholics. The project is conducted in Denmark, Germany and the US. Aarhus University was awarded a grant for a project aimed at improving diagnostics and treatment of general practitioner patients suffering from mental and physical illnesses. The project seeks to develop electronic tools for diagnostics and monitoring of stress and depression, with the aim of subsequently rolling out such electronic tools in the primary care segment.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Lundbeckfond Emerge Lundbeckfond Emerge was established at the beginning of 2012 to assist in the commercial development of scientific inventions with a significant inventive step, high quality and a major commercial potential which cannot yet attract venture funding. In its first year of operation, Lundbeckfond Emerge invested in two projects. One was Insusense Therapeutics, a project run by Professor Anders Nykjær based on breakthrough research in the use of a new protein for treating diabetes. The other is EpiTherapeutics, which was transferred from Lundbeckfond Ventures, since it was a seed investment. In 2013, Emerge will continue its work on these two projects, while also continuing to identify new development opportunities in the academic communities.
The Foundation's operations The Foundation continuously seeks to minimise its operating expenses, which totalled DKK 54 million in 2012. The expense covers the total cost of operations of Lundbeckfond Invest, Lundbeckfond Ventures, Lundbeckfond Emerge, grant-making activities and administration, including the monitoring of subsidiaries. The cost of Lundbeckfond Invest was DKK 6 million, corresponding to 0.05% of assets under management. The cost of Lundbeckfond Ventures was DKK 9 million, equivalent to 2.0% of the invested capital. Costs associated with grants were DKK 11 million, corresponding to 2,3% of the total awarded amount. Administrative and monitoring costs in 2012 amounted to DKK 28 million, DKK 6 million of which was for an increase in pension provisions for members of the Board. Total fees to Board members and executive officers of the Foundation and its subsidiaries amounted to DKK 7 million and DKK 5 million, respectively.
H. Lundbeck and ALK, and he has accepted retaining these directorships for another year. Steffen Kragh, the CEO of the Egmont Group, will be recommended as a new board member of the Lundbeck Foundation. Chief physician Nils Axelsen, MD, will retire as chairman of the board of the Grete Lundbeck European Brain Research Foundation, which he played an instrumental role in establishing. Professor Povl Krogsgaard-Larsen, Pharm.D., will replace him as chairman. Professors Jørgen Frøkiær, Aarhus University, and Bertil Hamberger, Karolinska Institute, Stockholm, stepped down as members of the biomedical science committee at the end of 2012. For a number of years, the two professors have both made a significant effort, sharing their insight and experience to the benefit of the Foundation. At the turn of the year, professors Ulf Hedin, Karolinska Institute, and Peter Friberg, Sahlgrenska University Hospital, Gothenburg, were elected as members of the biomedical sciences committee. We would like to express a warm thank you to the retiring board and committee members for their long-standing and important contribution to the Foundation. On behalf of the Foundation, we thank all participants on evaluation committees and our partners at universities and at the ministries for their a successful co-operation in 2012. We look forward to an equally good and eventful 2013.
Jørgen Huno Rasmussen Chairman of the Board
Christian Dyvig Chief Executive Officer
The Foundation is jointly taxed with the Group's subsidiaries. The Group’s total tax expense for 2012 was DKK 593 million, of which DKK 475 million was paid in Denmark. To this amount should be added substantial tax proceeds to the Danish government from the many Danish employees of the Lundbeck Foundation Group. -oChief Physician, Professor Mikael Rørth, MD, stepped down from his position as chairman of the Board of Trustees in connection with the AGM in 2012 in order to dedicate his time to the Foundation's grant-making activities. Mikael Rørth was elected deputy chairman and will continue to chair the research committee and the biomedical science committee. Jørgen Huno Rasmussen, deputy chairman, Group CEO at FLSmidth, was elected new chairman of the Board. In accordance with the statutes of the Foundation, Director Jes Østergaard will step down at the AGM in 2013 after having served on the Board for 12 years. Throughout his tenure, Mr Østergaard has been a tremendous driving force in the Foundation's development, focusing especially on transparency and communications. Moreover, Mr Østergaard has made particularly valuable contributions as a board member of
Christian Dyvig and Jørgen Huno Rasmussen
5
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GOVERNANCE, CSR AND RISKS The Lundbeck Foundation's daily operations are based on a governance structure ensuring that the Foundation, in a transparent manner, meets its objective of being an active, valuecreating owner and investor and of supporting Danish-based research of the highest international standards with the aim of making a difference to people's health and lives.
Corporate governance The Lundbeck Foundation is managed by a board of trustees comprising of six members elected according to its statutes and three employee-elected representatives of the subsidiaries. The Board of Trustees defines the Foundation's strategy and makes decisions of major significance or of an unusual nature in addition to final decisions on the allocation of grants. Furthermore, the Board of Trustees supervises the organisation and makes sure that the Foundation is managed appropriately and in accordance with applicable law and its statutes. The Board of Trustees does not participate in the daily management of the Foundation, but it appoints the CEO, who is in charge of the daily operations. There are a minimum of four board meetings each year and in addition a two-day seminar is held at which the Foundation's strategy is discussed and defined. The Board of Trustees has set up a research and an investment committee, which meets when required to conduct more detailed analyses and discuss issues relating to grants and investments, respectively. Major investment decisions are made by the Board of Trustees, and all grants are approved by the Board of Trustees. The six members of the Board of Trustees, all of whom are independent, are elected for terms of one year. The intention of one-year terms is to ensure that the members are regularly held accountable for their decisions. No member who has been a member of the Board of Trustees for more 12 years or who have turned 75 years of age can be elected or re-elected. The Board of Trustees may deviate from this rule if necessary for the purpose of retaining a board member due to his or her particular competencies. The chairman and the vice-chairman nominate new members to the Foundation's Board of Trustees, and no nomination committee has been set up. The Board of Trustees is self-perpetuating and elects new members in accordance with the Foundation's statutes. Ordinary election of members takes place at the AGM. Board members elected by the employees are elected according to statutory procedures. The principle governing the composition of the Board of Trustees is that the Board of Trustees should be made up of members whose combined knowledge and expertise will enable the Board of Trustees to fulfil the Foundation's objects as set out in the statutes. Members of the Board of Trustees are remunerated by a fixed fee which does not depend on the financial results of neither the subsidiaries nor the portfolio or venture investments. Members of the research and investment committee receive a special fee. The remuneration of each member is specified in the annual report. 6
A written code of conduct has been laid down in connection with investments and grants, and rules have also been laid down governing the access of board members, employees and third parties to grants from the Foundation. The applicable code of conduct is available on the Foundation’s website. At least half of the shareholder-elected board members of the subsidiaries, usually including the chairman, are independent of the Foundation. The Foundation monitors the performance of the subsidiaries closely and seeks to act as a value-creating owner and partner for the managements of the subsidiaries, but will only exert its influence through representation on the company boards and at general meetings. The CEO of the Foundation normally sits on the boards of directors of the subsidiaries, typically as the vice-chairman, whereas the chairman of the Foundation is not a member of the boards of directors of the subsidiaries. The Board of Trustees performs regular self-assessments facilitated by a third party. The self-assessments include a review of the strengths and weaknesses of the board work, of whether statutory requirements are met and of the collaboration between the Executive Management and the Board of Trustees. In 2013, a whistleblowing scheme was established providing the Foundation’s employees, applicants for grants and minority shareholders of the subsidiaries with the option of confidentially reporting serious wrongdoing. The Foundation wants to ensure transparency in respect of all its activities, which is done through a high level of information on the Foundation’s website and a detailed description of the activities of the year in the annual report. At the same time, the Foundation closely monitors the recommendations made by Erhvervsfondsudvalget for regulation of commercial foundations as well as recommendations for foundation governance.
Grant governance The Lundbeck Foundation’s general criteria for granting research funds are that the scientific content of the application, the qualifications of the applicant and the academic environment of the host institution are at a high international level, and that the research can make a difference for people's health and lives. The Foundation seeks to ensure uniform assessment of applications. Fundamentally, the Foundation would like for all applications to be subjected to peer review and for such review to be undertaken by a majority of experts independent of the Foundation. For assessing regular project applications, the Foundation has set up three permanent evaluation committees with a majority of external and foreign
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
experts. For assessing larger personal and strategic applications, ad hoc evaluation panels of international experts are set up. All assessments lead to a recommendation to the Board of Trustees, which makes the final allocation of grants in accordance with statutory requirements. Assessment procedures for applications and recommendations are adjusted on an ongoing basis in step with developments and implementation of new initiatives. Evaluation committees The Lundbeck Foundation has set up three permanent evaluation committees for assessing biomedical and natural science project applications as well as teaching and communication initiatives. The biomedical science committee has nine members six of whom are external experts who may be affiliated with the committee for a maximum of six years. The remaining three members are board members with research expertise. The natural science committee and the teaching committee each have three members of whom two are external experts and one is a member of the Board of Trustees. External ad hoc reviewers External review of applications by ad hoc expert panels is used for example in connection with the assessment of the Lundbeck Foundation Fellowships and strategic initiatives. To support the assessment of such applications, the Foundation also makes bibliometric analyses of applicants' publications and quotations. Throughout the years, the Foundation has built a database of external reviewers. Some of the ways in which the Foundation selects its reviewers are via expert panels around the world set up by the European Research Council (ERC), among experts known within the European Science Foundation (ESF), via its own assessment committees and via recommendations from partners in private European research foundations.
CSR The Lundbeck Foundation Group is a global group with significant societal influence. The Lundbeck Foundation would like to live up to this responsibility and to be recognised by external as well as internal stakeholders as a trustworthy and responsible group characterised by professionalism, commitment, honesty and integrity. The Foundation is committed to the UN Global Compact, which consists of ten principles concerning corporate social responsibility. These are the cornerstones of the policies, strategies and guidelines of the Lundbeck Foundation, including its grant-making activities, ownership of H. Lundbeck, ALK and Falck as well as portfolio investments and other investments. One of the consequences is that the Foundation opposes all forms of corruption, including extortion and bribery, and that the Foundation follows the UN guidelines relating to labour standards, environment and human rights as well as sustainable development. The Lundbeck Foundation’s values and policies are reflected within the entire Lundbeck Foundation Group. The specific CSR policies and codes of the subsidiaries are laid down by the boards of directors of the subsidiaries in which the Lundbeck Foundation is represented. Values and policies may thereby be adapted to the special circumstances of the sub-
sidiaries. See the annual reports and websites of the subsidiaries for further information about their respective CSR policies. The CSR policies, strategies and guidelines of the Lundbeck Foundation are for example reflected through: Support to independent research: The Foundation allocates substantial funds to research affiliated with Denmark for the benefit of Danish society and people's health and lives. Portfolio investments: The Foundation will not make investments in enterprises presumed to be acting unethically or not respecting the ten principles of the UN Global Compact. Lundbeckfond Ventures and Emerge: The Foundation makes risk-bearing domestic and international investments within life science to enable the development of new pharmaceuticals and new methods of treatment and diagnostic testing for diseases for the purpose of improving people's quality of life. Gender equality and diversity: The Lundbeck Foundation supports gender equality and diversity and aims to have both genders represented on the boards of the Lundbeck Foundation and its subsidiaries within the next four years and, in the long term, to have at least two members of both genders represented on the boards. Currently, one out of six members elected to the Board of Trustees of the Foundation is a woman. At management level, the Foundation aims to have a mix of genders reflecting the distribution of genders of the recruitment base. At management level, two out of six Foundation employees are women.
Risks The Lundbeck Foundation seeks to ensure a reasonable balance between risk exposure and value creation. The goal is to achieve a long-term, stable return subject to moderate risk. The risk management of the Lundbeck Foundation is performed across Lundbeckfond Invest and Lundbeckfond Ventures. Portfolio investment market risk is managed by limiting maximum exposure to individual asset classes and underlying assets. In addition, limits have been set for the duration of bond investments to manage interest rate risk. The Board of Trustees lays down the investment policy. Derivative financial instruments such as swaps, options and forward contracts are used for risk management purposes. The investment policy governs the use of such instruments with regard to maturity, quantity and counter-party requirements. Weekly portfolio performance reports are prepared for the Executive Management, and there is also regular reporting to the Board of Trustees. Risks also involve the business risks and financial risks associated with the operations of the subsidiaries: H. Lundbeck, ALK, and Falck as well as Lundbeckfond Invest and Lundbeckfond Ventures. Risk management policies and procedures of the subsidiaries are defined individually by the managements of the subsidiaries in which the Foundation is represented on the boards of directors. The Foundation monitors the performance of the subsidiaries on an ongoing basis, which is part of the regular reporting to the Board of Trustees and management of the Foundation. See the annual reports of the subsidiaries for information on their risk management policies and procedures. 7
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Anne-Marie Engel, Director of Research
LUNDBECK FOUNDATION GRANTS The Lundbeck Foundation awards grants to make a significant difference to people’s health and lives. The Foundation supports outstanding researchers in the biomedical and natural sciences and strengthens Danish-related research of the highest international quality. The Lundbeck Foundation also funds projects and individuals who enhance the quality of teaching and communicating research. The amount available for grants is based on the profits generated by the Foundation’s subsidiaries.
Focus areas Dividends from subsidiaries and grants awarded
DKK MILLION
Grants
Dividends from subsidiaries
600
The internationalisation of Danish research is promoted via funding partnerships and exchange programmes involving leading Danish and international research teams.
500
400
Young researchers are a particular priority, but the Foundation seeks to support particularly outstanding researchers throughout their careers. The Lundbeck Foundation aims to motivate, inspire and acknowledge research talents, for example by awarding personal grants and honorary prizes.
300
200
100
0 2008
8
The Foundation can choose to prioritise high-quality projects in neuroscience, psychiatry and allergology/immune modulation, and pre-hospital treatment over high-quality projects within other biomedical research fields.
2009
2010
2011
2012
The Foundation also supports activities designed to promote interest in and awareness of research into the biomedical and natural sciences, both within the education system and among the general population.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Grants 2012
lowships, Visiting Professorships, scholarships as well as travel and study grants.
The total sum awarded in 2012 was DKK 482 million, of which DKK 16 million went to the first investment by Lundbeckfond Emerge.
DKK Million
Regular grants
223
Personal grants
123
Strategic grants
120
Lundbeckfond Emerge
16
Total 482
A very large proportion of the funds that the Lundbeck Foundation grants for research go to the salaries of researchers at different stages in their careers. The grants awarded in 2012 covered wages equivalent to 852 FTEs for researchers at all stages of their careers, from scholarships to senior researchers and technical staff.
Research FTEs covered by Lundbeck Foundation grants in 2012 Number 400
Total 852
350 300 250 200 150 100 50 0 Post doc.
Ph.d.
Other academic staff
Scholarships
Technical staff
Regular grants Regular grants include applications for biomedical- and natural science projects, as well as projects focusing on education and science communication. Regular grants accounted for DKK 223 million, of which DKK 175 million went to biomedical science research projects: 80% in basic research and 20% in clinical research. DKK 25 million was granted for natural science research projects and DKK 23 million for projects that focus on teaching and communicating science. Personal grants In this category, the Foundation awards Lundbeck Foundation Fellowships, the Lundbeck Foundation’s Research Prize for Young Scientists, talent prizes and The Brain Prize. It also provides international under- and postgraduate research fel-
Lundbeck Foundation Fellowships have been awarded since 2007. These personal grants of DKK 10 million are given to outstanding young researchers who are ready to establish their own research group at a Danish university or university hospital. In 2012, eight such fellowships were awarded to promising young researchers in the biomedical and natural sciences. The Lundbeck Foundation’s Research Prize for Young Scientists 2012 went to Mads Hald Andersen at Herlev Hospital, who works with cancer treatment based on the patients’ own immune systems. The Foundation also awarded talent prizes to three particularly promising researchers aged under 30: Anne Ersbak Nielsen, Jonas Bjerring Olesen and Kira Irina Astakhova. The Grete Lundbeck European Brain Research Foundation awarded The Brain Prize for the second time in 2012. Two outstanding researchers, professors Christine Petit (France) and Karen Steel (UK), received the award for their pioneering work to unravel the genetic and molecular causes of hereditary deafness and hearing impairments. The internationalisation of Danish research has been a top priority for the Foundation for a number of years. The intention is for the Foundation to enter into partnership agreements with top international universities and provide opportunities for Danish biomedical researchers to gain international experience and build networks within their field of research. The Foundation has entered into an agreement with the McGovern Institute at the Massachusetts Institute of Technology in Boston to fund a two-year postdoc stay at the Institute. It is also considering funding international undergraduate students to come to Denmark to take their Master’s degrees. Strategic grants Strategic grants are awarded on the basis of requests from research communities, discussions with universities and research councils and internal deliberations. They often go to groups of researchers to set up large projects and shed light on relevant issues from a multi-disciplinary perspective. These projects are defined in close co-operation with the Foundation’s management and undergo peer review by an ad hoc panel of international experts. In 2011 and 2012, psychiatry and neuroscience have been the focus of the Foundation’s strategic grants. In 2012, three major strategic projects received grants: • DANDRITE, a Danish division of EMBL (European Molecular Biology Laboratories), was established at Aarhus University. DANDRITE’s research focus is basic neuroscience • RESCueH, University of Southern Denmark, is an interna tional project involving clinical trials of non-medical treat- ment of various types of alcohol dependency • MEPRICA (Mental Health in Primary Care), Aarhus Univer sity, focuses on treatment and diagnosis in general practice of mentally ill individuals who also suffer from other condi- tions
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Teaching and communicating science and research For several years, the Foundation has supported projects that focus on providing quality teaching in order to maintain and increase pupils’ interest in the sciences. In early 2013, a permanent evaluation committee was set up for this purpose. It will evaluate project applications that focus on research and development in the teaching of science subjects, as well as applications that focus on communicating new research within the biomedical and natural sciences. As a natural extension of its support for teaching science subjects and disseminating information about research, the Foundation entered into three exciting new partnerships, the main purpose of which is to highlight both how important the issues are, and the number of good and exciting initiatives and projects in this area in Denmark. The Foundation collaborates with the Danish newspaper Politiken on its Teaching Awards, which will be awarded to primary and secondary school teachers for the first time in the spring of 2013. In conjunction with the newspaper Information, Danish Universities and the Danish Broadcasting Corporation (DR), the Foundation will help new ph.d. graduates communicate their research results and bring them to bear on public debate. Along with Experimentarium and Information, the Foundation has also launched the Lundbeck Foundation Lectures. Since spring 2012, more than 1,300 participants have heard Danish top-researchers explain their work and answer questions on a wide range of topical issues in biomedicine and the natural sciences.
Grants by category since 2008
DKK million
Regular
Personal
Strategic
Emerge
600
500
16
400
204
120
74 300
200
100
95
100
30
50
203
190
2008
2009
123
80
72
230
228
223
2010
2011
2012
0
10
In the following articles, some of the projects and people who have received ongoing, personal or strategic grants, as well as projects that focus on teaching and communicating science are described.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Regular grants In 2012, the biomedical- and natural science evaluation committees assessed 942 applications and grants were awarded to 170 projects. The projects vary greatly in terms of subject, scope and duration, and their results will have an impact on future research and other processes in many different ways. Common to all projects supported by the Foundation is that they involve fascinating narratives, one or more questions that meticulous researchers are eager to answer, and hypotheses that must be confirmed or rejected. Below are three examples of research projects that the Foundation fully or partially funded via regular project grants in 2012.
Applications submitted to evaluation committees Biomedical sciences
Number of applications
Number of grants
Success rate
872
151
17%
70
19
27%
942
170
18%
Natural sciences Total
Advanced Statistical Inference Techniques in Molecular Genetics or: The Gorilla In Us All Asger Hobolth, Associate Professor, ph.d., Department of Mathematics, Aarhus University Asger Hobolth and his colleague Mikkel H. Schierup are responsible for the Danish contribution to the work of a major international research team that published its findings in Nature in 2012. The team mapped the genome of the lowland gorilla and compared it with the chimpanzee and humans. 98.3% of gorilla DNA is identical to human. The chimpanzee is an even closer relative in evolutionary history, sharing 98.6% of its DNA with humans. In comparison, the pig has a 75% genetic crossover with people, mice 70%. The researchers identified a number of genes that may have provided evolutionary advantages for gorillas, chimpanzees and humans, including ones that may play important roles in developing a large brain. The major differences between the three species are only found in a small part of the human genome, including a variant of the FOXP-2 gene, which is specific to humans. FOXP-2 is important to human language, as it enables us to put words together in long sequences and verbalise intelligibly. Large amounts of data have yet to be analysed before we are fully able to understand the function of the genes in the complete gorilla genome. Photo: Raul654
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
DNA Metabolism of Persisting Bacteria or: Combating Anti-Resistant Bacteria Anders Loebner-Olesen, Professor, ph.d., Department of Science, Systems and Models, Roskilde University Pathogenic bacteria possess the ability to remain dormant in our bodies. When they do, they cease to grow and divide, and therefore become temporarily resistant to antibiotics that specifically attack bacteria while they are growing and actively dividing. This means that, following a course of antibiotics, an infection may flare up again after a certain amount of time, even if sensitivity tests have indicated that the bacteria in question are sensitive to the antibiotic with which the patient has been treated. Several different types of bacteria possess this ability to remain dormant, but Mycobacterium tuberculosis, which causes tuberculosis (TB), is the record-holder. It is capable of remaining dormant for up to 30 years and then re-infecting the carrier. It is used as the model bacterium in this project. In bacteria from TB patients, it has been observed that a particular part of the DNA of the bacteria is blocked. This stops the bacteria replicating its DNA and being able to divide. This part of the DNA needs to be studied in greater detail because the hypothesis is that removing the blockage will make it possible to bring the bacteria back to life. If they begin to divide, it will be possible to attack them with existing antibiotics and therefore completely cure chronic infections, e.g. in TB patients.
Unexplained Infertility in People with Allergies and Asthma Is It Due To Systemic Illness? Vibeke Backer, Clinical Professor, MD, Department of Pulmonary Medicine, Bispebjerg Hospital Doctors treating involuntary infertility have observed that many of their patients suffer from asthma and allergies. This group of patients also seem to have greater than average difficulty becoming pregnant via fertility treatment. Based on the Danish Twin Registry, the project will study the prevalence of allergic conditions in women with normal and impaired fertility. The Twin Registry was set up in 1953 and includes almost all twins born in Denmark since 1870 – currently almost 80,000 pairs. It is mainly used for medical research. The study at Bispebjerg Hospital will also map whether it is actually more difficult for patients with asthma and allergies to become pregnant via fertility treatment. The hypothesis is that the whole body is affected by asthma/allergy, not just the organ that gives the patient symptoms, and that optimal treatment of the allergic condition may help make fertility treatment for this patient group easier, or perhaps completely unnecessary.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Personal grants The Foundation awards personal grants and prizes to support and encourage outstanding researchers at different stages of their careers THE BRAIN PRIZE The Brain Prize is a personal award of â‚Ź1 million to one or more scientists who have distinguished themselves by making an outstanding contribution to European brain research. In the year following the award, the winners engage in Danish research via an outreach programme put together by representatives of Danish neuroscience from the universities of Copenhagen, Aarhus and Southern Denmark, the Danish Society for Neuroscience, the Lundbeck Foundation and The Brain Prize. The aim of the programme is to provide young neuroscientists from Denmark with the opportunity to establish networks with outstanding international research groups in their field. In 2012, the prize went to Christine Petit, Professor, The Pasteur Institute in Paris and Karen Steel, Professor, The Wellcome Trust Sanger Institute, Hinxton, UK. Her Majesty Queen Margrethe II awarded the prize at a ceremony in Copenhagen
in May. The two researchers have conducted ground-breaking basic research on genetic conditions surrounding the development of the inner ear, uncovered the molecular causes of congenital hearing impairment and deafness, added crucial new knowledge to their field, and had a direct impact upon the understanding of the best way to use cochlear implants to help deaf children. The next Brain Prize will be awarded in May 2013. The scientist(s) awarded the prize are nominated by peers from around the world and selected by a broad-based international committee of neuroscience experts. Further information: www.thebrainprize.org
Presentation of the Brain Prize 2012. From the left: Prize-winners Christine Petit and Karen Steel, Her Majesty Queen Margrethe II and Nils Axelsen, Chairman of the Board
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
LUNDBECK FOUNDATION FELLOWSHIPS Lundbeck Foundation Fellowships are personal grants of DKK 10 million for five years of research. They are awarded to young researchers who are ready to start or expand their own research groups in strong Danish research environments.
Lundbeck Foundation Fellow, Brian Møller Andersen Associate Professor, ph.d., Solid-state Physics, the Niels Bohr Institute, University of Copenhagen
The Theory behind New Superconducting Materials Brian Møller Andersen’s research focuses on superconducting materials. A superconductor is a substance that carries electric currents without resistance – i.e. without generating heat and without losing energy. Usually, very low temperatures (over 100 degrees below zero) are required to turn materials into superconductors. Experiments have shown that certain ceramic materials are superconductive at temperatures higher than the classic metal superconductors. However, as yet there is no theoretical explanation for this observable phenomenon. Brian’s research focuses on finding one. Using computer models, he will calculate what exactly it is that happens when the materials are cooled down to temperatures where they become superconductors. In the long term, there will be major benefits, including in the form of energy savings, from superconductors that work at room temperature.
Lundbeck Foundation Fellow Thomas Lars Andresen Professor, ph.d., Department of Micro- and Nanotechnology, Technical University of Denmark
Nanocapsules Deliver Medicine Directly to Diseased Tissue Thomas Andresen has set himself and his research group at DTU the task of designing nanocapsules capable of delivering medicine directly to specific cells or tissues. The idea is to ensure that the chemistry in the capsule suits the biology in which it will be deployed. Specifically, Thomas and his team want to design nanocapsules that deliver drugs directly to cancer cells, making them incapable of repairing the damage to their DNA caused by radiation treatment. In other words, when a tumour is treated with a combination of nanoparticles and radiotherapy, the nanocapsules are expected to make radiotherapy far more effective while sparing the surrounding normal tissue.
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Lundbeck Foundation Fellow Thomas Bjarnsholt Associate Professor, ph.d., Department of International Health, Immunology and Microbiology, University of Copenhagen
Bacteria hiding in Biofilm Thomas Bjarnsholt is mapping the mechanisms behind the formation of biofilms – an additional defence mechanism used by bacteria when they accumulate in particularly large numbers. Biofilms can form on surfaces inside the body, resulting in chronic infections, e.g. in people who have had joint replacements or new heart valves. Biofilms protect bacteria against antibiotics, making them very difficult to combat. Thomas wants to study what makes bacteria stick to each other so efficiently when they find themselves in the same vicinity. Individual bacteria are sensitive to antibiotics, so neutralising their ability to stick to each other and form biofilms would mean that ordinary antibiotics could be used to combat chronic infections.
Lundbeck Foundation Fellow Kim Jensen Associate Professor, ph.d., Biotech Research and Innovation Centre, University of Copenhagen
Stem-cell Life Cycles and the Key to the Development of Disease Stem cells and their maturation pathways are central to Kim Jensen’s research. Stem cells continually renew body tissue when worn-out cells need to be replaced. At the same time, they can be viewed as a source of biological spare parts as it were – for example, when transplanting new bone marrow into cancer patients or repairing damage to the heart after blood clots. A host of questions about stem cell life cycles remain unanswered. If they divide too quickly, it may indicate the start of a cancer. If they do not divide rapidly enough, it can slow down the healing process for wounds. Kim’s research focuses very closely on the ‘stop-or-go’ that normally regulates stem cell division. He has developed a model in which to study this in detail, by following stem cell maturation in the skin of mice. New knowledge about the life cycles of normal stem cells will help us better understand elements of the background to the development of certain diseases.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Lundbeck Foundation Fellow Birgitte Rahbek Kornum Senior Researcher, ph.d., Sleep and Neuro-immunological Research Unit, Glostrup Hospital
Does the Immune System Destroy the Hypothalamus in Narcolepsy Patients? Narcolepsy is a disease causing excessive fatigue and bouts of sleep during the daytime. Normal sleep patterns are controlled by a particular region of the hypothalamus the size of a pea, in which a large number of neurons produce the hormone hypocretin. In patients with narcolepsy, these neurons are destroyed. Birgitte’s research focuses on the immune system’s role in this. The theory is that the nerve cells are damaged due to an autoimmune reaction whereby the body’s immune system mistakenly attacks normal tissue. Birgitte’s research in the US has focused on two specific genes predisposed to the development of narcolepsy. She will now study in greater detail, whether they play a role in the immune system’s destruction of the sleep-regulating nerve cells in the hypothalamus.
Lundbeck Foundation Fellow Morten Mørup Associate Professor, ph.d., Department of Informatics and Mathematical Modelling, Technical University of Denmark
The Brain’s Internal Communications Network Morten Mørup’ conducts neuroscience research into the biological basis for mental phenomena. Using a large number of brain scans of healthy volunteers and subsequent mathematical and statistical processing of very large volumes of data, Morten aims to map communication pathways and patterns between different brain centres. Detailed knowledge of internal communication in a healthy brain will allow us to identify the early signs of diseases such as Parkinson’s. This knowledge will be used both for early diagnosis and for evaluating new treatments for diseases that affect the brain’s functions by changing its communication patterns.
Lundbeck Foundation Fellow Claudio Pica Professor, ph.d. Department of Mathematics and Computer Science, University of Southern Denmark
Is the Higgs Particle the Fifth Force of Nature? The current Standard Model of particle physics operates with four forces of nature but lacks something that explains why particles have a mass. According to Claudio Pica, the Higgs particle, which was detected in summer 2012 by the Large Hadron Collider at CERN, potentially holds the answer to the question of mass by itself representing a fifth force of nature. Claudio will use some of the world’s most powerful computers to test different models for such a fifth force of nature by analysing the huge volumes of data generated the CERN experiments.
Lundbeck Foundation Fellow Thomas Bjørnskov Poulsen Post doc., ph.d., Department of Chemistry, Aarhus University
Natural Substances Can Kill Cancer Cells Thomas Bjørnskov Poulsen conducts research at the interface between chemistry and biology. As a trained chemist with particular interest in biological processes, Thomas has chosen to focus his research on identifying the chemical processes behind certain natural substances’ ability to suppress the growth of cancer cells. We know that some natural substances affect the proteins in cancer cells, which otherwise enable them to grow uninhibited. Thomas aims to identify the target proteins of these natural proteins by producing artificial variants of them and seeking to create substances that even more precisely affect the cancer cells, especially cancer stem cells. These stem cells are found in very small numbers and are particularly difficult to reach by conventional means, which may partly explain why current treatments do not always completely eradicate cancer cells.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
THE LUNDBECK FOUNDATION’S RESEARCH PRIZE FOR YOUNG SCIENTISTS
THE LUNDBECK FOUNDATION’S TALENT PRIZES
The Lundbeck Foundation’s Research Prize for Young Scientists is awarded annually to a researcher under the age of 40 who is nominated by one or more colleagues for particularly outstanding and significant research.
Mads Hald Andersen Professor, Doctor of Technical Sciences, Centre for Cancer Immunotherapy, Department of Haematology, Herlev Hospital
The Role of the Immune System in the Development of Cancer In 2012, Professor Mads Hald Andersen was awarded the prize for his work in mapping the role of the immune system vis-àvis cancer cells. His research at the Centre for Cancer Immunotherapy at Herlev Hospital has focused on how cancer cells apparently are able to hide from the immune system, even though they should be instantly recognisable to the cells that specialise in removing alien elements from the body. Mads’ research has shown that certain regulating cells in the immune system become conducive to the growth of cancer cells because they protect them against attacks by the immune system’s killer cells. Mads’ team is now developing vaccine therapy to inhibit the regulating immune cells’ protection of cancer cells. This will improve treatments designed to help patients’ own immune systems defeat cancers such as malignant melanomas.
The Lundbeck Foundation’s Talent Prizes are awarded annually, on the recommendation of supervisors and colleagues, to three exceptionally talented scientists aged under 30.
Kira Irina Astakhova Associate Professor, ph.d., Department of Physics, Chemistry and Pharmacy, University of Southern Denmark
Glowing DNA Molecules in Diagnostics Kira Irina Astakhova co-authored her first article at the age of 19. She came to Denmark from Russia as a ph.d.-student, and is now a postdoctoral scientist establishing her own research profile in Denmark. Kira’s research is into fluorescent markers, which can be coupled to synthetic DNA molecules. These fluorescent molecules are used to locate specific regions of DNA in our cells. Kira is currently working on a marker to use in the diagnosis of people who carry a particular gene variant. People in this group who are infected with HIV do not respond to the conventional therapy that works for most patients. The technique Kira has developed for HIV patients could, with minor alterations, be applied to other types of diagnostics.
Anne Ersbak Bang Nielsen Post doc., ph.d., Max Planck Institute of Quantum Optics, Germany
The Many-body Problem in Modern Quantum Physics Anne Ersbak Bang Nielsen’s research in quantum physics focuses on the many-body problem of microscopic systems made up of a large number of interacting particles. She has a special talent for processing very large and complex mathematical problems. After defending her ph.d.-thesis at Aarhus University, Anne was recruited to the Max Planck Institute for Quantum Optics in Garching, Germany. In this international scientific setting, she continues her research into the manybody problem, which, amongst other things, seeks to understand how, according to modern quantum mechanics, a physical object can be in more than one state at the same time, e.g. both alive and dead. Scanpix
Cancer cell (yellow) is attacked by immune cells programmed to recognise and eliminate cells that differ from the body’s normal tissue.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Dr. Jonas Bjerring Olesen Department of Cardiology, Gentofte Hospital
Safe Treatment for Cardiac Fibrillation Patients Cardiac fibrillation increases the risk of blood clots, which at worst can become lodged in the brain’s blood vessels and lead to a stroke. To prevent this, people with cardiac fibrillation are treated with anticoagulants. If this treatment is not tightly regulated, it can itself increase the risk of bleeding – including in the brain – and possibly lead to a stroke. It is therefore important to have accurate methods of predicting the risk of blood clots in cardiac fibrillation patients so that treatment can be tailored to suit the individual. Jonas’ research – first as a medical student, and later as a physician – has focused on this problem. He has already published articles that have helped to change risk-assessment practices in Europe for this group of patients.
OTHER PERSONAL GRANTS The Lundbeck Foundation has various instruments at its disposal. Its personal grants serve both to provide career support for individual researchers and to promote the internationalisation of Danish-related biomedical research. In 2012, the Foundation awarded several types of personal grants, in particular for collaborations with institutions abroad and to promote Danish research in an international context.
The Lundbeck Foundation Research Committee will nominate candidates, and the McGovern Institute will decide who will take up the post in autumn 2013. The Foundation also wants to extend this type of more formalised international partnership, and is exploring the potential for a similar initiative in China. FULBRIGHT Scholarships In collaboration with the Denmark-America Foundation, the Lundbeck Foundation funded two Fulbright Scholarships in 2012. The beneficiaries are young researchers who want to spend a year at a university abroad, where they will be able to focus on an area of research or study of particular interest. The two recipients in 2012 were Amanda Lassen MSc (Lundbeck Foundation and ALK scholarship), who is spending a year at the Jonsson Comprehensive Cancer Center in Los Angeles, where she will be working with various issues pertaining to melanoma. The other is Physician Anne-Christine Huth Ruwald (Lundbeck Foundation and Falck scholarship), who is visiting the University of Rochester, NY, where she is contributing to several clinical studies that seek to clarify the effect of implanted pacemakers in patients at risk of heart failure. Researchers in Residence It is crucial that researchers are afforded the opportunity to go abroad to conduct research for shorter or longer periods, or to present new research findings at meetings and conferences. The Foundation provides grants to well qualified applicants for ph.d. or postdoctoral fellowships who have posts lined up at laboratories or hospitals in other countries, where they will receive advice and support to help them with the practical side of their research. The Foundation also supports Danish biomedical researchers who want to invite colleagues from abroad with new methods and perspectives, and who offer potential new opportunities for collaboration, to come to Denmark for up to six months.
Support for international
International postdoctoral fellowships As a new internationalisation initiative, the Foundation has entered into an agreement with the McGovern Institute for Brain Research at the Massachusetts Institute of Technology in Boston to fund a Lundbeck Foundation Fellow’s postdoctoral studies there. The McGovern Institute focuses its research on understanding how the human brain works and on discovering new ways to prevent or treat brain disease.
Number
DKK mill.
research stays in 2012 Travel grants for conferences and similar
125
4.0
Research stays abroad
28
18.4
Visiting professorships
7
2.7
Total
160 25.1
In 2012, the Foundation provided 160 researchers from Denmark with the opportunity to conduct research abroad and establish or consolidate international networks that may have a lasting impact on their careers.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Strategic grants For many years, the Foundation has supported innovative research in strategic areas. In 2012, DKK 120 million was granted to strategic initiatives. The three major strategic grants represent a continuation of the Foundation’s focus on psychiatric research and an extension of the aim of contributing further to the internationalisation of Danish research.
iPSYCH iPSYCH (Integrative Psychiatric Research) is a major psychiatric project to which the Lundbeck Foundation donated DKK 121 million in 2012. The grant is for three years, with an option for extensions up to a total of nine years. iPSYCH is a combined clinical and basic-research project. It primarily addresses, autism, ADHD, schizophrenia, bipolar disorder and depression. The size and quality of the Danish data sources available to iPSYCH means that the project can expect to place Danish psychiatric research at the centre of international efforts to identify the reasons for these common, costly and debilitating conditions. In 2010, it was estimated that 3.3 million Europeans suffered from ADHD, 33.3 million from depression and 5 million from schizophrenia. The project’s main objective is to find the causes of mental disorders in order to ameliorate these conditions and improve the prognosis for individual patients. This will be achieved through a combination of genetic research and the evaluation of environmental factors. The project will also seek to find ways to prevent diseases by focusing on changes in genes and the environmental factors that may affect their function. The aim is to build up a more detailed understanding of the diseases’ causes and mechanisms.
The results of the biological analyses will be cross-referenced with data regarding, e.g. admissions, diagnoses and prescriptions. In this way, it will be possible to create a very detailed picture of a person’s health history, including information about the many different factors that may trigger mental illness in genetically predisposed individuals. The project started on 1 March 2012. Since then, extensive work has been done to establish the methods and infrastructure to be used in the treatment of the large volumes of biological samples and other data across the participating groups, SSI and other partners. Due to the interdisciplinary nature of the project, it is headed by five Principal Investigators. Former Dean Søren Mogensen, Professor, is responsible for the administrative management of the project.
iPSYCH aims to establish an internationally acknowledged research environment capable of attracting top researchers to Denmark. The project will include genetic and other biological analyses of up to 70,000 people. Denmark is in a unique position because it has preserved blood samples from approx. two million people born in the country since 1981 who were screened for congenital diseases by Statens Serum Institut (SSI). These samples are the result of the many years spent building up the visionary biobank at SSI. They make it possible to map in detail both DNA and a number of proteins and other molecules and disease markers. This means that in the future we will be able to obtain information about a person’s possible genetic predisposition to disease. Genetic research to date has shown that it is necessary to study a large number of people in order to identify gene variants that may influence the development of disease. It is therefore necessary to work with major research groups abroad. Such partnerships are being established with several leading international centres.
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Five leading Danish researchers, in a national collaboration across universities and regions, developed the project with its many sub-projects. They are each responsible for specific parts of the project. From left to right: • Merete Nordentoft, Professor of Clinical Psychiatry, University of Copenhagen • Anders Børglum, Professor of Medical Genetics, Aarhus University • Preben Bo Mortensen, Professor, Centre for Registry Research, Aarhus University • Thomas Werge, Professor of Clinical Psychiatry, University of Copenhagen • Ole Mors, Professor of Clinical Psychiatry, Aarhus University
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
EMBL node in Denmark, DANDRITE
Life expectancy Year
General population
90
Bipolar affective disorder Schizophrenia 80.3
Denmark is a member of the European Molecular Biology Laboratories (EMBL) – a basic-research institution that provides a framework for research of the highest international quality. EMBL also seeks to bring together national research units that have a more translational approach to research. Therefore, it has invited the Scandinavian countries to participate, mainly due to their strong tradition of high quality, practical and registry-based health research. EMBL subsidiaries have already been established in Norway, Sweden and Finland. In collaboration with the Danish Council for Independent Research and EMBL, the Foundation has in 2012 invited applications for a Danish EMBL node to focus on neuroscience. Following an international peer review conducted by the Danish Council for Independent Research, the Lundbeck Foundation’s Board of Directors decided to award up to DKK 120 million, over a period of up to ten years, to DANDRITE, which will be affiliated to Aarhus University and headed by professors Poul Nissen, Anders Nykjær and Poul Henning Jensen.
75.7 69.3 63.8
62.1 55.7 50 Men
Women
People with mental disorders have a significantly higher mortality rate than those without. The figure shows that the life expectancy of people with schizophrenia or bipolar disorder is 10–20 years shorter than that of people without these disorders. This is probably due to lack of treatment for their physical ailments, higher risk of suicide and accidents, and the side effects of medication, as well as unhealthy lifestyles (for example, inactivity, smoking and unhealthy diet).
The project’s objective is to improve GPs’ diagnosis and treatment of mentally ill patients. There will be a special focus on patients who at the same time also suffer from physical illness. Recent research indicates that people with mental disorders are at increased risk of physical illness, and persons with physical ailments are at increased risk of mental problems. A basic understanding of these relationships is needed to optimise treatment and counselling. MEPRICA will establish a database that collates information from the general practice database, national registries and clinical databases about patients in general practice. This will form the basis for a study of the relationship between mental and physical illness.
Inauguration of DANDRITE in spring 2013. Rector Lauritz B. Holm-Nielsen, Aarhus University, Director General Ian Mattaj, EMBL and Director Poul Nissen, DANDRITE
Mental Health in Primary Care The Lundbeck Foundation has awarded DKK 16 million to the five-year research project ‘Mental Health in Primary Care’ (MEPRICA) led by Professor Mogens Vestergaard, Aarhus University. One in four Danes is affected by a mental condition at some point in their life. Most of our knowledge about these disorders stems from research carried out in specialised psychiatric treatment facilities. However, up to 90% of the patients are diagnosed and treated by general practitioners (GPs).
People with both mental and physical disorders often have complex needs with which modern and highly specialised health systems find it difficult to cope. People with mental disorders have significantly shorter life expectancy, partly as a result of the lack of treatment for physical ailments (see figure). MEPRICA wants to identify the reasons for this mortality rate in individuals with depression, stress, schizophrenia and bipolar disorder. MEPRICA will also develop and quality-test electronic tools for the diagnosis and monitoring of anxiety and depression. These tools will be made freely available to GPs. Good diagnostics is a prerequisite for optimal treatment.
THE GROUP BEHIND MEPRICA • Mogens Vestergaard, Professor, specialist in General Medicine at Aarhus University • Thomas Munk Laursen, Associate Professor, Centre for Register-based Research, Department of Economics, Aarhus University • Kaj Sparle Christensen, Associate Professor, Department of Public Health, Aarhus University
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Clinical alcohol research Excessive alcohol consumption is one of the lifestyle factors that most affects morbidity and mortality in the Western world. Knowledge of the mechanisms that lead to alcohol abuse has improved, but treatment is still inadequate and the results of it discouraging. The five-year research programme RESCueH includes five studies of non-medical treatment of alcohol-dependent patients. The programme title comprises the names of the five studies included in the project: Relay, Elderly, Self-match, Cue Exposure and Healthy Lifestyle. These are clinical studies involving a treatment group and a control group, and all revolving around maintaining the patient’s motivation and participation regarding the choice of treatment type. The largest of the studies is being carried out in collaboration with leading alcohol research groups in the United States and Germany. The purpose of the Foundation’s grant is to strengthen Danish clinical psychiatric research and to establish a strong alcohol research environment that helps procure evidence about which types of treatment are the most effective for specific patients. The Lundbeck Foundation provided a start-up grant of DKK 44 million in 2012. The project was established in co-operation with TrygFonden, which donated DKK 10 million. The Region of Southern Denmark and the University of Southern Denmark together provided another DKK 10 million. The project is managed by the Unit for Clinical Alcohol Research, under the Psychiatry Research Unit at the University of Southern Denmark, and the Region of Southern Denmark, which has 20 years’ experience of clinical alcohol research projects. The
ODENSE ALBUQUERQUE
DRESDEN MUNICH
The research will be conducted in Denmark, Germany and the US
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project managers are Anette Søgaard Nielsen, Associate Professor and Bent Nielsen, Professor, The Psychiatry Research Unit, University of Southern Denmark. The largest study is The Elderly Study, which will look at 1,000 subjects aged 60 and over. The project will explore the effect of a specially targeted treatment for individuals whose alcohol abuse started late in life. It will be an international study, the first of its kind, with the participation of three major Danish alcohol treatment centres and research centres in Germany and the US: Dresden, Munich and Albuquerque, New Mexico. The whole RESCueH programme will include a total of 3,000 patients with alcohol abuse problems, and will be the largest clinical alcohol project in the world. The results of the five studies are expected to improve the treatment of alcohol abuse by providing evidence for the efficacy of various nonmedical forms of treatment. The project represents a significant strengthening of clinical alcohol research in Denmark. It is expected to lead to a new generation of researchers entering the field and to closer co-operation between Danish researchers and international partners.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Teaching and communicating science and research The Lundbeck Foundation has a tradition of supporting projects that focus on science teaching. Schools are the first step on the education pathway, where hopefully more talented students will choose a degree in science, technology or biomedicine.
The focus is on projects that collate experiences or evidence regarding specific teaching methods or processes. The Foundation prioritises projects that result in outcomes or experiences that can be shared with others in the same field, be it through research results or teaching.
of the research communication prize of the Danish Ministry of Science, Innovation and Higher Education. Finally, the eight winners will appear on a DR2 (Danish Broadcasting Corporation) programme, where they will compete for the title of best oral communicator of a ph.d. project in 2013.
Over the last decade, the Foundation has supported a large number of major projects focusing on the development of teaching and research in science education. In order to maintain its focus on this area in 2013, the Foundation has set up an evaluation committee to assess applications for project funding in science education and research dissemination, on a par with the existing evaluation committees for biomedical and natural sciences. As well as supporting teaching and communication projects, the Foundation wishes to promote the dissemination of research results to recipients other than just researchers and companies. Many of the results obtained by Danish researchers and their international counterparts will eventually have a major impact on public debate and everyday life. The illustration was printed in Politiken 02/05/13. Graphics: Claus Nørregaard
When prominent scientists are asked how they chose their area of study, they very often answer that the deciding factor was an inspiring, committed teacher with special communication skills. In the end, it’s all about the good teacher – the teacher who grabs students’ attention, engages their interest and shows them new perspectives.
iBureauet
From 2013, the Foundation will work with the Danish newspaper Politiken on a prize for teachers who have made a special impression. Nominations can be submitted by their students, colleagues, managers or the students’ parents.
From 2013, the Foundation is working with the Danish newspaper Information, Universities Denmark and the Danish Broadcasting Corporation on the Information ph.d. Cup.
The aim of Politiken’s Teaching award is to contribute to the development of teaching practices in Danish primary and secondary schools, and help restore respect for the profession as such.
The idea is to let young researchers who have obtained their ph.d. within the last year disseminate their research and put its purpose and results into a social context. The new knowledge generated by ph.d. students should be used and recognised in the public debate. Each Danish university is entitled to nominate eight candidates, each of whom will submit an informative text to be assessed by a panel of judges consisting of previous winners
The Lundbeck Foundation would like to help highlight good examples of teachers in Danish schools who have made a particular impression on students – and therefore made a difference. A panel of expert judges will review the nominations. The winners will be announced at an event focusing on inspirational teaching and good teachers. 21
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
LUNDBECK FOUNDATION LECTURES PROGRAMME 2012
22 MAY WHO CONTROLS YOUR ACTIONS? Hartwig Siebner, Professor, Hvidovre Hospital Pelle Guldborg Hansen, Professor, Department of Communication, Business and Information Technologies, Roskilde University 4 SEPTEMBER THE SEARCH FOR DARK MATTER Lundbeck Foundation Fellow, Troels Petersen, Associate Professor, the Atlas Experiment, CERN/The Niels Bohr Institute Director Kristian Pedersen, astrophysicist, National Space Institute, DTU 25 SEPTEMBER THE SECRETS OF THE SLEEPING BRAIN Poul Jennum, Professor, and Lundbeck Foundation Fellow, Birgitte Rahbek Kornum, Senior Researcher, ph.d., Danish Center for Sleep Medicine, Glostrup Hospital 23 OCTOBER THE ANATOMY OF EVIL Lundbeck Foundation Centre Director, Gitte Moos Knudsen, Professor, Rigshospitalet Henrik Høgh-Olesen, Professor, Department of Psychology, Aarhus University 27 NOVEMBER THE IMMUNE SYSTEM’S FIGHT AGAINST CANCER Mads Hald Andersen, Professor, and Inge Marie Svane, Professor Centre for Cancer Immune Therapy, Herlev Hospital 4 DECEMBER LIGHT IN THE DARK – ABOUT DEPRESSION Royal actor Henning Jensen Thomas Werge, Professor, Lundbeck Foundation iPSYCH Centre
The Lundbeck Foundation would like to provide an opportunity for more people to meet scientists, who share their research and put it into perspective. In co-operation with Experimentarium and Information, the Foundation has initiated a lecture series that aims to raise awareness of Danish research. The lectures are geared towards a general audience, and use experiments on stage and crowd voting to engage the audience and bring the research to life. The lecturers are scientists and other celebrities who provide interesting perspectives on new findings from the front line of research, and discuss the opportunities they provide and the consequences of them. The lectures are open to the public.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
The interest for Lundbeck Foundation Lectures has been overwhelming with all six events in 2012 being sold out. It is the Foundation’s intention to develop the concept further.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Partner Christian E. Elling
The Lundbeck Foundation established Lundbeckfond Emerge in 2012 aiming to create a vehicle to invest in, support and act as a catalyst for the commercialisation of ground-breaking new research and innovation in Denmark in the pre-venture funding stage. Accordingly, Lundbeckfond Emerge invests in new research data from, among others, Danish universities which we believe have a substantial commercial potential and where our experience and skills can add value to individual new companies or projects. Lundbeckfond Emerge built the basis for the first new business in 2012 by concluding a license agreement with Aarhus University on the potential commercialisation of the use of a family of proteins discovered by the Lundbeck Foundation Research Centre for Membrane-receptors in Neuronal Disease (MIND).
Background Commercialising new research data may represent a challenge. For the individual scientist, the process may seem insurmountable, especially if he or she lacks experience and a network in the commercial field. It may often be difficult to source the venture capital required to convert exciting research results into a focused research project with a commercial perspective. Funding sources are very restricted because such projects typically involve a high risk given the early development stage. In addition to funding, scientists also need partners with commercial experience, which can be difficult to find. These circumstances make conditions difficult for scientists and their projects, to the disadvantage of themselves and society, which are unable to capitalise on the value of such innovation if the commercial applications are not investigated. Lundbeckfond Emerge Establishing Lundbeckfond Emerge, the Lundbeck Foundation has set up a new activity to complement its grants for the best research activities in Denmark on the one hand and the existing venture capital activity through Lundbeckfond Ventures on the other.
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The Lundbeck Foundation's intention with Lundbeckfond Emerge is to contribute to the growth and successful commercialisation of new and ground-breaking research and innovation in Denmark. The objective is achieved by investing in projects on commercial terms and by providing relevant support to businesses to help them build professional operations. We wish to identify high-quality research offering strong commercial potential and where the framework conditions allow a clear plan of execution to be developed. The research projects will build on constructive collaborations between Lundbeckfond Emerge and the individual scientists, leveraging each party’s strengths. Lundbeckfond Emerge thus aims to be a proactive partner and to contribute to building new businesses and innovation, not only by investing but also through intellectual contributions and by making our experience and network connections available to other investors and the industry. Each new business will benefit substantially from this approach, allowing it to pursue an optimised plan and gain access to the relevant industry players from the beginning. We have not defined a specific procedure for how to approach Lundbeckfond Emerge. However, it is important to have prepared a business plan or a presentation of the project
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Portfolio companies
Insusense Therapeutics
Denmark
Development of new pharmaceuticals for the treatment of diabetes based on groundbreaking, internationally leading research in the role of the sortilin protein family.
 Denmark
Development of new pharmaceuticals for the treatment of cancer based on internatio-
www.epitherapeutics.dk
nally leading research in epigenetics.
The picture illustrates a molecular model of the protein that Insusense Therapeutics researches the use of as a pharmaceutical product. The company has discovered that the protein can increase the body’s sensitivity towards insulin significantly. Insulin regulates the body’s level of sugar in the blood. The protein therefore has the potential to become a medicinal product for treatment of diabetes, which among other things is characterised by reduced sensitivity towards insulin.
describing how the new potential product differs from existing products or competing ideas. Portfolio and new investments Lundbeckfond Emerge built the basis for the first new business in 2012 by concluding a license agreement with Aarhus University on the commercialisation of the use of a protein discovered by the Lundbeck Foundation Research Centre for Membrane-receptors in Neuronal Disease (MIND). For a number of years, the centre has worked with dedication to develop its original discovery of the so-called sortilin family of proteins and their effect on the central nervous system. Surprisingly, it turned out that the proteins may also play a key role in the treatment of metabolic disorders, including diabetes. Lundbeckfond Emerge has therefore invested in the company Insusense Therapeutics. The parties will jointly prepare and execute a research and development plan for the further commercial application of sortilin proteins for the treatment of diabetic patients. On the basis of current knowledge and in-house research, the company will develop a new pharmaceutical product that may form part of an improved diabetes treatment regimen.
Through Lundbeckfond Ventures, the Lundbeck Foundation has previously invested in the oncology company EpiTherapeutics. The management of this company has been transferred to Lundbeckfond Emerge as its profile matches the objectives of Emerge. In 2012, EpiTherapeutics achieved major research milestones, which took the company important steps forward and matured its technology and pipeline.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
COMMERCIAL ACTIVITIES – THE YEAR AT A GLANCE The commercial activities of the Lundbeck Foundation Group centre on its three subsidiaries, which are complemented by portfolio and venture investments managed by the Foundation through Lundbeckfond Invest and Lundbeckfond Ventures.
and earnings, owing especially to improvements in the Emergency and Training business areas.
Activities and results for the year In terms of earnings, the Lundbeck Foundation had a much better year in 2012 than in 2011, primarily on account of a strong performance by Lundbeckfond Invest. Revenue rose by 21% from DKK 23,602 million in 2011 to DKK 28,675 million in 2012. In July 2011, the Lundbeck Foundation acquired the shareholding majority of Falck, and 2012 was therefore the first full year in which Falck contributed revenue. Falck contributed to the substantial increase in revenue in spite of the Foundation recording declining sales in H. Lundbeck related to the Lexapro® patent expiry. Disregarding the impact from full-year revenue recognition from Falck, revenue was on level with 2011. H. Lundbeck reported lower revenue and earnings due to the Lexapro® patent expiry in the US and continuing investment in product development and new product launches. ALK reported revenue on a level with 2011, while the company's earnings were down due to challenging conditions in the European markets and large-scale investments in the development of new tablet products. Falck recorded an increase in revenue
In 2012, H. Lundbeck and ALK made significant investments in research and development and new product launches both in the near and the long term. Overall, however, the Group's research and development costs fell by DKK 343 million to DKK 3,432 million. The reason was that, in 2011, H. Lundbeck incurred costs relating to the reorganisation of its research and development department. The consolidation of Falck has led to an increase in the Group's production costs and administrative expenses. Operating profit before special items fell by DKK 1,436 million to DKK 2,729 million in 2012. Exclusive of Lexapro® revenue in the US, which declined by DKK 1,960 million, there was an increase in the Group's core business operating profit. Lundbeckfond Invest recorded a profit of DKK 1,280 million, against a loss of DKK 72 million in 2011. The large fluctuation from 2011 to 2012 was due to a much better investment climate in 2012, the full-year effect of Lundbeckfond Invest's strategy change in August 2011 and the fact that Lundbeckfond Invest outperformed the equity and credit markets. Lundbeckfond Invest reported a time-weighted return of 13.1% in 2012.
The Lundbeck Foundation's share of profit
DKK MILLION 3,000
1,280
2,500
5 -87
2,000
-11
2,243
-34 -177 1,590
1,500
-476 303
1,000
775
12
H. Lundbeck
ALK
500
0 Falck
Invest
Ventures
Grants
Admin
Tax
Before grants
Special items, net
Grants
Total
ALK and Falck are recognised in the consolidated financial statements of the Lundbeck Foundation in accordance with the Foundation's accounting policies. Provisions for unfunded pension obligations and special items are treated differently in the Foundation's consolidated financial statements. In the chart, administrative expenses include a loss on the sale of the property at Vestagervej 22 of DKK 6 million. Grants are entered as net amounts.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Distribution of net wealth
Net wealth
Ventures and Emerge 2%
Value (DKK million)
Change in net wealth
1/1-31/12 2012
H. Lundbeck 41% Invest 39%
H. Lundbeck
11,386
-3,448
ALK 1,587 297 Falck 3,414 137 Invest 10,989 1,046 Ventures and Emerge Payable grants etc. Falck 12%
ALK 6%
Net wealth
520
253
-1,003
-128
26,893
-1,843
Change in net wealth includes transfers between activities
The loss recorded by Lundbeckfond Ventures amounted to DKK 87 million in 2012, largely unchanged from 2011, when the loss was DKK 70 million. The financial performance was principally due to price developments of the listed equities in which Lundbeckfond Ventures has invested – primarily Veloxis. The Foundation's operating expenses totalled DKK 54 million in 2012, which was a small increase from DKK 42 million in 2011. The increase was due to a generally higher level of activity in the Foundation, including the start-up of Emerge, greater involvement in the strategic grants, active in-house asset management and an increase in the employee headcount. Moreover, operating expenses in 2012 were affected by a non-recurring provision for pensions to board members in the amount of DKK 6 million, up from DKK 3 million in 2011. Adjusted for these two factors, operating expenses climbed from DKK 39 million to DKK 48 million. The Lundbeck Foundation Group had tax expenses of DKK 593 million in 2012, against DKK 1,100 million in 2011.
wealth was primarily due to the declining price of H. Lundbeck's shares and the Foundation's grants. The share price of H. Lundbeck depreciated in 2012, and especially the 15% drop in connection with the reduced floor guidance in December took its toll. ALK performed well, recording a share price appreciation of 20% including dividends, and made a positive contribution to value creation, whilst Falck, on account of depreciation charges in Brazil, has only generated a marginally positive value since the acquisition in 2011. Lundbeckfond Invest made a particularly positive contribution, helping to reduce the fall in net wealth. Outlook The financial performance of the Lundbeck Foundation Group is correlated with developments in the commercial activities of H. Lundbeck, ALK and Falck and the return on the portfolio and venture investments which, in turn, depend on trends in the financial markets. For a detailed description of the outlook for the subsidiaries, go to www.lundbeck.com, www.alk-abello. com and www.falck.com.
The Lundbeck Foundation's share of net profit after tax and before special items rose by DKK 428 million to DKK 2,243 million in 2012. The improvement was attributable to the strong performance in Lundbeckfond Invest. Special items amounted to DKK 177 million after tax in 2012 and related to Falck's amortisation of intangible assets and costs associated with acquisitions as well as a reversal of provisions made in connection with ALK's divestment of Chr. Hansen. In 2012, DKK 482 million was awarded in grants for biomedical and natural science research, continuing the record-high level of 2011, when grants awarded amounted to DKK 504 million. Net wealth The Foundation's net wealth is calculated on the basis of its share of the equity adjusted for the shareholdings in H. Lundbeck, ALK and Falck recognised at market value. At 31 December 2012, net wealth amounted to DKK 26,893 million, against DKK 28,736 million at the end of 2011. The reduction in net
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
H. Lundbeck is a world-leading pharmaceutical company engaged in the development, marketing, distribution and sale of pharmaceuticals targeted at disorders of the central nervous system (brain disorders) such as depression/anxiety, Alheimer's disease, bipolar disorder, epilepsy, Huntington's and Parkinson's diseases and schizophrenia, mainly based on in-house research. According to the World Health Organization, WHO, more than 700 million cases of brain disorders are reported every year. These are serious and often life-threatening diseases that affect the quality of life of the patients and their relatives. Furthermore, brain disorders involve major socio-economic costs.
Business development 2012 was an eventful year for H. Lundbeck with positive pipeline progress, two new product launches and strong product performance despite difficult market conditions. At the same time, H. Lundbeck scaled up its investment in product launches and development because three products are due to be launched in 2013/14 and one new Alzheimer's product is entering the pivotal development phase. At the end of the year, H. Lundbeck announced that the previously announced floor guidance for 2013 and 2014 would be revised as long-term investments would put near-term earnings under pressure. Diversified product portfolio H. Lundbeck is in a transition period, during which the composition of its product portfolio is expected to change dramatically. In 2012, revenue from new products, including Lexapro® in Japan, Onfi®, Sabril®, Saphris/Sycrest®, Treanda® and Xenazine®, rose by 71% to DKK 2,141 million. Reorganisation of the European sales force In June, H. Lundbeck restructured its commercial operations in Europe. The aim was partly to establish a more flexible commercial infrastructure and partly to maintain cost control to enable a successful launch of new pharmaceuticals. The project involved the reduction of around 600 positions in H. Lundbeck's subsidiaries.
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Successful product development in strategic collaboration. In November 2011, H. Lundbeck signed a strategic partnership agreement with Otsuka Pharmaceutical. The agreement covers the development and commercialisation of pharmaceuticals for the treatment of psychiatric disorders. Abilify Maintaina™, the first pharmaceutical to emerge from the collaboration, is a depot formulation for the treatment of schizophrenia. Towards the end of the year, H. Lundbeck and Otsuka filed an application with the European authorities and expect to launch the product during 2013. In the US, H. Lundbeck filed an application for approval of its new antidepressant, Brintellix™, with the US authorities and expect to launch the product during 2013. Brintellix™ is part of a partnership agreement which H. Lundbeck signed with Takeda in 2007. On filing of the final US application, H. Lundbeck received a milestone payment of USD 50 million (approximately DKK 285 million). Other pipeline progress Selincro® is H. Lundbeck's new compound for the treatment of alcohol dependence and the first medicine that facilitates a reduction of alcohol consumption provided the patient wishes to reduce his intake. H. Lundbeck submitted a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) in December 2011 and received a positive reply in December 2012. This means that H. Lundbeck can now prepare for a launch of this new product.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
DKK MILLION Revenue Research and development costs Operating profit before special items
2012
2011
2010
14,802 16,007 14,765 2,915 3,320
3,045
1,647 3,393 3,357
Profit for the year before special items 1,107 2,282
2,466
The Lundbeck Foundation's share of profit for the year before special items
775
1,594
1,727
Average number of employees
5,639
5,690
5,689
Net cash
1,912
2,036
430
Dividends for the year
392
685
740
The Lundbeck Foundation's share of dividends for the year
275
480
518
In 2012, H. Lundbeck decided to advance its anti-Alzheimer's product Lu AE58054, which to date has demonstrated strong results in the preliminary studies. Best-in-class H. Lundbeck ended the year by receiving a distinction when the company took first place in a survey in which 600 patient groups around the world evaluated 29 pharmaceutical companies. H. Lundbeck received special praise for its ability to provide high-quality information to patients and to be transparent with external stakeholders. Results achieved in 2012 Annual revenue exclusive of Lexapro® in the US amounted to DKK 14,227 million, up 6% on 2011. Total revenue for the year was DKK 14,802 million, a decrease of 8% compared to 2011. The decline was due to the expiry of the Lexapro® patent in the US, where generics quickly took over the market, and a small decline in sales of Cipralex® (down 2%). Lundbeck reported growing sales of Ebixa® for the treatment of Alzheimer's disease (+2%), Azilect® for Parkinson's disease (+3%), Xenazine® for Huntington's disease (+40%) and Sabril® for infantile spasms (+22%) as well as Onfi® for Lennox-Gastaut Syndrome, which H. Lundbeck launched at the beginning of 2012 in the US. Revenue was also lifted by a milestone payment of DKK 285 million from Takeda related to the filing of Brintellix® and by a gain of DKK 115 million relating to the divestiture of Proximagen Group Plc in the UK.
Research and development costs amounted to DKK 2,915 million, corresponding to 20% of revenue. This was 12% less than in 2011, which is primarily explained by restructuring costs in 2011. Sales and distribution costs amounted to DKK 5,274 million, corresponding to 36% of revenue and an increase of 17% relative to 2011. Administrative expenses amounted to DKK 1,641 million, corresponding to 11% of revenue and an increase of 2% on 2011. Profit from operations before special items was DKK 1,647 million, which was 51% lower than in 2011. The EBIT margin was 11%, against 21% in 2011. The profit for 2012 was adversely affected by non-recurring expenses of DKK 530 million related to restructuring of the sales organisation. The effective tax rate was 30%, in line with the level in 2011 when the tax rate was 31%. Profit for the year was down 51% to DKK 1,107 million. The Lundbeck Foundation's share of profit for the year was DKK 775 million in 2012, against DKK 1,594 million in 2011, and in 2013 the Foundation will receive DKK 275 million in dividends from H. Lundbeck related to the profit for 2012.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
ALK is a global research-driven pharmaceutical company focusing on allergy prevention, diagnosis and treatment. ALK is the global leader in allergy vaccination (immunotherapy) where the patients are regularly exposed to allergens in the form of allergy vaccines. The unique treatment induces a protective immune response which reduces and potentially halts the development of allergy and asthma and allergic reactions. ALK offers allergy vaccines as injections, sublingual drops and tablets, the most recent, best documented and most convenient treatment. The product portfolio also includes an adrenaline auto-injector for the treatment of severe allergic reactions and diagnostic products.
2012 business development To ALK, 2012 was characterised by challenging conditions in a number of the company's core European markets and positive trends in the company's own research projects and the strategic partnerships in North America and Japan. Core business under pressure The challenging market conditions in Europe with little or negative market growth in a number of countries had an impact on ALK's financial performance, but the company nevertheless succeeded in achieving a modest increase in its vaccine sales. Especially the markets of Southern Europe proved difficult in 2012, and ALK was met with increasing regulatory and clinical requirements. To counter the sluggish market trends and consolidate its drop-based portfolio of vaccines, ALK launched the new, improved vaccine product SLIToneULTRAŽ. The launch contributed positively to the sale of sublingual vaccines products in several countries, especially France and Germany, Europe’s second-largest and largest markets, respectively, for allergy vaccines. Throughout 2012, ALK remained focused on optimising its business to adapt the organisation to the competitive environment. As a result, ALK started to simplify its organisation in 2012. This involved gradually phasing out minor production units, consolidating production in centres of excellence, generally streamlining the organisation especially in finance and IT functions and restructuring the sales and marketing unit, where activities in the German-speaking countries have been consolidated in one organisation, and the
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staff in some Southern European sales companies have been adjusted to a lower level of activity. Pipeline In 2012, ALK's product development activities reached a historically high level with particular focus on house dust mites and tree pollen allergy. In March, ALK completed patient recruitment for two European pivotal Phase III clinical trials with the new allergy immunotherapy tablet (AIT) against house dust mite induced hay fever and asthma. More than 1,700 patients participated in the trials that will evaluate the AIT compared to placebo until mid2013. In one of the trials with 900 patients from 12 countries, ALK evaluates the efficacy and safety of the AIT in the treatment of hay fever, and the other trial with 800 patients from 12 countries evaluates its efficacy and safety in the treatment of asthma. Towards the end of 2012, ALK filed an application with the Chinese authorities to conduct a Phase III clinical trial with the AIT against house dust mites. In 2012, ALK initiated a clinical Phase II trial concerning the fourth most widespread allergy in Europe and North America, i.e. tree pollen allergy. The trial in Europe is to evaluate the efficacy, safety and tolerability of the tablet compared to placebo. The trial includes approximately 600 patients with moderate to severe hay fever caused by pollen from birch, hazel, alder and other related trees. The trial will be completed in 2013.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
DKK MILLION Revenue
2012
2011
2010
2,345 2,348 2,159
Research and development costs
511
455
366
Operating profit before special items
182
299
192
Profit for the year before special items
54
200
128
The Lundbeck Foundation's share of profit for the year before special items
23 76 50
Average no. of employees
1,828
1,724
1,612
145
420
202
Dividends for the year
51
51
51
The Lundbeck Foundation's share of dividends for the year
20 19 19
Net cash
The figures are calculated using ALK's own accounting policies.
Strategic alliances ALK has entered into a strategic partnership with US-based Merck on the development, registration and commercialisation of a portfolio of allergy immunotherapy tablets against grass pollen, ragweed and house dust mite allergy in the US, Canada and Mexico. It is estimated that some 60 million people suffer from allergy in North America alone, of whom an estimated 25 million have been diagnosed as suffering from moderate to severe allergy to grass pollen, ragweed or house dust mites, but in many cases the patients’ disease and allergy symptoms are not well-controlled, and no registered products are currently available. In 2012, Merck brought two products closer to the market, and in 2013 it has submitted Biologics License Applications (BLA) to the FDA for approval of its grass and ragweed AIT. ALK has entered into a partnership agreement with Japanbased Torii on the development, registration and commercialisation of the allergy immunotherapy tablet against allergy and allergic asthma caused by house dust mites in Japan. The agreement also covers ALK’s existing SCIT product against house dust mite allergy and diagnostic products. In addition, ALK and Torii collaborates on the joint development of an AIT against Japanese cedar pollen allergy. It is estimated that 25-35 million Japanese suffer from allergy or asthma primarily caused by house dust mites or pollen from Japanese cedar, which is one of the most frequent allergies in Japan. As in the US, there is a significant unmet need for better allergy treatment in Japan. Torii initiated the clinical development of the AIT against house dust mites in 2011, and in 2012, following a successful Phase I trial, Torii accelerated the final clinical development with two Phase II/III trials. Results achieved in 2012 At DKK 2,345 million, ALK’s revenue was largely unchanged compared to 2011 (DKK 2,348 million). Total vaccine sales increased slightly by 1%, driven by growth in France, while sales declined in a number of the European markets, including Germany and Southern Europe. Vaccine sales accounted for 82% of total revenue, while the remainder derives from sales of adrenaline and diagnostics products and income from partnerships.
Research and development costs rose by 12% to DKK 511 million from DKK 455 million in 2011. The increase was due to a high level of clinical and pharmaceutical activities, including the European studies focused on house dust mites and tree pollen allergy. Costs were also incurred in relation to the strategic alliances in North America and Japan. Sales and marketing costs amounted to DKK 801 million, corresponding to 34% of revenue and an increase of 3% relative to 2011. The higher costs were due partly to an expansion of the sales force in selected primary markets as well as expenses for the launch of new products such as the Jext® adrenaline auto-injector and the SLIToneULTRA® product line. ALK reported a 39% decline in operating profit before special items to DKK 182 million from DKK 299 million in 2011. The decline was primarily due to higher research and development costs and sales and marketing expenses. In 2012, ALK incurred non-recurring costs of DKK 64 million for restructuring the organisation. Income tax for the year amounted to DKK 59 million, corresponding to an effective tax rate of 52%. Profit for the year thus amounted to DKK 209 million, an increase of 5% compared to 2011. Profit from discontinued operations before special items was DKK 54 million as ALK reversed a provision of DKK 155 million in 2012 made in connection with the divestment of Chr. Hansen. The Lundbeck Foundation's share of profit for the year was DKK 23 million, against DKK 76 million in 2011, and in 2013 the Foundation will receive DKK 20 million in dividends related to the profit for 2012. The Lundbeck Foundation owned 42% of the shares in ALK at the end of 2012 and 69% of the votes after deduction of treasury shares. This increase relative to 2011 was partly due to the Foundation's acquisition of shares, partly to ALK buying back treasury shares in 2012.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Falck is a leading international supplier of pre-hospital services, healthcare, firefighting, roadside assistance, safety training and other contingency services, with operations on five continents and in 35 countries. Falck has four divisions: Emergency (ambulance and fire service), Assistance (roadside, personal and home assistance), Healthcare (medical clinics, healthcare employee assistance programmes for companies and pension funds and healthcare staff supply service) and Training (offshore safety and emergency training). All of Falck’s activities are aimed at preventing accidents and illness, providing assistance in case of accidents and emergencies, and helping people to get on with their lives after illnesses or accidents.
2012 business development In 2012, Falck continued on its track to becoming a worldwide organisation that works to prevent accidents, diseases and emergency situations; that rescues and assists people in an emergency quickly and competently; and that rehabilitates people after illness and injury. Organic growth and international expansion were priority areas in 2012. Especially in Emergency, Falck rapidly expanded its international operations during the past year through acquisitions and contracts won in the US, Kazakhstan, Sri Lanka, Chile, Spain and Germany. Emergency Falck's Emergency activities in 2012 were dedicated to international expansion both through acquisitions and new contracts. Early in the year, Falck acquired Grupo VL, the Spanish ambulance operator in Catalonia in the north-eastern part of Spain. The combination of Falck's existing operations in Spain and the acquisition of Grupo VL provides Falck with a strong platform for future growth in the Spanish market. In US, Falck continued its expansion in 2012 by acquiring three ambulance companies in the states of Florida and Massachusetts. Overall, Falck strengthened its position as the third-largest ambulance service company in the US, and it now operates 1,000 vehicles and have more than 3,700 employees. In Sweden, Poland and Germany, Falck won new contracts, thereby substantially expanding its emergency operations in these countries. In the Emergency business, Falck has in recent years invested a great deal in emerging markets: 2012 saw the start of additio32
nal projects aimed at increasing growth in Falck's core business areas. Assistance Falck's Assistance activities are concentrated in the four Nordic countries: Denmark, Norway, Sweden and Finland. In all these countries, Falck mainly provides assistance to its subscribers with their vehicles and homes. For example, Falck helps people get their car started again if it has broken down, and assists homeowners with everything from water in the basement to snow on the roof. Moreover, both individuals and businesses can make use of Falck's assistance and service offering for buildings, healthcare and travel activities. Falck provided a total of 1.4 million responses to calls for assistance in 2012. Falck was particularly successful in growing sales of alarms in Denmark, Sweden and Norway. In addition to burglar alarms, Falck's alarm products include a number of other security and safety components. In 2012, Falck TravelCare signed agreements with Nordic insurance customers and companies, assisting a total of 39,500 Nordic travellers in more than 200 countries with clinic referrals, hospitalisation, evacuation and repatriation. This represented a substantial increase in Falck TravelCare's business. Healthcare Falck's healthcare activities are directly targeted at ensuring that employees have longer, healthier and better working lives. A research report from the University of Southern Denmark in
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Revenue split*
EBITA split
Training DKK 1,164m 9% (943)
Training DKK 197m 18% (136)
Emergency DKK 7,515m 60% (6,553)
Healthcare DKK 1,012m: 8% (944)
Emergency DKK 459m 42% (430)
Healthcare DKK 94m 9% (79)
Assistance DKK 2,815m 23% (2,693)
Assistance DKK 333m 31% (335)
* Before eliminations
DKK MILLION
2012
Revenue
2011* 2010*
11,504 10,193 8,367
Operating profit before special items
1,083
980
839
Profit for the year before special items
559
519
527
The Lundbeck Foundation's share of profit for the year before special items
3 1 1 236 n.a.
Number of employees Net interest-bearing debt
28,005 25,262 1 9,1 74 5,755
5,437
n.m.
0
0
0
Dividends for the year The Lundbeck Foundation's share of dividends for the year
n.a. n.a. n.a.
The figures are calculated using Falck's own accounting policies. * Pro forma figures for 2010 and 2011
2012 investigated the effect of Falck's efforts, demonstrating that access to prophylactic treatment under Falck healthcare schemes reduces sickness absence by as much as 15%. By the end of the year, Falck covered 1.8 million people in Denmark in healthcare plans and had contracts with 7,500 public-sector institutions and private-sector companies. In Healthcare, Falck launched a number of new initiatives in 2012, including Falck Dental Care, which brings dentists to Danish workplaces. Training The global training activities, which traditionally involve safety training of employees in the offshore sector, continued to grow in 2012. In Europe, Falck recorded a sharp increase especially in its British, German and Dutch operations, while Nigeria and Malaysia made strong contributions to the positive trend in the rest of the world. Falck expanded its leading position in the Gulf of Mexico by acquiring Occupational Safety Training, which operates two training centres with a total of 79 employees in Texas and Louisiana. Falck now has six training centres in these two states.
Results achieved in 2012 Falck generated revenue of DKK 11,504 million in 2012, equivalent to a growth rate of 12.9%. The improvement was attributable partly to acquisition of emergency activities both in Europe and the rest of the world, partly to strong organic revenue growth of 7.6%. Operating profit before special items (EBITA) rose 10.5% to DKK 1,083 million. The improvement was primarily attributable to acquisitions in the Emergency business area. Adjusted for acquisitions, the operating profit rose by DKK 30 million. Depreciation and amortisation related to acquisitions amounted to DKK 551 million compared with DKK 293 million in 2011. The large increase was due to the full-year recognition of the Lundbeck Foundation's acquisition of Falck. Profit for the year before special items was DKK 559 million in 2012. The Lundbeck Foundation's share of the profit for the year before special items was DKK 311 million, an increase relative to 2011, when the Foundation's share was DKK 236 million. The increase was attributable to better financial results and the full-year recognition of the Foundation's acquisition of Falck. 33
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Bertil From, CFO
Lundbeckfond Invest manages portfolio investments, consisting of the Foundation’s cash and financial investments. Lundbeckfond Invest’s primary purpose is to generate a return on the Foundation’s financial assets and secure sufficient reserves, in order to support the subsidiaries and grant-making activities. The Foundation’s strategy is for Invest to have a diversified investment portfolio at all times in terms of both sectors and asset classes.
Investment strategy Lundbeckfond Invest had a successful year in 2012 in terms of business development and financial performance, generating a return of 13.1%, or DKK 1,286 million (DKK -67 million). In August 2011, the Lundbeck Foundation adopted a new investment strategy with a significantly changed asset allocation strategy involving fewer government and mortgage bonds and cash but more credit bonds and equities. The strategy also called for more of the asset management activities to be insourced from external managers to in-house management. From August 2011 to the end of 2012, the share of credits consisting of corporate loans and bonds was increased from 13% to 24%, while the proportion of equities was lifted from 34% to 44%: The allocation to real estate was also increased when a number of properties on Guldbergsgade in Copenhagen were acquired for development through Obel-LFI Ejendomme. Similarly, the proportion of bonds and cash was reduced from 42% to 21%. The changes have been implemented concurrently with Lundbeckfond Invest expanding its in-house asset management operations and at the same time identifying attractive investment opportunities, for example in connection with the market setback in the spring of 2012. All new investments in 2012 were made by Invest’s in-house team, and a number of external asset management mandates have been closed.
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The purpose of expanding the in-house management is to create greater value by being better able to plan the investments relative to the Lundbeck Foundation's long-term investment horizon, acting swiftly and capitalising on Lundbeckfond Invest's competencies. The investment philosophy differs from the conventional portfolio management model applied by the Foundation until the summer of 2011.
Development in asset allocation 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 g 1 p 1 ct 1 v 1 c 1 n 1 b 1 r 1 r 1 y 1 n 1 ul 1 ug 1 ep 1 ct 1 ov 1 ec 1 J A Au Se O No De Ja Fe Ma Ap Ma Ju O N S D
Bonds and cash
Listed equities
Credit
Unlisted equities and properties
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Companies in which Lundbeckfond Invest had major shareholdings
The investment philosophy of Lundbeckfond Invest builds on an unconventional in-house management approach in that its focus is on understanding and analysing the companies in which it invests. The next step is considering where and how to invest in the capital structure – in other words whether to invest in equity (shares) or debt (bonds or loans) and whether the investment could be optimised by way of financial instruments such as options. This approach is different from a conventional portfolio management model where the asset allocation between e.g. equities and credit is determined first, after which the manager selects the investments to be made within the asset class. In other words, asset allocation is the result of individual investment decisions. The asset allocation is monitored as part of the portfolio management and risk management activities conducted to ensure that the holdings are within the limits defined by the Board of Trustees. Experience with in-house management suggests that asset allocation becomes more dynamic. The large credit exposure was therefore accumulated quickly in a limited number of companies and financial institutions. The reason was that the price of these companies fell due to the debt crisis in Southern Europe even though these companies and institutions only had limited exposure to the region.
Since the markets stabilised towards the end of 2012 and the investments have yielded good returns, Invest reduced its credit exposure again, while increasing its exposure to equities. The reason was that specific credits had once again become expensive and that Invest had identified equities that were relatively more attractive. This trend is expected to continue into 2013. Companies targeted for investment by Lundbeckfond Invest must be solid, well-run and global market leaders or leaders in their respective markets. Furthermore, they must not act unethically or otherwise in disrespect of the principles of the UN Global Compact. Examples of such companies are Volkswagen VW, LVMH, Google, CISCO and Allianz. These are companies that on the basis of their technology, production efficiency or brand have built a global leadership position with exposure to emerging markets and which can also contribute to defending their leadership going forward, thereby creating value for investors. In each case, expectations for the companies' future earnings are assessed relative to the current market value, and an investment is only made if the shares look attractive.
Summary of assets and return
Bonds and cash
Market value 31.12 2012
Return
31.12 2011
2012
Time-weighted return 2011
2012
2011
DKK million DKKm DKKm DKKm % % 2,278
3,784
74
201
3 .1
4.9
Credit incl. distressed debt and mezzanine
2,605
1,330
411
-4
20.3
-1.4
Listed equities
4,776
3,62 1
669
-276
1 7.1
-7.4
Unlisted equities
847
835
63
44
7.8
5.4
Real assets
483
373
69
-32
16.8
-8.0
10,989
9,943
1,286
-67
13.1
-1.0
Lundbeckfond Invest total
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Lundbeckfond Invest is dedicated to securing its assets. When selecting investments, Invest therefore attaches greater importance to identifying companies generating sustainable financial growth instead of seeking the companies that offer the best short-term potential.
Return on in-house managed assets
40% 35%
35%
In order to retain a lean investment organisation, Invest seeks to follow a limited number of companies and to maintain a relatively small portfolio. Lundbeckfond Invest had a cost ratio of 0.06% in 2012 (0.06%) of assets under management. As a result of the new strategy, the Lundbeckfond Invest team increasingly conducts active in-house due diligence, and this may push up the cost ratio in the years to come. Including management fees the cost ratio fell to 0.14% in 2012 (0.17%) as a result of the new strategy. The Foundation considers these low levels to be very satisfactory. Return Even though the global economy, especially Europe, struggled to keep pace in 2012, the financial markets developed favourably posting falling interest rates, rising share prices and contracting spreads between credit bonds and government bonds. All asset classes yielded a positive return. The markets were characterised by investors, who in their search for yield preferred more risky assets due to the very low yields on safe government bonds. The highest returns were therefore offered by credit and equities. Having anticipated this shift in investor focus was precisely why the Lundbeck Foundation opted to revise its asset allocation strategy in August 2011. The change in asset allocation towards higher-risk assets made a strong contribution to Invest's return, as these assets outperformed in 2012. With respect to timing, the largest investments were made during periods of market slumps, such as the one in the spring of 2012. Measured by asset class, credit yielded the highest return at 20% (-1%) as compared with 16% for the benchmark, followed by listed equities, which offered a return of 18% (-7%). In order to secure the solid return on listed equities, a collar hedge was put in place in September 2012 as the Foundation believed that the buoyant equity markets were not the result of developments in the underlying economy but falling risk premiums.
Lundbeckfond Invest acquired a number of properties on Guldbergsgade, inner Nørrebro in Copenhagen including the cinema Empire
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30% 25% 20%
22% 16%
15%
14%
10% 5% 0% Credit
Equities
Benchmark In-house managed
This makes for more vulnerable appreciation going forward. The return on listed equities including costs for the hedge was 17%, compared with 14% for the benchmark. Unlisted private equity funds yielded a return of 8% (5%), underperforming both the listed markets and the benchmark. Real assets, consisting primarily of real estate, offered a return of 17% (-8%), compared with 23% for the benchmark. Investments in listed property companies yielded a particularly good return. Bonds and cash offered Invest the lowest return at 3% (5%), compared with 2% for the benchmark. Overall, Lundbeckfond Invest delivered a return of 13.1%, while the benchmark returned 12.2%. In-house managed investments in equities and credit yielded very strong returns. The strong performance was supported by investment selection but also by disciplined selling: When prices of equities or credits soared and were found to be too expensive, Invest took profit, placing the proceeds in other investment opportunities.
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Mette Kirstine Agger, Managing Partner
Lundbeckfond Ventures is an international evergreen life-science venture fund. The evergreen structure allows for a flexible investment strategy with a long-term investment perspective. Ventures invests broadly in life science, primarily in the development of new medicines and medical technology. It is essential that the development projects address clear medical needs and are of high scientific and technical quality. The primary focus is on investment in companies with early clinical results and in medtech companies that have achieved regulatory approval or where such approval is underway.
Developments in 2012 2012 was another active year for Lundbeckfond Ventures, which made five new investments, three of which were in the US. With an annual investment framework of DKK 300-400 million, Lundbeckfond Ventures' has the basis for pursuing broad international operations. Overall, Lundbeckfond Ventures ended 2012 with a portfolio of twelve companies with potential pharmaceuticals and technologies that address clear medical needs while also offering the potential to become among the first medicines based on innovative biological principles such as gene therapy, viral cancer therapy and stem cells. Five new investments In January 2012, Lundbeckfond Ventures invested in Celladon in the US. Celladon has developed the pharmaceutical candidate MYDICAR速 for the treatment of patients with heart failure. MYDICAR速 is a gene therapy in which the gene encoding the SERCA2a enzyme is inserted into the heart muscle cells to enhance calcium signalling and thereby the ability of the heart muscle to contract. A small clinical study with MYDICAR速 has previously shown an improvement of the heart function and quality of life in heart patients for more than two years after the treatment. Celladon is now conducting a comprehensive clinical study to demonstrate efficacy in a large patient population. Celladon commenced the clinical trial in July, and in December the first Danish patient in the study was treated by Professor Jens Kastrup at the Copenhagen University Hospital.
Enterome develops diagnostic tests used in the treatment of chronic and challenging medical conditions, especially metabolic and intestinal disorders. The diagnostic tests are based on novel biomarkers capable of identifying abnormalities of bacterial composition of the human intestine. Enterome's first diagnostic test targets the identification of the group of patients with fatty liver disease, who have a high risk of contracting serious liver disorders such as steatohepatitis (approx. 15%). Another test focuses on identifying when patients with Crohn's disease are about to have an outbreak and a resulting need for initiating medical treatment and when the outbreak will stop and the medical treatment therefore can be concluded. Acute kidney injury occurs in certain patient populations, for example after general anaesthesia and surgery. Allocure is developing a cell-based treatment, AC607, which is being investigated in Phase II clinical trials with respect to the ability of the cells to prevent kidney injury. A607 is a special type of stem cells (mesenchymal stem cells) that may be administered as a standard treatment to any patient without the necessity for administering immunosuppressive drugs as is the case for other types of stem cells. The cells specifically target injured areas of the kidney and stimulate the repair mechanisms. PsiOxus is conducting early Phase I/II clinical testing of ColoAd1, a virus that specifically and very potently attacks
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
Portfolio 2012
dbv
USA www.allocure.com
Mesenchymal stem cell therapy in clinical Phase II for the treatment of post-operative acute kidney injury. The cells are derived from conventional bone marrow from donors and developed into a well-characterised drug that can be administered to any patient suffering from acute kidney injury.
UK www.acacia.com
New pharmaceutical candidates which in recent years have shown a clear effect in Phase II clinical trials especially for the treatment of post-operative and chemotherapy-induced nausea.
USA www.asantesolutions.com
Insulin pump with a whole new pre-filled insulin cartridge and a high degree of userfriendliness.
Sweden www.bonesupport.com
Cerament™, a bone cement material that supports the regeneration of bone tissue and remodels into bone. The material can be injected and has a range of future potential uses, including the ability to mix it with antibiotics. The first combination product in the form of Cerament™ mixed with gentamycin® has been approved in Europe.
USA www.celladon.net
Gene therapy for heart failure in comprehensive Phase II clinical study in the US and Europe. Using gene therapy, the SERCA2a-encoding gene is inserted into the heart muscles to enhance calcium transport.
France www.dbv-technologies.com
New epicutaneous patch primarily for the treatment of food allergies, with a focus on peanut allergy in the most advanced project. The administration via the skin is particularly suitable for the treatment of allergies where other forms of treatment have the risk of allergic side-effects, including anaphylactic shock (DBV, NYSE Euronext).
France www.enterome.com
Development of prognostic and diagnostic tests based on abnormalities of bacterial flora in the human intestine. Focus especially on metabolic disorders.
Finland www.nexstim.com
New technology that, by means of precise and targeted transcranial magnetic stimulation – and without surgery – can map the brain’s speech and motor centres, e.g. before neurosurgery. The technology has a number of potential therapeutic applications.
UK www.psioxus.com
Oncolytic virus for the treatment of cancer, where virus, unlike other drugs in clinical development, may potentially be administered into the bloodstream and thus potentially reach both the primary tumour and metastases. The first clinical project for the treatment of colon cancer is in Phase I/II clinical trials.
USA
New biologic pharmaceutical for the treatment of Graves' Orbitopathy (GO). GO is a condition afflicting a proportion of Graves' Disease patients, in which an autoimmune response is mounted against tissues behind the eye, causing inflammation and tissue proliferation. In serious cases, the disease may cause vision impairment or blindness and facial deformity.
UK www.syntaxin.com
Development of new biological medicines based on botulinum toxin analogues for the treatment of disease through the targeted inhibition of cellular secretion. The main programme for pain treatment is in late-stage Phase II under a license agreement with Allergan
Denmark www.veloxis.com
Development of LCP-Tacro™ for lifelong immunosuppressive treatment following organ transplant. LCP-Tacro™ is in clinical Phase III specifically targeting kidney transplants. The first product based on its formulation technology platform MeltDose® was approved by the FDA in 2008 (LCP, NASDAQ OMX).
technologies
River Vision LLC
Targeted Secretion Inhibitors
Targeted Secretion Inhibitors
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
cancer cells. ColoAd1 may potentially be used as a broadspectrum treatment of a number of different cancers. Early data indicates that ColoAd1 may be administered as a systemic injection, with the virus capable of identifying and destroying the cancer cells. In October, PsiOxus was awarded a GBP 1.7 million grant from a UK government initiative in order to initiate an early clinical trial to assess the use of ColoAd1 in the treatment of ovarian cancer patients. In 2013, River Vision will initiate a Phase II clinical trial with a new biological drug for the treatment of Graves' Orbitopathy (GO). GO is an autoimmune reaction in the tissue around the eyes causing inflammation and uncontrollable proliferation and swelling of tissue and muscles. The eyes are protruded from their sockets causing vision impairment and facial deformity. Currently, no satisfactory treatment exists for this disorder. Portfolio developments Lundbeckfond Ventures remains focused on being an active investor with substantial allocation of resources to its portfolio. In 2012, the companies reported a number of results according to the plans that formed the basis of Ventures' investments. In May, Acacia Pharma announced positive Phase IIb results for APD421, a drug candidate for the prevention of postoperative nausea & vomiting. APD421 significantly reduces the incidence of nausea and vomiting compared to placebo in adult post-operative patients. In October, the company completed a small Phase II study with APD403, which showed a very distinct effect in terms of preventing nausea in patients receiving cisplatin, an anti-cancer drug that causes severe and persistent nausea in nearly all patients.
Syntaxin's partner, Allergan, reported positive results from Phase II clinical trials with AGN-214868 against neuropathic pain. Another key player in botulinum-toxin therapeutics, Ipsen Pharmaceuticals, established a new research collaboration with Syntaxin in recognition of the strong technology platform and patent position. Veloxis Pharmaceuticals, which is developing an enhanced formulation of the drug tacrolimus for lifelong treatment of kidney transplanted patients, completed a DKK 422 million financing round in November. In connection with the financing, the Lundbeck Foundation increased its ownership interest to 42.7%. In October, the company entered into a license agreement with Italy-based Chiesi, which obtained exclusive rights for the marketing and sale of LCP-Tacro in Europe and adjacent countries. Overall, the company now has the funding to complete the development and registration of LCP-Tacro and commence its own marketing efforts in the US. The company also announced preliminary data indicating that LCPTacro has less pronounced neurotoxic effect compared with Prograf, the most commonly used tacrolimus compound. Financial performance in 2012 Lundbeckfond Ventures reported a loss of DKK 87 million compared with a loss of DKK 70 million in 2011. The loss was primarily caused by movements in the share price of Veloxis.
Asante received marketing approval for its insulin pump Pearl™ from the U.S. Federal Drug Administration (FDA). In September, Bonesupport signed an exclusive distribution agreement with Biomet Inc., a global leader in the production and sale of musculoskeletal medical products. Under the agreement, Biomet will have distribution rights for Bonesupport's bone cement product CERAMENT™|BONE VOID FILLER in the US and Canada. DBV Technologies was listed on the stock exchange in March 2012 at a total value of EUR 120 million, raising EUR 40 million to finance the company through the completion of a comprehensive Phase II trial in the US. The company is testing a newly developed patch technology containing peanut allergens for the treatment of peanut allergy. In June, the company presented early data from a study with small children with peanut allergy conducted at French children's hospitals. The study showed that the patch technology is safe and well-tolerated and that 18.5% of the children after six months' treatment increased their peanut tolerance ten times compared with the placebo group. Nexstim received FDA clearance for NexSpeech®. NexSpeech® allows for accurate mapping of the speech centre, which means that surgeons can navigate around this vital centre when performing neurosurgery.
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
FINANCIAL STATEMENTS THE LUNDBECK FOUNDATION GROUP
CONTENTS Income statement for the period 1 January – 31 December Statement of comprehensive income for the period 1 January – 31 December Balance sheet at 31 December Management statement and Independent auditors’ report Cash flow statement for the period 1 January – 31 December Statement of changes in equity for the period 1 January – 31 December
42 43 44 46 48 49
Notes 1. Accounting policies 49 2. Revenue 60 3. Staff costs 60 4. Depreciation, amortisation and impairment 64 5. Fees to auditors appointed at general meeting 65 6. Special items 65 7. Net financial items 65 8. Tax on profit for the year 67 9. Grants for the year 68 10. Intangible assets 68 11. Property, plant and equipment 70 12. Financial assets and financial risks 7 1 13. Investments in associates 73 14. Deferred tax 73 15. Inventories 75 16. Trade receivables and other receivables 75 17. Income tax 76 18. Cash resources 76 19. Assets held for sale 77 20. Capital base 77 21. Other reserves 78 22. Minority interests 78 23. Provisions 79 24. Mortgage, bank, leasing and repo debt 83 25. Other payables 85 26. Adjustment for non-cash operating items 85 27. Working capital changes 85 28. Acquisition of companies 85 29. Financial risks and financial instruments 87 30. Contractual obligations 93 31. Guarantees and contingent liabilities 94 32. Related parties 96 33. Events after the balance sheet date 96 Group overview 97
CONSOLIDATED FINANCIAL STATEMENTS
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
INCOME STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER
2012 2011 2010 Note DKKm DKKm DKKm Revenue 2 28,675 23,602 16,927 Cost of sales 3, 4 (12,563) (7,568) (3,611) Gross profit 16,112 16,034 13,316 Research and development costs 3, 4 (3,432) (3,775) (3,411) Sales and distribution costs 3, 4 (6,766) (5,583) (4,695) Administrative expenses 3, 4, 5 (3,185) (2,511) (1,697) Operating profit before special items 2,729 4,165 3,513 Special items 6 (396) (362) Operating profit 2,333 3,803 3,513 Financial items, Lundbeckfond Invest, net 7 1,286 (67) 1,185 Financial items, Lundbeckfond Ventures, net 7 (78) (63) (49) Financial items, subsidiaries, net 7 (381) (244) (53) Income from investments in associates 13 - 100 Profit before tax 3,160 3,529 4,596 Tax on profit for the year 8 (593) (1,100) (899) Profit for the year 2,567 2,429 3,697
Minority interests’ share of profit for the year 22 (501) (815) (817) Lundbeck Foundation's share of profit for the year 2,066 1,614 2,880
Lundbeck Foundation's share of profit for the year 2,066 1,614 2,880 Special items after tax 267 302 Minority interests' share of special items (90) (101) Lundbeck Foundation's share of profit for the year before special items 2,243 1,815 2,880
Grants authorised during the year, including Emerge activities, gross
42
9
CONSOLIDATED FINANCIAL STATEMENTS
482
504
384
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY - 31 DECEMBER
2012 2011 2010 Note DKKm DKKm DKKm Profit for the year 2,567 2,429 3,697
Currency translation, foreign subsidiaries (17) 105 328 Currency translation concerning additions to net investments in foreign subsidiaries (27) 115 240 Realised exchange gains/losses concerning additions to net investments in foreign subsidiaries (40) 20 Adjustment, deferred exchange gains/losses, hedging (67) 64 (214) Exchange gains/losses, hedging (transferred to the hedged items) 130 (127) 163 Exchange gains/losses, trading (transferred from hedging) 1 - 1 Value adjustment of interest hedging instruments (32) (56) Repayment of interest hedging instruments - 15 Accumulated exchange loss on divestment of investments in associates - - 2 Other equity entries concerning associates - (18) (1) Fair value adjustment of available-for-sale financial assets 21 8 (6) (4) Adjustment for hyperinflation 1 - Tax on other comprehensive income 8 1 (19) (51) Other comprehensive income (42) 93 464 Comprehensive income 2,525 2,522 4,161 Minority interests’ share of comprehensive income for the year 22 (490) (843) (965) Lundbeck Foundation's share of comprehensive income 2,035 1,679 3,196 Currency translation of foreign subsidiaries and currency translation concerning additions to net investments in foreign subsidiaries and tax related to these items, net loss of DKK 72 million (DKK 197 million in 2011), is recognised in the currency translation reserve in equity. Other items and tax related to such items are recognised in reserve for hedging transactions and reserve for fair value adjustments of available-for-sale financial assets, respectively, at DKK 23 million (DKK (77) million in 2011) and DKK 8 million (DKK (6) million in 2011) and recognised under retained earnings in equity in the amount of DKK 10 million (DKK (49) million in 2011).
CONSOLIDATED FINANCIAL STATEMENTS
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
BALANCE SHEET AT 31 DECEMBER, ASSETS
2012 2011 2010 Note DKKm DKKm DKKm Goodwill 10,158 9,733 4,298 Contractual customer relationships etc. 2,634 3,005 Other intangible assets 5,612 4,912 4,420 Intangible assets 10 18,404 17,650 8,718 Property, plant and equipment 11 5,912 5,701 4,268 Financial assets – Lundbeckfond Invest 12 10,924 9,517 9,744 Financial assets – Lundbeckfond Ventures and Emerge 12 519 267 258 Other financial assets 12 194 176 106 Investments in associates 13 17 15 Deferred tax 14 563 483 178 Financial assets 12,217 10,458 10,286 Non-current assets 36,533 33,809 23,272 Inventories 15 2,101 1,985 1,801 Trade receivables and other receivables 16 5,401 5,133 3,112 Income tax 17 538 134 261 Receivables 5,939 5,267 3,373 Securities – Lundbeckfond Invest 72 138 442 Securities – subsidiaries 1,597 2,177 54 Securities 18 1,669 2,315 496 Cash – Lundbeckfond Invest 214 407 3,246 Cash – subsidiaries 3,763 3,578 2,544 Cash 18 3,977 3,985 5,790 Assets held for sale 19 - 98 Current assets 13,686 13,650 11,460 Assets 50,219 47,459 34,732
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CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
BALANCE SHEET AT 31 DECEMBER, EQUITY AND LIABILITIES
2012 2011 2010 Note DKKm DKKm DKKm Capital base 20 2,270 2,225 2,050 Other reserves 21 (221) (180) (294) Retained earnings 21,984 20,506 19,640 Lundbeck Foundation's share of equity 24,033 22,551 21,396 Minority interests' share of equity 22 3,895 3,781 4,571 Total equity 27,928 26,332 25,967 Payable grants 400 389 308 Provisions 23 1,245 1,045 596 Deferred tax 14 2,005 1,871 601 Payables to financial institutions – subsidiaries 24 8,356 8,405 1,895 Other payables 54 76 60 Non-current liabilities 12,060 11,786 3,460 Payable grants 591 530 416 Provisions 23 446 279 228 Payables to financial institutions – subsidiaries 24 672 284 11 Repo debt – Lundbeckfond Invest 24 126 97 297 Income tax 17 68 244 137 Other payables 2, 25, 31 8,328 7,809 4,216 Current liabilities 10,231 9,243 5,305 Liabilities relating to assets held for sale 19 - 98 Liabilities 22,291 21,127 8,765 Equity and liabilities 50,219 47,459 34,732
CONSOLIDATED FINANCIAL STATEMENTS
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
MANAGEMENT STATEMENT
The Board of Directors and the Executive Management have today presented the annual report of the Lundbeck Foundation for the financial year ended 31 December 2012.
liabilities and financial position at 31 December 2012, and of the Group’s and the Foundation’s activities and the Group’s cash flows for the financial year 1 January – 31 December 2012.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports, and the financial statements of the Foundation have been prepared in accordance with the Danish Financial Statements Act.
We believe that the management’s review includes a fair review of developments in the Group’s and the Foundation’s activities and finances, results for the year and the Group’s and the Foundation’s financial position in general as well as a fair description of the principal risks and uncertainties to which the Group and the Foundation are exposed.
We consider the accounting policies used to be appropriate. Accordingly, the consolidated financial statements give a true and fair view of the Group’s and the Foundation’s assets,
We recommend that the annual report be approved at the annual meeting.
Copenhagen, 23 May 2013
Executive Management Christian Dyvig
Board of Directors
46
Jørgen Huno Rasmussen Chairman
Mikael Rørth Deputy Chairman
Thorleif Krarup
Povl Krogsgaard-Larsen
Gunhild Waldemar
Jes Østergaard
Kim Klitgaard Elected by the employees
Ken Liljegren Elected by the employees
Peter Adler Würtzen Elected by the employees
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of the Lundbeck Foundation Report on the consolidated financial statements and the Foundation's financial statements We have audited the consolidated financial statements and the Lundbeck Foundation's financial statements for the financial year 1 January – 31 December 2012, which comprise the income statement, balance sheet, statement of changes in equity and notes, including the accounting policies, for the Group as well as the Foundation, and the statement of comprehensive income and the cash flow statement for the Group. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports, and the Foundation's financial statements are prepared in accordance with the Danish Financial Statements Act. Managements’ responsibility for the consolidated financial statements and the Foundation 's financial statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports as well as the preparation of financial statements of the Foundation that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and financial statements of the Foundation that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on the consolidated financial statements and the Foundation's financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and the Foundation's financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the Foundation's financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the Foundation's financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements and the Foundation's financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances but not to express an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements and the Foundation's financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the consolidated financial statements and the Foundation's financial statements give a true and fair view of the Group’s financial position at 31 December 2012 and of the results of the Group’s operations and cash flows for the financial year 1 January to 31 December 2012 in accordance with the International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports. Further, in our opinion, the Foundation’s financial statements give a true and fair view of the Foundation’s financial position at 31 December 2012 and of the results of the Foundation’s operations for the financial year 1 January – 31 December 2012 in accordance with the Danish Financial Statements Act. Statement on the management review Pursuant to the Danish Financial Statements Act, we have read the management review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the Foundation's statements. On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and Foundation's financial statements. Copenhagen, 23 May 2013 Deloitte Statsautoriseret Revisionspartnerselskab
Anders Dons State Authorised Public Accountant
Martin Faarborg State Authorised Public Accountant
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THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
CASH FLOW STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER
2012 2011 2010 Note DKKm DKKm DKKm Operating profit before special items 2,729 4,165 3,513 Special items (14) (51) Adjustment for non-cash operating items etc. 26 1,656 1,489 1,193 Working capital changes 27 108 23 106 Cash flows from operating activities 4,479 5,626 4,812 Financial receipts 241 258 464 Dividend received 153 113 91 Financial payments (507) (317) (313) Income tax paid for the year 17 (989) (989) (1,177) Income tax paid/received regarding previous years 17 (146) 80 (51) Authorised grants paid (388) (304) (283) Cash flows from operating activities 2,843 4,467 3,543 Acquisition of companies 28 (437) (4,537) (178) Divestment of subsidiaries, non-controlling interests and operations 12 - Investments in intangible assets (1,488) (1,005) (468) Investments in property, plant and equipment (938) (558) (521) Disposal of intangible assets and property, plant and equipment 106 26 3 Investments in other financial assets at fair value through profit or loss (8,272) (8,020) (6,042) Sale of other financial assets at fair value through profit or loss 8,357 6,084 8,067 Change in other financial assets (2) (11) (5) Cash flows from investing activities (2,662) (8,021) 856 Loan proceeds 555 6,305 297 Repayment of loans (252) (4,222) (1,560) Change in other financial liabilities (5) - 2 Buyback of shares from minority interests (238) (76) (24) Capital injections from minority interests 39 - Employee bonds (13) (9) Dividend paid to minority interests 22 (269) (252) (211) Cash flows from financing activities (183) 1,746 (1,496) Change in cash (2) (1,808) 2,903 Cash at 1 January 3,985 5,790 2,847 Unrealised exchange adjustments for the year (6) 3 40 Cash at 31 December 18 3,977 3,985 5,790
48
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY – 31 DECEMBER
Lundbeck Minority Foundation's interests'
Capital base
Other
Retained
share of
share of
reserves
earnings
equity
equity
Total equity
DKKm DKKm DKKm DKKm DKKm DKKm
Equity at 1 January 2012
2,225
(180)
20,506
22,551
3,781
26,332
Profit for the year
2,066
2,066
501
(41)
10
(31)
(11)
(42)
-
(41)
2,076
2,035
490
2,525
Other comprehensive income Comprehensive income
2,567
Grants authorised during the year, net
(460)
(460)
-
(460)
Minority interests' share of dividends
-
-
(245)
(245)
Buyback of shares from minority interests
(37)
(37)
(115)
(152)
Decrease in minority interests
(49)
(49)
-
(49) (88)
Adjustment of provision for acquisition of minority interests Incentive programmes
(51)
(51)
(37)
44
44
21
-
(553)
(553)
Other transactions
-
(376)
65 (929)
Increase of capital base
45
-
(45)
-
-
-
Equity at 31 December 2012
2,270
(221)
21,984
24,033
3,895
27,928
Equity at 1 January 2011
2,050
(294)
19,640
21,396
4,571
25,967
Profit for the year
1,614
1,614
815
Other comprehensive income
114
(49)
65
28
93
114
1,565
1,679
843
2,522
Comprehensive income
-
2,429
Grants authorised during the year, net
(498)
(498)
-
(498)
Minority interests' share of dividends
-
-
(252)
(252)
Buyback of shares from minority interests
(29)
(29)
(52)
(81)
Minority interests in Falck acquisition
-
-
(1,329)
(1,329)
Increase in minority interests
1
1
2
3
(19)
(19)
(14)
(33)
Adjustment of provision for acquisition of minority interests Incentive programmes Other transactions
21
21
-
-
(524)
(524)
12 (1,633)
33 (2,157)
Increase of capital base
175
-
(175)
-
-
-
Equity at 31 December 2011
2,225
(180)
20,506
22,551
3,781
26,332
1. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance
The annual report has been prepared under the historical cost convention,
with International Financial Reporting Standards (IFRS) as adopted by the
except that the following assets and liabilities are measured at fair value:
EU and the Danish Statutory Order on Adoption of IFRS issued pursuant to
derivative financial instruments and financial instruments at fair value.
the Danish Financial Statements Act. The consolidated financial statements are presented in accordance with the The consolidated financial statements are presented in Danish kroner (DKK),
new and revised standards (IFRS/IAS) and interpretations (IFRIC) which ap-
which also is the functional currency of the Lundbeck Foundation.
ply for the financial year. This has not resulted in any changes in accounting policies that have affected recognition and measurement in the current or previous years other than the change described below.
CONSOLIDATED FINANCIAL STATEMENTS
49
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
Accounting policies and estimates critical to financial reporting
Changes in accounting policies In the preparation of the consolidated financial statements for 2012, a change was made to accounting policies due to a revised assessment of the classification of certain marketing costs. The classification was changed in
In the preparation of the consolidated financial statements in accordance
order to align the company's policies with those applied by its peers.
with IFRS and generally accepted accounting principles, it is necessary for Management to make certain estimates and assumptions as not all accoun-
As a result of the reclassification, marketing costs, which were previously
ting items and accruals can be calculated with certainty.
recognised as administrative expenses, have now been reclassified as sales and distribution costs. The effect on the profit for the year is DKK 0. The
Management’s estimates are based on historical data, recent information
change has been made with retrospective effect, and comparative figures
available at the time of presentation of the financial statements and other
have been restated. The effect of the change is shown in the table below.
assumptions considered reasonable under the given circumstances. The actual outcome may differ from these estimates.
Restatement of comparative figures due to changes in accounting policies: The estimates are made by the management of the Lundbeck Foundation,
2011 2010
the H. Lundbeck Group, the Falck Group and the ALK Group, respectively.
DKKm DKKm It is believed that the following accounting policies and accounting estimates
Sales and distribution costs Administrative expenses
509
456
(509)
(456)
are critical to the Group's financial reporting for 2012. License income and income from research collaborations
If the change in accounting policies had not been effected, sales and distri-
License income and royalties from outlicensed products and non-refundable
bution costs for 2012 would have been DKK 644 lower and administrative
downpayments and milestone payments relating to research collaborations
expenses correspondingly higher.
totalled DKK 861 million in 2012 (DKK 1,088 million in 2011), which is recognised in the income statement under revenue when the following criteria
Changes have also been made to the way in which the income statement
have been met:
and balance sheet are presented in order to align the presentation to the
• The payment relates to research results already obtained.
Group's circumstances.
• The buyer has gained access to and possession of the research results. • The most significant risks and benefits associated with the asset sold are
The above changes in accounting policies has no impact on the profit for the
transferred to the buyer.
year or on the profit, the statement of comprehensive income, the balance
• The Group does not retain management control of the asset sold.
sheet, the statement of changes in equity or the cash flow statement of prior
• Revenue from the individual payments in an overall agreement can be
years.
clearly separated and calculated reliably at fair value. • It is probable that the Group will receive payment for the asset sold. • There are no further delivery obligations for the Group concerning the as-
Future IFRS changes
set sold.
At the date of the publication of these consolidated financial statements,
Research and development costs
a number of new and amended standards and interpretations have not yet
Research and development costs totalled DKK 3,432 million in 2012 (DKK
entered into force or have not yet been adopted by the EU. Therefore, they
3,775 million in 2011). Research and development costs are recognised in
are not included in the consolidated financial statements.
the income statement as they are incurred unless the criteria for capitalisation of the development costs are deemed to have been met and it is found
Amendments to IAS 19 Employee benefits effective from 1 January 2013
to be probable that future earnings will cover the development costs. Due
entail that actuarial gains and losses must be recognised in the statement of
to a very long development period and significant uncertainty in relation
comprehensive income and that such gains and losses cannot subsequently
to the development of new products, in the opinion of the Group, develop-
be recycled through profit or loss and that the corridor method no longer
ment costs should not normally be capitalised in the balance sheet until
can be applied. The Lundbeck Foundation currently recognises all costs as-
the development of the product has been completed and all the necessary
sociated with defined benefit pension plans under staff costs in the income
public registration and marketing approvals have been obtained. Develop-
statement and does not apply the corridor approach. Actuarial gains and
ment costs relating to individual minor development projects running for
losses must henceforth be recognised in the statement of comprehensive
short-term periods and subject to limited risk are capitalised under other
income. The accounting impact for 2012 is expected to be approximately
intangible assets.
DKK 114 million before tax, which will be reclassified from the income statement to other comprehensive income. Other than this, the amendments
Intangible assets
are not expected to materially affect recognition or measurement in future
Goodwill and product rights and contractual customer relationships etc. rep-
consolidated financial statements.
resent a significant part of the Group's total assets, amounting to DKK 17,754 million in 2012 (DKK 17,008 million in 2011). The majority of the value of
None of the other new standards or amendments of existing standards are
these items arose through the acquisition of companies. In connection with
expected to have any material impact on future consolidated financial state-
acquisitions, the individual assets and liabilities are re-assessed to ensure
ments.
that both recognised and unrecognised values are measured at fair value. Especially for intangible assets for which there is often no active market,
50
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
the calculation of fair value may involve uncertainty. Intangible assets with
Amortisation and depreciation periods and scrap values
indefinite lives and intangible assets in progress are tested for impairment at
In the determination of the carrying amount of intangible assets and pro-
least once a year or if there is evidence of impairment. Contractual customer
perty, plant and equipment, estimates are required of the estimated eco-
relationships etc. identified at acquisitions were primarily acquired with a
nomic lives of the assets and of scrap values.
view to further developing the acquired business areas and markets and establishing positions in new markets. As a result, a large part of the purchase prices has been allocated to goodwill. The value in use of the product rights
Recognition and measurement
is calculated by discounting the estimate made by Management over the expected cash flows during a budget period of at least five years with due
Assets are recognised in the balance sheet when it is probable that future
consideration to patent expiry. For the calculation of the value in use of the
economic benefits will flow to the Group and the value of the asset can be
assets, the Group uses different discount factors depending on the individual
measured reliably. Liabilities are recognised in the balance sheet if they are
areas of activity and Management's expectations for growth and terminal
probable and can be measured reliably.
value. These factors are crucial for the assessment of any impairment and On initial recognition, assets and liabilities are measured at cost or fair value.
thus for the final calculation of the fair value of intangible assets.
Subsequently, assets and liabilities are measured as described below for It is a precondition for the retention of the value of the Group's rights that
each individual item.
such rights are respected. It is the Group's policy to defend these rights Certain financial assets and financial liabilities are measured at amortised
wherever they may be violated.
cost, implying the recognition of a constant effective rate of interest to maFinancial assets
turity. Amortised cost is stated as original cost less any principal payments
Financial assets include investments in listed and unlisted equity instruments
and plus/less the accumulated amortisation of any difference between cost
and securities, including life science investments recognised at their fair
and the nominal amount. Recognition and measurement take into conside-
value. Investments in unlisted equity instruments and securities at the end of
ration gains, losses and risks that arise before the time of presentation of
2012 amounted to DKK 1,550 million (DKK 1,324 million in 2011).
the consolidated financial statements and that confirm or invalidate matters existing at the balance sheet date.
The assessment of fair value of these investments is subject to considerable risk. This applies especially to life science investments because the value of
Income is recognised in the income statement as earned and includes value
these businesses is linked to the company's often long-term investment in
adjustments of financial assets and financial liabilities measured at fair value
the development of new pharmaceuticals and technologies.
or amortised cost. In addition, expenses incurred to generate the income for the year are recognised, including depreciation, amortisation, impairment
Management estimates the fair value of unlisted investments in accordance
losses and provisions as well as reversals of amounts previously recognised
with International Private Equity and Venture Capital Valuation Guidelines.
in the income statement as a result of changed accounting estimates.
i.e. on the basis of relevant valuation methods based on comparable transactions on market conditions, capital increases and the like. If the fair value cannot be determined with sufficient reliability, the investments in question
Consolidated financial statements
are recognised at cost less any impairment. The Group assesses at each balance sheet date whether there is objective evidence that an investment
The consolidated financial statements include the Lundbeck Foundation and
or a group of investments is impaired. An impairment loss is recorded if
subsidiaries controlled by the Foundation. Control is achieved where the
the Group assesses that lack of compliance with business plans affect the
Foundation directly or indirectly holds more than 50% of the voting rights or
calculation of fair value or if subsequent capital injections are made at lower
is otherwise able to exercise or actually exercises control.
prices. Companies in which the Group holds between 20% and 50% of the voting Purchase price allocation in business combinations
rights and/or exercises significant influence but not control are regarded as
In connection with allocation of purchase price in business combinations,
associates. Unrealised gains on transactions with associates are eliminated in
calculations are made of fair value of acquired assets and liabilities. Since
proportion to the Group’s share of the enterprise.
such calculations are based on expected future cash flows relating to the acquired assets and liabilities, there is an inherent uncertainty in respect of
Associates included in the Group's documented investment strategy are
whether such cash flows will materialise as expected. In accordance with
recognised as financial assets measured at fair value through profit or loss.
IFRS 3, the purchase price allocations in business combinations may be adjusted for up to 12 months from the date of acquisition.
Basis of consolidation The consolidated financial statements are prepared on the basis of the
Provisions for acquisition of minorities
financial statements of the Foundation and the subsidiaries, which are all
Provisions for acquisition of minorities amounted to DKK 711 million at 31
prepared in accordance with the Group's accounting policies.
December 2012 (DKK 555 million in 2011). When calculating the fair value of issued put options which commit the Group to acquire minority interests
The consolidated financial statements are prepared by adding together uni-
in subsidiaries, the Management applies estimates of, e.g. the subsidiaries'
form items and eliminating intra-group income and expenses, investments,
future financial performance, the likelihood of option holders exercising their
balances and dividends as well as realised and unrealised gains and losses
selling right and the time of exercise. These factors are of material impor-
on transactions between the consolidated companies. Account is taken of
tance to the fair value calculation, which is therefore subject to uncertainty.
the tax effect of these eliminations.
CONSOLIDATED FINANCIAL STATEMENTS
51
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
Financial statement items of subsidiaries are fully consolidated. Profit for the
Gains or losses on disposal or discontinuance of subsidiaries and associates
year and equity attributable to minority interests in subsidiaries that are not
Gains or losses on the disposal or discontinuance of subsidiaries and associ-
fully controlled are included in the consolidated profit and equity and stated
ates are calculated as the difference between the selling price or the discon-
as separate line items.
tinuance amount and the carrying amount of net assets at the time of sale as well as anticipated costs relating to sale or discontinuance. The resulting
Business combinations
gain or loss is recognised in the income statement together with accumulat-
Newly acquired companies are recognised in the consolidated financial
ed currency translation adjustments previously recognised in other compre-
statements from the date of acquisition. Businesses sold or discontinued are
hensive income. A proportional capital reduction does not result in recycling
recognised in the consolidated income statement up to the time of sale or
of accumulated exchange rate adjustments through profit or loss.
discontinuance. Expected costs related to divestment or discontinuance are included in the calculation of gains or losses.
Minority interests Acquired businesses are accounted for using the purchase method of accounting, according to which the identifiable assets, liabilities and contin-
On initial recognition, minority interests are either recognised at fair value
gent liabilities of the acquired businesses are measured at fair value at the
(including the fair value of goodwill related to minority interests in the
time of acquisition. Account is taken of the tax effect of the revaluations
acquired company) or at the minority interests' share of the acquired com-
made. The cost of a business is generally the fair value of the consideration
pany's identifiable assets, liabilities and contingent liabilities measured at fair
paid. If the final determination of the consideration is contingent on one or
value (excluding the fair value of goodwill related to minority interests in the
more future events, the value thereof will be recognised at fair value at the
acquired company). The measurement basis for minority interests is selected
date of acquisition. Changes to contingent considerations are recognised
for each individual transaction.
in the income statement. Put options issued in connection with acquisitions and the value of which is contingent on future events will be recognised as part of the consideration at the date of acquisition. The put options issued
Acquisition and divestment of minority interests
are subsequently measured at fair value. Any changes to the fair value of issued put options after initial recognition are recognised in equity. Costs di-
Increases and reductions of minority interests are treated for accounting
rectly attributable to the business combination are recognised in the income
purposes as transactions with owners, in their capacity as owners. As a
statement as incurred. Adjustments of commitments in connection with
result, any differences between adjustment to the carrying amount of mi-
conditional consideration or issued put options the value of which is contin-
nority interests and the fair value of the consideration received or paid are
gent on future events concerning business combinations with an acquisition
recognised directly in equity.
date before 1 January 2010 will still be recognised in accordance with IFRS 3 (2004). Accordingly, the adjustments are recognised in goodwill until the
When put options are issued as part of the consideration for business com-
conditions have been met or the issued put options exercised.
binations, the minority interests receiving put options are considered to have been redeemed on the acquisition date. The minority interests are eliminated
Any positive difference (goodwill) between the consideration and the value
and a debt obligation is recognised at fair value on initial recognition. Fair
of non-controlling interests in the acquiree and the fair value of the previous-
value is calculated as the present value of the exercise price of the option.
ly held interests in the acquiree, on the one hand, and the fair value of the
Subsequent measurements are made at amortised cost with amortisation
acquired identifiable assets, liabilities and contingent liabilities, on the other
and value changes to equity being recognised on an ongoing basis.
hand, is recognised in intangible assets. On acquisition, goodwill is allocated to the cash generating units which will subsequently form the basis for fu-
Issued put options relating to business combinations with an acquisition
ture impairment tests. Negative differences (negative goodwill) between the
date before 1 January 2010 will still be recognised in accordance with
cost of the acquired business and the fair value of the acquired identifiable
IFRS 3 (2004). Accordingly, the subsequent measurement will be made at
assets, liabilities and contingent liabilities are recognised in the income state-
amortised cost with ongoing recognition of interest expenses in the income
ment at the time of acquisition. Goodwill arising from acquired businesses is
statement and value changes in goodwill. Any subsequent dividend pay-
adjusted within a maximum period of 12 months from the acquisition if ad-
ments to option holders are recognised as a financial expense in the income
ditional information about the fair value at the time of acquisition of assets,
statement in the cases where the option price is independent of dividend
liabilities and contingent liabilities acquired is obtained after the acquisition
payments. Dividend payments are included in the determination of the cost
and it is found that the fair values originally calculated were incorrect or the
of the put options in cases where the option price is adjusted for dividend
consideration for the business combination is different from that originally
payments received.
fixed. The effect of the adjustments will be recognised in the opening equity, and the comparative figures will be restated accordingly. Subsequently, goodwill is not adjusted. However, goodwill will not be recognised by an
Translation of foreign currency
amount exceeding the expectations of future income from the acquiree. A functional currency is determined for each of the reporting enterprises of Goodwill and fair value adjustments in connection with the acquisition of
the Group. The functional currency is the currency in the primary economic
independent foreign entities (subsidiaries or associates) are accounted for
environment in which the reporting entity operates. Transactions in curren-
as assets and liabilities in the acquiree and translated at the exchange rate at
cies other than the functional currency are transactions in foreign currencies.
the balance sheet date. On initial recognition, transactions denominated in foreign currencies are translated at standard rates which approximate the actual exchange rates
52
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
at the transaction date. Exchange differences arising between the exchange
divestment. Any repayment of intercompany balances that are considered
rate at the transaction date and the exchange rate at the date of payment
part of the net investment is not considered, in itself, a partial divestment of
are recognised in the income statement as net financials except in case of
subsidiaries.
hedge accounting. In case of hedge accounting, such differences are recognised in the same item as the hedged item.
Financial instruments Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the balance sheet date are translated
Forward exchange contracts, interest rate swaps, share options and other
at the exchange rates at the balance sheet date. The difference between the
derivatives are initially recognised in the balance sheet at fair value on the
exchange rates at the balance sheet date and the rates at the time the re-
value date and are subsequently remeasured at fair value at the balance
ceivable or payable is created or recognised in the latest consolidated finan-
sheet date. Positive and negative fair values are included in other receivables
cial statements is recognised in the income statement under net financials in
and other payables respectively.
respect of unhedged items and under the same items for hedged items. Changes in the fair value of derivatives classified as hedging instruments On recognition of foreign subsidiaries having a functional currency different
and meeting the criteria for hedging future cash flows are recognised in the
from that used by the Foundation, non-monetary as well as monetary items
Group's statement of comprehensive income under other comprehensive
are translated at the exchange rates at the balance sheet date. Exchange
income. Income and expenses related to such hedging transactions are
differences arising from the translation of both the balance sheets and the
transferred from other comprehensive income on invoicing of the hedged
income statements of the foreign subsidiaries are recognised in the Group's
item and recognised in the same item as the hedged item.
statement of comprehensive income under other comprehensive income. Changes in the fair value of derivatives classified as hedging instruments However, for foreign subsidiaries and associates operating in hyperinflation-
and meeting the criteria for hedging the fair value of a recognised asset or
ary economies, revenue and costs are translated at the exchange rate ruling
liability are recognised in the income statement together with changes in the
at the balance sheet date. Prior to the translation, the income statement
value of the hedged asset or liability.
and the non-monetary items of the balance sheet are restated taking into account the buying power of the functional currency based on inflation
For derivatives which do not qualify for hedge accounting, changes in fair
until the balance sheet date (inflation correction). The effect of the infla-
value are recognised in the income statement under net financials as they
tion correction is recognised in the currency translation reserve in equity.
arise.
In the income statement, it is recognised in financials as a loss/gain on the monetary net position in the relevant entities. The assessment of when an
Changes in the fair value of derivatives used to hedge net investments in in-
economy is hyperinflationary is based on qualitative as well as quantitative
dependent foreign subsidiaries or associates and which otherwise meet the
factors, including whether the accumulated inflation over a three-year period
relevant criteria are recognised in the Group's statement of comprehensive
is in the order of 100%.
income under other comprehensive income.
Foreign exchange adjustment of receivables from or debt to subsidiaries
Securities, available-for-sale financial assets and derivatives measured at
which are considered part of the Foundation's overall investment in the sub-
fair value are classified as belonging to levels 1-3 depending on the pricing
sidiary in question is recognised in the Group's statement of comprehensive
method applied. Level 1 includes financial assets for which the fair value is
income under other comprehensive income.
measured on the basis of quoted prices (unadjusted) in active markets for identical assets. Level 2 includes financial assets and financial liabilities for
On recognition of foreign associates having a functional currency different
which the fair value is measured on the basis of directly or indirectly observ-
from that used by the Foundation, assets and liabilities are translated at the
able inputs other than the quoted prices included in level 1. Level 3 includes
exchange rates at the balance sheet date, while the income statement is
financial assets for which the fair value is measured on the basis of valuation
translated at average exchange rates for the year. Exchange differences ari-
techniques which include inputs not based on observable market data.
sing from the translation of foreign associates are recognised in the Group's statement of comprehensive income under other comprehensive income.
Income statement On the divestment of wholly-owned foreign entities, foreign exchange adjustments accumulated in equity via other comprehensive income and which
Revenue: Pharmaceuticals for the treatment of brain disorders and allergy
can be attributed to entities are reclassified from the “Currency translation
Revenue comprises invoiced sales for the year less returned goods and
reserve” to the income statement together with any gain or loss on the di-
revenue-based taxes consisting mainly of value added taxes and foreign
vestment. On the divestment of partially owned foreign subsidiaries, the part
revenue-based drug taxes.
of the currency translation reserve that relates to non-controlling interests is not recognised in the income statement. On partial divestment of foreign
Sales subject to a price adjustment clause are included in revenue at the
subsidiaries without giving up control, a proportionate share of the currency
time of delivery at the minimum price. The balance of the invoiced price
translation reserve is transferred from the parent company shareholders’ to
is recognised in the balance sheet as a prepayment and is subsequently
the non-controlling shareholders’ share of equity. On partial divestment of
included in revenue when the price has been finally determined. The price is
associates and joint ventures, the proportionate share of the accumulated
finally determined as the product is resold by the customer.
currency translation reserve recognised in other comprehensive income is transferred to profit for the year together with the gain or loss on the
CONSOLIDATED FINANCIAL STATEMENTS
53
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
Moreover, revenue includes license income and royalties from outlicensed
Sales and distribution costs
products as well as non-refundable downpayments and milestone payments
Sales and distribution costs comprise expenses incurred in connection with
relating to research and development collaborations.
the sale and distribution of the Group's products sold during the year. This includes expenses for sales campaigns launched, training and administration
In addition, income from the reduction of investments in research enterprises
of the sales force and direct distribution and marketing costs. Also recog-
considered to represent sale of research results is recognised as revenue.
nised are wages and other expenses for the sales and marketing functions, amortisation/depreciation and impairment of product rights, for example,
See Accounting policies and estimates critical to financial reporting for a
and other indirect costs.
description of the accounting treatment of license income and income from research collaborations.
Administrative expenses Administrative expenses comprise expenses incurred in the year for the
Revenue: Emergency, Assistance, Healthcare and Training sectors
management and administration of the Group. This includes wages and
Revenue represents the value of services and goods delivered and invoiced
other costs relating to the Group's management, HR, IT and finance func-
subscriptions attributable to the financial period, and is recognised in the in-
tions. Also recognised are amortisation/depreciation and impairment and
come statement if delivery and transfer of risk to the buyer have taken place
other indirect costs.
before year-end, and if the income can be reliably measured and is expected to be received.
Results of investments in associates The proportionate share of the results of associates is recognised in the
The value of services rendered is recognised on the basis of the delivered
consolidated income statement after tax and elimination of the propor-
percentage of the total service.
tionate share of any intra-group gains and losses and after deduction of any writedowns of the equity investments.
Revenue from subscriptions is allocated to the income statement on a straight-line basis.
Net financials Net financials include interest income and expenses, including the interest
Revenue from sales of goods is recognised when the significant risks and
component of financial lease payments, which are recognised in the income
rewards of ownership have been transferred to the buyer.
statement at the amounts relating to the financial year. Net financials also include value adjustments of financial assets and realised and unrealised
Revenue is measured at the fair value of the agreed consideration exclu-
gains and losses on securities, unhedged items denominated in foreign
ding VAT and other taxes collected on behalf of third parties. All discounts
currencies as well as forward contracts and other derivatives not used for
granted are recognised in revenue.
hedge accounting, realised exchange gains and losses concerning additions to net investments in foreign subsidiaries that are recycled from other com-
Cost of sales
prehensive income, realised fair value adjustments and prolonged losses on
Cost of sales comprises the cost of goods and services sold. Cost includes
available-for-sale financial assets. Dividends to capital holders who have re-
the cost of raw materials, transport costs, consumables and goods for resale,
ceived put options in connection with business combinations are recognised
direct labour and indirect costs of production, including costs for operating
as a financial expense in the cases where the option price is independent of
and maintaining production facilities and equipment, amortisation/deprecia-
dividend payments and other financial expenses.
tion and impairment losses relating to such assets. Cost of sales moreover includes royalty payments concerning inlicensed products, expenses in con-
Tax
nection with quality assurance of products and any writedown to net realis-
The Group's controlled Danish companies are jointly taxed with Lundbeck-
able value of unsaleable and slow-moving items. Cost of sales also includes
fond Invest A/S as administration company. The current Danish income tax
external assistance to generate the year's income.
liability is allocated among the companies of the tax pool in proportion to their taxable income (full allocation subject to reimbursement in respect of tax losses).
Research and development costs Research and development costs comprise expenses incurred during the year in connection with the Group's research and development functions,
The Lundbeck Foundation has opted to use section 3(4) of the Danish
including wages and salaries, amortisation/depreciation and impairment and
Corporation Tax Act. Under these rules, the taxable income of Lundbeckfond
other indirect costs as well as costs relating to research and development
Invest A/S is considered to have been earned by the Lundbeck Foundation if
collaborations on in-licensed products.
the taxable income is distributed as dividends to the Lundbeck Foundation. Since the Lundbeck Foundation's taxable income is regularly offset against
Research costs are always recognised in the income statement as they are
grants for the year and provisions for future grants, no current or deferred
incurred.
tax is recognised.
Development costs are recognised in the income statement as they are
Tax for the year, which consists of the year's current tax and the change in
incurred. Development costs are capitalised only if a number of specific
deferred tax, is recognised in the income statement as regards the amount
criteria are deemed to have been met.
that can be attributed to the net profit or loss for the year and directly in the statement of comprehensive income under other comprehensive income as
See Accounting policies and estimates critical to financial reporting for a
regards the amount that can be attributed to items under other comprehen-
description of conditions for capitalising development costs.
sive income or directly in equity. Exchange adjustments of deferred tax are recognised as part of the movements in deferred tax in the balance sheet.
54
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
The current tax charge for the year is calculated based on the tax rates and
Depreciation is recognised in the income statement under cost of sales, sales
rules applicable at the balance sheet date.
and distribution costs, administrative expenses and research and development costs, respectively.
Special items Special items comprise major one-off amounts not directly attributable to
Other intangible assets with indeterminable useful lives are not amortised
the Group's ordinary activities, and they concern matters such as amortisa-
but tested for impairment at least once a year, or if there is evidence of
tion on contractual customer relationships identified at acquisitions and
impairment.
transaction costs associated with acquisitions. Borrowing costs to finance the manufacture of other intangible assets are recognised in the cost price if such borrowing costs relate to the production
Balance sheet
period. Other borrowing costs are expensed.
Intangible assets
Gains and losses on the disposal of development projects, patents and
Goodwill
licenses are measured as the difference between the selling price less cost to
On initial recognition, goodwill is measured and recognised as the excess
sell and the carrying amount at the time of sale.
of the cost or fair value of the acquired business over the fair value of the acquired assets, liabilities and contingent liabilities. On recognition of good-
See Accounting policies and estimates critical to financial reporting for a
will, the goodwill amount is allocated to those of the Group’s activities that
description of the calculation of the fair value of intangible assets.
generate separate cash flows (cash generating units). Property, plant and equipment Goodwill is not amortised, but is tested for impairment at least once a year
Property, plant and equipment are measured at cost less accumulated de-
(impairment test), or if there is evidence of impairment.
preciation and impairment. Land is not depreciated.
Development projects
Cost includes the costs of purchase and expenses directly attributable to
Clearly defined and identifiable development projects are recognised as
the purchase until the asset is ready for use. In the case of assets manufac-
intangible assets where the technical rate of utilisation of the project,
tured by the company, cost includes expenses directly attributable to the
the availability of adequate resources and a potential future market or
manufacture of the asset, including materials, components, subsupplies and
development opportunity in the company can be demonstrated and where
labour.
the intention is to manufacture, market or use the project if the cost can be measured reliably and it is probable that the future earnings can cover
Assets held under finance leases are recognised under property, plant and
production and selling expenses, administrative expenses as well as the
equipment and measured at the lower of the fair value and value in use of
development costs. Other development costs are recognised in the income
the future lease payments at the inception of the lease. Assets held under
statement as the costs are incurred.
finance leases are depreciated over the useful lives of the assets or, if shorter, over the lease term.
After completion of the development work, development costs are amortised on a straight-line basis over the expected useful life. For development
Borrowing costs to finance the manufacture of property, plant and equip-
projects protected by intellectual property rights, the maximum amortisation
ment are recognised in the cost price if such borrowing costs relate to the
period is the remaining term of the rights concerned. Ongoing development
production period. Other borrowing costs are expensed.
projects are tested for impairment at least once a year, or if there is evidence Property, plant and equipment are depreciated on a straight-line basis over
of impairment.
the expected useful lives of the assets, which are expected to be as follows: Other intangible assets Acquired intellectual property rights in the form of product rights, contrac-
Years
tual customer relationships, patents, licenses, brand names and software are
Buildings 25-50
measured at cost less accumulated amortisation and impairment. The cost of
Installations
software comprises the cost of planning, including labour and costs directly
Plant and machinery
attributable to the project.
Vehicles according to category
5-12
Fixtures and fittings, tools and equipment
3-10
10 3-10
Product rights are amortised on a straight-line basis over the economic lives
Leasehold improvements max.
of the underlying products. Contractual customer relationships are measured
at cost less accumulated depreciation and impairment. Intangible assets
The depreciation base is cost less the estimated residual value at the end
acquired on acquisition are amortised over the expected economic life,
of the expected useful life. The cost of a total asset is divided into smaller
estimated to be 3 to 10 years. Patents are amortised over a maximum of the
components that are depreciated separately if such components have dif-
remaining life of the patent. Licenses are amortised over the period of the
ferent useful lives. Depreciation methods, useful lives and residual values are
agreement. Software is amortised over the expected economic life, estimat-
re-assessed annually.
10
ed to be 3 to 5 years. The economic lives of large administrative systems are estimated to be 8 years. Amortisation commences when the asset is ready
Depreciation is recognised in the income statement under cost of sales, sales
to be brought into use, which means at the time of commercialisation.
and distribution costs, administrative expenses and research and development costs, respectively.
CONSOLIDATED FINANCIAL STATEMENTS
55
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
The costs of maintaining property, plant and equipment are recognised in
Financial assets
the income statement as they are incurred, either directly in the income
Securities that are included in the Group's documented investment strategy
statement or as part of indirect costs of production.
in accordance with the fair value option of IAS 39 Financial Instruments: Recognition and Measurement are recognised on the basis of the value date
Costs incurred that increase the recoverable amount of the asset concerned
at fair value and are subsequently measured at market price or estimated fair
are added to the asset's cost as an improvement and are depreciated over
value at the balance sheet date. Bonds with a term to maturity of less than
the expected useful life of the improvement.
one year are recognised in current assets. Both realised and unrealised gains and losses are recognised in the income statement under net financials.
Gains or losses on the sale or retirement of items of property, plant and equipment are calculated as the difference between the carrying amount
Financial assets are measured at fair value through profit or loss, including
and the selling price reduced by costs relating to divestment or discontinu-
investments in associates if they are included in the Group's documented
ance. Gains and losses are recognised in the income statement under the
investment strategy.
same items as the associated depreciation. Bonds forming part of repo transactions, i.e. the selling of bonds to be reImpairment
purchased at a later date, remain in the balance sheet as financial assets, and
Goodwill is written down through the income statement in those cases
the amount received on repo transactions is recognised as repo debt. Re-
where the carrying amount exceeds the future net income expected from
turns on such bonds are recognised in the normal manner under financials.
the cash generating unit (CGU) to which the goodwill relates (recoverable amount). In the impairment test, the discounted expected future cash flows
The fair value of listed investments is calculated using official currently
(value in use) for each CGU are compared to the carrying amounts of good-
quoted prices. The calculation of fair value of unlisted investments, including
will and other net assets.
life science investments, is made in accordance with International Private Equity and Venture Capital Valuation Guidelines. i.e. on the basis of relevant
The carrying amount of intangible assets and property, plant and equipment
valuation methods based on comparable transactions on market conditions,
is analysed in connection with the preparation of the consolidated financial
capital increases and the like. If the fair value cannot be determined with suf-
statements if there are indications that the carrying amount of an asset
ficient reliability, the investments in question are recognised at cost less any
may exceed the expectations of future income from the asset (recoverable
impairment. The Group assesses at each balance sheet date whether there is
amount). If this analysis concludes that the future expected net income from
objective evidence that an investment or a group of investments is impaired.
the asset will be lower than the carrying amount, the carrying amount will be
Assessments of investments in unlisted equity instruments and securities,
reduced to the higher of fair value less cost to sell and value in use. Impair-
including life science investments, include an assessment of whether the
ment losses are recognised in the income statement under the same items
companies live up to the defined business plans and the impact of any non-
as the associated depreciation or amortisation.
compliance on the calculation of fair value.
Investments in associates
On initial recognition, other investments classified as available-for-sale are
Investments in associates are recognised and measured in the consolidated
measured at fair value with the addition of costs directly attributable to the
financial statements according to the equity method, which entails that the
acquisition. Other investments are subsequently measured at fair value at
investments are measured in the balance sheet at the proportionate share
the balance sheet date, and changes to the fair value are recognised in the
of the associate's net asset value calculated in accordance with the Group'
statement of comprehensive income under other comprehensive income
accounting policies less or plus unrealised intra-group gains and losses and
with the exception of impairment losses and dividends, which are taken to
plus the carrying amount of goodwill.
the income statement. When other available-for-sale investments are sold or settled, the accumulated fair value adjustments recognised under other
The proportionate share of the result of the associate is recognised in the
comprehensive income are recycled to net financials or revenue if the fair
income statement after tax and elimination of the proportionate share of any
value adjustment concerns investments in research enterprises.
intra-group gains and losses and after deduction of any writedowns of the investments. The proportionate share of all transactions and events recog-
Inventories
nised directly in the associate's other comprehensive income is recognised in
Raw materials, packaging and goods for resale are measured at the latest
the Group's statement of comprehensive income under other comprehensive
known cost at the balance sheet date, which equals cost computed accord-
income.
ing to the FIFO method. Work in progress and finished goods manufactured by the company are measured at cost, i.e. the cost of raw materials,
Investments in associates with a negative carrying amount are recognised
consumables, direct labour and indirect costs of production. Indirect costs
at DKK 0. Receivables and other long-term financial assets considered to
of production include materials and labour as well as maintenance of and
form part of the overall investment in the associate are written down by any
depreciation on the machines, factory buildings and equipment used in the
remaining negative net asset value. Trade receivables and other receivables
manufacturing process as well as the cost of factory administration and
are written down only to the extent they are deemed to be irrecoverable. A
management. Indirect costs of production are allocated based on the normal
provision to cover the remaining negative net asset value will only be made
capacity of the production plant.
if the Group has a legal or constructive obligation to cover the liabilities of the relevant associate.
Inventories are written down to net realisable value if it is lower than the cost price. The net realisable value of inventories is determined as the selling price less costs of completion and costs incurred to execute the sale, and it is determined having regard to marketability, obsolescence and expected selling price developments.
56
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
Receivables
Treasury shares
Current receivables comprise trade receivables and other receivables arising
Cost and selling prices of treasury shares as well as dividends are recognised
in the Group's normal course of business. Other receivables recognised un-
directly in equity under retained earnings.
der financial assets are financial assets with fixed or determinable payments that are not quoted on an active market and are not derivative financial
Minority interests
instruments.
The proportionate shares of the profits and equity of subsidiaries attributable to minority interests are recognised as a separate item under equity.
On initial recognition, receivables are measured at fair value, which usually
On initial recognition, minority interests are recognised as described under
corresponds to the nominal value less writedowns to counter the risk of loss
“Business combinations”. The issuance of put options as part of the consid-
calculated on the basis of an individual evaluation. A provision account is
eration in business combinations is recognised as described under “Acquisi-
used for this purpose.
tion and divestment of minority interests”.
Prepayments
Share-based payments
Prepayments consist of expenses relating to subsequent financial years.
Share-based incentive programmes in which employees may opt to buy
Prepayments are measured at cost.
shares in H. Lundbeck A/S, Falck Holding A/S and ALK A/S and in which shares are allocated to employees (equity schemes) are measured at the eq-
Securities
uity instruments' fair value at the date of grant and recognised in the income
The bond portfolio and other securities, which are included in the Group's
statement under staff costs under the respective functions when or as the
documented investment strategy for excess liquidity, or bonds with a term to
employee obtains the right to buy/receive the shares. The balancing item is
maturity of less than one year, are recognised under current assets. Securi-
recognised directly in equity under other transactions.
ties are initially recognised at fair value on the value date and are subsequently remeasured at market value at the balance sheet date. Both realised
Share price-based incentive programmes in which employees have the
and unrealised gains and losses are recognised in the income statement
difference between the agreed price and the actual share price settled in
under net financials.
cash (debt schemes) are measured at fair value at the date of grant and recognised in the income statement under staff costs when or as the employee
Equity
obtains the right to such difference settlement. The incentive programmes
Authorised grants
are subsequently remeasured on each balance sheet date and upon final
Grants are considered equity movements and are recognised as a liability at
settlement, and any changes in the fair value of the programmes are
the time when the grant has been authorised by the Board of Directors and
recognised in the income statement under staff costs under the respective
announced to the recipient. Authorised grants not yet disbursed are recog-
functions. The balancing item is recognised under provisions until the time of
nised in long-term or short-term liabilities, respectively.
the final settlement.
Hedging reserve
Pension obligations
Hedge transactions that meet the criteria for hedging future cash flows and
IFRS 1, First-time adoption of IFRS, has been applied for the presentation of
for which the hedged transaction has yet to be realised are recognised in
consolidated financial statements according to IFRS. The first time was in
equity under the hedging reserve.
2011. The Group has applied the exemption clause, under which there is no requirement for a 5-year overview of changes in pension obligations. The
Value adjustments concerning hedging transactions used to hedge the
information has therefore been provided prospectively from 1 January 2010.
Group's net investment in such entities are recognised in equity under the Periodical payments to defined contribution plans are recognised in the
hedging reserve.
income statement at the due date and any contributions payable are recognised in the balance sheet under current liabilities.
Currency translation reserve Foreign exchange adjustments arising on the translation of financial statements for entities which have a functional currency other than Danish kroner,
The present value of the Group's liabilities relating to future pension pay-
foreign exchange adjustments relating to financial assets and liabilities
ments according to defined benefit plans is measured on an actuarial basis
representing a part of the Group’s net investment in such entities are recog-
once a year on the basis of the pensionable period of employment up to the
nised in equity under the currency translation reserve.
time of the actuarial valuation. The Projected Unit Credit Method is applied to determine the present value. The present value is calculated based on as-
On full or partial realisation of a net investment, foreign exchange adjust-
sumptions of the future developments of salary, interest, inflation, mortality
ments are recognised in the income statement.
and disability rates and other factors. Actuarial gains and losses are recognised in the income statement as they are calculated.
Reserve for fair value adjustment of available-for-sale financial assets Reserve for fair value adjustment comprises accumulated changes in the fair
The present value of the liability according to defined benefit plans is
values of available-for-sale financial assets. The reserve, which forms part of
measured less the fair value of the plan assets, and any net obligation is
the Group’s free reserves, is dissolved and transferred to the income state-
recognised in the balance sheet under non-current liabilities. Any net asset is
ment as the investment is sold or written down.
recognised in the balance sheet as a financial asset. The year's changes in the provisions relating to defined benefit plans are recognised in the income statement.
CONSOLIDATED FINANCIAL STATEMENTS
57
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
Income tax and deferred tax
has been announced to the parties involved. In connection with acquisi-
Current tax liabilities and receivables are recognised in the balance sheet,
tions, provisions for restructuring costs are only included in the computation
computed as tax calculated on the taxable income for the year, adjusted for
of goodwill if an obligation exists for the entity acquired as of the date of
provisional tax paid.
acquisition.
Tax on items in other comprehensive income is recognised in the statement
Provisions are made for onerous contracts when the anticipated benefits to
of comprehensive income under other comprehensive income. Tax on equity
the Group from a contract are outweighed by the unavoidable costs under
entries is recognised in equity.
the contract.
Deferred tax is recognised on all temporary differences between the carry-
When the Group is under an obligation to dismantle an asset or re-establish
ing amounts of assets and liabilities and their tax base, except for temporary
the site where the asset has been used, a provision is made corresponding to
differences arising either on initial recognition of goodwill or a transaction
the present value of the expected future costs. The provision is determined
that is not a business combination and with the temporary difference as-
based on current orders and estimated future costs, discounted to their
certained at the time of the initial recognition affecting neither the financial
present value. The discount factor used reflects the general level of interest
result nor the taxable income. The tax value of the assets is calculated based
rates. The present value of the costs is recognised in the cost of the item of
on the planned use of each asset.
property, plant and equipment in question and depreciated with these assets. The increase of the present value over time is recognised in the income
Deferred income tax is provided on temporary differences arising on invest-
statement under financial expenses.
ments in subsidiaries and associates, unless the Group has a possibility of controlling when the deferred tax is to be realised and it is likely that the
Other provisions are recognised when the Group has a legal or constructive
deferred tax will not materialise as current tax.
obligation that arises from past events and it is probable that an outflow of financial resources will be required to settle the obligation.
Deferred tax is measured on the basis of the tax rates and tax rules in force in the respective countries on the balance sheet date. Changes in deferred
Other provisions are measured as the best estimate of the costs required to
tax as a result of changed tax rates or tax rules are recognised in the income
settle the liabilities at the balance sheet date.
statement. Return obligations imposed on the industry are recognised in the balance Deferred tax assets, including the tax value of tax loss carry-forwards, are
sheet under other provisions.
recognised in the balance sheet at the value at which the asset is expected to be realised, either through a set-off against deferred tax liabilities or as
Debt
net assets to be offset against future positive taxable income.
Mortgage debt and debt to credit institutions are recognised at the time of the raising of the loan at proceeds received less transaction costs paid. In
Changes in deferred tax concerning the cost of share-based payments are
subsequent periods, the financial liabilities are measured at amortised cost,
generally recognised in the income statement.
equivalent to the capitalised value when the effective rate of interest is used, so that the difference between the proceeds and the nominal value is recog-
Deferred tax in respect of recaptured losses previously deducted in foreign
nised in the income statement over the loan period.
subsidiaries is recognised on the basis of a specific assessment of the intenResidual lease commitments from finance leases are recognised at amor-
tion with each individual subsidiary.
tised cost. Balances calculated according to the rules on interest deductibility limitations in the Danish Corporate Income Tax Act are allocated between the
Repo debt relates to bonds included in repo transactions. Debt is recognised
jointly-taxed companies according to a joint taxation agreement and are
at amortised cost, and accumulated repo interest has been accrued.
allocated between the companies that are subjected to deductibility limitation in proportion to their share of the total limitation. Deferred tax liabilities
Debt included in the short-term financial liquidity is also measured at amor-
in respect of these balances are recognised in the balance sheet, whereas
tised cost in subsequent periods.
deferred tax assets are recognised only if the criteria for recognition of Other payables, which include trade payables and debt to public authorities
deferred tax assets are met.
etc. are measured at amortised cost. Other provisions Other provisions consist of different types of provisions, including provisions
Assets held for sale
for pending lawsuits. Management makes assessments of provisions and
Assets held for sale comprise non-current assets and disposal groups held
contingent liabilities, including the probable outcome of pending and pos-
for sale. A disposal group is a group of assets to be disposed of, by sale or
sible future lawsuits, which inherently depends on uncertain future events.
otherwise, together as a group in a single transaction. Liabilities regarding
When management determines the probable outcome of lawsuits and
assets held for sale are liabilities directly associated with those assets that
similar factors, it relies on assessments made by external advisers who are
will be transferred in the transaction. Assets are classified as held for sale if
familiar with the specific cases and the existing legal practice in the area.
their carrying amount will be recovered principally through a sale transaction within 12 months in accordance with a formal plan rather than through
Provisions for restructuring are recognised when a detailed, formal plan for
continuing use.
the restructuring has been made before or on the balance sheet date and
58
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 1
Assets or disposal groups held for sale are measured at the lower of the car-
Cash flows denominated in foreign currencies, including cash flows in foreign
rying amount at the date when the assets were classified as held for sale and
subsidiaries, are translated at the average exchange rates during the year
fair value less costs to sell. Assets are not depreciated or amortised as from
because they approximate the actual exchange rates at the date of payment.
the date they are classified as held for sale.
Cash at year-end is translated at the exchange rates at the balance sheet date, and the effect of exchange rate adjustments on cash is shown as a
Impairment losses from the initial classification of the non-current assets as
separate item in the cash flow statement.
held for sale as well as gains and losses from following measurement of the lowest value of the carrying amount or the fair value less costs to sell are recognised in the income statement. Gains and losses are disclosed in the
Key figures
notes to the financial statements. Key figures are calculated according to Recommendations and Financial Assets and related liabilities are recognised separately in the balance sheet,
Ratios 2010 issued by the Danish Society of Financial Analysts.
and the main items are specified in the notes to the financial statements. Operating profit:
Defined as the Group's profit before
special items, financial items and tax
Operating profit margin:
Operating profit x 100 / Revenue
all risks and rewards of ownership of the leased asset are transferred. Other
Return on equity:
Lundbeck Foundation's share of profit x 100 /
leases are classified as operating leases.
Lundbeck Foundation's share of average
Comparative figures in the balance sheet are not restated. Leases For accounting purposes, lease obligations are divided into finance and operating leases. Leases are classified as finance leases when substantially
equity The accounting treatment of assets held under finance lease and the related liability is described in the sections on property, plant and equipment and financial liabilities, respectively. Assets held under operating leases are not recognised in the balance sheet. Lease liabilities under operating leases are disclosed as contingent liabilities. Lease payments concerning operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
Cash flow statement The consolidated cash flow statement is presented according to the indirect method and shows the composition of cash flows, divided into operating, investing and financing activities respectively, and cash and cash equivalents at the beginning and at the end of the year. Cash flows from acquisitions and divestments of companies are shown separately under cash flows from investing activities. The cash flow statement includes cash flows from acquired companies from the date of acquisition and cash flows from divested companies until the time of divestment. Cash flows from operating activities are calculated as the Group's profit from operations and special items, adjusted for non-cash operating items, working capital changes, financial receipts and payments and income taxes paid. Cash flows from investing activities include payments in connection with purchases and sales of intangible assets, property, plant and equipment and financial assets, including equity investments in companies. Also included are securities classified as current assets. Entering into a finance lease is considered a non-cash transaction. Cash flows from financing activities include payments to and from shareholders and related expenses as well as the raising of and repayments on loans, mortgage debt and other long-term debt and cash flows from dividends and minorities. Cash comprises cash less current bank debt falling due on demand.
CONSOLIDATED FINANCIAL STATEMENTS
59
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 2 - 3
2. REVENUE 2012 2011 DKKm DKKm Europe
19,384
USA
4,028
14,468 4,708
Rest of the world
5,263
4,426
28,675
23,602
CNS pharmaceuticals (H. Lundbeck Group)
14,802
16,007
Allergy pharmaceuticals (ALK Group)
2,345
2,348
Emergency, assistance, healthcare and training (Falck Group)
11,528
5,247
28,675
23,602
Revenue includes: Downpayments and milestone payments
515
448
Royalty
346
640
Income from sale of ownership interest in Proximagen Group plc.
115
-
Revenue in Denmark
5,655
2,878
Income from Forest in the USA Income from sales of citalopram and escitalopram concerning Forest amounted to DKK 575 million in 2012 (DKK 2,535 million in 2011) based on the minimum price for this year’s shipments and adjustments of prepayments concerning prior-year shipments. Prepayments, which is the difference between the invoiced price and the minimum price, were DKK 79 million at 31 December 2012 (DKK 234 million in 2011). The escitalopram patent protection in the USA expired in March 2012, triggering a sharp fall in Forest's escitalopram sales. However, Forest retains a minor sale of escitalopram, which continuously reduces the inventories. Lundbeck believes that there is presently no material repayment risk concerning the prepayment. Other accrued income There is deferred income concerning research and development partnerships in the amount of DKK 0 (DKK 74 million in 2011). Furthermore, there is accrued subscription revenue in the amount of DKK 1,121 million in 2012 (DKK 1,036 million in 2011) and other accrued income in 2012 of DKK 326 million (DKK 295 million in 2011).
3. STAFF COSTS 2012 2011 DKKm DKKm Short-term staff benefits
10,289
Share-based payment
73
6,607 34
Pension benefits
708
414
Other social security costs
1,107
707
12,177
7,762
The year's staff costs are specified as follows: Cost of sales
6,050
Research and development costs
1,252
3,072 1,309
Sales and distribution costs
2,947
2,093
Administrative expenses
1,928
1,288
Total
12,177
7,762
Total remuneration in the Group for the Executive Management of the Foundation amounts to
5
4
Total remuneration in the Group for the Board of Directors of the Foundation amounts to
7
7
60
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 3 3. STAFF COSTS, CONTINUED
2012 2011 DKKm DKKm Remuneration of the Executive Management and the Board of Directors is specified as follows: Executive Management: Christian Dyvig, appointed on 1 June 2011
4.5
2.6
Board of Directors: Jørgen Huno Rasmussen, Chairman of the Foundation and Lundbeckfond Invest A/S from 2 May 2012, chairman of the investment committee
0.7
0.4
0.9
0.8
2.1
2.6
natural sciences committees
0.5
0.2
Gunhild Waldemar, member of the research committee and the biomedical sciences committee
0.4
0.2
Mikael Rørth, Deputy Chairman of the Foundation and Lundbeckfond Invest A/S, chairman of the research committee and the biomedical sciences committee, member of the investment committee Thorleif Krarup, member of the investment committee, deputy chairman of Falck Holding A/S, board member of H. Lundbeck A/S and ALK-Abelló A/S Povl Krogsgaard-Larsen, member of the investment, research and the biomedical and
Jes Østergaard, chairman of the natural sciences committee and member of the research and investment committees, board member of H. Lundbeck A/S and ALK-Abelló A/S
1.8
1.7
Kim Klitgaard, employee representative from H. Lundbeck A/S
0.2
0.2
Ken Liljegren, employee representative from H. Lundbeck A/S
0.2
0.2
Peter Adler Würtzen, employee representative from ALK-Abelló A/S
0.2
0.2
Nils Axelsen, stepped down on 30 May 2011
-
0.2
Mogens Bundgaard-Nielsen, stepped down on 30 May 2011
-
0.4
7.0
7.1
Average number of full-time employees during the year
28,049
15,875
Number of employees at year-end
35,421
32,795
Incentive programmes The Executive Management of the Foundation is not offered incentive programmes. An incentive programme has been launched for employees of Lundbeckfond Ventures which is similar to standard incentive programmes for the venture industry. The purpose of the incentive programme is for Lundbeckfond Ventures to be able to attract and retain skilled and qualified labour. In addition, a bonus programme has been established for the Foundation's employees. In order to attract, retain and motivate key employees and align their interests with those of the shareholders, the Group has established a number of incentive programmes in the H. Lundbeck, ALK and Falck groups. The Group uses short-term incentive programmes that provide an annual bonus for the achievement of pre-determined targets of the financial year as well as equity-based and debt-based schemes. Equity-based schemes Equity-based schemes are used both in H. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S. For the schemes in H. Lundbeck A/S, each warrant entitles the holder to buy one share of DKK 5 nominal value in the company. The Executive Management has been granted share schemes. Exercise of the warrants and the share schemes is subject to the relevant employees continuing employment at the date of exercise. Exercise of warrants and share schemes granted to the Executive Management is also subject H. Lundbeck achieving its financial targets. For the schemes in ALK-Abelló A/S, each warrant entitles the holder to buy one B share of DKK 10 nominal value in the company. The right to exercise the warrants is subject to the holder of the option not having resigned at the time of exercise. Moreover, the Executive Management has been granted a conditional share scheme subject to ALK achieving specific financial targets. There are no other conditions for vesting. The options can be exercised only during a period of four weeks after the publication of annual or interim financial statements. Share options are considered adequately secured in own shares. For the scheme in Falck Holding A/S, each warrant entitles the holder to buy one share of DKK 1 nominal value in the company. The warrants issued were acquired at market value, and no conditions were attached. Consideration for the issued warrants has been paid in the form of a non-cash contribution of a corresponding number of warrants in Falck A/S, which have subsequently been cancelled. Debt-based schemes H. Lundbeck A/S has granted Stock Appreciation Rights (SARs) and Restricted Cash Units (RCUs) to a few employees of US subsidiaries. SAR is a share price-based scheme with conditions and award criteria similar to those of the warrant schemes. RCU is a share price-based scheme with conditions and award criteria similar to those of the share schemes. Neither of the two schemes can be converted into shares, but the value of the scheme is distributed as a cash amount. The tables below show all the incentive programmes in place in 2011 and 2012. CONSOLIDATED FINANCIAL STATEMENTS
61
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 3 3. STAFF COSTS, CONTINUED
Conditions for the various incentive programmes are set out below: Number of Outstanding at H. Lundbeck A/S - equity-based schemes
Vesting date
Exercise- period begins
Exercise warrants/shares period ends
granted
Exercise price
31 December 2012
2008, warrants
6/5-2/6 2011
6/5-2/6 2011
5/5-1/6 2016
539,544
115.00
151,870
2009, warrants
16/3 2012
16/3 2012
15/3 2017
534,058
102.00
190,256
2010, warrants
16/3 2013
16/3 2013
15/3 2018
790,950
97.00
264,375
2011, warrants
31/3 2014
1/4 2014
31/3 2019
849,085
121.00
439,663
2012, warrants (3 years)1)
31/3 2015
1/4 2015
31 Dec 2018
155,750
113.00
-
2012, warrants (4 years)1)
31/3 2016
1/4 2016
31 Dec 2018
233,629
113.00
-
2012, warrants (5 years)1)
31/3 2017
1/4 2017
31 Dec 2018
389,380
113.00
-
2012, warrants
31/3 2015
1/4 2015
31 Dec 2020
692,003
113.00
1,319,312 434
2008, share scheme
6/5-2/6 2011
74,609
2009, share scheme
16/3 2012
92,627
-
2010, share scheme
16/3 2013
102,689
75,018
2011, share scheme
31/3-30/6 2014
539,962
476,881
2012, share scheme
31/3 2015
245,681
220,580
1) Concerns the Executive Management, in which the CEO is invited to invest up to DKK 10 million while the other members of the Executive Management are invited. The warrants will vest after a period of respectively 3 years (20%), 4 years (30%) and 5 years (50%). The exercise price is DKK 113.00 plus a premium of 4.00% per year adjusted for the dividend payout ratio. H. Lundbeck A/S
- debt-based schemes 2008, SARs
11/8 2011
11/8 2011
11/8 2016
2,258
119.76
2,258
2009, SARs
1/7 2012
1/7 2012
30/6 2017
241,137
102.00
2,352
2009, RCUs
1/7 2012
2010, SARs
16/3 2013
16/3 2013
15/3 2018
338,975 36,060
97.00
2010, RCUs
16/3 2013
10,346
2011, SARs
31/3 2014
53,832
2011, RCUs
1/4 2014
31/3 2019
31/3-30/6 2014
2012, SARs
31/3 2015
1/4 2015
31/3 2020
2012, RCUs
31/3 2015
121.00
66,233 64,453
4,639 1,331 49,627 65,149
113.00
64,453
12,946
12,946
ALK-Abell贸 A/S - equity-based schemes 2006, share options
1/11 2009
1/11 2009
1/11 2013
33,375
896.00
26,225
2007, share options
1/11 2010
1/11 2010
1/11 2014
29,000
727.00
23,850 38,050
2008, share options
1/11 2011
1/11 2011
1/11 2015
47,600
504.00
2009, share options
1/11 2012
1/11 2012
1/11 2016
58,300
465.00
46,750
2010, share options
1/11 2013
1/11 2013
1/11 2017
174,000
345.00
151,200
2011, share options
1/11 2014
1/11 2014
1/11 2018
220,000
319.00
202,200
2012, share options
1/5 2015
1/5 2015
1/5 2019
101,000
399.00
100,200
2012, share scheme
1/5 2015
15,300
15,300
The exercise price for ALK-Abell贸 A/S' schemes equals the average of the market price during the last five business days prior to the date of grant. The exercise price is increased by 2.5% p.a. and reduced by dividends paid.
Number of Outstanding at Falck Holding A/S - egenkapitalbaseret ordning
Acquisition
Exercise-
date
period begins
period ends
Exercise warrants/shares granted
Exercise price
31 December 2012
13/7 2011
30/12 2015
30/12 2015
4,443,120
125.00
4,443,120
2011, warrants
62
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 3 3. STAFF COSTS, CONTINUED
Outstanding January
Additions
Exercised/ settled
Expired/ Outstanding at cancelled
31 December
Outstanding warrants and share schemes 2012 H. Lundbeck A/S, warrants
2,127,701
1,470,762
(593)
(1,232,394)
H. Lundbeck A/S, share scheme
693,952
245,681
(68,011)
(98,709)
2,365,476 772,913
ALK-Abell贸 A/S, share options
588,350
101,000
-
(100,875)
588,475
ALK-Abell贸 A/S, share scheme
-
15,300
-
-
15,300
Falck Holding A/S, warrants
4,443,120
-
-
-
4,443,120
Total 2012
7,853,123
1,832,743
(68,604)
(1,431,978)
8,185,284
Average exercise price for options, DKK
149.45
134.01
102.00
147.73
145.88
Outstanding warrants and share schemes 2011 H. Lundbeck A/S, warrants
2,693,412
849,085
(19,284)
(1,395,512)
H. Lundbeck A/S, share scheme
264,437
539,962
(69,505)
(40,942)
693,952
ALK-Abell贸 A/S, share options
382,150
220,000
(13,800)
588,350
Falck Holding A/S, warrants
-
4,443,120
-
4,443,120
Total 2011
3,339,999
6,052,167
- - (88.789)
(1,450,254)
2,127,701
7,853,123
Average exercise price for options/warrants DKK
176.68
133.44
138.59
118.97
150.67
Outstanding debt-based schemes 2012 H. Lundbeck A/S, SARs
63,081
64,453
-
(4,205)
H. Lundbeck A/S, RCUs
68,409
12,946
(845)
(1,084)
123,329 79,426
Total 2012
131,490
77,399
(845)
(5,289)
202,755
Outstanding debt-based schemes 2011 H. Lundbeck A/S, SARs
132,106
53,832
-
(122,857)
63,081
H. Lundbeck A/S, RCUs
251,917
66,233
(814)
(248,927)
68,409
Total 2011
384,023
120,065
(814)
(371,784)
131,490
Recognised expenses At H. Lundbeck's annual general meeting in 2012, it was resolved to cancel warrants granted to the Executive Management in 2010 and 2011. The fair value per warrant for warrants granted in 2010 was calculated at the time of grant using the Black-Scholes method and was based on a volatility of 32.29 %, a dividend payout ratio of 1.50 %, a risk-free interest rate of 2.60 %, an average maturity of approximately 66 months and a share price of DKK 99.55. This translates into a fair value of DKK 29.86 per warrant. The volatility was based on daily data during the period 18 January 2005 to 31 December 2009. The fair value per warrant for warrants granted in 2011 was calculated at the time of grant using the Black-Scholes method and was based on a volatility of 31.03 %, a dividend payout ratio of 2.50 %, a risk-free interest rate of 2.99 %, an average maturity of approximately 66 months and a share price of DKK 121.20. This translates into a fair value of DKK 30.10 per warrant. The volatility was based on daily data during the period 1 April 2006 to 1 April 2011. Cash or shares corresponding to a value of six months' salary was transferred to each participant for each programme. As a result of the changes to the programmes, an expense of DKK 17 million has been recognised in the income statement. Warrants granted to key employees in 2010 and 2011 have not been cancelled. Warrants and shares allocated to key employees in 2009 vested in 2012. In 2012, 593 warrants were exercised from the 2009 grant. The weighted average share price of exercised warrants was DKK 122.18. The warrants and shares granted are recognised in the income statement for 2012 at an expense corresponding to the fair value at the time of grant calculated according to the Black-Scholes method for the vesting period to date. For the warrants and shares in the programmes that depend on Lundbeck achieving specific financial targets, the recognised expense was calculated with due consideration to fulfilment of the vesting conditions. The SARs granted are recognised in the income statement for 2012 at an expense corresponding to the value adjustment for the year based on the BlackScholes method, and the RCUs granted are recognised in the income statement for 2012 at an expense corresponding to the value adjustment for the year based on the performance of the Lundbeck share. 2012 2011 DKKm DKKm Recognised expenses concerning equity-based schemes
71
Recognised expenses concerning debt-based schemes
2
1
Total recognised expenses
73
34
CONSOLIDATED FINANCIAL STATEMENTS
33
63
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 3 - 4 3. STAFF COSTS – CONTINUED
The assumptions applied in determining the fair value of warrant, share option and debt-based schemes at the grant date are as follows:
Market price at
Expected
Expected dividend payout
Risk-free Calculated value
time of grant
DKK
volatility, %
H. Lundbeck A/S, warrant and share scheme, March 2009
98.75
44.05
1.50
3.20
79
40.37
H. Lundbeck A/S, debt-based scheme, June 2009
96.79
36.34
1.50
3.38
79
36.42
debt-based scheme, March 2010
99.55
32.29
1.50
2.60
66
29.86
H. Lundbeck A/S, warrant and share scheme, October 2010
95.70
31.70
1.50
1.73
60
24.30
121.20
31.03
2.50
2.99
66
30.10
113.20
30.57
2.50
0.52
59
21.05
113.20
31.77
2.50
0.52
65
22.40
113.20
31.08
2.50
0.52
71
21.99
ratio, %
interest
Expected
per option,
rate, % maturity, mhts.
DKK
H. Lundbeck A/S, warrant, share and
H. Lundbeck A/S, warrant, share and debt-based scheme, April 2011 H. Lundbeck A/S, warrant and share scheme, April 2012 (3 years) H. Lundbeck A/S, warrant and share scheme, April 2012 (4 years) H. Lundbeck A/S, warrant and share scheme, April 2012 (5 years) H. Lundbeck A/S, warrant, share and debt-based scheme, April 2012
113.20
29.94
2.50
0.93
66
24.11
ALK-Abelló A/S, 2009 scheme
465.00
45.00
0.97
3.58
60
173.00
ALK-Abelló A/S, 2010 scheme
345.00
25.00
1.31
2.21
60
63.00
ALK-Abelló A/S, 2011 scheme
319.00
24.00
1.42
1.68
60
52.00
ALK-Abelló A/S, 2012 scheme
399.00
22.00
1.14
1.49
60
61.00
Warrants for subscription of shares in Falck Holding A/S were acquired at fair value. 4. DEPRECIATION, AMORTISATION AND IMPAIRMENT Intangible Property, plant
assets and equipment
DKKm
DKKm
Total DKKm
Depreciation, amortisation and impairment for 2012 are specified as follows: Cost of sales
84
461
Research and development costs
101
124
545 225
Sales and distribution costs
426
30
456
Administrative expenses
31
105
136
Special items
515
-
515
1,157
720
1,877
An impairment loss on other product rights totalling DKK 15 million is recognised in research and development costs. An impairment loss on patent rights totalling DKK 8 million is recognised in research and development costs. An impairment loss on property, plant and equipment totalling DKK 5 million is recognised in cost of sales in the amount of DKK 3 million and in research and development costs in the amount of DKK 2 million. Losses and gains on the sale of intangible assets and property, plant and equipment were recognised at a net gain of DKK 142 million. Intangible Property, plant
assets and equipment
DKKm
DKKm
Total DKKm
Depreciation, amortisation and impairment for 2011 are specified as follows: Cost of sales
121
232
Research and development costs
216
399
615
Sales and distribution costs
406
25
431
Administrative expenses
31
99
130
Special items
242
-
242
1,016
755
1,771
64
CONSOLIDATED FINANCIAL STATEMENTS
353
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 4 - 5 - 6 - 7 4. DEPRECIATION, AMORTISATION AND IMPAIRMENT – CONTINUED
An impairment loss on other rights totalling DKK 47 million is recognised in cost of sales in the amount of DKK 31 million, in research and development costs in the amount of DKK 11 million and in administrative expenses in the amount of DKK 5 million. An impairment loss on patent rights totalling DKK 95 million is recognised in research and development costs. An impairment loss on property, plant and equipment totalling DKK 283 million mainly consists of impairment of land and buildings in the USA. The impairment loss is recognised in cost of sales in the amount of DKK 21 million, in research and development costs in the amount of DKK 258 million and in administrative expenses in the amount of DKK 4 million. Losses and gains on the sale of intangible assets and property, plant and equipment are recognised at a net gain of DKK 113 million. Of this amount, the gain from the sale of production facilities in the UK amounts to DKK 95 million.
5. FEES TO AUDITORS APPOINTED AT THE GENERAL MEETING
Deloitte
KPMG
2012 2011 2012 2011 DKKm DKKm DKKm DKKm Administrative expenses include fees to the company's auditors appointed by the general meeting in the amount of: Statutory audit
17
10
-
Other assurance engagements
-
1
-
6 -
Tax advisory services
3
2
2
-
Other services
8
6
1
1
28
19
3
7
The Falck Group was audited by KPMG in 2011. A few small foreign subsidiaries are not audited by the parent company's auditors, a foreign business partner of the auditors, or by a recognised, international auditing firm. 6. SPECIAL ITEMS 2012 2011 DKKm DKKm Reversal of provision concerning divestment of Chr. Hansen in 2005. In connection with the divestment, the Group assumed the usual representations and warranties towards the buyer in the amount of DKK 140 million and other recognised specific debt obligations of DKK 15 million. On expiry of the warranty period at the end of July 2012, the obligations were no longer considered to be in force.
155
-
Amortisation of contractual customer relationships, Falck Group
(515)
(242)
Amortisation of contractual customer relationships, Falck Group associate
-
(69)
Transaction costs associated with acquisitions
(36)
(51)
Special items
(396)
(362)
7. NET FINANCIAL ITEMS 2012 2011 DKKm DKKm Financial items, Lundbeckfond Invest, net, are specified as follows: Financial income Interest on financial assets measured at amortised cost
10
5
Gains on financial instruments at fair value through profit or loss
1,467
517 63
Gains on financial instruments included in the trading portfolio
13
Exchange gains
26
53
Total financial income
1,516
638
CONSOLIDATED FINANCIAL STATEMENTS
65
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 7 7. NET FINANCIAL ITEMS - CONTINUED
2012 2011 DKKm DKKm Financial expenses Other financial expenses
2
2
Losses on financial instruments at fair value through profit or loss
92
568
Losses on financial instruments included in the trading portfolio
131
130
Exchange losses
5
5
Total financial expenses
230
705
Net financials
1,286
(67)
Financial items, Lundbeckfond Ventures, net, are specified as follows: Financial income Gains on financial instruments at fair value through profit or loss
22
Other financial income
-
2 2
Total financial income
22
4
Financial expenses Losses on financial instruments at fair value through profit or loss
100
67
Total financial expenses
100
67
Net financials
(78)
(63)
Financial items, subsidiaries, net, are specified as follows: Financial income Interest on financial assets measured at amortised cost
31
Gains on financial assets at fair value through profit or loss
16
58 21
Gains on available-for-sale financial assets, incl. dividends
-
14
Gains on financial instruments included in the trading portfolio
4
3
Exchange gains
99
71
(transferred from comprehensive income)"
40
4
Other financial income
1
-
Total financial income
191
171
"Realised exchange gains concerning additions to net investments in foreign subsidiaries
Financial expenses Interest on financial liabilities measured at amortised cost
375
Debt restructuring costs
-
253 15
Other financial expenses
41
25
Losses on available-for-sale financial assets
-
3
Losses on financial instruments at fair value through profit or loss
7
3
Losses on financial instruments included in the trading portfolio
4
1
Interest component, discounted liabilities
4
2
Exchange losses
141
89
"Realised exchange losses concerning additions to net investments in foreign subsidiaries (transferred from comprehensive income)"
-
24
Total financial expenses
572
415
Net financials
(381)
(244)
At 31 December 2012, the Group recorded a net result on available-for-sale financial assets of DKK 0 million (net gain of DKK 11 million in 2011). The net gain on financial instruments measured at fair value through profit or loss amounted to DKK 1,290 million at 31 December 2012 (net loss of DKK 119 million in 2011). The net loss on financial instruments included in the trading portfolio amounted to DKK 118 million (net loss of DKK 65 million in 2011), and the net exchange gain, including realised net exchange loss transferred from other comprehensive income, amounted to DKK 19 million in 2012 (net gain of DKK 10 million in 2011).
66
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 8
8. TAX ON PROFIT FOR THE YEAR 2012 2011 DKKm DKKm Current tax
598
1,057
Prior-year adjustment, current tax
(15)
(20)
Prior-year adjustment, deferred tax
56
38
Change of deferred tax for the year
(47)
44
Total tax for the year
592
1,119
Tax for the year is composed of: Tax on profit for the year
593
Tax on other comprehensive income
(1)
1,100 19
Total tax for the year
592
1,119
Tax on other comprehensive income is specified as follows: Currency translation concerning additions to net investments in foreign subsidiaries
2
41
Realised exchange gains/losses, additions to net investments in foreign subsidiaries (transferred to profit and loss)
(10)
5
Adjustment, deferred exchange gains/losses, hedging
(19)
21
Exchange gains/losses, hedging (transferred to the hedged items)
36
(37)
Value adjustment of interest hedging instruments
(8)
(11)
Fair value adjustment of available-for-sale financial assets
(2)
-
Tax on other comprehensive income
(1)
19
Explanation of the Group's effective tax rate relative to the Danish tax rate 2012
DKKm
%
Profit before tax
3,160
Calculated tax, 25%
790
25.0
Tax effect of: Differences in the tax rates of foreign subsidiaries from the Danish tax rate of 25%
(20)
Non-deductible expenses/non-taxable income and other permanent differences
96
(0.6) 3.1
Research and development activities (tax credits)
(30)
(1.0)
Prior-year tax adjustments etc., total effect on operations
38
1.2
Non-deductible losses/non-taxable gains on shares and other equity investments
19
0.6
Unrecognised timing differences on securities recognised at fair value through profit or loss
1
0.0
Deduction for grants
(307)
(9.7)
Other taxes and other adjustments
6
0.2
Effective tax for the year
593
18.8
Explanation of the Group's effective tax rate relative to the Danish tax rate 2011
DKKm
%
Profit before tax
3,529
Calculated tax, 25%
882
25.0
Tax effect of: Differences in the tax rates of foreign subsidiaries from the Danish tax rate of 25%
(53)
Non-deductible expenses/non-taxable income and other permanent differences
123
3.5
Research and development activities (tax credits)
(77)
(2.2)
Prior-year tax adjustments etc., total effect on operations
24
0.7
Non-deductible losses/non-taxable gains on shares and other equity investments
8
0.2
Unrecognised timing differences on securities recognised at fair value through profit or loss
(2)
(0.1)
Change in valuation of net tax assets
228
Deduction for grants
(48)
(1.5)
6.5 (1.4)
Other taxes and other adjustments
15
0.5
Effective tax for the year
1,100
31.2
CONSOLIDATED FINANCIAL STATEMENTS
67
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 9 - 10
9. GRANTS FOR THE YEAR 2012 2011
DKKm DKKm Biomedical sciences projects
175
Natural sciences projects
164
25
26
Teaching and communicating science
23
13
Fellowships 80 70 Grete Lundbeck European Brain Research Foundation
15
Talent prizes
-
1
1
Travel grants for conferences and similar activities
4
4
Research abroad
18
16
Visiting professorships
3
3
Other
2
2
Regular and personal grants
346
299
EMBL 60 RESCueH 44 MEPRICA
16
-
Psychiatric research (iPSYCH)
-
121
Centres of Excellence
-
84
Strategic grants
120
205
Grants for the year, gross
466
504
Descendants
-
-
Reversed grants/repayments (6) (6) Grants for the year, net
460
498
Emerge activities
16
-
Grants authorised during the year, including Emerge activities, gross
482
504
10. INTANGIBLE ASSETS
Contractual
Patent and
customer Product- Cost at 1 January 2012 Currency translation Reclassification Addition on acquisitions Adjustment of put options and contingent consideration Additions
Goodwill relationes etc.
Other
and intangible Ongoing
rights license rights
assets
projects
Total
DKKm DKKm DKKm DKKm DKKm DKKm DKKm 9,753
3,254
5,582
687
1,545
64
(3)
16
(17)
1
8
-
20,885 5
(1)
-
(1) 505
-
-
-
-
391
114
-
-
-
-
33
-
-
-
-
-
33
-
-
1,295
15
190
39
1,539
(28)
(55)
(83)
Disposals
-
-
-
-
Adjustment, acquisitions in 2011
4
16
-
-
-
-
20
10,178
3,400
6,860
703
1,714
48
22,903
Cost at 31 December 2012
Amortisation and impairment at 1 January 2012
(20)
(249)
(1,312)
(1,159)
-
(3,235)
(2)
-
4
-
Reclassification
-
Amortisation
-
Impairment
-
-
Amortisation and impairment, end of year
-
-
-
-
(20)
(766)
(1,898)
(531)
(1,284)
Amortisation and impairment at 31 December 2012
(2)
(495)
Currency translation
8
-
-
-
-
1
-
1
(515)
(579)
(28)
(146)
-
(1,268)
(15)
(8)
-
-
(23)
22
-
22
-
(4,499)
Carrying amount at 31 December 2012
10,158
2,634
4,962
172
430
48
18,404
Carrying amount at 31 December 2011
9,733
3,005
4,270
192
386
64
17,650
68
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 10 10. INTANGIBLE ASSETS – CONTINUED
Goodwill impairment test The management of H. Lundbeck A/S, Falck Holding A/S and ALK-Abelló A/S have tested intangible assets for impairment. Based on the impairment tests performed in 2012, it was concluded that there is no need for writing down the goodwill. Methodology In the impairment test, the discounted expected future cash flows (value in use) pursuant to the most recent management-approved budgets for each CGU are compared to the carrying amounts of goodwill and other net assets. The future cash flows are based on specific business plans for the next 1-8 years with due consideration to patent expiry. The key parameters in the calculation of the value in use are revenue, earnings, working capital, discount factor and the preconditions for the terminal period. Negative growth is projected in the H. Lundbeck Group in the terminal period due to patent expiry, and positive growth of 2.5-3.5% (2-3% in 2011) is projected for the Falck Group and 2% (2% in 2011) for the ALK Group. The calculation of the value in use for the H. Lundbeck Group, excl. Lundbeck Inc., is based on a discount rate of 11.6% (9.7% in 2011). For Lundbeck Inc. a discount rate of 13.6% (11.8% in 2011) was used. For the Falck Group, a discount rate of 10% (10% in 2011) has been used for emergency, assistance and healthcare activities, while a discount rate of 11% (11% in 2011) was used for training services. For the ALK Group, a discount factor of 12% was used (12% in 2011). The discount rate is before tax, and the result of [WACC/(1 – tax rate)] and the applied cash flows are also pre-tax figures. Impairment of other intangible assets In 2012, H. Lundbeck wrote down patent rights and other rights by a total amount of DKK 23 million (DKK 142 million in 2011). The recoverable amount was calculated on the basis of management’s re-assessed estimate of the value in use of the assets. Product rights Of product rights, DKK 2,534 million (DKK 2,179 million in 2011) are products not yet commercialised.
Contractual
Patent and
customer Product-
Goodwill relationes etc.
Other
and intangible Ongoing
rights license rights
assets
projects
Total
DKKm DKKm DKKm DKKm DKKm DKKm DKKm
Cost at 1 January 2011
4,317
-
4,570
683
1,342
127
11,039
179
34
58
-
1
-
272
-
-
75
-
1
(75)
5,256
3,220
-
-
100
Adjustment of put options and contingent consideration
1
-
-
-
-
-
1
Additions
-
-
1,143
4
104
34
1,285
-
-
(264)
(3)
(22)
9,753
3,254
Currency translation Reclassification Addition on acquisitions
Disposals Cost at 31 December 2011
5,582
- 687
1,545
-
64
1 8,576
(289) 20,885
Amortisation and impairment at 1 January 2011 Currency translation
(19) (1)
-
(979)
(7)
(31)
(360)
-
(2,321)
-
(963) -
-
(39)
Reclassification
-
-
-
-
(1)
-
(1)
Amortisation
-
(242)
(435)
(40)
(151)
-
(868)
Impairment
-
-
(95)
(47)
-
(142)
Amortisation and impairment, end of year
-
-
133
-
3
-
136
(20)
(249)
(1,312)
(495)
(1,159)
-
(3,235)
Amortisation and impairment at 31 December 2011
-
Carrying amount at 31 December 2011
9,733
3,005
4,270
192
386
64
17,650
Carrying amount at 31 December 2010
4,298
-
3,591
323
379
127
8,718
CONSOLIDATED FINANCIAL STATEMENTS
69
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 11
11. PROPERTY, PLANT AND EQUIPMENT Other fixtures Prepayments
Land and
buildings
Plant and machinery
and fittings, tools and
Leasehold
and assets under
equipment improvements construction
Total
DKKm DKKm DKKm DKKm DKKm DKKm
Cost at 1 January 2012
5,219
2,158
2,076
62
788
Currency translation
(9)
-
14
4
(1)
8
Reclassification
134
105
38
-
(280)
(3)
Addition on acquisitions
10,303
14
-
46
-
-
60
201
146
429
9
408
1,193
Disposals
(48)
(472)
(274)
-
(251)
(1,045)
Cost at 31 December 2012
5,511
1,937
2,329
75
664
10,516
Additions
(2,039)
(1,577)
(982)
(4)
-
Currency translation
Depreciation and impairment at 1 January 2012
5
-
(3)
-
-
2
Reclassification
-
-
(1)
-
-
(1)
(177)
(127)
(356)
(13)
-
(673)
(38)
(1)
-
-
-
(39)
226
-
-
709
-
(4,604)
Depreciation Depreciation for the year Depreciation and impairment on disposals Depreciation and impairment at 31 December 2012
20 (2,229)
463 (1,242)
(1,116)
(17)
(4,602)
Carrying amount at 31 December 2012
3,282
695
1,213
58
664
5,912
Carrying amount at 31 December 2011
3,180
581
1,094
58
788
5,701
In the carrying amount at 31 December 2012, financial leasing is included in the amount of
148
24
172
Carrying amount of property, plant and equipment provided as loan collateral
2,312
44
2,356
Cost at 1 January 2011
4,472
2,024
1,211
-
637
8,344
Currency translation
17
14
2
1
4
38
Reclassification
16
13
3
-
(33)
712
-
891
60
Addition on acquisitions
-
(1) 1,663
Additions
167
152
185
8
409
921
Disposals
(165)
(45)
(216)
(7)
(229)
(662)
Cost at 31 December 2011
5,219
2,158
2,076
62
788
10,303
Depreciation and impairment at 1 January 2011
(1,687)
(1,481)
(908)
-
-
(4,076)
(18)
(13)
(5)
-
-
(36)
-
1
-
-
-
1
Depreciation
(198)
(118)
(240)
(7)
-
(563)
Depreciation for the year
(271)
(5)
(15)
-
-
(291)
135
39
186
3
-
363
(1,577)
(982)
-
(4,602)
Currency translation Reclassification
Depreciation and impairment on disposals Depreciation and impairment at 31 December 2011
(2,039)
(4)
Carrying amount at 31 December 2011
3,180
581
1,094
58
788
5,701
Carrying amount at 31 December 2010
2,785
543
303
-
637
4,268
In the carrying amount at 31 December 2011, financial leasing is included in the amount of
40
12
156
208
Carrying amount of property, plant and equipment provided as loan collateral
70
2,305
CONSOLIDATED FINANCIAL STATEMENTS
11
2,316
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 12
12. FINANCIAL ASSETS AND FINANCIAL RISKS The Group's financial investments classified as financial assets at fair value through profit or loss primarily relate to Lundbeckfond Invest's investments. These investments are made on the basis of an investment policy approved by the Board of Directors. The strategy aims for an appropriate diversification of investments on different asset classes and geographical markets in order to achieve an appropriate diversification of interest rate, exchange rate, credit and equity risks on the financial investments. The purpose is to reduce the risk of losses but also to retain the prospect of gaining a long-term return on the investments. Credit risks Credit risks concerning the Group's financial investments primarily relate to investment in bonds and other unlisted foundations investing in loans to businesses. In order to limit the credit risk, a large proportion of this asset class has been invested in Danish government and mortgage bonds with a high credit rating. To achieve a higher return, the Group also invests in corporate bonds. Equity risks Equity risks concerns the Group's holding of listed and unlisted shares, including private equity funds as part of the Group's investment operations. Most of these investments are placed in listed shares. To limit the risk of losses on these shares, they are diversified on different geographical regions and sectors in accordance with the applicable investment policy. Derivative financial instruments are used to manage the equity risk. Other things being equal, a 10% drop/increase in equity prices would reduce/increase profits by DKK 541 million and DKK 477 million (+/- DKK 473 million in 2011). For further information on risks concerning the Group's financial investments, see note 18: Cash resources and note 29: Financial risks and financial instruments.
Financial
assets
assets
at fair value
at fair value
through profit
assets
through profit
or loss,
at fair value
or loss, Lundbeckfond
through profit
Available-for-
or loss,
sale financial
total
assets
Lundbeckfond
Financial Financial
Ventures and
Invest Emerge
Other financial assets Other receivables
DKKm DKKm DKKm DKKm DKKm Carrying amount at 1 January 2012
9,655
267
9,922
119
Reclassification to securities, current assets, 1 January 2012
(138)
-
(138)
-
-
Carrying amount at 1 January 2012, adjusted
9,517
267
9,784
119
57
7,883
330
Additions
8,213
68 (172)
57
17
Disposals
(7,412)
-
(7,412)
(17)
Value adjustments, year-end
870
(78)
792
123
Reclassification to securities, current assets
66
-
66
-
-
Carrying amount at 31 December 2012
10,924
519
11,443
138
56
(1)
Carrying amount at 1 January 2011
10,186
258
10,444
43
Reclassification to securities, current assets, 1 January 2011
(442)
-
(442)
-
-
Carrying amount at 1 January 2011, adjusted
9,744
258
10,002
43
63
Additions
5,866
73
5,939
89
7
Disposals
(6,098)
-
(6,098)
(11)
(14)
Value adjustments, year-end
(299)
(64)
(363)
(2)
1
Reclassification to securities, current assets
304
-
304
-
-
Carrying amount at 31 December 2011
9,517
267
9,784
119
57
CONSOLIDATED FINANCIAL STATEMENTS
63
71
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 12 12. FINANCIAL ASSETS AND FINANCIAL RISKS – CONTINUED
Fair value hierarchy for financial assets and financial liabilities, measured at fair value Level 1 includes financial assets for which the fair value is measured on the basis of quoted prices (unadjusted) in active markets for identical assets. Level 2 includes financial assets and financial liabilities for which the fair value is measured on the basis of directly or indirectly observable inputs other than the quoted prices included in level 1. Level 3 includes financial assets for which the fair value is measured on the basis of valuation methods which include inputs not based on observable market data. Financial assets and liabilities measured at fair value
Level 1
Level 2
Level 3
31 December 2012 DKKm DKKm DKKm Financial assets Financial assets at fair value through profit or loss Danish mortgage and government bonds
3,880
-
-
Credit bonds
2,198
74
-
Listed equities
4,813
-
-
Property companies
320
-
162
Lundbeckfond Ventures og Emerge
222
-
297
Private equity funds
63
27
757
Other unlisted funds
22
108
169
Available-for-sale financial assets
108
-
30
Derivative financial instruments
-
37
-
Financial assets at fair value
11,626
246
1,415
Financial liabilities Derivative financial instruments
-
274
-
Financial liabilities at fair value
-
274
-
Financial assets and liabilities measured at fair value
Level 1
Level 2
Level 3
31 December 2011 DKKm DKKm DKKm Financial assets Financial assets at fair value through profit or loss Danish mortgage and government bonds
5,704
-
Credit bonds
1,029
38
-
Listed equities
3,579
-
-
Property companies
286
-
85
Lundbeckfond Ventures og Emerge
117
-
150
Private equity funds
36
11
788
Other unlisted funds
39
141
95
Available-for-sale financial assets
65
-
54
Derivative financial instruments
-
16
-
Financial assets at fair value
10,855
206
1,172
Financial liabilities Derivative financial instruments
-
212
-
Financial liabilities at fair value
-
212
-
2012 2011 DKKm DKKm Financial assets measured at fair value according to level 3 Carrying amount at 1 January
1,172
1,003
Additions
457
248
Disposals (173) (136) Reclassification, from level 3
(71)
1
Fair value adjustment
30
56
Carrying amount at 31 December
1,415
1,172
72
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 13 - 14
13. INVESTMENTS IN ASSOCIATES 2012 2011 DKKm DKKm Cost at 1 January
16
-
Additions
-
2,850
Additions through acquisitions
2
14
Reclassification
-
(2,850)
Adjustment regarding prior-year acquisitions
-
2
Cost at 31 December
18
16
Value adjustments and impairment at 1 January
(1)
-
Share of profit for the year after tax before special items
-
100
Share of special items
-
(69)
Share of other comprehensive income
-
(18)
Share of other changes in equity
-
(3)
Reversed impairment on disposals
-
(11)
Accumulated value adjustments and impairment at 31 December
(1)
(1)
Carrying amount at 31 December
17
15
Please see the group overview for information about registered office and ownership interests in associates
2012 / 31
2011 / 31
December 2012 December 2011 DKKm DKKm Summarised financial data for associates Revenue
57
Profit for the year
3
23 -
Total assets
350
320
Total provisions
349
320
14. DEFERRED TAX
Temporary differences between the carrying amount and the tax base
Adjustment of
Addition on
Balance at
Currency
deferred tax,
acqusition of
during
Balance at
1 January
translation
1 January
activities
the year,
31 December
Movements
DKKm DKKm DKKm DKKm DKKm DKKm
2012 Non-current assets
7,264
(19)
72
116
479
7,912
Current assets
(663)
8
18
-
158
(479)
69
Other Provisions in subsidiaries Tax loss carry-forwards etc. Total
18
(43)
(16)
-
-
(614)
1
30
6,040
8
77
- - - 116
(386)
(342)
316
300
(439)
(1,022)
128
6,369
Deferred (tax assets)/tax liabilities
1,579
12
39
29
(40)
1,619
Research and development activities (tax credits)
(191)
3
17
-
(6)
(177)
1,388
15
56
29
(46)
Deferred (tax assets)/tax liabilities
1,442
CONSOLIDATED FINANCIAL STATEMENTS
73
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 14 14. DEFERRED TAX – CONTINUED
Adjustment of
Addition on
Balance at
Currency
deferred tax,
acqusition of
during
Balance at
1 January
translation
1 January
activities
the year,
31 December
Movements
DKKm DKKm DKKm DKKm DKKm DKKm
2011 Non-current assets
3,856
59
193
3,700
(544)
7,264
Current assets
(777)
13
31
-
70
(663)
32
Other
(10)
(119)
40
126
69
(52)
2
(1)
-
35
(16)
Tax loss carry-forwards etc.
(821)
(8)
76
(148)
Total
2,238
56
180
3,592
Provisions in subsidiaries
287 (26)
(614) 6,040
Deferred (tax assets)/tax liabilities Research and development activities (tax credits) Deferred (tax assets)/tax liabilities
609
(11)
38
898
45
(186)
(4)
-
-
(1)
1,579 (191)
423
(15)
38
898
44
1,388
2012 2011 DKKm DKKm Deferred tax assets concern the following items: Non-current assets
152
189
Current assets
187
194
Provisions and payables
64
79
Other
21
195
Provisions in subsidiaries
222
15
Tax value of tax loss carry-forwards etc.
363
211
Research and development activities (tax credits)
177
191
Offset within legal tax entities and jurisdictions
(623)
(591)
563
483
Deferred tax liabilities concern the following items: Non-current assets
2,295
2,175
Current assets
59
60
Provisions and payables
51
31
Other
224
183
Provisions in subsidiaries
-
13
Tax value of tax loss carry-forwards etc.
(1)
-
Offset within legal tax entities and jurisdictions
(623)
(591)
2,005
1,871
Net
1,442
1,388
Of the recognised deferred tax assets, DKK 541 million (DKK 402 million in 2011) related to tax losses etc. and research and development activities (tax credits) to be carried forward. Utilisation of these is based on a future positive income that exceeds realisation of the deferred tax liabilities. The recognition of tax losses is based on estimates of the expected earnings and taxable income in the loss-making entities, supported by reports by external analysts, when available. 2012 2011 DKKm DKKm Unrecognised deferred tax assets: Unrecognised deferred tax assets at 1 January
323
94
Currency translation
(1)
1
Prior-year adjustments
-
1
Additions
11
261
Utilised (30) (34) Unrecognised deferred tax assets at 31 December
74
CONSOLIDATED FINANCIAL STATEMENTS
303
323
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 15 - 16
15. INVENTORIES 2012 2011 DKKm DKKm Raw materials and consumables
248
243
Work in progress
503
480
Manufactured goods and goods for resale
1,350
1,262
Total
2,101
1,985
Indirect costs of production
350
346
Impairment loss for the year
40
23
Inventories calculated at net realisable value
4
2
The total cost of goods sold is included in cost of sales in the amount of
2,445
2,377
16. TRADE RECEIVABLES AND OTHER RECEIVABLES 2012 2011 DKKm DKKm Trade receivables and other receivables may be specified as follows: Trade receivables
4,075
3,995
Other receivables
778
716
Receivables from associates
67
55
Prepayments
481
367
5,401
5,133
Trade receivables Receivables
4,322
4,100
Impairment (247) (105) Total
4,075
3,995
Due dates of trade receivables Not due
3,206
2,976
Overdue by more than 1 month and up to 6 months
943
991
Overdue by more than 6 month and up to 12 months
72
61
Overdue by more than 12 months
101
72
Total
4,322
4,100
Development in writedowns of trade receivables Writedowns at 1 January
105
27
Actual writedowns
(35)
(42)
Reversed, unrealised writedowns
(8)
(1)
Change in writedowns
185
121
Writedowns at 31 December
247
105
Specification of other receivables by due date Not due
766
Overdue by up to 3 months
8
697 6
Overdue by more than 3 month and up to 6 months
-
4
Overdue by more than 6 month and up to 12 months
-
8
Overdue by more than 12 months
4
1
Total
778
716
As no losses are expected on other receivables, no writedowns have been made.
CONSOLIDATED FINANCIAL STATEMENTS
75
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 16 - 17 - 18 16. TRADE RECEIVABLES AND OTHER RECEIVABLES – CONTINUED
Credit risks The Group's products are sold primarily to distributors of pharmaceuticals and hospitals and services to public authorities, other large customers and small subscription receivables from individual customers. Historically, the losses sustained have been insignificant. This was also the case in 2012, when there was a decline in losses incurred. However, the change in writedowns reflects a potentially higher loss in 2012. The Group has no particular customer concentration and no significant reliance on specific customers. For the Falck Group, the large customers are to a great extent represented by public authorities. The H. Lundbeck, ALK and Falck groups have all defined internal procedures to be followed in connection with the establishment of new customer relationships and changes to existing relationships. The purpose of these procedures is to ensure that the risk of losses is reduced to the extent possible. Market risks The pharmaceutical market is characterised by the aim of the authorities to reduce or cap healthcare costs. Market changes such as price reductions may have a considerable impact on the earnings potential of pharmaceuticals. In recent years, the subsidiaries have experienced significant price reductions in several countries in Europe, where higher debts and rising unemployment have compelled the governments to identify savings in the public budgets. Furthermore, the earlier market access for generic pharmaceuticals has eroded earnings from the H. Lundbeck Group's products in certain markets, where H. Lundbeck had expected exclusivity to protect the value of the large investments it had made some years back. The Group expects that the uncertainty about public debts and developments in unemployment and the resulting focus on public budgets will continue into 2013 and 2014. The Group is monitoring developments in the European economies and also developments in trade receivables in order to reduce the risk of losses to the best possible extent.
17. INCOME TAX 2012 2011 DKKm DKKm Income tax payable/(income tax receivable) at 1 January
110
(124)
Currency translation
(28)
34
Tax payable on acquisition
-
72
Prior-year adjustments
(15)
(20)
Tax payable on profit for the year
599
1,038
Tax on other comprehensive income
(1)
19
Income tax paid for the year
(989)
(989)
Tax paid/received in respect of prior years
(146)
80
Income tax payable/(income tax receivable) at 31 December
(470)
110
Income tax is specified as follows: Income tax receivable
(538)
(134)
Income tax payable
68
244
Income tax payable/(income tax receivable)
(470)
110
18. CASH RESOURCES 2012 2011 DKKm DKKm Fixed-term deposits
1,708
1,680
Other cash resources
2,269
2,305
Cash at 31 December
3,977
3,985
Securities with a maturity of less than 3 months
444
744
Securities with a maturity of more than 3 months
1,225
1,571
Securities at 31 December
1,669
2,315
Cash and securities at 31 December
5,646
6,300
76
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 18 - 19 - 20 18. CASH RESOURCES – CONTINUED
DKK 107 million (DKK 95 million in 2011) of the Group's cash and securities is held by a Swedish subsidiary comprised by Swedish insurance rules and, by extension, governed by rules on solvency requirements. The securities portfolio is classified as financial assets measured at fair value through profit or loss. Liquidity and credit risk and capital structure With the present capital structure, the Group is well-consolidated. The Group aims to retain adequate cash resources to support business development and flexibility in chase of changes to the market situation, potential acquisition activities and product in-licensing opportunities. This is achieved through a combination of liquidity management, ultra-liquid assets and guaranteed and unguaranteed credit facilities. The capital structure is considered appropriate relative to the Group's strategic plans. The credit risk of cash and derivatives (forward exchange contracts, currency options, interest-rate options and share options) is limited because Lundbeck deals only with banks with a high credit rating. To further limit the risk of losses, internal limits have been defined for the credit exposure accepted towards the banks with which the Group collaborates, and the Group aims to maintain counterparty diversification to avoid material concentration at individual counterparties. The Group also uses collateral agreements (e.g. ISDA and GRMA) and exchange of collateral with counterparties with which the Group has hedging business. Certain of the Falck Group’s loans, including the debt of Falck Holding A/S, are subject to certain loan covenants, and the Falck Group continuously monitors whether the covenants are observed. All loan covenants were observed in 2012. 19. ASSETS HELD FOR SALE 2012 2011 DKKm DKKm Assets and liabilities concerning assets held for sale may be specified in the following main groups: Receivables
-
Other non-current assets
-
92 6
Total assets held for sale
-
98
Non-current liabilities
-
Current liabilities
-
23 75
Total liabilities relating to assets held for sale
-
98
20. CAPITAL BASE The Foundation's capital base is DKK 2,270 million. The present charter of the Foundation was approved by the Board of Directors on 2 May 2012. The Civil Affairs Agency acts as supervisory authority. Of the Foundation's profit before tax less non-distributed dividends in the subsidiaries and associates, at least 20% must first be allocated to the capital base. 2012 2011
Note
DKKm
DKKm
Change in capital base during the period 1 January 2007 - 31 December 2012 The capital base at 1 January 2007 amounted to:
1,650
1,650
2007 Capital base increased by
100
100
2009 Capital base increased by
150
150
2010 Capital base increased by
150
150
2011 Capital base increased by
175
175
2012 Capital base increased by
45
-
Capital base, 31 December
2,270
2,225
9
Grants, net
460
498
CONSOLIDATED FINANCIAL STATEMENTS
77
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 21 - 22
21. OTHER RESERVES 2012 2011 DKKm DKKm Currency translation reserve Balance at 1 January
(94)
(291)
Currency translation for the year concerning foreign subsidiaries and additions to net investments in foreign subsidiaries
(85)
243
Tax in relation hereto
13
(46)
Balance at 31 December
(166)
(94)
Hedging reserve Balance at 1 January
(82)
Adjustment, deferred exchange gains/losses, hedging, recognised in other comprehensive income
(67)
(5) 64
Exchange gains/losses, hedging, transferred to revenue
130
(126)
Exchange gains/losses, trading, transferred to net financials (transferred from hedging)
1
-
Value adjustment of interest hedging instruments
(32)
(56)
Repayment of interest hedging instruments
-
15
Tax in relation hereto
(9)
26
Balance at 31 December
(59)
(82)
Reserve for fair value adjustment of available-for-sale financial assets Fair value adjustment at 1 January
(4)
Fair value adjustment
123
2 (2)
Realised gain on disposal
(115)
(7)
Prolonged impairment losses recognised in the income statement.
-
3
Tax in relation hereto
-
-
Fair value adjustment at 31 December
4
(4)
Total other reserves
(221)
(180)
22. MINORITY INTERESTS 2012 2011 DKKm DKKm Minority interests at 1 January
3,781
4,571
Share of profit/loss for the year
501
815
Share of other comprehensive income for the year
(11)
28
Share of other capital movements
21
12
Dividend (245) (252) Addition on acquisition of Falck
-
(1,329)
Buyback of shares from minority interests
(115)
(52)
Change in minority interests
-
2
Adjustment of provision for acquisition of minority interests
(37)
(14)
Minority interests at 31 December
3,895
3,781
Of dividend paid to minority interests, DKK 24 million was recognised in provisions for acquisition of minority interests in 2012.
78
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 23
23. PROVISIONS 2012 2011
Note DKKm DKKm
Provisions can be specified as follows: Pensions and similar obligations
23.1
473
361
Liabilities relating to acquisitions and minority interests
23.2
711
555
Other provisions
23.3
507
408
1,691
1,324
Provisions break down as follows: Long-term
1,245
Short-term
446
1,045 279
1,691
1,324
23.1 PENSIONS AND SIMILAR OBLIGATIONS The majority of the employees of the Group are covered by pension plans paid for by the companies of the Group. The nature of the plans varies according to regulatory requirements, tax rules and economic conditions in the countries in which the employees are employed. A summary of the most important plans is given below. Defined contribution plans For defined contribution plans, the employer undertakes to pay a defined contribution (e.g. a fixed amount or a fixed percentage of the pay). Under a defined contribution plan, the employees will usually bear the risk related to future developments in interest and inflation rates, mortality and disability etc. The cost of defined contribution plans, representing contributions to the plans, totalled DKK 551 million in 2012 (DKK 373 million in 2011). Defined benefit plans For defined benefit plans, the employer undertakes to pay a defined benefit (e.g. a retirement pension at a fixed amount or a fixed percentage of the employee’s final salary). Under a defined benefit plan, the company usually bears the risk relating to future developments in interest and inflation rates etc. For defined benefit plans, the present value of future benefits, which the company is liable to pay under the plan, is computed using actuarial principles. The computation of present value is based on assumptions about discount rates, changes in pay rates and pensions, investment yield, staff resignation rates, mortality, disability and other factors. Present value is computed exclusively for the benefits to which the employees have earned entitlement through their employment with the company. Actuarial gains and losses are recognised in the income statement as they are calculated. 2012 2011 2010 DKKm DKKm DKKm Pensions and similar obligations Present value of funded pension obligations
423
345
283
Fair value of plan assets
(311)
(279)
(233)
Funded pension obligations, net
112
66
50
Present value of unfunded pension obligations
260
190
186
Provisions for pensions, 31 December
372
256
236
Other pension-like obligations
100
105
92
Provisions for pensions and pension-like obligations, 31 December
472
361
328
Pension assets/liabilities and similar obligations break down as follows: Non-current liabilities
466
342
316
Current liabilities
7
19
12
Pension obligations
473
361
328
Plan assets Pension assets/liabilities and similar obligations 31 December, net
CONSOLIDATED FINANCIAL STATEMENTS
(1)
-
-
472
361
328
79
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 23 23.1 PENSIONS AND SIMILAR OBLIGATIONS – CONTINUED
The actuarial assumptions applied in calculating pension obligations concerning the defined benefit plans vary from one country to the next and are based on local economic and social conditions. The following assumptions were applied: 2012 2011 2010 Discount rate 1.8%-7.0% 2.7%-8.0% 2.7%-8.5% Pay rate increase 2.0%-5.5% 2.0%-5.5% 2.0%-5.5% Pension increase 2.2%-2.7% 1.3%-2.9% 1.3%-3.3% Age-weighted staff resignation rate
0%-8.0%
0%-8%
0%-8%
Expected return on plan assets
1.8%-7.0%
2.5%-8.0%
2.5%-8.5%
2012 2011 % distribution % distribution The fair value of the plan assets breaks down as follows: Shares
7
9
Bonds
17
33
Property
4
4
Insurance contracts
70
52
Other assets
2
2
Total
100
100
2012 2011 DKKm DKKm Change in present value of funded pension obligations Present value of funded pension obligations at 1 January
345
283
Addition on acquisitions
-
24
Currency translation
8
8
Pension expenses
12
12
Interest expenses relating to the obligations
15
15
Actuarial (gains)/losses
49
10
Disbursements (8) (6) Employee contributions
2
2
Settlement
-
(3)
Present value of funded pension obligations at 31 December
423
345
Change in fair value of plan assets Fair value of plan assets 1 January
279
233
Addition on acquisitions
-
26
Currency translation
8
6
Expected return on plan assets
12
12
Actuarial (gains)/losses
1
(3)
Payments
18
16
Disbursements (9) (10) Employee contributions
2
2
Settlement
-
(3)
Fair value of plan assets 31 December
311
279
Realised return on plan assets
80
CONSOLIDATED FINANCIAL STATEMENTS
5
6
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 23 23.1 PENSIONS AND SIMILAR OBLIGATIONS – CONTINUED
2012 2011
DKKm DKKm Change in present value of unfunded pension obligations Present value of unfunded pension obligations at 1 January
190
Currency translation
1
186 -
Pension expenses
7
7
Interest expenses relating to the obligations
9
7
Actuarial (gains)/losses
65
(7)
Disbursements (3) (3) Plan changes
(9)
-
Present value of unfunded pension obligations at 31 December
260
190
Change in obligations concerning defined benefit plan Pension obligations at 1 January
256
Currency translation
1
236 2
Addition on acquisitions
-
(2)
Recognised as expense (change recognised in the income statement)
144
35
Payments (18) (16) Disbursements (2) 1 Plan changes
(9)
-
Pension obligations at 31 December
372
256
Specification of expenses recognised in the income statement Pension expenses
19
19
Interest expenses relating to the obligations
24
22
Expected return on plan assets
(12)
(12)
Actuarial (gains)/losses
113
6
New plan
-
-
Total expenses recognised
144
35
Other pension-like obligations An obligation of DKK 100 million (DKK 105 million in 2011) is recognised in the Group to cover other pension-like obligations, including primarily termination benefits in a number of subsidiaries. The benefit payments are conditional upon specified requirements being met. The amount of pension-like obligations fell by DKK 5 million (an increase of DKK 13 million in 2011). 23.2 LIABILITIES RELATING TO ACQUISITIONS AND MINORITY INTERESTS 2012 2011 DKKm DKKm Liabilities concerning acquisition of minorities
655
Payable considerations and contingent consideration
56
516 39
Liabilities 31 December
711
555
Non-current portion: Liabilities concerning acquisition of minorities
653
Payable considerations and contingent consideration
49
493 19
Non-current portion 31 December
702
512
Current portion: Liabilities concerning acquisition of minorities
2
23
Payable considerations and contingent consideration
7
20
Current portion 31 December
9
43
CONSOLIDATED FINANCIAL STATEMENTS
81
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 23 23.2 LIABILITIES RELATING TO ACQUISITIONS AND MINORITY INTERESTS – CONTINUED
2012 2011 DKKm DKKm Liabilities concerning acquisition of minorities Liabilities, 1 January
516
-
Currency translation
(4)
43
Additions through acquisitions
42
438
Disposals on acquisition of minority interests
(9)
(1)
Interest component, discounted liabilities
4
2
Dividends paid and other adjustments
(15)
-
Adjustments recognised in goodwill relating to business combinations before 1 January 2010
33
1
Adjustments and interest recognised in equity relating to business combinations after 1 January 2012
88
33
Liabilities concerning acquisition of minorities 31 December
655
516
Due dates in respect of acquisition of minorities are expected to be: Within 1 year of the balance sheet date
2
23
Between 1 and 5 years from the balance sheet date
508
374
More than 5 year after the balance sheet date
145
119
Liabilities concerning acquisition of minorities 31 December
655
516
Payable considerations and contingent consideration Liabilities, 1 January
39
-
Additions through acquisitions
39
39
Reassessment of previously recognised earn-outs
(5)
-
Payments during the year
(17)
-
Payable considerations and contingent consideration 31 December
56
39
Due dates in respect of payable considerations and contingent considerations are expected to be: Within 1 year of the balance sheet date
7
20
Between 1 and 5 years from the balance sheet date
49
19
More than 5 year after the balance sheet date
-
-
Liabilities concerning acquisition of minorities 31 December
56
39
23.3 OTHER PROVISIONS 2012 2011 DKKm DKKm Other provisions at 1 January
408
Currency translation
-
496 4
Addition on acquisitions
3
33
Provisions charged
629
51
Provisions used
(228)
(152)
Unused provisions reversed
(305)
(24)
507
408
Other provisions at 31 December break down as follows: Non-current provisions
77
191
Current provisions
430
217
507
408
Other provisions primarily cover H. Lundbeck A/S' expenses for defence of the company’s intellectual property rights, returns and the restructuring of the H. Lundbeck Group's commercial organisation in Europe, the ALK Group's organisational restructuring costs and the Falck Group's pending litigation, an unprofitable lease contract for premises and the Group's obligation to clean up and demolish facilities on leased land.
82
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 24
24. MORTGAGE, BANK, LEASING AND REPO DEBT 2012 2011
Note DKKm DKKm
Mortgage, bank, leasing and repo debt can be specified as follows: Mortgage debt
24.1
2,245
2,263
Bank and leasing debt
24.2
6,783
6,426
Repo debt
24.3
126
97
9,154
8,786
Can be specified as follow: Long-term debt to financial institutions – subsidiaries
8,356
8,405
Short-term debt to financial institutions – subsidiaries
672
284
Repo debt – Lundbeckfond Invest
126
97
9,154
8,786
24.1 MORTGAGE DEBT 2012 2011 DKKm DKKm Mortgage debt by maturity: Within 1 year of the balance sheet date
1
1
Between 1 and 5 years from the balance sheet date
132
7
More than 5 year after the balance sheet date
2,112
2,255
Mortgage debt at 31 December
2,245
2,263
Specification of mortgage debt: Non-current liabilities
2,244
Current liabilities
1
2,262 1
Mortgage debt at 31 December
2,245
2,263
Weighted
Currency/
Expiry
Fixed/floating
average Amortised effective
effective rate
Nominal
cost
value
Fair value
DKKm
DKKm
DKKm
2012 Bond loan, H. Lundbeck
DKK/2035
Floating
2.1%
1,413
1,511
1,571
Bond loan, H. Lundbeck
DKK/2037
Floating
1.2%
437
440
423
Bond loan, H. Lundbeck
DKK/2034
Floating
0.9%
10
10
10
Bond loan, H. Lundbeck
DKK/2034
Floating
0.9%
2
2
2
Bond loan, Falck
DKK/2025
Fixed until 2015
4.5%
358
382
396
Bond loan, ALK
DKK/2028
Fixed
4.0%
25
25
25
Total
2,245
2,370
2,427
2011 Bond loan, H. Lundbeck
DKK/2035
Floating
2.4%
1,411
1,540
1,581
Bond loan, H. Lundbeck
DKK/2037
Floating
1.9%
437
440
420
Bond loan, H. Lundbeck
DKK/2034
Floating
1.5%
10
10
10
Bond loan, H. Lundbeck
DKK/2034
Floating
1.5%
2
2
2
Bond loan, Falck
DKK/2025
Fixed until 2015
4.5%
377
409
415
Bond loan, ALK
DKK/2028
Fixed
4.0%
26
26
26
Total
2,263
2,427
2,454
CONSOLIDATED FINANCIAL STATEMENTS
83
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 24 24. MORTGAGE, BANK, LEASING AND REPO DEBT - CONTINUED
24.2 BANK AND LEASING DEBT 2012 2011 DKKm DKKm Bank and leasing debt by maturity: Within 1 year of the balance sheet date
671
283
Between 1 and 5 years from the balance sheet date
2,527
1,772
More than 5 year after the balance sheet date
3,585
4,371
Bank debt at 31 December
6,783
6,426
Specification of bank and leasing debt: Long-term obligations, loan
6,071
Long-term obligations, leased assets
41
6,088 55
Total long-term
6,112
6,143 257
Short-term obligations, loan
647
Short-term obligations, leased assets
24
26
Total short-term
671
283
Bank debt at 31 December
6,783
6,426
Weighted average Carrying effective amount 2012 Currency
Expiry
Fixed/floating
effective rate
DKKm
4.3%
6,420 56
DKK, EUR, NOK, USD, SEK, UYU, Bank debt, Falck Group other
2013-2018
Floating
EUR, BLR, Leasing debt, Falck Group COP, NOK, USD 2013-2020
Floating
6.1%
Leasing debt, ALK Group EUR, USD
2014-2016
Floating
3.5%
9
Other bank and finance loans, ALK Group EUR
2016
Fixed
3.1%
298
Total 6,783 2011 DKK, EUR, NOK, Bank debt, Falck Group USD, SEK, BRL
2012-2018
Floating
4.2%
6,048 70
EUR, BLR, COP, Leasing debt, Falck Group NOK, USD
2012-2016
Floating
7.1%
Leasing debt, ALK Group EUR
2014-2016
Floating
3.5%
11
Other bank and finance loans, ALK Group EUR
2016
Fixed
3.1%
297
Total 6,426 24.3 REPO DEBT Repo debt in Lundbeckfond Invest of DKK 126 million (DKK 97 million in 2011) falls due on 7 January 2013. The debt carries a fixed rate of interest from the date of conclusion at 0.8% (0.67% in 2011).
84
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 25 - 26 - 27 - 28
25. OTHER PAYABLES
Note
2012 2011 DKKm
DKKm
Employee bonds
19
13
Trade payables
2,388
2,280
Other payables
4,395
3,877
Prepayments
31
1,526
1,639
8,328
7,809
26. ADJUSTMENT FOR NON-CASH OPERATING ITEMS
2012 2011
DKKm DKKm
Depreciation, amortisation and impairment
1,346
Gain on reduction of ownership interest
(115)
1,508 -
Incentive programmes
65
33
Change in pension obligation
61
25
Change in other provisions
253
(102)
Other adjustments
46
25
1,656
1,489
27. WORKING CAPITAL CHANGES
2012 2011
DKKm DKKm
Change in inventories
(113)
(113)
Change in receivables
(220)
(344)
Change in receivables from associates
(6)
(22)
Change in current liabilities
447
502
108
23
28. ACQUISITION OF COMPANIES Fair value on Fair value on acqusition acqusition of other
Total 2012
Total 2011
of Falck
businesses
DKKm
DKKm
DKKm
DKKm
Calculation of acquired net assets and cash consideration: Intangible assets
-
100
100
-
Property, plant and equipment
60
1,663
1,643
20
Cash and cash equivalents
25
980
969
11
Other current assets
82
1,906
1,887
19
Interest-bearing debt
(46)
(4,487)
(4,478)
Current liabilities, provisions etc.
(58)
(3,629)
(3,622)
(7)
Minority interests
-
1,326
1,329
(3)
Net assets acquired
63
Goodwill
391
(2,141)
(2,172)
5,245
5,173
(9)
31 72
Other intangible assets
114
3,231
3,206
25
Deferred tax on intangible assets
(42)
(818)
(812)
(6)
Acquisition cost
526
5,517
5,395
122
CONSOLIDATED FINANCIAL STATEMENTS
85
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 28 28. ACQUISITION OF COMPANIES – CONTINUED
Fair value on Fair value on acqusition acqusition of other
Total 2012
Total 2011
of Falck
businesses
DKKm
DKKm
DKKm
DKKm
Acquisition cost
526
5,517
5,395
122
Provisions for acquisition of minorities
(42)
-
-
-
Acquisition cost exclusive of obligations to buy minority interests
484
5,517
5,395
122
Acquired cash in hand and at bank
(25)
(980)
(969)
(11)
Outstanding consideration
(39)
-
-
-
Consideration relating to prior-year acquisitions
17
-
-
-
Cash consideration
437
4,537
4,426
111
Expensed transaction costs
36
51
24
27
Acquisitions 2012 Name
Principal activity
Date of acquisition
Purchase price
Grupo VL
Emergency
Feb. 2012
113
75%
American Ambulance
Emergency
Sep. 2012
243
96%
Occupational Safety Training
Training
Dec. 2012
61
100%
Other
67
484
Voting share acquired
The transactions were accounted for using the purchase method of accounting. Grupo VL consists of two Spanish ambulance companies that provide non-emergency transportation of patients in Catalonia, Spain. Catalonia is considered attractive to Falck, as the region is among the biggest and richest in Spain. Grupo VL is a medium-sized player on the Spanish market through its position among the Top 10 of Catalonia, where most of its revenues are generated from providing patient transportation for Catalonia. Part of the purchase price has been allocated to customer contracts, while the rest has been allocated to goodwill. Goodwill relates to the development of a strategic platform on the Spanish markets and the personal relations and knowhow of key employees. American Ambulance is a US ambulance company primarily providing non-emergency transportation of patients in the state of Florida. The acquisition of American Ambulance has given Falck an additional presence in the United States. It is expected that the market in Florida has substantial growth potential based on the demography of the population in the state. Part of the purchase price has been allocated to existing customer contracts and the rest to goodwill, which represents the expected value of the future growth potential, the acquired strategic platform and to key employees and their knowledge of operations and the market. Occupational Safety Training is a training company based in Louisiana, USA. The company offers its customers a broad range of services, including safety training, outsourcing of paramedics and safety technicians, etc. The company is operated from two training centres: one in New Iberia, Louisiana, and one in Houston, Texas. The company's customers are mainly offshore oil and gas companies operating in the Gulf of Mexico. The acquisition of Occupational Safety Training strengthens Falck's presence and consolidates Falck's competitive position as a leading provider of offshore training in the market around the Gulf of Mexico. Part of the purchase price has been allocated to the existing customer portfolio and the rest to goodwill, which represents the expected value of the future growth potential and expected synergies.
Acquisitions 2011 Name
Principal activity
Date of acquisition
Falck Holding A/S
Emergency, Assistance,
Healthcare and
Training activities
July 2011
Ambulance services
Aug./Sep. 2011
Purchase price
Voting share acquired
5,395
57.36%
122
100%
Servicio Emergencias Regional (SER) and Kranken-Transport Herzig
86
5,517
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 28 - 29 28. ACQUISITION OF COMPANIES – CONTINUED
The transactions were accounted for using the purchase method of accounting. In July 2011, the Lundbeck Foundation acquired a controlling influence in Falck Holding A/S. through the contribution of the Foundation's holding of Falck A/S shares and the subscription of new shares in Falck Holding A/S. At the same time, Falck Holding A/S acquired additional shares in Falck A/S and now owns 98.8% of Falck A/S and the Falck Group. The investment is consistent with the Foundation's intention to expand its healthcare activities. In August 2011, the Falck Group acquired all the shares in Colombian ambulance service provider SER, which operates in three large cities in Colombia and has a large network of doctors. In addition, in September 2011 the Falck Group acquired all the shares in German company Kranken-Transport Herzig, which operates ambulance services in the German state of North Rhine Westphalia. These acquisitions should be seen as part of the Falck Group's aim to become a global and leading player within their business areas. The cost price paid in connection with the company acquisitions exceeded the fair value of acquired identifiable assets, liabilities and contingent liabilities. According to a preliminary calculation, the positive difference amounts to DKK 463 million. (DKK 7,658 million in 2011). The difference with respect to acquisition of companies represents the value of acquired contractual customer relationships in the amount of DKK 72 million (DKK 2,413 million in 2011) after tax. The remaining difference of DKK 391 million (DKK 5,245 million in 2011) represents goodwill. In connection with acquisitions, an assessment is made of the value of the acquired customer agreements, framework agreements and customer portfolios. The valuation thereof was based on the ”Multi Period Excess Earnings Method (MEEM-method)” in which the value is calculated on the basis of an expected future cash flow. The principal assumptions are expected lives of the existing agreements and portfolios, earnings and contribution for using associated assets and employees. Acquired assets include trade receivables at a fair value of DKK 46 million (DKK 1,116 million in 2011). The contractual gross receivable is DKK 50 million (DKK 1,234 million in 2011), of which DKK 4 million (DKK 118 million in 2011) was deemed to be unrecoverable as of the date of takeover. Minority interests in acquisitions in 2012 are recognised at fair value, including the fair value of goodwill related to the minority interest. In 2011, goodwill in relation to acquisition of the Falck Group was recognised exclusive of goodwill relating to minority interests. Business combinations may be adjusted for up to 12 months after the date of acquisition. Of the Group's comprehensive income in 2012 of DKK 2,525 million (DKK 2,522 million in 2011), DKK 13 million (DKK 28 million in 2011) is attributable to results generated by the acquired operations after the acquisition date. Revenue and comprehensive income for the year for the Group in 2012 calculated pro forma as if the acquired enterprises had been acquired on 1 January 2012 amount to DKK 28,996 million (DKK 28,731 million in 2011) and DKK 2,533 million (DKK 2,920 million in 2011), respectively. The amounts stated are exclusive of the effect of the purchase price allocation, which is incorporated in the pre-acquisition balance sheet. 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS The Group's business activities imply that the results and balance sheet may be affected by various financial risks. The management of these risks is decentralised and handled in the H. Lundbeck, ALK and Falck groups and in Lundbeckfond Invest based on policies and guidelines approved by the Board of Directors. See also note 12: Financial assets and financial risks, note 16: Trade receivables and other receivables, and note 18: Cash resources for a description of risks and the management thereof.
29.1 EXCHANGE RATE RISKS Exchange rate risks arise because the Group's expenses and income in different currencies do not match and because the Group's assets and liabilities denominated in foreign currency do not balance, among other things due to Lundbeckfond Invest's investment assets. The management of these risks is focused on risk mitigation. The Group applies various derivative financial instruments to manage these risks. Some of these instruments are classified as hedging instruments and meet the accounting criteria for hedging future cash flows. Changes in the fair value of these contracts are recognised in the statement of comprehensive income under other comprehensive income as they arise and – on invoicing of the hedged cash flow – transferred from other comprehensive income for inclusion in the same item as the hedged cash flow. Hedging contracts that do not meet the hedge criteria are classified as trading contracts, and changes in the fair value are recognised as financial items as they arise. The need for hedging is assessed separately in the H. Lundbeck, ALK and Falck groups and in Lundbeckfond Invest. Other things being equal, an increase of 5% in the DKK/USD exchange rate would increase the Group's profit by DKK 120 million (DKK 79 million in 2011).
CONSOLIDATED FINANCIAL STATEMENTS
87
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 29 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS – CONTINUED
2012 2011 DKKm DKKm Monetary assets and monetary assets and liabilities for the principal currencies at 31 December Monetary assets CAD
213
171
CHF
165
279
GBP
1,042
786
JPY
29
108
TRY
-
103
USD
3,720
3,061
Monetary liabilities CAD
227
CHF
-
182 19
GBP
124
136 100
JPY
100
TRY
-
21
USD
1,380
1,517
Due to the long-standing fixed exchange rate policy in Denmark, the foreign currency risk for EUR is considered immaterial, and EUR is therefore not included in the list above.
Estimated impact on profit and equity from a 5% increase in year-end exchange rates of the most important currencies
CAD CHF GBP JPY TRY USD DKKm DKKm DKKm DKKm DKKm DKKm
2012 Profit Equity
(2)
8
6
(4)
-
120
(38)
8
24
(4)
-
472
2011 Profit Equity
(2)
10
(5)
1
1
77
(28)
3
(6)
(2)
(2)
374
The profit impact is included in the impact on equity. 29.2 INTEREST RATE RISKS Interest rate risk relates to the Group's interest-bearing assets and liabilities and principally to the Group's bonds classified as financial assets measured at fair value through profit or loss, cf. note 12: Financial assets and financial risks and the Falck Group's overall loan financing, cf. note 24: Mortgage, bank, leasing and repo debt. Interest receivable The duration of the investments when selecting financing and investment instruments is used to manage the interest rate risk. In addition, the Group uses derivative financial instruments to mitigate the interest rate exposure. The use of financial instruments to manage interest rate risk does not qualify for hedge accounting, and the changes in fair value are therefore recognised as financial income or expenses in an ongoing process. The Group's portfolio of bonds has a duration of 1.6 year (1.0 year in 2011). Other things being equal, an increase of 1 %-point in interest rates would increase the Group's profit by DKK 74 million (DKK 66 million in 2011). At 31 December 2012, the Group had an interest rate swap for managing interest rate exposure on portfolio investments. Other than this, there were no derivatives at 31 December 2012 and 31 December 2011 to manage interest rate risks because the distribution of investments carrying floating and fixed interest at the given times was deemed to be satisfactory.
88
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 29 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS – CONTINUED
Interest expenses The Falck Group’s interest rate risk is mainly affected by the Falck Group’s overall financing. Based on the current market situation, the Falck Group's executive management and board of directors have resolved to convert 70% of the overall financing to a fixed rate of interest via interest rate swaps that expire in 2014. The remainder of the overall financing is based on a short-term interest rate. The interest rate exposure is hedged by interest rate swaps during the hedging period to the effect that interest rates on the part of the debt that is denominated in DKK cannot exceed 4.15% including the current interest rate margin, for debt denominated in EUR interest rates cannot exceed 3.92% including the current interest rate margin, and for debt denominated in USD, interest rates cannot exceed 3.30% including the current interest rate margin. The remaining part of the syndicated financing is to be based on short-term interest rates. The Falck Group is therefore only to a minor extent sensitive to fluctuations in market interest rates, and a fluctuation by 1% would change the interest expense for the year by DKK 23 million (DKK 20 million in 2011), as a large part of the interest rate risk is hedged by interest rate swaps. Without this hedge, a fluctuation by 1%-point would change the Group's interest expense by DKK 61 million (DKK 62 million in 2011). The sensitivity stated has been determined based on the recognised financial assets and liabilities at 31 December 2012. No adjustment has been made for servicing and raising of debt, or the like in 2012. Furthermore, it is assumed that all hedges of floating-rate loans are deemed to be effective. 29.3 MATURITY DATES FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES More than 31 December 2012 Less than 1 year
1-5 years
5 years
Total
Effective
Financial assets DKKm DKKm DKKm DKKm interest rates Derivatives included in the trading portfolio
1
-
-
1
-
Securities 1) Danish mortgage and government bonds
1,609
530
1,741
3,880
0-5%
Credit bonds
46
548
1,678
2,272
1-25%
Listed equities
-
-
4,813
4,813
-
Shares in property companies
-
-
482
482
-
Lundbeckfond Ventures
-
-
519
519
-
Private equity funds
-
-
866
866
-
Other unlisted funds
-
-
280
280
-
Financial assets at fair value through profit or loss
1,656
1,078
10,379
13,113
-
Derivatives to hedge future cash flows
36
-
-
36
-
Financial assets used as hedging instruments
36
-
-
36
-
Receivables 2)
5,421
51
5
5,477
-
Fixed-term deposits
1,708
-
-
1,708
0-4%
Other cash resources
2,269
-
-
2,269
0-5%
Loans and receivables
9,398
51
5
9,454
-
Available-for-sale financial assets Total financial assets
- 11,090
86
52
138
-
1,215
10,436
22,741
-
Financial liabilities Derivatives included in the trading portfolio
160
-
-
160
-
Financial liabilities at fair value through profit or loss
160
-
-
160
-
Derivatives to hedge future cash flows and net investment in foreign subsidiaries
Financial liabilities used as hedging instruments
41
73
-
114
-
41
73
-
114
-
Mortgage, bank, leasing and repo debt 3)
798
2,427
5,929
9,154
0-6%
Employee bonds/purchase obligations
28
611
145
784
3-6%
Other payables and non-disbursed grants 2)
7,166
402
-
7,568
-
Financial liabilities, measured at amortised cost
7,992
3,440
6,074
17,506
-
Total financial liabilities
8,193
3,513
6,074
17,780
-
CONSOLIDATED FINANCIAL STATEMENTS
89
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 29 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS – CONTINUED
More than 31 December 2011 Less than 1 year
1-5 years
5 years
Total
Effective
Financial assets DKKm DKKm DKKm DKKm interest rates Derivatives included in the trading portfolio
4
-
-
4
-
Securities 1) Danish mortgage and government bonds
2,295
1,096
2,351
5,742
0-6%
Credit bonds
1
323
704
1,028
3-35%
Listed equities
-
-
3,580
3,580
-
Shares in property companies
-
-
371
371
-
Lundbeckfond Ventures
-
-
267
267
-
Private equity funds
-
-
853
853
-
Other unlisted funds
-
-
257
257
-
Financial assets at fair value through profit or loss
2,300
1,419
8,383
12,102
-
Derivatives to hedge future cash flows
12
-
-
12
-
Financial assets used as hedging instruments
12
-
-
12
-
Receivables 2)
4,883
53
35
4,971
-
Fixed-term deposits
1,680
-
-
1,680
0-8%
Other cash resources
2,305
-
-
2,305
0-8%
Loans and receivables
8,868
53
35
8,956
-
Available-for-sale financial assets
-
89
-
89
-
Total financial assets
11,180
1,561
8,418
21,159
-
Financial liabilities Derivatives included in the trading portfolio
82
-
-
82
-
Financial liabilities at fair value through profit or loss
82
-
-
82
-
Derivatives to hedge future cash flows and net investment in foreign subsidiaries
89
41
-
130
-
Financial liabilities used as hedging instruments
89
41
-
130
-
Mortgage, bank, leasing and repo debt 3)
463
1,711
6,612
8,786
1-7%
Employee bonds/purchase obligations
56
469
119
644
3-6% -
Other payables and non-disbursed grants 2)
6,714
394
-
7,108
Financial liabilities, measured at amortised cost
7,233
2,574
6,731
16,538
-
Total financial liabilities
7,404
2,615
6,731
16,750
-
The amounts in the table above are exclusive of interest. 1) The securities are classified as financial assets measured at fair value through profit or loss. 2) Including receivables and payments recognised in non-current assets and liabilities 3) Nominal value of mortgage debt falling due after more than 5 years totals DKK 2,370 million at 31 December 2012 (DKK 2,427 million in 2011).
90
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 29 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS – CONTINUED
29.4 NET OUTSTANDING FORWARD EXCHANGE TRANSACTIONS, CURRENCY OPTIONS AND INTEREST RATE SWAPS Hedging part
Exchange Exchange
Contractual gains/losses gains/losses Average hedge value in
recognised in
aacording with
other
hedge comprehensive accounting
income
recognised in
prices of
income existing forward statement/
exchange
balance sheet
transactions
Expiry
Forward contracts DKKm DKKm DKKm DKK period 2012 CAD
775
(2)
(42)
561.84
GBP
618
-
(29)
907.86
Nov. 2013
USD
(547)
(6)
(20)
569.85
Dec. 2013
(39)
-
Dec. 2013
Other currencies
1,822
Forward contracts 2012
2,668
5 (3)
Dec. 2013
(130)
2011 CAD
552
(19)
5
536.25
Dec. 2012
GBP
577
(15)
(1)
859.70
Dec. 2012
USD
457
(15)
113
550.15
Dec. 2012
Other currencies
1,487
(17)
(9)
-
Dec. 2012
Forward contracts 2011
3,073
(66)
108
Hedging part
Exchange Exchange
Contractual gains/losses gains/losses value in
recognised in
aacording with
other
hedge comprehensive
recognised in income statement/
Average
accounting
income
balance sheet
exercise prices
Currency options (zero cost options)
DKKm
DKKm
DKKm
DKK
Expiry period
2011 JPY/DKK (JPY put bought)
-
-
19
Currency options
-
19
-
At 31 December 2012, the exchange difference between the contract value and the market value of the concluded forward exchange contracts and currency options represented a loss of DKK 69 million (a loss of DKK 77 million in 2011), of which DKK 2 million was recognised in the income statement (DKK 11 million in 2011). Interest rate
gains/losses
recognised in other
Contractual comprehensive
Interest rate collar/interest rate swap
Fixed interest
value income DKKm
DKKm
rate Expiry %
period
2012 DKK interest rate swap
2,300
(47)
1.40
Aug. 2014
USD interest rate swap
424
(2)
0.55
Aug. 2014
EUR interest rate swap
1,492
(24)
1.17
Aug. 2014
Interest rate collar/interest rate swap
(73)
CONSOLIDATED FINANCIAL STATEMENTS
91
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 29 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS – CONTINUED
Interest rate
gains/losses
recognised in other
Contractual comprehensive
Interest rate collar/interest rate swap
Fixed interest
value income DKKm
DKKm
rate Expiry %
period
2011 DKK interest rate swap
2,300
(38)
1.40
Aug. 2014
USD interest rate swap
431
-
0.55
Aug. 2014
EUR interest rate swap
1,487
(3)
1.17
Aug. 2014
Interest rate collar/interest rate swap
(41)
Trading part Exchange Average hedge gains/losses prices of
recognised in existing forward
Contractual Value
the income
exchange
statement transactions
Expiry
Forward contracts DKKm DKKm DKK period 2012 GBP
100
Forward contracts
1
916.50
Mar. 2013
1
2011 USD
-
Forward contracts
8
-
-
8
Share option gains/losses recognised in
Contractual
the income
Market value
Value
statement
31 December
Expiry
Share contracts DKKm DKKm DKK period 2012 Options on indices
11,371
(53)
Options on shares
245
11
Share contracts
11,616
(42)
(46)
juni 2013
(9) jan.-marts 2013 (55)
Exchange gains/losses recognised in
Contractual
the income
Average
Value
statement
exercise prices
Expiry
Share contracts DKKm DKKm DKK period 2012 EUR/DKK (EUR put bought)
-
(1)
-
-
EUR/DKK (EUR call sold)
-
2
-
-
JPY/DKK (JPY call bought)
-
JPY/DKK (JPY put sold)
-
- (2)
-
-
-
-
Currency options (1) 2011 EUR/DKK (EUR put bought)
597
746.17
Aug. 2012
EUR/DKK (EUR call sold)
1,194
(1)
746.17
Aug. 2012
JPY/DKK (JPY call bought)
100
1
7.00
May 2012
JPY/DKK (JPY put sold)
100
(3)
7.55
May 2012
Currency options 92
CONSOLIDATED FINANCIAL STATEMENTS
3
-
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 29 - 30 29. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS – CONTINUED
Interest rate
gains/losses recognised in
Contractual
Interest rate swap
the income
Fixed interest
value statement DKKm
DKKm
rate %
Expiry period
2012 Fixed to floating
600
Interest rate swap
(41)
3.47
May 2020
(41)
2011 Fixed to floating
600
Interest rate swap
(74)
3.47
May 2020
(74)
2012 2011 Deferred recognition of hedging transactions recognised in other comprehensive income
DKKm
DKKm
Deferred gains/losses on hedging transactions at 1 January
(82)
Adjustment, deferred exchange gains/losses, hedging, recognised in other comprehensive income
(51)
48
Exchange gains/losses, hedging, transferred to revenue
97
(81)
Exchange gains/losses, hedging, transferred to prepayments from Forest (balance sheet)
-
(14)
Exchange gains/losses, trading, transferred to net financials (transferred from hedging)
1
-
Value adjustment of interest hedging instruments
(24)
(42)
Repayment of interest hedging instruments
-
Deferred gains/losses on hedging transactions at 31 December
(59)
(4)
11 (82)
30. CONTRACTUAL OBLIGATIONS 2012 2011 DKKm DKKm The Group has signed operating lease obligations for a total amount of
2,522
2,491
Payment of the obligations breaks down as follows: Less than 1 year
496
474
Between 1 and 5 years
1,059
1,063
More than 5 years
967
954
2,522
2,491
Expensed lease payments amounted to
516
406
The operating lease commitments primarily concern the Falck Group's leases for vehicles and buildings. The lease term for vehicles typically runs for 4-9 years. The lease term for buildings typically runs for 20 years. The Group has signed finance lease obligations for a total amount of
75
86
Payment of the finance lease obligations breaks down as follows: Less than 1 year
25
29
Between 1 and 5 years
37
48
More than 5 years
13
9
75
86
Present value of finance lease obligations
63
80
Financial lease arrangements comprise leases on buildings, vehicles and other lease arrangements.
CONSOLIDATED FINANCIAL STATEMENTS
93
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 30 - 31 30. CONTRACTUAL OBLIGATIONS – CONTINUED
Besides this, the Group has made the following contractual obligations:
Lundbeck Foundation and Lundbeckfond Invest A/S The Lundbeck Foundation and Lundbeckfond Invest A/S have capital contribution obligations amounting to DKK 465 million (DKK 691 million in 2011).
H. Lundbeck Group Other purchase obligations The H. Lundbeck Group has undertaken purchase obligations in the amount of DKK 305 million (DKK 318 million in 2011). Research collaborations The H. Lundbeck Group is part of multi-year research and development collaboration projects comprising minimum research and contractual obligations in the order of DKK 141 million (DKK 126 million in 2011). The total amount of the obligations may increase substantially in line with the favourable development of the collaborations. Other contractual commitments The H. Lundbeck Group has entered into various service agreements amounting to DKK 102 million (DKK 80 million in 2011).
ALK Group The ALK Group's financial obligations in respect of research and development projects amounted to DKK 3 million (DKK 3 million in 2011)
Falck Group Falck Holding A/S has a right of first refusal to buy a number of buildings at a preset value. At the end of the year, Falck Holding A/S had not notified any owners that it wanted to exercise such a right of first refusal in 2013 (DKK 68 million in 2011).
31. GUARANTEES AND CONTINGENT LIABILITIES The Group has the following warranty commitments and contingent liabilities: Joint taxation H. Lundbeck A/S, ALK A/S and Falck Holding A/S and their Danish subsidiaries are pooled for tax purposes with Lundbeckfond Invest A/S. As from 1 July 2012, the companies in the tax pool have partly a joint and several liability and partly a secondary liability with respect to any obligations to withhold tax on interest, royalties and dividends for the jointly-taxed companies. However, the secondary liability is capped at an amount equal to the share of the capital of the companies directly or indirectly owned by Lundbeckfond Invest A/S.
H. Lundbeck Group Forest Prepayments from Forest have been translated at the exchange rate at the transaction date or at the forward rate and recognised in the balance sheet in the amount of DKK 79 million (DKK 234 million in 2011). If the translation had been made at the exchange rate at the balance sheet date, the prepayments would have amounted to DKK 81 million (DKK 286 million in 2011). It is believed that there is presently no material repayment risk concerning prepayments from Forest. Bank guarantees and letters of intent The H. Lundbeck Group’s bankers have issued bank guarantees to third parties in the amount of DKK 105 million (DKK 136 million in 2011). The Group has assessed that the fair value of guarantees is DKK 0 (DKK 0 in 2011). Pending legal proceedings The H. Lundbeck Group is involved in legal proceedings in a number of countries against a number of businesses, including patent disputes. In the opinion of the management of H. Lundbeck A/S, the outcome of these proceedings will not have a material impact on the Group’s financial position, results of operations or cash flows beyond the amount provided for in the financial statements. Due to uncertainty about the outcome of the legal proceedings, the amount of the provision is uncertain.
94
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 31 31. GUARANTEES AND CONTINGENT LIABILITIES – CONTINUED
In 2010, the European Commission opened a formal investigation to examine whether H. Lundbeck by way of unilateral behaviour and/or agreements has violated EU competition law and thereby hindered a lawful entry of generic citalopram into markets in the European Economic Area (EEA). In 2012, Lundbeck again complied with a number of Requests for Information from the Commission, and Lundbeck also submitted a reply to the Commission's Statement of Objections. There is no formal deadline for the European Commission to complete the ongoing investigation. In December 2011, the Brazilian antitrust authorities (Secretariat of Economic Law – SDE) initiated administrative proceedings to investigate whether H. Lundbeck’s enforcement of data protection rights could be viewed as anticompetitive conduct. In January 2012, H. Lundbeck submitted a response to the authorities. The case remains pending. Industry obligations The H. Lundbeck Group has return obligations normal for the industry. H. Lundbeck A/S' management expects no major loss on these obligations.
ALK Group Warranty and guarantee commitments Warranty and guarantee commitments amounted to DKK 13 million (DKK 9 million in 2011). Collaterals The carrying amount of land and buildings provided as collateral for credit institutions amounted to DKK 152 million (DKK 162 million in 2011). Contingent liabilities and assets The management of ALK-Abelló A/S assesses that the outcome of pending claims and other disputes will not have a material impact on the group’s financial position. In connection with the divestment of the ingredients business, Chr. Hansen in 2005, ALK-Abelló A/S undertook usual representations and warranties towards the buyer. On expiry of the warranty period at the end of July 2012, the management assessed the company’s liabilities towards the buyer, which resulted in a reversal of the provision to cover specific risks of DKK 140 million. See note 6.
Falck Group Warranty and guarantee commitments Warranty and guarantee commitments amounted to DKK 7 million (DKK 9 million in 2011). The Falck Group has issued performance bonds to a certain extent in connection with a number of contracts, including performance bonds for a total of DKK 297 million provided in connection with ambulance contracts in Denmark (DKK 249 million in 2011). As part of the Group's activities, usual supplier agreements have been entered into. In connection with the divestment of companies and operations, usual representations and warranties are made. There are currently no outstanding claims which are not sufficiently recognised in the balance sheet. Contingent liabilities and assets The Falck Group is a party to certain litigation and claims. Management believes that rulings in this respect will not have a material impact on the group’s financial position. Collaterals The shares in the subsidiary Falck A/S and Falck Danmark A/S have been provided as collateral for debt in the Falck Group. The carrying amount of property, plant and equipment provided as collateral for debt to credit institutions amounted to DKK 534 million (DKK 518 million in 2011). Issued mortgage deeds amounted to DKK 359 million (DKK 380 million in 2011).
Lundbeck Foundation and Lundbeckfond Invest A/S Collaterals Bonds in repo business have been provided as collateral for repo debt, and other bonds have been provided as collateral for hedging transactions. The value of bonds provided as collateral at 31 December 2012 amounted to DKK 263 million (DKK 180 million in 2011).
CONSOLIDATED FINANCIAL STATEMENTS
95
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTE 32 - 33
32. RELATED PARTIES The Lundbeck Foundation is a commercial foundation established by Grete Lundbeck in 1954. Related parties exercising a significant influence on the Lundbeck Foundation: * The company’s Executive Management and Board of Directors * Companies in which the company's Executive Management and Board of Directors exercise a significant influence The following transactions were made between related parties and the Lundbeck Foundation, all on an arm's length basis: • The Board of Directors and the Executive Management received remuneration. See note 3.
• In connection with the acquisition of shares in Falck A/S and Falck Holdings A/S´ acquisition of shares in Falck A/S in 2011, a small amount of the shares
were acquired from board members in the amount of DKK 8 million. • Transactions with associates:
Related parties of the Falck Group also comprise associates in which the company exercises significant influence. Reference is made to note 13 and the group overview for an overview of associates. 2012 2011 DKKm DKKm Transactions with associates: Disposal of property, plant and equipment
5
28
Acquisition of services 15 10 Sale of services 0 1 Rental costs 20 9 Receivables from associates appear from the balance sheet, and interest payable for the period amounted to DKK 0. • Other than the above and except for transactions eliminated in the consolidated financial statements, there have only been few transactions of immaterial importance with related parties. 33. EVENTS AFTER THE BALANCE SHEET DATE On 26 March 2012, H. Lundbeck A/S and Otsuka Pharmaceutical Co., Ltd. (Otsuka) announced a license and development agreement for Lu AE58054, a selective 5HT6 receptor antagonist currently in development for the treatment of Alzheimer's disease. Under the terms of the agreement, Lundbeck will grant Otsuka co-development and co-commercialization rights to Lu AE58054 in the USA, Canada, East Asia including Japan, major European countries and Nordic countries. Under the terms of the agreement, Lundbeck will receive from Otsuka an initial payment of USD 150 million (approximately DKK 855 million) upon signing. Both companies will share the sales, development, and commercialisation costs based on the agreement. Lundbeck is also entitled to up to USD 675 million (approximately DKK 3.9 billion) in regulatory and sales milestones. Additional specific financial terms of the agreement remain undisclosed. The initial payment of USD 150 million (approximately DKK 855 million) is a non-refundable cash payment which will be split and USD 50 million (approximately DKK 285 million) will be booked under Other revenue for the first quarter of 2013 and the additional non-refundable cash payment of USD 100 million (approximately DKK 570 million) will be recognised in the income statement in the period 2013-2015. At the beginning of 2013, the Lundbeck Foundation acquired the property at Scherfigsvej 7, DK-2100 Copenhagen Ø, Denmark. Other than the above, no material events have occurred subsequent to the balance sheet date.
96
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2012
COMPANY NAME
COUNTRY
OWNERSHIP
Subsidiaries H. Lundbeck A/S
Denmark
Falck Holding A/S
Denmark
70% 57%
ALK-Abelló A/S
Denmark
42% (67% of the votes)
Associates Obel-LFI Ejendomme A/S
Denmark
50%
Veloxis Pharmaceuticals A/S
Denmark
43%
Direct investments Acacia Pharma Ltd.
United Kingdom
22%
Allocure Inc.
USA
Asante Solutions Inc.
USA
6%
Sweden
17%
Bonesupport Holding AB
13%
Celladon
USA
DBV Technologies
France
6%
Enterome
France
24%
EpiTherapeutics ApS
Denmark
Insusense ApS
Denmark
12%
13% 60%
Nexstim Oy
Finland
8%
PsiOxus Ltd
United Kingdom
13%
River Vision Corp.
USA
Syntaxin Ltd
United Kingdom
27% 10%
H. Lundbeck Group Lundbeck Argentina S.A.
Argentina
100%
Lundbeck Australia Pty Ltd.
Australia
100%
Australia
100%
Belgium
100%
Lundbeck Brasil Ltda.
Brazil
100%
Lundbeck Canada Inc.
Canada
100%
Chile
100%
Lundbeck Colombia S.A.S.
Colombia
100%
Lundbeck China Holding A/S
Denmark
67%
China
100%
- CNS Pharma Pty Ltd.
Lundbeck S.A.
Lundbeck Chile Farmacéutica Ltda.
- Lundbeck Pharmaceuticals (Tianjin) Co., Ltd.
- Lundbeck Pharmaceuticals Consulting (Shanghai) Co., Ltd.
China
100%
Lundbeck Cognitive Therapeutics A/S
Denmark
100%
Lundbeck Export A/S
Denmark
100%
Lundbeck Insurance A/S
Denmark
100%
Lundbeck Pharma A/S
Denmark
100%
United Kingdom
100%
Lundbeck Group Ltd. (Holding)
- Lundbeck Limited
United Kingdom
100%
- Lundbeck Pharmaceuticals Ltd.
United Kingdom
100%
- Lifehealth Limited
United Kingdom
100%
- Lundbeck UK LLP
United Kingdom
100%
Lundbeck Eesti A/S
Estonia
100%
OY H. Lundbeck AB
Finland
100%
Lundbeck SAS
France
100%
Sofipharm SA
France
100%
France
100%
- Laboratoire Elaiapharm SA
Lundbeck Hellas S.A.
Greece
Lundbeck B.V.
The Netherlands
Lundbeck India Private Limited
100% 100%
India
100%
Lundbeck (Ireland) Ltd.
Ireland
100%
Lundbeck Israel Ltd.
Israel
100%
Lundbeck Italia S.p.A.
Italy
100%
Lundbeck Pharmaceuticals, Italia S.p.A.
Italy
100%
CONSOLIDATED FINANCIAL STATEMENTS
97
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2012
COMPANY NAME
- Archid S.a.
COUNTRY
OWNERSHIP
Luxembourg
100%
Lundbeck Japan K. K.
Japan
100%
Lundbeck (Beijing) Pharmaceuticals Consulting Co., Ltd.
China
100%
Lundbeck Korea Co., Ltd.
Korea
100%
Lundbeck Croatia d.o.o.
Croatia
100%
SIA Lundbeck Latvia
Latvia
100%
UAB Lundbeck Lietuva
Lithuania
100%
Malaysia
100%
Mexico
100%
New Zealand
100%
Norway
100%
Lundbeck Pakistan (Private) Limited
Pakistan
100%
Lundbeck America Central S.A.
Panama
100%
Peru
100%
Poland
100%
Portugal
100%
Lundbeck RUS OOO
Russia
100%
Lundbeck (Schweiz) AG
Switzerland
100%
Lundbeck Pharmaceutical GmbH
Switzerland
100%
Singapore
100%
Lundbeck Slovensko s.r.o.
Slovakia
100%
Lundbeck Pharma d.o.o.
Slovenia
100%
Axofarma Lab, S.A.
Spain
100%
Lundbeck España S.A.
Spain
100%
H. Lundbeck AB
Sweden
100%
Sweden
100%
Lundbeck Malaysia SDN. BHD Lundbeck México, SA de CV Lundbeck New Zealand Limited H. Lundbeck AS
Lundbeck Peru S.A.C. Lundbeck Poland Sp.z.o.o. Lundbeck Portugal - Produtos Farmacêuticos Unipessoal Lda.
Lundbeck Singapore PTE. LTD.
- CNS Pharma AB
Lundbeck South Africa (Pty) Limited Lundbeck Czech Republic s.r.o. Lundbeck İlaç Ticaret Limited Şirketi
South Africa
100%
Czech Republic
100%
Turkey
100%
Lundbeck GmbH
Germany
100%
Lundbeck Hungária KFT
Hungary
100%
Lundbeck USA Holding, Inc. 1)
USA 100%
- Lundbeck Inc. 2)
- Lundbeck Pharmaceuticals Ireland Limited
USA
100%
Ireland
100%
- Lundbeck Pharmaceuticals Services, LLC
USA
100%
- Lundbeck Research USA, Inc.
USA
100%
Venezuela
100%
Lundbeck Austria GmbH
Austria
100%
Austria
100%
Lundbeck de Venezuela, C.A. - Innenwelt Germeinnützige GmbH
1) At 1 January 2012, the subsidiary was renamed from Lundbeck USA Holding Inc. 2) At 1 January 2012, the subsidiary was renamed from Lundbeck Inc. ALK Group ALK-Abelló Nordic A/S
Denmark
100%
ALK-Abelló Nordic A/S (branch)
Sweden
100%
ALK-Abelló Nordic A/S (branch)
Norway
100%
ALK-Abelló Nordic A/S (branch)
Finland
100%
United Kingdom
100%
ALK-Abelló Ltd. ALK-Abelló S.A.
France
ALK-Abelló Arzneimittel GmbH ALK-Abelló Allergie-Service GmbH
100%
Germany
100%
Austria
100%
ALK-Abelló AG
Switzerland
ALK AG
Switzerland
100% 100%
ALK-Abelló B.V.
The Netherlands
100%
- Artu Biologicals Europe B.V.
The Netherlands
100%
- Artu Biologicals Onroerend Goed B.V.
The Netherlands
100%
ALK-Abelló S.A.
98
Spain
CONSOLIDATED FINANCIAL STATEMENTS
100%
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2012
COMPANY NAME
COUNTRY
OWNERSHIP
- ALK-Abelló S.p.A.
Italy
100%
ALK-Abelló sp. z.o.o.
Poland
100%
ALK-Abelló, Inc.
USA
100%
ALK-Abelló, Source Materials, Inc.
USA
100%
ALK-Abelló Pharmaceuticals, Inc.
Canada
100%
China
100%
ALK-Abelló A/S (branch)
Falck Group Falck A/S
Denmark
100%
- Falck Danmark A/S
Denmark
100%
Denmark
100%
Denmark
100%
- Falck Health Care Holding A/S
- Falck Health Care A/S
- Falck CARE4 A/S
Denmark
75%
- PreviaSundhed A/S
Denmark
100%
- ActivCare A/S
Denmark
100%
Denmark
100%
Denmark
100%
- ActivCare Privat A/S
- Ulfab Danmark A/S
- Vikteam A/S
Denmark
- Falck Hjælpemidler A/S
Denmark
80% 92%
- Falck JobService A/S
Denmark
85%
- North Securities A/S
Denmark
49%
- Falck Norge Holding AS
Norway
100%
- Falck Redning AS
Norway
100%
- Falck Emergency AS
Norway
100%
Norway
100%
- Falck Ambulanse AS
- Falck Norge Leasing AS
Norway
100%
- Falck Health Care Norge AS
Norway
100%
- Falck Sevices AS
Norway
100%
- Falck Nutec Holding A/S
Denmark
100%
- Falck Nutec Esbjerg A/S
Denmark
100%
- Falck Nutec Management A/S
Denmark
100%
- Falck Global Safety B.V.
The Netherlands
100%
- Falck Nutec AS
Norway
- Falck Nutec Ltd.
United Kingdom
- Nutec Centre for Safety Ltd.1)
- Falck Onsite Limited - Onsite Training Services Limited1)
- Falck Nutec Trinidad and Tobago Limited
- Nutec UK Ltd.
- Nutec Belgium Holding BVBA1)
- Nutec Belgium BVBA1)
- Marinesafety International Rotterdam B.V.
- MSTS Asia Sdn. Bhd. - Falck Bestari Healthcare Sdn Bhd.
- MSTS Asia (S'pore) Pte. Ltd.
- Karma Jaya Sdn. Bhd.
- Falck BHV Operations B.V.
- Falck Caspian Safe LLC
100% 100%
United Kingdom
100%
Trinidad & Tobago
80%
United Kingdom
100%
Belgium 100% The Netherlands
100%
The Netherlands
100%
Malaysia
- Risktec (M) Sdn. Bhd.
United Kingdom United Kingdom
Belgium 100%
- Falck Nutec B.V.
100% 100%
Malaysia
70% 100%
Malaysia
82%
Singapore
100%
Malaysia
70%
The Netherlands
100%
- Falck Safety Services Nigeria Limited
Nigeria
51%
- Falck Prime Atlantic Limited
Nigeria
51%
Azerbaijan
65%
Brazil
100%
Brazil
100%
- Southfield Ltd
Thailand
50%
Thailand
65%
USA
100%
- Falck Nutec Brasil Participacoes Ltda
- Falck Nutec Brasil Treinamentos em Segurança Marítima Ltda - Falck Nutec (Thailand) Ltd
- Falck USA Holdings, Inc
CONSOLIDATED FINANCIAL STATEMENTS
99
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2012
COMPANY NAME
COUNTRY
OWNERSHIP
- Falck Alford Holdings, Inc
USA
- Alford Services, Inc
USA
100%
- Alford Safety Services, Inc
USA
100%
- Alford Safety & Compliance, L.L.C.
USA
100%
USA
100%
- Haztec Services - West Indies, L.L.C.
- Haztec Services St. Lucia Ltd - Haztec Services Trinidad Limited - Occupational Safety Traning, Inc.
- Falck Alford International B.V.
- Falck Holding de México, S.A. de C.V.
- Falck Safety Services de México, S.A.I.P. de C.V.
- Falck Nutec Vietnam Limited
- Falck Safety Services LLC
- Falck Investment Norge AS
- Falck Followit Norge AS
- Falck Sverige Holding AB
- Falck Investment Sverige AB
80%
St. Lucia
100%
Trinidad & Tobago
100%
USA
100%
The Netherlands
100%
Mexico
100%
Mexico
100%
Vietnam
88%
United Arab Emirates
49%
Norway
100%
Norway
100%
Sweden
100%
Sweden
100%
- Falck Räddningskär AB
Sweden
100%
- Falck Forsäkrings AB
Sweden
100%
- Falck TravelCare AB
Sweden
100%
- Falck Ambulans AB
Sweden
- Falck Räddningstjänst AB
95%
Sweden
100%
- Falck Services AB
Sweden
100%
- Svensk Sjöambulans AB2)
Sweden 50%
- Falck Ensihoito Oy
Finland
100%
- Falck Sverige AB
Sweden
100%
- S Reg Holding A/S
Denmark
100%
- S Reg AB
Sweden
100%
- S Reg Service AB
Sweden
100%
Denmark
100%
- S Reg Oy
Finland
100%
- S Reg AS
Norway
100%
Sweden
100%
Sweden
100%
Sweden
100%
Sweden
100%
- S Reg A/S
- Falck Health Care Sverige Holding AB
- Falck AM Health Care AB
- Falck Aktiv Arbetsmedicin AB
- Falck Healthcare AB
- Falck USA, Inc.
USA
- FCA Corp.
USA
USA
- Care Ambulance Service, Inc.
- Falck EMS Corp.
- Lifestar Response Corporation, Inc.
- Lifestar Response of Alabama, Inc.
100% 87% 100%
USA
96%
USA
100%
USA
100%
- Medibus, Inc.
USA
100%
- STAT Equipment Corp.
USA
100%
- STAT EMS, LLC
USA
USA
100%
- Bi-County Ambulance & Ambulette Transport Services Corp.
51%
- Lifestar Response of New Jersey, Inc.
USA
100%
- Lifestar Response of Maryland, Inc.
USA
100%
- Access Transport Services Holding, Inc.
USA
100%
USA
100%
- Home Care Equipment, Inc.
USA
100%
USA
100%
USA
100%
USA
100%
- American Ambulance, Inc
USA
100%
- Falck Southeast II Corp.
USA
96%
- Falck Northern California Corp.
USA
100%
- Robinson's Ambulance & Oxygen Service, Inc.
- Falck Southeast Corp.
100
- Access on Time Language Services LLC
- Cape Cod Medica Enterprises, Inc
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2012
COMPANY NAME
COUNTRY
- Falck Northwest Corp.
OWNERSHIP
USA
100%
Finland
100%
- Falck Oy
Finland
100%
Estonia
100%
- Falck Investments Finland Oy Ab - Falck Autoabi OÜ
- Falck Benelux NV
Belgium
93%
- Falck Investments NV
Belgium
80%
United Arab Emirates
49%
- Falck Medical Services LLC
- Falck Eurasia B.V.
- Beijing Falck Rescue Consulting Services Co., Ltd
- Falck Kazakhstan LLP
- Open Clinic LLP
- Falck Fire Services Rus LLC
- Falck Medical Vladivostok LLC
- Falck Foundation VZW
- Falck Medycyna Sp.z o.o.
The Netherlands
95%
China
100%
Kazakhstan
100%
Kazakhstan
80%
Russia
100%
Russia
100%
Belgium
100%
Poland
100%
- Starowka sp zo.o.
Poland
75%
- Falck SK a.s.
Slovakia
93%
- Falck Emergency AS
Slovakia
51%
Slovakia
100%
- Falck Academy s.r.o.
Slovakia
100%
Slovakia
100%
- Falck Phrama s.r.o.
Slovakia
100%
Slovakia
100%
- Falck Záchranná a.s. - Falck Healthcare a.s. - Falck Fire Services a.s.
- Falck CZ a.s.
Czech Republic
93%
- Falck SCI, S.A.
Spain
65%
- Falck Emergency Spain, S.L.
Spain
65%
- Falck VL Servisios, S.L.
- Falck France SAS
- Falck Holding B.V.
- Falck B.V.
- Falck AVD B.V.
- AVD-ICT B.V.
- Safety Center Zuid Holland B.V.
Spain
75%
France
100%
The Netherlands
100%
The Netherlands
100%
The Netherlands
100%
The Netherlands
100%
The Netherlands
100%
- Safety Center Colleage c.v.
The Netherlands
51%
- Safety Center Zuid Holland c.v.
The Netherlands
52%
- Safe Building B.V.
The Netherlands
100%
- Falck BHV B.V.
The Netherlands
100%
- AVD Consultancy N.V.
Belgium
100%
Brazil
100%
Brazil
100%
Brazil
100%
Brazil
100% 100%
- Falck Brasil AVD Participações Ltda.
- Falck Brasil Plano de Saúde Ltda.
- Falck Brasil 747 Participações Ltda.
- Falck Brasil FF Participações Ltda.
- Falck Panama Holding S.A.
Panama
- EMI Holdings Management S.A.
Panama
63%
- EMI Foreign Holdings 1 S.A.
Panama
100%
- EMI Foreign Holdings 2 S.A.
Panama
100%
- EMI Foreign Holdings 3 S.A.
Panama
100%
- EMI Foreign Holdings 4 S.A.
Panama
100%
- Falck Fire & Safety do Brasil S.A.
- Empresa de Medicina Prepagada - Servicio de Ambulancia Prepagada – Gru
- EMI El Salvador S.A. de C.V.
Brazil
65%
Colombia
100%
El Salvador
100%
- Inversiones EMI Worldwide S.A.
Panama
100%
- EMI Panama S.A.
Panama
100%
Ecuador
100%
- Perses S.A.
Uruguay
100%
- Portovenus S.A.
Uruguay
16%
- EMI Venezuela Holding S.A.
Panama
100%
- EMI Ecuador S.A.- Emergencia Medica Integral
CONSOLIDATED FINANCIAL STATEMENTS
101
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2012
COMPANY NAME
COUNTRY
- Emergencia Medica Integral EMI Centro S.A.
OWNERSHIP
Venezuela
100%
Venezuela
100%
Panama
100%
- Solution Services International Inc.
Panama
100%
- Scandinavian Worldwide Capital Corp.
Panama
100%
- Rheades Business Inc.
Panama
100%
- Right Connection Services Corp.
Panama
100%
- Centro Medico Integral CEMICA S.A.
- Panamedical Health Systems S.A.
- Servicio Emergencias Regional SER S.A.
- Falck Chile Holding S.A.
Colombia
100%
Chile
100%
- Falck Aprem S.A.
Chile
- Falck Aprem Consultores en Prevención de Riesgos y Medio Ambiente Limitada
Chile
100%
- Falck Aprem Aserorías Prevención de Riesgos Limitida
- Falck Rettungsdienst GmbH
- Kranken-Transport Herzig GmbH
- KS-Medi-Service GmbH
80%
Chile
100%
Germany
100%
Germany
100%
Germany
100% 100%
- Falck Österreich GmbH
Austria
- Falck Yardim Hizmetleri Limited Şirketi
Turkey
95%
- Falck UK Limited
United Kingdom
100%
- Falck EMS UK Limited
United Kingdom
100%
- Falck Emergency Services UK Ltd.
United Kingdom
100%
- Falck India Limited
- Falck Services Limited
United Kingdom
93%
Mauritius
100%
- Falck India Pvt. Ltd.
India
100%
- Falck Services Pvt Ltd.
India
100%
- Falck Fire Services S.R.L
- Falck South Africa Holding (PTY) LTD
- Med1 (Private) Limites
Sri Lanka
50%
- Falck Treasury A/S
Denmark
100%
- Falck Asset Management 9 A/S
Denmark
100%
- Falck DRF Luftambulance A/S
Denmark
51%
Sweden
100% 100%
- Falck Air AB
Romania
93%
South Africa
100%
- A C Trafik A/S
Denmark
- KPC Ejendomme af 6. juni 2002 A/S2)
Denmark 25%
1) Dormant company 2) Associate
102
CONSOLIDATED FINANCIAL STATEMENTS
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
PARENT FOUNDATION FINANCIAL STATEMENTS THE LUNDBECK FOUNDATION CONTENTS Income statement for the period 1 January – 31 December Balance sheet at 31 December
104 105
Notes 1. Accounting policies 2. Financial income and expenses 3. Staff costs 4. Fees to auditors appointed at the general meeting 5. Tax on profit for the year 6. Grants for the year 7. Investments in subsidiaries 8. Other securities and investments 9. Statement of changes in equity and capital base 10. Pension obligations 11. Related parties 12. Events after the balance sheet date
106 106 106 107 107 108 109 109 110 110 110 110
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
103
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
INCOME STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER
2012 2011 Note DKKm DKKm Dividend from Lundbeckfond Invest A/S 7 - 682 Financial income 2 279 239 Financial expenses 2 (25) (26) Profit from investing activities before costs 254 895 Staff costs 3 (21) (14) Other external costs 4 (19) (7) Profit before tax 214 874 Tax on profit for the year 5 (1) Profit for the year 213 874 Proposed distribution of profit: Profit for the year 213 Amount available for distribution 213 The Board of Directors proposes that the profit be allocated as follows: Transferred to capital base 45 Total amount for grants in 2012 466 Reversed grants/repayments (6) Net grants for the year 6 460 Retained earnings (292) Distributed 213
104
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
BALANCE SHEET AT 31 DECEMBER
Assets 2012 2011 Note DKKm DKKm Other intangible assets 2 Intangible assets 2 Land and buildings 12 26 Property, plant and equipment 12 26 Investments in subsidiaries 7 4,061 4,046 Other securities and investments 8 3,239 3,168 Financial assets 7,300 7,214 Non-current assets 7,314 7,240 Other receivables 21 35 Receivable from subsidiary 1 Income tax receivable 2 Cash 71 281 Current assets 95 316 Assets 7,409 7,556
Equity and liabilities Capital base 2,270 Retained earnings 3,998 Equity 9 6,268 Pension provisions 10 29 Provisions 29 Payable grants, long-term 400 Non-current liabilities 400 Payable grants, short-term 591 Repo debt 8 95 Other payables 26 Current liabilities 712 Liabilities 1,112 Equity and liabilities 7,409 Related parties 11 Events after the balance sheet date 12
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
2,225 4,290 6,515 23 23 389 389 530 97 2 629 1,018 7,556
105
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 1 - 2 - 3
1. ACCOUNTING POLICIES The annual report of the parent company of the Lundbeck Foundation for 2012 has been prepared in accordance with the provisions of the Danish Financial Statements Act for medium-sized reporting class C enterprises. The annual report is presented in Danish kroner (DKK), which also is the functional currency of the parent company. The accounting policies are unchanged from last year. Differences relative to the Group’s accounting policies The parent company's accounting policies for recognition and measurement are in accordance with the Group's policies with the exceptions stated below: Investments in Lundbeckfond Invest A/S Investments in Lundbeckfond Invest A/S are recognised in the Foundation's balance sheet at cost. Dividends are recognised in the income statement. 2. FINANCIAL INCOME AND EXPENSES 2012 2011 DKKm DKKm Financial income Interest income, etc.
117
Gain from securities and other equity investments
162
107 132
279
239
Financial expenses Interest expenses etc.
-
2
Loss on securities and other equity investments
25
24
25
26
3. STAFF COSTS 2012 2011 DKKm DKKm Wages and salaries, incl. holiday allowance
12.2
Pension contributions
0.1
8.3 0.1
Pension benefits, including adjustment of pension provision
8.4
4.9
Other social security costs
0.1
0.0
20.8
13.3
Pension benefits including adjustment of pension provision relates to pension obligations taken over from H. Lundbeck and pension obligations towards existing and former board members. The increase is due to the fact that it has been decided to terminate the scheme going forward, and the conditions for this termination were specified in this connection. Remuneration of the Executive Management
2
2
Remuneration of the Board of Directors, including committee fees
4
2
The increase in board remuneration is due to the fact that, from 1 January 2012 the board members have only received remuneration for board duties in the Lundbeck Foundation and Lundbeckfond Invest A/S from the Foundation. Members of Executive Management and the Board of Directors who also serve as directors in subsidiaries also receive board remuneration directly from such subsidiaries. For a complete description hereof, please see the consolidated financial statements in the annual report of the Lundbeck Foundation for 2012, note 3.
106
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 3 - 4 - 5 3. STAFF COSTS – CONTINUED
Total remuneration of the Executive Management and Board of Directors (including remuneration
2012
2011
received from the wholly owned subsidiary Lundbeckfond Invest A/S) is specified as follows:
DKKm
DKKm
Executive Management: Christian Dyvig, appointed on 1 June 2011
3.4
2.2
0.7
0.4
0.9
0.8
0.3
0.5
0.5
0.2
Gunhild Waldemar, member of the research committee and the biomedical sciences committee
0.4
0.2
Board of Directors: Jørgen Huno Rasmussen, Chairman of the Foundation and Lundbeckfond Invest A/S from 2 May 2012, chairman of the investment committee Mikael Rørth, Deputy Chairman of the Foundation and Lundbeckfond Invest A/S, chairman of the research committee and the biomedical sciences committee, member of the investment committee Thorleif Krarup, member of the investment committee, deputy chairman of Falck Holding A/S, board member of H. Lundbeck A/S and ALK-Abelló A/S
Povl Krogsgaard-Larsen, member of the investment, research and the biomedical and natural sciences committees Jes Østergaard, chairman of the natural sciences committee and member of the research and investment committees, board member of H. Lundbeck A/S and ALK-Abelló A/S
0.6
0.6
Kim Klitgaard, employee representative from H. Lundbeck A/S
0.2
0.2
Ken Liljegren, employee representative from H. Lundbeck A/S
0.2
0.2
Peter Adler Würtzen, employee representative from ALK-Abelló A/S
0.2
0.2
Nils Axelsen, stepped down on 30 May 2011
-
0.2
Mogens Bundgaard-Nielsen, stepped down on 30 May 2011
-
0.4
(0.1)
(0.1)
3.9
3.8
Average number of employees during the year
8
7
Number of employees at year-end
9
7
Rounding
4. FEES TO AUDITORS APPOINTED AT THE GENERAL MEETING 2012 2011 DKKm DKKm Administrative expenses include fees to the company's auditors appointed by the general meeting, Deloitte, in the amount of: Statutory audit
0.3
Other services
0.2
0.2 -
0.5
0.2
5. TAX ON PROFIT FOR THE YEAR 2012 2011 DKKm DKKm Tax on profit for the year, Lundbeck Foundation
1
-
1
-
In the financial year, the Lundbeck Foundation paid income tax of TDKK 677 (TDKK 260 in 2011). When calculating taxable income, the Foundation has deducted grants and tax provisions for future grants. No deferred tax is recognised for accounting purposes concerning tax provisions for future grants as this is not expected to crystallise. Deferred tax hereon amounted to DKK 333 million (DKK 177 million in 2011).
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
107
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 5 - 6 5. TAX ON PROFIT FOR THE YEAR – CONTINUED
The Lundbeck Foundation is jointly taxed with Lundbeckfond Invest A/S, which means that the Lundbeck Foundation must pay tax on dividends received from Lundbeckfond Invest A/S. The total income tax payment for the Lundbeck Foundation Group amounted to DKK 1,136 million (DKK 909 million in 2011), of which Danish income tax accounted for DKK 475 million (DKK 468 million in 2011). 6. GRANTS FOR THE YEAR 2012 2011 DKKm DKKm Biomedical sciences projects
175
164
Natural sciences projects
25
26
Teaching and communicating science
23
13
Fellowships
80
70
Grete Lundbeck European Brain Research Foundation
15
-
Talent prizes
1
1
Travel grants for conferences and similar activities
4
4
Research abroad
18
16
Visiting professorships
3
3
Other
2
2
346
299
EMBL
60
-
RESCueH
44
-
MEPRICA
16
-
Psychiatric research (iPSYCH)
-
121
Regular and personal grants
Centres of Excellence
-
84
Strategic grants
120
205
466
504
Grants for the year, gross Descendants
-
-
Reversed grants/repayments
(6)
(6)
Grants for the year, net
460
498
Emerge activities
16
Grants for the year, including Emerge activities, gross
482
108
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
504
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 7 - 8
7. INVESTMENTS IN SUBSIDIARIES
Lundbeckfond Other Invest A/S subsidiaries Total DKKm DKKm DKKm
4,046
-
Additions
Cost at 1 January 2012
-
15
15
4,046
15
4,061 -
Cost at 31 December 2012
4,046
Net revaluation at 1 January 2012
-
-
Value adjustments for the year
-
-
-
Net revaluation at 31 December 2012
-
-
-
Carrying amount at 31 December 2012
4,046
15
4,061
Carrying amount at 31 December 2011
4,046
-
4,046
-
14,586
-
-
Carrying amount of equity as per the most recently published annual report
14,586
Dividend received 2012 Dividend received 2011
-
682
Lundbeckfond Invest A/S has its registered office in Hellerup and is wholly owned by the Lundbeck Foundation. At the end of 2012, the Foundation acquired 60% of the share capital of Insusense ApS, registered in Risskov, Denmark.
8. OTHER SECURITIES AND INVESTMENTS
Unlisted Bond investment portfolios
Equties
funds
Total
DKKm DKKm DKKm DKKm Carrying amount at 1 January 2012
3,150
18
3,168
Additions
3,091
880
-
1
3,972
Disposals
(3,882)
(128)
(1)
(4,011)
Value adjustments for the year
76
33
1
110
Carrying amount at 31 December 2012
2,435
785
19
3,239
Bonds in repo transactions have been provided as collateral for repo debt. The value of bonds in repo transactions provided as collateral at 31 December 2012 amounted to DKK 95 million (DKK 98 million in 2011). Unlisted investment funds include investments in an unlisted investment fund with a residual payment obligation of DKK 5 million (DKK 6 million in 2011).
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
109
THE LUNDBECK FOUNDATION 2012 ANNUAL REPORT
NOTES 9 - 10 - 11 - 12
9. STATEMENT OF CHANGES IN EQUITY AND CAPITAL BASE Retained Capital base*) earnings Total DKKm DKKm DKKm Equity at 1 January 2012 Grants, net.
2,225
4,290
6,515
(460)
(460)
Retained profit for the year
45
168
213
Equity at 31 December 2012
2,270
3,998
6,268
*) Changes in capital base 2007-2012: The capital base at 1 January 2007 amounted to:
1,650
2007 Capital base increased by
100
2009 Capital base increased by
150
2010 Capital base increased by
150
2011 Capital base increased by
175
2012 Capital base increased by
45
Capital base at 31 December 2012
2,270
10. PENSION OBLIGATIONS 2012 2011 DKKm DKKm Obligations at 1 January
23
Adjustment for the year
6
20 3
Obligations at 31 December
29
23
11. RELATED PARTIES The Lundbeck Foundation defines related parties as the Foundation's Board of Directors and Executive Management, its wholly-owned investment and holding company Lundbeckfond Invest A/S and this company's subsidiaries H. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S. Lundbeckfond Invest A/S shares the same address as the Lundbeck Foundation, and there is duality of membership between the Executive Management, administration (partly) and Board of Directors. The Lundbeck Foundation receives dividends from Lundbeckfond Invest A/S. Lundbeckfond Invest A/S pays rent to the Lundbeck Foundation on an arm's length basis. Payments are likewise made for administrative services. For information on remuneration paid to the members of the Executive Management and Board of Directors, please see note 3. Other than the above, the Lundbeck Foundation has only had immaterial transactions with the related parties. 12. EVENTS AFTER THE BALANCE SHEET DATE At the beginning of 2013, the Lundbeck Foundation acquired the property at Scherfigsvej 7, DK-2100 Copenhagen Ø, Denmark.
110
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
BOARD OF TRUSTEES
Jørgen Huno Rasmussen, Chairman Born 1952, elected to the Board in 2008. MSc engineering (civil), B. Com. and Lich.tech., Group CEO of FLSmidth. Chairman of the Investment Committee. Vice-chairman of the board of Tryghedsgruppen and member of the boards of Tryg A/S, Bladt Industries A/S and Vestas Wind Systems A/S.
Special qualifications In-depth knowledge of managing an international, listed group and skills in new markets, strategy, branding, acquisitions and divestments, business development, procurement, finance, risk management and optimising production processes.
Mikael Rørth, Vice-chairman Born 1943, elected to the Board in 2002. Professor, Chief Physician, M.D., Copenhagen University Hospital. Chairman of the Research and the Biomedical Science Committees and member of the Investment Committee.
Special qualifications Experienced clinician with substantial scientific production in clinical oncology and basic research. Chief physician at the Copenhagen University Hospital since 1980 and professor at Copenhagen University since 1993. Long-standing contribution to research policy, including chairmanship of a number of scientific committees.
Thorleif Krarup Born 1952, elected to the Board in 2003. B.Sc. (Economics) and B. Com., Director. Member of the Investment Committee. Chairman of the board of Exiqon A/S, vice-chairman of Falck A/S, member of the boards of ALK A/S, H. Lundbeck A/S, Bisca A/S and the Denmark-America Foundation.
Special qualifications Management experience from large international organisations. Expertise in finance and economics. In-depth experience with board work in listed companies.
Povl Krogsgaard-Larsen Born 1941, elected to the Board in 2011. Professor, Pharm.D., Copenhagen University. Member of the Research, the Biomedical and Natural Science Committees and the Investment Committee. Chairman of the board of Bioneer A/S, vice-chairman of the Alfred Benzon Foundation and member of the board of the Carlsberg Laboratory.
Special qualifications Experience with board work in a large international company and management of knowledge-intensive organisations. Skills in research, development and innovation and experience with research evaluation.
Gunhild Waldemar Born 1957, elected to the Board in 2011. Professor, Chief Physician, M.D., Copenhagen University Hospital. Member of the Research and the Biomedical Sciences Committees. Director of Danish Dementia Research Centre, Chairman of the Research Committee under the Danish Alzheimers Association, Liaison with the European Federation of Neurological Societies EFNS and vice-chairman of the Dementia Council, Capital Region of Denmark.
Special qualifications Skills in research, development, research evaluation and innovation. Long-standing experience with international research management and board work in international scientific companies.
Jes Østergaard Born 1948, elected to the Board in 2001. M.Sc. (Chemical Engineering), Director. Chairman of the Natural Science Committee and member of the Research and Investment Committees. Member of the boards of ALK A/S, H. Lundbeck A/S, Heed Diagnostics and SCION DTU A/S.
Special qualifications Extensive management experience from international companies in the biotech, pharma and diagnostics industries and experience with board work in listed companies.
Kim Klitgaard Born 1963, elected to the Board in 2010. Operator. Elected by the employees of H. Lundbeck A/S.
Ken Liljegren Born 1963, elected to the Board in 2010. Civil engineer, Principal Scientist. Elected by the employees of H. Lundbeck A/S.
Peter Adler Würtzen Born 1968, elected to the Board in 2008. Ph.d., Team Leader. Elected by the employees of ALK A/S
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EMPLOYEES
Management
Christian Dyvig
Chief Executive Officer
Theis Martin Malmborg Britt Wilder Nina Kamille Holmgaard
Executive Assistant Executive Secretary Adm. Service Coordinator
Grants
Anne-Marie Engel Sissel Vorstrup Nina Espegård Hassel Ulla Jakobsen Kirsten Ljungdahl Heidi Stoklund Larsen
Director of Research Associate Director of Research Strategic Advisor Science Manager Secretary Student Assistant
Emerge
Christian E. Elling
Partner
Ventures
Mette Kirstine Agger Johan Kördel Mikael Strindlund Casper Breum Jon Kaznelson
Managing Partner Senior Partner Senior Partner Partner Student Assistant
Invest
Bertil From Kasper Kitaj Pedersen Christoffer Gundelach
CFO Investment Director Student Assistant
Accounting/Controlling
Claus Køhler Carlsson Vibeke P. Bache Susanne Bernth Lotte Halse
Director, Accounting & Tax Head of Accounts Senior Controller Controller
The Brain Prize
Kim Krogsgaard Janne Axelsen
Director International Relations Manager
Design: Klaus Wilhardt Photo: Pernille Ringsing ISSN 1901-5933
The Lundbeck Foundation is an active industrial foundation that strives to maintain and expand the Lundbeck Foundation Group by:
• being an active value-adding owner of its subsidiaries (H. Lundbeck, ALK and Falck) and other innovative companies (through Lundbeckfond Ventures and Lundbeckfond Emerge) that rank among the leaders in their respective areas of business • being an active manager of its portfolio investments (Lundbeckfond Invest) • supporting and strengthening research in biomedical and natural sciences of the highest international standards with ties to Denmark in order to make a significant difference for people’s health and life
The Lundbeck Foundation Group 2012 Revenue
DKK 28,675 million
Operating profit before special items
DKK 2,729 million
Lundbeck Foundation’s share of profit for the year before grants and special items
DKK 2,243 million
Grants
DKK
Net wealth
DKK 26,893 million
Number of employees
The Lundbeck Foundation ı Vestagervej 17 ı DK-2900 Hellerup ı Tel +45 39 12 80 00 www.lundbeckfonden.com
482 million
28,049