2014 Annual Report
Lundbeck Foundation
In 1954, Grete Lundbeck established Lundbeck Foundation. She was the widow of Hans Lundbeck, founder of the pharmaceutical company, H. Lundbeck A/S. The couple had no heirs so Grete Lundbeck transferred her shares in Lundbeck to the Foundation. Lundbeck Foundation is an active industrial foundation. Our main objective is to maintain and expand the activities of the Lundbeck Group, and to provide financial support for research of the highest quality within biomedical and health sciences. The latter is given in the form of grants and through commercial investments. We are the majority shareholder in three large Danish companies: Lundbeck, ALK (acquired in 1989) and Falck (acquired in 2011). In addition, we own a portfolio of securities managed by Lundbeckfond Invest, and a portfolio of biotech investments managed by Lundbeckfond Ventures. Finally, Lundbeckfond Emerge works to commercialise early-stage scientific projects through investments and active project participation. In 2014, our grant contributions rose to DKK 474 million and the market value of our commercial activities reached DKK 38,770 million.
Grete Lundbeck
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Contents
Growth through healthy investments Management report Lundbeck Foundation Grants
2 3-7 8-29
– Internationalization
12-13
– Fellowships
14-16
– Prizes
17-23
– Strategic Grants
24-25
– Lectures
26-27
– Communicating Science
28-29
Lundbeckfond Emerge
30-31
Lundbeckfond Ventures
32-33
Lundbeckfond Invest
34-35
Lundbeck 37 ALK 38 Falck Corporate governance
39 40-42
Risk management
42
Corporate Social Responsibility
43
Financial statements Lundbeck Foundation Group
45
Financial statements Parent Foundation
111
Board of Trustees and employees
120
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Growth through healthy investments Lundbeck Foundation is committed to improving people’s health and quality of life. To fulfil this mission, we must continue to deliver good financial results.
Lene Skole, CEO and Jørgen Huno Rasmussen, Chairman of the Board of Trustees
The profit generated by our commercial activities allows us to gradually strengthen our contribution to Danish life science. By investing in innovative research – through grants and investments – we not only support the development of new treatments and technologies. We also create jobs for a large number of research staff, provide the basis for new companies, and stimulate the growth of others. In this way, investments in pioneering life science benefit human health as well as the economy. Denmark holds a strong international position within life science research. We wish to help strengthen this position. As a direct result of increased earnings, our grant donations rose to half a billion DKK in 2014, and we added six new companies to the Lundbeckfond Ventures portfolio. Lundbeck Foundation is the proud owner of three subsidiaries – Lundbeck, ALK and Falck – all of which are global market leaders in their respective fields and key contributors to our earnings. As a long-term owner, we actively participate in the development of these companies to help sustain their
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successful performance, and, in this way, contribute to keeping important knowledge-intensive jobs in Denmark. As a company owner, investor and grant distributor, we operate with a high level of professional commitment and integrity. We set the highest standards for good governance, transparent operations and social responsibility. In 2015, we will adopt the newly issued recommendations on good corporate governance in industrial foundations. Lundbeck Foundation aims to maintain an ambitious level of grant and investment activities in the future. To help researchers and companies push new frontiers – and to stimulate growth in society.
Jørgen Huno Rasmussen Chairman of the Board of Trustees
Lene Skole CEO
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Management report Earnings in Lundbeck Foundation have increased over recent years, generated primarily by the successful management of our investment portfolio and our three subsidiaries – Lundbeck, ALK and Falck. In 2014, this allowed us to raise our grant contributions to DKK 474 million and add six new companies to the Lundbeckfond Ventures portfolio.
As a result of recent years’ growth in earnings, we increased our grant contributions in 2014, bringing them to almost half a billion DKK. We also expanded our ventures portfolio with six new biotech companies, whose pioneering results hold significant potential. In 2014, the increase in profit came primarily from our investment portfolio in Lundbeckfond Invest. While the earnings in both ALK and Falck increased, the total earnings in our subsidiaries fell this year due to patent expiry of some of Lundbeck’s best selling products, combined with the cost of launching the company’s extensive programme of new innovative products.
Commercial activities Our commercial activities include ownership of three large Danish companies – Lundbeck, ALK and Falck – as well as venture investments in life science companies and active inhouse management of a financial investment portfolio. Lundbeckfond Invest In 2014, Lundbeckfond Invest generated the highest return we have seen so far. Executing on the strategy from 2011, Lundbeckfond Invest continued its active in-house management of the portfolio, drawing on only a small number of external managers where additional expertise was needed.
Lundbeckfond Emerge In 2014, Lundbeckfond Emerge continued its efforts to turn early-stage life science research into viable businesses. As a proactive partner, we helped to further develop our two portfolio companies, Insusense Therapeutics and EpiTherapeutics. The former develops new therapeutics for the treatment of diabetes and metabolic diseases, and the latter explores novel cancer drugs. Both biotech companies made significant progress in their development programmes in 2014. Lundbeck Lundbeck is navigating through a period of transition. In 2014, the company continued its extensive product launch programme and completed the successful acquisition of US-based Chelsea Therapeutics International Ltd. at a price of USD 530 million. The growth in sales of new products is on track to replace the revenue lost from mature products such as Cipralex®/Lexapro® and Ebixa®, where Lundbeck has faced competition from generic products in recent years. Revenue from new products increased by 44% to DKK 4,460 million in 2014. As well as an ambitious product launch effort, Lundbeck has also made significant progress in its development activities and continued to strengthen the clinical profiles of its most strategically important new products. In 2014, the company presented new important clinical data which shows that Brintellix® improves cognitive performance and function in adult patients with depression.
The main contributors to the high returns were equities, listed and unlisted. The portfolio also benefitted from the strengthening of the USD.
The company’s financial performance is satisfactory considering the loss of patents for Cipralex® in Europe and Canada, continued generic erosion on Ebixa® in Europe, and a heavy investment effort to support the successful launch of new products.
Lundbeckfond Invest’s return for the year amounted to DKK 2,228 million, up from DKK 1,206 million in 2013. This translates into a total time-weighted return of 19.1% (11.3%), which is highly satisfactory. At the end of the year, Lundbeckfond Invest had a portfolio of approximately DKK 13.7 billion under management.
ALK In 2014, ALK achieved one of its best results ever. The company’s total revenue grew by 9% to DKK 2,433 million. This progress was driven by continued growth in the base business, increased partner income, and improved underlying profitability.
Lundbeckfond Ventures Lundbeckfond Ventures invested in six new companies in 2014, bringing its portfolio to a total of 19. The existing portfolio of companies experienced substantial progress during the year, and the Lundbeckfond Ventures team continues to support the portfolio companies in their development through active board participation.
Following many years of R&D investments – including more than 35 clinical trials with over 15,000 patients – ALK launched its first two allergy immunotherapy tablets in North America in 2014. With the introduction of tablets into North America, the company saw important progress towards the goal of globalising its lead products, the tablet portfolio.
In 2014, Lundbeck Foundation’s total investments in new and existing venture companies were DKK 324 million.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Falck In 2014, Falck continued its efforts to become a global provider of emergency and healthcare services. The company strengthened its position in its most important markets – Europe, Latin America and the United States – by winning new contracts and renewing existing ones. With growing activities throughout the year, Falck’s revenue increased by 11.3% to DKK 13,952 million. This was primarily attributed to organic growth, the merger with TryghedsGruppen’s healthcare companies, and acquisitions made by Falck’s Emergency business. Falck’s operating profit rose to DKK 1,139 million in 2014, an increase of DKK 27 million. This was achieved in spite of the drop in earnings experienced in Safety Services – whose business was impacted by the lower levels of activity in the oil industry.
Grants The profit generated by our commercial activities constitutes the basis for our grant contributions. In 2014, Lundbeck Foundation granted DKK 474 million to research with a connection to Denmark. A total of 349 grants were awarded, ranging from travel grants to large strategic grants to research groups collaborating on more extensive projects. In total, 643 researchers and technical staff had their salaries funded by our grants in 2014. The research we supported was mainly within biomedicine and other health-related areas. However, grants were also given to projects that aim to communicate science to a broader audience, and to projects that focus on improving the quality of science education. Young researchers continue to be a particular priority for the Foundation. We aim to motivate, inspire and acknowledge research talents, for example by awarding personal grants and honorary prizes – e.g. Lundbeck Foundation Fellowships, Lundbeck Foundation Research Prize for Young Scientists, and Talent Prizes. In 2014, six new Lundbeck Foundation Fellows were appointed. Each of them received a five-year grant of DKK 10 million to form independent research groups at Danish research institutions. In addition, we granted 34 PhD scholarships to individual scholars and 48 postdoc scholarships for research projects. In 2014, the project, iPSYCH received an additional grant of DKK 120 million. The project received a strategic grant of DKK 121 million from us back in 2011 – the largest grant ever awarded to Danish psychiatric research. The extension of funds allows iPSYCH to pursue its pioneering research into the mechanisms behind some of the major psychiatric diseases. The Grete Lundbeck European Brain Research Prize – or The Brain Prize as it is popularly known – is an annual personal research prize awarded to 1-3 scientists who have made outstanding contributions to European brain research. With a total prize sum of EUR 1 million, this is the world’s largest personal prize in neuroscience. This year, The Brain Prize was given to three scientists who have provided extraordinary insights into reading skills, mathematical ability, motivations for behaviour and social interaction. 4
Board members and management In 2014, Christian Dyvig retired from his position as CEO of Lundbeck Foundation. During his period as CEO, the Foundation has undergone huge development, especially in its commercial activities. Mr. Dyvig has been the driving force in the modernisation of the Foundation, promoting the active ownership of Lundbeck, ALK and Falck as well as the in-house management of our investment portfolio. We wish to express our gratitude to Mr. Dyvig for his significant contribution to the development of Lundbeck Foundation. Mr. Dyvig was replaced by Lene Skole, former CFO of the Danish medico company, Coloplast A/S. In accordance with statute terms, Professor Mikael Rørth stepped down from the Board of Trustees in 2014. During his 12 years as board member, Mr. Rørth has contributed significantly to the Foundation’s development, focusing particularly on making our decision-making processes as transparent as possible and establishing international peer review of grant applications. Professor Rørth was replaced by Professor Susanne Krüger Kjær, MD, DMSc. At the Foundation’s Annual Meeting, new employee representatives were appointed to the Board of Trustees. The employees in the subsidiaries appointed Vagn Flink Møller Pedersen (Falck) and Henrik Sindal Jensen (Lundbeck); they replaced Kim Klitgaard (Lundbeck) and Ken Liljegren (Lundbeck). Peter Adler Würtzen (ALK) was reelected. We would like to welcome the new board members – and express our warm thanks to retiring board members for their important contribution to the Foundation.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Breakdown of Lundbeck Foundation’s share of profit 2014 DKK MILLION
364
3,000
-17
2,214
-31
2,500
2,731 2,494
-120 -237
2,020
2,000
-474
1,500 1,000 500
352
76 -107
0 Falck
ALK
Lundbeck
Invest
Ventures
Grants
Admin
Tax
Before grant donations
Special items
Profit fot the year
Grant donations
Total
The figures in the table above illustrate net contribution to Lundbeck Foundation’s share of profit 2014.
Results Lundbeck Foundation Group’s revenue declined by 0.6% to DKK 29,904 million in 2014 (30,092). The decline in Group revenue is the result of a fall in Lundbeck’s revenue due to patent expiry, which is not fully compensated by the increasing revenue in ALK and Falck. To sustain profitable growth in the future, Lundbeck and ALK continued to make significant investments in R&D in 2014. However, the Group R&D costs fell 4% to DKK 3,204 million (3,344). R&D costs in 2014 include Lundbeck’s discontinuation and writedown of desmoteplase of DKK 309 million. Sales and distribution costs rose to DKK 6,491 million in 2014 (5,694), which is an increase of 14%. This significant increase is the result of Lundbeck’s extensive product launch programme. With DKK 3,351 million in Group administration costs, Lundbeck Foundation Group's administration costs remained at last year’s level. The increase in Falck's administration costs was compensated for by a decrease of the same in Lundbeck.
Lundbeck Foundation’s share of profit for the year increased to DKK 2,494 million (2,074). The increase in profit for the year is the result of improved earning in Lundbeckfond Invest and Lundbeckfond Ventures. The combined contribution from Lundbeckfond Invest and Lundbeckfond Ventures to the Foundation’s profit rose by DKK 1,212 million compared to last year. However, the contribution from our subsidiaries declined by DKK 654 million. The decline was expected and is a consequence of Lundbeck’s patent expiry combined with the cost of launching the company’s extensive programme of new products. Falck and ALK both increased their earnings and contribution to the Foundation’s profit. The Foundation’s operating expenses totalled DKK 70 million (59). The increase was due to a generally higher level of activity in the Foundation, including costs incurred in the recruitment of a new CEO and other project costs. DKK 474 million (376) was awarded in grants in 2014, equal to 19% (18%) of the Foundation’s profit for the year.
The return from the activities in Lundbeckfond Invest and Lundbeckfond Ventures increased significantly in 2014. Lundbeckfond Invest realized a return of DKK 2,228 million (1,206). This translates into a total time-weighted return of 19.1% (11.3%), a highly satisfactory result. Lundbeckfond Ventures realized a return of DKK 373 million (181). The improved financial performance in Lundbeckfond Ventures was primarily due to increased share prices in Veloxis and Celladon following the latter’s Initial Public Offering (IPO). Lundbeck Foundation Group’s tax expenses amounted to DKK 441 million in 2014 (707), equal to an effective tax rate of 14% (22%). Lundbeck Foundation’s share of net profit after tax and before special items fell by 2.7% to DKK 2,731 million in 2014 (2,807). Special items amounted to DKK 237 million after tax (733). This sum relates to Falck’s amoritisation of intangible assets, costs associated with acquisitions, and the fine incurred by Lundbeck in 2013 from the European Commission of DKK 699 million. 5
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Distribution of net wealth
Net wealth Value (DKK million)
Ventures and Emerge 4%
Change in net wealth 1/1-31/12 2014
Lundbeck 42%
Lundbeck 16,867
Invest 34%
-1,570
ALK
2,656
171
Falck
5,094
561
Invest 13,735 2,214 Ventures and Emerge Falck 13%
1,461
394
Grants, Admin, etc.
-1,043
-642
Net wealth
38,770
1,128
ALK 7%
Equity and wealth
Outlook
As a combined effect of the development in the Group’s operations, the Foundation’s share of consolidated equity rose to DKK 28,354 million after grants (25,437).
The financial performance of Lundbeck Foundation Group depends on developments in the commercial activities of Lundbeck, ALK and Falck, as well as the returns generated by Lundbeckfond Ventures and Lundbeckfond Invest. The latter, in turn, depend on trends in the financial markets.
The Foundation’s net wealth calculated at fair value increased to DKK 38,770 million in 2014 (37,642), primarily due to the results achieved by Lundbeckfond Invest and Lundbeck Ventures, as well as the increase in the share price of ALK and Falck. Lundbeckfond Invest and Lundbeckfond Ventures’ share of the Foundation’s net wealth by the end of the year had increased by 16% compared to last year.
Based on current financial performance across the Group, we expect to maintain our current level of grant activities in the coming years. For a detailed account of the outlook for the subsidiaries, please go to their company websites www.lundbeck.com, www.alk-abello.com and www.falck.com.
Group key figures Financial highlights (DKK million) Revenue Operating profit before special items Lundbeck Foundation's share of profit before special items Lundbeck Foundation's share of profit
2014 2013 2012 2011 2010 29,904 1,425 2,731 2,494
30,092 3,465 2,807 2,074
28,675 2,842 2,292 2,115
23,602 4,172 1,819 1,618
16,927 3,513 2,880 2,880
Grants awarded 474 376 482 504 384 Dividends from subsidiaries 401 295 499 537 441 Investments in acquisitions 3,534 593 437 4,537 178 Investments in property, plant, equipment and intangible assets 2,358 2,361 2,426 1,563 989 Equity 33,023 29,357 27,928 26,332 25,967 Lundbeck Foundation's share of equity 28,354 25,437 24,033 22,551 21,396 Total assets 59,588 54,121 50,232 47,459 34,732 Net wealth 38,770 37,642 26,893 28,736 28,519 Key figures Revenue growth Operating profit margin Return on equity before special items Average number of employees
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-0.6% 5.0% 21.5% 39.4% 8.5% 4.8% 11.5% 9.9% 17.7% 20.8% 10.2% 11.3% 9.8% 8.3% 14.4% 32,135 29,798 28,049 15,875 7,314
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Overview of Lundbeck Foundation
Global leader in brain disorders
70%
Revenue DKK 13,468 million
Annual grants of DKK 400-500 million for research of the highest international standard
From invention to commercialisation 2 portfolio companies Global leader in allergy vaccines
42% (69%)
Revenue DKK 2,433 million
Investment in life science companies 19 portfolio companies
International leader in assistance and emergency Revenue DKK 13,952 million
57%
Portfolio investments in shares, bonds, etc. Value DKK 13,735 million
Note: Lundbeck Foundation owns 42% of the share capital and 69% of the votes in ALK after the deduction of treasury shares.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
A year of tradition and renewal
Anne-Marie Engel, Director of Research
2014 has been a year of tradition and renewal. Our aim and purpose remain the same, but we have taken new steps to further expand our grant activities, initiating new grants for clinical research positions. We have also increased our efforts to share and discuss the research we support with a wider audience. With close to half a billion DKK in grant contributions to innovative researchers and projects in one year, the Foundation exerts considerable influence on the areas of research we have chosen to support. For this reason, it is of great importance to us that our strategy and procedures concerning application and evaluation are transparent and their conditions clearly communicated. As of 2014, anyone who receives a grant from Lundbeck Foundation must agree to follow the Foundation’s Code of Good Research Practice, which covers compliance with laws, rules and standards; it also sets out guidelines for the integrity of research, transparency of procedures, and the sharing of research data. This year, we welcomed and endorsed The Danish Code of Conduct for Research Integrity. In the future, this document will constitute the general framework for the Foundation’s own Code of Good Research Practice.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Through our grant activities, we support high-quality biomedical and health science research with an aim of improving people’s health and quality of life.
Grants The DKK 474 million in grants awarded in 2014 (including Lundbeckfond Emerge’s portfolio investments) were awarded to researchers and projects that have some connection to Denmark. This sum covers a total of 349 grants, ranging from travel grants supporting researchers who want to present the results of their work to fellow scientists, to large strategic grants for research groups collaborating on complex research questions over longer periods of time. The research supported was mainly within biomedicine and other health-related areas. On a smaller scale, grants were also given to projects that aim to communicate science and/or significant research results to a broader audience. We also supported projects that focus on improving the quality of science education – e.g. by improving science teacher education or introducing innovative science teaching methods. The Foundation allocated 34 individual PhD scholarships and 35 postdoc scholarships for research projects that will be conducted mainly in Denmark. Furthermore, 13 postdoc scholarships were granted to young researchers, who will be working on their research projects in international research groups located outside Denmark. 29 researchers received funding for short internships at universities or university hospitals in other countries. We appointed six new Lundbeck Foundation Fellows in 2014.
Grants by category in 2014 (in DKK million)
Initiated in 2007, our fellowship grants are awarded to young, outstanding researchers who wish to establish and expand their own independent research group at a Danish research institution. The six new Fellows are young, very promising researchers, working in both basic and more applied areas of biomedicine. Each fellowship consists of a five-year grant of DKK 10 million, and the researcher joins the group of Lundbeck Foundation Fellows, which now counts 43 scientists. The Foundation’s main grant instruments are shown on page 11. They match the different areas of our grant strategy. In each their way, our grants contribute to our overall mission of improving people’s health and quality of life.
’This year, we welcomed and endorsed The Danish Code of Conduct for Research Integrity.’ Research full-time equivalents in 2014
Emerge 14.9 million PhD 146
Personal Grants 230.7 million Postdoc 261
Technical staff 21
Strategic Grants 199.3 million
Prizes 16.0 million
Science Communication 13.1 million
Other academic staff 146
Scolarships 69
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Personal Grants Our personal grants help advance the careers of outstanding researchers whose work have shown particular promise. In this category, we also offer travel grants that allow young researchers to go abroad to further qualify themselves and expand their network. Other grants in this category are aimed at researchers who are ready to set up their own research team in Denmark. In 2014, two new types of grants were added to the personal grant category. By application from the deans at the medical faculties in Western Denmark, we granted two clinical research professorships and two clinical research associate professorships. With these new types of grants, we wish to highlight the importance of providing doctors with the time and resources to engage in patient consultations and research – allowing the latter to be based on the challenges and needs they identify through their clinical work. Strategic Grants Our strategic grants support large and complex research projects, most of which are interdisciplinary and involve multiple research groups. In 2014, we awarded three strategic grants. One of them is a three-year extension of the project, iPSYCH – a collaboration between five Danish professors and their extensive international network. iPSYCH aims to identify the genetic, biological and other mechanisms behind the development of some of the major psychiatric diseases. The second project, PROCRIN is funded in collaboration with the Novo Nordisk Foundation. This two-year project aims to ultimately increase the quality of patient treatment and safety through the establishment of a national infrastructure programme. By supporting the increased use of patient data in clinical work, this infrastructure programme will help increase the quality of Danish clinical research. Our third strategic grant was awarded to a group of researchers based at the Technical University of Denmark (DTU). The focus of their project is the complicated immunological
’The personal and strategic grants awarded by the Foundation contribute to growth in Denmark – directly as well as indirectly.’ mechanisms underlying the development and persistence of inflammatory bowel diseases such as Crohn’s Disease and ulcerative colitis. The personal and strategic grants awarded by the Foundation contribute to growth in Denmark – directly as well as indirectly. They help to secure jobs for a large number of research staff, academic and technical, who work on high-quality research projects. These people educate – or are themselves being educated – as the next generation of Danish biomedical researchers through our PhD and postdoc scholarships. In 2014, the salaries of 643 full time researchers and other staff were covered by grants from the Foundation. This figure comprises PhD students and postdocs as well as the large number of academic and technical staff working as part of a research team at centres of excellence or on larger strategic projects. Our grants indirectly translate into growth in society by generating new knowledge and insight into important basic and applied scientific issues within biomedicine. Without such new knowledge, no new treatments or procedures would be developed and many medical needs would remain unmet.
Prizes With our prizes – awarded to young as well as experienced scientists – we wish to honour researchers who have been nominated by their mentors or peers as particularly promising and talented; we also wish to acknowledge individual scientists who have done outstanding work in their particular field of research. The Brain Prize – the world’s largest personal prize in neuroscience (brain research) – is awarded through a separate foundation, the Grete Lundbeck European Brain Research Foundation founded in 2010. On page 20, the Managing Director Kim Krogsgaard describes the prize’s early beginnings as well as the results it has helped to generate so far. The article on pp. 22-23 presents the three recipients of this year’s Talent Prizes. All three are biomedical scientists but work within very different fields; cellular biology, inflammatory bowel diseases and modification of animal cells.
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The article, ‘Outstanding study on genomes reveals why birds became birds’ introduces this year’s recipient of the Lundbeck Foundation Research Prize for Young Scientists. Professor Tom Gilbert received a Lundbeck Foundation Fellowship in 2010. He has published the results of his primary fellowship work with great success, but the article tells you more about other research projects that have emerged as a result of the fellowship. Among them, a highly significant project on avian genetics, which developed from a small project into a huge international collaborative effort, resulting in the genetic mapping of all known families of birds and several articles published in the scientific journal Science in December 2014. This is an impressive example of how pioneering research results can extend into related fields because the scientists involved have flexible funding at their disposal.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Communicating Science Pursuing our efforts to promote science education and communication, we have granted DKK 13 million to projects focusing on both development of new education material and inspiration for schoolchildren. Among the projects supported are the launch of the first Danish astronaut into space and the Scandinavian final of the international competition, First Lego League. Initiated in 2012, the Lundbeck Foundation Lectures is a lecture series that aims to raise awareness of Danish research among the general public. The lectures are now held in both Copenhagen and Aarhus, and have been very positively received. We are delighted that so many have shown an interest in meeting scientists – to learn more about their research and
discuss the possible social or ethical implications of the latest research results. Among other events sponsored and hosted by the Foundation in 2014 were science journalist Lone Frank’s documentary, ‘Genetic Me’, and presentation events in Aarhus and Copenhagen, where three distinguished Danish scientists gave their evidence-based version of how the universe, life on earth, and human evolution happened. Please see the articles on the following pages for more detailed accounts of some of the talented people and pioneering projects we have supported during 2014.
Lundbeck Foundation Grant Strategy
Biomedicine and Health Science
Scientific Encouragement
Communicating Science
Research Grants
Prizes
• Science Education
• Personal Grants
• Talent Prizes
• Science Communication Projects
• Strategic Grants
• Young Researcher Prize
• Travel Grants
• Best Teacher Prize • PhD Cup • The Brain Prize
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Internationalization
Norway 2 Iceland 1 Canada 11
Finland 2
Scotland 1
2
England 12 Ireland 1
Sweden 2 Estonia 2 Denmark 28
2
Germany 12
Poland 1 3
Czech Republic 27 Austria 2 France 11 Switzerland 4 1
Netherlands 2 USA 84 12
Spain 12 Portugal 4
Italy 11
Greece 1 Cyprus 1
Mexico 1
Ethiopia 1
Costa Rica 1
Zanzibar 1 Brazil 2
1
South Africa 1 Argentina 2
’Most wanted destination: 29% of the ones receiving the travel stipends crossed the Atlantic and went to the United States.’ 12
’Almost half of the stipend recipients stayed in Europe. (48%)’ ’Only 6 travel grant recipients went to Asia. (2%)’
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
The internationalization of Danish research is an important priority for the Foundation. Danish researchers who go abroad and work in international environments build up knowledge, expertise and networks that benefit them and their research, whether they choose to stay abroad or return to Denmark and continue their research career here. In 2014, the Foundation awarded 308 travel grants and international research grants. Japan 1 China 2
Travel Grants International Research Grants Taiwan 2
37 of the 308 travel and international research grants supported by Lundbeck Foundation are distributed in collaboration with organisations, whose expert committees assess the applications directed to them. These assessments are still ongoing.
Malaysia 1
Australia 1
New Zealand 1
’The grant recipients went to 34 different countries ranging from Canada as the most northern country to Argentina as the most southern country.’
’Less than 3% got the opportunity to experience the tropical climate (Brazil, Mexico, Costa Rica, Malaysia).’
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Each year Lundbeck Foundation invites applications for fellowships from particularly promising young researchers The fellowships are awarded for a five-year period, and each grant amounts to DKK 10 million. They are aimed at researchers who are qualified to establish or develop their own research groups in Denmark. The main criterion for receiving a fellowship is that the suggested project represents top-quality innovative research within biomedicine and health science, including natural science projects with a clear biomedical focus. Furthermore, applicants must be junior researchers, which means that we expect them to have completed their PhD degree within the last five to seven years.
Lundbeck Foundation Fellow Hanne Poulsen, PhD, Associate Professor, Department of Molecular Biology and Genetics, University of Aarhus Managing the smallest pumps
The fellowship will support Ilia in developing a universal set of computer programs to the benefit of biomedical researchers all over the world. Although there are already programs available in this field, Ilia’s goal is to make these programs very user friendly. Researchers will be able to use them without specialised training.
Our body consists of billions of cells, all of them equipped with a sodium-potassium pump system that is crucial to normal cell function. Imbalances in this finely-tuned system can lead to severe neurological diseases.
The simulations are not an alternative to real experiments. But they provide researchers with an opportunity to understand the biological processes of their own experiments in much greater detail.
Lundbeck Foundation Fellow Hanne Poulsen is working to understand this mechanism and why its malfunction causes paralysis in newborns. Her work may also uncover the sodiumpotassium pump’s impact on other neurological diseases such as dementia and migraine.
—
Hanne is a committed scientist, and will be putting together a team of researchers to work in the labs at the University of Aarhus – the same place where the sodium-potassium pump was originally discovered and earned one of her predecessors, Jens Christian Skou, the Nobel Prize in Chemistry. — Lundbeck Foundation Fellow Ilia Solov’yov, PhD, Assistant Professor, Department of Physics, Chemistry and Pharmacy University of Southern Denmark Simulating the inside of cells Knowing how human cells work is crucial in the fight against diseases. However, not even the most powerful microscope in the world can show us the inside of living cells in sufficient detail. Biophysicist Ilia Solov’yov is developing a computational microscope that simulates cell processes. These simulations will give researchers an insight into processes that are otherwise invisible.
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Lundbeck Foundation Fellow Vasileios Bekiaris, PhD, Associate Professor, Section for Immunology and Vaccinology, Technical University of Denmark (DTU) Understanding the human body’s defence system The immune system is designed to destroy viruses and bacteria that invade and infect our body. But there are cases when the defence system turns on healthy cells, resulting in diseases such as multiple sclerosis. This is due to a genetic error, causing the immune system to believe that healthy cells are infected. Immunologist Vasileios Bekiaris is finding out how the immune system’s white bloodcells react. He wants to use this knowledge to help prevent the progression of multiple sclerosis. Vasileios will use his fellowship grant to gather a team of researchers from all over the world at the Technical University of Denmark (DTU) in Lyngby. Over the coming years, this team will build an immunology centre and an immunology programme. Their research will focus specifically on the group of enzymes that activate the white blood cells, causing them to initiate inflammation. Vasileios has already discovered a substance that stops white blood cells from being activated, which, in turn, may help suppress the symptoms of multiple sclerosis and ultimately stop disease progression.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
David Gloriam laus Bønnelykke Klaus
Hanne Poulsen Ilia Solov’yov
Vasileios Bekiaris
Leticia Hosta-Rigau
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
’The main criterion for receiving a fellowship is that the suggested project represents top-quality innovative research within biomedicine and health science.’ Lundbeck Foundation Fellow David Gloriam, PhD, Associate Professor, Department of Drug Design and Pharmacology, University of Copenhagen
Organelles are the ‘inner organs’ of human cells, and a malfunction in one of these subcellular compartments can cause life-threatening diseases. Over the next five years, with support from Lundbeck Foundation, Leticia and her colleagues intend to develop a nano-sized vessel that will carry and deliver artificial organelles as fresh spare parts to damaged cells in the body. The team will focus on organelles that are unable to produce a particular enzyme. The current treatment of injecting the missing enzyme has only a limited effect, resulting in children born with this disorder dying at a young age. Thanks to her PhD supervisor’s ability to recognise potential, Leticia can now use her talent in the field of biology to improve health and fight diseases. — Lundbeck Foundation Fellow Klaus Bønnelykke, PhD, Senior Researcher, Copenhagen Studies on Asthma in Childhood (COPSAC), Danish Pediatric Asthma Center, University Hospital of Gentofte, Copenhagen Uncovering the mystery of childhood asthma
Unlocking human cells Part of understanding the complexity of human physiology requires finding the hidden locks and keys in the human body. Truly game-changing results can be obtained when new locks are found and opened. David Gloriam has found many of these locks – that is, orphan receptors in human cells. The individual keys to these locks are yet to be identified, and this is what David’s fellowship project will focus on. Just like a network hub, the receptors act as a gateway to the cells and control cell function. Discovering the functions of new human receptors has led to understanding diseases such as Alzheimer’s, diabetes, cancer, and obesity. The Lundbeck Foundation fellowship will help David and his colleagues at the Faculty of Health and Medical Sciences at the University of Copenhagen to gain a better understanding of the functions of the orphan receptors. They will then be able to design new drugs that can act on the receptors, by fitting the drugs into 3D models of the receptors and the corresponding keys that they have discovered in their research. The fellowship will also help David build a database to capture the data from his research. Data that will make it possible to identify new keys much faster in the future.
The cause of severe childhood asthma is a mystery, making proper prevention and treatment difficult. Klaus Bønnelykke is working to uncover this mystery by mapping the genetic regulation of asthma. Klaus uses clinical studies, research methods and genomic screening to identify the risk genes for asthma. Combining his laboratory work with his clinical job as a paediatrician at Gentofte Hospital, he examines the genetic and immunological information of his young patients. Klaus is conducting his research at COPSAC in close collaboration with Professor Hans Bisgaard, who originally encouraged Klaus to study childhood asthma. With the support of his fellowship from Lundbeck Foundation, Klaus will put together a team of researchers to work on improving the quality of life for children and their families living with asthma. Klaus believes that childhood asthma actually consists of several different diseases. It is only through an understanding of each of them at a basic level that researchers can contribute to provide better treatment for future asthma patients.
— Lundbeck Foundation Fellow Leticia Hosta-Rigau, PhD, Postdoc, DTU Nanotech, Department of Micro- and Nanotechnology, Technical University of Denmark (DTU) Microsubmarines to the rescue of diseased human cells Sending microsubmarines into the human bloodstream to cure diseases may sound ambitious, but Leticia Hosta-Rigau plans to do just that.
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’The fellowships are awarded for a five-year period, and each grant amounts to DKK 10 million.’
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Outstanding study on genomes reveals why birds became birds Professor Tom Gilbert won this year’s Lundbeck Foundation Research Prize for Young Scientists. His research is described as a milestone in biology relating to the ‘big bang’ of bird evolution.
Professor Tom Gilbert
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Recently, the findings of the Avian Phylogenomics Consortium, headed by Tom Gilbert, Guojie Zhang (University of Copenhagen and BGI China), and Erich Jarvis (Duke University) were reported in no less than 23 articles in different scientific journals, eight of them in the same volume of Science. Some of the papers are bird-specific, focusing on how penguins adapted to living in cold-water environments, and why they swim rather than fly. Some focus on why some species tend to become extinct and others not. Some are about the genetic basis of avian-specific features, and in essence how birds evolved at the genome level as they broke away from their dinosaur ancestors. For example, how they lost their teeth, modified their bodies for flight, developed different types of feathers, and changed their vision. 23 articles published at the same time is in itself a milestone, and, on top of that, Tom’s team answered a wide range of questions. To colleagues and outsiders alike, this level of productivity begs the question: How was this possible? “Actually when we started in 2010, my idea was to focus on one key question, and that was simply to try and determine how the different avian ‘orders’ of birds relate to each other. This has been studied again and again with other datasets, both morphological things and small DNA datasets. And each time, people got different results. This is why we wanted to try with the whole genome”, says Tom.
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“When it comes to analysing the bird data, my group and I were only able to do this thanks to the skills we had developed during the Lundbeck Foundation Fellowship I received back in 2010”. When Tom initially wrote a grant proposal to Lundbeck Foundation, he proposed a study of the evolution of infectious agents: through the exploitation of historic and ancient tissue samples, he wished to recover ancient pathogen genomes, using them as a tool to examine how these pathogens evolve. He requested five years of funding, but only proposed a threeyear research plan. His underlying argument was that because genomic sequencing and analysis methods are advancing so fast, it was nearly impossible to accurately plan five years
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
ahead. And that is basically what happened. The team achieved their original scientific goals in the first three years. And by then it had become obvious to him that the best way to use the expertise developed, thanks to the flexibility of Lundbeck Foundation’s funding, would be to tackle the avian question, using a pioneering whole genome approach. And finally, after more than a century of previous attempts, Tom’s team and their collaborators were able to create a dataset that allowed this question to be tackled in the biggest way possible – using whole genomes from 48 different types of birds.
’The study of evolutionary relationships among groups of species – is the future of all evolutionary analyses.’
A valuable and unique dataset Previous avian genome studies are based on analysing a single species’ genome, focusing on one or two genomes at best. “My collaborators and I proposed to sequence across the complete diversity of a vertebrate group, which means that we would include at least one bird species from each of the major subdivisions of birds – consisting of 35 avian ‘orders’. This meant that the dataset spanned the full evolutionary diversity of birds, and was a very powerful resource for many scientists”, says Tom. Tom and his two key collaborators, Zhang and Jarvis, decided to establish a resource that would be of use to a wide range of researchers who are either studying birds, or using birds as a model system to understand other subjects.
“This meant that it could be used immediately in different studies, which is why we ended up publishing 23 articles simultaneously, making it possible to answer a whole range of different questions – and not just bird-specific questions”, Tom explains. Birds’ genes relevant to human brain research “In general, we demonstrate how powerful an approach it is to look at the whole genome of many species in parallel. The dataset provides knowledge on how genomes evolve, including how they gain and lose DNA, how new genes form, how genes get lost, how sex chromosomes evolve and so on”. “While the bird answer is of interest to bird people, the ‘bigger picture’ about how to do such analyses, is relevant to a huge number of people. Ultimately, using whole genomes to answer phylogenetic questions – that is, the study of evolutionary relationships among groups of species – is the future of all evolutionary analyses. We are the first to do that and we show the path that others may follow,” Tom explains. One study used the genomic data to show that there are near-identical, independently evolved similarities in the genetic basis of the brain circuits that control human speech, and the ability of some bird species to perform vocal learning. It seems that this process involved over 50 different genes evolving in a similar manner. In addition to providing fascinating insights into the function of both the avian and the human brain, it also shows something more fundamental about evolution: that the pathways it travels are sometimes very narrow. Sometimes there is really only one way to evolve a particular trait, and species that do it independently must do it very similarly, right down to the genetic level. The big challenge now is to understand what genes do. “We have become very good at finding genes that are probably quite interesting, but are not yet sure what they actually do”, Tom says.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
What is The Brain Prize all about? 2014 marked the fourth year of The Brain Prize. Managing Director of the Grete Lundbeck European Brain Research Foundation, Kim Krogsgaard talks about The Brain Prize and its contribution to brain research.
Kim Krogsgaard, Managing Director and Janne Axelsen, Int. Relations Manager
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
The Grete Lundbeck European Brain Research Prize, The Brain Prize is a EUR 1 million personal research prize that each year is awarded to 1-3 scientists who have made outstanding contributions to European brain research, and who are still active in research. The prize is shared equally between the winners if it is awarded to more than one scientist. The first call for nominations was announced on 16 May 2010 and the first Brain Prize was awarded on 2 May 2011. The Brain Prize is announced during the international Brain Awareness Week.
Why have a Brain Prize? The ambition of Lundbeck Foundation when The Brain Prize was established was to create a prestigious international personal research prize in neuroscience that would eventually become known as the Danish ‘Nobel Prize’. We intend to attract outstanding international scientists to Denmark – not only to receive the prize but to enforce a strong collaboration with the Danish neuroscience community and other international networks. Who can win the prize? Eligible candidates must be nominated by their peers. Since 2011, there have been 14 prizewinners – mainly from a biomedical background including MDs, psychiatrists and psychologists, while others have a background in biochemistry, biophysics or engineering. What is expected from the prizewinners? Prizewinners have an obligation to contribute to the advancement and internationalisation of Danish brain research through interaction with Danish neuroscience researchers. An example of this is to comply with and participate in our Danish outreach programme, which invites the prizewinners to participate in and present their work at the annual Brain Prize Meeting; and to visit research groups at major Danish universities. In addition, one or more prizewinners will participate and speak at the annual meeting of The Danish Society for Neuroscience. The winners are also expected to share their knowledge and expertise by actively working in The Brain Prize Academy, a forum for previous prizewinners. Academy members will assemble once a year and act as ambassadors and advisers to the Foundation. Who won the prize in 2014 and why? The 2014 Brain Prize was awarded to Professor Stanislas Dehaene (Paris, France), Professor Giacomo Rizzolatti (Parma, Italy) and Professor Trevor Robbins (Cambridge, UK). The selection committee stated that the 2014 prize was awarded to the three candidates: “for their pioneering research on higher brain mechanisms underpinning complex human functions as literacy, numeracy, motivated behaviour and social cognition, and for their efforts to understand cognitive and behavioural disorder”. The three scientists have provided extraordinary insights into reading skills, mathematical ability, motivations for behaviour and social interaction. They are renowned for translating knowledge gained from basic research to achieve greater understanding of human cognitive and behavioural disorders and their treatments.
For the first time, an international specialist Brain Conference (Controlling Neurons, Circuits and Behaviour) was held in Denmark during 20-24 April 2014. The conference was held in partnership with the Federation of European Neuroscience Societies and will take place biannually for the next four years. How would you describe the outcome of the first conference? I would call it a tremendous success. It was fully booked, we had great spring weather in Denmark, and there was a wonderful blend of attendees – young as well as seasoned scientists. The conference was applauded by speakers and participants, with one saying: “This was an amazing conference. So well run, and the scientific content was fantastic”. Another said: “Fantastic conference, one of the best I have ever attended”. I have never seen such a high evaluation score before. We are very pleased that our first-ever conference went so well. The Brain Prize is in its fourth year. Looking back, what have you achieved so far? We have established a prestigious personal research prize that is comparable to the Norwegian USD 1 million Kavli Prize in Neuroscience, which is awarded every other year. We receive nominations from all over the world and the number is steadily increasing. The Brain Prize is acknowledged by the national and international neuroscience communities. Most importantly, we have been able to foster valuable partnerships between Danish and international neuroscience researchers and organisations. From the very start, we were pleased to be endorsed by the Federation of European Neuroscience Societies. This has evolved into a mutually beneficial collaboration, especially around the Brain Conferences. What are the future plans for The Brain Prize? Our vision is to have the most prestigious, desired and most distinctive personal international research prize within neuroscience. To achieve this, we must expand our activities and work even more internationally in the future.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
The Lundbeck Foundation Talent Prizes 2014 The prize is awarded to young scientists under the age of 30 who have conducted particularly promising research in biomedical or health sciences.
Johan Burisch, MD, PhD, Department of Gastroenterology, Hvidovre Hospital and Assistant Lecturer, Department of Biomedical Science, University of Copenhagen A new app that will help patients self-monitor their chronic bowel disease Inflammatory bowel disease is the main subject of Johan Burisch’s research. He began research in the field of gastroenterology in his fourth semester at medical school, and has received much international acclaim for his work. Johan is working to get a better understanding of bowel disease. This involves recognising the behavioural patterns of the disease – how it acts in terms of being active or quiet, and which patients need surgery or intensive medication. He wants to convert this knowledge into an e-health application (app) to help monitor and treat patients in a more effective, accurate and timely manner. The main purpose of the e-health app is to involve patients in monitoring their disease, which will allow them to be proactive in relation to their own treatment, rather than having to make frequent trips to the hospital. This would also help reduce public health costs. In addition, Johan has also led the largest long-term study of chronic bowel disease in Europe. — Lin Lin, Postdoc, PhD, Department of Biomedicine, University of Aarhus Unlocking the mystery of Huntington’s disease Helping patients with Huntington’s disease is the main goal of Lin Lin’s research. With the help of the Lundbeck Foundation award, she will focus on identifying abnormal therapeutic ‘targets’ that seem to critically influence the progressive neurodegenerative process that eventually leads to patient death. Lin Lin, originally from China, already has an impressive track record of publications. She chose to settle in Aarhus and contribute to the research on disease mechanisms using her comprehensive knowledge of genes and gene regulation. Lin Lin's specific research interest is the management and modification of a specific type of cells. With the use of this model system,
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her aim is to gain a better understanding of the disease and to use it in the development of a regenerative medical prevention and/or treatment for Huntington’s disease, for which there is currently no cure or treatment available. — Catharina Steentoft, PhD student, MSc, Department of Cellular and Molecular Medicine, University of Copenhagen New knowledge defeating cancer At a very early stage of her career, Catharina Steentoft invented a new concept of research, called SimpleCells. Her SimpleCells method facilitates the analysis of important functions of protein glycosylation. In other words, the method enables the identification of sugar molecules and their specific location on proteins on the cell surface. This knowledge is essential in understanding the development of a number of diseases. For example, sugar molecules influence the way bacteria and viruses bind to the surface of cells, which is an early step in the development of an infection. Cancer cells often produce a different kind of sugar molecules compared to healthy cells, causing the body to react and produce antibodies. Catharina hopes that her innovative concept will contribute to the development of novel cancer-specific antibodies, which in the long term, can be used in cancer diagnostics or therapy.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
’Lundbeck Foundation’s Talent Prize was established in 2002. The prize is awarded to young scientists under the age of 30 who have conducted particularly promising research in biomedical or health sciences.’
Catharina Steentoft Lin Lin
Johan Burisch
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Strategic Grants Our strategic grants support large and complex research projects, most of which are interdisciplinary and involve multiple research groups.
Pioneering psychiatry project gets a three-year extension. iPSYCH has been awarded DKK 120 million to continue the project, initiated in 2012, for another three years. The project has gained remarkable results and already sets new standards for psychiatric research worldwide.
Lundbeck Foundation has decided to continue the funding of The Initiative for Integrative Psychiatric Research (iPSYCH) with another record-breaking grant for a three-year period starting 1 March 2015. iPSYCH is expected to pave the way for better treatment of mental disorders and, in some cases, find ways to prevent the development of these disorders. The project focuses on five specific mental disorders: autism, ADHD, schizophrenia, bipolar disorder and depression. These disorders are associated with major human and societal costs all over the world. However, surprisingly little is still known about their genetic and biological origin. In 2012, five leading Danish researchers in psychiatry and genetics joined forces to examine why so many people develop these mental disorders. This marked the beginning of the iPSYCH project. Now, two-and-a half years later, iPSYCH has already managed to generate important knowledge about the different disorders. The iPSYCH group has produced or contributed to more than 177 publications.
’The project focuses on five specific mental disorders: autism, ADHD, schizophrenia, bipolar disorder and depression.’
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A key element of the research project is the possibility of combining data from Danish registers and biobanks, allowing the study of 2.2 million individuals born in Denmark since 1981. Through collaboration with other groups around the world, the population study has been expanded to include more than 80,000 individuals, of whom 50,000 have been diagnosed with autism, ADHD, schizophrenia, bipolar disorder or depression. These patients, as well as comparable healthy controls, have now been genotyped, making iPSYCH the largest single genetic study of mental disorders in the world. Furthermore, iPSYCH is the only genetic study to be truly population-based, including comprehensive longitudinal information on environmental risk factors. Interactions between the whole genome and environmental factors iPSYCH´s main focus is to study how genetic background and early environmental exposures interact and impact an individual’s future risk of mental disorders. As the only group in this field, they have been able to study the interactions between the whole genome and environmental factors. One important result showed that children with a particular gene variant had a highly increased risk of developing schizophrenia if their mothers had antibodies against cytomegalovirus. “This finding needs replication but in itself, it illustrates the unique capability in Denmark to conduct studies on the causes of these complex disorders”, explains Professor Preben Bo Mortensen, who is the scientific director of the project. Massive data provides the basis for future research During the initial period of the project, extensive effort has been put into generating the data that will provide the basis for future research. “Now that we have managed to build up something on this massive scale, we are very excited to exploit these fantastic resources and produce even more knowledge about these devastating disorders – knowledge that is desperately needed”, says Professor Mortensen. He adds that in the next phase of the project, new focus areas – such as gene regulation, analysis of the influence of gut bacteria, as well as studies of environmental pollutants will be included.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Unravelling the immunological mystery of inflammatory bowel disease. Lundbeck Foundation has awarded DKK 45 million to the newly established project ‘Regional immunemodulation of mucosal inflammation’. The project will run for a five-year period and aims to provide new opportunities for preventing and treating inflammatory bowel disease (IBD), specifically Crohn’s disease (CD) and Ulcerative Colitis (UC).
The number of people suffering from IBD has increased globally over the last five decades. These diseases have a severe impact on the patients’ quality of life and, as chronic diseases which affect people from a young age, they constitute a substantial economic burden to the healthcare system. In addition, approximately one third of the patients do not respond to current state-of-the-art treatment. Another 30-50%, who initially benefit from treatment, develop intolerable adverse events or lose the therapeutic effect over time. “This indicates an unmet need for new and more selective therapies for the treatment of CD and UC”, says Professor William Agace, who is leading the project. The gastrointestinal mucosa, a moist tissue that lines the inside of our digestive tracts, represents the largest surface of the body. It is continually exposed to foreign material derived from our diet and the trillions of microbes that live in the intestinal lumen. For us to remain healthy, our immune system must react appropriately and tolerate such material, while maintaining the ability to react against the numerous viruses, bacteria and fungi that utilise the intestine as their primary site of infection or entry into the rest of the body. “We believe that a breakdown in these immunological mechanisms contributes both to the development and persistence of IBD”, says Professor Agace. He and his team aim to understand the underlying immune problem, which has so far been unresolved and has made it difficult to find suitable treatments.
’The project brings together key Danish and international expertise in immunology, clinical gastroenterology, protein analysis and systems biology.’ “With this project, we want to study the cellular and molecular mechanisms regulating immune cell functionality in different segments of the digestive tract. We would like to understand what goes wrong, and we hope to identify some of the immunological pathways underlying this process. Identification of such pathways will most likely have important spin-off effects in our understanding of these diseases and potentially identify novel avenues of treatment, such as preventing inflammation locally in inflamed bowel tissue, and thus avoiding potential complications of generalised immune suppression”, explains Professor Agace. The project brings together key Danish and international expertise in immunology, clinical gastroenterology, protein analysis and systems biology. “Such a cross-disciplinary approach allows us to address complex unanswered questions in rare depth and breadth for the very first time. We believe this project will also benefit other scientific communities. We particularly hope that the healthcare system and pharmaceutical companies will take advantage of our results in the development of novel treatments and designs of vaccines against these debilitating intestinal diseases”, says Professor Agace.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Lundbeck Foundation Lectures Since 2012 Lundbeck Foundation has sponsored a series of public lectures with the aim to raise broad awareness of frontline research. The lectures are held by scientists and public figures that offer interesting perspectives on new discoveries and discuss the opportunities and consequences that they provide. In 2014, 23 Lundbeck Foundation Lectures were held in Copenhagen and Aarhus with the following topics:
Addiction – The brain’s reward system • Ancient DNA and man’s great migrations • ADHD – Fashion diagnosis or harsh reality • Depression – Light in the Darkness • Schizophrenia – Genes and Environment • The Brain – Your control center • The wild world of atoms • Is breast feeding good for your child? • The human body as an engine • Tough bacteria and chronic infections • Pain – Is there more between heaven and earth? • Genetic Me • The evidence-based ‘genesis’ • Antibiotics and the threat from multiple drug resistance (MDR) • Alzheimers – a new widespread disease • The science behind a sustainable transformation – The green solution • Life in space • Nanoscience and cancer
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Communicating Science New initiatives
Sigdetvidere (Pass it on)
First LEGO League Final
Genetic Me Lundbeck Foundation supported the production of the documentary, Genetic Me, which premiered in 2014. The movie connects the personal story of the Danish author and science journalist, Lone Frank, who introduces us to frontier genetic research regarding the balance between nature and nurture, and provides new perspectives on the eternal question of: How did I become me? Genetic Me won the Pierre-Gilles de Gennes Prize and the Student Award at the Paris Science Film Festival in 2014. It was nominated for the Danish film award, ‘Robert’ by the Film Academy of Denmark in the category, Best Short Documentary.
The evidence-based ‘genesis’ The three renowned scientists, physicist and Lundbeck Foundation Fellow, Troels C. Petersen; geologist Professor Minik Rosing; and biologist and Lundbeck Foundation Professor, Professor Eske Willerslev gave an onstage performance of their evidence-based version of how the universe, life on earth, and human evolution happened. We organised and sponsored the events, which took place in Aarhus and Copenhagen and attracted an audience of more than 800 people. The lecture has been recorded and posted on the Foundation’s YouTube channel.
Sigdetvidere (Pass it on) In 2014, we celebrated the 200th anniversary of the Danish children’s right to receive education. As a part of the extensive teaching materials developed to connect past and present methods of teaching, the Foundation sponsored the development of the learning app, Sigdetvidere (Pass it on). The app
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The evidence-based ‘genesis’
was launched on 29 October 2014 at Experimentarium Science Centre in Copenhagen. It takes its users through an interactive tour of the various ways of communicating throughout the history of mankind. Sigdetvidere is linked with several learning materials with the aim of strengthening primary school science education.
First LEGO League Final First LEGO League is a global technology competition involving more than 230,000 pupils (aged 9-16 years). The competition introduces younger students to real-life engineering challenges by building LEGO-based robots to complete tasks on a thematic playing surface. Lundbeck Foundation co-sponsored the 2014 Scandinavian Final, which took place on 29 November 2014, with more than 600 pupils taking part. Her Royal Highness Crown Princess Mary of Denmark and Minister of Education, Christine Antorini attended the event.
Nerd Camp 2014 We supported NØRDCAMP (Nerd Camp) 2014. This three-day summer camp introduces children, aged 9-13 years, to various scientific challenges and encourages them to explore, be curious, experiment and play with other children who share their interest for science and technology. This year’s theme was rescue work and involved day-to-day challenges at a field hospital. The popular ‘Storenørd’ (‘Big Nerd’) characters from the Danish TV channel, DR Ramasjang hosted the camp.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Communicating Science Ongoing initiatives PhD Cup In 2014, the Foundation continued its partnership with the daily newspaper, Information, Denmark’s universities and the Danish Broadcasting Corporation (DR) to expand the PhD Cup, develop its activities, and debate and communicate the PhD students’ research and results to a larger audience. The Danish universities selected PhD candidates to submit a well-written abstract of their PhD thesis for evaluation by a committee of top researchers, who were all previous winners of the Danish Research Communication Prize. Eight winners were chosen, and they subsequently contributed to a special newspaper edition on research and the battle for knowledge, which was distributed to universities and libraries. The eight winners were also invited to participate in the TV version of the PhD Cup. In this programme, they had to battle against each other by presenting their PhD project in front of a live audience at DR Koncerthuset (DR’s Concert Hall). The winner and the other finalists were recognised onstage by the Minister of Science, Innovation and Higher Education, Sofie Carsten Nielsen. The TV programme attracted more than 100,000 viewers, and the participants have taken part in radio programmes and other media broadcasts following the show.
The best teacher We aim to highlight and celebrate teachers in Danish schools who have had a positive influence on students – by making a difference to their school life in general, or by helping them with their choice of subjects and further education.
PhD Cup
In 2014, the Foundation continued its collaboration with the daily newspaper, Politiken on Undervisningsprisen (‘The Teaching Award’). Pupils, colleagues, school management teams and parents can nominate candidates. The aim of the award is to contribute to the development of teaching practices in Danish primary and upper secondary schools, as well as vocational schools, and help restore respect for the profession. A panel of expert judges reviewed the nominations, and the winners were announced at an event focusing on inspirational teaching and good teachers. The teaching award received much attention and Politiken received more than 1,000 nominations.
Young Scientists Lundbeck Foundation supports Unge Forskere (‘Young Scientists‘), Denmark’s largest science and technology competition for talented children and teenagers from primary and secondary schools. The competition consists of three programmes: ‘Young Scientists Senior’ for higher secondary students, ‘Young Scientists Junior’ for primary and lower secondary pupils, and ‘My Wildest Idea’ – a drawing competition for primary school pupils. The 2014 final was a three-day (Sunday to Tuesday) open event, which took place at the Forum concert venue in central Copenhagen. Students from China, Brazil and several European countries also participated in the event. In addition to providing financial support, we award a communication prize for the best dissemination of one junior and one senior project. Furthermore, the Foundation is supporting a TV series that follows the young participants on their road to success. The series, produced by the Danish Broadcasting Corporation (DR), will be broadcasted in 2015.
The best teacher
Young Scientists
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Innovation in life science
Christian E. Elling, Partner
In 2014, Lundbeckfond Emerge continued its efforts to turn early-stage life science research into viable businesses. As a proactive partner, we helped to further develop our two portfolio companies, Insusense Therapeutics and EpiTherapeutics.
Innovation in life science With growing populations and changing demographics, effective healthcare is key to any society. But healthcare is costly. New medical treatments and technologies are assessed on the medical needs they address, but factors such as cost effectiveness and the overall impact on public healthcare are equally important parameters when evaluating the efficacy of a new drug or technology.
build professional operations and develop a project into a viable business.
This has raised the requirements to researchers. They not only have to be highly qualified in their own field. They also need business acumen, network and the nose for finding the capital that will convert promising data into a marketable product. Not many people master all these skills. So that is where Emerge can assist.
Developments in 2014 Insusense Therapeutics is a Danish biotech company that develops new therapeutics for the treatment of diabetes and metabolic diseases such as obesity. The company is based on breakthrough research conducted by Professor Anders NykjĂŚr and his team at the neuroscience research centre, MIND at Aarhus University, Denmark.
A catalyst for new life science companies Complementing the Foundation’s grant activities as well as its venture investments in mature life science companies, Lundbeckfond Emerge invests in early-stage life science research. By providing capital and commercial guidance, we help to
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Working closely with each team, we aim to be a proactive partner that contributes with commercial know-how and access to an international network of key players in the industry. In this way, we hope to create the conditions innovative science needs to grow.
Studying the biology of a class of receptors in the body called sortilins, the team has discovered that sortilins are not only involved in a number of central nervous system diseases, they also impact the control of metabolism.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Lundbeckfond Emerge turns breakthrough science into new businesses. We invest in pioneering research with commercial potential, providing the capital and commercial expertise a project needs to advance from lab setting to biotech business.
During 2014, the company expanded their activities, hiring new researchers to accelerate the development of lead candidates and technology that will ultimately bring important new treatment therapies to doctors and their patients. EpiTherapeutics is a Danish biotech company that develops novel cancer drugs. The company is based on world-class research into epigenetics conducted by Professor Kristian Helin and his group at Biotech Research & Innovation Centre (BRIC) at the University of Copenhagen, Denmark. Epigenetic enzymes play a key role in numerous human diseases, including cancer. EpiTherapeutics’ development programmes are focused on enzymes involved in the regulation of gene transcription in cancer.
In 2014, Kapil Dhingra, MD joined the Board of Directors and the company hired Dr. Ivan Melezínek, MD PhD as its new Chief Medical Officer. Lundbeckfond Emerge participated in the 2014 financing, raising EUR 10.68 million in a second closing of a Series A round, which brought the total Series A to EUR 15.68 million. With this financing, the company is able to advance its anti-cancer drug candidates toward clinical development. During 2014, the company made important progress to that effect by nominating its first candidate for preclinical development. EpiTherapeutics is also building a pipeline of additional novel small-molecule inhibitors against selected epigenetic cancer targets.
Inhibitory effect on cell type (IC50)
EpiTherapeu<cs KDM5 inhibitor EPT103182 show strong inhibi<on of certain hematology cell lines
Individual colors represent cell subtype Micrograph of primary myocytes (‘muscle cells’) used in studying the effects of SorCS1 on the insulin receptor. SorCS1 plays a key role in controlling blood sugar levels.
Crystal structure of an inhibitor (top panel) developed by EpiTherapeutics to inhibit an epigenetic enzyme involved in cancer. The inhibitor suppresses the growth of a range of different cancer cell lines (bottom panel), which suggests that it may eventually be used as an effective therapy for humans.
Portfolio 2014
Denmark
Develops new pharmaceuticals for the treatment of diabetes and obesity, based on breakthrough discoveries about the family of sortilin receptors.
Denmark
Develops new pharmaceuticals for the treatment of cancer, based on innovative
www.epitherapeutics.dk
research within the field of epigenetics.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
An exciting year
Mette Kirstine Agger, Managing Partner, Johan Kördel, Senior Partner and Casper Breum, Partner
2014 has been an eventful year for the biotech and pharma industries. Among the important activities and achievements are significant regulatory approvals of novel drugs, new mergers and acquisitions, an impressive number of public offerings, and very solid venture financing – particularly in US biotech.
Lundbeckfond Ventures also experienced positive developments. Following dedicated efforts by the teams in our portfolio companies, the existing portfolio of companies made great progress in 2014. We managed to add no less than six new companies to our portfolio, participate in follow-on investments in others, and sell one of our portfolio companies. Since its start in 2010, Lundbeckfond Ventures has invested a total of DKK 1,066 million primarily in private companies. Our portfolio now counts 19 companies. Total investments in 2014 in new and existing companies were DKK 324. At the end of the year, combined exit proceeds and market value of our share of the portfolio companies totalled DKK 1,517 million.
Key developments in the portfolio Acacia Pharma Ltd develops supportive care therapeutics. In 2014, the company completed two clinical phase III studies with its lead molecule, APD421 for the treatment of postoperative nausea and vomiting. Two double-blind, placebo controlled, phase III studies were conducted in the US, France
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and Germany. APD421 was significantly superior to placebo (p=0.005) and there was no significant difference in the rate of adverse events. BoneSupport AB produces and markets CERAMENT®, an injectable ceramic bone substitute that mimics natural bone and allows regrowth of the bone into the affected area during the healing process. CERAMENT® can be used as bone void filler and as a carrier of other agents such as antibiotics. Sales of CERAMENT® continued to grow in 2014, and CERAMENT® with gentamycin (an antibiotic against many types of bacterial infections) has been approved in Europe. Celladon Inc. went public on NASDAQ (US) in January, raising USD 50.6 million in the first offering and a further USD 43.7 million in the second offering in August. The company develops a pioneering gene therapy for treatment of heart failure. By restoring a deficient enzyme to normal levels, this type of treatment offers a long awaited alternative to heart transplantation. The company received ‘breakthrough’ designation from the Food and Drug Administration (FDA), which opens for possible approval if data are positive. Having completed the
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Lundbeckfond Ventures is an international, evergreen venture fund. We invest in life science, focusing particularly on the development of new medicines and medical technologies. The programmes we support are of the highest scientific quality, delivering treatments that address unmet medical needs.
USA
enrolment of 250 patients from 56 different clinics in the largest gene therapy trial ever conducted, the company expects to report data in April 2015. Nexstim Oy has developed a new system for transcranial magnetic non-invasive stimulation, which can be used to map the functional areas of the brain prior to brain surgery and improve rehabilitation following strokes. Nexstim Oy initiated a multicentre clinical trial to improve rehabilitation for stroke patients. It also completed its Initial Public Offering (IPO) on the OMX NASDAQ stock exchanges in Stockholm and Helsinki, raising EUR 15.3 million. Veloxis Pharmaceuticals A/S successfully completed the clinical development of Envarsus®, their lead product candidate for the prevention of organ rejection in kidney transplant patients. The product received regulatory approval from the European Medicines Agency (EMA), allowing launch of the product in the first European countries. The FDA also approved the drug but restricted its sale until expiry of a third party exclusivity period. Veloxis disagree with FDA’s decision and has filed action, seeking a court order to direct the FDA to grant final approval.
New investments Thesan Pharmaceuticals Inc. develops novel therapeutics for disorders of the skin and is led by a senior management team highly experienced in dermatology. Thesan is developing novel drug candidates targeting unmet medical needs in indications such as acne and atopic dermatitis (eczema). ATOX Bio develops AB103 for the treatment of Necrotizing Soft Tissue Infections (NSTI) – rare, fast developing infections that affect tissue destruction, multiple organ dysfunction and ultimately death. Based on a successful phase IIa study, AB103
Europe
was granted Fast Track status and Orphan Drug designation by both FDA and EMA. Recognising the potential of AB103, the Biomedical Advanced Research and Development Authority (BARDA) awarded Atox Bio a grant of USD 24 million for the further clinical development of AB103. scPharmaceuticals LLC develops novel subcutaneous delivery of important medicines that have so far been administered intravenously. The company’s two-component micro pump technology makes self-administration easy, comfortable and cost-effective. The company’s first drug-device product is subcutaneous furosemide, the most commonly used diuretic in the treatment for heart failure. Iconic Therapeutics, Inc. focuses on the treatment of the ophthalmological disease, Wet Age-related Macular Degeneration (Wet AMD), a chronic eye disease that causes vision loss and over time functional blindness. The company is preparing for a phase IIa clinical trial to be conducted in 2015. Ziarco Pharma Ltd. develops novel therapies for inflammatory and allergic diseases focusing on atopic dermatitis and psoriasis, both indications with unmet medical needs. Ziarco’s lead compound, ZPL-3893787 is a potent and selective H4R antagonist suitable for oral administration. A phase IIa proofof-concept study in patients with moderate-to-severe atopic dermatitis is scheduled to begin in 2015. Vtesse Inc. focuses on the treatment of Niemann-Pick C., a rare genetic lysosomal storage disease that sets in during childhood and/or teenage years and leads to rapidly progressing mental and physical dysfunction and early death. No effective treatment is currently available for this disease. Vtesse has in-licensed a molecule that is currently undergoing early clinical testing in patients and the company is preparing for a phase II/III study.
33
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
An exceptionally good year
Kasper Kitaj Pedersen, Investment Director, Klaus Ørtoft Madsen, Chief Investment Director and Bertil From, CFO
In the wake of volatile financial markets and an unstable world economy, we generated the highest return in the history of the Foundation: DKK 2.2 billion corresponding to 19.1%. The main contributors to this year’s return were equities, listed and unlisted, supported by the strengthening of the USD. In short, 2014 was a very good year for us, and the result is considered highly satisfactory. The financial markets In 2014, the global economy and the financial markets were particularly affected by the policies of the central banks, geopolitical unrest, the deceleration of the Chinese economy, the continued decoupling of the EU and US economies as well as the falling oil price towards the end of the year. In spite of the above affecting the equity markets and adding uncertainty, the market valuation multiples increased, which in turn has supported our portfolio of listed equities. Our private equity portfolio benefitted from the strong equity markets through exits, Initial Public Offerings (IPOs) and revaluations. During the first half of the year, developments on the financial markets were sluggish. The sluggish development was caused by the US economy being affected by an unusually harsh winter – and the general fears in the markets that the Chinese economy was in for a hard landing. We utilized this opportunity to increase our exposure to Chinese equities in pre-identified companies exposed to the growing Chinese middle class. Effectively, we increased our exposure to Chinese equities to nearly DKK 700 million.
The monetary policies of the central banks in the US, the EU, Japan and China were a major driver for the global equity markets in 2014. During the second quarter, the US economy had recovered and begun to show signs of renewed strength.
Global equity indices (rebased, in DKK) 130 125 120 115 110 105 100 95 90 Jan
Feb
Mar
MSCI All World 34
Apr US
May
Jun Europe
Jul
Aug
Sep
Oct
Nov
Dec
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Lundbeckfond Invest manages the Foundation’s cash and financial investments. Our purpose is to generate returns and secure sufficient reserves to support the Foundation’s grant activities and the subsidiaries.
This, combined with the fact that the US Federal Reserve (FED) reduced quantitative easing, enticed us to seek further USD exposure. From May through to year end, the USD has appreciated by more than 10% against EUR.
The key themes of our investment philosophy • We invest in quality companies with regards to market position, organisation, technology and ethics • We pursue attractive pricing or return potential • We invest across asset classes • We follow a bottom-up driven investment approach with a directional top-down overlay • We have an agile approach to asset allocation and selection
The second half of 2014 was a volatile period, caused primarily by continuing geopolitical unrest and increasing unease in the financial markets. The latter culminated in October when Europe reported weak macroeconomic figures, which subsequently led to a sharp correction in the equity markets. The decline in the European markets was further amplified by the fact that the European Central Bank (ECB) reacted hesitantly to the situation. Both FED and Bank of Japan reacted more firmly, which secured a significant rebound that lasted into December. Despite equities declining more than 10% over a couple of weeks in October – we maintained a firm belief in our portfolio and retained all positions as well as an overweight in equities. This paid off in the subsequent rebound.
between markets and assets classes, the overall asset allocation is adjusted from time to time. During 2014, we actively reduced exposure to credit bonds. Allocation to credit bonds was gradually reduced to 18% from 22% during the year – primarily through selling positions when the envisaged potential was reached or when funds were allocated to other investments. We ran an option overlay strategy as a risk management tool, buying put-options and selling call-options on listed equities. In 2014, the overlay strategy yielded DKK 124 million.
Following the market correction in October, the global oil prices experienced a strong decline – from USD 100 per barrel to below USD 60 per barrel at year end. The decline will have significant impact on the oil industry. In spite of having a low exposure to the oil industry, some of our positions have endured losses. The lower oil price is expected to have significant effect on the balance of the global economy and the financial markets. For this reason, we have initiated work to position the portfolio for 2015.
Our organisation and investment philosophy The investment team is in place and the investment strategy change initiated in 2011 has been fully implemented. In accordance with this strategy, investments and allocations are made within the guidelines defined by the Board. External managers are selected based on the following criteria: gain exposure to a market; geography or sector not attainable through the competencies and resources of the internal team; cost efficiency; and the possibility of obtaining a speaking partner with similar focus and investment philosophy. By the end of 2014, 43% of our investment portfolio was under external management.
Given increased volatility and a strong performance over the past couple of years, we anticipate that equity markets will not yield as high returns going forward as they did during 2012-14. Consequently, this calls for a more agile investment approach. Allocation and risk management The allocation between asset classes is primarily a residual of the underlying investments in single equities and bonds etc., which are based on comprehensive analysis of every investment. However, for risk management purposes and based on a general view of the economy as well as the relative value
In 2014, the expense ratio (including management fees) increased to 0.19% (0.15%) of the invested capital, primarily due to increased external and internal performance compensation.
Market value 31.12 2014
Return
31.12 2013
2014
Time-weighted return 2013
2014
2013
DKKm DKKm DKKm DKKm % %
Bonds and liquid funds
2,182
2,339 37 42
0.8
2.0
Credit etc.
2,360
2,656 166 279
6.4
11.7
Listed equities
7,393
5,829 1,429 723
23.5
15.2
Unlisted equities
1,319
735 634 81
94.0
9.9
481
363 -38 81
-8.2
18.7
19.1
11.3
Real estate Lundbeckfond Invest total
13,735
11,922
2,228
1,206
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Lundbeck Foundation is the proud owner of the three subsidiaries Lundbeck, ALK and Falck â&#x20AC;&#x201C; all of which are global market leaders in their respective fields and key contributors to our earnings. As a long-term owner, we actively participate in the development of these companies to help sustain their successful performance, and, in this way, contribute to keeping important knowledge-intensive jobs in Denmark.
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
DKK MILLION
2014 2013 2012
Revenue
13,468 15,258 14,802
Research and development costs
2,802 2,872 2,919
Operating profit before special items
99
1,599
1,726
Profit/loss for the year
-153
855
1,165
Lundbeck Foundation's share of profit/loss for the year
-107
599
816
5,665
5,530
5,639
Average number of employees Net cash
326 3,699 1,893
Dividends for the year
0
544
392
Lundbeck Foundation's share of dividends for the year
0
380
275
The figure are calculated using Lundbeck’s own accounting policies that do not acknowledge the fine from the EU Commission in 2013 as a special item.
Lundbeck is a specialised pharmaceutical company that develops new and innovative treatments for brain diseases such as depression, alcohol dependence, epilepsy and schizophrenia as well as Alzheimer’s, Huntington’s and Parkinson’s diseases. The company is navigating through a period of transition.
A new Lundbeck The strategy to create a new Lundbeck with a truly global presence and a multiple product portfolio is well underway. In 2014, the company’s four latest products – Abilify Maintena®, Brintellix®, Northea® and Selincro® – were successfully launched in 39 markets around the world. This is the most extensive launch programme in the history of the company. In June 2014, Lundbeck completed the acquisition of the US-based biopharmaceutical company, Chelsea Therapeutics International Ltd. at a price of USD 530 million. In 2014, the revenue from New Products increased by 44% to DKK 4,460 million – which amounts to 33% of the company’s total turnover. Continued high growth is expected within this area. The growth in sales of New Products is on track to replace the revenue lost from Mature Products such as Cipralex®/Lexapro® and Ebixa®, where Lundbeck has faced competition from generic products in recent years.
A collaborative culture Lundbeck operates a sophisticated partner strategy and is highly committed to seeing it succeed. The strategic alliances with Otsuka Pharmaceutical Co., Ltd. and Takeda Pharmaceutical Co., Ltd. are developing successfully. With Otsuka, Lundbeck are currently working on a number of projects, such as the development and commercialization in Japan of Abilify Maintena®, brexpiprazole, idalopirdine, Lu AF20513 and Selincro®. In cooperation with Takeda, Lundbeck continues to market Brintellix® in an increasing number of markets. For further information on Lundbeck, please visit www.lundbeck.com.
Pipeline progress Apart from its ambitious launch efforts, Lundbeck has also made significant progress in its development activities. One of the exciting milestones reached during 2014 was the US filing for brexpiprazole (for adjunctive treatment of major depressive disorder and for schizophrenia). Lundbeck also continued to strengthen the clinical profiles of its most strategically important new products. In 2014, the company presented new important clinical data which shows that Brintellix® improves cognitive performance and function in adult patients with depression.
New Products include
Mature Products include
- Abilify Maintena®
- Onfi®
- Sycrest®
- Azilect®
- Brintellix®
- Selincro®
- Treanda®
- Cipralex®/ Lexapro®
- Northera®
- Sabril®
- Xenazine®
- Ebixa®
37
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
DKK MILLION
2014 2013 2012
Revenue
2,433 2,244 2,345
Research and development costs
394
463
511
Operating (EBIT) profit before special items
313
131
182
Profit for the year
181
61
54
76
26
23
1,809
1,804
1,828
-35
-15
145
Dividends for the year
51
51
51
The Lundbeck Foundation's share of dividends for the year
20
20
20
Lundbeck Foundation's share of profit for the year Average number of employees Net cash
The figures are calculated using ALK's own accounting policies that acknowledge restructuring costs as a special item.
ALK is a global, research-driven pharmaceutical company focusing on allergy prevention, allergy diagnosis and the treatment of respiratory allergic rhinitis and allergic asthma. ALK’s vision is to be the commercial leader and the number one innovator within allergy immunotherapy (AIT). The strategy aims to transform ALK from a largely European company focused on allergic rhinitis to a truly global company whose products also treat, and potentially prevent, allergic asthma.
One of the best results ever In 2014, ALK achieved one of its best results ever. ALK’s total revenue by grew 9% to DKK 2,433 million. The progress was driven by continued growth in the base business, increased partner income, and improved underlying profitability. With the introduction of SLIT-tablets into North America in 2014, the company also saw important progress towards the goal of globalising its lead products, the SLIT-tablet portfolio. Development in the base business Europe accounted for 76% of ALK’s revenue in 2014 (81%). European revenue increased by 2% to DKK 1,858 million. The increase is attributed to SCIT-products and the GRAZAX® SLIT-tablet. Sales of these two products grew by 8% and 10%, respectively. As expected, sales of SLIT-drops declined as a consequence of changes in reimbursement and documentation requirements that have been introduced over recent years. Eventually, this trend favours sales of ALK’s clinically validated SLIT-tablets and SCIT products. In Europe, ALK filed for regulatory approval of its most important product candidate, the SLIT-tablet against house dust mite-induced allergy and allergic asthma. ALK’s regulatory filing is supported by a clinical development programme involving approximately 3000 patients. Data from the clinical trials demonstrated efficacy in both HDM allergic asthma and HDM allergic rhinitis.
Progress in North America Following many years of R&D investments – including more than 35 clinical trials with over 15,000 patients – ALK launched its first two SLIT-tablets in North America in 2014. These are the first AIT products to be documented and receive FDA approval in the US. ALK’s partner, Merck is responsible for the North American launch and sale of the SLIT-tablets. Full-year revenue in North America increased by 42% to DKK 499 million (356 million in 2013), equal to 21% of ALK’s total revenue (16% in 2013). Growth was driven by a strong performance from ALK’s own businesses in the US and Canada, as well as increased revenue (mainly milestones) from the partnership with Merck. For further information on ALK, please visit www.alk-abello.com
SCIT: subcutaneous injection-based allergy immunotherapy SLIT-drops: sublingual drop-based allergy immunotherapy SLIT-tablets: sublingual tablet-based allergy immunotherapy HDM: house dust mite
38
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
DKK MILLION Revenue Operating profit before special items Profit for the year The Lundbeck Foundation's share of profit for the year Number of employees Net interest-bearing debt
2014 2013 2012 13,952 12,534 11,504 1,139
1,112
1,083
218
205
119
115
114
61
34,230 32,009 28,005 5,678
6,215
5,755
Dividends for the year
225
0
0
The Lundbeck Foundation's share of dividends for the year
129
n.a.
n.a.
The figures are calculated using Falck’s own accounting policies.
Falck is a leading international supplier of pre-hospital services, healthcare, fire-fighting, roadside assistance, safety training and other contingency services. With business activities in 45 countries on six continents, Falck’s activities are directed at assisting people in emergency situations and preventing and mitigating the effects of illness and accidents.
A global provider In 2014, Falck continued its efforts to become a global provider of emergency and healthcare services. The company strengthened its position in its most important markets – Europe, Latin America and the United States – by winning new contracts and renewing existing ones. Key business developments Falck is divided into four business areas: Emergency, Assistance, Healthcare, and Safety Services. All four increased their revenues in 2014. Emergency continued its organic growth primarily due to an increase in customers in Latin America, new ambulance contracts in Slovakia (won in 2013), and the securing of a significant number of new fire-fighting contracts across all markets. In Denmark, tender processes were conducted for ambulance services in all five Danish regions, and Falck won the contracts in four of them. In the Capital Region of Denmark, Falck was re-awarded all the contracts possible under the tender conditions. Unfortunately, other bidders were awarded the contracts in the Region of Southern Denmark.
By merging its organisation with TryghedsGruppen’s healthcare companies, Falck’s Healthcare business established itself as Scandinavia’s largest private provider of services within the prevention and treatment of work-related injuries. Lower activity levels in the oil industry made 2014 a difficult year for Safety Services, as this business area caters particularly for the safety training of employees in the offshore sector. To offset the reduced activity, Safety Services opened new training centres and introduced a series of new courses and services – initiatives that secured an increase of revenue by the end of the year. For further information on Falck, please visit www.falck.com.
Assistance is the leading provider of assistance services in the Nordic region. 2014 saw the further consolidation of this position. In Sweden, the number of automobile subscriptions increased considerably, and in Denmark and Norway, the sales of alarm solutions experienced a significant boost.
39
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Corporate governance At Lundbeck Foundation, we wish to run a transparent operation. This is reflected in our governance structure and our approach to investments and grants.
Industrial foundations play an important role in the Danish society. With substantial contributions to Danish research and ownership of some of the largest Danish corporations, industrial foundations have considerable influence on the social and economic development in Denmark. In our view, such influence comes with a high level of responsibility: to ensure transparent operations and conduct our business with integrity. At Lundbeck Foundation, we set high standards for good governance. We fully support the new Danish Industrial Foundations Act, effective as of 1 January 2015, as well as the issued recommendation on corporate governance for industrial foundations. We already meet most of the recommendations and aim to follow the best practice recommendations – in certain areas, we set the bar even higher.
Composition and election The Board consists of nine members; six members are elected according to the statutes and three are employee-elected representatives appointed by the employees in the subsidiaries. The Board is composed in such a way that the combined knowledge and expertise of its members ensures the fulfilment of the Foundation’s objectives, as specified in the statutes. Please go to page 48 for a full presentation of the members of the Board of Trustees. The recommended election period for board members is 2-4 years. We have chosen to be more stringent. The board members elected according to the statutes are elected for a term of one year at a time. This is to allow for regular evaluation of their performance. However, board members elected by the employees in the subsidiaries are elected for a term of four years, in accordance with statutory regulations.
The Board of Trustees Tasks and responsibilities Lundbeck Foundation is managed by a Board of Trustees. The Board’s primary responsibilities are to: • define the Foundation’s strategy; • make all decisions of major significance or of an unusual nature • make final decisions on the allocation of grants, based on recommendations from the evaluation committees; • supervise the organisation to make sure the Foundation is managed appropriately, in accordance with applicable law and the Foundation’s statutes; and • appoint the Foundation’s CEO.
No member who has been a member of the Board of Trustees for more than 12 years – or who has turned 75 years of age – can be elected or re-elected to the Board. The Board of Trustees may deviate from this rule if they wish to retain a board member due to his or her particular competencies.
The Board of Trustees meets a minimum of four times a year for board meetings and holds an annual seminar to review, discuss and refine the Foundation’s strategy.
The Board of Trustees
The Board has set up research and investment committees, which meet regularly to analyse and discuss grant and investment issues in greater detail.
The Board of Trustees is a self-perpetuating entity that elects new members in accordance with the Foundation’s statutes. Ordinary election of members takes place at the Annual Meeting. It is the Chairman and Vice Chairman who nominate new members to the Foundation’s Board of Trustees. External
Research expertise
Commercial expertise
Board of Trustees
Group employee representation
The composition of the Board ensures the presence of relevant expertise and knowledge to fulfil the Foundation’s objectives as set out in the statutes.
40
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
search and selection advisors are usually called in to assist with this, to make sure the right candidates are found. The Board performs self-assessments facilitated by a third party. They include a review of the strengths and weaknesses of the Board’s work, an assessment to establish whether statutory requirements have been met, and an evaluation of the collaboration between the Board and the Foundation’s executive management. Active involvement in subsidaries As owners, we are actively involved in all our subsidiaries. We monitor their performance closely and seek to act as a value-creating partner for their executive management and boards. We exert our influence through board selection and representation on the companies’ Boards and at their General Meetings. The CEO of the Foundation normally sits on the subsidiaries’ Board of Directors, typically in the role of Vice Chairman, as one of the Foundation’s two representatives. The Chairman of the Foundation, however, is not a member of the subsidiaries’ Board of Directors.
Our tax policy is available in full text on our website. As one of our objectives is to support research, we distribute part of our taxable income through our grant activities. The effect of our grant activities on income tax can be explained through a simple example:
Grants No Grants
Taxable income before grants Deductable grants Deduction for consolidation (25%) Taxable income after grants Income tax (current tax rate)
100 80 20 0 0
100 0 0 100 23.5
Whistleblowing Our whistleblowing scheme provides our employees, employees in our subsidiaries and people related to the Foundation with the option of confidentially reporting wrongdoing. The whistleblowing reporting function is accessed via the Foundation’s website.
Remuneration The members of the Board of Trustees are remunerated by a fixed fee that does not depend on the financial results of the subsidiaries nor on our investment portfolio or venture investments. Members of the research and investment committee as well as board members in our subsidiaries receive an additional fee in proportion to their workload. The remuneration of each member is specified in our Annual Report.
Code of conduct for grants We have a code of conduct in place regarding grants, and rules governing the access of board members, employees and third parties to Foundation grants. Members of the Board of Trustees may not receive grants from the Foundation.
Policies
Grant governance
Transparency on tax Lundbeck Foundation is a responsible tax payer. We work to minimize tax risks and to be transparent in our policy on tax. In 2014, we adopted a new tax policy based on four basic principles: • We always comply with tax legislation. • We place activities in a way that allows us to compete on equal terms within the industry. • We always pursue activities for commercial reasons – and not to gain tax benefits. • We can account for all our decisions and transactions on tax.
The basic criteria for our allocation of research funds are that the scientific content of the application, the qualifications of the applicant, and the academic environment at the host institution are of a high international standard, and that the proposed research may eventually make a difference to people’s health and quality of life. We seek to ensure consistent and equal assessment of all applications. Consequently, we aim to have all applications peer reviewed by a group of experts, of which the majority are independent of the Foundation. For the assessment of regular project applications, we have set up two permanent evaluation committees with a majority
The full version of our Code of Conduct is available on our website.
Grant governance
Application
Administrative procedure
Peer review
Assessment by Research Commitee and recommendation to the Board
Final grant allocation by the Board
41
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
of external and international experts. For the assessment of larger personal and strategic applications, we set up ad hoc evaluation panels with international experts. The members of both types of panels must all adhere to the Foundation’s rules on members’ disqualification. All expert assessments lead to a recommendation to the Board of Trustees that makes the final allocation of grants in accordance with statutory requirements. Assessment procedures for applications and recommendations are adjusted on an ongoing basis, to accommodate the developments and implementation of new initiatives. Code of Conduct for Good Research Practice In 2014, the Board of Trustees adopted Lundbeck Foundation’s Code of Good Research Practice. This document supports basic principles of good research, i.e. honesty, transparency and accountability. All grant holders must sign this document before any research funds can be disbursed. By doing so, they declare that they will comply with these codes at all times. The Lundbeck Foundation’s Code of Good Research Practice also refers to the new national Code of Conduct for Research Integrity of 2014 by the Danish Ministry of Higher Education and Science.
’We seek to ensure consistent and equal assessment of all applications. Consequently, we aim to have all applications peer reviewed by a group of experts, of which the majority are independent of the Foundation.’
Risk management At Lundbeck Foundation, we wish to ensure a reasonable balance between value creation and risk exposure. Our goal is to achieve long-term, stable returns at a moderate risk.
Risk assessment is an important part of business procedures at Lundbeck Foundation. We perform risk management across the entire Group and systematically monitor risks in all our subsidiaries and investment areas, to make sure we respond fast to changing circumstances. The most important risks relate to the business risks of our subsidiaries and investments. However, for an industrial foundation, reputation is also an important part of risk management. That is why we pay close attention to good governance, setting high standards for the way we do business. Risk related to our subsidiaries Risks include business and financial risks associated with the operations of our subsidiaries, Lundbeck, ALK, and Falck. We believe that such risks are most effectively managed decentrally. Consequently, the management of the individual subsidiaries define their own risk management policies and procedures.
42
As owner and member of the Board of Directors of each subsidiary, we monitor business performance in the subsidiaries closely, and report back to the Foundation’s Board of Trustees on a monthly basis on all business and risk-related issues. Risks related to portfolio investments We manage the market, credit and currency risks related to our portfolio investments by limiting maximum exposure to individual asset classes and underlying assets. The Board lays down the investment policy. To manage interest rate risk, we define limits for the duration of bond investments. 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 as well our venture investments. Weekly portfolio performance reports are prepared for the CEO, and monthly detailed reporting is prepared for the Board.
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
Corporate Social Responsibility (CSR) CSR is integral to our way of doing business. Our activities in this field are guided by a keen understanding of stakeholder expectations and a clear commitment to making a positive impact on the societies we operate in.
As an international player with various grant and investment activities, Lundbeck Foundation Group has significant societal influence. We want to honour the responsibilities that follow from this and be recognised as a trustworthy group that sets high standards for transparency, commitment and integrity. The Foundation is committed to the UN Global Compact, whose 10 principles set out the general framework for our approach to corporate social responsibility. These principles guide our policies, corporate strategies and guidelines for: • corporate governance • grant-making activities • ownership of Lundbeck, ALK and Falck • portfolio investments and other investments We oppose any form of corruption, including extortion and bribery. Furthermore, we follow the UN guidelines laid down for labour and environmental principles, human rights and sustainable development. Lundbeck Foundation’s values and policies are shared across the entire Lundbeck Foundation Group. The specific CSR policies and codes of conduct for the subsidiaries are laid down by their respective Boards of Directors, in which the Foundation is represented. Our representatives make sure that policies for CSR, including human rights and impact on climate, are enforced. Values and policies are adapted to meet the circumstances in which each of the subsidiaries operates.
For more information about Lundbeck, ALK and Falck’s approach to CSR, please visit their websites or annual reports. Our approach to CSR is also reflected in our approach to allocation of grants, commercial investments, and our championing of gender equality and diversity in the workplace. Support to independent research The Foundation allocates substantial funds to independent research for the benefit of the society and to help improve people’s health and quality of life. In 2014, we awarded grants worth DKK 474 million. To make sure grant recipients comply with the conditions specified for the individual grants, we review their status reports and hold status meetings with all significant grant recipients. Furthermore, all grant holders must sign our Code of Conduct for Good Research Practice.
Portfolio investments Our investment policy states that the Foundation is not allowed to make investments in enterprises presumed to act unethically. Nor are we allowed to invest in companies presumed to violate any of the 10 principles set out in the UN Global Compact. We regularly review our investment portfolios to make sure that major investments comply with the policy. The reviews conducted in 2014 revealed no instances of unethical conduct or violation among our investments. Gender equality and diversity Lundbeck Foundation supports gender equality and diversity and aims to have both genders represented on the Board of Lundbeck Foundation and on the Boards of its subsidiaries. Our ambition sat in 2012 to have at least two members of each gender represented on these Boards has already been reached. In 2014, a male member of the Foundation’s Board of Trustees was replaced by a woman; the Board now counts two women and four men (not including employee representatives). At management level, three out of six are women.
’Our approach to CSR is also reflected in our approach to allocation of grants, commercial investments, and our championing of gender equality and diversity in the workplace.’ 43
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
FINANCIAL STATEMENTS LUNDBECK FOUNDATION GROUP
CONTENTS Income statement for the period 1 January – 31 December 46 Statement of comprehensive income for the period 1 January – 31 December 47 Balance sheet at 31 December 48 Management statement and Independent auditors’ report 49 Cash flow statement for the period 1 January – 31 December 52 Statement of changes in equity for the period 1 January – 31 December 53
Notes 1. Accounting policies 54 2. Revenue 64 3. Staff costs 64 4. Depreciation, amortisation and impairment 68 5. Fees to auditors appointed at general meeting 69 6. Special items 69 7. Net financial items 69 8. Tax on profit for the year 70 9. Grants for the year 7 1 10. Intangible assets 72 11. Property, plant and equipment 74 12. Financial assets and financial risks 75 13. Investments in associates 78 14. Deferred tax 79 15. Inventories 80 16. Trade receivables and other receivables 8 1 17. Cash resources 82 18. Capital base 82 19. Other reserves 83 20. Non-controlling interests 83 21. Provisions 84 22. Mortgage, bank, leasing and repo debt 89 23. Other payables 9 1 24. Adjustment for non-cash operating items 9 1 25. Working capital changes 9 1 26. Acquisition 9 1 27. Financial risks and financial instruments 93 28. Contractual obligations 99 29. Guarantees, contingent assets and liabilities and collaterals 100 30. Related parties 101 31. Events after the balance sheet date 102 Group overview 103
CONSOLIDATED FINANCIAL STATEMENTS
45
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
INCOME STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER
2014 2013 Note DKKm DKKm Revenue 2 29,904 30,092 Cost of sales 3, 4 -15,433 -14,232 Gross profit 14,471 15,860 Research and development costs 3, 4 -3,204 -3,344 Sales and distribution costs 3, 4 -6,491 -5,694 Administrative expenses 3, 4, 5 -3,351 -3,357 Operating profit before special items 1,425 3,465 Special items 6 -533 -1,249 Operating profit 892 2,216 Financial items, Lundbeckfond Invest, net 7 2,228 1,206 Financial items, Lundbeckfond Ventures, net 7 373 181 Financial items, subsidiaries, net 7 -392 -441 Income from investments in associates 13 -7 Profit before tax 3,094 3,162 Tax on profit for the year 8 -441 -707 Profit for the year 2,653 2,455 Profit attributable to: Lundbeck Foundation 2,494 2,074 Non-controlling interests 20 159 381 2,653 2,455 Lundbeck Foundation’s share of profit after tax for the year 2,494 2,074 Special items after tax 412 1,123 Non-controlling interests’ share of special items -175 -390 Lundbeck Foundation’s share of profit for the year before special items 2,731 2,807 Grants authorised during the year, including Emerge activities, gross 9 474 376
46
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY - 31 DECEMBER
2014 2013 Note DKKm DKKm Profit for the year 2,653 2,455 Actuarial gains/losses 21 -78 19 Tax 8 22 -4 Items that will not subsequently be reclassified to the income statement -56 15 Currency translation, foreign subsidiaries 418 -354 Currency translation concerning additions to net investments in foreign subsidiaries 664 -145 Realised exchange gains/losses concerning additions to net investments in foreign subsidiaries - -8 Adjustment, deferred exchange gains/losses, hedging -102 142 Exchange gains/losses, hedging (transferred to the hedged items) 85 -126 Exchange gains/losses, trading (transferred from hedging) -13 Value adjustment of interest hedging instruments -50 9 Repayment of interest hedging instruments - 51 Fair value adjustment of available-for-sale financial assets 19 -48 -35 Adjustment for hyperinflation 18 -2 Tax on other comprehensive income 8 -155 71 Items that may subsequently be reclassified to the income statement 817 -397 Other comprehensive income for the year, net of tax 761 -382 Total comprehensive income for the year 3,414 2,073 Attributable to: Lundbeck Foundation 3,487 1,553 Non-controlling interests 20 -73 520 Total comprehensive income for the year 3,414 2,073
Currency translation of foreign subsidiaries and currency translation concerning additions to net investments in foreign subsidiaries and tax related to these items amounted to a net gain of DKK 924 million (net loss of DKK 427 million in 2013), and 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 a net loss of DKK 61 million (net gain of DKK 57 million in 2013) and a net loss of DKK 48 million (DKK 35 million in 2013) and recognised under retained earnings in equity in the amount of DKK 252 million (DKK 152 million in 2013).
CONSOLIDATED FINANCIAL STATEMENTS
47
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
BALANCE SHEET AT 31 DECEMBER, ASSETS
2014 2013 Note DKKm DKKm Goodwill 11,384 10,435 Product rights 8,335 5,188 Contractual customer relationships etc. 1,951 2,261 Other intangible assets 840 692 Intangible assets 10 22,510 18,576 Property, plant and equipment 11 6,344 6,153 Financial assets – Lundbeckfond Invest 12 13,245 11,814 Financial assets – Lundbeckfond Ventures and Emerge 12 1,452 728 Investments in associates 13 78 86 Deferred tax 14 983 550 Other financial assets 12 254 232 Financial assets 16,012 13,410 Non-current assets 44,866 38,139 Inventories 15 2,485 2,312 Trade receivables and other receivables 16 6,265 5,809 Income tax 190 275 Receivables 6,455 6,084 Securities – Lundbeckfond Invest 251 188 Securities – subsidiaries 320 1,300 Securities 17 571 1,488 Cash – Lundbeckfond Invest 458 208 Cash – subsidiaries 4,753 5,890 Cash 17 5,211 6,098 Current assets 14,722 15,982 Assets 59,588 54,121
48
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
BALANCE SHEET AT 31 DECEMBER, EQUITY AND LIABILITIES
2014 2013 Note DKKm DKKm Capital base 18 2,728 2,523 Other reserves 19 939 -626 Retained earnings 24,687 23,540 Lundbeck Foundation’s share of equity 28,354 25,437 Non-controlling interests’ share of equity 20 4,669 3,920 Total equity 33,023 29,357 Payable grants 375 298 Provisions 21 1,714 1,490 Deferred tax 14 1,779 1,881 Payables to financial institutions – subsidiaries 22 9,572 9,037 Other payables 28 31 Non-current liabilities 13,468 12,737 Payable grants 582 674 Provisions 21 623 544 Income tax 97 106 Payables to financial institutions – subsidiaries 22 870 643 Repo debt – Lundbeckfond Invest 22 205 196 Other payables 2, 23 10,720 9,864 Current liabilities 13,097 12,027 Liabilities 26,565 24,764 Equity and liabilities 59,588 54,121
CONSOLIDATED FINANCIAL STATEMENTS
49
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
MANAGEMENT STATEMENT
The Board of Trustees and the Executive Management have today considered and approved the annual report of Lundbeck Foundation for the financial year ended 31 December 2014.
cial statements of the Foundation give a true and fair view of the Group’s and the Foundation’s assets, liabilities and financial position at 31 December 2014, and of the Group’s and the Foundation’s activities and the Group’s cash flows for the financial year 1 January – 31 December 2014.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the financial statements of the Foundation have been prepared in accordance with the Danish Financial Statements Act. In addition, the annual report has been prepared in accordance with the Danish disclosure requirements for annual reports.
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 and finan-
We recommend that the annual report be approved at the annual meeting.
Copenhagen, 9 April 2015
Executive Management Lene Skole
Board of Trustees
50
Jørgen Huno Rasmussen Chairman
Steffen Kragh Vice Chairman
Thorleif Krarup
Povl Krogsgaard-Larsen
Susanne Krüger Kjær
Gunhild Waldemar
Vagn Flink Møller Pedersen Elected by the employees
Henrik Sindal Jensen Elected by the employees
Peter Adler Würtzen Elected by the employees
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
To the Board of Trustees of Lundbeck Foundation Report on the consolidated financial statements and the Foundation’s financial statements We have audited the consolidated financial statements and Lundbeck Foundation’s financial statements for the financial year 1 January – 31 December 2014, 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 of 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. Management’s 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 preparation of consolidated financial statements and the Foundation’s financial statements that give a true and fair view in order to design 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 give a true and fair view of the Group’s assets, liabilities and financial position at 31 December 2014 and of the results of the Group’s operations and cash flows for the financial year 1 January to 31 December 2014 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 assets, liabilities and financial position at 31 December 2014 and of the results of the Foundation’s operations for the financial year 1 January – 31 December 2014 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 financial statements. On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and the Foundation’s financial statements. Copenhagen, 9 April 2015 Deloitte Statsautoriseret Revisionspartnerselskab
Erik Holst Jørgensen State Authorised Public Accountant
Martin Faarborg State Authorised Public Accountant
51
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
CASH FLOW STATEMENT FOR THE PERIOD 1 JANUARY â&#x20AC;&#x201C; 31 DECEMBER
2014 2013 Note DKKm DKKm Operating profit before special items 1,425 3,465 Special items -39 -744 Adjustment for non-cash operating items etc. 24 2,101 1,899 Working capital changes 25 382 1,005 Cash flows from operating activities before financial receipts and payments and tax 3,869 5,625 Financial receipts 441 499 Dividend received 125 118 Financial payments -486 -779 Income tax paid -764 -593 Cash flows from operating activities 3,185 4,870 Acquisition of companies 26 -3,534 -593 Divestment of subsidiaries, non-controlling interests and operations -7 -22 Investments in intangible assets -1,476 -1,377 Investments in property, plant and equipment -882 -984 Disposal of intangible assets and property, plant and equipment 108 42 Investments in other financial assets at fair value through profit or loss -6,532 -5,759 Sale of other financial assets at fair value through profit or loss 7,396 6,057 Change in other financial assets -12 -46 Cash flows from investing activities -4,939 -2,682 Loan proceeds 1,595 1,309 Repayment of loans -933 -664 Change in other financial liabilities -2 -5 Buyback of shares from non-controlling interests -70 -20 Capital injections from non-controlling interests 1,039 17 Settlement of exercised share options -73 -14 Employee bonds -18 -19 Dividend paid to non-controlling interests 20 -256 -193 Authorised grants paid 9 -459 -370 Cash flows from financing and grants activities 823 41 Change in cash -931 2,229 Cash at 1 January 6,098 3,977 Unrealised exchange adjustments for the year 44 -108 Cash at 31 December 17 5,211 6,098
52
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY – 31 DECEMBER
Non Lundbeck controlling Foundation’s interests’ Other Retained share of share of Capital base reserves earnings equity equity Total equity DKKm DKKm DKKm DKKm DKKm DKKm Equity at 1 January 2014 2,523 -626 23,540 25,437 3,920 29,357 Profit for the year 2,494 2,494 159 2,653 Other comprehensive income 815 -286 529 232 761 Comprehensive income - 815 2,208 3,023 391 3,414 Grants authorised during the year, net -444 -444 - -444 Transferred to provision for future grants 750 -750 Non-controlling interests’ share of dividends - - -206 -206 Buyback of shares from non-controlling interests -49 -49 -21 -70 Change in non-controlling interests 426 426 634 1,060 Adjustment of provision for acquisition of non-controlling interests -51 -51 -38 -89 Incentive programmes 34 34 19 53 Settlement of share options -31 -31 -42 -73 Tax related to items recognised directly on equity 9 9 12 21 Other transactions - 750 -856 -106 358 252 Increase of capital base 205 - -205 - - Equity at 31 December 2014 2,728 939 24,687 28,354 4,669 33,023 Equity at 1 January 2013 2,270 -221 21,984 24,033 3,895 27,928 Profit for the year 2,074 2,074 381 2,455 Other comprehensive income -405 162 -243 -139 -382 Comprehensive income - -405 2,236 1,831 242 2,073 Grants authorised during the year, net -351 -351 - -351 Non-controlling interests’ share of dividends - - -166 -166 Buyback of shares from non-controlling interests -13 -13 -8 -21 Change in non-controlling interests 8 8 20 28 Adjustment of provision for acquisition of non-controlling interests -108 -108 -80 -188 Incentive programmes 40 40 22 62 Settlement of share options -6 -6 -8 -14 Tax related to items recognised directly on equity 3 3 3 6 Other transactions - - -427 -427 -217 -644 Increase of capital base 253 - -253 - - Equity at 31 December 2013 2,523 -626 23,540 25,437 3,920 29,357
CONSOLIDATED FINANCIAL STATEMENTS
53
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
1. ACCOUNTING POLICIES The consolidated financial statements of Lundbeck Foundation have been
The estimates are made by the management of Lundbeck Foundation, the
prepared in accordance with International Financial Reporting Standards
Lundbeck Group, the ALK Group and, the Falck Group respectively.
(IFRS) as adopted by the EU and the Danish Statutory Order on Adoption of It is believed that the following accounting policies and accounting estimates
IFRS issued pursuant to the Danish Financial Statements Act.
are critical to the Group’s financial reporting for 2014. The consolidated financial statements are presented in Danish kroner (DKK), Application of materiality and relevance
which also is the functional currency of Lundbeck Foundation.
In the preparation of the consolidated financial statements, Lundbeck The annual report has been prepared under the historical cost convention,
Foundation aims to focus on information which is considered to be material
except that the following assets and liabilities are measured at fair value:
and thus relevant to the users of the consolidated financial statements. This
derivative financial instruments and financial instruments at fair value.
applies both to the accounting policies and to the information given in the notes in general.
The consolidated financial statements have been prepared in accordance with the new and revised standards (IFRS/IAS) and interpretations (IFRIC)
Based upon events which have taken place during the year and the financial
which apply for the financial year. Other than new disclosure requirements
position at year-end, Management has assessed which information is mate-
under IFRS 12 concerning material non-controlling interests in the subsidiar-
rial for the users. For this purpose, Lundbeck Foundation operates with
ies of Lundbeck Foundation, none of the new standards and interpretations
internal guidelines for the application of materiality and relevance which
have affected the recognition and measurement or the presentation and
have been agreed with the external auditors.
classification for 2014. When assessing materiality and relevance, due consideration is given to ensure adherence to the International Financial Reporting
Future IFRS changes
Standards as adopted by the EU and the Danish Statutory Order on Adoption of IFRS issued pursuant to the Danish Financial Statements Act and to
At the date of the publication of these consolidated financial statements,
ensure that the consolidated financial statements give a true and fair view of
a number of new and amended standards and interpretations have not yet
the Group’s financial position at the balance sheet date and the operations
entered into force or have not yet been adopted by the EU. Therefore, they
and cash flows for the financial year.
are not incorporated in the consolidated financial statements. License income and income from research collaborations IASB has issued IFRS 9 Financial Instruments, which awaits EU endorse-
License income and royalties from outlicensed products and non-refundable
ment. IFRS 9 Financial Instruments is part of IASB’s project to replace IAS 39
downpayments and milestone payments including service income from such
Financial Instruments: Recognition and Measurement, and the new standard
agreements relating to research collaborations is recognised in the income
will change the classification, presentation and measurement of financial
statement under revenue when the following criteria have been met:
instruments and hedging requirements. The Foundation is assessing the
• The payment relates to research results already obtained.
impact of the standard, but it is not expected to have any material impact on
• The buyer has gained access to and possession of the research results.
future consolidated financial statements.
• The most significant risks and benefits associated with the asset sold are transferred to the buyer.
IFRS 15 Revenue from Contracts with Customers was issued in May 2014
• The Group does not retain management control of the asset sold.
and is effective for annual periods beginning on or after 1 January 2017. The
• Revenue from the individual payments in an overall agreement can be
standard has not yet been endorsed by the EU. Entities will apply a five-step
clearly separated and calculated reliably at fair value.
model to determine when, how and at what amount revenue is to be recog-
• It is probable that the Group will receive payment for the asset sold.
nised depending on whether certain criteria are met. Before implementation
• There are no further delivery obligations for the Group concerning the
of the standard, The Foundation will assess whether IFRS 15 Revenue from
asset sold.
Contracts with Customers has an impact on current and new significant agreements. The new standard is not expected to have any material impact
Research and development costs
on future consolidated financial statements.
Research and development costs totalled DKK 3,204 million in 2014 (DKK 3,344 million in 2013). Research and development costs are recognised in the income statement as they are incurred unless the criteria for capitalisa-
Accounting policies and estimates critical to financial reporting
tion of the development costs are deemed to have been met and it is found
In the preparation of the consolidated financial statements in accordance
to be probable that future earnings will cover the development costs. Due
with IFRS and generally accepted accounting principles, it is necessary for
to a very long development period and significant uncertainty in relation
Management to make certain estimates and assumptions as not all account-
to the development of new products, in the opinion of the Group, develop-
ing items and accruals can be calculated with certainty.
ment costs should not normally be capitalised in the balance sheet until the development of the product has been completed and all the necessary
Management’s estimates are based on historical data, recent information
public registration and marketing approvals have been obtained. Develop-
available at the time of presentation of the financial statements and other
ment costs relating to individual minor development projects running for
assumptions considered reasonable under the given circumstances. The
short-term periods and subject to limited risk are capitalised under other
actual outcome may differ from these estimates.
intangible assets.
54
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
Valuation of intangible assets
value of these businesses is linked to the company’s often long-term invest-
Goodwill, product rights and contractual customer relationships etc. repre-
ment in the development of new pharmaceuticals and technologies.
sent a significant part of the Group’s total assets, amounting to DKK 21,670 million in 2014 (DKK 17,884 million in 2013). The majority of the value of
Management estimates the fair value of unlisted investments in accordance
these items arose through the acquisition of businesses or the acquisition
with International Private Equity and Venture Capital Valuation Guidelines.
of rights. In connection with acquisitions, the individual assets and liabilities
I.e. on the basis of relevant valuation methods based on comparable transac-
are re-assessed to ensure that both recognised and unrecognised values
tions on market conditions, capital increases and the like. If the fair value
are measured at fair value. Especially for intangible assets for which there is
cannot be determined with sufficient reliability, the investments in question
often no active market, the calculation of fair value may involve uncertainty.
are recognised at cost less any impairment. The Group assesses at each
Intangible assets with indefinite lives and intangible assets in progress are
balance sheet date whether there is objective evidence that an investment
tested for impairment at least once a year or if there is evidence of impair-
or a group of investments is impaired. An impairment loss is recorded if
ment. Contractual customer relationships etc. identified at acquisitions were
the Group assesses that lack of compliance with business plans affect the
primarily acquired with a view to further developing the acquired business
calculation of fair value or if subsequent capital injections are made at lower
areas and markets and establishing positions in new markets. As a result, a
prices.
large part of the purchase prices has been allocated to goodwill. The value in use of the product rights is calculated by discounting the estimate made
Acquisitions and purchase price allocation in business combinations
by Management over the expected cash flows during a budget period of a
Acquisitions are evaluated in order to determine whether they constitute a
number of years with due consideration to patent expiry. For the calculation
business combination in accordance with IFRS 3 Business Combinations. The
of the value in use of the assets, the Group uses different discount factors
evaluation is based on the input, processes and output of the acquisition.
depending on the individual areas of activity and Management’s expecta-
In connection with allocation of purchase price in business combinations,
tions for growth and terminal value in the period over the budget period.
calculations are made of fair value of acquired assets and liabilities. As this
These factors are crucial for the assessment of any impairment and thus for
determination is based on expected future cash flows relating to the assets
the final calculation of the fair value of intangible assets. The impairment test
and liabilities acquired, there is an inherent uncertainty in respect of whether
of goodwill and the associated key parameters are described in note 10 to
such cash flows will materialise as expected. In accordance with IFRS 3, the
the consolidated financial statements.
purchase price allocations in business combinations may be adjusted for up to 12 months from the date of acquisition.
It is a precondition for the retention of the value of the Group’s rights that such rights are respected. It is the Group’s policy to defend these rights
Provisions for acquisition of non-controlling interests
wherever they may be violated.
Provisions for acquisition of non-controlling interests amounted to DKK 1,160 million at 31 December 2014 (DKK 1,021 million in 2013). In the determina-
Impairment
tion of the fair value of issued put options under which the Group assumes
Goodwill is written down through the income statement in those cases
an obligation to buy shares in subsidiaries held by non-controlling interests,
where the carrying amount exceeds the future net income expected from
management makes certain estimates, including of the future financial
the cash-generating unit (CGU) to which the goodwill relates (recoverable
performance of the subsidiaries, the probability that the option holders
amount). In the impairment test, the discounted expected future cash flows
exercise their right to sell and the time of exercise. These factors are of
(value in use) for the CGU are compared to the carrying amounts of goodwill
material importance to the fair value calculation, which is therefore subject
and other net assets.
to uncertainty.
The carrying amount of intangible assets and property, plant and equipment
Amortisation and depreciation periods and scrap values
is analysed in connection with the preparation of the consolidated financial
In the determination of the carrying amount of intangible assets and prop-
statements or if there are indications that the carrying amount of an asset
erty, plant and equipment, estimates are required of the estimated economic
may exceed the expectations of future income from the asset (recoverable
lives of the assets and of scrap values.
amount). If this analysis concludes that the future expected net income from the asset will be lower than the carrying amount, the carrying amount will be reduced to the higher of fair value less cost to sell and value in use.
Consolidated financial statements
Impairment losses are recognised in the income statement under the same
The consolidated financial statements include Lundbeck Foundation and
items as the associated depreciation or amortization.
subsidiaries controlled by the Foundation and the group is exposed, or has right to variable returns from the company controlled. Control is achieved
Financial assets
where the Foundation directly or indirectly holds more than 50% of the
Financial assets include investments in listed and unlisted equity instruments
voting rights or is otherwise able to exercise or actually exercises control.
and securities, including life science investments recognised at their fair value. Investments in unlisted equity instruments and securities at the end of
Companies in which the Group holds between 20% and 50% of the voting
2014 amounted to DKK 1,719 million (DKK 1,389 million in 2013).
rights and/or exercises significant influence but not control are regarded as associates. Unrealised gains on transactions with associates are eliminated in
The assessment of fair value of these investments is subject to considerable
proportion to the Group’s share of the enterprise.
uncertainty. This applies especially to life science investments because the
CONSOLIDATED FINANCIAL STATEMENTS
55
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
Investments in associates included in the Group’s documented investment
ment at the time of acquisition. Goodwill arising from acquired businesses is
strategy are recognised as financial assets measured at fair value through
adjusted within a maximum period of 12 months from the acquisition if ad-
profit or loss.
ditional information about the fair value at the time of acquisition of assets, liabilities and contingent liabilities acquired is obtained after the acquisition
Basis of consolidation
and it is found that the fair values originally calculated were incorrect or the
The consolidated financial statements are prepared on the basis of the
consideration for the business combination is different from that originally
financial statements of the Foundation and the subsidiaries, which are all
fixed. The effect of the adjustments will be recognised in the opening equity,
prepared in accordance with the Group’s accounting policies.
and the comparative figures will be restated accordingly. Subsequently, goodwill is not adjusted. However, goodwill will not be recognised by an
The consolidated financial statements are prepared by adding together uni-
amount exceeding the expectations of future income from the acquiree.
form items and eliminating intra-group income and expenses, investments, balances and dividends as well as realised and unrealised gains and losses
Goodwill and fair value adjustments in connection with the acquisition of
on transactions between the consolidated companies. Account is taken of
independent foreign entities (subsidiaries or associates) are accounted for
the tax effect of these eliminations.
as assets and liabilities in the acquiree and translated at the exchange rate at the balance sheet date.
Financial statement items of subsidiaries are fully consolidated. Profit for the year and equity attributable to non-controlling interests in subsidiaries that
Gains or losses on the divestment or winding up of subsidiaries and associ-
are not fully controlled are included in the consolidated profit and equity
ates are stated as the difference between the sales or disposal amount and
and stated as separate line items.
the carrying amount of net assets including goodwill at the time of sale plus sales or winding up. In addition, any retained non-controlling interests are
Business combinations
measured at fair value. Gains or losses on the divestment or winding up of
Companies acquired or established during the financial year are recognised
subsidiaries and associates and the effect of renewed measurement of any
in the consolidated financial statements from the date of acquisition or
non-controlling interests are recognised in the income statement.
inception. The date of acquisition is the date when control actually passes to the Group. Companies divested or discontinued are recognised in the consolidated income statement up to the time of divestment or discontinu-
Non-controlling interests
ance. The date of disposal is the date when control of the business actually On initial recognition, non-controlling interests are either recognised at fair
passes to a third party.
value (including the fair value of goodwill related to non-controlling interests Acquired businesses are accounted for using the acquisition method of ac-
in the acquired company) or at the non-controlling interests’ proportionate
counting, according to which the identifiable assets, liabilities and contin-
share of the acquired company’s identifiable assets, liabilities and contingent
gent liabilities of the acquired businesses are stated at fair value at the time
liabilities measured at fair value (excluding the fair value of goodwill related
of acquisition. Account is taken of the tax effect of the revaluations made.
to non-controlling interests in the acquired company). The measurement
The cost of a business is generally the fair value of the consideration paid.
basis for non-controlling interests is selected for each individual transaction.
If the final determination of the consideration is contingent on one or more future events, the value thereof will be recognised at fair value at the date
Acquisition and divestment of non-controlling interests
of acquisition. Changes to contingent considerations are recognised in the
Increases and reductions of non-controlling interests are treated for ac-
income statement. Put options issued in connection with acquisitions and
counting purposes as transactions with shareholders, in their capacity as
the value of which is contingent on future events will be recognised as part
shareholders. As a result, any differences between adjustment to the carry-
of the consideration at the date of acquisition. The put options issued are
ing amount of non-controlling interests and the fair value of the consider-
subsequently measured at fair value. Any changes to the fair value of issued
ation received or paid are recognised directly in equity.
put options after initial recognition are recognised in equity. Costs directly attributable to the business combination are recognised in the income
When put options are issued as part of the consideration for business com-
statement as incurred. Adjustments of commitments in connection with
binations, the non-controlling interests receiving put options are considered
conditional consideration or issued put options the value of which is contin-
to have been redeemed on the acquisition date. The non-controlling inter-
gent on future events concerning business combinations with an acquisition
ests are eliminated and a debt obligation is recognised at fair value on initial
date before 1 January 2010 will still be recognised in accordance with IFRS
recognition. Fair value is determined as the present value of the exercise
3 (2004). Accordingly, the adjustments are recognised in goodwill until the
price of the option. The subsequent measurements is fair value with recogni-
conditions have been met or the issued put options exercised.
tion in equity of value changes as they arise.
Any positive difference (goodwill) between the consideration and the value
Issued put options relating to business combinations with an acquisition
of non-controlling interests in the acquiree and the fair value of the previous-
date before 1 January 2010 will still continue to be recognised in accordance
ly held interests in the acquiree, on the one hand, and the fair value of the
with IFRS 3 (2004). Accordingly, subsequent measurement takes place at
acquired identifiable assets, liabilities and contingent liabilities, on the other
amortised cost with recognition of interest expenses in the income state-
hand, is recognised in intangible assets. On acquisition, goodwill is allocated
ment and value changes in goodwill as they arise. Any subsequent dividend
to the cash-generating units which will subsequently form the basis for fu-
payments to option holders are recognised as a financial expense in the
ture impairment tests. Negative differences (negative goodwill) between the
income statement in the cases where the option price is independent of
cost of the acquired business and the fair value of the acquired identifiable
dividend payments. Dividend payments are included in the determination
assets, liabilities and contingent liabilities are recognised in the income state-
of the cost of the put options in cases where the option price is adjusted for dividend payments received.
56
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
Translation of foreign currency
vestment. On the divestment of partially owned foreign subsidiaries, the part of the currency translation reserve that relates to non-controlling interests
A functional currency is determined for each of the reporting enterprises of
is not recognised in the income statement. On partial divestment of foreign
the Group. The functional currency is the currency in the primary economic
subsidiaries without giving up control, a proportionate share of the currency
environment in which the reporting entity operates. Transactions in curren-
translation reserve is transferred from the parent company shareholders’ to
cies other than the functional currency are transactions in foreign currencies.
the non-controlling shareholders’ share of equity. On partial divestment of associates and joint ventures, the proportionate share of the accumulated
On initial recognition, transactions denominated in foreign currencies are
currency translation reserve recognised in other comprehensive income
translated at standard rates which approximate the actual exchange rates
is transferred to profit for the year together with the gain or loss on the
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 aris-
techniques which include inputs not based on observable market data.
ing 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-
discounts and revenue-based taxes consisting mainly of value added taxes
CONSOLIDATED FINANCIAL STATEMENTS
57
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
and revenue-based drug taxes. Moreover, revenue includes license income
Sales and distribution costs
and royalties from outlicensed products as well as non-refundable downpay-
Sales and distribution costs comprise expenses incurred in connection with
ments and milestone payments relating to research and development col-
the sale and distribution of the Group’s products sold during the year. This
laborations and collaboration on commercialization of products.
includes expenses for sales campaigns launched, training and administration of the sales force and direct distribution and marketing costs. Also recog-
In addition, income from the reduction of investments in research enterprises
nised are wages and other expenses for the sales and marketing functions,
considered to represent sale of research results is recognised as revenue.
amortisation/depreciation and impairment of product rights, for example, and other indirect costs.
See Accounting policies and estimates critical to financial reporting for a description of the accounting treatment of license income and income from
Administrative expenses
research collaborations.
Administrative expenses comprise expenses incurred in the year for the management and administration of the Group. This includes wages and
Revenue: Emergency, Assistance, Healthcare and Training sectors
other costs relating to the Group’s management, HR, IT and finance func-
Revenue represents the value of services and goods delivered and invoiced
tions. Also recognised are amortisation/depreciation and impairment and
subscriptions attributable to the financial period, and is recognised in the in-
other indirect costs.
come statement if delivery and transfer of risk to the buyer have taken place before year-end, and if the income can be reliably measured and is expected
Results of investments in associates
to be received.
The proportionate share of the results of associates is recognised in the consolidated income statement after tax and elimination of the proportion-
The value of services rendered is recognised on the basis of the delivered
ate share of any intra-group gains and losses and after deduction of any
percentage of the total service.
writedowns of the equity investments.
Revenue from subscriptions is allocated to the income statement on a
Net financials
straight-line basis.
Net financials include interest income and expenses, including the interest component of financial lease payments, which are recognised in the income
Revenue from sales of goods is recognised when the significant risks and
statement at the amounts relating to the financial year. Net financials also
rewards of ownership have been transferred to the buyer.
include value adjustments of financial assets and realised and unrealised gains and losses on securities, unhedged items denominated in foreign
Revenue is measured at the fair value of the agreed consideration exclud-
currencies as well as forward contracts and other derivatives not used for
ing VAT and other taxes collected on behalf of third parties. All discounts
hedge accounting, realised exchange gains and losses concerning additions
granted are recognised in revenue.
to net investments in foreign subsidiaries that are recycled from other comprehensive income, realised fair value adjustments and prolonged losses on
Cost of sales
available-for-sale financial assets. Dividends to capital holders who have re-
Cost of sales comprises the cost of goods and services sold. Cost includes
ceived put options in connection with business combinations are recognised
the cost of raw materials, transport costs, consumables and goods for resale,
as a financial expense in the cases where the option price is independent of
direct labour and indirect costs of production, including costs for operating
dividend payments and other financial expenses.
and maintaining production facilities and equipment, amortisation/depreciation and impairment losses relating to such assets. Cost of sales moreover
Tax
includes royalty payments concerning inlicensed products, expenses in con-
The Group’s controlled Danish companies are jointly taxed with Lundbeck-
nection with quality assurance of products and any writedown to net realis-
fond Invest A/S as administration company. The current Danish income tax
able value of unsaleable and slow-moving items. Cost of sales also includes
liability is allocated among the companies of the tax pool in proportion to
external assistance to generate the year’s income.
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
Lundbeck Foundation has opted to use section 3(4) of the Danish Corpora-
year in connection with the Group’s research and development functions,
tion Tax Act. Under these rules, the taxable income of Lundbeckfond Invest
including wages and salaries, amortisation/depreciation and impairment and
A/S is considered to have been earned by Lundbeck Foundation if the tax-
other indirect costs as well as costs relating to research and development
able income is distributed as dividends to Lundbeck Foundation. Since the
collaborations on in-licensed products.
Lundbeck Foundation’s taxable income is regularly offset against grants for the year and tax provisions for future grants, no current or deferred tax is
Research costs are always recognised in the income statement as they are
recognised in respect of financial assets or future grants.
incurred. Tax for the year, which consists of the year’s current tax and the change in Development costs are recognised in the income statement as they are
deferred tax, is recognised in the income statement as regards the amount
incurred. Development costs are capitalised only if a number of specific
that can be attributed to the net profit or loss for the year and directly in the
criteria are deemed to have been met.
statement of comprehensive income under other comprehensive income as regards the amount that can be attributed to items under other comprehen-
See Accounting policies and estimates critical to financial reporting for a
sive income or directly in equity. Exchange adjustments of deferred tax are
description of conditions for capitalising development costs.
recognised as part of the movements in deferred tax in the balance sheet.
58
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
The current tax charge for the year is calculated based on the tax rates and
Amortisation is recognised in the income statement under cost of sales,
rules applicable at the balance sheet date.
sales 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 Groupâ&#x20AC;&#x2122;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 Groupâ&#x20AC;&#x2122;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: Product rights and 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 10
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
3-10
Product rights are amortised on a straight-line basis over the economic
Leasehold improvements max.
lives of the underlying products which in all material aspects are currently
between 6-12 years. Contractual customer relationships are measured at cost
The depreciation base is cost less the estimated residual value at the end of
less accumulated depreciation and impairment. Intangible assets acquired
the expected useful life. The cost of a total asset is divided into smaller com-
on acquisition are amortised over the expected economic life, estimated to
ponents that are depreciated separately if such components have different
be 3 to 10 years. Patents are amortised over a maximum of the remaining
useful lives. Depreciation methods, useful lives and residual values are re-
life of the patent, which in all material aspects is currently between 10-13
assessed annually.
10
years. Licenses are amortised over the period of the agreement. Software is amortised over the expected economic life, estimated to be 3 to 5 years. The
Costs incurred that increase the recoverable amount of the asset concerned
economic lives of large administrative systems are estimated to be 8 years.
are added to the assetâ&#x20AC;&#x2122;s cost as an improvement and are depreciated over
Amortisation commences when the asset is ready to be brought into use,
the expected useful life of the improvement.
which means at the time of commercialisation.
CONSOLIDATED FINANCIAL STATEMENTS
59
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
Depreciation is recognised in the income statement under cost of sales, sales
statement of comprehensive income under other comprehensive income
and distribution costs, administrative expenses and research and develop-
with the exception of impairment losses and dividends, which are taken to
ment costs, respectively.
the income statement. When other available-for-sale investments are sold or settled, the accumulated fair value adjustments recognised under other
Gains or losses on the sale or retirement of items of property, plant and
comprehensive income are recycled to the income statement.
equipment are calculated as the difference between the carrying amount and the selling price reduced by costs relating to divestment or discontinu-
The fair value of listed investments is calculated using official currently
ance. Gains and losses are recognised in the income statement under the
quoted prices. The calculation of fair value of unlisted investments, including
same items as the associated depreciation.
life science investments, is made in accordance with International Private Equity and Venture Capital Valuation Guidelines. i.e. on the basis of relevant
Investments in associates
valuation methods based on comparable transactions on market conditions,
Investments in associates, except for investments in associates, that are
capital increases and the like. If the fair value cannot be determined with suf-
included in the Group’s documented investment strategy, are recognised and
ficient reliability, the investments in question are recognised at cost less any
measured in the consolidated financial statements according to the equity
impairment. The Group assesses at each balance sheet date whether there is
method, which entails that the investments are measured in the balance
objective evidence that an investment or a group of investments is impaired.
sheet at the proportionate share of the associate’s net asset value calculated
Assessments of investments in unlisted equity instruments and securities,
in accordance with the Group’ accounting policies less or plus unrealised
including life science investments, include an assessment of whether the
intra-group gains and losses and plus the carrying amount of goodwill.
companies live up to the defined business plans and the impact of any noncompliance on the calculation of fair value.
The proportionate share of the result of the associate is recognised in the income statement after tax and elimination of the proportionate share of any
Inventories
intra-group gains and losses and after deduction of any writedowns of the
Raw materials, packaging and goods for resale are measured at the latest
investments. The proportionate share of all transactions and events recog-
known cost at the balance sheet date, which equals cost computed accord-
nised directly in the associate’s other comprehensive income is recognised in
ing to the FIFO method. Work in progress and finished goods manufac-
the Group’s statement of comprehensive income under other comprehensive
tured by the company are measured at cost, i.e. the cost of raw materials,
income.
consumables, direct labour and indirect costs of production. Indirect costs of production include materials and labour as well as maintenance of and
Investments in associates with a negative carrying amount are recognised
depreciation on the machines, factory buildings and equipment used in the
at DKK 0. Receivables and other long-term financial assets considered to
manufacturing process as well as the cost of factory administration and
form part of the overall investment in the associate are written down by any
management. Indirect costs of production are allocated based on the normal
remaining negative net asset value. Trade receivables and other receivables
capacity of the production plant.
are written down only to the extent they are deemed to be irrecoverable. A provision to cover the remaining negative net asset value will only be made
Inventories are written down to net realisable value if it is lower than the
if the Group has a legal or constructive obligation to cover the liabilities of
cost price. The net realisable value of inventories is determined as the selling
the relevant associate.
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.
Financial assets Securities that are included in the Group’s documented investment strategy in accordance with the fair value option of IAS 39 Financial Instruments:
Receivables
Recognition and Measurement are recognised on the basis of the settle-
Current receivables comprise trade receivables and other receivables arising
ment date at fair value and are subsequently measured at market price or
in the Group’s normal course of business. Other receivables recognised un-
estimated fair value at the balance sheet date. Bonds with a term to maturity
der financial assets are financial assets with fixed or determinable payments
of less than one year are recognised in current assets. Both realised and
that are not quoted on an active market and are not derivative financial
unrealised gains and losses are recognised in the income statement under
instruments. On initial recognition, receivables are measured at fair value and
net financials.
subsequently to amortised costs, which usually corresponds to the nominal value less writedowns to counter the risk of loss calculated on the basis of
Financial assets are measured at fair value through profit or loss, including
an individual evaluation. A provision account is used for this purpose.
investments in associates if they are included in the Group’s documented Prepayments
investment strategy.
Prepayments consist of expenses relating to subsequent financial years. Bonds forming part of repo transactions, i.e. the selling of bonds to be
Prepayments are measured at cost.
repurchased at a later date, remain in the balance sheet as financial assets, and the amount received on repo transactions is recognised as repo debt.
Securities
Returns on such bonds are recognised under financials.
The bond portfolio and other securities, which are included in the Group’s documented investment strategy for excess liquidity, or bonds with a term to
On initial recognition, other investments classified as available-for-sale are
maturity of less than one year, are recognised under current assets. Securi-
measured at fair value with the addition of costs directly attributable to the
ties are initially recognised at fair value on the value date and are subse-
acquisition. Other investments are subsequently measured at fair value at
quently remeasured at market value at the balance sheet date. Both realised
the balance sheet date, and changes to the fair value are recognised in the
and unrealised gains and losses are recognised in the income statement under net financials.
60
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
Equity
Share price-based incentive programmes in which employees have the
Authorised grants
difference between the agreed price and the actual share price settled in
Grants are considered equity movements and are recognised as a liability at
cash (debt schemes) are measured at fair value at the date of grant and rec-
the time when the grant has been authorised by the Board of Trustees and
ognised in the income statement under staff costs when or as the employee
announced to the recipient. Authorised grants not yet disbursed are recog-
obtains the right to such difference settlement. The incentive programmes
nised in non-current or current liabilities, respectively.
are subsequently remeasured on each balance sheet date and upon final settlement, and any changes in the fair value of the programmes are
Reserve for future grants
recognised in the income statement under staff costs under the respective
In accordance with the Danish Act for Industrial Foundations, a reserve for
functions. The balancing item is recognised under provisions until the time of
future grants has been set up in order for the Board of Trustees to be able
the final settlement.
to donate grants during the financial year. The reserve does not have to be used, but is continuously reduced with donated grants. Every year at the
Pension obligations
Annual Meeting the Board of Trustees will re-evaluate the size of the reserve.
Periodical payments to defined contribution plans are recognised in the income statement at the due date and any contributions payable are recognised in the balance sheet under current liabilities.
Hedging reserve Hedge transactions that meet the criteria for hedging future cash flows and for which the hedged transaction has yet to be realised are recognised in
The present value of the Group’s liabilities relating to future pension pay-
equity under the hedging reserve.
ments according to defined benefit plans is measured on an actuarial basis once a year on the basis of the pensionable period of employment up to the
Value adjustments concerning hedging transactions used to hedge the
time of the actuarial valuation. The present value is calculated based on as-
Group’s net investment in such entities are recognised in equity under the
sumptions of the future developments of salary, interest, inflation, mortality
hedging reserve.
and disability rates and other factors. Present value is computed exclusively for the benefits to which the employees have earned entitlement through
Currency translation reserve
their employment with the Group. Pension expenses, finance costs and ad-
Foreign exchange adjustments arising on the translation of financial state-
ministration fees are recognised in the income statement under staff costs.
ments for entities which have a functional currency other than Danish kroner,
Actuarial gains and losses are recognised in the statement of comprehensive
foreign exchange adjustments relating to financial assets and liabilities
income as they are calculated and cannot subsequently be recycled through
representing a part of the Group’s net investment in such entities are recog-
profit or loss.
nised in equity under the currency translation reserve. The present value of the liability according to defined benefit plans is On full or partial realisation of a net investment, foreign exchange adjust-
measured less the fair value of the plan assets, and any net obligation is
ments are recognised in the income statement.
recognised in the balance sheet under non-current liabilities. Any net asset is recognised in the balance sheet as a financial asset.
Reserve for fair value adjustment of available-for-sale financial assets Reserve for fair value adjustment comprises accumulated changes in the fair
Income tax and deferred tax
values of available-for-sale financial assets. The reserve, which forms part of
Current tax payables and receivables are recognised in the balance sheet,
the Group’s free reserves, is dissolved and transferred to the income state-
computed as tax calculated on the taxable income for the year, adjusted for
ment as the investment is sold or written down.
provisional tax paid.
Treasury shares
Tax on items in other comprehensive income is recognised in the statement
Cost and selling prices of treasury shares as well as dividends are recognised
of comprehensive income under other comprehensive income. Tax on equity
directly in equity under retained earnings.
entries is recognised in equity.
Non-controlling interests
Deferred tax is recognised on all temporary differences between the carry-
The proportionate shares of the profits and equity of subsidiaries attribut-
ing amounts of assets and liabilities and their tax base, except for temporary
able to non-controlling interests are recognised as a separate item under
differences arising either on initial recognition of goodwill or from a transac-
equity. On initial recognition, non-controlling interests are recognised as de-
tion that is not a business combination and with the temporary ¬difference
scribed under “Business combinations”. The issuance of put options as part
ascertained at the time of the initial recognition affecting neither the finan-
of the consideration in business combinations is recognised as described
cial result nor the taxable income. The tax value of the assets is calculated
under “Acquisition and divestment of non-controlling interests”.
based on the planned use of each asset.
Share-based payments
Deferred income tax is provided on temporary differences arising on invest-
Share-based incentive programmes in which employees may opt to buy
ments in subsidiaries and associates, unless the Group has a possibility of
shares in H. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S and in
controlling when the deferred tax is to be realised and it is likely that the
which shares are allocated to employees (equity schemes) are measured at
deferred tax will not materialise as current tax.
the equity instruments’ fair value at the date of grant and recognised in the income statement under staff costs under the respective functions when or
Deferred tax is measured on the basis of the tax rates and tax rules in force
as the employee obtains the right to buy/receive the shares. The balancing
in the respective countries on the balance sheet date. Changes in deferred
item is recognised directly in equity under other transactions.
tax as a result of changed tax rates or tax rules are recognised in the income statement.
CONSOLIDATED FINANCIAL STATEMENTS
61
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
Deferred tax assets, including the tax value of tax loss carry-forwards, are
Return obligations imposed on the industry are recognised in the balance
recognised in the balance sheet at the value at which the asset is expected
sheet under other provisions.
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 Changes in deferred tax concerning the cost of share-based payments are
the raising of the loan at proceeds received less transaction costs paid. In
generally recognised in the income statement.
subsequent periods, the financial liabilities are measured at amortised cost, equivalent to the capitalised value when the effective rate of interest is used.
Deferred tax in respect of recaptured losses previously deducted in foreign
The difference between the proceeds and the nominal value is recognised in
subsidiaries is recognised on the basis of a specific assessment of the inten-
the income statement over the loan period.
tion with each individual subsidiary. Residual lease commitments from finance leases are recognised at amorBalances calculated according to the rules on interest deductibility limita-
tised cost.
tions in the Danish Corporate Income Tax Act are allocated between the jointly-taxed companies according to a joint taxation agreement and are
Repo debt relates to bonds included in repo transactions. Debt is recognised
allocated between the companies that are subjected to deductibility limita-
at amortised cost, and accumulated repo interest has been accrued.
tion in proportion to their share of the total limitation. Deferred tax liabilities in respect of these balances are recognised in the balance sheet, whereas
Debt included in the short-term financial liquidity is also measured at amor-
deferred tax assets are recognised only if the criteria for recognition of
tised cost in subsequent periods.
deferred tax assets are met. Other payables, which include trade payables and debt to public authorities Other provisions
etc. are measured at amortised cost.
Other provisions consist of different types of provisions, including provisions for pending lawsuits. Management makes assessments of provisions and
Leases
contingent liabilities, including the probable outcome of pending and pos-
For accounting purposes, lease obligations are divided into finance and
sible future lawsuits, which inherently depends on uncertain future events.
operating leases. Leases are classified as finance leases when substantially
When management determines the probable outcome of lawsuits and
all risks and rewards of ownership of the leased asset are transferred. Other
similar factors, it relies on assessments made by external advisers who are
leases are classified as operating leases.
familiar with the specific cases and the existing legal practice in the area. The accounting treatment of assets held under finance lease and the related Provisions for restructuring are recognised when a detailed, formal plan for
liability is described in the sections on property, plant and equipment and
the restructuring has been made before or on the balance sheet date and
financial liabilities, respectively.
has been announced to the parties involved and the parties affected can reasonably expect that the Group will carry out the restructuring, either by
Assets held under operating leases are not recognised in the balance sheet.
starting to implement the plan or announcing its main components. In con-
Lease liabilities under operating leases are disclosed as contingent liabilities.
nection with acquisitions, provisions for restructuring costs are only included
Lease payments concerning operating leases are recognised in the income
in the computation of goodwill if an obligation exists for the entity acquired
statement on a straight-line basis over the term of the lease.
as of the date of acquisition. Provisions are made for onerous contracts when the anticipated benefits to
Cash flow statement
the Group from a contract are outweighed by the unavoidable costs under The consolidated cash flow statement is presented according to the indirect
the contract.
method and shows the composition of cash flows, divided into operating, When the Group is under an obligation to dismantle an asset or re-establish
investing and financing activities respectively, and cash and cash equivalents
the site where the asset has been used, a provision is made corresponding to
at the beginning and at the end of the year.
the present value of the expected future costs. The provision is determined based on current orders and estimated future costs, discounted to their
Cash flows from acquisitions and divestments of companies are shown sepa-
present value. The discount factor used reflects the general level of interest
rately under cash flows from investing activities. The cash flow statement
rates. The present value of the costs is recognised in the cost of the item of
includes cash flows from acquired companies from the date of acquisition
property, plant and equipment in question and depreciated with these as-
and cash flows from divested companies until the time of divestment.
sets. The increase of the present value over time is recognised in the income Cash flows from operating activities are calculated as the Groupâ&#x20AC;&#x2122;s profit from
statement under financial expenses.
operations and special items, adjusted for non-cash operating items, working Other provisions are recognised when the Group has a legal or constructive
capital changes, financial receipts and payments and income taxes paid.
obligation that arises from past events and it is probable that an outflow of Cash flows from investing activities include payments in connection with
financial resources will be required to settle the obligation.
purchases and sales of intangible assets, property, plant and equipment and Other provisions are measured as the best estimate of the costs required to
financial assets, including equity investments in companies. Also included
settle the liabilities at the balance sheet date.
are securities classified as current assets. Entering into a finance lease is considered a non-cash transaction.
62
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 1
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 non-controlling interests. Cash comprises cash less current bank debt falling due on demand. Cash flows denominated in foreign currencies, including cash flows in foreign subsidiaries, are translated at the average exchange rates during the year because they approximate the actual exchange rates at the date of payment. 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 separate item in the cash flow statement.
Key figures Key figures are calculated according to Recommendations and Financial Ratios 2010 issued by the Danish Society of Financial Analysts. Operating profit:
Defined as the Group’s profit before special items,
financial items and tax
Operating profit margin: Operating profit x 100 / Revenue Return on equity:
Lundbeck Foundation’s share of profit x 100 /
Lundbeck Foundation’s share of average equity
CONSOLIDATED FINANCIAL STATEMENTS
63
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 2 - 3
2. REVENUE
2014 2013 DKKm DKKm Europe 18,179 19,993 USA 6,210 4,863 Rest of the world 5,515 5,236 Total 29,904 30,092 Brain diseases (Lundbeck Group) 13,468 15,258 Allergy treatment (ALK Group) 2,437 2,246 Emergency, assistance, healthcare and training (Falck Group) 13,999 12,588 Total 29,904 30,092 Revenue includes: Downpayments and milestone payments 249 1,148 Service income from research collaborations 51 60 Royalty 169 96 Revenue in Denmark 6,186 5,914 Other accrued income There is accrued subscription revenue in the amount of DKK 1,272 million in 2014 (DKK 1,191 million in 2013) and other accrued income in 2014 of DKK 328 million (DKK 345 million in 2013). 3. STAFF COSTS
2014 2013 DKKm DKKm Short-term staff benefits 11,355 10,410 Share-based payment 52 69 Pension benefits 647 598 Other social security costs 1,156 1,087 Total 13,210 12,164 The yearâ&#x20AC;&#x2122;s staff costs are specified as follows: Cost of sales 7,250 6,504 Research and development costs 1,268 1,235 Sales and distribution costs 2,590 2,328 Administrative expenses 2,102 2,097 Total 13,210 12,164 Total remuneration in the Group for the Executive Management of the Foundation amounts to 9 8 Total remuneration in the Group for the Board of Trustees of the Foundation amounts to 6 7
64
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 3 3. STAFF COSTS, CONTINUED
2014 2013 DKKm DKKm Remuneration of the Executive Management and the Board of Trustees is specified as follows: Executive Management: Lene Skole, from 1 September 2014 2.8 Christian Dyvig, stepped down on 31 August 2014 6.0 8.0 Board of Trustees: Jørgen Huno Rasmussen, Chairman of the Foundation and Lundbeckfond Invest A/S and, Chairman of the Investment Committee 0.8 0.8 Steffen Kragh, Vice-Chairman of the Foundation and Lundbeckfond Invest A/S, from 7 April 2014 and member of the Investment Commitee 0.4 0.2 Thorleif Krarup, member of the Investment Committee, Chairman of the Science Teaching and Communication Committee 2.2 2.0 Povl Krogsgaard-Larsen, member of the Biomedical Sciences Committee and Investment Committee 0.5 0.5 Susanne Krüger Kjær, member of the Biomedical Sciences Committee, from 7 April 2014 0.3 Gunhild Waldemar, Chairman of the Biomedical Sciences Committee 0.5 0.4 Vagn Flink Møller Pedersen, employee representative from Falck A/S, from 7 April 2014 0.3 Henrik Sindal Jensen, employee representative from H. Lundbeck A/S, from 7 April 2014 0.4 Peter Adler Würtzen, employee representative from ALK-Abelló A/S 0.2 0.2 Mikael Rørth, Vice-Chairman of the Foundation and Lundbeckfond Invest A/S, Chairman of the Biomedical Sciences Committee and member of the Investment Committee, stepped down on 7 April 2014 0.2 0.8 Kim Klitgaard, employee representative from H. Lundbeck A/S, stepped down on 7 April 2014 0.1 0.2 Ken Liljegren, employee representative from H. Lundbeck A/S, stepped down on 7 April 2014 0.1 0.2 Jes Østergaard, Chairman of the Natural Sciences Committee and member of the Investment Committee, stepped down on 23 May 2013 - 1.4 Rounding -0.1 Total 5.9 6.7 Average number of full-time employees during the year 32,135 29,798 Number of employees at year-end 41,907 39,314 Incentive programmes The Executive Management of the Foundation is not offered incentive programmes. An incentive programme has been in existence since 2010 for employees of Lundbeckfond Invest and Lundbeckfond Ventures which is similar to standard incentive programmes for investment management and venture industry. The purpose of the incentive programme is for Lundbeckfond Invest and Lundbeckfond Ventures to be able to attract and retain skilled and qualified labour. The cost related to the programs is not recognised as staff cost before payment take place, due to uncertainty about the amount and if and when the payment becomes payable. In 2014 bonus under Lundbeckfond Invest program amounts to DKK 6 million (DKK 3 million in 2013). For Lundbeckfond Ventures program, established in 2010, an expense of DKK 30 million (DKK 0 in 2013) has been recognised under financial items as a provision. 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 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 long term 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 to Lundbeck Group achieving its financial targets. For the schemes in ALK-Abelló A/S, each share option entitles the holder to acquire one existing B share of DKK 10 nominal value in the company. The right to exercise the option is subject to the holder of the option not having resigned at the time of exercise. No other vesting conditions apply. The option can be exercised only during a period of four weeks after the publication of annual reports or interim financial statements. Share options are considered sufficiently covered by treasury shares. The ALK Group has established conditional shares plans for the Board of Management and a number of key employees as part of retention programme. Conditional shares will be available three years after the date of grant, provided that ALK achieves the targets for vesting.
CONSOLIDATED FINANCIAL STATEMENTS
65
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 3 3. STAFF COSTS – CONTINUED
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. Issued warrants to Executive Management were acquired at market value, and no conditions were attached. Issued warrant to executive employees were acquired at market value and is subject to continuing employment on the date of exercise. Special provisions are in place concerning sickness and death and in case of change to the Group’s capital structure etc.
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 shows the conditions for the active equity-based scheme in 2014 and 2013 financial year: Number of warrants/ Exercise Exercise shares Vesting date period begins period ends granted Exercise price H. Lundbeck A/S - equity-based schemes 2008, warrants 6/5 2011 6/5 2011 5/5 2016 405,234 115.00 2009, warrants 16/3 2012 16/3 2012 15/3 2017 534,058 102.00 2010, warrants 16/3 2013 16/3 2013 15/3 2018 790,950 97.00 2011, warrants 31/3 2014 1/4 2014 31/3 2019 849,085 121.00 31/3 2015 1/4 2015 31/12 2018 155,750 113.00 2012, warrants (3 years) 1) 31/3 2016 1/4 2016 31/12 2018 233,629 113.00 2012, warrants (4 years) 1) 31/3 2017 1/4 2017 31/12 2018 389,380 113.00 2012, warrants (5 years) 1) 2012, warrants 31/3 2015 1/4 2015 31/3 2020 692,003 113.00 30/4 2017 1/5 2017 30/4 2020 1,355,000 141.00 2014, warrants 2) 2010, share scheme 16/3 2013 102,689 2011, share scheme 31/3-30/6 2014 539,962 2012, share scheme 31/3 2015 245,681 2013, share scheme 31/5 2016 540,562 2014, share scheme 31/5 2017 205,702 1) As from 2012, the exercise price of DKK 113.00 is revalued by 4.00% per year adjusted for the dividend payout ratio. 2) As from 2014, the exercise price of DKK 141.00 is revalued by 4.00% per year adjusted for the dividend payout ratio. The fair value at the time of grants of 2014 share scheme was respectively DKK 26.06 and DKK 138.81 pr. share (DKK 110.70 in 2013). ALK-Abelló A/S - equity-based schemes 2008, share options 1/11 2011 1/11 2011 1/11 2015 47,600 552.00 2009, share options 1/11 2012 1/11 2012 1/11 2016 58,300 499.00 2010, share options 1/11 2013 1/11 2013 1/11 2017 174,000 360.00 2011, share options 1/11 2014 1/11 2014 1/11 2018 220,000 328.00 2012, share options 1/5 2015 1/5 2015 1/5 2019 101,000 408.00 2013, share options 1/3 2016 1/3 2016 1/3 2020 89,000 464.00 2014, share options 1/3 2017 1/3 2017 1/3 2021 53,400 739.00 2012, share scheme 1/5 2015 15,300 2013, share scheme 1/3 2016 14,600 2014, share scheme 1/9 2017 8,875 The exercise price for ALK-Abelló A/S’ schemes equals the average market price of the company’s share for the five trading days immediately preceding the date of grant and increased by 2.5% p.a. and reduced by dividends paid. Conditional share under the share scheme have been granted at DKK 738 pr. share (DKK 420 in 2013). Fair value at the time of grants of warrants in 2014 was DKK 123 pr. share (DKK 69 in 2013). It was decided for each open window that ALK’s share options exercised in 2014 were to be settled by cash settlement. A total of 204,825 share options were exercised and a total payment amounted to DKK 73 million (DKK 14 million in 2013).
66
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 3 3. STAFF COSTS – CONTINUED
Number of
warrants/ Acquisition Exercise Exercise shares date period begins period ends granted Exercise price Falck Holding A/S - equity-based schemes 2011, Warrants Executive Management Board 15/3 2011 2019 2021 4,443,120 171.00-209.00 2014, Warrants executive employees 25/6 2014 2021 2025 1,040,877 102.00 At the annual general meeting held on 30 April 2014, the shareholders resolved to change the terms for exercising the warrants. Pursuant to the resolution, warrants are exercisable in the period 2019-2021 at between DKK 171 and DKK 209 per share. The warrants issued were acquired at market value with no conditions attached. The members of the Executive Management Board do not participate in the new warrant programme for executives. The employees acquired the warrants issued at market value, equivalent to DKK 5 million, so no cost relating to the warrants is recognised in the income statement. The warrants for executive employees are exercisable in three tranches in 2021, 2023 and 2025 at a price based on a share price of DKK 102 plus 8% per year. Dividends in the period between issuance and exercise of the warrants are adjusted in the price.
Outstanding at 1 January Additions
Exercised/ settled
Expired/ Outstanding at cancelled 31 December
Outstanding warrants and share options 2014 H. Lundbeck A/S, warrants 2,243,908 1,355,000 -191,839 -960,332 2,446,737 ALK-Abelló A/S, share options 564,475 53,400 -204,825 -35,475 377,575 Falck Holding A/S, warrants 4,443,120 1,040,877 - - 5,483,997 Total 2014 7,251,503 2,449,277 -396,664 -995,807 8,308,309 Average exercise price for warrants and share options, DKK 142.12 137.46 254.59 150.50 170.19
Outstanding at 1 January Additions
Exercised/ settled
Expired/ Outstanding at cancelled 31 December
Outstanding warrants and share options 2013 H. Lundbeck A/S, warrants 2,365,476 - -60,525 -61,043 2,243,908 ALK-Abelló A/S, share options 588,475 89,000 -77,700 -35,300 564,475 Falck Holding A/S, warrants 4,443,120 - - - 4,443,120 Total 2013 7,397,071 89,000 -138,225 -96,343 7,251,503 Average exercise price for warrants and share options, DKK 145.88 464.00 273.82 749.49 142.12
Debt-based schemes The debt-based schemes in Lundbeck Group consist of Stock Appreciation Rights (SARs) and Restricted Cash Units (RCUs) awarded during the years 2008-2014. A few key employees in the US subsidiaries were granted 10,543 RCUs in June 2014, (19,003 RCUs in June 2013) on terms and conditions similar to those that apply to the Restricted Share Unit programme granted in June 2014 (June 2013 for the grant made in 2013) to key employees of the parent company and its non-US subsidiaries. The RCUs will vest on 31 May 2017 (31 May 2016 for the grant made in 2013) subject to continuing employment with Lundbeck and Lundbeck achieving its financial targets, after which time they are settled. The size of the amount depends on the value of the Lundbeck share at the vesting date. The fair value per RCU at the time of grant was calculated at DKK 138.81 (DKK 110.70 for the grant made in 2013). The share price-based scheme for employees of the Group’s US subsidiaries cannot be converted into shares because the value of the scheme is distributed as a cash amount. The SARs allocated in 2011 vested in 2014. The RCUs allocated in 2011 vested in 2014, after which time the scheme was settled. The SARs allocated in 2010 vested in 2013. The RCUs allocated in 2010 vested in 2013, after which time the scheme was settled.
CONSOLIDATED FINANCIAL STATEMENTS
67
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 3 - 4 3. STAFF COSTS – CONTINUED
Liability and expense recognised in the income statement The warrants and shares granted are recognised in the income statement for 2014 at an expense corresponding to the fair value at the time of grant calculated according to the Black-Scholes method for the vesting period that concerns 2014, less any consideration received for such warrants. The SARs granted are recognised in the income statement for 2014 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 2014 at an expense corresponding to the value adjustment for the year based on the performance of the Lundbeck share. 2014 2013 DKKm DKKm Recognised expenses concerning equity-based schemes 53 62 Recognised expenses concerning debt-based schemes 3 8 Total recognised expenses 56 70 The amount for 2014 includes an income of DKK 18 million (DKK 1 million in 2013) regarding grants which were cancelled as the vesting conditions were not met. At 31 December 2014, the total liability in respect of debt-based schemes amounted to DKK 5 million (DKK 11 million in 2013). The liability covers all debt-based schemes in force at 31 December 2014.
4. DEPRECIATION, AMORTISATION AND IMPAIRMENT 2014 2013 DKKm DKKm Depreciation, amortisation and impairment are specified as follows: Cost of sales 1,437 1,370 Research and development costs 376 204 Sales and distribution costs 72 63 Administrative expenses 150 145 Special items 494 505 Total 2,529 2,287
The decision to cease the development of desmoteplase resulted in an impairment loss of DKK 222 million related to Lundbeck’s desmoteplase product rights. The impairment loss was recognized in amortisation, depreciation and impairment under research and development costs in 2014. Consequently, the carrying amount of the product rigths is DKK 0. In addition, the decision resulted in a DKK 87 million writedown of research and development materials previously recognised under prepayment. This writedown was recognized in research and development cotst.
The total impairment loss and writedown for desmoteplase recognised in research and development costs was DKK 309 million in 2014. In 2013, an impairment loss on the Sycrests ® product rights totalling DKK 210 million was recognised in cost of sales. Furthermore an impairment loss on patent rights totalling DKK 38 million was recognised in research and development costs. The recoverable amounts were calculated on the basis of management’s re-assessed estimate of the value in use of the assets. Losses and gains on the sale of intangible assets and property, plant and equipment were recognised at a net gain of DKK 29 million (DKK 14 million in 2013).
68
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 5 - 6 - 7
5. FEES TO AUDITORS APPOINTED AT THE GENERAL MEETING
Deloitte 2014 2013 DKKm DKKm Administrative expenses include fees to the companyâ&#x20AC;&#x2122;s auditors appointed by the general meeting in the amount of: Statutory audit 21 18 Other assurance engagements 1 Tax advisory services 3 3 Other services 21 29 Total 46 50
In 2013 and 2014, other services included one-off advisory services provided by Deloitte which have been evaluated by the Audit Committee as not impairing the independence of the external audit services provided. A few small foreign subsidiaries are not audited by the parent companyâ&#x20AC;&#x2122;s auditors, a foreign business partner of the auditors, or by a recognised, international auditing firm. 6. SPECIAL ITEMS
2014 2013 DKKm DKKm Fine from European Commission, Lundbeck Group - -699 Amortisation of contractual customer relationships, Falck Group -494 -505 Transaction costs associated with acquisitions, Falck Group -39 -45 Special items -533 -1,249
7. NET FINANCIAL ITEMS
2014 2013 DKKm DKKm Financial items, Lundbeckfond Invest, net, are specified as follows: Financial income Interest on financial assets measured at amortised cost 5 4 Gains on financial instruments at fair value through profit or loss 2,344 1,997 Gains on financial instruments included in the trading portfolio 138 46 Exchange gains 92 6 Total financial income 2,579 2,053 Financial expenses Other financial expenses 3 2 Losses on financial instruments at fair value through profit or loss 254 609 Losses on financial instruments included in the trading portfolio 93 205 Exchange losses 1 31 Total financial expenses 351 847 2,228 1,206 Net financials, Lundbeckfond Invest, net Financial items, Lundbeckfond Ventures, net, are specified as follows: Financial income Gains on financial instruments at fair value through profit or loss 422 201 Total financial income 422 201
CONSOLIDATED FINANCIAL STATEMENTS
69
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 7 - 8 7. NET FINANCIAL ITEMS - CONTINUED
2014 2013 DKKm DKKm Financial expenses Losses on financial instruments at fair value through profit or loss 49 20 Total financial expenses 49 20 Net financials, Lundbeckfond Ventures, net 373 181 Financial items, subsidiaries, net, are specified as follows: Financial income Interest on financial assets measured at amortised cost 25 23 Gains on financial assets at fair value through profit or loss 2 3 Gains on available-for-sale financial assets, incl. dividends 10 20 Exchange gains 354 133 Realised exchange gains concerning additions to net investments in foreign subsidiaries (transferred from comprehensive income) - 8 Other financial income 7 8 Total financial income 398 195 Financial expenses Interest on financial liabilities measured at amortised cost 368 362 Other financial expenses 43 28 Losses on financial instruments at fair value through profit or loss - 1 Interest component, discounted liabilities 17 10 Exchange losses 362 235 Total financial expenses, subsidiaries, net 790 636 Net financials -392 -441 At 31 December 2014, the Group recorded a net result on available-for-sale financial assets of DKK 10 million (DKK 20 million in 2013). The net gain on financial instruments measured at fair value through profit or loss amounted to DKK 2,463 million at 31 December 2014 (net gain of DKK 1,568 million in 2013). The net gain on financial instruments included in the trading portfolio amounted to DKK 45 million (net loss of DKK 159 million in 2013), and the net exchange gain, including realised net exchange loss transferred from other comprehensive income, amounted to net gain of DKK 44 million in 2014 (net loss of DKK 119 million in 2013). Interest on financial liabilities measured at amortised cost amounts in total to DKK 368 million (DKK 362 million in 2013).
8. TAX ON PROFIT FOR THE YEAR
2014 2013 DKKm DKKm Current tax 772 921 Prior-year adjustment, current tax 34 -93 Prior-year adjustment, deferred tax -34 12 Change of deferred tax for the year -205 -23 Change of deferred tax as a result of changed income tax rates 7 -177 Total tax for the year 574 640 Tax for the year is composed of: Tax on profit for the year 441 707 Tax on other comprehensive income 133 -67 Total tax for the year 574 640
70
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 8 - 9 8. TAX ON PROFIT FOR THE YEAR - CONTINUED
Explanation of the Groupâ&#x20AC;&#x2122;s effective tax rate relative to the Danish tax rate 2014 DKKm % Profit before tax 3,094 Calculated tax, 24.5% 758 24.5 Tax effect of: Differences in the tax rates of foreign subsidiaries from the Danish tax rate of 24.5% 67 2.2 Non-deductible expenses/non-taxable income and other permanent differences 129 4.2 Research and development activities (tax credits) -28 -0.9 Prior-year tax adjustments etc., total effect on operations -7 -0.2 Non-deductible losses/non-taxable gains on shares and other equity investments -214 -6.9 Unrecognised timing differences on securities recognised at fair value through profit or loss -13 -0.4 Change in valuation of net tax assets -2 -0.1 Deduction for grants -276 -9.0 Other taxes and other adjustments 20 0.7 Change of deferred tax as a result of changed income tax rates 7 0.2 Effective tax for the year 441 14.3 Explanation of the Groupâ&#x20AC;&#x2122;s effective tax rate relative to the Danish tax rate 2013 DKKm % Profit before tax 3,162 Calculated tax, 25% 790 25.0 Tax effect of: Differences in the tax rates of foreign subsidiaries from the Danish tax rate of 25% 104 3.3 Non-deductible expenses/non-taxable income and other permanent differences 154 4.9 Fine from the European Commission 175 5.5 Research and development activities (tax credits) 22 0.7 Prior-year tax adjustments etc., total effect on operations -44 -1.4 Non-deductible losses/non-taxable gains on shares and other equity investments -84 -2.7 Unrecognised timing differences on securities recognised at fair value through profit or loss -9 -0.3 Deduction for grants -233 -7.4 Other taxes and other adjustments 9 0.3 Change of deferred tax as a result of changed income tax rates -177 -5.5 Effective tax for the year 707 22.4
9. GRANTS FOR THE YEAR 2014 2013
DKKm DKKm Due to change in grant strategy adopted in 2013 with effect from 1 January 2014 grants have been presented in accordance with new types and categories. It has not been possible to allocate all grants for 2013 to the new types and categories of grants. Communicating science 13 12 Travel grants and research abroad, UCSF 5 2 Non-salary related project cost - running costs 20 Regular grants 38 14 Lundbeck Foundation Scholar 11 8 Lundbeck Foundation PhD 46 Lundbeck Foundation Postdoc 51 Lundbeck Foundation Fellowships 60 70 Lundbeck Foundation Professor 10 25 Lundbeck Foundation Clinical research associate professor 6 Lundbeck Foundation Clinical research professor 13 Personal grants - National 197 103 CONSOLIDATED FINANCIAL STATEMENTS
71
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 9 - 10 9. GRANTS FOR THE YEAR
2014 2013 DKKm DKKm Lundbeck Foundation International Masters 2 1 Lundbeck Foundation Postdoc Fellowships 5 Visiting Professor to Denmark 2 2 Personal grants - International 9 3 Talent and teaching prizes 1 1 Grete Lundbeck European Brain Research Foundation 15 15 Prizes 16 16 PROCRIN 24 Migrain 10 iPSYCH 120 RIMMI 45 DanFunD - 12 CINS II - 30 BBB-Project - 40 Strategic grants 199 82 Grant for scientific projects in 2013 has not been possible to allocate to new types and categories of grants - 150 Grants for the year, gross 459 368 Descendants - Reversed grants/repayments -15 -17 Grants for the year, net 444 351 Grants for the year, gross 459 368 Emerge activities 15 8 Grants authorised during the year, including Emerge activities, gross 474 376 Grants for the year, net 444 351 Change in payable grants 15 19 Grants paid for the year, net 459 370
10. INTANGIBLE ASSETS
Contractual customer Patent and Other relations Product and intangible Ongoing Goodwill etc. rights license rights assets projects Total DKKm DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2014 Currency translation Reclassification / transfers Addition on acquisitions Adjustment of put options and contingent consideration Additions Disposals Cost at 31 December 2014
10,455 468 - 498 -16 - -1 11,404
3,507 30 - 164 - - - 3,701
7,856 359 3 - - 4,103 -10 12,311
72
CONSOLIDATED FINANCIAL STATEMENTS
734 5 - - 17 4 - 760
1,857 - 9 34 - 192 -61 2,031
84 1 -51 - - 93 - 127
24,493 863 -39 696 1 4,392 -72 30,334
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 10 10. INTANGIBLE ASSETS – CONTINUED
Contractual
customer Patent and Other relations Product and intangible Ongoing Goodwill etc. rights license rights assets projects Total DKKm DKKm DKKm DKKm DKKm DKKm DKKm Amortisation and impairment at 1 January 2014 -20 -1,246 -2,668 -592 -1,391 - -5,917 Currency translation - -10 -236 - -1 - -247 Reclassification - - -2 - 7 - 5 Amortisation - -494 -848 -18 -154 - -1,514 Impairment - - -222 - - - -222 Amortisation and impairment on disposals - - - - 71 - 71 Amortisation and impairment at 31 December 2014 -20 -1,750 -3,976 -610 -1,468 - -7,824 Carrying amount at 31 December 2014 11,384 1,951 8,335 150 563 127 22,510 Carrying amount at 31 December 2013 10,435 2,261 5,188 142 466 84 18,576 Except for goodwill and the Falck trademark in the amount of DKK 514 million, recognised in intangible assets from acquisitions, all intangible assets are deemed to have a definite life. Goodwill impairment test On top-level the management of the Lundbeck Foundation has performed impairment tests of goodwill related to the investments in the sub-groups; Lundbeck Group (DKK 4,076 million), ALK Group (DKK 513 million) and Falck Group (DKK 6,795 million). The tests have been performed individually for each sub-group. The basis for the test is a comparison of market value of the shares held in the sub-group with the equity recognised in the consolidated financial statements. For Lundbeck and ALK market price equal to closing prices according to exchange markets. For Falck the price for shares has been based on latest transaction prices and market multiples for a peer group.
Furthermore the management of H. Lundbeck A/S, Falck Holding A/S and ALK-Abelló A/S have tested goodwill for impairment on a lower level. Based on the impairment tests performed in 2014, it was concluded that there is no need for writing down the goodwill. Methodology used in sub-groups 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 1-6 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 Lundbeck Group in the terminal period due to patent expiry, and positive growth of 2.5-3.5% (2.5-3.5% in 2013) is projected for the Falck Group and 2% (2% in 2013) for the ALK Group. The calculation of the value in use for the Lundbeck Group is based on a discount rate of 11.9% (11.8% in 2013). For the Falck Group, a discount rate of 8% (10% in 2013) has been used for emergency, assistance and healthcare activities, while a discount rate of 10% (11% in 2013) was used for safety services. For the ALK Group, a discount factor of 11% was used (12% in 2013). The discount rate is before tax, and the result of [WACC/(1 – tax rate)] and the applied cash flows are also pre-tax figures. The calculation of the discount rate includes a market adjustment premium. Product rights In 2014, Lundbeck purchased the Northera™ product rights by acquiring all shares in Chelsea Therapeutics International, Ltd. The purchase is considered a purchase of assets (i.e. not a business combination). The value of the product rights amounted to DKK 2,600 million at the time of purchase. The carrying amount at 31 December 2014 was DKK 2,770 million due to the development in the USD/DKK exchange rate. The remaining amortisation period is 6 years. Of product rights, DKK 2,531 million (DKK 2,632 million in 2013) are products not yet commercialised.
CONSOLIDATED FINANCIAL STATEMENTS
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 10- 11 10. INTANGIBLE ASSETS â&#x20AC;&#x201C; CONTINUED
Contractual customer Patent and Other relations Product and intangible Ongoing Goodwill etc. rights license rights assets projects Total DKKm DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2013 10,178 3,400 6,860 703 1,714 48 22,903 Currency translation -328 -64 -125 -3 -18 - -538 Reclassification / transfers - - - 13 16 -28 1 Addition on acquisitions 579 171 - 10 - - 760 Adjustment of put options and contingent consideration 17 - - - - - 17 Additions - - 1,121 11 181 65 1,378 Disposals - - - - -36 -1 -37 Adjustment, acquisitions in 2012 9 - - - - - 9 Cost at 31 December 2013 10,455 3,507 7,856 734 1,857 84 24,493 Amortisation and impairment at 1 January 2013 -20 -766 -1,898 -531 -1,284 - -4,499 Currency translation - 25 60 - 5 - 90 Amortisation - -505 -620 -23 -144 - -1,292 Impairment - - -210 -38 - - -248 Amortisation and impairment on disposals - - - - 32 - 32 Amortisation and impairment at 31 December 2013 -20 -1,246 -2,668 -592 -1,391 - -5,917 Carrying amount at 31 December 2013 10,435 2,261 5,188 142 466 84 18,576 Carrying amount at 31 December 2012 10,158 2,634 4,962 172 430 48 18,404
11. PROPERTY, PLANT AND EQUIPMENT
Other fixtures Prepayments and fittings, and assets Land and Plant and tools and Leasehold under buildings machinery equipment improvements construction Total DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2014 5,671 2,080 2,496 88 732 11,067 Currency translation 92 16 74 5 22 209 Reclassification / transfers 166 161 56 - -344 39 Addition on acquisitions - - 44 7 - 51 Additions 25 84 417 34 322 882 Disposals -56 -47 -334 -9 - -446 Cost at 31 December 2014 5,898 2,294 2,753 125 732 11,802 Depreciation and impairment at 1 January 2014 -2,371 -1,343 -1,173 -27 - -4,914 Currency translation -43 -12 -24 -3 - -82 Depreciation -207 -147 -410 -15 - -779 Depreciation and impairment on disposals -6 45 272 6 - 317 Depreciation and impairment at 31 December 2014 -2,627 -1,457 -1,335 -39 - -5,458 Carrying amount at 31 December 2014 3,271 837 1,418 86 732 6,344 Carrying amount at 31 December 2013 3,300 737 1,323 61 732 6,153 In the carrying amount at 31 December 2014, financial leasing is included in the amount of 132 61 193 Carrying amount of property, plant and equipment provided as loan collateral 2,298 4 2,302
74
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 11 - 12 11. PROPERTY, PLANT AND EQUIPMENT – CONTINUED
Other fixtures Prepayments and fittings, and assets Land and Plant and tools and Leasehold under buildings machinery equipment improvements construction Total DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2013 5,511 1,937 2,329 75 664 10,516 Currency translation -45 -6 -127 -5 -6 -189 Reclassification / transfers 63 105 132 - -301 -1 Addition on acquisitions - - 119 2 - 121 Additions 177 75 361 16 376 1,005 Disposals -35 -31 -318 - -1 -385 Cost at 31 December 2013 5,671 2,080 2,496 88 732 11,067 Depreciation and impairment at 1 January 2013 -2,229 -1,242 -1,116 -17 - -4,604 Currency translation 22 5 90 3 - 120 Reclassification / transfers 18 - -18 - - Depreciation -205 -134 -389 -13 - -741 Depreciation and impairment on disposals 23 28 260 - - 311 Depreciation and impairment at 31 December 2013 -2,371 -1,343 -1,173 -27 - -4,914 Carrying amount at 31 December 2013 3,300 737 1,323 61 732 6,153 Carrying amount at 31 December 2012 3,282 695 1,213 58 664 5,912 In the carrying amount at 31 December 2013, financial leasing is included in the amount of 140 55 195 Carrying amount of property, plant and equipment provided as loan collateral 2,330 31 2,361
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 Trustees. 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 funds 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% decrease/increase in equity prices would reduce/increase profits by DKK 806 million and DKK 751 million respectively (reduce by DKK 582 million and increase by DKK 384 million in 2013). For further information on risks concerning the Group’s financial investments, see note 17: Cash resources and note 27: Financial risks and financial instruments.
CONSOLIDATED FINANCIAL STATEMENTS
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LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 12 12. FINANCIAL ASSETS AND FINANCIAL RISKS â&#x20AC;&#x201C; CONTINUED
Financial Financial assets assets at fair value Financial at fair value through profit assets Other financial assets through profit or loss, at fair value or loss, Lundbeckfond through profit Available-for- Receivables Lundbeckfond Ventures and or loss, sale financial Other from Invest Emerge total assets receivables associates Total DKKm DKKm DKKm DKKm DKKm DKKm DKKm Carrying amount at 1 January 2014 11,698 728 12,426 92 88 52 Reclassification to securities, current assets, 1 January 2014 116 - 116 - - - Carrying amount at 1 January 2014, adjusted 11,814 728 12,542 92 88 52 Reclassification - - - -14 14 - Additions 6,081 346 6,427 48 46 20 Disposals -6,253 -18 -6,271 -8 -40 - Value adjustments, year-end 1,666 396 2,062 -47 3 - Reclassification to securities, current assets -63 - -63 - - - Carrying amount at 31 December 2014 13,245 1,452 14,697 71 111 72 Carrying amount at 1 January 2013 10,852 519 11,371 138 56 - Reclassification to securities, current assets, 1 January 2013 72 - 72 - - - Carrying amount at 1 January 2013, adjusted 10,924 519 11,443 138 56 - Reclassification - -15 -15 - - - Additions 5,651 109 5,760 11 39 52 Disposals -5,599 -67 -5,666 -42 -4 - Value adjustments, year-end 954 182 1,136 -15 -3 - Reclassification to securities, current assets -116 - -116 - - - Carrying amount at 31 December 2013 11,814 728 12,542 92 88 52
232 232 114 -48 -44 254
194 194 102 -46 -18 232
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. The requirement for reclassifications between the levels are evaluated continually during the year. For the individual financial assets and liabilities it is evaluated whether the most critical input variable in connection with determination of fair value have changed from unobservable to observable or the other way around. If this is the case the asset or liability is reclassified from the recent relevant level to new level from the time where the change in input variable occur.
76
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 12 12. FINANCIAL ASSETS AND FINANCIAL RISKS â&#x20AC;&#x201C; CONTINUED
Financial assets and liabilities measured at fair value Level 1 Level 2 Level 3 31 December 2014 DKKm DKKm DKKm Financial assets Financial assets at fair value through profit or loss Danish mortgage and government bonds 2,323 - Credit bonds 2,002 - 25 Listed equities 7,371 - Property and infrastructure 309 - 172 Lundbeckfond Ventures and Emerge 814 - 638 Private equity funds 623 - 695 Other unlisted funds 38 39 219 Available-for-sale financial assets 29 - 42 Derivative financial instruments - 73 Financial assets at fair value 13,509 112 1,791 Financial liabilities Derivative financial instruments - 228 Financial liabilities at fair value - 228 Applied valuation methods for the determination of fair value of the majority of the separate categories above are as follows: Sensitivity in fair value in case of Valuation method used Used unobservable inputs changes in unobservable inputs Danish mortgage and Closing prices according N/A N/A government bonds to exchange markets Credit bonds Closing prices according N/A N/A to exchange markets Listed equities Closing prices according N/A N/A to exchange markets Property and infrastructure Closing prices according Required rates on return 5.0% If required rate of return is reduced by to exchange markets and 0.25pp the fair value will be reduced the capitalisation model by DKK 27 million. Lundbeckfond Ventures Closing prices according Capital injections made at N/A og Emerge to exchange markets and price different prices of recent transactions for level 3 Private equity funds Closing prices according Multiples If closing prices according to and other unlisted funds to exchange markets and market exchange markets for a peer group multiples for a peer group, reduced increase by 1% the fair value will be by an estimated factor for trading increased by DKK 9 million in an unlisted market Available-for-sale financial assets Closing prices according N/A N/A to exchange markets or cost less write-downs Derivative financial instruments Fair value of interest rate swaps is N/A N/A calculated as the present value of estimated future cash flows based on observable yield curves, fair value of foreign exchange contracts is determined using forward exchange rate at the balance sheet date and fair value of share options is based on closing prices according to exchange markets
CONSOLIDATED FINANCIAL STATEMENTS
77
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 12 - 13 12. FINANCIAL ASSETS AND FINANCIAL RISKS â&#x20AC;&#x201C; CONTINUED
Financial assets and liabilities measured at fair value Level 1 Level 2 Level 3 31 December 2013 DKKm DKKm DKKm Financial assets Financial assets at fair value through profit or loss Danish mortgage and government bonds 3,634 - Credit bonds 2,234 61 25 Listed equities 5,979 - Property companies 190 - 173 Lundbeckfond Ventures and Emerge 377 - 352 Private equity funds 152 - 579 Other unlisted funds 23 68 183 Available-for-sale financial assets 58 - 34 Derivative financial instruments - 150 Financial assets at fair value 12,647 279 1,346 Financial liabilities Derivative financial instruments - 225 Financial liabilities at fair value - 225 2014 2013 DKKm DKKm Financial assets measured at fair value according to level 3 Carrying amount at 1 January 1,346 1,415 Additions 635 242 Disposals -145 -284 Reclassification, from level 3 to level 1 in connection with IPOâ&#x20AC;&#x2122;s -203 -104 Fair value adjustment 158 77 Carrying amount at 31 December 1,791 1,346
13. INVESTMENTS IN ASSOCIATES
2014 2013 DKKm DKKm Cost at 1 January 87 18 Exchange rate adjustments 5 3 Additions 18 14 Additions on acquisitions - 54 Disposal and reclassification -24 -2 Cost at 31 December 86 87 Value adjustments and impairment at 1 January -1 -1 Share of profit for the year after tax -7 Accumulated value adjustments and impairment at 31 December -8 -1 Carrying amount at 31 December 78 86 Please see the Group overview for information about registered office and ownership interests in associates
78
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 13 - 14 13. INVESTMENTS IN ASSOCIATES â&#x20AC;&#x201C; CONTINUED
2014 / 31 2013 / 31 December 2014 December 2013 DKKm DKKm Summarised financial data for associates Revenue 507 215 Profit for the year -4 2 Total assets 689 527 Total provisions 547 439
14. DEFERRED TAX
Temporary differences between the carrying amount and the tax base
Adjustment of Addition on Movements Balance at Currency deferred tax acqusition of during Balance at 1 January translation at 1 January businesses the year 31 December DKKm DKKm DKKm DKKm DKKm DKKm 2014 Non-current assets 8,379 102 3 162 -666 7,980 Current assets -388 -11 54 - 81 -264 Other -1,037 -163 33 - -61 -1,228 Provisions in subsidiaries -107 26 -70 - 31 -120 Tax loss carry-forwards etc. -871 -1 -164 - -849 -1,885 Total 5,976 -47 -144 162 -1,464 4,483 Deferred (tax assets)/tax liabilities 1,430 -15 -52 38 -453 948 Research and development activities (tax credits) -99 -22 - - -24 -145 Deferred (tax assets)/tax liabilities 1,331 -37 -52 38 -477 803 2013 Non-current assets 7,912 -55 -35 220 337 8,379 Current assets -400 41 6 - -35 -388 Other -421 65 -78 - -603 -1,037 Provisions in subsidiaries 300 -1 5 - -411 -107 Tax loss carry-forwards etc. -1,022 20 266 - -135 -871 Total 6,369 70 164 220 -847 5,976 Deferred (tax assets)/tax liabilities 1,619 77 17 55 -338 1,430 Research and development activities (tax credits) -177 9 -5 - 74 -99 Deferred (tax assets)/tax liabilities 1,442 86 12 55 -264 1,331 The movement during the year includes in 2014 additions from Lundbeckâ&#x20AC;&#x2122;s acqusition of Chelsea Therapeutics International, Ltd. of DKK 272 million not recognised in the income statement as well as change in deferred tax as a result of changes in corporate income tax rate and movement in deferred tax related to equity and other comprehensive income.
CONSOLIDATED FINANCIAL STATEMENTS
79
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 14 - 15 14. DEFERRED TAX â&#x20AC;&#x201C; CONTINUED
2014 2013 DKKm DKKm Deferred tax assets concern the following items: Non-current assets 84 113 Current assets 149 179 Provisions and payables 114 29 Other 499 490 Provisions in subsidiaries 39 28 Tax value of tax loss carry-forwards etc. 632 302 Research and development activities (tax credits) 144 99 Offset within legal tax entities and jurisdictions -678 -690 Total 983 550 Deferred tax liabilities concern the following items: Non-current assets 2,063 2,189 Current assets 69 54 Provisions and payables 19 6 Other 313 322 Offset within legal tax entities and jurisdictions -678 -690 Total 1,786 1,881 Net 803 1,331 Of the recognised deferred tax assets, DKK 776 million (DKK 401 million in 2013) related to tax losses etc. and research and development activities to be carried forward. Utilisation of these is based on a future positive taxable income that exceeds realisation of the deferred tax liabilities. The recognition of tax losses is based on estimates of the expected taxable income in the loss-making entities, supported by reports by external analysts, when available. 2014 2013 DKKm DKKm Unrecognised deferred tax assets: Unrecognised deferred tax assets at 1 January 302 303 Prior-year adjustments -22 -22 Additions 236 32 Utilised -13 -11 Unrecognised deferred tax assets at 31 December 503 302
15. INVENTORIES
2014 2013 DKKm DKKm Raw materials and consumables 376 280 Work in progress 579 606 Manufactured goods and goods for resale 1,530 1,426 Total 2,485 2,312 Indirect costs of production 455 417 Impairment loss for the year 38 93 Inventories calculated at net realisable value 4 5 The total cost of goods sold is included in cost of sales in the amount of 3,010 2,705
80
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 16
16. TRADE RECEIVABLES AND OTHER RECEIVABLES
2014 2013 DKKm DKKm Trade receivables and other receivables Trade receivables 5,125 4,444 Other receivables 615 753 Derivative financial instruments 73 150 Receivables from associates 52 50 Prepayments 400 412 Total 6,265 5,809 Trade receivables Receivables 5,487 4,772 Impairment -362 -328 Total 5,125 4,444 Due dates of trade receivables not written-down Not due 3,756 3,268 Overdue by more than 1 month and up to 6 months 1,322 1,111 Overdue by more than 6 month and up to 12 months 31 26 Overdue by more than 12 months 16 39 Total 5,125 4,444 Development in writedowns of trade receivables Writedowns at 1 January 328 247 Actual writedowns -282 -180 Reversed, unrealised writedowns -3 Change in writedowns 319 261 Writedowns at 31 December 362 328 Specification of other receivables by due date Not due 609 743 Overdue by up to 3 months 6 8 Overdue by more than 12 months - 2 Total 615 753 As no losses are expected on other receivables, no writedowns have been made. Credit risks The groups 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 on debtors have been insignificant. This was also the case in 2014, where there was an sligthly increase in losses incurred. However, the change in writedowns reflects a potentially higher loss. 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 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 increased market access hurdles by local authorities for Lundbeckâ&#x20AC;&#x2122;s new generation of pharmaceuticals have delayed access to the markets, thus impairing Lundbeckâ&#x20AC;&#x2122;s earnings potential for the new products in the finite period of exclusivity. The Group expects that the uncertainty about public debt and development in unemployment and the resulting focus on public budgets will continue into 2015 and 2016. CONSOLIDATED FINANCIAL STATEMENTS
81
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 16 - 17 - 18 16. TRADE RECEIVABLES AND OTHER RECEIVABLES – CONTINUED
The Group is monitoring development in the European economies and also developmens in trade receivables in order to reduce the risk of losses to the best possible extent.
17. CASH RESOURCES
2014 2013 DKKm DKKm Fixed-term deposits 2,312 3,821 Other cash resources 2,899 2,277 Cash at 31 December 5,211 6,098 Securities with a maturity of less than 3 months 443 345 Securities with a maturity of more than 3 months 128 1,143 Securities at 31 December 571 1,488 Cash and securities at 31 December 5,782 7,586 DKK 94 million (DKK 101 million in 2013) 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 inlicensing 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 the Group 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 2014. 18. CAPITAL BASE
The Foundation’s capital base is DKK 2,728 million. The present charter of the Foundation was approved by the Board of Trustees on 17 February 2015. The Danish Business Authority 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. 2014 2013 Note DKKm DKKm Change in the Foundation’s capital base during the period 1 January 2010 - 31 December 2014 The capital base at 1 January 2010 amounted to: 1,900 1,900 2010 Capital base increased by 150 150 2011 Capital base increased by 175 175 2012 Capital base increased by 45 45 2013 Capital base increased by 253 253 2014 Capital base increased by 205 Capital base at 31 December 2014 2,728 2,523
Grants for the year, net
82
9
CONSOLIDATED FINANCIAL STATEMENTS
444
351
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 19 - 20
19. OTHER RESERVES
2014 2013 DKKm DKKm Reserve for future grants Balance at 1 January - Transferred to reserve for future grants 750 Balance at 31 December 750 Currency translation reserve Balance at 1 January -593 -166 Currency translation for the year concerning foreign subsidiaries and additions to net investments in foreign subsidiaries 1,100 -508 Tax in relation hereto -176 81 Balance at 31 December 331 -593 Hedging reserve Balance at 1 January -2 -59 Adjustment, deferred exchange gains/losses, hedging, recognised in other comprehensive income -115 151 Exchange gains/losses, hedging, transferred to revenue 30 -123 Exchange gains/losses, hedging, transferred to the balance sheet 55 -3 Value adjustment of interest hedging instruments -50 51 Tax in relation hereto 19 -19 Balance at 31 December -63 -2 Reserve for fair value adjustment of available-for-sale financial assets Fair value adjustment at 1 January -31 4 Fair value adjustment -38 -15 Realised gain on disposal -10 -20 Fair value adjustment at 31 December -79 -31 Total other reserves 939 -626 20. NON-CONTROLLING INTERESTS
2014 2013 DKKm DKKm Non-controlling interests at 1 January 3,920 3,895 Share of profit/loss for the year 159 381 Share of other comprehensive income for the year 232 -139 Share of other capital movements -11 19 Dividend -206 -166 Addition on acquisition 15 10 Buyback of shares from non-controlling interests -21 -8 Change in non-controlling interests 619 8 Adjustment of provision for acquisition of non-controlling interests -38 -80 Non-controlling interests at 31 December 4,669 3,920 Of dividend paid to non-controlling interests, DKK 48 million (DKK 26 million in 2013) was recognised in liabilities relation to acquisition of noncontrolling interests (note 21.2) in 2014.
CONSOLIDATED FINANCIAL STATEMENTS
83
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 20 - 21 20. NON-CONTROLLING INTERESTS – CONTINUED
The Lundbeck Foundation Group’s subsidiaries with significant non-controlling interests include the following: Non-controlling Precentage Registered interests of votes Office H. Lundbeck A/S 30.1% 69.9% Copenhagen ALK-Abelló A/S 57.8% 68.9% Horsholm Falck Holding A/S 42.6% 57.4% Copenhagen The financial information set out below are aggregated for the sub-groups: Lundbeck Group ALK Group Falck Group 2014 2013 2014 2013 2014 2013 DKKm DKKm DKKm DKKm DKKm DKKm Statement of comprehensive income Revenue 13,468 15,258 2,433 2,244 13,952 12,534 Profit (loss) for the year -153 855 181 61 218 205 Total comprehensive income 596 627 195 41 216 72 Profit (loss) for the year attributable to non-controlling interests -46 256 105 35 103 91 Balance sheet Non-current assets 16,251 12,286 2,387 2,239 15,047 14,608 Current assets 9,386 11,363 1,032 1,029 3,646 3,073 Non-current liabilities 4,909 3,650 541 517 7,588 8,259 Current liabilities 7,202 6,518 524 502 4,498 3,967 Equity 13,526 13,481 2,354 2,249 6,607 5,455 Carrying amount of non-controlling interests of equity 4,066 4,043 1,360 1,299 3,029 2,361 Statement of cash flows Cash flows from operating activities 1,610 3,760 320 146 909 910 Cash flows from investing activities 3,396 1,500 -219 -231 1,219 1,187 Cash flows from financing activities 589 -141 -124 -74 407 260 Change in cash and cash equivalents -1,197 2,119 -23 -159 97 -17 Dividends paid to the non-controlling interests during the year 163 117 29 29 - In the Falck sub-group there is a non-controlling interests’ ownership in the Falck Healthcare sub-group of 40%. Sub-non-controlling interests in the Falck sub-group are included in figures for non-controlling interests above.
21. PROVISIONS
2014 2013 Note DKKm DKKm Provisions can be specified as follows: Pensions and similar obligations 21.1 539 448 Liabilities relating to acquisitions and non-controlling interests 21.2 1,160 1,021 Other provisions 21.3 638 565 Total 2,337 2,034 Provisions break down as follows: Non-current 1,714 1,490 Current 623 544 Total 2,337 2,034
84
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 21
21.1 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 610 million in 2014 (DKK 560 million in 2013). 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 employeeâ&#x20AC;&#x2122;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. 2014 2013 DKKm DKKm Pensions and similar obligations Present value of funded pension obligations 477 407 Fair value of plan assets -366 -314 Funded pension obligations, net 111 93 Present value of unfunded pension obligations 337 265 Provisions for pensions at 31 December 448 358 Other pension-like obligations 93 89 Provisions for pensions and pension-like obligations at 31 December 541 447 Pension assets/liabilities and similar obligations break down as follows: Non-current liabilities 532 438 Current liabilities 7 10 Pension obligations 539 448 Plan assets, recognised in other (receivables) / liabilities 2 -1 Pension assets/liabilities and similar obligations at 31 December, net 541 447 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: 2014 2013 Discount rate 2.2%-3.7% 3.4%-4.2% Inflation rate 2.1%-2.2% 2.2%-2.4% Pay rate increase 2.4%-4.1% 2.4%-4.4% Pension increase 2.2%-3.0% 2.4%-3.4% Age-weighted staff resignation rate 0%-8.0% 0%-8.0% Expected return on plan assets 2.3%-4.2% 2.9%-4.2%
CONSOLIDATED FINANCIAL STATEMENTS
85
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 21 21.1 PENSIONS AND SIMILAR OBLIGATIONSâ&#x20AC;&#x201C; CONTINUED
2014 2013 % distribution % distribution The fair value of the plan assets breaks down as follows: Shares 10 7 Bonds 16 18 Property 4 4 Insurance contracts 54 57 Other assets 16 14 Total 100 100 Shares and bonds are measured at fair value based on quoted prices in an active market. Property, insurance contracts and other assets are not based on quoted prices in an active market 2014 2013 DKKm DKKm Change in present value of funded pension obligations Present value of funded pension obligations at 1 January 407 423 Currency translation 15 -11 Past service costs 1 Pension expenses 11 13 Interest expenses relating to the obligations 15 13 Experience and assumptions adjustments 42 -18 Disbursements -16 -15 Employee contributions 2 2 Present value of funded pension obligations at 31 December 477 407 Change in fair value of plan assets Fair value of plan assets at 1 January 314 311 Currency translation 10 -10 Interest income on plan assets 12 9 Experience adjustments 23 -5 Contributions 24 24 Disbursements -16 -15 Employee contributions 2 2 Administration fee -3 -2 Fair value of plan assets at 31 December 366 314 Realised return on plan assets 21 7 Change in present value of unfunded pension obligations Present value of unfunded pension obligations at 1 January 265 260 Pension expenses 8 7 Interest expenses relating to the obligations 8 8 Experience and assumptions adjustments 60 -6 Disbursements -4 -4 Present value of unfunded pension obligations at 31 December 337 265
86
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 21 21.1 PENSIONS AND SIMILAR OBLIGATIONS - CONTINUED
2014 2013 DKKm DKKm Specification of expenses recognised in the income statement Pension expenses 20 20 Interest expenses relating to the obligations 23 21 Expected return on plan assets -12 -9 Actuarial (gains)/losses 3 2 Total expenses recognised 34 34 Specification of amount recognised in the statement of comprehensive income Actuarial (gains)/losses 78 -19 Total expenses recognised 78 -19 The expected contribution for 2015 for the defined benefit plans is DKK 38 million (DKK 37 million in 2014). Sensitivity analysis The most significant assumptions used in the calculation of the obligation for defined benefit plans are discount rate and inflation rate. An increase in the discount rate of 0.25% results in a decrease in the obligation of approximately DKK 31 million (DKK 26 million in 2013) and vice versa. An increase in the inflation rate of 0.25% results in a increase in the obligation of approximately DKK 9 million (DKK 7 million in 2013) and vice versa. Other pension-like obligations An obligation of DKK 93 million (DKK 89 million in 2013) 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 increase by DKK 4 million (fell by DKK 11 million in 2013).
21.2 LIABILITIES RELATING TO ACQUISITIONS AND NON-CONTROLLING INTERESTS 2014 2013 DKKm DKKm Liabilities: Liabilities concerning acquisition of non-controlling interests 1,077 898 Payable considerations and contingent consideration 83 123 Liabilities at 31 December 1,160 1,021 Non-current portion: Liabilities concerning acquisition of non-controlling interests 897 817 Payable considerations and contingent consideration 61 74 Non-current portion at 31 December 958 891 Current portion: Liabilities concerning acquisition of non-controlling interests 180 81 Payable considerations and contingent consideration 22 49 Current portion at 31 December 202 130 Liabilities concerning acquisition of non-controlling interests Liabilities at 1 January 898 655 Currency translation 78 -35 Additions through acquisitions 54 101 Additions on sale of non-controlling interests 40 Disposals on acquisition of non-controlling interests -23 -7 Interest component, discounted liabilities 11 5 Dividends paid and other adjustments -48 -26 Adjustments recognised in goodwill relating to business combinations before 1 January 2010 -22 17 Adjustments and interest recognised in equity relating to business combinations after 1 January 2010 89 188 Liabilities concerning acquisition of non-controlling interests at 31 December 1,077 898
CONSOLIDATED FINANCIAL STATEMENTS
87
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 21 21.2 LIABILITIES RELATING TO ACQUISITIONS AND NON-CONTROLLING INTERESTS - CONTINUED
2014 2013 DKKm DKKm Due dates in respect of acquisition of non-controlling interests are expected to be: Within 1 year of the balance sheet date 180 81 Between 1 and 5 years from the balance sheet date 870 785 More than 5 year after the balance sheet date 27 32 Liabilities concerning acquisition of non-controlling interests at 31 December 1,077 898 Payable considerations and contingent consideration Liabilities at 1 January 123 56 Currency translation -1 Additions through acquisitions 50 71 Reassessment of previously recognised earn-outs -9 2 Payments during the year -80 -6 Payable considerations and contingent consideration at 31 December 83 123 Due dates in respect of payable considerations and contingent considerations are expected to be: Within 1 year of the balance sheet date 22 49 Between 1 and 5 years from the balance sheet date 61 74 Liabilities concerning acquisition of non-controlling interests at 31 December 83 123 In connection with Falck assuming an obligation to acquire non-controlling interests, a concurrent right was obtained for Falck to acquire the same noncontrolling interests in the agreed period. The consideration for obligations and rights to acquire non-controlling interests is determined on the basis of profit before exercise multiplied by an already agreed multiple, typically less net debt in the relevant companies. On recognition in the balance sheet, this value is made up at fair value on the basis of earnings and net debt at the time when the non-controlling interests are expected to exercise their right to sell their shares to Falck. The calculated fair value assumes an increase in earnings and a decrease in net debt in the relevant companies as compared with the value recognised in the financial statements.
21.3 OTHER PROVISIONS
2014 2013 DKKm DKKm Other provisions at 1 January 565 507 Currency translation 15 -6 Addition on acquisitions 8 6 Provisions charged 346 386 Provisions used -280 -300 Unused provisions reversed -16 -28 Total 638 565 Other provisions at 31 December break down as follows: Non-current provisions 224 161 Current provisions 414 404 Total 638 565 Other provisions primarily cover H. Lundbeck A/S’ expenses for e.g. disputes, returns and the restructuring of the Lundbeck Group’s administrative processes in Europe, initiated in 2013 and of the commercial organisation in Europe, initiated in 2012, the ALK Group’s organisational restructuring costs and the Falck Group’s pending litigation, actuarially estimated liabilities relating to worker injuries in the United States and the Group’s obligation to clean up and demolish facilities on leased land.
88
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 22
22. MORTGAGE, BANK, LEASING AND REPO DEBT
2014 2013 Note DKKm DKKm Mortgage, bank, leasing and repo debt can be specified as follows: Mortgage debt 22.1 2,503 2,509 Bank and leasing debt 22.2 7,939 7,171 Repo debt 22.3 205 196 Total 10,647 9,876 Can be specified as follow: Non-current debt to financial institutions – subsidiaries 9,572 9,037 Current debt to financial institutions – subsidiaries 870 643 Repo debt – Lundbeckfond Invest 205 196 Total 10,647 9,876
22.1 MORTGAGE DEBT
2014 2013 DKKm DKKm Mortgage debt by maturity: Within 1 year of the balance sheet date 2 3 Between 1 and 5 years from the balance sheet date 339 221 More than 5 year after the balance sheet date 2,162 2,285 Mortgage debt at 31 December 2,503 2,509 Specification of mortgage debt: Non-current liabilities 2,501 2,506 Current liabilities 2 3 Mortgage debt at 31 December 2,503 2,509
Weighted average Amortised Nominal Currency effective cost value Fair value Expiry Fixed/floating interest rate DKKm DKKm DKKm 2014 Bond loan, Lundbeck DKK/2035 Floating 1.5% 1,416 1,450 1,474 Bond loan, Lundbeck DKK/2037 Floating 1.1% 439 440 428 Bond loan, Lundbeck DKK/2037 Floating 1.1% 272 283 275 Bond loan, Lundbeck DKK/2034 Floating 0.8% 12 12 12 Bond loan, Falck DKK/2025 Fixed until 2015 4.5% 342 351 357 Bond loan, ALK DKK/2026 Floating 2.0% 22 22 23 Total 2,503 2,558 2,569 2013 Bond loan, Lundbeck DKK/2035 Floating 2.5% 1,414 1,481 1,526 Bond loan, Lundbeck DKK/2037 Floating 1.2% 438 440 426 Bond loan, Lundbeck DKK/2037 Floating 1.2% 268 283 274 Bond loan, Lundbeck DKK/2034 Floating 0.9% 10 10 10 Bond loan, Lundbeck DKK/2034 Floating 0.9% 2 2 2 Bond loan, Falck DKK/2025 Fixed until 2015 4.5% 353 369 380 Bond loan, ALK DKK/2026 Floating 2.0% 24 24 24 Total 2,509 2,609 2,642 Bond loans are classified as level 1 under the fair value hierarchy. Fair value has been determined based on closing prices according to exchange markets.
CONSOLIDATED FINANCIAL STATEMENTS
89
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 22
2014 2013 DKKm DKKm Bank and leasing debt by maturity: Within 1 year of the balance sheet date 868 640 Between 1 and 5 years from the balance sheet date 5,708 6,265 More than 5 year after the balance sheet date 1,363 266 Bank debt at 31 December 7,939 7,171 Specification of bank and leasing debt: Non-current obligations, loan 7,003 6,453 Non-current obligations, leased assets 68 78 Total non-current 7,071 6,531 Current obligations, loan 824 613 Current obligations, leased assets 44 27 Total current 868 640 Bank debt at 31 December 7,939 7,171
22.2 BANK AND LEASING DEBT
Weighted average Carrying effective amount Fair value 2014 Currency Expiry Fixed/floating interest rate DKKm DKKm Bank debt, Lundbeck Group EUR 2019 Floating 1.2% 1,117 1,117 Overdraft facilities, Lundbeck Group Various - Floating 0.9% 76 76 Bank debt, Falck Group DKK, EUR, USD, other 2014-2018 Floating 3.9% 6,361 6,398 Leasing debt, Falck Group EUR, USD 2014-2025 Fixed/floating 8.0% 83 108 Leasing debt, ALK Group EUR, USD 2016-2020 Floating 3.5% - 4.0% 4 4 Other bank and finance loans, ALK Group EUR 2016 Fixed 3.1% 298 298 Total 7,939 8,001 2013 Bank debt, Falck Group DKK, EUR, USD, other 2014-2018 Floating 4.0% Leasing debt, Falck Group AUD, BLR, CAD, COP, EUR, NOK, USD 2014-2025 Fixed/floating 7.0% Leasing debt, ALK Group EUR, USD 2014-2016 Floating 3.5% Other bank and finance loans, ALK Group EUR 2016 Fixed 3.1% Total
6,769
6,819
99 5 298 7,171
99 5 298 7,221
22.3 REPO DEBT
Repo debt in Lundbeckfond Invest amounts to DKK 205 million (DKK 196 million in 2013) falls due 12 January 2015. The debt carries a fixed rate of interest from the date of conclusion at 0.25% (0.15% in 2013).
90
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 23 - 24 - 25 - 26
23. OTHER PAYABLES
2014 2013 Note DKKm DKKm Employee bonds 8 18 Trade payables 5,777 4,915 Other payables 3,092 3,170 Derivative financial instruments 228 225 Prepayments 29 1,600 1,536 Total 10,705 9,864 24. ADJUSTMENT OF NON-CASH OPERATING ITEMS
2014 2013 DKKm DKKm Depreciation, amortisation and impairment 2,002 1,761 Incentive programmes 53 62 Change in pension obligation -7 -7 Change in other provisions 51 59 Other adjustments 2 24 Total 2,101 1,899 25. WORKING CAPITAL CHANGES
2014 2013 DKKm DKKm Change in inventories -7 -252 Change in receivables -59 -434 Change in receivables from associates 15 -35 Change in current liabilities 433 1,726 Total 382 1,005 26. ACQUISITION 26.1 ACQUISITION OF BUSINESSES
Total 2014 Total 2013 DKKm DKKm Assets Intangible assets 215 181 Property, plant and equipment 51 121 Financial assets 1 3 Cash and cash equivalents 55 32 Other current assets 224 122 Liabilities Interest-bearing debt -30 -105 Current liabilities, provisions etc. -166 -71 Deferred tax -42 -56 Non-controlling interests -15 -10 Net assets acquired 293 217 Goodwill 504 579 Acquisition cost 797 796 Provisions for acquisition of non-controlling interests -54 -101 Aqusition costs exclusive of obligations to buy non-controlling interests 743 695 CONSOLIDATED FINANCIAL STATEMENTS
91
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 26 26.1 ACQUISITION OF BUSINESSES – CONTINUED
Total 2014 DKKm
Total 2013 DKKm
Acquisition cost exclusive of obligations to buy non-controlling interests 743 695 Acquired cash in hand and at bank -55 -32 Outstanding consideration -50 -79 Consideration relating to prior-year acquisitions 65 9 Cash consideration 703 593 Expensed transaction costs 39 45
Acquisitions 2014 Name Principal activity Country Date of acquisition Purchase price
Voting share acquired
Fineta Emergency France Mar. 2014 36 51% Previa Healthcare Sweden Jun. 2014 337 100% Quick Care Healthcare Denmark Jun. 2014 253 100% BHM and Haces Emergency Colombia Nov. 2014 45 80% Others 72 743 Acquisitions 2013 Name Principal activity Country Date of acquisition Purchase price Voting share acquired Verihealth Emergency USA Apr. 2013 Skandinavisk Hälsovärd Group Healthcare Sweden Aug. 2013 G.A.R.D. Emergency Germany Sep. 2013 Hostile Environment Services Emergency Australia Oct. 2013 Others
81
100%
43 462
100% 100%
79 30 695
55%
Fineta is one of the largest ambulance companies in France with activities in the Essonne region south of Paris. With this acquisition, Falck steps into the French market, one of the largest markets in Europe and expected to see substantial growth. The French market is highly fragmented with many small operators, which provides good opportunities for consolidation. Part of the consideration has been allocated to existing customer contracts, while the rest has been allocated to goodwill, relating to the potential of continuing growth in the French market by achieving a strong foundation and efficiency through consolidation, and by exploiting the competencies, knowledge and relations of key persons. Previa is the largest provider in Sweden of services that improve the working environment, reduce sickness absence and facilitate access to rehabilitation after illness (Företagshälso). The company provides services such as health checks, consulting on health and safety at work, handling of sick employees, rehabilitation, ergonomics, etc. In addition, the company offers training of management staff in health-related matters, for example policies and processes. Customers are employers (i.e. the B2B market). Part of the purchase price has been allocated to existing customer contracts, while the rest has been allocated to goodwill. Goodwill relates to the opportunity to expand Falck’s strategic platform for healthcare activities. Quick Care has since 2007 been one of the biggest Danish providers of services to job centres within its field. The company’s main activity is aimed at bringing people absent due to sickness back to work through rehabilitation, clarification and upskilling. Customers are job centres, i.e. the B2G market. Part of the consideration has been allocated to existing customer contracts, while the rest has been allocated to goodwill, reflecting Falck’s expansion of a strong strategic platform for the Group’s healthcare activities in Denmark. BHM Soluciones Integrales en Salud and Haces Inversiones y Servivios are two Colombian companies that provide patient transportation and home care services in Bogotá, Colombia. BHM is the market leader in the field of specialised patient transportation in Bogotá. The services are primarily sold to insurance companies, and to a lesser extent to the B2B market. The Colombian market is attractive with significant growth potential and as a platform for growth in other countries in Latin America. Part of the consideration has been allocated to existing customer relations and the rest to goodwill, which relates to the establishment of a strong platform for continuing growth in Colombia and other countries in Latin America.
92
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 26 - 27 26.1 ACQUISITION OF BUSINESSES – CONTINUED
The cost price paid in connection with the company acquisitions exceeded the fair value of acquired identifiable assets, liabilities and contingent liabilities. Other than customer contracts and customer relations with a total value of DKK 164 million (DKK 171 million in 2013), no assets or liabilities have been identified which were not recognised in the companies acquired on the date of acquisition. Goodwill represents DKK 504 million (DKK 579 million in 2013). 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 146 million (DKK 99 million in 2013). The contractual gross receivable is DKK 146 million (DKK 126 million in 2013), of which DKK 0 million (DKK 27 million in 2013) was deemed to be unrecoverable as of the date of takeover. Non-controlling interests in acquisitions in 2014 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 non-controlling interests. Business combinations may be adjusted for up to 12 months after the date of acquisition. Of the Group’s comprehensive income in 2014 of DKK 3,407 million (DKK 2,073 million in 2013), DKK 6 million (DKK 13 million in 2013) is attributable to results generated by the acquired operations after the acquisition date. Revenue and comprehensive income for the Group for 2014 calculated pro forma as if the acquired enterprises had been acquired on 1 January 2014 amount to DKK 30,444 million (DKK 30,638 million in 2013) and DKK 3,447 million (DKK 2,095 million in 2013), respectively. The amounts stated are exclusive of the effect of the purchase price allocation, which is incorporated in the pre-acquisition balance sheet. 26.2 ACQUISITION OF ASSETS
The acquisition of Chelsea Therapeutics International, Ltd., which is considered a purchase of assets, consists of the Northera™ product rights valued at DKK 2,600 million and tax assets of DKK 272 million as well as net liabilities totalling DKK 41 million. A cash balance of DKK 145 million was also acquired, and this amount is included in the cash flow statement as acqusition of companies. 27. 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 Lundbeck, ALK and Falck groups and in Lundbeckfond Invest based on policies and guidelines approved by the Board of Trustees or the Board of Directors in the sub-groups. See also note 12: Financial assets and financial risks, note 16: Trade receivables and other receivables, and note 17: Cash resources for a description of risks and the management thereof. 27.1 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 Lundbeck, ALK and Falck groups and in Lundbeckfond Invest.
CONSOLIDATED FINANCIAL STATEMENTS
93
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 27 27.1 EXCHANGE RATE RISKS – CONTINUED
2014 2013 DKKm DKKm Monetary assets and monetary liabilities for the principal currencies at 31 December Monetary assets CAD 317 233 CHF 224 139 EUR 4,855 2,011 GBP 604 778 JPY 123 63 USD 8,737 5,219 Monetary liabilities CAD 214 239 EUR 3,552 2,421 GBP 188 252 JPY 80 104 USD 2,092 1,773 Estimated impact on profit and equity from a 5% increase in year-end exchange rates of the most important currencies CAD CHF GBP JPY USD DKKm DKKm DKKm DKKm DKKm 2014 Profit 2 11 4 2 267 Equity -3 11 11 -8 602 2013 Profit -1 7 18 -2 193 Equity -39 7 19 -14 412 The profit impact is included in the impact on equity. Due to Denmark’s long-standing fixed exchange rate policy against euro and the expected continuation of this policy, the foreign currency risk for euro is considered immaterial, and euro is therefore not included in the table above. 27.2 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. See note 12: Financial assets and financial risks and the Falck Group’s overall loan financing, cf. note 22: 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 1.8 year (1.9 year in 2013). Other things being equal, an increase of 1 %-point in interest rates would increase the Group’s profit by DKK 23 million (DKK 88 million in 2013). At 31 December 2014, 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 2014 and 31 December 2013 to manage interest rate risks because the distribution of investments carrying floating and fixed interest at the given times was deemed to be satisfactory.
94
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 27 27.2 INTEREST RATE RISKS – 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 prolong the interest rate swaps that expire in 2017 until 2019, to the effect that a level of 70%80% of the syndicated loans are at fixed interest. The remainder of the syndicated loans are 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 3.1% including the current interest rate margin, that interest rate on the part of the debt that is denominated in EUR cannot exceed 2.9% including the current interest rate margin, and that interest rate on the part of the debt that is denominated in USD cannot exceed 3.4% including the applicable 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 20 million (DKK 26 million in 2013), as a large part of the interest rate risk is hedged by interest rate swaps. Without this hedge, a fluctuation by 1% would change the Group’s interest expense by DKK 64 million (DKK 68 million in 2013). The sensitivity stated has been determined based on the recognised financial assets and liabilities at 31 December 2014. No adjustment has been made for servicing and raising of debt, or the like in 2014. Furthermore, it is assumed that all hedges of floating-rate loans are deemed to be effective. 27.3 CATAGORIES AND MATURITY DATES FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES
More than Less than 1 year 1-5 years 5 years Total Effective 31 December 2014 DKKm DKKm DKKm DKKm interest rates Financial assets Derivatives included in the trading portfolio 5 - - 5 Securities 1) Danish mortgage and government bonds 324 708 1,151 2,183 0-5% Credit bonds 12 994 926 1,932 0-16% Listed equities - - 7,371 7,371 Shares in property and infrastructure - - 481 481 Lundbeckfond Ventures and Emerge - - 1,452 1,452 Private equity funds - - 1,329 1,329 Other unlisted funds - - 285 285 Financial assets at fair value through profit or loss 341 1,702 12,995 15,038 Derivatives to hedge future cash flows and net investment in foreign subsidiaries 68 - - 68 Financial assets used as hedging instruments 68 - - 68 6,054 90 21 6,165 Receivables 2) Fixed-term deposits 2,312 - - 2,312 0-7% Other cash resources 3,134 - - 3,134 0-10% Loans and receivables 11,500 90 21 11,611 Available-for-sale financial assets - 71 - 71 Total financial assets 11,909 1,863 13,016 26,788 Financial liabilities Derivatives included in the trading portfolio 66 - - 66 Financial liabilities at fair value through profit or loss 66 - - 66 Derivatives to hedge future cash flows and net investment in foreign subsidiaries 123 39 - 162 Financial liabilities used as hedging instruments 123 39 - 162 1,228 8,019 2,083 11,330 0-8% Mortgage, bank, leasing and repo debt 3) Employee bonds/purchase obligations 194 1,149 27 1,370 0-4% 9,588 378 - 9,966 Other payables and non-disbursed grants 2) Financial liabilities, measured at amortised cost 11,010 9,546 2,110 22,666 Total financial liabilities 11,199 9,585 2,110 22,894 -
CONSOLIDATED FINANCIAL STATEMENTS
95
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 27 27.3 CATAGORIES AND MATURITY DATES FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES â&#x20AC;&#x201C; CONTINUED
Less than More than 1 year 1-5 years 5 years Total Effective 31 December 2013 DKKm DKKm DKKm DKKm interest rates Financial assets Derivatives included in the trading portfolio 9 - - 9 Securities 1) Danish mortgage and government bonds 1,444 404 1,786 3,634 0 - 6% Credit bonds 16 968 1,336 2,320 1 - 18% Listed equities - - 5,979 5,979 Shares in property and infrastructure - - 363 363 Lundbeckfond Ventures and Emerge 7 - 722 729 Private equity funds - - 748 748 Other unlisted funds - - 257 257 Financial assets at fair value through profit or loss 1,476 1,372 11,191 14,039 Derivatives to hedge future cash flows and net investment in foreign subsidiaries 134 7 - 141 Financial assets used as hedging instruments 134 7 - 141 5,574 88 - 5,662 Receivables 2) Fixed-term deposits 3,821 - - 3,821 0-7% Other cash resources 2,277 - - 2,277 0-7% Loans and receivables 11,672 88 - 11,760 Available-for-sale financial assets - 65 23 88 Total financial assets 13,282 1,532 11,214 26,028 Financial liabilities Derivatives included in the trading portfolio 165 - - 165 Financial liabilities at fair value through profit or loss 165 - - 165 Derivatives to hedge future cash flows and net investment in foreign subsidiaries 31 29 - 60 Financial liabilities used as hedging instruments 31 29 - 60 1,055 7,525 2,238 10,818 0-5% Mortgage, bank, leasing and repo debt 3) Employee bonds/purchase obligations 100 1,119 53 1,272 3-6% 8,863 300 - 9,163 Other payables and non-disbursed grants 2) Financial liabilities, measured at amortised cost 10,018 8,944 2,291 21,253 Total financial liabilities 10,214 8,973 2,291 21,478 The amounts in the table above are exclusive of interest for Lundbeck Group. At 31 December 2014 the expected interest expense on mortage and bank debt for Lundbeck Group the following 12 months totalled DKK 87 million (DKK 74 million in 2013). 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 2,858 million at 31 December 2014 (DKK 2,609 million in 2013).
96
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 27
27.4 NET OUTSTANDING FORWARD EXCHANGE RATE TRANSACTIONS, CURRENCY OPTIONS, INTEREST RATE SWAPS AND EQUITY OPTIONS
27.4 Hedging part Exchange Exchange Average hedge Contractual gains/losses gains/losses prices of value in recognised in recognised in existing accordance other income forward with hedge comprehensive statement/ exchange accounting income balance sheet contracts Expiry Forward contracts DKKm DKKm DKKm DKK period 2014 CAD 174 -2 27 513.14 Nov. 2015 GBP 545 -9 -19 932.71 Dec. 2015 JPY 218 13 15 5.57 Aug. 2015 USD 304 -4 -98 573.87 Dec. 2015 Other currencies 1,206 -4 -10 Forward contracts 2014 2,447 -6 -85 2013 CAD 851 38 39 535.33 Oct. 2014 GBP 532 -11 11 873.52 Dec. 2014 JPY 281 26 53 5.91 Nov. 2014 USD 1,968 -47 10 536.31 Nov. 2014 Other currencies 1,249 17 13 Forward contracts 2013 4,881 23 126 At 31 December 2014, the exchange difference between the contract value and the market value of the concluded forward exchange contracts represented a gain of DKK 19 million (a gain of DKK 83 million in 2013), of which a loss of DKK 30 million was recognised in the income statement (a gain of DKK 41 million in 2013). Interest rate gains/losses recognised in other Contractual comprehensive Fixed interest value income rate Expiry Interest rate collar/interest rate swap DKKm DKKm % period 2014 DKK interest rate swap 725 -9 0.56 Jun. 2016 DKK interest rate swap 2,015 -35 0.89 Sep. 2017 USD interest rate swap 441 -1 1.14 Sep. 2017 EUR interest rate swap 1,198 -23 0.67 Sep. 2017 DKK interest rate swap 1,700 -2 0.53 Jun. 2019 EUR interest rate swap 1,489 -2 0.25 Jun. 2019 Interest rate collar/interest rate swap -72 2013 DKK interest rate swap 2,300 -19 1.40 Aug. 2014 DKK interest rate swap 725 - 0.56 Jun. 2016 DKK interest rate swap 2,015 3 0.89 Sep. 2017 USD interest rate swap 406 -1 0.55 Aug. 2014 USD interest rate swap 390 2 1.14 Sep. 2017 EUR interest rate swap 1,492 -9 1.17 Aug. 2014 EUR interest rate swap 1,201 2 0.67 Sep. 2017 Interest rate collar/interest rate swap -22
CONSOLIDATED FINANCIAL STATEMENTS
97
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 27 27.4 NET OUTSTANDING FORWARD EXCHANGE RATE TRANSACTIONS, CURRENCY OPTIONS, INTEREST RATE SWAPS AND EQUITY OPTIONS â&#x20AC;&#x201C; CONTINUED
27.4 Trading part Average hedge Exchange prices of gains/losses existing recognised in forward Contractual the income exchange value statement transactions Expiry Forward contracts DKKm DKKm DKKm period 2014 GBP - -3 - Forward contracts -3 2013 GBP 100 1 886.3 Feb. 2014 Forward contracts 1 Share option gains/losses recognised in Contractual the income Market value value statement 31 December Expiry Equity contracts DKKm DKKm DKKm period 2014 Options on indices -28 124 5 Jan. 2015 Options on shares - 14 -1 Share contracts -28 138 4 2013 Options on indices - -53 -162 Jan-Mar. 2014 Options on shares - 40 - Share contracts - -13 -162 Interest rate gains/losses recognised in Contractual the income Fixed interest value statement rate Expiry Interest rate swap DKKm DKKm % period 2014 Fixed to floating 600 -82 2.24 Nov. 2023 Interest rate swap -82 2013 Fixed to floating 600 19 2.24 Nov. 2023 Interest rate swap 19
98
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTE 28
28. CONTRACTUAL OBLIGATIONS
2014 2013 DKKm DKKm The Group has signed operating lease obligations for a total amount of 2,619 2,378 Payment of the obligations breaks down as follows: Less than 1 year 548 489 Between 1 and 5 years 1,204 982 More than 5 years 867 907 2,619 2,378 Expensed lease payments amounted to 589 561 The operating lease commitments primarily concern the Falck Groupâ&#x20AC;&#x2122;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 131 119 Payment of the finance lease obligations breaks down as follows: Less than 1 year 48 31 Between 1 and 5 years 52 72 More than 5 years 31 16 Minimum lease payments 131 119 Amortisations premium for future expensing 19 15 Present value of finance lease obligations 112 104 Financial lease arrangements comprise leases on buildings, vehicles and other lease arrangements. The lease contracts do not include any contingent lease payments. 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 477 million (DKK 485 million in 2013).
Lundbeck Group
Other purchase obligations The Lundbeck Group has undertaken purchase obligations in the amount of DKK 353 million (DKK 274 million in 2013). Research and development and collaborations Research and development milestone obligations amounted to DKK 2,485 million (DKK 1,096 million in 2013). The total amounts of the milestone obligations may increase in line with the development of the projects. The Lundbeck Group is part of multi-year research and development collaboration projects comprising minimum research and contractual obligations in the order of DKK 37 million (DKK 52 million in 2013). Other contractual commitments The Lundbeck Group has entered into various service agreements amounting to DKK 92 million (DKK 124 million in 2013). Furthermore Lundbeck had at 31 December 2014 capital contribution obligations amounting to DKK 6 million (DKK 8 million in 2013).
CONSOLIDATED FINANCIAL STATEMENTS
99
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 28 - 29 28. CONTRACTUAL OBLIGATIONS – CONTINUED
ALK Group The ALK Group’s liabilities relating to research and development projects and assets acquirement are estimated at DKK 5 million (DKK 28 million in 2013).
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 2014 (DKK 0 million in 2013).
29. GUARANTEES, CONTINGENT ASSETS AND LIABILITIES AND COLLATERALS
The Group has the following warranty commitments and contingent liabilities: Joint taxation H. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S and their Danish subsidiaries are pooled for tax purposes with Lundbeckfond Invest A/S. As from 2013 financial year, the companies have partly a joint and several liability and partly a secondary liability with respect to income taxes etc. for the jointly-taxed companies. 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, in both cases 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.
Lundbeck Group
Acquisition of Chelsea Therapeutics International, Ltd. In the second quarter of 2014, Lundbeck completed the purchase of all shares in Chelsea Therapeutics International, Ltd. for USD 6.44 per share in cash and non-transferable contingent value rights (CVRs) that may pay up to an additional USD 1.50 per share upon achievement of certain sales milestones. The acquisition is considered a purchase of assets, consisting mainly of the Northera™ product rights and tax assets. Pending legal proceedings The 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 already provided for in the financial statements. Due to uncertainty about the outcome of the legal proceedings, the amount of the provision is uncertain. In June 2013, the European Commission issued a decision in which it found that Lundbeck by entering into a few selected patent settlement agreements in 2002 had violated EU competition law and thereby hindered a lawful entry of generic citalopram into markets in the European Economic Area (EEA). The European Commission issued a fine of EUR 93.8 million (approximately DKK 700 million). In September 2013, this decision was appealed by Lundbeck to the General Court. It may take up to six years for the courts to decide upon the matter. Lundbeck does not expect that the fine will increase as a result of the appeal. Lundbeck paid the fine in the third quarter of 2013. Consequently, Lundbeck has a contingent asset corresponding to a maximum of the amount of the fine. 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, Lundbeck submitted a response to the authorities. Due to a change in the Brazilian Antitrust Law, handling of the case has shifted from SDE to CADE (the Administrative Council for Economic Defense) and remains pending. Industry obligations The Lundbeck Group has return obligations normal for the industry. H. Lundbeck A/S’ management expects no major loss on these obligations.
ALK Group
Collaterals and guarantee Collaterals and guarantee amounted to DKK 9 million (DKK 13 million in 2013).
100
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 29 - 30 29. GUARANTEES, CONTINGENT ASSETS AND LIABILITIES AND COLLATERALS – CONTINUED
Collaterals The carrying amount of land and buildings provided as collateral for credit institutions amounted to DKK 146 million (DKK 153 million in 2013). 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.
Falck Group
Warranty and guarantee commitments Warranty and guarantee commitments amounted to DKK 4 million (DKK 7 million in 2013). 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 418 million provided in connection with ambulance contracts (DKK 317 million in 2013). 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 449 million (DKK 520 million in 2013). Issued mortgage deeds amounted to DKK 343 million (DKK 354 million in 2013).
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 2014 amounted to DKK 283 million (DKK 334 million in 2013).
30. 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 Trustees. • Companies in which the company’s Executive Management and Board of Trustees 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 Trustees and the Executive Management received remuneration. See note 3. • 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.
CONSOLIDATED FINANCIAL STATEMENTS
101
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 30 - 31 30. RELATED PARTIES– CONTINUED
2014 2013 DKKm DKKm Transactions with associates: Sale of property, plant and equipment 30 Acquisition of services -15 -10 Sale of services - Royalty income 2 1 Rental costs -29 -25 Receivables from associates appear from the balance sheet, and interest payable for the period amounted to DKK 4 million. Transactions with associated companies have been eliminated in the consolidated financial statements. • Transactions and balances with other related parties: In 2014, Lundbeck paid a consultancy fee of DKK 5 million (DKK 3 million in 2013) to Lundbeck International Neuroscience Foundation, an independent commercial foundation established by H. Lundbeck A/S in 1997. • 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. 31. EVENTS AFTER THE BALANCE SHEET DATE
No events have occurred in the period from the balance sheet date until the presentation of the financial statements which may change the evaluation of the annual report.
102
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
COUNTRY
OWNERSHIP
Subsidiaries: Lundbeckfond Invest A/S
Denmark
100%
- H. Lundbeck A/S
Denmark
70%
- Falck Holding A/S
Denmark
57%
- ALK-Abelló A/S
Denmark
42% (69% of the votes)
Insusense ApS
Denmark
60%
Lundbeckfond Invest A/S - associates: Obel-LFI Ejendomme A/S
Denmark
50%
Veloxis Pharmaceuticals A/S
Denmark
43%
Lundbeckfond Invest A/S - direct investments: Acacia Pharma Ltd
United Kingdom
Allocure Inc. Asante Solutions Inc. Atox Bio Ltd Bonesupport Holding AB
26%
USA
20%
USA
22%
Israel
15%
Sweden
17%
Celladon Corp.
USA
8%
Cydan Inc.
USA
19%
DySIS Medical Ltd.
United Kingdom
Enterome
France
37% 28%
EpiTherapeutics ApS
Denmark
17%
Iconic Therapeutics Inc.
USA
14%
Nexstim Oy
Finland
5%
PsiOxus Ltd
United Kingdom
11%
River Vision Corp.
USA
33%
scPharmacauticals Inc.
USA
24%
Thesan Inc.
USA
13%
VHsquared Ltd.
United Kingdom
21%
Vtesse Inc.
USA
12%
Ziarco Ltd.
United Kingdom
15%
H. Lundbeck Group: Lundbeck Argentina S.A.
Argentina
100%
Lundbeck Australia Pty Ltd.
Australia
100%
- CNS Pharma Pty Ltd.
Australia
100%
Lundbeck Austria GmbH
Austria
100%
Lundbeck S.A.
Belgium
100%
Lundbeck Brasil Ltda.
Brazil
100%
Lundbeck Canada Inc.
Canada
100%
Chile
100%
China
100%
Colombia
100%
Lundbeck Chile Farmacéutica Ltda. Lundbeck (Beijing) Pharmaceuticals Consulting Co., Ltd. Lundbeck Colombia S.A.S. Lundbeck Croatia d.o.o. Lundbeck Czech Republic s.r.o. Lundbeck China Holding A/S 1)
Croatia
100%
Czech Republic
100%
Denmark 67%
- Lundbeck Pharmaceuticals (Tianjin) Co., Ltd.
China
100%
- Lundbeck Pharmaceuticals Consulting (Shanghai) Co., Ltd.
China
100%
Lundbeck Export A/S
Denmark
100%
Lundbeck Insurance A/S
Denmark
100%
Lundbeck Pharma A/S
Denmark
100%
Lundbeck Eesti A/S
Estonia
100%
OY H. Lundbeck AB
Finland
100%
Lundbeck SAS
France
100%
Sofipharm SA
France
100%
- Laboratoire Elaiapharm SA
France
100%
Germany
100%
Lundbeck Hellas S.A.
Greece
100%
Lundbeck Hungária KFT
Hungary
100%
India
100%
Lundbeck GmbH
Lundbeck India Private Limited
CONSOLIDATED FINANCIAL STATEMENTS
103
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
COUNTRY
OWNERSHIP
Lundbeck (Ireland) Ltd.
Ireland
100%
Lundbeck Israel Ltd.
Israel
100%
Lundbeck Italia S.p.A.
Italy
100%
Lundbeck Pharmaceuticals, Italy S.p.A.
Italy
100%
- Archid S.a.
Luxembourg
100%
Lundbeck Japan K. K.
Japan
100%
Lundbeck Korea Co., Ltd.
Korea
100%
SIA Lundbeck Latvia
Latvia
100%
UAB Lundbeck Lietuva
Lithuania
100%
Malaysia
100%
Lundbeck Malaysia SDN. BHD Lundbeck México, SA de CV
Mexico
Lundbeck B.V.
The Netherlands
Lundbeck New Zealand Limited
100% 100%
New Zealand
100%
Norway
100%
Lundbeck Pakistan (Private) Limited
Pakistan
100%
Lundbeck America Central S.A.
Panama
100%
Peru
100%
Lundbeck Business Service Centre Sp.z.o.o
Poland
100%
Lundbeck Poland Sp.z.o.o.
Poland
100%
Portugal
100%
Russia
100%
Singapore
100%
Lundbeck Slovensko s.r.o.
Slovakia
100%
Lundbeck Pharma d.o.o.
Slovenia
100%
South Africa
100%
Lundbeck España S.A.
Spain
100%
H. Lundbeck AB
Sweden
100%
- CNS Pharma AB
Sweden
100%
Lundbeck (Schweiz) AG
Switzerland
100%
Lundbeck Pharmaceutical GmbH
Switzerland
100%
H. Lundbeck AS
Lundbeck Peru S.A.C.
Lundbeck Portugal - Produtos Farmacêuticos Unipessoal Lda. Lundbeck RUS OOO Lundbeck Singapore PTE. LTD.
Lundbeck South Africa (Pty) Limited
Lundbeck İlaç Ticaret Limited Şirketi Lundbeck Group Ltd. (Holding)
Turkey
100%
United Kingdom
100%
- Lundbeck Limited
United Kingdom
100%
- Lundbeck Pharmaceuticals Ltd.
United Kingdom
100%
- Lifehealth Limited
United Kingdom
100%
- Lundbeck UK LLP
United Kingdom
100%
Lundbeck USA Holding LLC
USA
100%
- Lundbeck LLC
USA
100%
USA
100%
USA
100%
UK
100%
Ireland
100%
- Chelsea Therapeutics International, Ltd.
- Lundbeck NA Ltd f/k/a Chelsea Therapeutics Inc.
- Chelsea Therapeutics Limited
- Lundbeck Pharmaceuticals Ireland Limited
- Lundbeck Pharmaceuticals Services, LLC
USA
100%
- Lundbeck Research USA, Inc.
USA
100%
Venezuela
100%
Lundbeck de Venezuela, C.A.
1) In subsidiaries in which Lundbeck does not hold 100% of the share capital but has a put option to buy the remaining capital at a fixed price after a prearranged number of years, a debt obligation is recognized instead of recognition of minority interests. 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
100%
ALK AG
Switzerland
100%
ALK ilaç ve Alerji Ürünleri Ticaret Anonim Şirketi
104
Turkey
CONSOLIDATED FINANCIAL STATEMENTS
100%
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
COUNTRY
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.
OWNERSHIP
Spain
100%
- 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) ALK Slovakia s.r.o. ALK Slovakia s.r.o. – od štĕpný závod (branch)
Slovakia
100%
Czech Republic
100%
Falck Group: Falck A/S
Denmark
100%
- Falck Danmark A/S
Denmark
100%
- Falck Emergency A/S
Denmark
100%
- Falck Treasury A/S
Denmark
100%
- Falck Health Care Holding A/S
Denmark
59%
Denmark
100%
Denmark
100%
Denmark
100%
- Falck Health Care A/S
- Falck Dental Care ApS
- Falck Hjælpemidler A/S
- Vikteam A/S
Denmark
- ActivCare Privat A/S
Denmark
100%
80%
- Falck Health Care Norge AS
Norway
100%
- Sirculus ApS
Denmark
Denmark
100%
- Falck JobService A/S
Denmark
100%
- Falck Lægehuse A/S
Denmark
100%
- Quickcare A/S
Denmark
100%
- Quickcare Norge AS
Norway
100%
- Aktiv Helse Bedriftshelsetjenesten AS
Norway
100%
- Aktiv Helse Grenland
Norway
100%
- Bedriftstjenesten AS
Norway
100%
Sweden
100%
Sweden
100%
- Falck Healthcare AB
Sweden
100%
- Skandinavisk Hälsovård AB
Sweden
100%
- Svensk Närsjukvård AB
Sweden
100%
- Doc Care AB
Sweden
100%
- Ofelia Vård AB
Sweden
100%
- AB Previa
Sweden
100%
- Silverhälsen AB
Sweden
100%
- Inlandshälsen AB
Sweden
100%
- Previa Sjukvård AB
Sweden
100%
- Galleriva Husläkarmottagning AB
Sweden
100%
- Falck Healthcare CS Holding A/S
- Falck Health Care Holding AB
- Falck Aktiv Arbetsmedicin AB
- Falck Luftambulance A/S
Denmark
55%
100%
- Falck Air AB
Sweden
100%
- ActivCare A/S
Denmark
100%
- Falck Assistance A/S
Denmark
100%
- Falck Air Ambulance A/S 2)
Denmark 50%
- Traffilog Nordic ApS 2)
Denmark 49%
- Falck Fire Services A/S
Denmark
100%
- Falck fire Services Greenland A/S
Denmark
100%
- Falck fire Services DE GmbH
Germany
100%
- Falck fire Services CH AG
Switzerland
100%
- Falck fire Services BE NV
Belgium
100%
Denmark
100%
- Falck Fire Services Eastern Europe Holding A/S
- Falck Fire Services Polska Sp. z o.o. 2)
- Falck Norge Holding AS
Poland 100% Norway
CONSOLIDATED FINANCIAL STATEMENTS
100%
105
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
COUNTRY
OWNERSHIP
- Falck Redning AS
Norway
100%
- Falck Emergency AS
Norway
100%
- Falck Amulanse AS
Norway
100%
- Falck Emergency Norway AS
Norway
100%
- Falck Services AS
Norway
100%
- Falck Safety Services Holding A/S
Denmark
100%
- Falck Safety Services A/S
- Falck Global Safety B.V.
- Falck Nutec AS
Denmark
100%
The Netherlands
100%
Norway
100%
- Falck Nutec Ltd.
United Kingdom
100%
- Nutec Centre for Safety Ltd. 1)
United Kingdom
100%
- Falck Onsite Limited
United Kingdom
100%
- Onsite Training Services Limited 1)
United Kingdom
100%
- Falck Nutec Trinidad and Tobago Limited
Trinidad & Tobago
- Nutec UK Ltd.
United Kingdom
- Nutec Belgium Holding BVBA 1) - Nutec Belgium BVBA 1)
80% 100%
Belgium 100% Belgium 100%
- Falck Nutec B.V.
The Netherlands
100%
- Marinesafety International Rotterdam B.V.
The Netherlands
100%
- MSTS Asia Sdn. Bhd.
Malaysia
70%
- Risktec (M) Sdn. Bhd.
Malaysia
100%
- Falck Bestari Healthcare Sdn Bhd.
Malaysia
- MSTS Asia (S'pore) Pte. Ltd.
Singapore
- Falck Nutec Malaysia Sdn. Bhd.
82% 100%
Malaysia
70%
The Netherlands
100%
- Falck Safety Services Nigeria Limited
Nigeria
51%
- Falck Prime Atlantic Limited
Nigeria
51%
Azerbaijan
65%
- Falck BHV Operations B.V.
- Falck Caspian Safe LLC - Falck Safety Services Canada Ltd.
Canada
55%
- Newfoundland and Labrador Inc.
Canada
100%
- Falck Safety Services Belgium BVBA
Belgium
100%
Brazil
100%
Brazil
100%
- Southfield Ltd
Thailand
50%
- Falck Nutec (Thailand) Ltd
Thailand
65%
- Falck USA Holdings, Inc
USA
100%
- Falck Alford Holdings, Inc
USA
80%
- Alford Services, Inc
USA
100%
- Alford Safety Services, Inc
USA
100%
- Haztec Services - West Indies, LLC
USA
100%
St. Lucia
100%
Trinidad & Tobago
100%
- Falck Nutec Brasil Participacoes Ltda
- Falck Nutec Brasil Treinamentos em Segurança Marítima Ltda
- Haztec Services St. Lucia Ltd - Haztec Services Trinidad Limited - Occupational Safety Traning, Inc.
USA
- Falck Alford International B.V.
- Falck Holding de México, S.A. de C.V.
- Falck Safety Services de México, S.A.P.I. de C.V.
- Falck Nutec Vietnam Limited
- Falck Safety Services LLC
100%
Mexico
100%
Mexico
55%
Vietnam
88%
United Arab Emirates
- Falck Safety Services LLC
100%
The Netherlands
Qatar
49% 49%
- Falck Global Assistance Norway AS
Norway
100%
- Falck Sverige Holding AB
Sweden
100%
Sweden
100%
- Falck Räddningskär AB
Sweden
100%
- Falck Security AB
Sweden
100%
- Falck Forsäkring AB
Sweden
100%
- Falck Global Assistance AB
Sweden
100%
- Falck Ambulans AB
Sweden
95%
- Falck Räddningstjänst AB
Sweden
100%
- Falck Services AB
Sweden
100%
- Svensk Sjöambulans AB 2)
Sweden 50%
106
- Falck Investment Sverige AB
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
COUNTRY
OWNERSHIP
Finland
100%
Denmark
100%
- S Reg AB
Sweden
100%
- Falck Secure AB
Sweden
100%
- S Reg Oy
Finland
100%
- Falck Secure AS
Norway
100%
Sweden
100%
Sweden
100%
- Falck Ensihoito Oy - S Reg Holding A/S
- Falck Health Care Sverige Holding AB
- Falck AM Health Care AB
- Falck USA, Inc.
USA
- FCA Corp.
USA
87%
- Care Ambulance Service Inc.
USA
100%
- Falck EMS Corp.
USA
97%
- Lifestar Responce Corporation, Inc.
USA
100%
- Access on Time Language Services LLC
USA
100%
- Lifestar Response of Alabama, Inc.
USA
100%
- Medibus, Inc.
USA
100%
- STAT Equipment Corp.
USA
100%
- STAT EMS, Corp.
USA
USA
100%
- Bi-County Ambulance & Ambulette Transport Services Corp.
- Lifestar Response of new Jersey, Inc.
98%
51%
USA
100%
- Lifestar Response of Maryland, Inc
USA
100%
- Access Transport Services Holding, Inc
USA
100%
- Falck Global Assistance LLC
USA
100%
- Home Care Equipment, Inc.
USA
100%
- Robinson´s Ambulance & Oxygen Service, Inc.
USA
100%
- Falck Southeast Corp.
USA
96%
- Cape Cod Medica Enterprises, Inc.
USA
100%
- American Ambulance, Inc.
USA
100%
- Falck Southeast II Corp.
USA
96%
- Transitional Health Solutions LLC
USA
100%
USA
100%
USA
100%
- Falck Northern California Corp.
- Falck Northwest Corp.
- Falck Investments Finland Oy Ab
Finland
100%
- Falck Oy
Finland
100%
- Falck Autoabi OÜ
Estonia
100%
- Falck Benelux NV
Belgium
- Falck Investments NV
Belgium
88%
United Arab Emirates
49%
The Netherlands
100%
- Falck Medical Services LLC
- Falck Eurasia B. V.
- Falck Russia Holding 2)
- Beijing Falck Rescue Consulting Services Co., Ltd
The Netherlands
49%
China
100%
- Falck Kazakhstan LLP
Kazakhstan
- Open Clinic LLP
Kazakhstan
- Falck Fire Services Rus LLC
- Falck Foundation VZW
- Falck Medycyna Sp.z o.o.
- Starowka Sp. z o.o.
49%
100% 80%
Rusia
100%
Belgium
100%
Poland
100%
Poland
76%
- Falck SK a.s.
Slovakia
93%
- Falck Emergency AS
Slovakia
51%
- Falck Záchranná a.s.
Slovakia
100%
- Falck Academy s.r.o.
Slovakia
100%
- Falck Healthcare a.s.
Slovakia
100%
- Falck Pharma s.r.o.
Slovakia
100%
- Falck Fire Services a.s.
Slovakia
100%
- Falck CZ a.s.
Czech Republic
Czech Republic
- Falck Emergency a.s.
- Falck SCI, S.A.
Spain
- Falck SCI Portugal - Segurança Contra Incêndios, SA.
- Falck Emergency Spain, S.L.
- Falck VL Servicios Sanitarios, S.L.
CONSOLIDATED FINANCIAL STATEMENTS
93% 100% 65%
Portugal
100%
Spain
65%
Spain
75%
107
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
- Falck Servizi Industriali di Emergenza S.r.l.
- Falck France SAS
COUNTRY
Italy
OWNERSHIP
65%
France
65%
- Fineta SAS
France
42%
- Ambulances de Longjumeau SAS
France
100%
- Ambulances Départementales Sud Franciliennes SAS
France
100%
- Ambulances Saint Gilles SAS
France
100%
- Groupe Départemental Ambulance SAS
France
100%
- Groupe Essonne Ambulance SAS
France
100%
- Groupe France Ambulance SAS
France
100%
- Falck Holding B.V.
- Falck B.V.
- Falck Fire Services NL B.V.
- Falck AVD B.V.
The Netherlands
100%
The Netherlands
100%
The Netherlands
100%
The Netherlands
100%
- AVD-ICT B.V.
The Netherlands
100%
The Netherlands
100%
- Safety Center Zuid Holland B.V.
- Safety Center Zuid Holland c.v.
The Netherlands
52%
- Safe Building B.V.
The Netherlands
100%
- Falck BHV B.V.
The Netherlands
100%
Belgium
100%
Brazil
100%
Brazil
100%
- Falck Brasil 747 Participações Ltda.
Brazil
100%
- Falck Brasil FF Participações Ltda.
Brazil
100%
- Falck Panama Holding S.A.
Panama
100%
- AVD Consultancy N.V.
- Falck Brasil AVD Participações Ltda.
- Falck Brasil Plano de Saúde Ltda.
- 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%
- Servicio Emergencias Regional SER S.A
Panama
100%
- Falck Fire & Safety do Brasil S.A.
- Luvtel S.A.
- BHM Soluciones Integrales de Logistica en Salud S.A.S.
Brazil
65%
Uruguay
100%
Colombia
80%
- Haces Inversiones y Servicios S.A.S.
Colombia
Colombia
100%
El Salvador
100%
- Empresa de Medicina Integral EMI S.A. Servicio de Ambulancia Prepagada - Grupo EMI S.A.
- EMI El Salvador S.A. de C.V.
80%
- Inversiones EMI Worldwide S.A.
Panama
100%
- EMI Panama S.A.
Panama
100%
- EMI Ecuador S.A.- Emergencia Medica Integral
Ecuador
100%
- UCM Uruguay S.A.
Uruguay
100%
- Portovenus S.A.
Uruguay
16%
- EMI Venezuela Holding S.A.
Panama
100%
- Emergencia Medica Integral EMI Centro S.A.
Venezuela
100%
- Centro Medico Integral CEMICA S.A.
Venezuela
100%
- Falck Chile Holding S.A.
Chile
100%
- Falck Chile S.A.
Chile
80%
- Falck Safety Services Limitada
Chile
100%
Chile
100%
- Falck Capacitacion Limitada
- Falck Rettungsdienst GmbH
- G.A.R.D. Verwaltungssgesellschaft für Ambulanz und Rettungsdienst mbH
Germany
90%
Germany
100%
- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Cuxhaven GmbH
Germany
100%
- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Hamburg West mbH
Germany
100%
- Guard Hospital Service GmhB
Germany
100%
Germany
100%
- ASN-Ambulanz-Service-Nord GmbH
Germany
100%
Germany
100%
- G.A.R.D. Arbeitsgemeinschaft Rettungsdienst Dresden GmbH
Germany
100%
- G.A.R.D ArGe Dresden GbR
Germany
100%
- G.A.R.D. Gemeinnützige Ambulanz und Rettungsdienst GmbH
Germany
100%
- GUARD Gesellschaft für unabhängige ambulate Rettungsdienstleistungen GmbH
Germany
100%
108
- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Bremen mbH - G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Hamburg-ost GmbH
CONSOLIDATED FINANCIAL STATEMENTS
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
GROUP OVERVIEW – LUNDBECK FOUNDATION GROUP AT 31 DECEMBER 2014
COMPANY NAME
COUNTRY
Germany
- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst NRW mbH
OWNERSHIP
100%
- K&G Taxi-Krakentransporte und Dienstleitungs GmbH
Germany
Germany
100%
- promedica Rettungsdienst GmbH
Germany
100%
- RTD Consulting GmbH
Germany
100%
- ASG Ambulanz Leipzig GmbH
Germany
100%
- promedica Rettungsdienst Bremerhaven/Bremen GmbH
Germany
100%
Germany
- G.A.R.D. Beteiligungsgesellschaft für Ambulanz und Rettungsdienst mbH
- promedica Rettungsdienst Walbeck-Frankenberg GmbH & Co. KG
80%
70%
- Euro-Med Einkaufsgemeinschaft GmbH
Germany
63%
- Promedica Services GmbH
Germany
100%
- G.A.R.D. Ambulanzflugdienst GmbH
Germany
50%
- Brava Holding GmbH 2)
Germany 25%
- Kranken-Transport Herzig GmbH
Germany
100%
- KS-Medi-Service GmbH
Germany
100%
- Falck Österreich GmbH
Austria
100%
- Falck Yardim Hizmetleri Limited Şirketi
Turkey
100%
- Falck Pty Ltd.
- Falck Ambulance Services Australia Pty Ltd.
- Falck Investments Pty Ltd.
- Falck UK Limited
Australia
53%
Australia
100%
Australia
100%
United Kingdom
100%
United Kingdom
100%
- Medical Services Limited 2)
United Kingdom
45%
United Kingdom
93%
United Kingdom
100%
- Falck EMS UK Limited - Falck Emergency Services UK Ltd.
- Frontline Fire International Limited
- Falck Fire Service UK limited
United Kingdom
100%
- Falck Emergency Asia Pte. Ltd.
Singapore
100%
- Falck India Limited
United Kingdom
98%
- Falck Services Limited
Mauritius
100%
- Falck India Pvt. Ltd.
India
100%
- Falck Care Pvt. Ltd.
India
100%
- Falck Services Pvt Ltd.
India
100%
- Falck Fire Services S.R.L
Romania
- Falck South Africa Holding (PTY) LTD
93%
South Africa
100%
- Med1 (Private) Limites
Sri Lanka
50%
- A C Trafik A/S
Denmark
100%
- KPC Ejendomme af 6. juni 2002 A/S 2)
Denmark 25%
1) Dormant company 2) Associate
CONSOLIDATED FINANCIAL STATEMENTS
109
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
110
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
FINANCIAL STATEMENTS PARENT FOUNDATION CONTENTS Income statement for the period 1 January – 31 December Balance sheet at 31 December Notes 1. Accounting policies 2. Financial income and expenses 3. Staff costs 4. Total operating costs of the Lundbeck Foundation and Lundbeckfond Invest A/S 5. Fees to auditors appointed at the general meeting 6. Tax on profit for the year 7. Grants for the year 8. Investments in subsidiaries 9. Other securities and investments 10. Statement of changes in equity and capital base 11. Pension obligations 12. Related parties 13. Events after the balance sheet date
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
112 113
114 114 114 115 116 116 116 117 118 118 118 119 119
111
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
INCOME STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER
2014 2013 Note DKKm DKKm Dividend from Lundbeckfond Invest A/S 8 821 1,064 Financial income 2 411 341 Financial expenses 2 -133 -116 Profit from investing activities before costs 1,099 1,289 Other operating income 1 12 Staff costs 3, 4 -20 -18 Other external costs 4, 5 -19 -11 Depreciations and amortisations -3 -3 Profit before tax 1,058 1,269 Tax on profit for the year 6 -33 -5 Profit for the year 1,025 1,264 Proposed distribution of profit: Profit for the year 1,025 Amount available for distribution 1,025 The Board of Trustees proposes that the profit be allocated as follows: Transferred to capital base 205 Grants for the year 459 Reversed grants/repayments for the year -15 Net grants for the year 7 444 Transferred to provision for furture grants 750 Retained earnings -374 Distributed 1,025
112
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
BALANCE SHEET AT 31 DECEMBER
Assets 2014 2013 Note DKKm DKKm Other intangible assets 1 2 Intangible assets 1 2 Land and buildings 80 82 Property, plant and equipment 80 82 Investments in subsidiaries 8 4,055 4,059 Other securities and investments 9 4,440 3,987 Financial assets 8,495 8,046 Non-current assets 8,576 8,130 Other receivables 35 39 Receivable from subsidiary 4 1 Income tax receivable 1 1 Cash 197 97 Current assets 237 138 Assets 8,813 8,268 Equity and liabilities Capital base 2,728 2,523 Reserve for future grants 750 Retained earnings 4,284 4,658 Equity 10 7,762 7,181 Pension liabilities 11 18 20 Provisions 18 20 Payable grants, long-term 375 298 Non-current liabilities 375 298 Payable grants, short-term 582 674 Income tax payable 6 21 Repo debt 9 49 89 Other payables 6 6 Current liabilities 658 769 Liabilities 1,033 1,067 Equity and liabilities 8,813 8,268 Related parties 12 Events after the balance sheet date 13
FINANCIAL STATEMENTS â&#x20AC;&#x201C; LUNDBECK FOUNDATION
113
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 1 - 2 - 3
1. ACCOUNTING POLICIES
The annual report of the parent company of Lundbeck Foundation for 2014 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 Groupâ&#x20AC;&#x2122;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: Other operating income Other income consist of rental and other service income as well as gain on sale of tangible fixed assets. Investments in subisidiaries Investments in Lundbeckfond Invest A/S are recognised in the Foundation's balance sheet at cost. Dividends are recognised in the income statement. Investments in other subsidiaries follow the same principles as for Lundbeckfond Invest A/S. The other current subsidiary is classified as a Lundbeckfond Emerge activity. In practice this means that the fair value of the investment is written down yearly based on costs incurred by the subsidiary. 2. FINANCIAL INCOME AND EXPENSES
2014 2013 DKKm DKKm Financial income Interest income, etc. Gain from securities and other equity investments Financial expenses Interest expenses etc. Loss on securities and other equity investments
234 177 411
183 158 341
- 133 133
116 116
3. STAFF COSTS
2014 2013 DKKm DKKm Wages and salaries, incl. holiday allowance 16.8 15.8 Pension contributions 0.1 Pension benefits, including adjustment of pension provision 2.5 1.8 Other social security costs 0.1 0.1 19.5 17.7 Pension benefits including adjustment of pension provision relates to pension obligations taken over from H. Lundbeck A/S and pension obligations towards existing and former board members. It was decided in 2012 to terminate the scheme going forward. However, persons already under the scheme receives / will receive pensions according to right earned up to the date of termination in 2012. With effect from 1 September 2014 the Executive Management do not receive remuneration from the Lundbeckfond Invest A/S. Lundbeckfond Invest A/S reimburse the Lundbeck Foundation for a part of the remuneration.
114
FINANCIAL STATEMENTS â&#x20AC;&#x201C; LUNDBECK FOUNDATION
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 3 - 4 3. STAFF COSTS – CONTINUED
2014 2013 DKKm DKKm Remuneration of the Executive Management (excluding remuneration received from subsidiaries) Remuneration of the Board of Trustees, including committee fees (excluding remuneration received from subsidiaries)
6 4
4 4
Members of Executive Management and the Board of Trustees 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 2014, note 3. Total remuneration of the Executive Management and Board of Trustees (including remuneration 2014 received from the wholly owned subsidiary Lundbeckfond Invest A/S) is specified as follows: DKKm Executive Management: Lene Skole, from 1 September 2014 2.7 Christian Dyvig, stepped down on 31 August 2014 5.0 Board of Trustees: Jørgen Huno Rasmussen, Chairman of the Foundation and Lundbeckfond Invest A/S and, Chairman of the Investment Committee 0.8 Steffen Kragh, Vice-Chairman of the Foundation and Lundbeckfond Invest A/S, from 7 April 2014 and member of the Investment Commitee 0.4 Thorleif Krarup, member of the Investment Committee, Chairman of the Science Teaching and Communication Committee 0.4 Povl Krogsgaard-Larsen, member of the Biomedical Sciences Committee and Investment Committee 0.5 Susanne Krüger Kjær, member of the Biomedical Sciences Committee, from 7 April 2014 0.3 Gunhild Waldemar, Chairman of the Biomedical Sciences Committee 0.5 Vagn Flink Møller Pedersen, employee representative from Falck A/S, from 7 April 2014 0.1 Henrik Sindal Jensen, employee representative from H. Lundbeck A/S, from 7 April 2014 0.1 Peter Adler Würtzen, employee representative from ALK-Abelló A/S 0.2 Mikael Rørth, Vice-Chairman of the Foundation and Lundbeckfond Invest A/S, Chairman of the Biomedical Sciences Committee and member of the Investment Committee, stepped down on 7 April 2014 0.2 Kim Klitgaard, employee representative from H. Lundbeck A/S, stepped down on 7 April 2014 0.1 Ken Liljegren, employee representative from H. Lundbeck A/S, stepped down on 7 April 2014 0.1 Jes Østergaard, Chairman of the Natural Sciences Committee and member of the Investment Committee, stepped down on 23 May 2013 - Rounding - 3.7 Average number of employees during the year Number of employees at year-end
9 9
2013 DKKm
6.5
0.8 0.2 0.3 0.5 0.4 0.2 0.8 0.2 0.2 0.3 3.9
9 9
4. TOTAL OPERATING COSTS OF LUNDBECK FOUNDATION AND LUNDBECKFOND INVEST A/S 2014 2013
DKKm DKKm Lundbeck Foundation - Staff costs, other external costs and depreciations Lundbeckfond Invest A/S - Staff costs and other external costs Can be allocated to the Foundations activities as follows: Strategic investment, monitoring and administration Lundbeckfond Invest Lundbeckfond Ventures Grant and Emerge activities FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
42 28 70
32 27 59
32 14 9 15 70
26 11 10 12 59 115
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 5 - 6 - 7
5. FEES TO AUDITORS APPOINTED AT THE GENERAL MEETING
2014 2013 DKKm DKKm Administrative expenses include fees to the company's auditors appointed by the general meeting, Deloitte, in the amount of: Statutory audit Other services
0.3 0.2 0.5
0.3 0.3 0.6
6. TAX ON PROFIT FOR THE YEAR
2014 2013 DKKm DKKm Tax on profit for the year, Lundbeck Foundation 33 5 33 5
In the financial year, Lundbeck Foundation paid income tax of DKK 6 million (DKK 2 million in 2013). 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 558 million (DKK 438 million in 2013). Lundbeck Foundation is jointly taxed with Lundbeckfond Invest A/S, which means that Lundbeck Foundation is taxable on dividends received from Lundbeckfond Invest A/S. The total income tax payment for Lundbeck Foundation Group amounted to DKK 764 million (DKK 593 million in 2013), of which Danish income tax accounted for DKK 64 million (DKK (72) million in 2013). The negative tax payment in Denmark for 2013 was due to excess payment of Danish taxes in 2012.
7. GRANTS FOR THE YEAR
2014 2013 DKKm DKKm Due to change in grant strategy adopted in 2013 with effect from 1 January 2014 grants have been presented in accordance with new types and categories. It has not been possible to allocate all grants for 2013 to the new types and categories of grants. Communicating science 13 12 Travel grants and research abroad, UCSF 5 2 Non-salary related project cost - running costs 20 Regular grants 38 14 Lundbeck Foundation Scholar 11 8 Lundbeck Foundation PhD 46 Lundbeck Foundation Postdoc 51 Lundbeck Foundation Fellowships 60 70 Lundbeck Foundation Professor 10 25 Lundbeck Foundation Clinical research associate professor 6 Lundbeck Foundation Clinical research professor 13 Personal grants - National 197 103 116
FINANCIAL STATEMENTS â&#x20AC;&#x201C; LUNDBECK FOUNDATION
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 7 - 8 7. GRANTS FOR THE YEAR – CONTINUED
2014 2013 DKKm DKKm Lundbeck Foundation International Masters 2 Lundbeck Foundation Postdoc Fellowships 5 Visiting Professor to Denmark 2 Personal grants - International 9 Talent and teaching prizes 1 Grete Lundbeck European Brain Research Foundation 15 Prizes 16 PROCRIN 24 Migrain 10 iPSYCH 120 RIMMI 45 DanFunD - CINS II - BBB-Projekt - Strategic grants 199 Grant for scientific projects in 2013 has not been possible to allocate to new types and categories of grants - Grants for the year, gross 459 Descendants - Reversed grants/repayments -15 Grants for the year, net 444 Grants for the year, gross 459 Emerge activities 15 Grants for the year, including Emerge activities, gross 474
1 2 3 1 15 16 12 30 40 82 150 368 -17 351 368 8 376
8. INVESTMENTS IN SUBSIDIARIES
Lundbeckfond Other Invest A/S subsidiaries Total DKKm DKKm DKKm Cost at 1 January 2014 4,046 15 Additions - - Cost at 31 December 2014 4,046 15 Net revaluation at 1 January 2014 - -2 Value adjustments for the year - -4 Net revaluation at 31 December 2014 - -6 Carrying amount at 31 December 2014 4,046 9 Carrying amount at 31 December 2013 4,046 13 Carrying amount of equity as per the most recently published annual report 14,586 - Dividend received 2014 821 - Dividend received 2013 1,064 - Lundbeckfond Invest A/S has its registered office in Copenhagen and is wholly owned by Lundbeck Foundation. Other subsidiaries consist of Insusense ApS, registered in Copenhagen. Lundbeck Foundation has a ownership of 60% of the share capital. FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
4,061 4,061 -2 -4 -6 4,055 4,059 14,586
821 1,064
117
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 9 - 10 - 11
9. OTHER SECURITIES AND INVESTMENTS
Bond and
corporate Unlisted loans investment portfolios Equities funds Total DKKm DKKm DKKm DKKm Carrying amount at 1 January 2014 Additions Disposals Value adjustments for the year Carrying amount at 31 December 2014
3,186 2,755 -2,869 -71 3,001
784 837 -290 97 1,428
17 1 -8 1 11
3,987 3,593 -3,167 27 4,440
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 2014 amounted to DKK 49 million (DKK 89 million in 2013). Unlisted investment funds include investments in an unlisted investment fund with a residual payment obligation of DKK 3 million (DKK 5 million in 2013).
10. STATEMENT OF CHANGES IN EQUITY AND CAPITAL BASE
Reserve for Retained Capital base*) future grants earnings Total DKKm DKKm DKKm DKKm Equity at 1 January 2014 2,523 - 4,658 7,181 Grants, net - -444 -444 Transferred to provision for future grants 750 -750 Retained profit for the year 205 - 820 1,025 Equity at 31 December 2014 2,728 750 4,284 7,762 *) Changes in capital base 2010-2014: The capital base at 1 January 2010 amounted to: 1,900 2010 Capital base increased by 150 2011 Capital base increased by 175 2012 Capital base increased by 45 2013 Capital base increased by 253 2014 Capital base increased by 205 Capital base at 31 December 2014 2,728 11. PENSION OBLIGATIONS
2014 2013 DKKm DKKm Obligations at 1 January 20 29 Adjustment for the year -2 -9 Obligations at 31 December 18 20
118
FINANCIAL STATEMENTS â&#x20AC;&#x201C; LUNDBECK FOUNDATION
LUNDBECK FOUNDATION 2014 ANNUAL REPORT
NOTES 12 - 13
12. RELATED PARTIES
Lundbeck Foundation defines related parties as the Foundation’s Board of Trustees 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, Falck Holding A/S, and Insusense ApS. Lundbeckfond Invest A/S shares the same address as Lundbeck Foundation, and there is duality of membership between the Executive Management, administration (partly) and Board of Trustees. Lundbeck Foundation receives dividends from Lundbeckfond Invest A/S. Lundbeckfond Invest A/S pays rent to Lundbeck Foundation on an arm’s length basis. Payments are likewise made/received for administrative services. The Foundation also receive service fee for administrative services provided to Insusense ApS. For information on remuneration paid to the members of the Executive Management and Board of Trustees, please see note 3. Other than the above, Lundbeck Foundation has only had immaterial transactions with the related parties.
13. EVENTS AFTER THE BALANCE SHEET DATE
No events after the balance sheet date with effect on the financial statements have occured.
FINANCIAL STATEMENTS – LUNDBECK FOUNDATION
119
Board of Trustees
Jørgen Huno Rasmussen, Chairman Born 1952, elected to the Board in 2008. MSc engineering (civil), B. Com. and Lich.tech. Chairman of the Investment Committee. Chairman of the board of Tryghedsgruppen and board of Tryg A/S, member of the boards of Bladt Industries A/S, Haldor Topsoe A/S, Rambøll Group A/S, Terma A/S, Otto Mønsted A/S and Thomas B. Thriges Fond. Steffen Kragh, Vice Chairman Born 1964, elected to the Board in 2013. M.Sc. and MBA, Member of the Investment Committee, President & CEO of Egmont Foundation and Egmont International Holding. Non-executive board member of Nykredit Holding A/S (VC), Nykredit Realkredit A/S (VC), Foreningen Nykredit, and chairman of numerous companies in the Egmont group. Thorleif Krarup Born 1952, elected to the Board in 2003. B.Sc. (Economics) and B. Com., Director. Member of the Investment Committee, and Chairman of the Science Teaching and Communication Committee. Chairman of the board of Exiqon A/S, Chairman of the board of Falck A/S, member of the boards of ALK A/S, H. Lundbeck A/S and the Denmark-America Foundation. Povl Krogsgaard-Larsen Born 1941, elected to the Board in 2011. Professor, Pharm. D., Copenhagen University. Member of the Research Committee, Biomedical Science Commitee 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. Susanne Krüger Kjær Born 1955, elected to the Board in 2014. Professor, M.D., D.M.Sc. Rigshospitalet, Copenhagen University, and Head of Research, Unit of Virus, Lifestyle and Genes, Danish Cancer Society Research Center. Member of the Research and the Biomedical Science Committees. Member of the Steering Committee of the Mermaid Project and member of the board of the Aragon Foundation. Gunhild Waldemar Born 1957, elected to the Board in 2011. Professor, Chief Physician, M.D., D.M.Sc. Dept. of Neurology, Copenhagen University Hospital, Rigshospitalet. Chairman of the Research Committee and member of the Biomedical Science Committee. Director of Danish Dementia Research Centre, vice-chairman of the Dementia Council, Capital Region of Denmark and Vice-President at the Medical Society of Copenhagen. Vagn Flink Møller Pedersen Born 1957, elected to the Board in 2014. Rescue Officer
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.
Henrik Sindal Jensen Born 1969, elected to the Board in 2014. Principal Scientist.
Member of the Board of Lundbeck. Elected by the employees of Lundbeck.
Peter Adler Würtzen Born 1968, elected to the Board in 2008. Ph.d., Team Leader.
Elected by the employees of ALK.
120
Special qualifications Expertise within strategy, economics, finance and accounting, capital markets, securities and funding, legal and regulatory matters of importance to financial business, corporate management and financial business management, including IT.
Special qualifications Management experience from large international organisations. Expertise in finance and economics. In-depth experience with board work in listed companies in the Nordic, UK and US.
Special qualifications Experience with board work in large international company and management of knowledge-intensive organisations. Skills in research, development and innovation and experience with research evaluation. Introduction of the concept of scientific social responsibility and contribution to principles of academic leadership.
Special qualifications Substantial scientific production within oncology. Skills in research, development, research evaluation and innovation. Long-standing experience with international research management.
Special qualifications Skills in research, development, research evaluation and innovation. Long-standing experience with international research management and board work in international scientific companies.
Member of the Board of Falck. Elected by the employees of Falck.
Employees
Management
Lene Skole
Chief Executive Officer
Morten Jarlstrup Britt Wilder Nina Kamille Holmgaard
Executive Assistant Executive Secretary Adm. Service Coordinator
Invest Klaus Ørtoft Madsen Kasper Kitaj Pedersen Casper Lorenzen
Bertil From Chief Financial Director Investment Director Student Assistant
Chief Financial Officer
Grants Sissel Vorstrup Enno Hoffmann-Dose Ulla Jakobsen Kirsten Ljungdahl
Anne-Marie Engel Associate Director of Research Executive Assistant Science Manager Secretary
Director of Research
The Brain Prize Janne Axelsen
Kim Krogsgaard International Relations Manager
Managing Director
Emerge
Christian Elling
Partner
Ventures Johan Kördel Casper Breum Jette Brandsen Bundgaard Frederik I. Rasmussen
Mette Kirstine Agger Senior Partner Partner Associate Student Assistant
Managing Partner
Accounting/Controlling Susanne Bernth Lotte Halse Dorthe Mathiasen Steen Rosendal
Claus Køhler Carlsson Senior Investment Controller Investment Controller Book-keeper Controller
Director of Accounting & Tax
Scientific Committees
Biomedical Science Committee • Gunhild Waldemar, Chairman, Professor, Chief Physician, D.M.Sc. Department of Neurology, Copenhagen University Hospital, Denmark • Susanne Krüger Kjær, Professor, Chief Physician, D.M.Sc. Department of Gynaecology, Copenhagen University Hospital, University of Copenhagen and the Danish Cancer Society, Denmark • Povl Krogsgaard-Larsen, Professor, Pharm. D., University of Copenhagen, Denmark • Jan G. Bjaalie, Head of Department, Institute of Basic Medical Sciences, University of Oslo, Norway • Alastair Compston, Professor, Head of the Neurological Clinic, Addenbrooke’s Hospital, UK • Hans Erik Bøtker, Professor, Chief Physician, D.M.Sc., Department of Clinical Medicine, Aarhus University Hospital, Denmark • Ulf Hedin, Professor, MD, PhD, Department of Vascular Surgery, Karolinska University Hospital Solna, Sweden • Peter Friberg, Professor, Chief Physician, Department of Molecular and Clinical Medicine, Sahlgrenska University Hospital, University of Gothenburg, Sweden • Edvard Smith, Professor, D.M.Sc., Clinical Research Center, Karolinska Institutet, Sweden • Mikael Rørth, Professor, Consultant, MD, D.M.Sc. Department of Oncology, Rigshospitalet and University of Copenhagen, Denmark Science Teaching and Communication Committee • Thorleif Krarup, Chairman, B.Sc. Economics and B. Com. • Nils O. Andersen, Professor, dr. scient. • Doris Jorde, Professor, PhD Design: Klaus Wilhardt Photo: Pernille Ringsing Bird illustrations: Jon Fjeldså ISSN 1901-5933
Lundbeck Foundation Scherfigsvej 7 覺 DK-2100 Copenhagen www.lundbeckfonden.com
Above Lundbeck Foundation Fellows 2014
CVR no 11814913