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MANAGEMENT REVIEW
5 years performance 3
Preface 4
2020 performance and 2021 outlook 6
Strategy review 15
Research and development 19
Risk management 26
Sustainability & compliance 28
Corporate governance 31
Executive Management 32
Board of Directors 34
The Lundbeck share 36
Summary for the Group 2016-2020 40
FINANCIAL STATEMENTS
Consolidated financial statements 43
Financial statements of the parent company 85
Management statement 97
Independent auditor’s reports 98
CONTENTS
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*
Currency conversion is based on average exchange rates for
2020
**
2017
-
2019 have been restated to reflect the reversal of an impairment loss on the
Rexulti
®
product rights in 2017
REVENUE
(DKK
m)
RESEARCH AND DEVELOP
MENT COSTS
(
DKKm)
OPERATING PROFIT BEF
ORE DEPRECIATION
AND AMORTIZATION (EB
ITDA)**
(
DKKm)
PROFIT
FROM OPERATIONS (EBIT)**
(DKK
m)
EARNINGS PER SHARE,
BASIC (EPS)**
(DKK)
PROPOSED DIVIDEND PE
R SHARE
(
DKK)
CASH FLOWS FROM OPERATING AND
INVESTING ACTIVITIES
(DKK
m)
EBIT MARGIN**
(%)
AVERAGE NUMBER OF EMPLOYEES
5 YEARS
PERFORMANCE*
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2020 has been an unparalleled year. Covid-19 tested us all; not
only the company and our employees, but also the patients we
serve.
Under extraordinary circumstances, our employees have shown
immense creativity and can-do attitude in their wholehearted
efforts to deliver on our purpose of restoring brain health. Their
determination and hard work made us able to continue to supply
medicine to more than 7 million patients who depend on our
therapies.
Our strategic brands - Abilify Maintena
®
, Brintellix
®
/Trintellix
®
,
Northera
®
, Rexulti
®
/Rxulti
®
and Vyepti
®
- continue to show good
growth, both in volume and value, across all regions. Both our
mature and strategic brands have shown remarkable resiliency,
which can be attributed to their well-known effectiveness and
good tolerability profiles. Our supply chains have remained
uninterrupted throughout the pandemic, ensuring we have been
able to deliver medicines to the patients who need them most.
We have expanded our operating space and therapeutic reach
through acquisitions in 2019. We are now in the process of
building a migraine and specialty pain franchise, with the launch
of Vyepti in the U.S. and with regulatory approvals in additional
countries underway.
We are transforming our R&D organization to build a pipeline
around high unmet medical needs, in specialist neuroscience
indications. Furthermore, we are fortifying our winning culture,
leveraging the diversity of our global workforce to drive our
progress.
We remain committed to our shared purpose of being tirelessly
dedicated to restoring brain health, so every person can be their
best.
Our newest strategic brand, Vyepti, an effective treatment for
migraine prevention
On 21 February, Vyepti was approved by the U.S. Food and Drug
Administration (FDA) and subsequently launched on 6 April 2020.
Vyepti is a powerful, fast and sustained treatment for migraine
prevention. It is the first and only intravenous treatment for
prevention of migraines on the market. Migraine is the second
leading cause of years lived with disability among all diseases.
More than 130 million insured people in the U.S. have access to
Vyepti without a branded step.
We are very encouraged with how the product is delivering for
people with migraine who have reported their great satisfaction
with the efficacy, tolerability and ease of use of the product.
Launching during a pandemic definitely impacted the speed of
uptake of this infusion therapy, but patient uptake continues to
rise steadily.
Rebuilding our pipeline
Throughout 2020, we have been transforming our approach to
R&D to more effectively enable delivery of a steady stream of
breakthrough and differentiated medicines across all phases of
the pipeline. The transformation has ensured a more innovative
approach to research and development.
We have a strong, sustainable early clinical pipeline – two new
molecules entered phase I this year, offsetting two that exited
phase II. We have also initiated studies in new indications to
explore the full benefit to patients of our pipeline and marketed
molecules.
Preclinically, we have focused our internal discovery research on
four clusters, which represent areas of emerging biology in
neuroscience, rich with opportunities to address a range of
indications. We have established experimental medicine unit
capabilities to earlier establish the technical and scientific
qualities of our clinical candidates, in order to de-risk the path to
the market.
Clinical trials, initially impacted by Covid-19, are picking up pace
– enrollment rates are increasing, however still not at the level we
experienced before the pandemic.
PREFACE
Lundbeck showed resiliency during
unprecedented times.
Against the backdrop of a global
pandemic, we are pleased with the
performance of the business during
2020. Lundbeck employees showed
resiliency and responded to the immense
challenges faced. They continue to put
patients first, while embracing and
delivering on our Expand and invest to
grow strategy.
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Committed to building a better world
This year we introduced a company-wide Diversity & Inclusion
Forum. Just as much as we need a global and cross functional
working organization, we also need a diverse and inclusive one.
We aim to enrich our decision making through the different
viewpoints that a diverse workforce brings, and we are also taking
steps to ensure our clinical trials better reflect the diversity of the
patients we serve.
We have a zero-tolerance approach to harassment, racism and
discrimination of any kind and clear processes for employees and
stakeholders to voice their concerns and have them addressed.
As part of our commitment to sustainability, we launched an
Access to Brain Health strategy that goes beyond making safe
and efficacious medicine available. It builds on four long-term
aspirations aimed at enhancing Brain Health accessibility for the
most vulnerable.
We are transitioning our business model to a net-zero future as
approved by the Science Based Targets initiative. To drive efforts
forward, we will report progress annually and get revalidation of
our pathway to future-proof low-carbon growth at minimum every
5 years.
Thank you for your continued support
The pandemic has had a tremendous impact on mental health
around the world. We continue to work closely with stakeholders
to raise awareness and fight stigma associated with brain
diseases through our advocacy and outreach programs.
We will continue to build on the progress we made during 2020,
implementing digital approaches throughout our business where
they can help us better engage with our stakeholders and drive
better outcomes for patients. We will forge ahead, reaccelerating
our strategic brands as we move out of the pandemic. We will
continue to transform R&D and focus on filling our pipeline with
treatments for brain diseases for which there are few, if any,
treatment options and niche diseases affecting subpopulations of
people where there is a high, unmet medical need. We will
leverage our winning culture to take Lundbeck ahead.
On behalf of Lundbeck’s Board of Directors, Executive
Management and employees, we would like to thank all
stakeholders for the trust you place in our company.
Lars Søren Rasmussen Deborah Dunsire
Chairman of the board President and CEO
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We experienced robust growth in sales of our strategic brands;
Abilify Maintena
®
, Brintellix
®
/Trintellix
®
, Northera
®
, and
Rexulti
®
/Rxulti
®
. Our new strategic brand, Vyepti
®
, was launched
in the U.S. on 6 April 2020, adding to sales growth.
In 2020, Lundbeck’s total revenue reached DKK 17,672 million
compared to the guidance for 2020 set out in the Annual Report
2019 of DKK 17.4 – 18.0 bn. Operating profit (EBIT) reached DKK
1,990 million compared to the guidance for 2020 set out in the
Annual Report 2019 of DKK 2.2 – 2.7 bn. This was mainly due to
the foliglurax impairment and the increase in amortizations on the
Rexulti product rights as a consequence of the decision in
November 2020 from the Danish Business Authority
(Erhvervsstyrelsen). However, the realized EBIT for 2020 is in
line with the updated guidance in November 2020 in which the
expected EBIT for 2020 was DKK 1.7 – 1.9 bn.
Net profit for the year ended at DKK 1,581 million.
Vyepti will be a significant driver of growth in the coming years,
as it serves a big unmet medical need in migraine prevention as
a fast, powerful and sustained IV treatment. It will also be the first
product in Lundbeck’s history that we launch globally without the
use of partners, thereby retaining the entire value.
In February 2019, we announced our Expand and invest to grow
strategy and during 2020 we have continued to make significant
progress across all our strategic imperatives, setting us up for
long-term growth.
Our top priority is to provide innovative treatments that create
value for patients as well as the company. In 2019, we expanded
our operating space and therapeutic reach through acquisitions.
Now, with the launch of Vyepti, we are in the process of building
a migraine and specialty pain franchise and we are transforming
our R&D organization to build a pipeline around high unmet
medical needs, in specialist neuroscience indications.
TOTAL REVENUE 2020
DKKm
2020 2019 Growth
Growth
in local
currencies
Abilify Maintena
®
2,271
1,961
16%
17%
Brintellix
®
/Trintellix
®
3,102
2,826
10%
13%
Northera
®
2,553
2,328
10%
12%
Rexulti
®
/Rxulti
®
2,620
2,270
15%
17%
Vyepti
®
93
-
-
-
Strategic brands
10,639
9,385
13%
16%
Cipralex
®
/Lexapro
®
2,380
2,314
3%
7%
Onfi
®
642
1,052
(39%)
(38%)
Sabril
®
777
847
(8%)
(7%)
Other pharmaceuticals
2,738
3,100
(12%)
(9%)
Other revenue
491
660
(26%)
(25%)
Effects from hedging
5
(322)
-
-
Total revenue
17,672
17,036
4%
4%
2020 PERFORMANCE
AND 2021 OUTLOOK
In 2020, Lundbeck saw continued
growth of our strategic brands across all
regions. Sales have been impacted by
deteriorating currencies as well as the
global pandemic.
We made good progress on our Expand
and invest to grow strategy and
strengthened our pipeline.
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COVID-19 SITUATION REPORT
Lundbeck’s priorities during the global pandemic are to ensure
the health and safety of its employees and to continue to safely
supply all our medicines to millions of patients around the world.
We have successfully implemented and embraced new ways of
working, including less travel and switching to virtual meeting
solutions. Across our operations and over the course of the
pandemic, our employees have been able to adapt and have
successfully shifted their working patterns depending on the
situation in their particular country. Without the passion for our
patients and the commitment to excellence in serving them
shown by every single Lundbeck employee, we could not have
achieved the strong results demonstrated in 2020.
While we benefitted somewhat in the first quarter from stockpiling
by both patients and pharmacies, this was reversed in the second
quarter and it is our assessment that the inventory situation has
normalized. Our product portfolio has generally been very
resilient even if many physicians are still seeing significantly
fewer patients than before the pandemic. For example, in the U.S.
revenue of products such as Brintellix/Trintellix, where uptake is
dependent on new patient starts, have been negatively impacted
due to the pandemic.
A significant reduction of in-person patient visits to physician
offices significantly reduced the use of physician-administered
therapies in the U.S. across all disease categories.
We expect that health care activity will gradually improve during
2021 as health care providers utilize telehealth or in-person visits
to see patients despite additional Covid-19 outbreaks, including
that:
• new patient prescriptions will continue to improve in the
U.S.;
• pricing headwinds from increased utilization of patient
affordability programs and changes in segment mix due to
increased U.S. unemployment will continue to be modest;
• promotional spend will constitute a mix of in-person
customer interactions, direct-to-consumer advertising, and
investments in digital promotion.
The launch of Vyepti in April 2020 was significantly impacted by
patients being generally unable to visit healthcare providers to
receive an infusion therapy, but we saw this gradually improving
during the second half of the year.
The Covid-19 pandemic also continued to impact clinical and
regulatory activities causing manageable disruptions. Importantly,
we did see a reacceleration of clinical activity as sites reopen
patient accrual, although with intermittent limitations.
Our cash collections continue to be according to our normal trade
terms, and days sales outstanding are at normal levels. In
addition, in April 2020, Lundbeck purchased a “key buyer” credit
insurance covering around 100 of the largest customers of the
Group. The credit insurance protects against insolvency,
protracted default and political risk. Lundbeck remains well
positioned to meet its ongoing financial obligations and has more
than sufficient liquidity to support our normal business activities.
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SALES PERFORMANCE
Revenue in 2020 reached DKK 17,672 million compared to DKK
17,036 million in 2019. The strategic brands (Abilify Maintena,
Brintellix/Trintellix, Northera, Rexulti/Rxulti and Vyepti) grew by
13% for the year, reaching DKK 10,639 million or 60% of total
revenue. Lundbeck continues to see solid underlying demand
and the inventory level at wholesalers is assessed to be
normalized. The biggest markets are the U.S., China, Canada,
Japan, Spain, Italy and France.
NORTH AMERICA
Revenue reached DKK 9,790 million in 2020, which is an
increase of 2% (4% in local currencies) compared to DKK 9,583
million in 2019. The strategic brands, Abilify Maintena, Trintellix,
Northera, Rexulti and Vyepti, grew by 13% for the year, reaching
DKK 7,845 million. Adjusting for Onfi, sales for the region
increased 7%. The Covid-19 pandemic continues to impact
business in the region.
Abilify Maintena
®
revenue grew 16% (18% in local currencies)
for the year and reached DKK 980 million, which represents
Lundbeck’s share of total net sales. In the U.S., Abilify Maintena
is co-marketed with Otsuka Pharmaceutical and has a volume
market share of 20.7% and in Canada it reached 30.8% by
October 2020 (source: IQVIA).
Trintellix
®
sales grew 7% (9% in local currencies) to DKK 1,682
million in revenue for Lundbeck. The volume market share in the
U.S. and Canada was 0.9% and 1.34% of the total anti-
depressant market, respectively by October 2020. The value
market share of the total anti-depressant market in the U.S. was
24.3%. In Canada, the value market share of the total anti-
depressant market was 24.0% by October 2020 (source: IQVIA).
Northera
®
sales reached DKK 2,553 million in 2020, representing
growth of 10% (12% in local currencies).
Lundbeck’s share of Rexulti
®
revenue reached DKK 2,537 million
with growth of 14% (16% in local currencies). In the U.S., Rexulti
has achieved a market volume share of 2.1% by October 2020
(source: IQVIA). In Canada, the product has reached a volume
market share of 2.5%. Patient data suggest that more than 3/4 of
prescriptions in the U.S. are prescribed for Major Depressive
Disorder (MDD).
Vyepti
®
was approved by the U.S. Food and Drug Administration
(FDA) on 21 February 2020 for the preventive treatment of
chronic and frequent episodic migraine in adults. The product was
made available on 6 April and reached sales of DKK 93 million in
2020. Vyepti can be obtained via selected specialty distributors
and specialty pharmacies. It is still very early in the launch, and
the uptake has been affected by general decline in physician-
administered medicines during the pandemic. Nonetheless, more
patients are being treated with Vyepti, and we are encouraged by
the strong positive feedback from clinicians and patients on the
positive effects and the ease of use. There have also been
several national and regional payers who have issued positive
coverage policies and Vyepti is now available to more than 130
million insured patients without them having to go through any
other branded prevention therapies. Setting the stage further, in
October the Centers for Medicare & Medicaid Services issued a
permanent J-Code. It helps reduce uncertainty around
reimbursement and improves Vyepti claim processing turnaround
time.
REVENUE
– NORTH AMERICA
DKKm
2020 2019 Growth
Growth
in local
currencies
Abilify Maintena
®
980
845
16%
18%
Brintellix
®
/Trintellix
®
1,682
1,579
7%
9%
Northera
®
2,553
2,328
10%
12%
Rexulti
®
/Rxulti
®
2,537
2,219
14%
16%
Vyepti
®
93
-
-
-
Strategic brands
7,845
6,971
13%
15%
Onfi
®
642
1,052
(39%)
(38%)
Sabril
®
777
847
(8%)
(7%)
Other pharmaceuticals
526
713
(26%)
(25%)
Total revenue
9,790
9,583
2%
4%
FINANCIAL
PERFORMANCE
2020 PRODUCT PORTFOLIO
Our strategic brands are Abilify Maintena
®
(schizophrenia), Brintellix
®
/Trintellix
®
(depression),
Northera
®
(symptomatic neurogenic orthostatic
hypotension), Rexulti
®
/Rxulti
®
(depression/schizophrenia) and Vyepti
®
(migraine
prevention).
Our product portfolio also includes Azilect
®
(Parkinson’s disease), Cipralex
®
/Lexapro
®
(depression), Ebixa
®
(Alzheimer’s disease), Onfi
®
(Lennox-Gastaut syndrome), Sabril
®
(epilepsy) and
Xenazine
®
(chorea associated with Huntington’s
disease) as well as other mature products.
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INTERNATIONAL MARKETS
Revenue from International Markets, which comprise all
Lundbeck’s markets outside of Europe and North America,
reached DKK 4,057 million in 2020, compared to DKK 3,892
million in 2019. The growth of 4% (10% in local currencies) was
driven by Brintellix/Trintellix, Cipralex/Lexapro, Rexulti and Abilify
Maintena. The biggest markets are Australia, Brazil, China,
Japan and South Korea. China realized modest growth and
constitutes close to 25% of the regional revenue. The strategic
brands grew by 19% (28% in local currencies) for the year ending
at DKK 858 million corresponding to 21% of revenue from the
region.
Abilify Maintena
®
reached DKK 210 million in revenue in 2020
representing a growth of 27% (30% in local currencies). Sales are
mainly derived from Australia where Abilify Maintena shows solid
momentum and achieved a volume market share of 28.5% by
October 2020 (source: IQVIA). Countries such as Kuwait and
Saudi Arabia also had a positive impact.
Brintellix
®
/Trintellix
®
reached DKK 583 million in revenue or an
increase of 13% (24% in local currencies). The product realized
solid growth across several markets. Brazil, China, Mexico, South
Korea and Turkey are the largest markets for Brintellix.
Rexulti
®
reached DKK 65 million in revenue in 2020. In
International Markets, the product had its highest sales in
Australia, where it has achieved a market share to 2% in volume
by October 2020 (source: IQVIA).
Cipralex
®
/Lexapro
®
generated revenue of DKK 1,730 million
representing a growth of 6% (11% in local currencies). The
revenue of the product shows solid growth in most countries in
the region including Japan and China. Japan, China, South Korea,
Brazil and Saudi Arabia are the largest markets for
Cipralex/Lexapro.
REVENUE – INTERNATIONAL MARKETS
DKKm
2020 2019 Growth
Growth
in local
currencies
Abilify Maintena
®
210
165
27%
30%
Brintellix
®
/Trintellix
®
583
517
13%
24%
Rexulti
®
/Rxulti
®
65
40
63%
74%
Strategic brands
858
722
19%
28%
Cipralex
®
/Lexapro
®
1,730
1,638
6%
11%
Other pharmaceuticals
1,469
1,532
(4%)
0%
Total revenue
4,057
3,892
4%
10%
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EUROPE
Revenue reached DKK 3,329 million in 2020, representing a
growth of 3% (4% in local currencies) compared to DKK 3,223
million last year. The strategic brands, Abilify Maintena, Brintellix
and Rexulti/Rxulti, grew by 14% thereby reaching DKK 1,936
million or 58% of total revenue. In general, Europe sees a solid
underlying demand offsetting negative price development. The
mature portfolio is impacted by continued generic erosion.
Abilify Maintena
®
has been launched across Europe and is
Lundbeck’s largest product in the region. Sales uptake of Abilify
Maintena is solid with revenue reaching DKK 1,081 million. In
Europe, the penetration of long-acting atypical antipsychotics is
generally higher than seen in the U.S. (volume). Driven by
increasing demand from patients, sales of Abilify Maintena are
growing across Europe and the product in general has achieved
a 25% or more volume market share in most markets. In some
markets, the product is approaching or has exceeded 30%. Abilify
Maintena is the second most prescribed long acting injectable
treatment for patients with schizophrenia in many markets. Spain,
France and Italy are the largest European markets for Abilify
Maintena.
Brintellix
®
revenue grew 15% reaching DKK 837 million.
Brintellix is Lundbeck’s second largest product in Europe and
realized solid growth across many markets. In the main countries,
France, Italy and Spain, the product has achieved value market
shares of 10%, 9% and 9% respectively by October 2020 (source:
IQVIA). The volume market shares are stable or slightly
increasing at 4%, 3.6% and 3% respectively (source: IQVIA).
Rexulti
®
/Rxulti
®
revenue reached DKK 18 million. The product
was approved for the treatment of adults with schizophrenia in
July 2018. Rxulti is co-marketed with Otsuka Pharmaceutical.
Cipralex
®
generated revenue of DKK 523 million following a
decline of 3%.
REVENUE
– EUROPE
DKKm
2020 2019 Growth
Growth
in local
currencies
Abilify Maintena
®
1,081
951
14%
14%
Brintellix
®
/Trintellix
®
837
730
15%
15%
Rexulti
®
/Rxulti
®
18
11
62%
57%
Strategic brands
1,936
1,692
14%
15%
Cipralex
®
/Lexapro
®
523
538
(3%)
(3%)
Other pharmaceuticals
870
993
(12%)
(12%)
Total revenue
3,329
3,223
3%
4%
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COSTS AND PROFITS
Total costs in 2020 grew by 17% to DKK 15,623 million compared
to DKK 13,369 million for 2019.
The increase is mainly due to:
• increased investments in the commercial organization in the
U.S., China and Japan related to support the continued
growth of Brintellix/Trintellix and Vyepti;
• impairment in the first half of 2020 of the foliglurax product
rights and R&D restructuring costs both recognized in R&D
costs of DKK 792 million and DKK 77 million, respectively;
• the manufacturing of Vyepti has shown to be more cost
effective and thus production costs will be lower going
forward. In Q4 new information related to the inventory
valuation was obtained about facts and circumstances that
existed as of the acquisition date. This information resulted
in a partial reversal of the P&L adjustment of inventory
against goodwill. Net non-recurring impact for the year is
DKK 47 million (non-cash);
• increase in amortization due to Vyepti of approximately DKK
500 million.
Excluding the non-recurring costs for foliglurax impairment, the
R&D restructuring costs and the Vyepti inventory valuation
adjustment, total costs increased by approximately 10%.
Cost of sales increased by 8% to DKK 4,166 million in 2020 and
the gross margin is 76.4%. Cost of sales is impacted by the
valuation adjustment of Vyepti’s inventory due to the stabilization
of the production after the start-up phase and the decline in Onfi
sales that is offset by the changed product mix, resulting in
reduced royalty costs.
Sales and distribution costs were DKK 5,946 million, an
increase of 8% compared to 2019. Sales and distribution costs
correspond to 33.6% of revenue, compared to 32.3% the year
before.
Administrative expenses increased 7% to DKK 966 million,
corresponding to 5.5% of total revenue.
Total sales, distribution and administrative expenses (SG&A)
combined were DKK 6,912 million, compared to DKK 6,413
million in 2019. The SG&A ratio for the year was 39.1%,
compared to 37.6% the prior year.
Research & development costs increased 46% to DKK 4,545
million in 2020. The R&D ratio reached 25.7%. Adjusted for the
impairment and the restructuring costs, the R&D ratio was 21%.
Other operating expenses, net amounted to DKK 59 million for
2020 as a consequence of acquisition and integration costs
related to the acquisition of Alder Biopharmaceuticals Inc. in 2019.
In 2019, other operating expenses, net amounted to DKK 514
milion.
Core EBIT for 2020 declined 11% to DKK 4,436 million and the
Core EBIT margin was 25.1%*. Reported EBIT reached DKK
1,990 million compared to DKK 3,153 million in 2019, driven by
the foliglurax impairment and the valuation adjustment of Vyepti’s
inventory due to the stabilization of production after the start-up
phase.
TAX
The effective tax rate for 2020 is 17.0% compared to 23.6% in
2019**. The tax rate is positively impacted by the increase in
Danish research & development incentives and by integration
work of acquired companies causing:
• Accelerated utilization of net operating losses (NOLs)
leading to recognition of prior year not-recognized NOLs
and tax credits;
• Lower blended state rate taxes;
• Low tax rate realized on transfers to Denmark of all IP rights
from La Jolla and all IP rights related to foliglurax.
*
For definition of the measure “Core EBIT” and “Core EBIT margin”, see page 103
Core reconciliation
**
Please find Lundbeck’s tax policy on
https://www.lundbeck.com/global/sustainability/society/tax-policy
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PROFIT AND EPS
Profit for 2020 reached DKK 1,581 million compared to DKK
2,313 million in 2019. The reported net profit corresponds to an
EPS of DKK 7.95 versus an EPS of DKK 11.64 last year. Core
EPS was DKK 18.91 for 2020, compared to a Core EPS of DKK
19.46 in 2019.
CASH FLOW
Cash flows from operating activities amounted to DKK 3,837
million in 2020 compared to DKK 2,609 million in 2019. The
positive development compared to last year primarily relates to
reduced taxes paid and limited cash flow impact from working
capital in 2020 while 2019 had significant negative impact from
working capital.
Lundbeck’s net cash flows from investing activities was an
outflow of DKK 467 million compared to an outflow of DKK 7,755
million in 2019 as a consequence of the acquisition of Alder. The
free cash flow reached an inflow of DKK 3,370 million in 2020
compared to an outflow of DKK 5,146 million in 2019.
In 2020, the net cash flow reached an inflow of DKK 976 million
compared to an outflow of DKK 598 million in 2019. The net cash
flow is impacted by dividend payout, net of DKK 815 million which
was approved at the Annual General Meeting on 26 March 2020
and repayment of bank loans.
Net debt has decreased from DKK 6,566 million at year-end 2019
to DKK 4,106 million at the end of 2020. Interest bearing debt
was DKK 8,030 million at the end of the year.
On 8 October 2020, Lundbeck announced a successful
Eurobond issuance in an aggregate principal amount of EUR
500 million (the "Notes") under its EUR 2 billion Euro Medium
Term Note Programme. The Notes are senior unsecured notes
with a tenor of seven years maturing on 14 October 2027. The
Notes were issued on 14 October 2020. The net proceeds from
the issuance has been used for the partial refinancing of
drawdowns previously made under Lundbeck’s existing revolving
credit facility. As such, the issuance is leverage-neutral. The
Notes carry a fixed coupon of 0.875% per annum.
BALANCE SHEET
At 31 December 2020, Lundbeck’s total assets amounted to
DKK 36,029 million compared to DKK 38,133 million at the end
of 2019 mainly following a decline in intangible assets due to
amortization and the impairment of foliglurax.
At 31 December 2020, Lundbeck's equity amounted to DKK
16,973 million, corresponding to an equity ratio of 47.1%
compared to 44.0% at the end of 2019.
DIVIDEND
The Board of Directors proposes a dividend of approximately
31% of net profit for 2020, in line with our payout policy of 30-60%.
This corresponds to a dividend of DKK 2.50 per share. The
dividend payout is subject to approval at the Annual General
Meeting on 23 March 2021.
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GUIDANCE 2021
Lundbeck’s financial results for 2021 are expected to be driven
by the continued growth of Abilify Maintena, Brintellix/Trintellix,
Rexulti/Rxulti
and the expected strong growth of Vyepti from the
continued roll-out.
Northera is expected to be exposed to generic competition in
2021, which is expected to lead to a decline of approximately 50%
of revenue compared to 2020.
Lundbeck’s main currencies are USD, CNY and CAD. The
financial guidance for 2021 is based on mid-January spot rates
for the main currencies and includes an expected hedging gain of
DKK 150 - 200 million. The current hedging rates are USD/DKK
(6.48), CNY/DKK (0.92) and CAD/DKK (4.75).
Based on our assumptions for product and geographical mix, it is
estimated that 5% change of the USD/DKK exchange rate will
impact revenue by DKK 250 – 300 million. The financial guidance
for 2021 is summarized below:
FINANCIAL GUIDANCE 2021
DKK
FY 2020 actual FY 2021 guidance
Revenue
17,672 m
16.3 – 16.9 bn
EBITDA
4,783 m
3.5 – 4.0 bn
Profit from operation (EBIT)
1,990 m
1.8 – 2.3 bn
Core EBIT
4,436 m
3.1 – 3.6 bn
DISCLAIMER
Forward-looking statements are subject to risks,
uncertainties and inaccurate assumptions. This may
cause actual results to differ materially from
expectations. Various factors may affect future
results, incl. interest rates and exchange rate
fluctuations, delay or failure of development
projects, production problems, unexpected contract
breaches or terminations, governance-mandated or
market-driven price decreases for products,
introduction of competing products, Lundbeck’s
ability to successfully market both new and existing
products, exposure to product liability and other
lawsuits, changes in reimbursement rules and
governmental laws, and unexpected growth in
expenses.
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January
• Lundbeck ranked among the top 2% of more than 8,400
companies evaluated for their actions against climate
change by the independent interest group Carbon
Disclosure Project (CDP), which sets the global standard for
actions against climate change
February
• Lundbeck applied for market authorization of Vyepti in
Canada
• The U.S. Food and Drug Administration approved Vyepti,
the first and only intravenous preventive treatment for
migraine
March
• Lundbeck received a grant from The Michael J. Fox
Foundation for Parkinson’s disease research
• Lundbeck announced that phase IIa study results of Lu
AG06466 in adults with Tourette Syndrome showed
insufficient efficacy to proceed investigational studies in
additional indications
• Lundbeck held its Annual General Meeting
• Lundbeck announced that the phase IIa AMBLED study of
foliglurax for the treatment of Parkinson's disease did not
meet the primary study endpoint
April
• Lundbeck launched Vyepti in the U.S.
June
• As part of the Expand and invest to grow strategy, Lundbeck
announced changes to its organization in Research &
Development to focus in four core areas of emerging
biologies that have significant potential to yield
transformative therapies for brain disease in the future
August
• Lundbeck announced the decision to discontinue the phase
II clinical study of Lu AF11167 in patients with schizophrenia
• Lundbeck announced positive headline results in the
RELIEF study of efficacy and tolerability of Vyepti when
initiated during a migraine attack in patients who are
candidates for preventive therapy
October
• Lundbeck successfully placed its first Eurobond issuance in
an aggregate principal amount of EUR 500 million
• Lundbeck initiated a biomarker focused phase 1b study with
Lu AG06466 in patients with Post-Traumatic Stress
Disorder
November
• The Danish Business Authority required Lundbeck to
conduct a new impairment test for 2017. It led to a reversal
of an impairment loss on the Rexulti product rights. This was
expected to increase the annual amortizations and thereby
reduce Lundbeck’s FY 2020 financial guidance for reported
EBIT from previously DKK 2.0 – 2.2 billion to approximately
DKK 1.7 – 1.9 billion
December
• The European Medicines Agency accepted Lundbeck’s
application for marketing authorization of Vyepti
EVENTS AND
MILESTONES 20
20
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DELIVERING ON OUR PROMISES
We have taken significant strides to expand our operating space
through the acquisitions of Abide and Alder in 2019, which gave
us the platforms needed to expand our areas of focus in
neuroscience. With the 2020 launch of Vyepti in the U.S., we are
beginning to establish a new frontier in migraine prevention and
expanding our presence into protein-based therapies.
Furthermore, we are continuously expanding our existing
portfolio of medicines into new markets.
The changes we made to how we approach R&D enables us to
de-risk our internal pipeline compounds in early development. We
utilize an experimental medicine approach to identify effects of a
drug in carefully selected patient populations, to find the most
efficient clinical pathway powered by leading biomarkers and
study designs and advance the most promising drug candidates
into full development.
The geographical expansion of Vyepti and the work we are still
doing to continue to grow and expand Brintellex/Trintellix,
Rexulti/Rxulti and Abilify Maintena, along with several other life-
cycle management projects, are all crucial to our future.
We have made choices as to where we will focus our efforts to
enhance our operations digitally, which will pick up pace into 2021.
Also, we have taken steps to fortify our winning culture with
increased agility, collaboration, diversity and inclusion. These are
just a few of many actions that are helping us deliver on the
promise of our strategy to yield sustainable, long-term profitable
growth.
While we are realizing growth across our strategic and mature
brands, we are simultaneously experiencing headwinds that we
must navigate.
Covid-19 has contributed to a slower start than anticipated for
Vyepti sales in the U.S. and has also had an impact on our clinical
trials. We have faced additional attrition from our mid-stage
pipeline and early 2021 we lose exclusivity of Northera in the U.S.
CREATING VALUE THROUGH OUR UNIQUE POSITION
Our goal continues to be providing innovative treatments for
patients that create value for the company. Achieving our fullest
potential as a mid-size, highly specialized pharmaceutical
company requires that we thoughtfully concentrate our efforts
where we can make the most difference for patients and in areas
that set us up best for long-term growth.
While we maximize the great medicines and brands that we
already have, we will simultaneously focus on filling our pipeline
with treatments for brain diseases for which there are few, if any,
treatment options and niche diseases affecting subpopulations of
people where there is a high, unmet medical need. By focusing
on niche and rare disease neurology and niche psychiatry
indications, we can best take advantage of our size and strong
relationships with specialist health care providers to deliver
powerful solutions to challenging diseases.
We currently promote medicines that, in some countries, both
primary care physicians and specialists treat. We will continue to
promote these excellent medicines, working with our partners to
reach these larger numbers of physicians.
Just as important to filling our pipeline and selling our medicines,
is the manufacturing of our medicines, whether internally or via
external contract manufacturing. We have strong internal
capabilities within small molecule and antibody processes and
formulation development to support our R&D pipeline, internal
small molecule manufacturing and through our contract
manufacturing partners for biologics.
Our three priorities across Production Development & Supply
remain quality, reliability and cost. We have a robust track-record
on all three parameters and ambitious goals to continuously
improve performance with a strong focus on operational
excellence.
STRATEGY REVIEW
Since launching our Expand and invest
to grow strategy in 2019, we continue
to make strong progress, fueled by our
purpose, to restore brain health so
everyone can be their best.
First and foremost, our portfolio of
medicines provides important benefits
to patients who need them, hence both
our strategic and mature brands
continue to grow. This strong
foundation together with our winning
culture positions us well for the future.
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We aim to build on what we have achieved and capitalize further
on the strong fundamentals that are deeply ingrained in
Lundbeck; our rich heritage of developing and producing life-
changing treatments for patients, our deep scientific knowledge
in psychiatry and neurology and our patient-centric mindset. We
will focus on embracing new biologies and technologies,
adjusting and learning as we forge ahead.
In the future, we will work with even more agility and collaboration
across geographies, simplifying our processes and accelerating
our ability to test and learn for faster, higher quality decision
making. This will fully leverage our diverse talent, knowledge and
skill-sets so that we can pursue solving some of the biggest brain
disease challenges with the greatest patient reward.
EXPAND AND INVEST TO GROW: OUR STRATEGIC
IMPERATIVES
We will continue to use our strategic imperatives to guide us
towards reaching our objective to expand and invest to grow.
Maximize existing brands
Our strategic brands continue to show solid growth, both in
volume and value, across all regions. At the same time, several
of our mature brands have shown remarkable resiliency. Our
commercial teams will continue to accelerate our efforts in
growing our mature and strategic brands across more
geographies, thereby maximising our existing brands to drive
growth in the coming years.
Our strategic brands:
Brintellix
®
/Trintellix
®
is a prescription medication used to treat
Major Depressive Disorder (MDD). The brand delivered solid
growth in 2020 despite the flattening in total prescriptions of MDD
medications during the pandemic.
Rexulti
®
/Rxulti
®
is a prescription medication used as an
adjunctive therapy to antidepressants for the treatment of MDD.
We will continue to maximize this medication with launches in
additional countries in 2021.
Northera
®
is a prescription medication used to reduce dizziness
in adults who have symptomatic neurogenic orthostatic
hypotension (nOH) and who have Parkinson's disease. Northera
delivered solid growth in sales and has shown resiliency, despite
the pandemic. The brand lose exclusivity in the U.S. in early 2021.
Abilify Maintena
®
is globally the second most prescribed long
acting injectable treatment for patients with schizophrenia. In
some European countries it is the market leader.
Vyepti
®
is an infusion treatment for the prevention of migraine in
adults. This is our newest strategic brand launched in the U.S. on
6 April 2020. Initial patient testimonials are very encouraging.
While we continue to file for approval in more countries and
expand the indications, we remain confident that Vyepti will
deliver for migraine patients and become a strong growth driver
for Lundbeck in the future.
Our portfolio of mature brands is large.
In the U.S., Onfi, Sabril and Xenazine are declining after the initial
loss to generics. The larger group of mature brands is remarkably
resilient having high levels of trust and brand recognition in many
markets around the world. And some of the products show
impressive growth – e.g. Cipralex/Lexapro – adding an
underappreciated franchise to our portfolio.
In 2021, we will continue our strong partnerships with Otsuka
Pharmaceutical and Takeda Pharmaceutical to engage
healthcare professionals treating a broad range of psychiatric
diseases, with keen commercial execution against our portfolio of
strategic and mature brands.
In the coming years, we will further strengthen and reinforce our
field force ensuring that they have the digital tools and capabilities
needed to help them to expand their networks and collaborate
even better with patients and customers.
We continue to ensure patients receive the full benefit of our
medicines through continued clinical activities, life cycle
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management programs, proactive patient safety efforts, medical
activities and value positioning, and also through advocacy
efforts.
Expand operating space
We have expanded our operating space through the acquisitions
of Alder and Abide in 2019, which gave us the platforms needed
to expand our areas of focus in neuroscience towards our
targeted indication groups of niche and rare neurology and niche
psychiatry.
Furthermore, we continue to invest to maximize our strategic
brand franchises - Brintellix/Trintellix, Rexulti/Rxulti, Abilify
Maintena and Vyepti. And we are continuously expanding our
existing portfolio of medicines into new markets.
We have identified four biological clusters on which to focus our
R&D efforts that enable us to treat our targeted indication groups.
These are:
• Circuit / neuronal biology: Targeting neurotransmission /
synaptic dysfunction to restore brain circuits and reduce
neurological, psychiatric, and pain symptoms;
• Hormonal / neuropeptide signaling: Targeting selected
pathways of pain signals and stress response;
• Protein aggregation, folding, and clearance: Targeting
neurodegenerative proteinopathies involved in a range of
neurodegenerative diseases, e.g., Alzheimer’s and
Parkinson’s as well as rare diseases;
• Neuroinflammation / neuroimmunology: Targeting brain
function through the innate and adaptive immune system
relevant across most neurological disorders.
We will continue to pursue opportunities to acquire, partner or
build up capabilities and innovation in niche and rare neurology
and niche psychiatry indications with high unmet need that
complement these biological clusters.
Rebuilding the pipeline
The R&D organization is transforming, adopting an agile mindset
to enable the team to be more flexible when necessary. In this
way, we will more effectively and efficiently rebuild our pipeline
with a balance of first-in-class and best-in-class drug candidates,
to enable a steady stream of breakthrough and differentiated
medicines across all phases of the pipeline.
We will continue to shift Research & Development towards
specialist treated disease indications that address high unmet
needs in niche and rare disease neurology and niche psychiatry.
We will use our four biological clusters in our in-house discovery
research to target the high unmet needs within our expanded
operating space and to deliver impactful neuroscience medicines
of the future.
Drawing on our experimental medicine expertise, we will detect
signals and gain more objective evidence to test efficacy earlier
in development – de-risking the path to the market.
We will complement the rebuild of our pipeline with the right blend
of external innovation, mix of acquisitions, partnerships and
licenses for new medicines that fit with our refined focus on niche
neuroscience indications.
Maintain focus on profitability
Safeguarding a consistent level of profitability ensures our ability
to make strategic investments in our business.
We will increase cost efficiency across the organization whenever
we can by further leveraging the knowledge and capabilities in
our Group Business Services center (GBS) in Poland.
We will further harness the power of technology and pull digital
capabilities into our ways of working to drive greater efficiency.
With our current product portfolio and projects in our pipeline it is
our ambition to reach an EBIT margin of more than 25% by 2025.
Enhance organizational agility and collaboration
We work as global function teams, building on each other’s
strengths and harnessing the full power of our functions and
departments across borders for greater outcomes. Working
cross-functionally and cross-geographically allows us full clarity
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and alignment in terms of prioritization and decision making and
provides greater opportunity for our people through transfer of
knowledge and talent development. We work in alignment with
our priorities and shared purpose. We are grounded in our beliefs.
We will continue to infuse the organization with more flexible and
agile ways of working both in terms of how we work and the way
we work, simplifying our processes and accelerating our ability to
test and learn for faster, higher quality decision making.
By leveraging digital technologies and capabilities where it can
make us faster and more effective, we can make the best use of
our talent and competencies across functions that will enable the
development of best or first-in-class products and get them to
patients faster.
Just as much as we need a global and cross functional working
organization, we need a diverse and inclusive one too. We aim to
enrich our decision making through diversity of thought across all
that we do. Diversity comes from having inclusive teams made
up of people with different perspectives and experiences - and
that comes from having an organization of people with different
nationalities, race, gender and sexual orientation. We have a
zero-tolerance approach to harassment, racism and
discrimination of any kind and clear processes for employees and
stakeholders to voice their concerns and have them addressed.
Equally important, we will continue to ensure sustainable
business practices following leading environmental, social and
corporate governance criteria.
Our ability to successfully deliver on our strategy takes the entire
Lundbeck team collaborating around our shared purpose of
restoring brain health, so every person can be their best.
OUR LONG-TERM AMBITION: TO BE #1 IN BRAIN HEALTH
Over the past two years, we have made strategic choices around
where we put our efforts across our entire business. With the
choices we made, we have lofty ambitions for what the future
should look like when we succeed.
Our ambition is to be #1 in Brain Health – so what does that
mean?
We will have Top quartile financial results in our peer group.
By focusing on our patients and our products, top financial
performance will follow.
We will have a premier neuroscience pipeline filled with assets
that will make a difference to our patients.
We will have an established and focused commercial
footprint around commercially attractive patient segments in
niche and rare neurology and psychiatry.
We will be best in class in terms of how we use digital
technologies to improve patient outcomes.
We will be a company leveraging diversity, with top talents
across all functions.
We will continue to deliver sustainable growth in revenue and
profitability.
And finally, we will be on track to be carbon neutral. Giving
back to society is as equally important as financial performance.
The culmination of all this together is what will make us #1 in Brain
Health, serving the people who need new medicines to help them
conquer brain diseases. It will take every brain being fully “in the
game” to achieve it. We continue to prioritize and take action,
year by year to stay on track.
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R&D TRANSFORMATION
In mid-2020, Lundbeck restructured the global R&D organization
to execute on the Expand and invest to grow strategy, focusing
on cutting-edge science, de-risking and optimizing clinical
development, and supporting the commercialization of truly
global products.
In the earliest phases, we refocused research into four areas of
biology, where the science is the most advanced and holds the
most potential for discovering breakthroughs and differentiated
therapies.
We established experimental medicine and strengthened
portfolio management to ensure that programs that progress to
full development meet stringent criteria, including a positive
clinical proof of concept and a competitive product profile.
To launch and support truly global products, we refined our
global-local network in Patient Safety, Regulatory Affairs and
Medical Affairs, strengthening the link with our commercial
affiliates.
Throughout the value chain, we are implementing state-of-the-art
technologies (including digital) and agile principles into our ways
of working, to enable us to stay at the forefront of innovation, to
progress a strong portfolio of industry-leading therapies, and to
be the employer and partner of choice.
DEVELOPMENT PIPELINE
Lundbeck’s development pipeline underwent significant change
in 2020. One new molecule was added: Lu AG06479 (former
ABX1762; MAGLi - clinical phase I), and two new development
programs were started: eptinezumab in episodic cluster
headache (clinical phase III) and Lu AG06466 (former ABX-1431;
MAGLi) in Post-Traumatic Stress Disorder (PTSD) (clinical phase
Ib). Four clinical-stage molecules were discontinued: foliglurax
(mGluR4 PAM for Parkinson’s disease), Lu AF11167 (PDE10
inhibitor for negative symptoms in schizophrenia), Lu AF95245
(Kv7. 2-5 channels activator for neuropsychiatric disorders), and
Lu AF88434 (PDE1B inhibitor for cognitive dysfunction,
preclinical activity continues). Lu AG06466 (former ABX-1431;
MAGli) will not progress in Tourette Syndrome, but is being
explored in other indications.
PROJECTS UNDER REGULATORY REVIEW
Eptinezumab for migraine prevention
Eptinezumab for migraine prevention was approved by the U.S.
Food and Drug Administration (FDA) on 21 February 2020.
Eptinezumab is a monoclonal antibody (mAb) that is
administered as a quarterly 30-minute IV infusion. Eptinezumab
provides immediate and complete bioavailability and binds to
calcitonin gene-related peptide (CGRP), a neuropeptide believed
to play a key role in mediating and initiating migraines, with high
specificity and potency.
In February 2020, Lundbeck announced that Vyepti
(eptinezumab-jjmr) was approved by the FDA for the preventive
treatment of frequent episodic and chronic migraine in adults. The
recommended dose is 100 mg every 3 months; some patients
may benefit from a dose of 300 mg. Vyepti is the first FDA-
approved intravenous (IV) treatment for migraine prevention and
has demonstrated treatment benefit over placebo as early as day
1 post-infusion.
In August 2020, Lundbeck announced headline results from the
parallel group, double-blind, randomized, placebo-controlled
RELIEF-study (NCT04152083) that assessed the efficacy and
tolerability of Vyepti when initiated during a migraine attack in
patients who are candidates for preventive therapy. The study
met statistical significance on the co-primary endpoints,
demonstrating that patients receiving a 100 mg Vyepti infusion
during a migraine attack achieved earlier time to freedom from
headache pain and absence of their most bothersome symptom
compared to patients receiving the placebo. The most
bothersome symptom was the individual patient’s choice
between photophobia, phonophobia and nausea. The key
secondary endpoints of the proportion of patients with pain
RESEARCH AND
DEVELOPMENT
In 2020, Lundbeck transformed the
R&D organization in order to enrich the
pipeline with a steady stream of
programs addressing specialist
indications in neuroscience with high
unmet medical need.
Our aspiration is to effectively translate
forefront science into innovative
therapies, building on Lundbeck’s
strong heritage, competencies, and
footprint in brain diseases.
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freedom and the proportion of patients with the absence of their
most bothersome symptom two hours after the start of infusion,
also met statistical significance. All other secondary endpoints
were also statistically significant.
In June 2020, Lundbeck initiated the DELIVER study
(NCT04418765). The purpose of this study is to evaluate
eptinezumab in the prevention of migraine in patients with
unsuccessful prior preventive treatments. The patient must have
documented evidence of treatment failure (must be supported by
medical records or by a physician's confirmation specific to each
treatment) in the past 10 years of two to four different migraine
preventive medications and have a history of either previous or
active use of triptans for migraine. The total study duration from
the screening visit to the completion visit is approximately 76
weeks and includes a screening period (28-30 days), a placebo-
controlled treatment period (24 weeks) and a treatment extension
period (48 weeks). The patient starts the treatment at the baseline
visit and follows a 12-week dosing schedule with either
eptinezumab (100 or 300 mg) or a placebo by intravenous (IV)
infusion. Patients who were assigned to the placebo in the
placebo-controlled treatment period, will be randomly allocated to
one of two treatment groups: eptinezumab 300 mg or
eptinezumab 100 mg (n = 840).
In December 2020, Lundbeck initiated the ALLEVIATE study
(NCT04688775). The purpose of this study is to evaluate the
efficacy of eptinezumab intravenously in patients with episodic
Cluster Headache (eCH). Eligible patients will be randomly
assigned to receive, in a blinded manner, two infusions of either
eptinezumab or placebo in a cross-over manner during the
Placebo-controlled Period and Active Treatment Period of the
study. The duration of the active study is 24 weeks, including a
safety follow up period of 8 weeks.
In December 2020, the European Medicines Agency accepted
our application for marketing authorization of Vyepti and in United
Arab Emirates, Vyepti received approval. By year end, regulatory
review was ongoing in eight other countries (Australia, Brazil,
Canada, Indonesia, Kuwait, the Philippines, Singapore and
Switzerland).
PIVOTAL PROGRAMS (CLINICAL PHASE III)
Brexpiprazole – phase III in Alzheimer’s agitation
Lundbeck and Otsuka Pharmaceutical are pursuing a third
clinical phase III study (NCT03548584) of brexpiprazole in the
treatment of agitation in patients with dementia of the Alzheimer's
type. The decision to initiate a third adaptive trial followed
discussions with the FDA regarding two phase III clinical trials for
the agitation in Alzheimer’s disease indication that were
completed by Otsuka Pharmaceutical and Lundbeck in 2017. In
2020, the global Covid-19 pandemic impacted recruitment and
conduct of the trial. As the extent of the pandemic impact is
unknown, it was decided to increase the power of the trial and
adjust the sample size to the maximum of 330 subjects and
conduct an interim analysis, when a targeted sample of 255
subjects have completed the trial. The interim analysis decision
will be in accordance with pre-specified criteria and conducted by
an independent Data Monitoring Committee and is expected to
take place during the second quarter of 2021. Should the study
need to recruit all 330 patients, completion of the study is
anticipated at the beginning of 2022, based on the current
assessment of patient recruitment. The changes are not due to
any safety concerns and the increased sample size and the plans
to perform the interim analysis have been accepted by the FDA.
Brexpiprazole – phase III in Post-Traumatic Stress Disorder
(PTSD)
Lundbeck and Otsuka Pharmaceutical initiated a pivotal phase III
program (n = ~577) investigating the use of brexpiprazole in
combination with sertraline in the treatment of PTSD
(NCT04124614) subsequent to a positive phase II study and an
End of Phase II meeting with the FDA in May 2019.
PTSD is a psychiatric disorder that can develop as a response to
traumatic events, such as interpersonal violence, combat, life-
threatening accidents or natural disasters. Core features of PTSD
include a variety of symptoms, such as re-experiencing
phenomena (i.e. flashbacks and nightmares), avoidance
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behavior, numbing (i.e. amnesia, anhedonia, withdrawal,
negativism) and increased arousal (i.e. insomnia, irritability, poor
concentration, hypervigilance). Psychiatric co-morbidities are
common, and PTSD sufferers can also present with substance
abuse, mood and other anxiety disorders, impulsive and
dangerous behavior and self-harm.
PROOF OF CONCEPT STUDIES (CLINICAL PHASE II)
Brexpiprazole – phase II for borderline personality disorder
Lundbeck and Otsuka Pharmaceutical have initiated a proof-of-
concept study (n = ~240) investigating the use of brexpiprazole
in the treatment of borderline personality disorder (BPD)
subsequent to a Type B meeting with the FDA in May 2019
(NCT04100096). BPD is characterized by a pervasive pattern of
instability in affect regulation, impulse control, interpersonal
relationships, and self-image. The clinical signs of the disorder
include emotional dysregulation, impulsive aggression, repeated
self-injury, and chronic suicidal tendencies, which make these
patients frequent users of mental health resources. There is no
medication approved for BPD. In October 2019, the FDA
designated as a Fast Track development program the
investigation of brexpiprazole for BPD.
FIRST IN HUMANS (CLINICAL PHASE I)
Lu AG06466 (former ABX-1431) – phase Ib commenced in
September 2020
Lu AG06466 is an inhibitor of the monoacylglycerol lipase
(MAGL) and selective modulator of the endocannabinoid system,
and thereby works to reduce excessive neurotransmission and
neuroinflammation that are known pathophysiological hallmarks
for a range of psychiatric and neurological disorders.
Lundbeck is planning investigational studies in other indications
in neurology and psychiatry both with Lu AG06466 and with
additional compounds generated by Lundbeck La Jolla Research
Center. Trials across the indications will assess a variety of
common biomarkers to develop tools to help guide further late-
stage development. The first of these 1b studies will investigate
the effect of Lu AG06466 after multiple doses.
Lu AG06479 (former ABX1762) – phase I commenced in July
2020
Lu AG06479 is a follow up monoacylglycerol lipase (MAGL)
inhibitor. A phase I program has been initiated to investigate the
safety, tolerability and pharmacokinetic of Lu AG06479 after
single dose administration to healthy volunteers (NCT04473651).
The distribution profile of this agent differs from Lu AG06466 in
that it is only moderately brain penetrant.
Lu AG09222 (former ALD 1910) – phase I
Lu AG09222 is a monoclonal antibody (mAb) designed to inhibit
pituitary adenylate cyclase-activating polypeptide (PACAP).
PACAP has emerged as an important signalling molecule in the
pathophysiology of migraine and represents an attractive novel
target for treating migraine. Lu AG09222 may hold potential as a
migraine prevention treatment for those who have an inadequate
response to other therapies and could provide another
mechanism-specific therapeutic option for migraine patients and
their physicians. In addition, Lu AG09222 may hold potential as a
treatment of other disorders. The phase I double-blind, placebo-
controlled study of Lu AG09222, which was initiated in October
2019, has demonstrated safety and tolerability.
Lu AF87908 – phase I
Lu AF87908 is a monoclonal antibody targeting the pathological
form of the protein tau that is believed to play a pivotal role in the
development and progression of Alzheimer’s disease and other
neurodegenerative disorders. The project aims to demonstrate
delay of disease progression with a therapeutic effect on disease
burden and function, by targeting pathological tau with an
antibody that will inhibit aggregation and potentially clear
pathological tau from the brain. The ability to offer a treatment
that will change the course of the disease will offer a fundamental
improvement compared to currently available symptomatic
treatments. The purpose of the Phase I study, initiated in
September 2019 is to investigate the safety and tolerability of a
single dose of Lu AF87908, in both healthy subjects and people
living with Alzheimer's disease (NCT04149860).
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Lu AF28996 - phase IB study in Parkinson’s disease
commenced in October 2020
Dopaminergic neuronal loss is a key hallmark in Parkinson’s
disease and responsible for dysfunctions in motor control. Lu
AF28996 is targeting continuous D1/D2 stimulation as an
optimized approach to replace dopamine loss. The study aims to
explore the safety, tolerability, pharmacokinetics and efficacy of
multiple doses in subjects with Parkinson’s disease with motor
fluctuations (NCT04291859).
Lu AF82422 – phase I
Lu AF82422 is a monoclonal antibody targeting preferentially
pathological forms of the protein alpha-synuclein. Abnormal
aggregation of alpha-synuclein is believed to play a pivotal role in
the development and progression of neurodegenerative
disorders with synucleinopathies, e.g. Parkinson’s disease,
multiple system atrophy and dementia with Lewy bodies. The
project aims to demonstrate delay of disease progression with a
therapeutic effect on disease burden and patient function, by
targeting pathological alpha-synuclein with an antibody that will
inhibit aggregation and potentially clear pathological alpha-
synuclein from the brain. The ability to offer a treatment that will
change the course of the disease will offer a fundamental
improvement compared to currently available symptomatic
treatments. The purpose of the Phase I study, initiated in July
2018, is to investigate the safety and tolerability of a single dose
of Lu AF82422, in healthy subjects and people living with
Parkinson’s disease (NCT03611569).
Aripiprazole – 2-Month Injectable (LAI) formulation
In July 2019, Lundbeck and Otsuka Pharmaceutical initiated a
pivotal phase 1b study (NCT04030143) to determine the safety,
tolerability and pharmacokinetics of multiple-dose administrations
of aripiprazole to adult participants with schizophrenia or bipolar
I disorder. It was an open-label, multiple-dose, randomized,
parallel-arm, multicenter study. In addition to the assessment of
safety and tolerability, the objective was to establish the similarity
of aripiprazole concentrations on the last day of the dosing
interval and the exposure in the last dosing interval following the
final administration of aripiprazole into the gluteal muscle site.
The study showed that the new 2-Month formulation, while being
safe and tolerable, provided effective plasma concentrations of
aripiprazole for two months. This implies that the new formulation
can be dosed every second month compared to Abilify Maintena,
which is given on a monthly basis.
Dosing every second month can add important benefits in terms
of convenience for the patients and may increase treatment
adherence as well as minimizing the risk of missing doses. It may
also reduce the potential need for medication monitoring by
healthcare professionals, family and caregivers.
No further clinical studies are expected to be required and as a
next step the regulatory agencies in the U.S. and EU will be
approached. The scale-up of manufacturing capacity is
progressing at Otsuka Pharmaceutical, with regulatory
submission pending completion of the build and validation of the
new manufacturing capacity at Otsuka Pharmaceutical. The new
2-Month formulation is an innovative addition to the LAI franchise
and has patent protection until the early part of the next decade.
CLOSED STUDIES
In August 2020, Lundbeck announced the decision to discontinue
the phase II proof of concept clinical study of Lu AF11167
(PDE10 inhibitor) in patients with schizophrenia, who were
experiencing persistent negative symptoms. The decision to stop
the trial was based on the results of a futility interim analysis,
which concluded that the trial was unlikely to achieve statistical
significance on its primary endpoint. Further analysis of the data
showed no positive treatment effect on primary or secondary
endpoints. The development program of PDE10 has been
terminated.
In March 2020, Lundbeck announced that foliglurax, a selective
positive allosteric modulator of the glutamate 4 receptor (mGlu4
PAM) for the treatment of Parkinson's disease, did not meet the
primary study endpoint in the phase IIa study (AMBLED). There
was no statistically significant difference in change from baseline
in OFF time versus placebo after a 4-week treatment period. The
difference in change from baseline versus placebo was 0.27h and
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0.44h for the 10 and 30 mg doses (twice daily) respectively, as
assessed by the Hauser diary. Neither of the foliglurax doses
separated from placebo on dyskinesia (secondary endpoint). The
study showed an acceptable clinical safety and tolerability profile
in patients with Parkinson’s disease. The development program
of foliglurax has been terminated.
In addition, an investigational study with Lu AG06466 for the
treatment of adult patients with Tourette Syndrome (TS) was
completed. The randomized, double blind, placebo controlled and
with individual dose titration clinical trial enrolled 48 patients at
multiple sites in Europe. In this study the primary endpoint, the
Yale Global Tic Severity Scale (YGTSS-TTS), was not
statistically significant in favouring Lu AG06466 compared to
placebo after 28 and 56 days of treatment. The study did not
show any adverse events that prohibit development in other
indications. Lu AG06466 will be explored in other indications
through a series of phase 1b studies.
In April 2020, Lundbeck stopped the phase I study of Lu AF95245
(NCT04199585) as the drug did not have the desired
pharmacokinetic profile and the safety margins were unfavorable.
In November 2020, Lundbeck stopped the phase I study of Lu
AF88434 (PDE1b) as the drug did not have the desired
pharmacokinetic profile.
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PRODUCT
TOTAL
REVENUE
(DKKM)
%
OF TOTAL
REVENUE
GROWTH
COMMENT
STRATEGIC BRANDS
Abilify Maintena
®
(aripiprazole once-monthly)
2,271 13% 16%
Monthly intramuscular injection indicated for the treatment of schizophrenia. Lundbeck markets Abilify Maintena
®
in the U.S. in
collaboration with Otsuka Pharmaceutical Co., Ltd. and in Europe and International Markets either alone or in collaboration with
Otsuka Pharmaceutical Co., Ltd. First launched in the U.S. in 2013, hereafter launched in close to 40 countries.
Brintellix
®
/Trintellix
®
(vortioxetine)
3,102 18% 10%
Indicated for the treatment of Major Depressive Disorder (MDD). Lundbeck markets Brintellix
®
/Trintellix
®
in Europe and International
Markets. In the U.S., Takeda Pharmaceutical Company Limited is our co-promotion partner. Launched in the first markets in 2014
and now available in approximately 60 countries.
Northera
®
(droxidopa)
2,553 14% 10%
Indicated for the treatment of symptomatic neurogenic orthostatic hypotension in adult patients. Northera
®
is the only U.S. FDA-
approved therapy for this condition. Lundbeck markets Northera
®
in the U.S. and launched the product in 2014.
Rexulti
®
/Rxulti
®
(brexpiprazole)
2,620 15% 15%
Indicated for adjunctive therapy for the treatment of adults with Major Depressive Disorder (MDD) and as a treatment for adults with
schizophrenia. Launched in the U.S. in 2015 in collaboration with Otsuka Pharmaceutical Co., Ltd. hereafter in a number of other
countries.
Vyepti
®
(eptizumab)
93 1% -
Indicated for the preventive treatment of migraine in adults. Approved by the U.S. FDA on 21 February 2020 and made available on
6 April 2020 via selected specialty distributors and specialty pharmacies.
MATURE BRANDS
Cipralex
®
/Lexapro
®
(escitalopram)
2,380 14% 3% Indicated for the treatment of depression. First launched in 2002 and today available in more than 100 countries around the world.
Onfi
®
(clobazam)
642 4% (39%) Indicated as adjunctive treatment of Lennox-Gastaut syndrome for people aged two years or older. Launched in the U.S. in 2012.
Sabril
®
(vigabatrine)
777 5% (8%) Indicated for the treatment of refractory complex partial seizures (rCPS) and infantile spasms (IS). Launched in the U.S. in 2009.
Other pharmaceuticals 2,738 16% (12%)
Ebixa
®
(dementia), Azilect
®
(Parkinson’s disease), Xenazine
®
(chorea), Deanxit
®
(depression), Cipramil
®
(depression and anxiety)
and Cisordinol
®
(psychosis) are among the biggest of our other mature brands.
PRODUCTS
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RISK MANAGEMENT GOVERNANCE STRUCTURE
Lundbeck is exposed to risks throughout the value chain, from
the initial stages of developing innovative pharmaceuticals in our
in-house facilities to the proven pharmaceuticals reaching the
patients.
Lundbeck’s risk management processes are continually updated
and adapted to match internal and external requirements, where
risks related to trends, global economic developments,
geopolitics and long-term forecasts are assessed as part of
Lundbeck’s long-term strategic planning. With this understanding
of the wider context and an accurate and complete overview of
Lundbeck’s activities and resources, Executive Management has
a clear basis for decision-making on our overall risk-exposure and
mitigating actions.
The overall responsibility of risk management lies with the Board
of Directors. Oversight of compliance within the established
enterprise risk management framework is delegated to the Audit
Committee.
RISK MANAGEMENT FRAMEWORK
Enterprise risk management in Lundbeck is considered an
integral part of doing business, which is reflected in the risk
management process.
The process starts in the decentralized teams within Business
Units and Corporate Functions, which have detailed and
extensive knowledge of the risks within their areas of
responsibility. They systemically identify, quantify, respond to and
monitor risks. They are ideally placed to mitigate our risk
exposure in the first instance.
Business Units and Corporate Functions report to the central Risk
Office on a semi-annual basis. The central Risk Office provides
the risk framework and conducts interviews and workshops with
management from Business Units and Corporate Functions, risk
contributors and risk responsible individuals. This represents an
integral part in the alignment of risks reported to the Risk Office.
In cooperation with the Business Units and Corporate Functions,
the Risk Office assess the likelihood of an event occurring and
the potential impact on the Group in terms of financial loss. The
key risk overview is presented to Executive Management for their
assessment and approval, before it is reported to the Audit
Committee and approved by the Board of Directors.
The corporate risk register kept by the Risk Office provides a
consolidated overview of our risk exposure by detailing each risk,
risk category and type. The risk descriptions provide details on
the event, its current status, the status of the response and the
likelihood and potential impact. Our reporting process defines six
risk categories:
• Research and Development
• Market and Commercial
• Supply, Quality and Product Safety
• IT security
• Legal and Compliance
• Finance
Lundbeck has a streamlined process covering day-to-day risk
identification, monitoring, mitigation and reporting within
Business Units and Corporate Functions, all the way to the final
reporting to Executive Management. This process enables
Executive Management to control Lundbeck’s risk appetite when
deciding strategy and practice, and when making day-to-day
decisions.
RISK MANAGEMENT
Lundbeck’s risk management processes
ensure close monitoring, systematic risk
assessment and the ability to identify,
manage and report internal and
external risks and opportunities in a
changing environment.
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KEY RISKS
RISK AREA
DESCRIPTION
POTENTIAL CONSEQUENCES
MITIGATING ACTIONS
RESEARCH AND
DEVELOPMENT
Exposure to delays of regulatory approval
or failure in the development of new and
innovative medicines. Exposure to delays
is higher due to Covid-19.
Increased regulatory requirements for
clinical trials.
Data requirements from production of non-
clinical studies and clinical studies.
Delays or failure of new products could impact patients who
cannot benefit from these products and decrease earnings for
shareholders.
Delay in regulatory approval may impact the patient’s drug
access.
Issues with data integrity can lead to delays in studies and
production – ultimately leading to withdrawals and failure to
gain approval.
Clinical trials are run and evaluated throughout the research and development phase.
Ongoing evaluation of the product pipeline, regulatory requirements and product
benefit.
Robust quality management system is in place to ensure consistent quality, data
integrity and the compliance of clinical trials and clinical safety activities.
MARKET
AND
COMMERCIAL
Price pressure, new legislation, regulation
of reimbursement and healthcare reforms
in key markets, etc.
Limited access to physician offices due to
Covid-19.
Market restrictions could impact patients’ access to Lundbeck
products.
Changes in market conditions and health care reforms could
affect the pricing landscape as well as rebates and discounts.
Restrictions due to Covid-19 could impact patients’ access to
physicians.
Understanding the price development in main markets.
Working with health care authorities around the world to document the value of our
pharmaceuticals.
Monitor political developments and requirements.
SUPPLY, QUALITY
AND PRODUCT
SAFETY
Disruption of production or supply or
unpredictable demand and stock-out.
Loss of licenses to manufacture or sell
pharmaceuticals.
Defects in product quality or safety.
Product shortage, not giving patients needed access to the
pharmaceuticals they require.
Systems, policies and procedures are in place to ensure product supply, quality and
safety.
Dual sourcing strategy and high level of safety stock of key products.
Robust pharmacovigilance system.
IT SECURITY
Cyber-attacks and cyber fraud.
System down-time.
Disruption or compromise of IT security could affect all parts
of Lundbeck’s operations and product supply to patients.
Data loss.
IT policies and procedures are in place to safeguard processes and data.
Cyber-attack testing is being performed on a regular basis.
Annual testing of IT disaster recovery plan.
Lundbeck has also purchased a cyber insurance.
LEGAL AND
COMPLIANCE
Intellectual property rights.
Non-
compliance with laws, industry
standards, regulations and our Code of
Conduct.
Exposure to legal claims or investigations.
Infringement of intellectual property rights could decrease
earnings for shareholders.
Loss, expiration or invalidation of intellectual property rights
could decrease earnings for shareholders.
Non-compliance with laws, industry standards, regulations, or
our Code of Conduct could affect our ‘license to operate’ and
impact our reputation and earnings for shareholders.
Policies are in place to safeguard intellectual property rights.
The Code of Conduct is pivotal in sustaining our compliance culture. Annual training
is provided to all employees.
Third parties are committed to observe our legal and ethical standards in mutually
binding agreements and are subject to monitoring.
FINANCIAL
Fluctuations in exchange rates incl. impact
from currency devaluations.
Fluctuations in interest rates.
Lundbeck’s cash flow and earnings could be impacted in
cases of fluctuations in key currencies.
Monitoring the financial exposure and hedging a significant part of Lundbeck’s
currency risk up to 18 months in advance.
Issuing debt with fixed interest and fixing interest rates on floating debt with interest
rate swaps or similar derivatives.
Exchange rate risks and interest risks are managed within the Treasury Policy.
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STRATEGIC IMPERATIVE
SUSTAINABILITY &
COMPLIANCE
Lundbeck’s sustainability activities aim
to mitigate risks and adverse impacts
related to our business activities and
contribute to solving societal challenges
where we can. We remain committed to
the UN Global Compact Principles and
contribute to addressing seven of the
Sustainable Development Goals.
In this section we present a short
summary of aspirations, management,
due diligence and targets.
We publish an annual Sustainability
Report at the same time as the release
of the Annual Report. Here you ca
n find
detailed information and an ESG
(Environmental, Social and
Governance) section for analysts and
investors. Our mandatory annual
statutory reporting on sustainability
and diversity of management in
accordance with section 99(a), 99(b)
and 107(d) in the Danish Financial
Statements Act can also be found in our
Sustainability Report*.
*
https://www.lundbeck.com/global/sustainability
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SUSTAINABILITY
TARGETS
ISSUE
2021 TARGET
2020 TARGET
ACCESS TO BRAIN HEALTH
Ensure all disease awareness sponsorships within psychiatry measurably
support suicide prevention or mental health awareness
Donate treatment for at least 900 patients through new product donation
partnerships in low- and middle-income countries
Engage all Lundbeck offices in local World Mental Health Day activities (●)
Establish a product donation partnership (●)
SDG 3
BUSINESS ETHICS
Annual Code of Conduct training completed by all employees at work globally
Increase proportion of healthcare professionals supporting disclosure of
collaborations compared to the previous reporting year
Annual Code of Conduct training completed by all employees at work globally (●)
Work to increase proportion of healthcare professionals supporting disclosure of
collaborations compared to the previous reporting year (●)
SDG 16
CLIMATE ACTION
Reduce total carbon footprint across own operations, supply and
distribution in line with our Science-Based Target*
Reduce CO
2
emission by 4% in 2020 compared to 2019 (●)
Obtain ‘Science Based Targets initiative (SBTi)’ approval of new climate target (●)
SDG 13
ENVIRONMENTAL
MANAGEMENT
Recycle 60% of the solvents used in chemical production
Recycle 63% of all general waste
Recycle 55% of the solvents used in chemical production (●)
Zero environmental incidents (○)
SDG 12
Build an inclusive organization with a first initiative focusing on unconscious
bias across the organization
Maintain an overall equal gender split for people managers globally
Strive to maintain an overall equal gender split for people managers globally (●)
SDG 5
SDG 10
HEALTH & SAFETY
Reduce lost time accident frequency to ≤ 5 Reduce lost time accident frequency to ≤ 5 (○)
SDG 8
* We will report progress annually on the approved 15-year targets in Scope 1 & 2 (own operations and energy use) and Scope 3 (emissions from supply, services, distribution, and more).
(●) Achieved
(○) Not achieved
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Lundbeck has established a business ethics compliance
structure consisting of the elements needed to ensure that we are
doing the right thing. We continually improve processes and
sustain a compliance culture. The four active elements are
documents, training, monitoring and governance.
CODE OF CONDUCT
As the top-level document, the Code of Conduct conveys
Lundbeck’s commitments and the expectations to our employees
for areas that are critical to the pharmaceutical industry.
The global and local procedures in the Code of Conduct contain
more operational requirements and good practices. Lundbeck
maintains a Good Practice (GxP) quality management system in
relevant areas to control risks, continually improve processes and
meet regulatory expectations.
Lundbeck wants to make sure that the requirements are
understood, and people know how to act. Managers and
employees who have specific responsibilities receive relevant
training. All employees are annually requested to complete the
corporate Code of Conduct training. To support the training, we
continuously communicate through internal campaigns to
maintain awareness and engage our employees.
Our audits and monitoring efforts aim to validate the
understanding of the requirements and capture suggestions for
improvements of processes and controls. Lundbeck’s compliance
visits aim to provide feedback with corrective and preventive
actions to ensure local management ownership and follow-up.
Lundbeck’s Code of Conduct Compliance Committee represents
Executive Management and relevant business functions. They
meet regularly to maintain oversight and once yearly perform the
Code of Conduct risk management review to initiate needed
improvements. Further, the Chief Compliance Officer provides
relevant updates at meetings in the Audit Committee.
COMPLIANCE CULTURE BUILT ON AN OPEN DIALOGUE
We encourage everyone to have ongoing dialogue on
compliance and ethics with their colleagues and manager.
However, we realize that some questions, dilemmas or concerns
might not be discussed openly.
People who are uncertain of how to act or concerned that a matter
is not being properly addressed are encouraged to seek advice
in our Corporate Functions, e.g. HR, Finance, Legal or
Compliance.
Anyone within or outside Lundbeck can always report serious
compliance concerns in full confidentiality to Lundbeck’s
Compliance Hotline*. Concerns raised in good faith are protected
by Lundbeck’s non-retaliation policy.
All reported concerns will be investigated by Lundbeck experts.
The reporter can anonymously communicate with the investigator
through the Compliance Hotline. Concerns that end up being
substantiated are followed by proportionate corrective and
preventive actions.
*
https://www.lundbeck.com/global/compliance-hotline
BUSINESS ETHICS AND
CODE OF CONDUCT
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CORPORATE
GOVERNANCE
Corporate governance concerns the
way Lundbeck is managed and
controlled, while creating value for both
the company and our stakeholders.
More information on the mandatory
annual corporate governance report is
disclosed on www.lundbeck.com* in
accordance with section 107(b) in the
Danish Financial Statements Act.
*
https://www.lundbeck.com/upload/global/files/pdf/corporate_governance/2020/corp
orate_governance_report.pdf
**
Detailed description
of the Board members and their competencies and
qualifications can be found on
https://www.lundbeck.com/global/about-us/corporate
-
governance/boa
rd-of-directors/board-members
***
Detailed description of the Board of Directors
’ work, evaluation procedure and
results can be found on
https://www.lundbeck.com/global/about-us/corporate
-
governance/board
-of-directors/board-tasks
****
Detailed description of the remuneration can be found on
https://www.lundbeck.com/global/about-us/corporate-governance/remuneration
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DEBORAH DUNSIRE
President and CEO
• Born 1962
• Joined Lundbeck in 2018
Directorships
• Alexion Pharmaceuticals Inc. (M)
• Ultragenyx Pharmaceutical Inc. (M)
Holding of shares
• 3,500
PETER ANASTASIOU
**
Executive Vice President, North America
• Born 1970
• Joined Lundbeck in 2009
Directorships
• PhRMA (Pharmaceutical Research and Manufacturers of
America) (M)
Holding of shares
• None
LARS BANG
Executive Vice President, Product Development & Supply
• Born 1962
• Joined Lundbeck in 1988
Directorships
• Claudio Bidco A/S (M)
• Claudio Holdco A/S (M)
• Fertin Pharma A/S (M)
• O.B. Holding Aps (M)
Holding of shares
• 42,792
ANDERS GÖTZSCHE
Executive Vice President, CFO
• Born 1967
• Joined Lundbeck in 2007
Directorships
• Obsidian Therapeutics (M)
• DFDS (M)
• Rosborg Møbler A/S (C)
Holding of shares
• 42,796
EXECUTIVE
MANAGEMENT*
Per 31.12 2020
C = Chairman, DC = Deputy Chairman, M = Member
*
For more information about Executive Management and their competencies, please
visit
https://www.lundbeck.com/global/about-us/corporate-governance/executive
-
management
**
Peter Anastasiou (Executive Vice President for North America), Elise Hauge
(Executive Vice President, People & Communication) and Keld Flintholm Jørgensen
(Executive
Vice President, Corporate Strategy & Business Development) participate
in the Executive Management in their respective roles but are not members of the
Executive Management as registered with the Danish Business Authority
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ELISE HAUGE **
Executive Vice President, People & Communication
• Born 1967
• Joined Lundbeck in 2019
Directorships
• CBS Executive Fonden (M)
Holding of shares
• 1,225
KELD FLINTHOLM JØRGENSEN **
Executive Vice President, Corporate Strategy & Business
Development
• Born 1971
• Joined Lundbeck in 2019
Directorships
• None
Holding of shares
• None
PER JOHAN LUTHMAN
Executive Vice President, Research & Development
• Born 1959
• Joined Lundbeck in 2019
Directorships
• None
Holding of shares
• None
JACOB TOLSTRUP
Executive Vice President, Commercial Operations
• Born 1972
• Joined Lundbeck in 1999
Directorships
• Pharmacosmos A/S (C)
Holding of shares
• 257
Per 31.12 2020
C = Chairman, DC = Deputy Chairman, M = Member
**
Peter Anastasiou (Executive Vice President for North America), Elise Hauge
(Executive Vice President, People & Communication) and Keld Flintholm Jørgensen
(Executive Vice President, Corporate Strategy & Business Development) participate
in the Executive Management in their respective roles but are not members of the
Executive Management as registered with the Danish Business Authority
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LARS SØREN RASMUSSEN
Chairman
• Born 1959
• Elected at the 2013 Annual General Meeting
• Considered independent
Lundbeck Committees
• Audit Committee (M)
• Remuneration & Nomination Committee (C)
Directorships
• Coloplast A/S (C)
• Igenomix S.L. (C)
• William Demant Holding A/S (M)
Holding of shares
• 20,000
LENE SKOLE-SØRENSEN
Deputy Chairman
• Born 1959
• CEO, Lundbeck Foundation
• Elected at the 2015 Annual General Meeting
• Considered dependent
Lundbeck Committees
• Remuneration & Nomination Committee (M)
• Scientific Committee (M)
Directorships
• ALK-Abelló A/S (DC)
• Falck A/S (DC)
• Tryg A/S (M)
• Tryg Forsikring A/S (M)
• Ørsted A/S (DC)
Holding of shares
• 8,808
HENRIK ANDERSEN
• Born 1967
• Group President and CEO, Vestas Wind Systems A/S
• Elected at the 2018 Annual General Meeting
• Considered independent
Lundbeck Committees
• Audit Committee (C)
Directorships
• The Investment Committee of Maj Invest Equity 4 K/S (M)
• The Investment Committee of Maj Invest Equity 5 K/S (M)
Holding of shares
• 3,500
JEFFREY BERKOWITZ
• Born 1966
• CEO, Real Endpoints
• Elected at the 2018 Annual General Meeting
• Considered independent
Lundbeck Committees
• Remuneration & Nomination Committee (M)
• Scientific Committee (M)
Directorships
• Esperion Therapeutics, Inc. (M)
• Zealand Pharma A/S (M)
• Uniphar PLC (M)
Holding of shares
• None
BOARD OF
DIRECTORS*
Per 31.12 2020
C = Chairman, DC = Deputy Chairman, M = Member
*
For more information about the Board of Directors and their competencies, please
visit
https://www.lundbeck.com/global/about-us/corporate-governance/board-of
-
directors/board-members
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LARS ERIK HOLMQVIST
• Born 1959
• Elected at the 2015 Annual General Meeting
• Considered dependent
Lundbeck Committees
• Audit Committee (M)
Directorships
• ALK-Abelló A/S (M)
• Biovica International AB (C)
• Lundbeck Foundation (M)
• Naka UK topco Ltd. (M)
• Tecan AG (M)
• Vitrolife AB (M)
Holding of shares
• 15,000
JEREMY MAX LEVIN
• Born 1953
• CEO and chairman, Ovid Therapeutics
• Elected at the 2017 Annual General Meeting
• Considered independent
Lundbeck Committees
• Scientific Committee (C)
Directorships
• BIO (Biotechnology Innovation Organization in the U.S.) (C)
• Ovid Therapeutics Inc. (C)
• Opthea Ltd. (C)
Holding of shares
• None
RIKKE KRUSE ANDREASEN
• Born 1971
• Senior Laboratory Technician
• Elected by employees in 2018
Holding of shares
• 5
HENRIK SINDAL JENSEN
• Born 1969
• Director, Corporate Business Development & Licensing
• Elected by employees in 2018
Holding of shares
• None
LUDOVIC TRANHOLM OTTERBEIN
• Born 1973
• Director, Research Informatics & Operations
• Elected by employees in 2018
Directorships
• Lundbeck Foundation (M)
Holding of shares
• None
Per 31.12 2020
C = Chairman, DC = Deputy
Chairman, M = Member
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TURNOVER
Total trading in Lundbeck shares amounted to DKK 24.6 billion in
2020, while the average daily turnover was DKK 110 million, an
increase of 22% compared to 2019. A total of 109 million shares
were traded in 2020, equivalent to 435,658 shares per day, an
increase of 28% compared to 2019.
Lundbeck has an American Depository Receipt (ADR) Level 1
program. The ADR volume increased slightly during 2020. At the
end of 2020, 370,011 ADRs were outstanding, representing 0.2%
of the total shares or 0.6% of the free float.
SHARE CAPITAL
The Lundbeck share is listed on the Copenhagen Stock
Exchange, Nasdaq Copenhagen. All shares belong to the same
class and rank equally. The shares are negotiable and there are
no restrictions on their transferability. Each share has a nominal
value of DKK 5 and carries one vote. At the end of 2020,
Lundbeck’s total share capital amounted to DKK 995,741,110,
which is equivalent to 199,148,222 shares.
COMPOSITION OF SHAREHOLDERS
According to the Lundbeck share register, the company had
approximately 52,000 shareholders at the end of 2020,
representing approximately 99% of the outstanding shares. The
Lundbeck Foundation (Lundbeckfond Invest A/S) is the
company’s largest shareholder, holding 137,351,918 shares at
the end of 2020, which equals 69% of the share capital and voting
rights. The Lundbeck Foundation is the only shareholder to report
a holding in excess of 5% of the share capital. At the end of 2020,
investors in North America held 32% of the free float compared
to 45% in 2019; European (excl. Danish) investors held 31%
compared to 31% in 2019; Danish investors held 14% compared
to 7% in 2019; rest of the world held unchanged 4% and other
investors, incl. private, held 19% compared to 13% in 2019.
In order to fund our long-term share-based incentive programs,
Lundbeck acquired treasury shares in 2020 at a value of DKK 29
million (DKK 20 million in 2019), corresponding to 114,000 shares
(69,000 shares in 2019).
At the end of 2020, Lundbeck’s Board of Directors and Executive
Management held a total of 137,878 Lundbeck shares compared
to 130,339 Lundbeck shares by the end of 2019. The total
number of shares in 2020 corresponds to 0.07% of the total
shares outstanding.
LUNDBECK AND THE EQUITY MARKET
Through our Investor Relations function, Lundbeck aspires to
provide a fair and accurate view of its activities by providing
ongoing communications with prospective and existing
shareholders and equity analysts. Through regular meetings and
dialogue, we convey relevant information about our vision and
goals, business areas and financial development.
In 2020, investor relations activity was materially impacted by the
global pandemic with lock-downs and travel restrictions.
Lundbeck’s Investor Relations team held more than 300
meetings most of them based on digital platforms. Lundbeck has
also participated/presented at 12 investor conferences, most of
which were virtual.
Lundbeck is currently covered by 18 sell-side analysts, incl. the
major global investment banks that regularly produce research
reports on Lundbeck. A list of analysts covering Lundbeck is
available on www.lundbeck.com*.
After the announcement of our interim and full-year reports,
members of Lundbeck’s Executive Management and Investor
Relations team always conduct roadshows to inform investors
and analysts about the company’s latest developments. Our
investor presentations are available for download on
www.lundbeck.com**.
THE LUNDBECK
SHARE
2020 was a very eventful year for
Lundbeck with solid financial results
and progression against our Expand
and invest to grow strategy while
operating during a global pandemic.
The Lundbeck share price began the
year at DKK 254.40 (closing price end
2019), reached a year high of DKK
302.4 (5 February), recorded a year
low of DKK 178.15 (3 November) and
ended the year at DKK 208.80
. This is a
decrease of 18% for the year. In
comparison, the Danish OMXC25 index
increased by 34%, while the MSCI
European Pharmaceutical Index
increased by 4%.
*
https://investor.lundbeck.com/share/analysts
**
https://investor.lundbeck.com/download-center
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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COMPOSITION OF OWNERSHIP, END 2020
STOCK PERFORMANCE 20
16-2020
COMPOSITION OF FREE FLOAT, END 2020
STOCK PERFORMANCE 20
20
FINANCIAL CALENDAR 2021
23
March 2021
Annual General Meeting
26 March 2021
Dividends for 2020 at the disposal of
shareholders
11
May 2021
Financial statements for the first
three months of
2021
18
August 2021
Financial statements for the first six
months
of 2021
10
November 2021
Financial statements for the first
nine months
of 2021
LUNDBECK
ANNUAL REPORT 2020
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2020
2019
2018
2017
Earnings per share, basic (EPS) (DKK) 7.95 11.64 17.88 28.14
Earnings per share, diluted (DEPS) (DKK) 7.95 11.64 17.87 28.10
Cash flow from operating activities per share, diluted (DKK) 19.31 13.13 30.09 20.44
Net asset value per share, diluted (DKK) 85.42 84.45 84.67 76.03
Proposed dividend per share (DKK) 2.50 4.10 12.00 8.00
Dividend payout ratio (%) 31 35 67 29
Dividend yield (%) 1.2 1.6 4.2 2.5
Share price, year-end (DKK) 208.80 254.4 285.4 315.0
Share price, high (DKK) 302.4 306.9 475.9 411.8
Share price, low (DKK) 178.15 217.2 257.0 315.0
Price/Earnings, diluted (DKK) 26.25 21.86 15.97 11.21
Price/Cash flow, diluted (DKK) 10.82 19.38 9.48 15.41
Price/Net asset value, diluted (DKK) 2.44 3.01 3.37 4.14
Market capitalization, year-end (DKKm) 41,582 50,660 56,825 62,700
Annual trading, million shares 108.9 84.4 99.2 107.7
Average trading per trading day, thousands of shares 435.7 340.4 400.1 429.2
SHARE RATIOS
LUNDBECK
ANNUAL REPORT 2020
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SHARE FACTS
Number of shares, year-end 199,148,222
Share capital, year-end (DKK) 995,741,110
Nominal value per share (DKK) 5
Holding of treasury shares 449,896
Free float (%) 31
IPO 18 June 1999
Stock exchange Nasdaq Copenhagen
ISIN code DK0010287234
Ticker LUN.CO (Reuters), LUN DC (Bloomberg)
ADR program Sponsored level 1 program
ADR trading code HLUYY
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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Statement of profit or loss (DKKm)
2020
2019¹
2018¹
2017¹
2016
Revenue
17,672
17,036
18,117
17,234
15,634
Research and development costs
4,545
3,116
3,277
2,705
2,967
Reversal of impairment loss
-
-
-
3,766
-
Operating profit before depreciation and amortization (EBITDA)
4,783
4,823
6,436
9,190
3,846
Profit from operations (EBIT)
1,990
3,153
4,846
8,174
2,292
Net financials, expenses
84
127
12
131
135
Profit before tax
1,906
3,026
4,834
8,043
2,157
Profit for the year
1,581
2,313
3,553
5,560
1,211
SUMMARY FOR
THE GROUP
2016-2020
Assets (DKKm)
2020
2019¹
2018¹
2017¹
2016
Non
-current assets
25,924
29,095
13,944
13,893
12,686
Inventories
2,163
2,204
1,753
1,376
1,528
Receivables
4,018
3,822
3,261
3,791
3,779
Cash, bank balances and securities
3,924
3,012
6,635
3,677
2,217
Total assets
36,029
38,133
25,593
22,737
20,210
Equity and liabilities (DKKm)
2020
2019¹
2018¹
2017¹
2016
Equity
16,973
16,782
16,833
15,117
9,694
Non-current liabilities
9,044
11,071
1,184
1,141
2,740
Current liabilities
10,012
10,280
7,576
6,479
7,776
Total equity and liabilities
36,029
38,133
25,593
22,737
20,210
Statement of cash flows (DKKm)
2020
2019
2018
2017
2016
Cash flows from operating activities
3,837
2,609
5,981
4,045
3,126
Cash flows from investing activities
(467)
(7,755)
(2,907)
(1,830)
(337)
Cash flows from operating and investing activities (free cash flow)
3,370
(5,146)
3,074
2,215
2,789
Cash flows from financing activities
(2,394)
4,548
(1,607)
(2,235)
(2,006)
Interest
-bearing debt, cash, bank balances and securities, net, year-end
– net cash/(net debt)
(4,106)
(6,566)
6,635
3,677
326
1) 2017
-2019 have been restated to reflect the reversal of an impairment loss on the Rexulti
®
product rights in 2017. See note 7 Intangible assets.
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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Key figures
2020
2019¹
2018¹
2017¹
2016
EBIT margin (%)
11.3
18.5
26.7
47.4
14.7
Research and development ratio (%)
25.7
18.3
18.1
15.7
19.0
Return on equity (%)
9.4
13.8
22.2
44.8
13.1
Equity ratio (%)
47.1
44.0
65.8
66.5
48.0
Invested capital (DKKm)
21,079
23,348
10,198
11,440
9,368
Net debt/EBITDA
0.9
1.4
(1.0)
(0.7)
(0.1)
Effective tax rate (%)
17.0
23.6
26.5
30.9
43.9
Purchase of intangible assets, gross (DKKm)
114
88
1,149
480
104
Purchase of property, plant and equipment, gross (DKKm)
364
356
300
245
238
Purchase of financial assets, gross (DKKm)
17
18
1,524
1,509
16
Average number of employees
5,717
5,475
5,060
4,980
5,120
Share data²
2020
2019¹
2018¹
2017¹
2016
Number of
shares for the calculation of EPS (millions)
198.7 198.7 198.7 197.5 197.2
Earnings per share, basic (EPS) (DKK)³
7.95
11.64
17.88
28.14
6.11
Earnings per share, diluted (DEPS) (DKK)³
7.95
11.64
17.87
28.10
6.11
Proposed dividend per share (DKK)
2.50
4.10
12.00
8.00
2.45
Cash flows from operating activities per share, diluted (DKK)³
19.31
13.13
30.09
20.44
15.77
Net asset value per share, diluted (DKK)³
85.42
84.45
84.67
76.03
48.86
Market capitalization (DKKm)
41,582 50,660 56,825 62,700 56,776
Price/Earnings, diluted (DKK)³
26.25
21.86
15.97
11.21
47.04
Price/Cash flow, diluted (DKK)³
10.82 19.38 9.48 15.41 18.22
Price/Net asset value, diluted (DKK)³
2.44
3.01
3.37
4.14
5.88
1) 2017-2019 have been restated to reflect the reversal of an impairment loss on the Rexulti
®
product rights in 2017. See note 7 Intangible assets.
2) The calculation is based on a share denomination of DKK 5.
3) Comparative figures have been restated using a factor 0.99997 for the effect of employees’ exercise of warrants.
SUMMARY FOR
THE GROUP
2016-2020
CONTINUED
LUNDBECK
ANNUAL REPORT 2020
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Definitions
Interest-bearing debt
Debt and financial instruments (including financial leases) carrying interest
Interest-bearing net cash
Cash, bank balances and securities less interest-bearing debt
EBIT margin
2
Profit from operations as a percentage of revenue
EBITDA
Profit before interest, tax, depreciation, amortization and gain on divestment of properties
Return on equity
2
Net profit/(loss) for the year as a percentage of shareholders’ equity (average)
Equity ratio
2
Shareholders’ equity, year
-end, as a percentage of total assets
Invested capital
Shareholders’ equity, year-end, plus net interest-bearing debt
Net debt
Interest bearing debt less cash, bank balances and securities
Net debt/EBITDA
2
Net interest-bearing debt divided by EBITDA
Earnings per share, basic (EPS)
2
Net profit/(loss) for the year divided by average number of shares, excl. treasury shares
Earnings per share, diluted (DEPS)
2
Net profit/(loss) for the year divided by
average number of shares, excl. treasury shares,
incl. warrants, fully diluted
Cash flows
from operating activities per share,
diluted
2
Cash flows from
operating activities divided by average number of shares, excl. treasury
shares, incl. warrants, fully diluted
Net asset value per share, diluted
Shareholder’s equity, year
-end, divided by number of shares, year-end, excl. treasury
shares, incl. warrants, fully diluted
Market capitalization
2
Total number of shares, year
-end, multiplied by the official price quoted on Nasdaq
Copenhagen, year
-end
Price/Earnings, diluted
2
The official price quoted on Nasdaq Copenhagen, year
-end, divided by earnings per
share, diluted
Price
/Cash flows, diluted
2
The official price quoted on Nasdaq Copenhagen, year
-end, divided by cash flows from
operating activities per share, diluted
Price/Net asset value, diluted
The official price quoted on
Nasdaq Copenhagen, year-end, divided by net asset value
per share, diluted
EBITDA calculation (DKKm)
2020
2019¹
2018¹
2017¹
2016
EBIT
1,990
3,153
4,846
8,174
2,292
+ Depreciation, amortization and impairment losses
2,793
1,670
1,638
1,258
1,554
-
Gain on divestment of properties recognized in other operating expenses,
net
-
-
(48)
(242)
-
EBITDA
4,783
4,823
6,436
9,190
3,846
1) 2017-2019 have been restated to reflect the reversal of an impairment loss on the Rexulti
®
product rights in 2017. See note 7 Intangible assets.
2) Definitions according to the Danish Finance Society's
Recommendations & Financial Ratios.
SUMMARY FOR
THE GROUP
2016-2020
CONTINUED
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
43 / 105
NOTES
1 Basis of preparation 48
2 Revenue and segment information 49
3 Employee costs 50
4 Other operating expenses, net 52
5 Net financials 52
6 Income taxes 52
7 Intangible assets 56
8 Property, plant and equipment 59
9 Right-of-use assets and lease liabilities 60
10 Inventories 60
11 Trade and other receivables 60
12 Cash resources 61
13 Equity 62
14 Retirement benefit obligations and similar obligations 64
15 Incentive programs 66
16 Provisions 68
17 Contingent assets and contingent liabilities 68
18 Bank debt, bond debt and borrowings 70
19 Other payables 71
20 Financial instruments 71
21 Audit fees 75
22 Contractual obligations 76
23 Related parties 76
24 List of subsidiaries 77
25 Subsequent events 78
26 Significant accounting policies 79
CONSOLIDATED
FINANCIAL
STATEMENTS
CONTENTS
Statement of profit or loss 44
Statement of comprehensive income 44
Statement of financial position 45
Statement of changes in equity 46
Statement of cash flows 47
LUNDBECK
ANNUAL REPORT 2020
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2020
2019
Notes
DKKm
DKKm
Revenue
2
Cost of sales
3
Gross profit
Sales and distribution costs
3
Administrative expenses
3
Research and development costs
3
Other operating expenses, net
4
Profit from operations (EBIT)
Financial income
5
Financial expenses
5
Profit before tax
Tax on profit for the year
6
Profit for the year
Earnings per share, basic (EPS) (DKK)
13
Earnings per share, diluted (DEPS) (DKK)
13
2020
2019
Notes
DKKm
DKKm
Profit for the year
Actuarial gains/losses
14
(1 )
(61 )
Tax
13
Items that will not be reclassified subsequently to profit or loss
(55 )
Exchange rate gains/losses on investments in foreign subsidiaries
(1,007 )
Exchange rate gains/losses on additions to net investments in foreign
subsidiaries
(21 )
(136 )
Hedging of net investments in foreign subsidiaries
20
Deferred exchange gains/losses, hedging
20
(337 )
Deferred fair value of interest rate swaps
20
(90 )
Exchange gains/losses, hedging (transferred to revenue)
20
(5 )
Exchange gains/losses, hedging (transferred to intangible assets)
20
(17 )
Tax
13
(124 )
Items that may be reclassified subsequently to profit or loss
(578 )
Other comprehensive income
(578 )
Comprehensive income
STATEMENT OF PROFIT OR LOSS
1 January
– 31 December
STATEMENT OF COMPREHENSIVE INCOME
1 January
– 31 December
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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2020
2019
Notes
DKKm
DKKm
Goodwill
7
Product rights
7
Other rights
7
Projects in progress
7
Intangible assets
Land and buildings
8
Plant and machinery
8
Other fixtures and fittings, tools and equipment
8
Prepayments and assets under construction
8
Right-of-use assets
9
Property, plant and equipment
Other financial assets
Other receivables
Deferred tax assets
6
Financial assets
Non-current assets
Inventories
10
Trade receivables
11
Income taxes receivable
Other receivables
11
Prepayments
Receivables
Securities
12
Cash and bank balances
12
Current assets
Assets
2020
2019
Notes DKKm DKKm
Share capital
13
Foreign currency translation reserve
Hedging reserve
20
(75 )
Retained earnings
Equity
Retirement benefit obligations
14
Deferred tax liabilities
6
Provisions
16
Bank debt and bond debt
18
Lease liabilities
9
Other payables
19
Non-current liabilities
Retirement benefit obligations
14
Provisions
16
Bank debt
18
Trade payables
Lease liabilities
9
Income taxes payable
Other payables
19
Current liabilities
Liabilities
Equity and liabilities
STATEMENT OF FINANCIAL POSITION –
ASSETS
A
t 31 December
STATEMENT OF FINANCIAL POSITION –
EQUITY AND LIABILITI
ES
A
t 31 December
LUNDBECK
ANNUAL REPORT 2020
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STATEMENT OF CHANGES IN EQUITY
At 31 December
Share capital
Foreign currency
translation reserve
Hedging
reserve
Retained earnings
Total equity
Notes DKKm DKKm DKKm DKKm DKKm
2020
Equity at 1 January
(75 )
Profit for the year
Other comprehensive income
13
(748 )
(578 )
Comprehensive income
(748 )
Distributed dividends, gross
13
(816 )
(816 )
Dividends received, treasury shares
Capital increase through exercise of warrants
13
Buyback of treasury shares
13
(29 )
(29 )
Incentive programs
15
Tax on other transactions in equity
6
Other transactions
(812 )
(812 )
Equity at 31 December
2019
Equity at 1 January
(56 )
Profit for the year
Other comprehensive income
13
(19 )
(55 )
Comprehensive income
(19 )
Distributed dividends, gross
13
(2,389 )
(2,389 )
Dividends
received, treasury shares
Capital increase through exercise of warrants
13
Buyback of treasury shares
13
(20 )
(20 )
Incentive programs
15
Tax on other transactions in equity
6
(1 )
(1 )
Other transactions
(2,368 )
(2,368 )
Equity at 31 December
(75 )
LUNDBECK
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2020
2019
Notes
DKKm
DKKm
Profit from operations (EBIT)
Adjustment for non-cash items:
Amortization, depreciation and impairment losses
Incentive programs
Change in provisions
(307 )
(508 )
Other adjustments
(39 )
(124 )
Change in working capital:
Change in inventories
(265 )
Change in receivables
(428 )
(138 )
Change in short-term debt
(1,024 )
Cash flows from operations before financial receipts and payments
Financial receipts
Financial payments
(298 )
(15 )
Cash flows from ordinary activities
Income taxes paid
(325 )
(670 )
Cash flows from operating activities
Acquisition of businesses
(10,496 )
Purchase of intangible assets
7
(114 )
(88 )
Purchase of property, plant and equipment
8
(364 )
(356 )
Sale of property, plant and equipment
Purchase of securities and other financial assets
(17 )
(18 )
Sale of securities and other financial assets
Cash flows from investing activities
(467 )
(7,755 )
Cash flows from operating and investing activities (free cash flow)
(5,146 )
2020
2019
Notes
DKKm
DKKm
Proceeds from loans and issue of bonds
18
Repayment of bank loans and borrowings
18
(5,169 )
(4,080 )
Repayment of lease liabilities
9
(83 )
(67 )
Buyback of treasury shares
13
(29 )
(20 )
Capital increase through exercise of warrants
13
Dividends paid in the financial year, net
(815 )
(2,384 )
Cash flows from financing activities
(2,394 )
Net cash flows for the year
(598 )
Cash and bank balances at 1 January
Unrealized exchange gains/losses on cash and bank balances
(60 )
Net cash flows for the year
(598 )
Cash and bank balances at 31 December
Interest
-bearing debt, cash, bank balances and securities, net,
is composed as follows:
Cash and bank balances
12
3,924
3,008
Securities
12
-
4
Interest bearing debt
18
(8,030)
(9,578)
Interest
-bearing debt, cash, bank balances and securities, net,
at 31 December – net cash/(net debt)
(4,106)
(6,566)
STATEMENT OF CASH FLOWS
At
31 December
LUNDBECK
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1 BASIS OF PREPARATION
1.1 Reporting entity
H. Lundbeck A/S (herein denominated the “Parent company” or “Company”) is domiciled in Denmark. The
Company’s registered office is at Ottiliavej 9, 2500 Valby. These consolidated financial statements comprise
the Parent company and its subsidiaries (together referred to as the “Group” or “Lundbeck”). The Group is
engaged in research, development, production and sale of pharmaceuticals for the treatment of psychiatric and
neurological disorders. See note 2 Revenue and segment information.
1.2 Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU and additional requirements of the Danish Financial Statements Act.
The consolidated financial statements were approved by the Board of Directors and authorized for issue on 4
February 2021.
The comparative figures for 2019 are in accordance with the restated figures as published in the "Adjusted
Supplementary Information to the Annual Report 2019" on 5 January 2021 presenting the changes required by
the Danish Business Authority (“Erhvervsstyrelsen”). See note 7 Intangible assets.
The statement of financial position is also referred to as “balance sheet”.
Details of the Group’s accounting policies are included in note 1.7 Standards issued but not yet effective and
note 26 Significant accounting policies.
1.3 Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (“the functional currency”).
The consolidated financial statements are presented in Danish kroner (DKK), which is also the functional
currency of the Parent company. All amounts have been rounded to millions, unless otherwise indicated.
1.4 Principal accounting policies
The consolidated financial statements have been prepared to give a true and fair view of the Group’s financial
position at 31 December 2020 and financial performance for the year. The significant accounting policies are
described in note 26 Significant accounting policies. Management believes that the accounting policies listed
in note 1.5 Use of judgments and estimates are principal to the financial statements.
1.5 Use of judgments and estimates
In preparing the consolidated financial statements, Management has made estimates and judgments that affect
the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of estimates are
recognized prospectively.
Management believes that the following accounting estimates, assumptions and judgments are significant to
the consolidated financial statements.
Principal accounting policies
Key accounting estimates and judgments
Note
Provision for discounts and rebates
Estimate of discounts and rebates in the U.S.
2, 16
Income taxes and deferred income
taxes
Judgment and estimate of deferred tax assets and
liabilities and provision for uncertain tax positions
6
Impairment of product rights Estimate of the value-in-use methodology for
impairment of product rights
7
Provisions for legal disputes,
contingent assets and liabilities
Estimate of ongoing legal disputes, litigations and
investigations
16, 17
Other payables - contingent
consideration
Assumptions and estimates used in the calculation
of the fair value related to contingent consideration
from the businesses acquired in 2019
19
1.6 Changes in significant accounting policies
Effective 1 January 2020, a number of amendments to the accounting standards were implemented.
None of the amendments have a material impact on the accounting policies and/or on the consolidated financial
statements, consequently, no changes to the accounting policies or retrospective adjustments have been made
as a result of adopting these standards.
NOTE 1
LUNDBECK
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1 BASIS OF PREPARATION - CONTINUED
1.7 Standards issued but not yet effective
A number of new standards and amendments are effective for annual periods beginning after 1 January 2020
though not mandatory for annual reporting periods ending on 31 December 2020. Earlier application is
permitted; however the new or amended standards have not been early adopted by the Group.
The amended standards are as follows:
• Classification of Liabilities as Current or Non-current (amendments to IAS 1 Presentation of Financial
Statements)
• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (amendments to IFRS
10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures)
The amended standards are not mandatory for 31 December 2020 reporting periods. The Group expects to
adopt the new standards, improvements, amendments and interpretations when they become mandatory.
None of the amended standards are expected to have a significant impact on the accounting policies and/or
on the consolidated financial statements.
1.8 European Single Electronic Format (ESEF)
Reporting using ESEF is introduced for annual reports of public listed companies on EU regulated markets
from 2020.
The annual report is prepared in XHTML format, and the consolidated financial statements are tagged using
inline eXtensible Business Reporting Language (iXBRL). The iXBRL tags comply with the ESEF taxonomy,
which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS
Foundation. Where a financial statement line item is not defined in the ESEF taxonomy, an extension to the
taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for
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The annual report submitted to the Danish Financial Supervisory Authority consists of the XHTML document
together with certain technical files, all included in a ZIP file named HLUN-2020-12-31.zip.
2 REVENUE AND SEGMENT INFORMATION
The Group is engaged in research, development, production and sale of pharmaceuticals for the treatment of
psychiatric and neurological disorders, which is the Group’s single business (operating) segment. The business
segment reflects the way in which Management makes decisions and assesses the business performance.
The Group is organized in geographical regions, and the tables below show the Group’s revenue from external
customers broken down by key products and geographical regions.
Europe
North
America
International
Markets
Group
2020
DKKm
DKKm
DKKm
DKKm
Abilify Maintena
®
1,081 980 210 2,271
Brintellix
®
/Trintellix
®
837 1,682 583 3,102
Cipralex
®
/Lexapro
®
523 127 1,730 2,380
Northera
®
- 2,553 - 2,553
Onfi
®
- 642 - 642
Rexulti
®
/Rxulti
®
18 2,537 65 2,620
Sabril
®
- 777 - 777
Vyepti
®
- 93 - 93
Other pharmaceuticals
870 399 1,469 2,738
Other revenue
491
Effects from hedging
5
Total revenue
3,329
9,790
4,057
17,672
Of this amount:
Royalty
752
Downpayments and milestone payments
32
Of total revenue, DKK 30 million derived from sales in Denmark, and DKK 9,074 million derived from sales in
the U.S.
For information on trade receivables and major customers, see note 11 Trade and other receivables.
NOTES 1-2
LUNDBECK
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2 REVENUE AND SEGMENT INFORMATION – CONTINUED
Europe
North
America
International
Markets
Group
2019
DKKm
DKKm
DKKm
DKKm
Abilify Maintena
®
951 845 165 1,961
Brintellix
®
/Trintellix
®
730 1,579 517 2,826
Cipralex
®
/Lexapro
®
538 138 1,638 2,314
Northera
®
- 2,328 - 2,328
Onfi
®
- 1,052 - 1,052
Rexulti
®
/Rxulti
®
11 2,219 40 2,270
Sabril
®
- 847 - 847
Other pharmaceuticals
993 575 1,532 3,100
Other revenue
660
Effects from hedging
(322)
Total revenue
3,223
9,583
3,892
17,036
Of this amount:
Royalty
888
Downpayments and milestone payments
74
Of total revenue, DKK 29 million derived from sales in Denmark, and DKK 8,804 million derived from sales in
the U.S.
2020
2019
Intangible assets and property, plant and equipment
DKKm DKKm
Denmark
11,452
10,120
USA
12,487
16,557
Other countries
1,532
2,252
Total
25,471
28,929
3 EMPLOYEE COSTS
Breakdown of employee costs
2020
2019
DKKm DKKm
Short-term employee benefits
4,293
3,849
Retirement benefits
244
238
Social security costs
353
330
Equity- and cash-settled incentive programs
34
36
Total
4,924
4,453
2020
2019
Employee costs by nature
DKKm
DKKm
Cost of sales
725 593
Sales and distribution costs
2,550 2,344
Administrative expenses
633 531
Research and development costs
1,016 985
Total
4,924
4,453
Registered Executive Management
Each of the registered Executive Management members participates in a short-term incentive program that
provides an annual cash bonus based on the achievement of predetermined targets for the preceding financial
year. The short-term incentive payment levels will be determined by the Board of Directors from year to year.
The CEO has a target of up to 100% and a maximum of up to 117% of the fixed annual base salary. The other
registered Executive Management members have a target of up to 33.33% and a maximum of up to 50% of
the fixed annual base salary. All registered Executive Management members may receive payment below
target and potentially no payment in case of performance below target.
NOTES 2-3
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3 EMPLOYEE COSTS – CONTINUED
Salary
Cash
bonus
Pension
Other
benefits
Equity- and
cash-settled
incentive
programs
Total
Tax
indemni-
fication¹
Total
after tax
indemni-
fication
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
2020
Deborah Dunsire, President and
CEO
9.6 9.1 - 0.4 3.9 23.0 2.7 25.7
Lars Bang, Executive Vice
President, Product Development &
Supply
4.0 1.8 1.1 0.2 2.2 9.3 - 9.3
Anders Götzsche, Executive Vice
President, CFO
5.0 2.4 1.3 0.2 2.3 11.2 - 11.2
Per Johan Luthman, Executive Vice
President, Research &
Development
3.8 1.7 1.0 0.2 1.1 7.8 - 7.8
Jacob Tolstrup, Executive Vice
President, Commercial Operations
3.9 1.7 1.0 0.2 1.9 8.7 - 8.7
Total
26.3
16.7
4.4
1.2
11.4
60.0
2.7
62.7
2019
Deborah Dunsire, President and
CEO
9.4 9.0 - 0.1 2.7 21.2 36.0 57.2
Lars Bang, Executive Vice
President, Product Development &
Supply
4.0 1.8 1.0 0.2 1.9 8.9 - 8.9
Anders Götzsche, Executive Vice
President, CFO
4.9 2.3 1.3 0.2 1.5 10.2 - 10.2
Per Johan Luthman², Executive
Vice President, Research &
Development
3.2 1.6 0.8 0.1 0.5 6.2 - 6.2
Jacob Tolstrup, Executive Vice
President, Commercial
Operations 3.8 1.8 1.0 0.2 1.5 8.3 - 8.3
Total
25.3
16.5
4.1
0.8
8.1
54.8
36.0
90.8
1) According to the employment agreement with Deborah Dunsire, Lundbeck will pay the difference in taxation on investment ret
urn from
personal assets between the U.S. and Denmark.
2) Per Johan Luthman joined H. Lundbeck A/S in February 2019.
Executives
2020
2019
DKKm DKKm
Short-term employee benefits
96
85
Retirement benefits
11
11
Other social security costs
1
1
Equity- and cash-settled incentive programs
11
10
Total
119
107
Executives are persons who report directly to the registered Executive Management.
Board of Directors
The total remuneration of the Board of Directors for 2020 amounted to DKK 7.5 million (DKK 6.8 million in 2019).
The amount includes fees for participation in the Audit Committee of DKK 0.7 million (DKK 0.7 million in 2019),
the Remuneration & Nomination Committee of DKK 0.7 million (DKK 0.7 million in 2019), the Scientific
Committee of DKK 0.7 million (DKK 0.7 million in 2019) and travel allowances of DKK 0.8 million (DKK 0.5
million in 2019) for board members with permanent residence outside of Europe. The remuneration for 2020 is
consistent with the remuneration presented at the Annual General Meeting held on 24 March 2020.
The members of the Board of Directors held a total of 47,313 Lundbeck shares at 31 December 2020 (47,313
shares in 2019).
The total remuneration of the Chairman of the Board of Directors amounted to DKK 1.7 million (DKK 1.6 million
in 2019). The total remuneration of the Deputy Chairman of the Board of Directors amounted to DKK 1.2 million
(DKK 1.1 million in 2019). These amounts include fees for participation in Board committees.
Number of employees
2020
2019
Average number of full-time employees in the financial year
5,717
5,475
Number of full-time employees at 31 December
In Denmark
1,728 1,786
In other countries
3,900 4,020
Total
5,628
5,806
NOTE 3
LUNDBECK
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4 OTHER OPERATING EXPENSES, NET
In 2020, other operating expenses, net, amounted to DKK 59 million (DKK 514 million in 2019) relating to
integration, retention and transaction costs in connection with the acquisition of Alder BioPharmaceuticals, Inc.
(subsequently renamed Lundbeck Seattle BioPharmaceuticals, Inc.).
5 NET FINANCIALS
2020
2019
DKKm
DKKm
Net interest income/(expenses) from financial assets and financial liabilities measured at
amortized cost
(167)
(17)
Interest expenses relating to
lease liabilities (8)
(7)
Net gains/(losses) on securities and other financial assets, measured at fair value through profit
or loss, incl. dividends
80 (5)
Net fair value adjustment of contingent consideration
3 (20)
Net exchange
gains/(losses) 76 (55)
Net income/(expenses), other financial items
(68)
(23)
Financial income/(expenses) - Net financials
(84)
(127)
Interest income from financial assets measured at amortized cost amounted to DKK 6 million (DKK 39 million
in 2019), and interest expenses on financial assets and financial liabilities measured at amortized cost
amounted to DKK 173 million (DKK 56 million in 2019).
6 INCOME TAXES
Tax on profit for the year
2020
2019
DKKm DKKm
Current tax
735
402
Prior-year adjustments, current tax
1
385
Prior-year adjustments, deferred tax
(41)
(403)
Change in deferred tax for the year
(284)
303
Change in deferred tax as a result of changed income tax rates
36
(1)
Total tax for the year
447
686
Tax for the year is composed of:
Tax on profit for the year
325
713
Tax on other comprehensive income
123
(28)
Tax on other transactions in equity
(1)
1
Total tax for the year
447
686
For a specification of tax on comprehensive income, see note 13 Equity.
Uncertain tax positions
The Group operates in a multinational tax environment. Complying with tax rules can be complex as the
interpretation of legislation and case law may not always be clear or may change over time. In addition, transfer
pricing disputes with tax authorities may occur. Management’s judgments are applied to assess the possible
effect of exposures and the possible outcome of disputes or interpretational uncertainties.
The net accrual for uncertain tax positions amounts to DKK 406 million (DKK 385 million in 2019). Management
believes that the accrual is adequate. However, the actual obligation may differ from the accrual made and
depends on the outcome of litigations and settlements with the relevant tax authorities.
NOTES 4-6
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6 INCOME TAXES - CONTINUED
Explanation of the Group’s effective tax rate
DKKm %
2020
Profit before tax
1,906
Calculated tax, 22%
419
22.0
Tax effect of:
Differences in the income tax rates of foreign subsidiaries from the Danish
corporate income
tax rate
20
1.0
Non-deductible expenses/non-taxable income and other permanent differences
59
3.1
Research and development incentives
(69)
(3.6)
Foreign-derived intangible income benefit
(26)
(1.4)
Non-deductible writedown on intangible assests
111
5.8
Non-deductible amortization of product rights
101
5.3
Change in valuation of net tax assets
(286)
(15.0)
Change in deferred tax as a result of changed income tax rates
36
1.9
Prior-year tax adjustments etc., total effect on operations
(40)
(2.1)
Effective tax/tax rate for the year
325
17.0
DKKm %
2019
Profit before tax
3,026
Calculated tax, 22%
665
22.0
Tax effect of:
Differences in the income tax rates of foreign subsidiaries from the Danish corporate income
tax rate
62
2.0
Non-deductible expenses/non-taxable income and other permanent differences
79
2.6
Research and development incentives
(13)
(0.4)
Foreign-derived intangible income benefit
(140)
(4.6)
Non-deductible amortization of product rights
103
3.4
Change in valuation of net tax assets
(24)
(0.8)
Change in deferred tax as a result of changed income tax rates
(1)
(0.0)
Prior-year tax adjustments etc., total effect on operations
(18)
(0.6)
Effective tax/tax rate for the year
713
23.6
NOTE 6
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6 INCOME TAXES – CONTINUED
Deferred tax balances
NOTE 6
Temporary differences between assets and liabilities as stated
in the consolidated financial statements and in the tax base
Balance at
1 January
Effect of foreign
exchange
differences
Adjustment of
deferred tax at
beginning of year²
Additions through
acquisitions
Movements
during the year
Balance at
31 December
DKKm DKKm DKKm DKKm DKKm DKKm
2020
Intangible assets
15,708
(981)
5
-
(1,896)
12,836
Property, plant and equipment
753
(15)
6
-
(16)
728
Inventories
597
(15)
(582)
(178)
103
(75)
Provisions
(1,645)
102
49
(164)
247
(1,411)
Other items¹
(546)
36
(8)
-
(27)
(545)
Tax loss carryforwards etc.
(7,191)
380
366
164
453
(5,828)
Total temporary differences
7,676
(493)
(164)
(178)
(1,136)
5,705
Deferred (tax assets)/tax liabilities
1,831
(119)
(41)
(38)
(248)
1,385
Research and development incentives
(4)
-
-
-
-
(4)
Deferred (tax assets)/tax liabilities
1,827
(119)
(41)
(38)
(248)
1,381
2019
Intangible assets
4,420
(298)
10
15,274
(3,698)
15,708
Property, plant and equipment
283
(39)
202
98
209
753
Inventories
(116)
(3)
22
668
26
597
Provisions
(1,452)
(57)
(61)
(462)
387
(1,645)
Other items¹
1,867
(116)
(1,937)
(51)
(309)
(546)
Tax loss carryforwards etc.
(4,365)
47
(124)
(7,229)
4,480
(7,191)
Total temporary differences
637
(466)
(1,888)
8,298
1,095
7,676
Deferred (tax assets)/tax liabilities
109
(16)
(403)
1,910
231
1,831
Research and development incentives
(73)
(2)
-
-
71
(4)
Deferred (tax assets)/tax liabilities
36
(18)
(403)
1,910
302
1,827
1) Movements during the year include DKK
-1 million (DKK 1 million in 2019) recognized in equity.
2) In 2019, in accordance with IFRIC 23 Uncertainty over Income Tax Treatments movements in Other items includes a reclassification to income taxes payable of DKK 1,672 million (tax value DKK 368 million) relating to provisions for uncertain tax positions.
LUNDBECK
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6 INCOME TAXES – CONTINUED
Management estimates future income according to budgets, forecasts, business plans and initiatives scheduled
for the coming years, which supports the recognition of deferred tax assets. When forecasting the utilization of
tax assets, the Group applies the same assumptions as for impairment testing. See note 7 Intangible assets.
Accordingly, at 31 December 2020 all deferred tax assets relating to tax losses carried forward in Denmark
from 2015, 2016 and 2018 were capitalized in the amount of DKK 777 million (DKK 820 million in 2019). U.S.
tax losses and tax credits stemming from acquisitions have been recognized in the amount of DKK 553 million
(DKK 775 million in 2019) equalling the expected utilization within a foreseeable future, whereas an amount of
DKK 132 million (DKK 454 million in 2019) has not been recognized in the balance sheet.
Unrecognized deferred tax assets
2020
2019
DKKm DKKm
Unrecognized deferred tax assets at 1 January
507
77
Additions through acquisitions
- 454
Prior
-year adjustments (37)
(24)
Additions
1
3
Recognized
(287)
(3)
Unrecognized deferred tax assets at 31 December
184
507
Unrecognized deferred tax assets primarily relate to net operating losses and tax credits not expected to be
utilized within a foreseeable future.
NOTE 6
2020
2020
2020
2019
2019
2019
Deferred tax
assets
Deferred tax
liabilities
Net
Deferred tax
assets
Deferred tax
liabilities
Net
Deferred (tax assets)/tax liabilities
DKKm DKKm DKKm DKKm DKKm DKKm
Intangible assets
(105)
3,156
3,051
(35)
3,790
3,755
Property, plant and equipment
(8)
179
171
(9)
183
174
Inventories
(94)
68
(26)
(70)
207
137
Provisions
(339)
-
(339)
(396)
-
(396)
Other items
(195)
53
(142)
(197)
53
(144)
Tax loss carryforwards etc.
(1,330)
-
(1,330)
(1,695)
-
(1,695)
Research and development incentives
(4)
-
(4)
(4)
-
(4)
Deferred (tax assets)/tax liabilities
(2,075)
3,456
1,381
(2,406)
4,233
1,827
Set off within legal tax entities and jurisdictions
1,842 (1,842)
- 2,401 (2,401)
-
Total net deferred (tax assets)/tax liabilities
(233)
1,614
1,381
(5)
1,832
1,827
LUNDBECK
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7 INTANGIBLE ASSETS
Reconciliation of carrying amount
Goodwill
Product
rights¹
Other
rights²
Projects in
progress²
Total
intangible
assets
Intangible assets
DKKm
DKKm
DKKm
DKKm
DKKm
2020
Cost at 1 January
5,278 31,610 1,826 134 38,848
Effect of foreign exchange differences
(409)
(1,357)
(12)
(1)
(1,779)
Transfers
- - 55 (55)
-
Additions
- - 21 93 114
Additions through acquisitions, change in opening
balance
(24)
- - - (24)
Disposals
- - (159)
- (159)
Cost at 31 December
4,845
30,253
1,731
171
37,000
Amortization and impairment losses at 1 January
- 10,878 1,712 3 12,593
Effect of foreign exchange differences
- (597)
(10)
- (607)
Transfers
- - 3 (3)
-
Amortization
- 1,548 63 - 1,611
Impairment losses
- 792 - - 792
Disposals
- - (127)
- (127)
Amortization and impairment losses at 31 December
-
12,621
1,641
-
14,262
Carrying amount at 31 December
4,845
17,632
90
171
22,738
1) At 31 December 2020, product
rights not yet commercialized amounted to DKK 5,890 million (DKK 15,956 million in 2019).
2) Other rights and projects in progress include items such as the IT system SAP. The amounts include directly attributable internal expenses.
In 2020, Lundbeck changed the initial purchase price allocation relating to the acquisition of Alder
BioPharmaceuticals, Inc. (subsequently renamed Lundbeck Seattle BioPharmaceuticals, Inc.) due to
prepayments to a supplier expensed prior to the acquisition date and due to a reassessment of the inventory
valuation. This resulted in a decrease in goodwill of DKK 24 million, comprising an increase in prepayments of
DKK 164 million and a decrease in inventories, net of tax, of DKK 140 million.
Goodwill
Product
rights¹
Other
rights²
Projects in
progress²
Total
intangible
assets
Intangible assets
DKKm
DKKm
DKKm
DKKm
DKKm
2019
Cost at 1 January
4,300 16,239 1,759 136 22,434
Effect of foreign exchange differences
69 97 3 - 169
Additions through acquisitions
909 15,274 - - 16,183
Transfers
- - 58 (58)
-
Additions
- - 15 73 88
Disposals
- - (9)
(17)
(26)
Cost at 31 December
5,278
31,610
1,826
134
38,848
Amortization and impairment losses at 1 January
- 9,432 1,648 20 11,100
Effect of foreign exchange differences
- 137 3 - 140
Amortization
- 1,309 68 - 1,377
Disposals
- - (7)
(17)
(24)
Amortization and impairment losses at 31 December
-
10,878
1,712
3
12,593
Carrying amount at 31 December
5,278
20,732
114
131
26,255
Description of material product rights
In October 2019, as part of the acquisition of Alder BioPharmaceuticals, Inc. (subsequently renamed Lundbeck
Seattle BioPharmaceuticals, Inc.), Lundbeck acquired the eptinezumab product rights, which is an
investigational monoclonal antibody (mAb) for migraine prevention targeting the calcitonin gene-related peptide
(CGRP). The value of the product rights was DKK 13,421 million at the time of acquisition. The carrying amount
of DKK 12,076 million at 31 December 2020 (DKK 13,340 million in 2019) was affected by developments in the
USD/DKK exchange rate.
NOTE 7
LUNDBECK
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7 INTANGIBLE ASSETS - CONTINUED
In May 2019, as part of the acquisition of Abide Therapeutics, Inc. (subsequently renamed Lundbeck La Jolla
Research Center, Inc., Lundbeck acquired a portfolio of compounds, including the product rights to
ABX-1431; a first-in-class, small-molecule inhibitor of monoacylglycerol lipase (MGLL) currently being
investigated in clinical trials for the treatment of neurological disorders, and various compounds in the pre-
clinical phase. The value of the portfolio of compounds recognized as product rights was DKK 1,853 million at
the time of acquisition. The carrying amount of DKK 1,871 million at 31 December 2020 (DKK 1,840 million in
2019) was affected by developments in the USD/DKK exchange rate.
In 2015, Lundbeck recognized an impairment loss on the Rexulti
®
product rights in the approximate amount of
DKK 5 billion. In 2020, based on the requirement from the Danish Business Authority, an impairment test was
performed for 2017, leading to the conclusion that the impairment loss recognized in the Annual Report 2015
should be reversed in 2017 net of accumulated amortization. The reversal led to an increase in the value of the
Rexulti
®
product rights amounting to DKK 3,766 million, net of amortization, at 31 December 2017. The value
of the Rexulti
®
product rights was restated and published on 5 January 2021 as “Adjusted Supplementary
Information to the Annual Report 2019”. The total carrying amount of the Rexulti
®
product rights amounted to
DKK 2,823 million, net of amortization, at 31 December 2020 (DKK 3,150 million in 2019).
Amortization and impairment losses
Amortization and impairment losses for the year are included in the following functions in the statement of profit
or loss:
2020
2019
Amortization and impairment losses
DKKm DKKm
Cost of sales
1,584
1,343
Sales and distribution costs
33
18
Administrative expenses
18
6
Research and development costs
800
12
Total
2,435
1,379
In March 2020, it was announced that the phase IIa study (AMBLED) of its novel selective positive allosteric
modulator of the glutamate 4 receptor (mGlu4 PAM), foliglurax, for the treatment of Parkinson's disease did not
meet the primary study endpoint. Consequently, Lundbeck recognized an impairment loss of DKK 792 million
relating to the foliglurax product rights. The impairment loss is included in research and development costs.
Impairment test
The Group is considered a single cash-generating unit (CGU) as this is how Management makes decisions
and assesses business performance. All subsidiaries are considered fully integrated into the Group as no entity
has significant independent or separately identifiable inflow of cash. Most cash inflows are based on the output
from research and development activities performed by headquarters on behalf of the entire Group. Accordingly,
an impairment test was performed based on Lundbeck having one single CGU.
In addition to the impairment test of the CGU, an impairment test was performed for the product rights of Rexulti
®
as indications of impairment were identified.
Methodology
In the impairment test of the CGU, based on the fair value less cost of disposal, the market price of Lundbeck
is compared with its carrying amount.
In the impairment test of the product rights of Rexulti
®
, based on value in use, the discounted expected future
cash flows for the specific asset tested are compared with the carrying amount of the intangible asset. The
expected future cash flows are based on a forecast period of nine years, which is the period used by
Management for decision making, with due consideration of patent expiry. The assumptions used in the
impairment test are based on benchmarked external data and historical trends. The key parameters in the
calculation of the value in use are revenue, earnings, working capital, discount rate and the preconditions for
the cash flow period.
In the impairment test of the product rights of Rexulti
®
, based on value in use, significant assumptions and
estimates are applied to the discounted expected future cash flows from the product right. The value-in-use
calculation is compared with the carrying amount of the relevant asset.
NOTE 7
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7 INTANGIBLE ASSETS - CONTINUED
The four category elements in the table below are taken into consideration when determining the key
parameters for the value-in-use calculation.
Financial elements
Market elements
Prices
Healthcare reforms
Rebates
Price reforms
Quantities
Market access
Patient population
Pharma restrictions
Market shares
Launch success
Competition
Product positioning
Fill rates
Competing pharmaceuticals
Prescription rates
Generics on the market
Lundbeck costs (including promotion costs)
R&D elements
Other elements
R&D spend
Supply chain effectiveness
Collaborations
Strength and abilities of partners
Pipeline success rate
Product labelling
Liaison with regulatory bodies
The calculation of the value in use for product right is based on a discount rate after tax of 7.3% (7.93%
in 2019).
2020 testing outcome
The impairment tests performed in 2020 did not result in the recognition of impairment losses other than the
impairment loss on the foliglurax product rights recognized in March 2020.
2019 testing outcome
The impairment test performed in 2019 did not result in the recognition of any impairment losses.
Impact of possible changes in key assumptions
If the budgeted revenue had been 5% lower than Management's estimates, the safety margin would continue
to be positive. If the discount rate after tax applied to cash flows had been 1% higher, the safety margin would
continue to be positive.
NOTE 7
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
59 / 105
8 PROPERTY, PLANT AND EQUIPMENT
Land and
buildings¹
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Prepayments
and assets
under
construction
Total
property,
plant and
equipment
Property, plant and equipment
DKKm
DKKm
DKKm
DKKm
DKKm
2020
Cost at 1 January
3,381 1,906 853 419 6,559
Effect of foreign exchange differences
(1)
(6)
(16)
(2)
(25)
Transfers
91 68 21 (180)
-
Additions
29 46 34 255 364
Disposals
(5)
(12)
(59)
- (76)
Cost at 31 December
3,495
2,002
833
492
6,822
Depreciation and impairment losses at 1 January
2,176 1,468 717 - 4,361
Effect of foreign exchange differences
(1)
(5)
(8)
- (14)
Depreciation
104 100 45 - 249
Impairment losses
1 7 - - 8
Disposals
(4)
(12)
(43)
- (59)
Depreciation and impairment losses at
31 December
2,276
1,558
711
-
4,545
Carrying amount at 31 December
1,219
444
122
492
2,277
1) No land and
buildings were mortgaged at 31 December 2020 and at 31 December 2019.
Land and
buildings¹
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Prepayments
and assets
under
construction
Total
property,
plant and
equipment
Property, plant and equipment
DKKm
DKKm
DKKm
DKKm
DKKm
2019
Cost at 1 January
3,309 1,765 813 333 6,220
Effect of foreign exchange differences
1 - 3 - 4
Additions through acquisitions
- 17 32 - 49
Transfers
60 89 11 (160)
-
Additions
17 55 28 256 356
Disposals
(6)
(20)
(34)
(10)
(70)
Cost at 31 December
3,381
1,906
853
419
6,559
Depreciation and impairment losses at 1 January
2,083 1,401 708 10 4,202
Effect of foreign exchange differences
1 - 3 - 4
Depreciation
97 87 36 - 220
Impairment losses
1 - - - 1
Disposals
(6)
(20)
(30)
(10)
(66)
Depreciation and impairment losses at
31 December
2,176
1,468
717
-
4,361
Carrying amount at 31 December
1,205
438
136
419
2,198
NOTE 8
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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9 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
2020
2019
Amounts recognized in profit or loss
DKKm
DKKm
Expenses relating to short
-term leases, not capitalized 2 4
Depreciation of right
-of-use assets, land and buildings 85 70
Interest expenses relating to lease liabilities
8 7
2020
2019
Land and buildings
DKKm DKKm
Carrying amount at 1 January
476
441
Additions (in 2019, including additions through acquisitions)
34
76
Carrying amount at 31 December
456
476
Balance at
1 January
Cash outflow
Non-cash
flow
Balance at
31 December
Development in lease liabilities
DKKm DKKm DKKm DKKm
2020
Lease liabilities
516
(83)
60
493
Total lease liabilities
516
(83)
60
493
2019
Lease liabilities
472 (67)
111 516
Total lease liabilities
472
(67)
111
516
The total cash outflow from lease agreements relating to office leases and similar amounted to DKK 91 million
(DKK 74 million in 2019) and includes repayment of lease liabilities and interest.
The maturity analysis of lease liabilities is provided in the table ”Classification of and contractual maturity dates
for financial assets and financial liabilities” in note 20 Financial instruments.
10 INVENTORIES
2020
2019
DKKm DKKm
Raw materials and consumables
206
233
Work in progress
1,155
1,084
Finished goods and goods for resale
802
887
Total
2,163
2,204
Inventories recognized as cost of sales amounted to DKK 2,618 million (DKK 2,531 million in 2019).
Inventories of DKK 722 million (DKK 749 million in 2019) are expected to be utilized after more than
12 months.
11 TRADE AND OTHER RECEIVABLES
2020
2019
DKKm
DKKm
Trade receivables
2,579 2,797
Writedowns
(26)
(29)
Trade receivables, net
2,553
2,768
Other receivables
868
388
Credit risks
Lundbeck’s products are sold primarily to distributors of pharmaceuticals, pharmacies and hospitals. The
payment conditions for the customers, including credit periods and any payment of interest in case of non-
payment, vary, but are always based on industry practice in the relevant market. As a result of special trading
conditions in specific markets, the credit period may be up to approximately 200 days. The weighted average
credit period is approximately 60 days.
NOTES 9-11
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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11 TRADE AND OTHER RECEIVABLES - CONTINUED
In April 2020, Lundbeck purchased a “key buyer” credit insurance covering around 100 of the largest customers
of the Group. The credit insurance protects against insolvency, protracted default and political risk.
Changes to the Group’s customer portfolio are limited. When collaboration is established with a new customer,
credit assessment is done either by Lundbeck or an external credit rating agency. At the time of revenue
recognition, Lundbeck assesses the full lifetime expected credit losses. In addition, undue and due receivables
are analyzed in an ongoing process. Based on the credit assessment, receivables analysis, historical and
industry experience, it is estimated whether the receivables are recoverable or writedowns are needed.
Historically, losses on debtors have been insignificant. This was also the case in 2020.
The Group has one customer in the U.S. contributing approximately DKK 1.8 billion (DKK 1.7 billion in 2019)
of total revenue. No other single customer contributed 10% or more to total revenue.
Fluctuations in foreign exchange rates, including the impact from currency devaluations, represent an inherent
risk as Lundbeck also operates in volatile economies. Lundbeck monitors and takes action to mitigate risks
associated with receivables.
Market risks
The pharmaceutical market is characterized by the aim of authorities to reduce or cap healthcare costs in
general. Market changes such as price reductions and ever-earlier launch of generics may have a considerable
impact on the earnings potential of pharmaceuticals.
Moreover, the growing number of market access hurdles set up by local authorities is impairing the earnings
potential of Lundbeck’s new generation of pharmaceuticals in the finite period of exclusivity. Lundbeck expects
that these conditions will prevail going forward.
12 CASH RESOURCES
2020
2019
DKKm DKKm
Cash and bank balances
3,924
3,008
Securities with a maturity of more than three months¹
-
4
Cash, bank balances and securities at 31 December
3,924
3,012
1) The securities portfolio is classified as financial assets measured at fair value through profit or loss.
Liquidity risk and capital structure
The credit risk on cash and derivatives (forward exchange contracts, currency options and interest rate swaps)
is limited as Lundbeck only deals with banks with a solid credit rating. To further limit the risk of loss, internal
limits have been defined for the credit exposure accepted towards the banks with whom Lundbeck collaborates.
The counterparty risk towards banks with a short-term credit rating lower than A-1 (Standard & Poor’s) is kept
to a minimum, only allowing balances necessary for operating needs within the immediate future. Credit lines
are part of the Treasury Policy.
The Treasury Policy covers financial resources, foreign currency exposure, interest rate risk, securities, loan
and bond portfolios as well as capitalization of subsidiaries. The Treasury Policy is presented to the Audit
Committee annually for subsequent approval by the Board of Directors. In addition, the Board of Directors
approves the framework for selecting financial collaboration partners and the credit lines and types of
transactions allowed.
Pursuant to its Treasury Policy, Lundbeck must ensure that a minimum of DKK 1.0 billion is held in cash or
cash equivalents. If this amount is not available in cash, fixed-term deposits or bonds, Lundbeck will enter into
committed credit facilities with its banking partners.
In 2019, Lundbeck entered into two loan agreements with its strategic banks; a revolving credit facility (RCF)
of EUR 1.5 billion and a term loan of DKK 2 billion.
The RCF expires in 2024 and has an option, at the lenders' discretion, to extend the maturity for up to two
additional years. The flexible structure of the RCF enables repayment of the debt in full at short notice, normally
not more than three months, and still maintain the facility until expiration of the credit commitment.
The term loan also has an extension possibility, at the lenders’ discretion, to extend the maturity for up to two
additional years. Due to Lundbeck’s significant unutilized credit facilities and cash position, from a liquidity risk
perspective, it is not expected to be necessary to extend the term loan.
NOTES 11-12
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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12 CASH RESOURCES - CONTINUED
Both facilities are subject to covenants, and no breaches were encountered during the year. At 31 December
2020, Lundbeck had unutilized committed credit facilities of DKK 9.4 billion (DKK 4.1 billion in 2019).
In October 2020, Lundbeck issued a seven-year eurobond in the amount of EUR 500 million with a fixed coupon
of 0.875%. The bond was issued under Lundbeck´s euro medium-term note (EMTN) program of EUR 2 billion.
In addition, Lundbeck has a number of uncommitted credit facilities to cover its day-to-day operations. At 31
December 2020 and 31 December 2019, these credit facilities were unutilized.
When managing its capital structure, Lundbeck’s main objective is to support the Expand and invest to grow
strategy; use capital resources for required research and development and for investments to realize the
strategy; and to generate long-term attractive return for the shareholders. Lundbeck also wishes to be a strong
financial counterparty to debt providers and other stakeholders by maintaining its investment grade credit rating
(BBB-).
To maintain or adjust its capital structure, Lundbeck may adjust dividends paid to shareholders, return capital
to shareholders, issue new shares, sell assets to reduce debt or increase debt. To minimize its refinancing risk,
Lundbeck strives to have diversified funding, both in terms of duration and source.
Lundbeck defines capital as total equity and net interest-bearing debt (see notes 18 Bank debt, bond debt and
borrowings and 9 Right-of-use assets and lease liabilities) and after deducting cash resources. At 31 December
2020, total equity amounted to DKK 16,973 million compared with DKK 16,782 million at 31 December 2019.
At 31 December 2020, interest-bearing debt, cash, bank balances and securities, net, amounted to DKK 4,106
million compared with DKK 6,566 million at 31 December 2019. The change in interest-bearing debt, cash,
bank balances and securities, net, is mainly due to cash flows from operations.
Lundbeck has unfunded obligations relating to defined benefit plans amounting to DKK 255 million at 31
December 2020 (DKK 262 million in 2019).
13 EQUITY
Share capital
The share capital of DKK 996 million at 31 December 2020 is divided into 199,148,222 shares at a nominal
value of DKK 5 each.
2020
2019
2018
2017
2016
Share capital
DKKm
DKKm
DKKm
DKKm
DKKm
At 1 January
996 996 995 988 987
Capital increase through exercise of warrants
- - 1 7 1
At 31 December
996
996
996
995
988
2020
2019
Issued shares
Number Number
At 1 January
199,136,725
199,104,996
Capital increase through exercise of warrants
11,497
31,729
At 31 December
199,148,222
199,136,725
Treasury shares
Shares of
DKK 5 nom.
Nominal
value
Proportion of
share capital
Cost
Treasury shares
Number DKKm % DKKm
2020
Shareholding at 1 January
435,019
2
0.22
135
Share buyback
114,000
1
0.06
29
Shares used for funding incentive programmes
(99,123)
(1)
(0.05)
(29)
Shareholding at 31 December
449,896
2
0.23
135
2019
Shareholding at 1 January
366,019
2
0.18
115
Share buyback
69,000
-
0.04
20
Shareholding at 31 December
435,019
2
0.22
135
The Parent company has only one class of shares, and all shares rank equally. The shares are negotiable
instruments with no restrictions on their transferability.
NOTES 12-13
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
63 / 105
13 EQUITY - CONTINUED
In 2020, the Parent company acquired treasury shares at a value of DKK 29 million (DKK 20 million in 2019),
corresponding to 114,000 shares (69,000 shares in 2019). The shares were acquired to fund Lundbeck’s long-
term share-based incentive programs. A total of 99,123 shares were used for this purpose in 2020 (0 shares in
2019).
The Board of Directors is authorized to issue new shares and raise the share capital of the Parent company as
set out in article 4 of the Parent company’s Articles of Association.
The share capital is in compliance with the capital requirements of the Danish Companies Act and the rules of
Nasdaq Copenhagen.
In 2020, employees exercised warrants totalling DKK 1 million (DKK 4 million in 2019). The share premium in
this connection was DKK 1 million (DKK 4 million in 2019).
Distribution of profit
The Board of Directors is proposing distribution of dividends for 2020 of approximately 31% (35% in 2019) of
the net profit for the year allocated to the shareholders, equivalent to DKK 2.50 per share (DKK 4.10 per share
in 2019) or DKK 498 million (DKK 816 million in 2019), inclusive of dividends on treasury shares. Total dividends
are based on the current share capital.
Earnings per share
2020
2019
Profit for the year (DKKm)
1,581
2,313
Average number of shares (‘000 shares)
199,146
199,120
Average number of treasury shares (‘000 shares)
(416)
(427)
Average number of shares, excl. treasury shares (‘000 shares)
198,730
198,693
Average number of warrants, fully diluted (‘000 warrants)
3 22
Average number of shares, fully diluted ('000 shares)
198,733
198,715
Earnings per share, basic (EPS) (DKK)
7.95
11.64
Earnings per share, diluted (DEPS) (DKK)
7.95
11.64
At 31 December 2020, no warrants were outstanding.
Tax on other comprehensive income
Before tax
Tax
After tax
DKKm DKKm DKKm
2020
Other comprehensive income recognized under foreign currency
translation reserve in the statement of changes in equity
Exchange rate gains/losses on investments in foreign subsidiaries
(1,007)
-
(1,007)
Exchange rate gains/losses on additions to net investments in foreign
subsidiaries
(21)
3
(18)
Hedging of net investments in foreign subsidiaries
356
(79)
277
Total
(672)
(76)
(748)
Other
comprehensive income recognized under hedging reserve in the
statement of changes in equity
Deferred exchange gains/losses, hedging
313
(69)
244
Deferred fair value of interest rate swaps
(90)
20
(70)
Exchange gains/losses, hedging (transferred to revenue)
(5)
1
(4)
Total
218
(48)
170
Other comprehensive income recognized under retained
earnings in the statement of changes in equity
Actuarial gains/losses
(1)
1
-
Total
(1)
1
-
Recognized in other comprehensive income
(455)
(123)
(578)
NOTE 13
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
64 / 105
13 EQUITY - CONTINUED
Before tax
Tax
After tax
DKKm DKKm DKKm
2019
Other comprehensive income recognized under foreign currency
translation reserve in the statement of changes in equity
Exchange rate gains/losses on investments in foreign subsidiaries
135
-
135
Exchange rate gains/losses on additions to net investments in foreign
subsidiaries
(136)
30
(106)
Hedging of net investments in foreign subsidiaries
62
(13)
49
Total
61
17
78
Other comprehensive income recognized under hedging reserve in the
statement of changes in equity
Deferred exchange gains/losses, hedging
(337)
74
(263)
Deferred fair value of interest rate swaps
8
(2)
6
Exchange gains/losses, hedging (transferred to revenue)
322
(71)
251
Exchange gains/losses, hedging (transferred to intangible assets)
(17)
4
(13)
Total
(24)
5
(19)
Other comprehensive income recognized under retained
earnings in the statement of changes in equity
Actuarial gains/losses
(61)
6
(55)
Total
(61)
6
(55)
Recognized in other comprehensive income
(24)
28
4
Exchange rate gains/losses on investments in foreign subsidiaries, a loss of DKK 1,007 million (a gain of DKK
135 million in 2019), and exchange rate gains/losses on additions to net investments in foreign subsidiaries, a
loss of DKK 21 million (DKK 136 million in 2019), are primarily driven by developments in USD/DKK and
GBP/DKK exchange rates.
14 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS
Defined contribution plans
The major defined contribution plans cover employees in Australia, Canada, Denmark, Finland, South Korea,
Sweden, the UK and the U.S. The cost of defined contribution plans, representing contributions to the plans,
amounted to DKK 234 million in 2020 (DKK 231 million in 2019).
Defined benefit plans
The Group has defined benefit plans in a few countries. The most important plans comprise current and former
employees in Germany and the UK.
The defined benefit plan in Germany is unfunded and administered by Lundbeck Germany. The defined benefit
plan in the UK is funded and constituted under a trust, whose assets are legally separated from the Group.
Both plans entitle the employees to an annual pension on retirement based on the service and salary level until
retirement.
2020
2019
Retirement benefit obligations and similar obligations
DKKm DKKm
Present value of defined benefit plans
530
537
Fair value of plan assets
(275)
(275)
Defined benefit plans at 31 December
255
262
Other obligations of a retirement benefit nature
35 33
Retirement benefit obligations and similar obligations at 31 December
290
295
Retirement benefit obligations and similar obligations break down as follows:
Non
-current obligations 288 295
Current obligations
2 -
Retirement benefit obligations and similar obligations at 31 December
290
295
NOTES 13-14
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
65 / 105
14 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS – CONTINUED
2020
2019
Assumptions for the most important plans
% %
Discount rate
0.70-1.70
0.65-2.00
Inflation rate
1.75-2.85
1.75-1.85
Pay rate increase
0.00-2.50
0.00-2.50
Pension increase
1.75-5.00
1.75-5.00
Age-weighted employee resignation rate
0-8
0-8
Expected return on plan assets
1.70
2.00
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 of a percentage point would result in a decrease
in the obligation of approximately DKK 22 million (DKK 22 million in 2019) and vice versa. An increase in the
inflation rate of 0.25 of a percentage point would result in an increase in the obligation of approximately DKK 8
million (DKK 8 million in 2019) and vice versa. The sensitivity analysis indicates how a change in the individual
assumptions would change the obligation. However, the assumptions will most likely be correlated and
consequently result in a different obligation.
2020
2019
Fair value of plan assets
DKKm DKKm
Shares
56
52
Bonds
38
46
Property
17
17
Insurance contracts
147
147
Other assets
17
13
Total
275
275
Shares, bonds, property and other assets are measured at fair value based on quoted prices in an active market.
Insurance contracts are not based on quoted prices in an active market.
2020
2019
Change in present value of defined benefit plans
DKKm DKKm
Present value of defined benefit plans at 1 January
537
455
Effect of foreign exchange differences
(16)
13
Pension expenses
7
6
Interest expenses relating to the obligations
7
10
Experience adjustments
4
14
Adjustments relating to financial assumptions
9
75
Adjustments relating to demographic assumptions
-
(18)
Benefits paid
(19)
(16)
Employee contributions
1
1
Curtailments
-
(3)
Present value of defined benefit plans at 31 December
530
537
2020
2019
Change in fair value of plan assets
DKKm
DKKm
Fair value of plan assets at 1 January
275 247
Effect of foreign exchange differences
(13)
13
Interest income on plan assets
5 7
Experience adjustments
12 10
Administration fees
(1)
(1)
Contributions
7 8
Benefits paid
(11)
(10)
Employee contributions
1 1
Fair value of plan assets at 31 December
275
275
2020
2019
Net expense recognized in profit or loss
DKKm DKKm
Pension expenses
7
6
Curtailments
-
(3)
Finance costs
2
3
Administration fees
1
1
Total
10
7
NOTE 14
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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14 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS – CONTINUED
2020
2019
Amount recognized in other comprehensive income
DKKm DKKm
Actuarial (gains)/losses
1
61
Total
1
61
Realized return on plan assets
17
17
The benefit under unfunded defined benefit plans is paid directly by the Group. In some countries, the future
contribution to funded defined benefit plans depends on the development in salaries, administrative fees and
regular premiums, and in other countries on the surplus/deficit according to local requirements. The weighted
average duration of the obligation is 15 years (16 years in 2019). The expected contribution to defined benefit
plans for 2021 is DKK 14 million (DKK 16 million for 2020).
Other obligations of a retirement benefit nature
An obligation of DKK 35 million (DKK 33 million in 2019) was recognized to cover other obligations of a
retirement benefit nature, which primarily include termination benefits in a number of subsidiaries. These benefit
payments are conditional upon specified requirements being met.
15 INCENTIVE PROGRAMS
In order to attract, retain and motivate key employees and align their interests with those of its shareholders,
Lundbeck has established a number of long-term incentive programs. Lundbeck uses equity- and cash-settled
programs.
Equity-settled programs
In 2020, equity-settled incentive programs consisted of restricted share units (RSUs) and warrants.
In February 2020, as part of Lundbeck’s recurring long-term incentive program, Lundbeck established an RSU
program for Lundbeck’s registered Executive Management and key employees. Four of the members of the
registered Executive Management and 131 key employees employed with H. Lundbeck A/S or a Lundbeck
subsidiary were granted RSUs. The participants were selected on the basis of job level. All the RSUs vest three
years after grant. Vesting is subject to the Board of Directors’ decision on vesting, to Lundbeck achieving certain
financial targets specified by the Board of Directors and to continuing employment with the Group during the
vesting period. The fair value of the RSUs has been calculated on the basis of a share price of DKK 274.56
reduced by an expected dividend yield of 2.00% p.a. The fair value at the time of the grant was DKK 258.41
per RSU.
In February 2019, as part of Lundbeck’s recurring long-term incentive program, Lundbeck established an RSU
program for Lundbeck’s registered Executive Management and key employees. Four members of the
registered Executive Management and 135 key employees employed with H. Lundbeck A/S or a Lundbeck
subsidiary were granted RSUs. The participants were selected on the basis of job level. All the RSUs vest three
years after grant. Vesting is subject to the Board of Directors’ decision, to Lundbeck achieving certain financial
targets specified by the Board of Directors and to continuing employment with the Group during the vesting
period. The calculation of the fair value of the RSUs is based on a share price of DKK 286.56 reduced by an
expected dividend yield of 2.00% p.a. The fair value at the time of the grant was DKK 269.71 per RSU.
The RSUs granted to the registered Executive Management and key employees in 2016 vested in 2020. No
RSUs vested in 2019.
RSU programs
2020
2019
2018
2017
2016
Number of persons included in the program
135
139
133
127
126
Total number of RSUs granted
139,119
127,899
107,321
131,516
120,549
Number of RSUs granted to the
registered
Executive Management
29,923
28,128
24,783
47,911
20,484
Vesting date
01.02.23
01.02.22
01.02.22
01.02.21
01.02.20
Fair value at the date of grant, DKK
258.41
269.71
291.03
268.65
237.56
At 31 December 2020, no warrants were outstanding (26,985 warrants in 2019).
In 2020, 11,497 warrants from the 2012 grant were exercised (27,934 in 2019). In 2019, 3,795 warrants from
the 2011 grant were exercised and at 31 December 2019, no warrants from the 2011 grant were outstanding.
The weighted average share price of the warrants exercised was DKK 284.52 (DKK 271.77 in 2019).
NOTES 14-15
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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15 INCENTIVE PROGRAMS - CONTINUED
Warrant programs
2011
2012
Number of persons included in the program
112
102
Total number of warrants granted
849,085
692,003
Number of warrants granted to the registered Executive Management
381,224
-
Vesting date
31.03.14
31.03.15
Exercise period begins
01.04.14
01.04.15
Exercise period ends
31.03.19
31.03.20
Exercise price, DKK
121.00
113.00
Fair value at the date of grant, DKK
30.10
24.11
Registered
Executive
Management
Executives
Other
Total
Average
exercise
price
Warrants
Number Number Number Number DKK
2020
1 January
-
3,458
23,527
26,985
113.00
Exercised
-
(3,458)
(8,039)
(11,497)
113.00
Expired
-
-
(15,488)
(15,488)
113.00
31 December
-
-
-
-
-
2019
1 January
23,741
3,458
37,324
64,523
114.19
Exercised
(23,741)
-
(7,988)
(31,729)
113.96
Expired
-
-
(5,809)
(5,809)
121.00
31 December
-
3,458
23,527
26,985
113.00
Cash-settled programs
In 2020, the cash-settled programs consisted of restricted cash units (RCUs).
The cash-settled programs cannot be converted into shares because the value of the programs is distributed
as a cash amount.
In February 2020, Lundbeck established an RCU program for the Chief Executive Officer (CEO) and a few key
employees in the U.S. subsidiaries. The terms and conditions are similar to those applying to the RSU program
granted to the registered Executive Management and key employees of the Parent company and its non-U.S.
subsidiaries in February 2020. The RCUs granted to the CEO, a total of 30,012, and the RCUs granted to the
key employees, a total of 1,526, will vest three years after grant. Vesting is subject to the Board of Directors’
decision on vesting, to Lundbeck achieving certain financial targets specified by the Board of Directors and to
continuing employment with the Group during the vesting period. The size of the amount depends on the value
of the Lundbeck share on the vesting date. The fair value at the time of the initial grant was DKK 258.41 per
RCU.
In February 2019, Lundbeck established an RCU program for the Chief Executive Officer (CEO) and a few key
employees in the U.S. subsidiaries. The terms and conditions are similar to those applying to the RSU program
granted in February 2019. The RCUs granted to the CEO, a total of 27,917, and the RCUs granted to the key
employees, a total of 1,323, will vest three years after grant. Vesting is subject to the Board of Directors’ decision,
to Lundbeck achieving certain financial targets specified by the Board of Directors and to continuing
employment with the Lundbeck Group during the vesting period. The size of the amount depends on the value
of the Lundbeck share on the vesting date. The fair value at the time of grant was DKK 269.71 per RCU.
The RCUs granted in 2016 vested in 2020, after which time the program was settled. No RCUs vested in 2019.
Fair value, liability and expense recognized in the statement of profit or loss
The RSUs granted are recognized in profit or loss for 2020 at an expense corresponding to the fair value at the
time of grant for the part of the vesting period that concerns 2020. The total expense recognized in respect of
equity-settled programs amounted to DKK 30 million (DKK 33 million in 2019). At 31 December 2020, the fair
value of the remaining equity-settled programs was DKK 89 million (DKK 103 million in 2019).
The RCUs granted are recognized in the profit or loss at an expense corresponding to the value adjustment for
the year based on the performance of the Lundbeck share. The total expense recognized in respect of cash-
settled programs amounted to DKK 4 million (DKK 3 million in 2019) and covers all cash-settled programs in
force in 2020. At 31 December 2020, the total liability in respect of cash-settled programs was DKK 7 million
(DKK 4 million in 2019) and covers all cash-settled programs in force at 31 December 2020.
The total expense recognized in profit or loss for all incentive programs amounted to DKK 34 million in 2020
(DKK 36 million in 2019).
NOTE 15
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
68 / 105
16 PROVISIONS
Discounts
and rebates
Product
returns
Other
provisions
Total
DKKm
DKKm
DKKm
DKKm
2020
Provisions at 1 January
1,040 246 1,020 2,306
Effect of foreign exchange differences
(96)
(17)
(51)
(164)
Provisions charged
2,154 18 268 2,440
Provisions used
(1,954)
(68)
(534)
(2,556)
Unused provisions reversed
(142)
- (73)
(215)
Provisions at 31 December
1,002
179
630
1,811
Provisions break down as follows:
Non
-current provisions - 85 54 139
Current provisions
1,002 94 576 1,672
Provisions at 31 December
1,002
179
630
1,811
Discounts and rebates
The most significant sales deductions are in the U.S. and comprises discounts and rebates given in connection
with sales under the U.S. Federal and State Government Healthcare programs, primarily Medicaid.
Management’s estimate of discounts and rebates is based on a calculation which includes a combination of
historical product/population utilization mix, price increases, program/market growth and state-specific
information. Further, the calculation of rebates involves legal interpretation of relevant regulations and is subject
to changes in interpretive guidance from governmental authorities. The obligations for discounts and rebates
are incurred at the time the sale is recorded; however, the actual rebate related to a specific sale may be
invoiced by the authorities six to nine months later. In addition to this billing time lag, there is no statute of
limitations for states to submit rebate claims; thus, rebate adjustments in any particular period may relate to
sales from a prior period. Moreover, when a product loses exclusivity, shifts in payer mix may cause Medicaid
claims/estimates to be more volatile.
Product returns
The Group has product return obligations normal for the industry. Management does not expect any major
losses from these obligations apart from the amount already recognized.
Other provisions
Of other provisions at 31 December 2020, DKK 161 million (DKK 337 million in 2019) relates to restructuring
programs. In addition, other provisions comprise liabilities relating to items such as legal disputes.
17 CONTINGENT ASSETS AND CONTINGENT LIABILITIES
Pending legal proceedings
Lundbeck is involved in a number of legal proceedings, including patent disputes, the most significant of which
are described below. In the opinion of Management, the outcome of these proceedings will not have a material
impact on the financial position or cash flows beyond the amount already provided for in the financial statements,
or it is too uncertain to make a reliable provision. Such proceedings will, however, develop over time, and new
proceedings may occur which could have a material impact on the financial position and/or cash flows.
In June 2013, Lundbeck received the European Commission’s decision that agreements concluded with four
generic competitors concerning citalopram violated competition law. The decision included fining Lundbeck
EUR 93.8 million (approximately DKK 700 million). Lundbeck paid and expensed the fine in the third quarter of
2013. In September 2016, Lundbeck announced that the General Court of the European Union had delivered
its judgment concerning Lundbeck’s appeal against the European Commission’s 2013 decision. Lundbeck’s
appeal was rejected by the General Court. Lundbeck has appealed the judgment to the European Court of
Justice. An oral hearing was conducted by the European Court of Justice in January 2019. The Advocate
General delivered her opinion to the European Court of Justice on 4 June 2020. In the opinion, the Advocate
General proposes that the European Court of Justice should uphold the fine of EUR 93.8 million imposed on
Lundbeck. The final judgment will be delivered on 25 March 2021. So called “follow-on claims” for
reimbursement of alleged losses, resulting from alleged violation of competition law, often arise when decisions
and fines issued by the European Commission are upheld by the European Court of Justice. Health authorities
in the UK and the Netherlands have taken formal protective steps against Lundbeck with the principal purpose
of preventing potential claims from being time-barred under the applicable statutes of limitation. Lundbeck
expects no further material development in these matters until after the European Court of Justice has issued
its final judgment.
NOTES 16-17
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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17 CONTINGENT ASSETS AND CONTINGENT LIABILITIES - CONTINUED
In Canada, Lundbeck is involved in three product liability class-action lawsuits relating to Cipralex
®
/Celexa
®
(two cases alleging various Celexa
®
induced birth defects and one case against several SSRI manufacturers
(incl. Lundbeck) alleging that SSRI (Celexa
®
/Lexapro
®
) induces autism birth defect); three relating to Abilify
Maintena
®
(alleging i.a. failure to warn about compulsive behavior side effects), and one relating to Rexulti
®
(also alleging i.a. failure to warn about compulsive behavior side effects). The cases are in the preliminary
stages and as such there is significant uncertainty as to how these lawsuits will be resolved. Lundbeck strongly
disagrees with the claims raised.
In 2018, Lundbeck entered into settlements with three of four generic companies involved in an Australian
federal court case, in which Lundbeck was pursuing patent infringement and damages claims over the sale of
escitalopram products in Australia. Lundbeck received AUD 51.7 million (DKK 242 million) in 2018. In
Lundbeck’s case against the last of the four generic companies, Sandoz Pty Ltd, the Federal Court found that
Sandoz Pty Ltd had infringed Lundbeck’s escitalopram patent between 2009 and 2012 and awarded Lundbeck
AUD 26.3 million in damages. Sandoz’ appeal of the decision was heard in May 2019, and the Full Federal
Court in August 2020 allowed Sandoz' appeal and decided that Sandoz is not liable for damages. Lundbeck’s
application for special leave to appeal the decision to the High Court will be heard in February 2021.
Together with Takeda, Lundbeck has instituted patent infringement proceedings against 16 generic companies
that have applied for marketing authorization for generic versions of Trintellix
®
in the U.S. Two opponents have
withdrawn and Lundbeck has now settled with eight opponents. The cases against the six remaining opponents
continue. The trial with the six opponents was in late January 2021 and decision is currently expected within
seven months after the trial. Lundbeck has strong confidence in its vortioxetine patents. The FDA cannot grant
marketing authorization to the generic companies unless they receive a decision in their favor. The compound
patent, including patent term extensions, will expire in the U.S. on 17 December 2026. Lundbeck has other
patents relating to vortioxetine with expiry in the period until 2032.
Together with Otsuka, Lundbeck has instituted patent infringement proceedings against several generic
companies that have applied for marketing authorization for generic versions of Rexulti
®
in the U.S. Lundbeck
has strong confidence in the Rexulti
®
patents. The FDA cannot grant marketing authorization in the U.S. to the
generic companies before the patents expire unless the generic companies receive decisions in their favor.
In February 2019, Alder BioPharmaceuticals, Inc. (now a wholly owned subsidiary of Lundbeck LLC and
subsequently renamed Lundbeck Seattle BioPharmaceuticals, Inc.) terminated a Development and
Manufacturing Services Agreement (DMSA) with Lonza Ltd. (Lonza), based on material breaches of that
agreement by Lonza. In April 2019, Lonza filed a claim for arbitration with the American Arbitration Association
(AAA), asserting claims for breach of contract and declaratory judgment arising from the termination. The case
was settled in January 2021 with no significant impact on the financial position at 31 December 2020.
Lundbeck received a Civil Investigative Demand (CID) from the U.S. Department of Justice (DOJ) in March
2020. The CID seeks information regarding the sales, marketing, and promotion of Trintellix. Lundbeck is
cooperating with the DOJ.
Joint taxation
H. Lundbeck A/S and Danish subsidiaries are part of a Danish joint taxation scheme with Lundbeckfonden
(Lundbeckfond Invest A/S including subsidiaries of Lundbeckfond Invest A/S), according to which the Company
has partly a joint and several liability and partly a secondary liability with respect to corporate income taxes etc.
for the jointly-taxed companies. In addition, H. Lundbeck A/S has 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 these
companies. However, in both cases the secondary liability is capped at an amount equal to the share of the
capital of the Company directly or indirectly owned by the ultimate parent company. The total tax obligation
under the joint taxation scheme is shown in the financial statements of Lundbeckfond Invest A/S.
NOTE 17
LUNDBECK
ANNUAL REPORT 2020
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18 BANK DEBT, BOND DEBT AND BORROWINGS
2020
2019
Bank debt and bond debt maturing within below periods from the balance sheet date
DKKm DKKm
Within one year
2,000
2,000
Between three and four years
1,698
7,062
After more than five years
3,699
-
Bank debt and bond debt at 31 December
7,397
9,062
Bank debt and bond debt breaks down as follows:
Non-current liabilities
5,397
7,062
Current liabilities
2,000
2,000
Bank debt and bond debt at 31 December
7,397
9,062
Currency
Expiry of
commitment
Fixed/
floating
Weighted
average
effective
interest rate
Amortized
cost
Nominal
value
Fair
value
% DKKm DKKm DKKm
2020
Bank loan
DKK
Oct 2021
Floating
0.80
2,000
2,000
2,000
Bank loan
USD
Jun 2024
Floating
1.11
1,698
1,698
1,698
Issued bonds
EUR
Oct 2027
Fixed
0.88
3,699
3,720
3,781
Total
7,397
7,418
7,479
2019
Bank loan
DKK
Oct 2020
Floating
0.65
2,000
2,000
2,000
Bank loan
USD
Jun 2023
Floating
2.80
3,326
3,326
3,326
Bank loan
EUR
Jun 2023
Floating
0.55
3,736
3,736
3,736
Total
9,062
9,062
9,062
The DKK 2 billion bank loan has been swapped into USD using cross-currency swaps expiring in October 2021.
The total nominal value of the cross-currency swaps amounts to USD -295 million and DKK +2 billion. At 31
December 2020, the interest rates were 0.94% (floating) for the USD leg and 0% (fixed) for the DKK leg. The
cross-currency swaps as well as the USD bank loan are designated as hedging of net investments.
A large part of the USD funding, including bank loan and cross-currency swaps, has been swapped into fixed
interest rates by interest rate swaps. The nominal amounts of the interest rate swaps follow the expected
repayment profile of the USD debt until they expire in 2023. The total outstanding amount of the interest rate
swaps as of 31 December 2020 was USD 290 million, and the average interest rate was 1.56% for the fixed
legs and 0.22% for the floating legs.
In 2019, the DKK loan was swapped into USD using cross-currency swaps, expiring in October 2020 and with
an average fixed interest rate of 2.58% for the USD leg and 0% for DKK leg. USD 450 million of the USD loan
(totalling USD 500 million) was swapped into fixed interest by interest rate swaps with a four-year tenor and an
average fixed interest rate of 1.56%.
The eurobond is issued with a fixed coupon until October 2027.
Amortized cost is calculated as the proceeds received less instalments paid, plus or minus amortization of
capital gains or losses.
Development in bank debt, bond debt and borrowings
Balance at
1 January
Additions
through
acquisitions
Cash inflow
Cash
outflow
Non-cash
flow
Balance at
31 December
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
2020
Bank loans
9,062 - - (5,169)
(195)
3,698
Issued bonds
- - 3,701 - (2)
3,699
Total bank debt and bond debt
9,062
-
3,701
(5,169)
(197)
7,397
2019
Bank loans
- - 11,095 (2,010)
(23)
9,062
Borrowings
- 2,053 - (2,070)
17 -
Total bank debt and borrowings
-
2,053
11,095
(4,080)
(6)
9,062
NOTE 18
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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19 OTHER PAYABLES
2020
2019
DKKm DKKm
Contingent consideration
1,108
1,128
Other payables
82
59
Non-current payables
1,190
1,187
Contingent consideration
-
96
Other payables
1,846
1,573
Current payables
1,846
1,669
Contingent consideration recognized in acquisition of businesses in 2019
As part of the acquisition of Alder BioPharmaceuticals, Inc. (subsequently renamed Lundbeck Seattle
BioPharmaceuticals, Inc.), Lundbeck is required to pay a contingent value right (CVR) of USD 2.00 per share
upon European approval of eptinezumab. The CVR has a value of up to USD 236 million. At 31 December
2020, the fair value of the CVR amounted to DKK 1,059 million (DKK 1,080 million in 2019).
The CVR was recognized as a contingent consideration at fair value at the acquisition date. Key inputs to the
fair value of the CVR are the promise to pay a fixed price per share acquired, probability of success weighted
by the possible outcomes and Lundbeck’s WACC (weighted average cost of capital). The probability of success
used for calculating the fair value of the CVR is based on the BIO/MedTracker 2016 publication.
As part of the acquisition of Abide Therapeutics, Inc., Inc. (subsequently renamed Lundbeck La Jolla Research
Center, Inc.), Lundbeck is required to pay up to USD 150 million in future development and sales milestones
dependent on predefined milestones being reached. At 31 December 2020, the fair value of the contingent
consideration amounted to DKK 49 million (DKK 144 million in 2019).
Contingent consideration is recognized at fair value. The calculation of the fair value is based on the discounted
cash flow method (DCF method) which comprises significant assumptions and estimates. Key inputs are
expected timing of payment (using a specific discount rate) and probability of success.
20 FINANCIAL INSTRUMENTS
Foreign currency risks
Foreign currency management is handled centrally by the Parent company. Currency management focuses on
risk mitigation and is carried out in conformity with the Group's Treasury Policy, as approved by the Board of
Directors.
Foreign currency risks managed by derivatives and loans in 2020 comprise cash flow risk in several currencies
and USD translation risk emanating from net investments in foreign subsidiaries.
The Parent company hedges a part of the Group’s anticipated revenue in selected currencies for a period of
12-18 months using forward exchange contracts and in some cases currency options. Hedging is performed
on a rolling basis each month. The forward exchange contracts and currency options are classified as hedging
instruments when meeting the accounting criteria for hedge accounting according to IFRS 9 Financial
Instruments. Unhedged cash flows are sold spot. Changes in the fair value of all instruments meeting the criteria
for hedge accounting are recognized in the statement of comprehensive income as they arise. At maturity of
the hedge contracts, the final effect is transferred from other comprehensive income and recognized in the
profit or loss or balance sheet together with the hedged item.
Forward exchange contracts and currency options that do not meet the hedge accounting criteria are classified
as trading contracts, and changes in the fair value are recognized under financial income or financial expenses
as they arise.
Cash flow timing and changes to the forecasted amounts are the main sources for evaluating the risk of hedge
ineffectiveness. When concluding a hedge transaction, and each time presenting the financial statements
thereafter, it is assessed whether the hedged exposure and the hedging instrument are still financially
correlated. If the hedged cash flows are no longer expected to be realised, the accumulated value change is
transferred to financial income or financial expenses.
Lundbeck did not have any hedge ineffectiveness in 2020 or 2019.
NOTES 19-20
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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20 FINANCIAL INSTRUMENTS - CONTINUED
Contract
amount
according to
hedge
accounting
Fair value
at year-end
recognized in
the statement of
comprehensive
income/other
receivables
Fair value
at year-end
recognized in
the statement of
comprehensive
income/other
payables
Realized
exchange
gains/losses
for the year
recognized in
the statement
of profit or
loss/
statement of
financial
position
Average
hedge
prices
of existing
forward
exchange
contracts
Maturity
Forward exchange contracts
(against DKK)
DKKm
DKKm
DKKm
DKKm
DKK
2020
CAD (sell position)
383 2 (1)
7 475.46 Dec. 2021
CNY (sell position)
458 3 (5)
- 91.71 Oct. 2021
JPY (sell position)
294 8 - 5 6.04 Oct. 2021
USD (sell position)
3,337 225 - (55)
648.01 Oct. 2021
Other currencies
1,172 14 (41)
48 Dec. 2021
Total
252
(47)
5
2019
CAD (sell position)
300 - (9)
(17)
492.68 Oct. 2020
CNY (sell position)
289 1 (3)
(25)
93.79 Oct. 2020
JPY (sell position)
344 4 (2)
(17)
6.15 Nov. 2020
USD (sell position)
2,594 2 (74)
(210)
640.47 Oct. 2020
Other currencies
1,364 3 (25)
(31)
Dec. 2020
Total
10
(113)
(300)
Net foreign exchange contracts, trading
There were no outstanding forward exchange contracts relating to trading in December 2020 and no material
impact from trading contracts was recognized in financial income or financial expenses in 2020.
Hedges of net investment
Lundbeck has hedged part of the translation risk emanating from its net investments in foreign subsidiaries in
the U.S. by taking out bank debt in USD and by entering two cross-currency swaps, converting DKK bank debt
into USD. Thereby, Lundbeck decreases the negative impact that a weaker USD will have on the value of its
U.S. assets, as a decrease in the value of the debt portfolio will offset part of this impact. Lundbeck designates
the USD bank debt and the cross-currency swaps as hedges of net investment, and the exchange rate
adjustments are recognized in other comprehensive income. The hedges of net investment are considered to
be effective as long as there is a clear financial correlation between how a change in the exchange rate impacts
the net investment in subsidiaries and the hedges of net investment. For more information about the net
investment hedges, see note 18 Bank debt, bond debt and borrowings.
Monetary assets and monetary liabilities for the main currencies at 31 December
2020
2019
DKKm DKKm
Monetary assets
CAD
55
78
CNY
65
111
EUR
183
330
USD
607
595
Monetary liabilities
CNY
15
-
EUR
3,834
3,866
USD
3,723
5,486
Monetary assets and monetary liabilities include trade receivables, other receivables, securities, cash, bank
debt and bond debt (including interest rate swaps), lease liabilities, trade payables, other payables, deferred
taxes and income taxes. The balances exclude all intra-group balances and monetary assets and monetary
liabilities in entities where the currency of the assets/liabilities and the functional currency are identical.
NOTE 20
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20 FINANCIAL INSTRUMENTS - CONTINUED
Estimated impact from financial instruments on profit for the year and equity from a 5% increase in
year-end exchange rates of the major currencies
CAD
CNY
USD
DKKm DKKm DKKm
2020
Profit for the year
4
(2)
(78)
Equity
(18)
(25)
(330)
2019
Profit for the year
4
-
2
Equity
(11)
(15)
(396)
The shown sensitivities only comprise impact from Lundbeck’s financial instruments and reflect a relative
change of the exchange rates at 31 December 2020 and 2019.
The profit impact comprises financial instruments that remained open at the balance sheet date and which have
an impact on profit in the current financial year. It includes foreign exchange differences relating to intra-group
balances that are not eliminated in the consolidated financial statements. The calculation of the estimated
impact is based on the functional currency of the entities where the monetary assets and liabilities are located.
The profit impact is limited as the largest liabilities are exchange rate adjusted in other comprehensive income,
being part of Lundbeck’s hedging structure.
The equity impact includes financial instruments that remained open at the balance sheet date and which are
exchange rate adjusted in other comprehensive income. The equity effect in 2020 and 2019 primarily consists
of exchange rate adjustments on bank loans and cross-currency swaps in USD that are designated as hedges
of net investment and foreign exchange differences on outstanding cash flow hedging contracts.
Due to Denmark’s long-standing fixed exchange rate policy against the 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.
Interest rate risks
Lundbeck ensures that the interest rate risk is managed according to the Treasury Policy. Interest rate risk
relates mainly to outstanding interest-bearing debt with floating interest rates.
Interest rate risk management is handled centrally by the Parent company. Through the Group’s Treasury Policy,
the Board of Directors has approved the limits for borrowing and investment. Loans secured by property must be
approved by the Board of Directors. Only a limited part of the total loan portfolio is allowed to have floating interest
rates, and to hedge the interest rate risk on loans, the Board of Directors has approved the use of Interest Rate
Swaps (IRS), Caps, Floors and Forward Rate Agreements (FRAs).
Lundbeck’s exposure to interest rate risk is considered limited due to the EUR 500 million bond being issued
with a fixed coupon until 2027 and the USD funding to a large extent being swapped into fixed interest through
interest rate swaps. For more information about interest rate swaps, see note 18 Bank debt, bond debt and
borrowings.
An interest rate change on bank debt and bond debt, including interest rate swaps, of +/- 1 percentage point
would decrease/increase profit for the year before tax by DKK 15 million (DKK 38 million in 2019) and
increase/decrease equity by DKK 56 million in 2020 (DKK 63 million in 2019) on an annual basis.
The below table includes undiscounted cash flows, including interest payments, and assumes that the liabilities
will be repaid at their contractual maturity dates.
See note 19 Other payables for details on the obligations relating to contingent consideration.
See note 18 Bank debt, bond debt and borrowings for details on the bank debt and bond debt.
NOTE 20
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20 FINANCIAL INSTRUMENTS - CONTINUED
Classification of and contractual maturity dates for financial assets and financial liabilities
Within 1 year
Between
1 and 5 years
After 5 years
Total
Effective
interest rates
2020
DKKm
DKKm
DKKm
DKKm
%
Financial assets
Derivatives to hedge future cash flows
- FX 252 - - 252 0
Derivatives to hedge future cash flows
- interest 15 7 - 22 0-2
Derivatives to hedge net investments
209 - - 209 0-2
Financial assets measured at FVTOCI¹
476
7
-
483
Other financial assets
- - 116 116 0
Other financial assets measured at FVTPL²
-
-
116
116
Receivables³
2,941 104 - 3,045 0
Cash and bank balances
3,924 - - 3,924 (1)-10
Financial assets measured at amortized cost
6,865
104
-
6,969
Total financial assets
7,341
111
116
7,568
Financial liabilities
Derivatives to hedge future cash flows
- FX 47 - - 47 0
Derivatives to hedge future cash flows
- interest 46 58 - 104 0-2
Financial liabilities measured at FVTOCI¹
93
58
-
151
Contingent consideration⁴
- 1,087 21 1,108
Other financial liabilities measured at FVTPL²
-
1,087
21
1,108
Bank and bond debt
2,063 1,865 3,786 7,714 0-2
Lease
liabilities 77 229 187 493 1-8
Trade and other payables
5,896 82 - 5,978 0
Financial liabilities measured at amortized
cost
8,036
2,176
3,973
14,185
Total financial liabilities
8,129
3,321
3,994
15,444
1) Fair value through other comprehensive income.
2) Fair value through profit or loss.
3) Including other receivables recognized in non-current assets.
4) See
note 19 Other payables.
Within 1 year
Between
1 and 5 years
After 5 years
Total
Effective
interest rates
2019
DKKm
DKKm
DKKm
DKKm
%
Financial assets
Derivatives to hedge future cash flows
- FX 10 - - 10 0
Derivatives to hedge future cash flows
- interest 8 - - 8 0-3
Derivatives to hedge net investments
62 - - 62 0-3
Financial assets measured at FVTOCI¹
80
-
-
80
Other financial assets
- - 60 60 0
Securities
4 - - 4 0-1
Other financial assets measured at FVTPL²
4
-
60
64
Receivables³
3,540 101 - 3,641 0
Cash and bank balances
3,008 - - 3,008 (1)-10
Financial assets measured at amortized cost
6,548
101
-
6,649
Total financial assets
6,632
101
60
6,793
Financial liabilities
Derivatives to hedge future cash flows
- FX 113 - - 113 0
Financial liabilities measured at FVTOCI¹
113
-
-
113
Contingent consideration⁴
96 1,081 47 1,224
Other financial liabilities measured at FVTPL²
96
1,081
47
1,224
Bank debt
2,113 7,309 - 9,422 0-3
Lease liabilities
79 229 208 516 1-8
Trade and other payables
5,944 59 - 6,003 0
Financial liabilities measured at amortized
cost
8,136
7,597
208
15,941
Total financial liabilities
8,345
8,678
255
17,278
NOTE 20
LUNDBECK
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20 FINANCIAL INSTRUMENTS – CONTINUED
Level 1
Level 2
Level 3
Financial assets and financial liabilities measured
or disclosed at fair value
DKKm DKKm DKKm
2020
Financial assets
Other financial assets¹
81
-
35
Derivatives¹
-
697
-
Total
81
697
35
Financial liabilities
Contingent consideration¹
-
-
1,108
Derivatives¹
-
365
-
Bank debt²
-
3,698
-
Bond debt²
3,781
-
-
Total
3,781
4,063
1,108
2019
Financial assets
Securities¹
4
-
-
Other financial assets¹
20
-
40
Derivatives¹
-
80
-
Total
24
80
40
Financial liabilities
Contingent consideration¹
-
-
1,224
Derivatives¹
-
113
-
Bank debt²
-
9,062
-
Total
-
9,175
1,224
1) Measured at fair value.
2) Disclosed at fair value.
The fair value of securities is based on publicly quoted prices of the invested assets. The fair value of derivatives
is calculated by applying recognized measurement techniques, whereby assumptions are based on the market
conditions prevailing at the balance sheet date. The fair value of contingent consideration is calculated as the
discounted cash outflows (DCF method) from future milestone payments, taking probability of success into
consideration. The fair value adjustment of contingent consideration amounts to a net gain of DKK 3 million
and is the result of changes in the time value of the contingent value rights and the milestone relating to the
phase IIa study results of Lu AG06466 not being met. Total contingent consideration amounted to DKK 1,108
million at 31 December 2020 (DKK 1,224 million at 31 December 2019). Besides the fair value adjustment, the
only change in contingent consideration is exchange rate adjustments of DKK 113 million.
The carrying amount of other receivables, trade receivables, prepayments, bank debt, other debt, trade
payables and other payables is believed to be equal to or close to fair value.
21 AUDIT FEES
2020
2019
DKKm DKKm
Statutory audit
10
10
Other opinions
-
-
Tax consulting
4
1
Other services
1
9
Total
15
20
A few minor foreign subsidiaries are not audited by the Parent company’s auditor, a foreign business partner
of the auditor, or by a recognized, international auditing firm.
At the Annual General meeting held on 24 March 2020, PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab was elected as Lundbeck’s external auditor. Deloitte Statsautoriseret
Revisionspartnerselskab was Lundbeck’s external auditor in 2019.
The fee for non-audit services provided to the Group by PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab, Denmark, amounted to DKK 4 million during 2020 and consisted of tax services
relating to expatriates and transfer pricing, advisory services relating to cyber risk, other auditor reports on
various statements to public authorities, and other accounting and tax advisory services.
NOTES 20-21
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22 CONTRACTUAL OBLIGATIONS
Research and development milestones and collaborations
The Group has entered into a number of agreements relating to research and development. According to the
agreements, Lundbeck is committed to pay certain milestones. At 31 December 2020, potential future milestone
payments covering the coming ten-year period totalled up to approximately DKK 300 million (approximately
DKK 1,750 million in 2019). In addition, the Group is part of multi-year research and development collaboration
projects comprising minimum collaboration obligations in the order of DKK 1 million (DKK 10 million in 2019).
Sales milestones
Lundbeck is committed to pay certain commercial sales milestones. The amounts depend on future sales.
Other purchase obligations
The Group has undertaken purchase obligations in the amount of DKK 1,102 million (DKK 1,828 million in
2019), the majority of which relates to service contracts. In addition, the Group has undertaken purchase
obligations relating to property, plant and equipment in the amount of DKK 126 million (DKK 138 million in
2019). Furthermore, the Group has entered into service agreements amounting to DKK 227 million (DKK 290
million in 2019).
23 RELATED PARTIES
Lundbeck’s related parties
• The Parent company’s principal shareholder, Lundbeckfonden (Lundbeckfond Invest A/S), Scherfigsvej 7,
2100 Copenhagen, Denmark.
• Companies in which Lundbeckfonden exercises controlling influence, including ALK-Abelló A/S and
Falck A/S.
• Members of the Parent company’s registered Executive Management and Board of Directors as well as close
relatives of these persons.
• Companies in which members of the Parent company’s registered Executive Management and Board of
Directors as well as close relatives of these persons exercise controlling influence.
Transactions and balances with Lundbeckfonden
There have been the following transactions and balances with Lundbeckfonden:
• Payment of dividends of DKK 563 million in 2020 (DKK 1,648 million in 2019).
• Payment of provisional tax of DKK 101 million in 2020 (DKK 100 million in 2019) for the Parent company and
Danish subsidiaries.
• Refund of residual tax of DKK 64 million in 2020 (DKK 70 million in 2019) for the Parent company and Danish
subsidiaries.
• Interest expense of DKK 1 million in 2020 (income of DKK 0 million in 2019).
Lundbeckfonden exercises controlling influence on H. Lundbeck A/S.
Transactions and balances with the ALK group
There have been no transactions or balances with the ALK group.
Transactions and balances with the Falck group
There have been no material transactions or balances with the Falck group.
Transactions and balances with the registered Executive Management and the Board of Directors
In addition to the transactions with members of the registered Executive Management and the Board of
Directors outlined in notes 3 Employee costs and 15 Incentive programs, the Parent company has paid
dividends on shares held by members of the registered Executive Management and the Board of Directors in
H. Lundbeck A/S. At 31 December 2020 and 31 December 2019, there were no balances with the registered
Executive Management and the Board of Directors.
Transactions and balances with other related parties
Other than the above, there have been no material transactions or balances with other related parties.
NOTES 22-23
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24 LIST OF SUBSIDIARIES
The list below shows the subsidiaries in the Group.
Share of voting rights
and ownership
Purpose
%
Lundbeck Argentina S.A., Argentina
Sales and distribution
100
Lundbeck Australia Pty Ltd, Australia, including
Sales and distribution
100
-
CNS Pharma Pty Ltd, Australia
Sales and distribution
100
Lundbeck Austria GmbH, Austria
Sales and
distribution 100
Lundbeck S.A., Belgium
Sales and distribution
100
Lundbeck Brasil Ltda., Brazil
Sales and distribution
100
Lundbeck Canada Inc., Canada
Sales and distribution
100
Lundbeck Chile Farmacéutica Ltda., Chile
Sales and
distribution 100
Lundbeck (Beijing) Pharmaceuticals Consulting Co., Ltd., China
Sale services
100
Lundbeck Colombia S.A.S., Colombia
Sales and distribution
100
Lundbeck Croatia d.o.o., Croatia
Sale services
100
Lundbeck Czech Republic s.r.o., Czech Republic
Sales and distribution
100
Lundbeck Export A/S, Denmark
Sales and distribution
100
Lundbeck Pharma A/S, Denmark
Sales and distribution
100
Lundbeck Eesti A/S, Estonia
Sales and distribution
100
OY H.
Lundbeck AB, Finland
Sales and distribution
100
Lundbeck SAS, France
Sales and distribution
100
Sofipharm SA, France, including
Other
100
-
Laboratoire Elaiapharm SA, France
Production
100
Lundbeck GmbH, Germany
Sales and distribution
100
Lundbeck Hellas S.A., Greece
Sales and distribution
100
Lundbeck HK Limited, Hong Kong
Sales and distribution
100
Lundbeck Hungária KFT, Hungary
Sales and distribution
100
Lundbeck India Private Limited, India
Sales and distribution
100
Lundbeck (Ireland) Ltd., Ireland
Sales and distribution
100
Lundbeck Israel Ltd., Israel
Sales and distribution
100
Lundbeck Italia S.p.A., Italy
Sales and distribution
100
Lundbeck Pharmaceuticals, Italy S.p.A., Italy, including
Production
100
-
Archid S.A., Luxembourg
Sales and distribution
100
Lundbeck Japan K.K., Japan
Sale services
100
Lundbeck Korea Co., Ltd., Republic of Korea
Sales and distribution
100
SIA Lundbeck Latvia, Latvia
Sale services
100
Share of voting rights
and ownership
Purpose
%
UAB Lundbeck Lietuva, Lithuania
Sale services
100
Lundbeck Malaysia SDN. BHD., Malaysia
Sales and distribution
100
Lundbeck México, SA de CV, Mexico
Sales and distribution
100
Lundbeck B.V., The Netherlands
Sales
and distribution 100
Prexton Therapeutics B.V., The Netherlands, including
Other
100
-
Prexton Therapeutics S.A., Switzerland
Other
100
Lundbeck New Zealand Limited, New Zealand
Other
100
H. Lundbeck AS, Norway
Sales and distribution
100
Lundbeck Pakistan (Private) Limited, Pakistan
Sales and distribution
100
Lundbeck America Central S.A., Panama
Sales and distribution
100
Lundbeck Peru S.A.C., Peru
Sales and distribution
100
Lundbeck Philippines Inc., Philippines
Sales and
distribution 100
Lundbeck Business Service Centre Sp.z.o.o., Poland
Other
100
Lundbeck Poland Sp.z.o.o., Poland
Sales and distribution
100
Lundbeck Portugal
- Produtos Farmacêuticos Unipessoal Lda,
Portugal
Sales and distribution
100
Lundbeck
Romania SRL, Romania
Sales and distribution
100
Lundbeck RUS OOO, Russian Federation
Sale services
100
Lundbeck Singapore PTE. LTD., Singapore
Sales and distribution
100
Lundbeck Slovensko s.r.o., Slovakia
Sales and distribution
100
Lundbeck
Pharma d.o.o., Slovenia
Sales and distribution
100
Lundbeck South Africa (Pty) Limited, South Africa, including
Sales and distribution
100
-
H. Lundbeck (Proprietary) Limited, South Africa
Other
100
Lundbeck España S.A., Spain
Sales and
distribution 100
H. Lundbeck AB, Sweden
Sales and distribution
100
Lundbeck (Schweiz) AG, Switzerland
Sales and distribution
100
Lundbeck İlaç Ticaret Limited Şirketi, Turkey
Sales and distribution
100
Lundbeck Group Ltd. (Holding), UK,
including
Other
100
-
Lundbeck Limited, UK
Sales and distribution
100
-
Lundbeck Pharmaceuticals Ltd., UK
Other
100
-
Lifehealth Limited, UK
Other
100
-
Lundbeck UK LLP, UK¹
Other
100
NOTE 24
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24 LIST OF SUBSIDIARIES – CONTINUED
Share of voting rights
and ownership
Purpose
%
Lundbeck USA Holding LLC, USA, including
Other
100
-
Lundbeck LLC, USA, including
Sales and distribution
100
- Chelsea Therapeutics International, Ltd., USA, including
Other
100
- Lundbeck NA Ltd., USA
Other
100
- Lundbeck Pharmaceuticals LLC, USA
Other
100
- Lundbeck Research USA, Inc., USA
Other
100
- Lundbeck La Jolla Research Center, Inc., USA, including
Research and development
100
- Abide Therapeutics (UK) Limited, UK
Other
100
- Lundbeck Seattle BioPharmaceuticals, Inc., USA, including
Research and development
100
- Alder Biopharmaceuticals Pty., Ltd., Australia
Other
100
- Alder Biopharmaceuticals Limited, Ireland
Other
100
- Alderbio Holdings LLC ("ANEV"), USA
Other
100
Lundbeck de Venezuela, C.A., Venezuela
Sales and distribution
100
1) Lundbeck UK LLP is owned by Lundbeck Group Ltd. (Holding), Lundbeck Limited and Lifehealth Limited, all of which have H. L
undbeck A/S
as their direct or ultimate parent company.
Lundbeck China Holding A/S and Lundbeck Insurance A/S were liquidated in 2020.
In 2019, Lundbeck acquired Alder BioPharmaceuticals, Inc. (subsequently renamed Lundbeck Seattle
BioPharmaceuticals, Inc.) and Abide Therapeutics, Inc., (subsequently renamed Lundbeck La Jolla Research
Center, Inc.).
25 SUBSEQUENT EVENTS
No events of importance to the Annual Report have occurred during the period from the balance sheet date
until the presentation of the consolidated financial statements.
NOTES 24-25
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26 SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the following accounting policies to all periods presented in these
consolidated financial statements, unless otherwise mentioned (see note 1.7 Standards issued but not yet
effective).
Lundbeck has made some reclassifications in the statement of financial position with effect from 2020.
Discounts and rebates, previously recognized in other payables, are reclassified to provisions. Contingent
consideration is reclassified to other payables. Management believes that the new presentation better reflects
the nature of the Group's operations and is more aligned with industry practice. The comparative figures for
2019 have been reclassified accordingly. There has been no impact on profit or loss for the years.
Basis of consolidation
The consolidated financial statements comprise the Parent company H. Lundbeck A/S and entities controlled
by the Parent company.
Translation of foreign currency
On initial recognition, transactions denominated in foreign currencies are translated at standard rates which
approximate the exchange rates at the transaction date. Exchange differences arising between the exchange
rates at the transaction date and the exchange rates at the date of payment are recognized in profit or loss
under financial income or financial expenses.
Receivables, payables and other monetary items denominated in foreign currencies that have not been settled
at the balance sheet date are translated at the exchange rates at the balance sheet date. The differences
between the exchange rates at the balance sheet date and the rates at the time of recognition or settlement
are recognized in profit or loss under financial income or financial expenses.
On recognition of foreign subsidiaries having a functional currency different from that used by the Parent
company, items in the profit or loss are translated at monthly average exchange rates, and non-monetary and
monetary balance sheet items are translated at the exchange rates at the balance sheet date. Exchange
differences arising when translating the profit or loss and the balance sheet of foreign subsidiaries are
recognized in other comprehensive income.
Exchange gains/losses on translation of receivables from and payables to subsidiaries that are considered part
of the Parent company’s overall net investment in subsidiaries are recognized in other comprehensive income.
Exchange gains/losses on that part of the bank debt in foreign currency which is used for hedging of the net
investments in subsidiaries and which provides an effective hedging of the exchange gains/losses of the net
investments are recognized in other comprehensive income
Statement of cash flows
The consolidated statement of cash flows is presented in accordance with the indirect method and shows the
composition of cash flows, divided into operating, investing and financing activities, and cash and bank
balances at the beginning and end of the year.
Cash comprises cash and bank balances.
Cash flows denominated in foreign currencies, including cash flows in foreign subsidiaries, are translated at the
average exchange rates for the year as they approximate the actual exchange rates at the date of payment.
Cash and bank balances at year-end are translated at the exchange rates at the balance sheet date, and the
effect of exchange gains/losses on cash and bank balances is shown as a separate line item in the statement
of cash flows.
Financial instruments
Forward exchange contracts and other derivatives are initially recognized in the balance sheet at fair value on
the contract date and subsequently remeasured at fair value at the balance sheet date. The fair value of
derivatives is determined by applying recognized measurement techniques, whereby assumptions are based
on the market conditions prevailing at the balance sheet date. Positive and negative fair values are included in
other receivables and other payables, respectively.
Changes in the fair value of derivatives classified as hedging instruments and meeting the criteria for hedge
accounting are recognized in other comprehensive income. On recognition of hedged items, income and
expenses relating to such hedging transactions are transferred from other comprehensive income and
recognized in the same line item as the hedged item.
Changes in the fair value of derivatives not qualifying for hedge accounting are recognized in the statement of
profit or loss under financial income or financial expenses as they arise.
Securities, equity investments recognized in other financial assets, derivatives and contingent consideration
measured at fair value are classified according to the fair value hierarchy as belonging to levels 1-3 depending
on the valuation method applied.
NOTE 26
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26 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Statement of profit or loss
Revenue
Revenue comprises invoiced sales less expected return of goods for the year, discounts, rebates and revenue-
based taxes. Revenue is recognized when the goods are delivered at the agreed destination.
Moreover, revenue includes licensing income and royalties from out-licensed products, non-refundable
downpayments and milestone payments relating to research and development collaborations, and income from
collaborations on commercialization of products.
Sales-based licensing and royalty income from out-licensed products are recognized in profit or loss under
revenue, when the Group provides access to its product rights as it exists throughout the license period. As the
performance obligations are satisfied over time, the revenue is also recognized over time.
When the Group provides a customer the right to use the product rights as it exists at the point in time at which
the license is granted, revenue is recognized at a point in time when control is transferred to the licensee and
the license period begins when the customer's rights to the intellectual property is transferred.
Non-refundable downpayments and milestone payments received relating to research collaborations are
recognized in profit or loss under revenue.
Cost of sales
Cost of sales comprises cost of goods sold, which includes the cost of raw materials, transportation costs,
consumables and goods for resale, direct labour and indirect costs of production, including operating costs,
and amortization/depreciation and impairment losses relating to product rights and manufacturing facilities.
Sales and distribution costs
Sales and distribution costs comprise costs incurred for the sale and distribution of the Group’s products sold
during the year. This includes costs incurred for sales campaigns, training and administration of the sales force
and for direct distribution, marketing and promotion. Also included are salaries and other costs for the sales,
distribution and marketing functions, amortization/depreciation and impairment losses and other indirect costs.
Administrative expenses
Administrative expenses comprise expenses incurred for the management and administration of the Group, i.e.
salaries and other expenses relating to e.g. management, HR, IT and finance functions as well as
amortization/depreciation and impairment losses and other indirect costs.
Research and development costs
Research and development costs comprise costs incurred for the Group’s research and development functions,
i.e. employee costs, amortization/depreciation and impairment losses and other indirect costs as well as costs
relating to research and development collaborations.
Research costs are always recognized in profit or loss as they are incurred.
Due to a very long development period and the significant uncertainties inherent in the development of new
products, development costs are expensed as incurred in line with industry practice. Consequently, the
development costs do not qualify for capitalization as intangible assets until marketing approval by a regulatory
authority is obtained or considered highly probable.
Other operating expenses
Other operating expenses comprise other income and expenses relating to operating activities of a secondary
nature to the Group. Other operating expenses include integration and transaction costs relating to material
acquisitions, income and expenses relating to legal settlements and material gains and losses on the sale or
retirement of items of property, plant and equipment.
Financial income and financial expenses
Financial income and financial expenses include:
• Interest income and expenses from financial assets and financial liabilities measured at amortized cost
• Interest expenses relating to lease liabilities
• Net gain or loss on securities and other financial assets measured at fair value through profit or loss, including
dividends
• Fair value adjustment of contingent consideration classified as a financial liability
• Fair value adjustment of other financial liabilities
• Foreign currency gain or loss on financial assets and financial liabilities
• Other financial income and expenses
Interest income or expense is recognized using the effective interest method.
Income tax
The Parent company and Danish subsidiaries are jointly taxed with the principal shareholder, Lundbeckfonden
(Lundbeckfond Invest A/S), and its Danish subsidiaries. The current Danish corporate income tax liability is
allocated among the companies of the tax pool in proportion to their taxable income (full allocation subject to
reimbursement in respect of tax losses).
NOTE 26
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26 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Tax for the year, which consists of the year’s current tax and the change in deferred tax, is recognized in the
statement of profit or loss as regards the amount that can be attributed to the net profit or loss for the year, in
other comprehensive income as regards the amount that can be attributed to items in other comprehensive
income, and in equity as regards the amount that can be attributed to items in equity. The effect of foreign
exchange differences on deferred tax is recognized in the statement of financial position as part of the
movements in deferred tax.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the Group operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation and considers whether it is probable that a tax authority will accept an
uncertain tax treatment. The Group measures its tax balances based on either the most likely amount or the
expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Current tax for the year is calculated based on the income tax rates and rules applicable at the reporting date.
Current tax payables and receivables, including contributions payable and receivable under the Danish joint
taxation scheme, are recognized in the balance sheet, computed as tax calculated on the taxable income for
the year adjusted for provisional tax paid.
Deferred tax is recognized on all temporary differences between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not recognized on temporary differences arising either on initial
recognition of goodwill or from a transaction that is not a business combination, if the temporary difference
ascertained at the time of the initial recognition affects neither the financial result nor the taxable income. The
tax value of the assets is calculated based on the planned use of the individual assets.
Deferred tax is measured on the basis of the income tax rates and tax rules in force in the respective countries
at the balance sheet date. Changes in deferred tax resulting from changed income tax rates or tax rules are
recognized in profit or loss.
Deferred tax assets, including the tax value of tax loss carryforwards, are recognized in the balance sheet at
the value at which the assets are expected to be realized, either through an offset against deferred tax liabilities
or as net tax assets to be offset against future positive taxable income.
Changes in deferred tax concerning expenses for share-based payments are generally recognized in profit or
loss. However, if the amount of the tax deduction exceeds the related cumulative expense, it indicates that the
tax deduction relates not only to an operating expense, but also to an equity item. In such a case, the excess
of the associated current or deferred tax is recognized directly in equity.
Deferred tax in respect of recaptured losses previously deducted in foreign subsidiaries is recognized on the
basis of a specific assessment of each individual subsidiary.
Balances on interest deductibility limitations calculated according to the provisions of the Danish Corporation
Tax Act are allocated between the jointly-taxed companies according to a joint taxation agreement and are
allocated between the companies that are subject to deductibility limitation in proportion to their share of the
total limitation. Deferred tax liabilities in respect of these balances are recognized in the balance sheet, whereas
deferred tax assets are recognized only if the criteria for recognition of deferred tax assets are met.
Statement of financial position
Intangible assets
Goodwill
On initial recognition, goodwill is measured and recognized as the excess of the cost over the fair value of the
acquired assets, liabilities and contingent liabilities.
Development projects
Development costs are recognized in profit or loss as they are incurred unless the conditions for capitalization
have been met. Development costs are capitalized only if the development projects are clearly defined and
identifiable and where the technical rate of utilization of the project, the availability of adequate resources and
a potential future market or development opportunity can be demonstrated. Furthermore, such costs are
capitalized only where the intention is to manufacture, market or use the project, when the cost can be
measured reliably and when it is probable that the future earnings can cover production, sales and distribution
costs, administrative expenses and development costs.
After completion of the development work, development costs are amortized over the estimated useful life. The
maximum amortization period for development projects protected by intellectual property rights is consistent
with the remaining patent protection period of the rights concerned. Ongoing development projects are tested
for impairment at least annually or when there is indication of impairment.
Product rights and other intangible assets
Acquired intellectual property rights in the form of product rights, patents, licences, customer relationships and
software are measured at cost less accumulated amortization and impairment losses. The cost of software
comprises the cost of planning, labor and costs directly attributable to the project.
NOTE 26
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26 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Product rights are amortized over the economic lives of the underlying products, which in all material aspects
follow the patent terms, which are currently between five and fifteen years. Other rights are amortized over the
period of agreement. Amortization commences when the asset is ready to be brought into use.
Amortization is recognized in profit or loss under cost of sales and research and development costs,
respectively.
Borrowing costs to finance the manufacture of intangible assets are recognized in the cost price if such
borrowing costs relate to the production period. Other borrowing costs are expensed.
Gains and losses on the disposal of development projects, patents and licences are measured as the difference
between the selling price less cost to sell and the carrying amount at the time of sale. In general, amortization
methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Property, plant and equipment
Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses. Land
is not depreciated.
Cost includes the costs of purchase and expenses directly attributable to the purchase until the asset is ready
for use. The cost of self-constructed assets includes costs directly attributable to the construction of the asset.
Borrowing costs to finance the construction of property, plant and equipment are recognized in the cost price if
such borrowing costs relate to the production period. Other borrowing costs are expensed.
Property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the
assets:
• Buildings 30 years
• Installations 10 years
• Plant and machinery 3-10 years
• Other fixtures and fittings, tools and equipment 3-10 years
• Leasehold improvements, max. 10 years
Depreciation methods, useful lives and residual values are reassessed annually and adjusted if appropriate.
Costs incurred that increase the recoverable amount of an asset are added to the value of the asset as an
improvement and are depreciated over the estimated useful life of the improvement.
Gains or losses on the sale or retirement of items of property, plant and equipment are calculated as the
difference between the carrying amount and the selling price less cost to sell or discontinuance costs. Gains
and losses are recognized in profit or loss; normally in a separate line item or, if considered immaterial to the
understanding of the consolidated financial statements, in the same line item as the associated depreciation.
Right-of-use assets are initially measured at cost, which comprises the initial amount of the liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives.
Subsequently, the right-of-use asset is depreciated using the straight-line method from the commencement
date to the end of the lease term. Depreciation is recognized in profit or loss. Right-of-use assets are presented
as part of property, plant and equipment.
Impairment
Intangible assets with indefinite useful lives, intangible assets not yet available for use and goodwill acquired in
a business combination are not subject to amortization and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they may be impaired. The annual impairment
test is performed irrespective of whether there is any indication of impairment.
Intangible assets and property, plant and equipment in use with finite useful lives are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets
(cash-generating unit). Non-financial assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at the end of each reporting period.
NOTE 26
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26 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Impairment losses are reversed only if the assumptions and estimates underlying the impairment calculation
have changed. Indications of impairment or reversal of impairment include the following:
• Research and development results for a product
• Changes in expected cash flows due to lower sales expectations
• Changes in technology
• Changes in assumptions about future use
• Changes in market and legal risks
• Changes in cost structure
Other financial assets
Equity investments that are not investments in associates are classified as other financial assets.
On initial recognition, equity investments are measured at fair value. Subsequently, they are measured at fair
value at the balance sheet date, and changes to the fair value are recognized under financial income or financial
expenses or in other comprehensive income according to an individual decision for each equity investment.
Inventories
Raw materials, packaging and goods for resale are measured at the latest known cost at the balance sheet
date, which is equivalent to cost computed according to the FIFO method. Work in progress and finished goods
manufactured by Lundbeck are measured at cost, i.e. the cost of raw materials, consumables, direct labor and
indirect costs of production. Indirect costs of production include materials, labor, maintenance of and
depreciation on machines, factory buildings and equipment used in the manufacturing process as well as the
cost of factory administration and management. Indirect costs of production are allocated based on the normal
capacity of the production plant.
Inventories are written down to net realizable value if it is lower than the cost price. The net realizable value of
inventories is calculated as the selling price less costs of completion and costs incurred to execute the sale.
The net realizable value is determined having regard to marketability, obsolescence and expected selling price
developments.
Receivables
Current receivables comprise trade receivables and other receivables arising in the Group’s normal course of
business.
Other receivables recognized in financial assets are financial assets with fixed or determinable cash flows that
are not quoted in an active market and are not derivative financial instruments.
On initial recognition, receivables are measured at fair value and subsequently at amortized cost, which usually
corresponds to the nominal value less writedowns to counter the risk of losses. Writedowns are calculated
using the ‘full lifetime expected credit losses’ method, whereby the likelihood of non-fulfilment throughout the
lifetime of the financial instrument is taken into consideration. A provision account is used for this purpose.
Securities
On initial recognition, securities (including the bond portfolio), which are included in the Group’s documented
investment strategy for excess liquidity and recognized under current assets, are measured at fair value.
Subsequently, the securities are measured at fair value at the balance sheet date. The fair value is based on
officially quoted prices of the invested assets. Both realized and unrealized gains and losses are recognized in
profit or loss under financial income or financial expenses.
Equity
Dividends
Proposed dividends are recognized as a liability at the time of adoption of the dividend resolution at the Annual
General Meeting (the time of declaration). Dividends expected to be paid in respect of the year are included in
the line item Profit for the year in the statement of changes in equity.
Treasury shares
Acquisition and sale of treasury shares as well as dividends are recognized directly in equity under retained
earnings.
Share-based payments
Share-based incentive programs in which shares are granted to employees and in which employees may opt
to buy shares in the Parent company (equity-settled programs) are measured at the equity instruments’ fair
value at the date of grant and recognized under employee costs as and when the employees obtain the right
to receive/buy the shares. The offsetting item is recognized directly in equity under retained earnings.
Share price-based incentive programs in which employees have the difference between the agreed price and
the actual share price settled in cash (cash-settled programs) are measured at fair value at the date of grant
and recognized under employee costs as and when the employees obtain the right to such difference
settlement. The cash-settled programs are subsequently remeasured on each balance sheet date and upon
final settlement, and any changes in the fair value of the programs are recognized under employee costs. The
offsetting item is recognized under liabilities until the time of the final settlement.
NOTE 26
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
84 / 105
26 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Retirement benefit obligations
Periodical payments to defined contribution plans are recognized in profit or loss at the due date, and any
contributions payable are recognized in the balance sheet under current liabilities.
The present value of the Group’s liabilities relating to future pension payments under defined benefit plans is
measured on an actuarial basis once a year on the basis of the pensionable period of employment up to the
time of the actuarial valuation. The calculation of present value is based on assumptions of future developments
of salary, interest, inflation, mortality and disability rates and other factors. Present value is computed
exclusively for the benefits to which the employees have earned entitlement through their employment with
Lundbeck. Pension expenses, finance costs and administration fees are recognized in profit or loss under
employee costs. Actuarial gains and losses are recognized in other comprehensive income as they are
calculated and cannot subsequently be recycled through profit or loss.
The present value of the defined benefit plan liability is recognized less the fair value of the plan assets, and
any net obligation is recognized in the balance sheet under non-current liabilities. Any net asset is recognized
in the balance sheet as a financial asset, taking into consideration, where relevant, the provisions of IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.
Provisions
Provisions mainly consist of provisions for discounts and rebates, product returns, pending lawsuits and
restructuring. A provision is a liability of uncertain timing or amount.
Unsettled discounts and rebates are recognized as provisions, when the time or amount is uncertain. Where
absolute amounts are known, the discounts and rebates are recognized as trade payables.
Return obligations imposed on the Group are recognized as provisions in the balance sheet.
Amounts relating to pending lawsuits are recognized when the outflow is probable and the amount is measured
as the best estimate of the costs required to settle the liabilities at the balance sheet date.
In connection with restructurings in the Group, provisions are made only for liabilities set out in a specific
restructuring plan on the basis of which the parties affected can reasonably expect that the Group will carry out
the restructuring, either by starting to implement the plan or announcing its main components.
Debt
Bank debt and bond debt are recognized at the time of raising of the loan/issuing of the bonds at the fair value
of the proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are
measured at amortized cost, which is equivalent to the capitalized value when the effective rate of interest is
used. The difference between the proceeds and the nominal value is recognized in profit or loss under financial
income or financial expenses over the loan period.
Other payables
Other payables include contingent consideration, payables to shareholders, debt to public authorities, etc.
Contingent consideration is recognized as part of the business combination and is recognized at fair value
considering the passage of time and changes in the applied probability of success. The fair value is assessed
at each reporting date and the effect of any adjustments relating to the timing of payment and the probability of
success is recognized under financial income or financial expenses.
Payables to shareholders and other debts are measured at amortized cost.
Lease liabilities
Lease liabilities are recognized at the present value of future payments in accordance with the lease
agreements and include the present value of future payments relating to reasonably certain extensions. Interest
on the lease liabilities is calculated using Lundbeck’s incremental borrowing rate and recognized under financial
income or financial expenses. The lease liabilities are reduced by any instalments paid to the lessor.
Lundbeck uses the same incremental borrowing rate for lease agreements with similar characteristics.
Changes to lease agreements after initial recognition are accounted for either as a modification to an existing
agreement, a separate agreement or a partial disposal depending on the nature of the change. Changes will
result in changes to both the lease liability and the right-of-use asset.
NOTE 26
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
85 / 105
NOTES
1 Management review of the Parent company 89
2 Employee costs 89
3 Investments in subsidiaries 90
4 Net financials 90
5 Income taxes 90
6 Distribution of profit 91
7 Intangible assets 91
8 Property, plant and equipment 92
9 Right-of-use assets and lease liabilities 92
10 Inventories 93
11 Provisions 93
12 Contingent assets and contingent liabilities 93
13 Bank debt and bond debt 94
14 Payables to subsidiaries 94
15 Financial instruments 94
16 Audit fees 95
17 Contractual obligations 95
18 Related parties 95
19 Subsequent events 95
20 Significant accounting policies 96
FINANCIAL
STATEMENTS OF THE
PARENT COMPANY
CONTENTS
Statement of profit or loss 86
Statement of financial position 87
Statement of changes in equity 88
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
86 / 105
2020
2019
Notes
DKKm
DKKm
Revenue
10,733
9,464
Cost of sales
2
2,532
2,175
Gross profit
8,201
7,289
Sales and distribution costs
2
3,110
3,104
Administrative expenses
2
648
563
Research and development costs
2
5,027
2,510
Other
operating expenses, net
8
20
Profit from operations (EBIT)
(592)
1,092
Income from investments in subsidiaries
3
757
3,217
Financial income
4
743
187
Financial expenses
4
273
290
Profit before tax
635
4,206
Tax on profit
for the year
5 (80)
114
Profit for the year
6
715
4,092
STATEMENT OF PROFIT OR LOSS
1 January
– 31 December
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
87 / 105
2020
2019
Notes DKKm DKKm
Product rights
7
9,850
8,224
Other rights
7
68
77
Projects in progress
7
132
90
Intangible assets
10,050
8,391
Land and buildings
8
1,040 1,028
Plant and machinery
8
197
212
Other fixtures and
fittings, tools and equipment
8
25
31
Prepayments and assets under construction
8
295
255
Right
-of-use assets
9
194
203
Property, plant and equipment
1,751
1,729
Investments in subsidiaries
3
10,534 10,769
Receivables from subsidiaries
4,819
3,779
Other investments
114
58
Other receivables
4
3
Financial assets
15,471
14,609
Non-current assets
27,272
24,729
Inventories
10
1,303
687
Trade receivables
587
572
Receivables from
subsidiaries
1,388
6,393
Joint taxation contribution
130
169
Other receivables
747 244
Prepayments
84
69
Receivables
2,936
7,447
Cash and bank balances
3,171
2,125
Current assets
7,410
10,259
Assets
34,682
34,988
2020
2019
Notes
DKKm
DKKm
Share capital
996
996
Proposed dividends
498
816
Hedging reserve
176
-
Retained earnings
12,144
11,921
Equity
13,814
13,733
Deferred tax liabilities
5
137
178
Provisions
11
-
50
Bank debt and bond debt
13
5,397
7,062
Lease liabilities
9
182
190
Payables to subsidiaries
14
6,226
2,064
Other payables
20
-
Non-current liabilities
11,962
9,544
Provisions
11
132
100
Bank debt
2,000
2,000
Trade payables
2,092
1,920
Lease liabilities
9
13
13
Payables to subsidiaries
3,791
7,069
Other payables
878
609
Current liabilities
8,906
11,711
Liabilities
20,868
21,255
Equity and liabilities
34,682
34,988
STATEMENT OF FINANCIAL POSITION –
ASSETS
A
t 31 December
STATEMENT OF FINANCIAL POSITION –
EQUITY AND LIABILITI
ES
A
t 31 December
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
88 / 105
Share
capital
Proposed
dividends
Hedging
reserve
Retained
earnings
Equity
Notes
DKKm
DKKm
DKKm
DKKm
DKKm
Equity at 1 January
996
816
-
11,921
13,733
Profit for the year
6
-
498
-
217
715
Distributed dividends, gross
-
(816)
-
-
(816)
Dividends received, treasury shares
- - - 1 1
Deferred exchange gains/losses,
hedging
-
-
313
-
313
Deferred fair value of
interest rate
swaps
- - (82)
- (82)
Exchange gains/losses, hedging
(transferred to revenue)
-
-
(5)
-
(5)
Capital increase through exercise of
warrants
- - - 1 1
Buyback of treasury shares
-
-
-
(29)
(29)
Incentive programs
-
-
-
32
32
Tax on transactions in equity
5
-
-
(50)
1
(49)
Equity at 31 December
996
498
176
12,144
13,814
See note 13 Equity in the consolidated financial statements.
STATEMENT OF CHANGES IN EQUITY
At
31 December
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
89 / 105
1 MANAGEMENT REVIEW OF THE PARENT COMPANY
The following is considered significant to the understanding of the financial statements of the Parent company.
Revenue
Of total revenue, DKK 4,806 derived from sales in North America, representing 45% of total revenue and DKK
3,704 derived from sales in Europe, representing 35% of total revenue. See note 2 Revenue and segment
information in the consolidated financial statements.
Financial income and expenses
Financial income and expenses are impacted by a net exchange loss of DKK 13 million relating to translation
of receivables from and payables to subsidiaries that are considered part of the overall investment in
subsidiaries. Further, financial income and expenses are impacted by a gain of DKK 356 million relating to the
translation of external loans and cross-currency swaps used for hedging net investments in foreign operations
in the U.S.
Intangible assets
The Parent company H. Lundbeck A/S has acquired all intellectual property rights from Lundbeck La Jolla
Research Center, Inc. and the intellectual property rights from Prexton Therapeutics S.A. relating to foliglurax
at a total amount of DKK 3,627 million. The foliglurax product rights were subsequently impaired impacting
research and development costs.
Bond issuance
The Parent company H. Lundbeck A/S has issued eurobonds in an aggregate amount of EUR 500 million. The
proceeds from the bond issuance have been used to settle part of the bank debt raised to finance Lundbeck’s
acquisition of Alder BioPharmaceuticals, Inc. (subsequently renamed Lundbeck Seattle BioPharmaceuticals,
Inc.) in 2019.
Treasury shares
See note 13 Equity in the consolidated financial statements for details on developments in the holding of
treasury shares.
2 EMPLOYEE COSTS
Breakdown of employee costs
2020
2019
DKKm DKKm
Short-term employee benefits
1,478
1,330
Retirement benefits
127
122
Social security costs
27
22
Equity- and cash-settled incentive programs
29
29
Total
1,661
1,503
2020
2019
Employee costs by nature
DKKm
DKKm
Cost of sales
427 406
Sales and distribution costs
105 95
Administrative expenses
396
304
Research and development costs
733 698
Total
1,661
1,503
Registered Executive Management
See notes 3 Employee costs and 15 Incentive programs in the consolidated financial statements.
Board of Directors
See note 3 Employee costs in the consolidated financial statements.
Number of employees
2020
2019
Average number of full-time employees in the financial year
1,738
1,734
Number of full-time employees at 31 December
1,709
1,766
Incentive programs
See note 15 Incentive programs in the consolidated financial statements.
NOTES 1-2
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
90 / 105
3 INVESTMENTS IN SUBSIDIARIES
2020
DKKm
Cost at 1 January
10,799
Disposals
(61)
Cost at 31 December
10,738
Impairment at 1 January
30
Impairment of investments in subsidiaries
204
Disposals
(30)
Impairment at 31 December
204
Carrying amount at 31 December
10,534
Income from investments in subsidiaries amounting to DKK 757 million is the net amount of dividends received,
proceeds from liquidations of subsidiaries and impairment losses recognized related to investments in
subsidiaries. In 2019, income from investments in subsidiaries was dividends amounting to DKK 3,217 million.
See note 24 List of subsidiaries in the consolidated financial statements for an overview of subsidiaries.
4 NET FINANCIALS
In 2020, financial income amounted to DKK 743 million (DKK 187 million in 2019), of which DKK 233 million
(DKK 120 million in 2019) related to intra-group interest income, and financial expenses amounted to DKK 273
million (DKK 290 million in 2019), of which DKK 56 million (DKK 54 million in 2019) related to intra-group
interest expenses.
5 INCOME TAXES
Tax on profit for the year
2020
2019
DKKm DKKm
Current tax, joint taxation contribution
12
(81)
Prior-year adjustments, current tax
(2)
8
Prior-year adjustments, deferred tax
8
(19)
Change in deferred tax for the year
(49)
200
Total tax for the year
(31)
108
Tax for the year is composed of:
Tax on profit for the year
(80)
114
Tax on transactions in equity
49
(6)
Total tax for the year
(31)
108
Deferred tax balances
Temporary differences between
assets and liabilities as
stated in the financial statements and in the tax base
Balance at
1 January
Adjustment of
deferred
tax at
beginning
of year
Movements
during
the year
Balance at
31 December
DKKm DKKm DKKm DKKm
Intangible assets
4,171
-
(456)
3,715
Property, plant and equipment
484
-
(13)
471
Inventories
236
-
114
350
Other items
(352)
(18)
(11)
(381)
Tax loss carryforwards etc.
(3,727)
52
143
(3,532)
Total temporary differences
812
34
(223)
623
Deferred (tax assets)/tax liabilities
178
8
(49)
137
The major assumptions relating to the recognition and measurement of tax assets are described in
note 6 Income taxes in the consolidated financial statements.
NOTES 3-5
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
91 / 105
5 INCOME TAXES - CONTINUED
2020
2019
Movements in deferred tax
DKKm DKKm
Balance at 1 January
178
(3)
Movements relating to profit for the year
(41)
180
Movements relating to transactions in equity
-
1
Balance at 31 December
137
178
6 DISTRIBUTION OF PROFIT
2020
2019
Proposed distribution of profit for the year
DKKm
DKKm
Proposed dividends for the year
498
816
Transferred to/from distributable reserves
217 3,276
Total profit for the year
715
4,092
Proposed dividend per share (DKK)
2.50
4.10
7 INTANGIBLE ASSETS
Product
rights¹
Other
rights²
Projects in
progress²
Total
intangible
assets
Intangible assets
DKKm
DKKm
DKKm
DKKm
Cost at 1 January
12,814
1,736
93
14,643
Transfers
- 29 (29)
-
Additions
3,627 16 68 3,711
Disposals
-
(122)
-
(122)
Cost at 31 December
16,441
1,659
132
18,232
Amortization and impairment losses at 1 January
4,590 1,659 3 6,252
Transfers
-
3
(3)
-
Amortization
594 39 - 633
Impairment losses
1,407 - - 1,407
Disposals
-
(110)
-
(110)
Amortization and impairment losses at 31 December
6,591
1,591
-
8,182
Carrying amount at 31 December
9,850
68
132
10,050
1
) At 31 December 2020, product rights not yet commercialized amounted to DKK 6,239 million (DKK 4,019 million in 2019).
2) Other rights and projects in progress primarily include items such as the IT system SAP. The amounts include directly attr
ibutable internal
expenses.
NOTES 5-7
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
92 / 105
8 PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Prepayments
and assets
under
construction
Total
property,
plant and
equipment
Property, plant and equipment
DKKm
DKKm
DKKm
DKKm
DKKm
Cost at 1 January
3,078 1,108 545 255 4,986
Transfers
83 27 14 (124)
-
Additions
20
8
5
164
197
Disposals
(5)
(8)
(33)
- (46)
Cost at 31 December
3,176
1,135
531
295
5,137
Depreciation and impairment losses at
1 January
2,050
896
514
-
3,460
Depreciation
89 44 11 - 144
Impairment losses
1 6 - - 7
Disposals
(4)
(8)
(19)
-
(31)
Depreciation and impairment losses at
31 December
2,136
938
506
-
3,580
Carrying amount at 31 December
1,040
197
25
295
1,557
1) Including leasehold improvements.
Pledged assets
No land and buildings were mortgaged at 31 December 2020. No other assets have been pledged.
9 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
2020
2019
Amounts recognized in profit or loss
DKKm DKKm
Expense relating to short-term leases, not capitalized
1
2
Depreciation of right-of-use assets, land and buildings
13
13
2020
2019
Land and buildings
DKKm
DKKm
Carrying amount at 1
January 203 216
Carrying amount at 31 December
194 203
2020
2019
Maturity analysis of lease liabilities
DKKm DKKm
Within 1 year
13
13
Between 1 year and 5 years
52
50
After 5 years
130
140
Lease liabilities at 31 December
195
203
NOTES 8-9
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
93 / 105
10 INVENTORIES
2020
2019
DKKm DKKm
Raw materials and consumables
143
159
Work in progress
868
332
Finished goods and goods for resale
292
196
Total
1,303
687
11 PROVISIONS
2020
DKKm
Provisions at 1 January
150
Provisions charged
122
Provisions used
(102)
Unused provisions reversed
(38)
Provisions at 31 December
132
The Parent company has entered into agreements with individual subsidiaries, under which the Parent
company will cover expected losses and obligations concerning the restructuring programs. The provisions in
the Parent company therefore cover such losses and obligations.
At 31 December 2020, provisions of DKK 132 million (DKK 150 million in 2019) related to restructuring
programs.
12 CONTINGENT ASSETS AND CONTINGENT LIABILITIES
Pending legal proceedings
H. Lundbeck A/S is involved in a number of legal proceedings, including patent disputes, the most significant
of which are described below. In the opinion of Management, the outcome of these proceedings will not have
a material impact on the financial position or cash flows beyond the amount already provided for in the financial
statements, or it is too uncertain to make a reliable provision. Such proceedings will, however, develop over
time, and new proceedings may occur which could have a material impact on the financial position and/or cash
flows.
In June 2013, the Company received the European Commission’s decision that agreements concluded with
four generic competitors concerning citalopram violated competition law. The decision included fining the
Company EUR 93.8 million (approximately DKK 700 million). The Company paid and expensed the fine in the
third quarter of 2013. In September 2016, the Company announced that the General Court of the European
Union had delivered its judgment concerning the Company’s appeal against the European Commission’s 2013
decision. The Company’s appeal was rejected by the General Court. The Company has appealed the judgment
to the European Court of Justice. An oral hearing was conducted by the European Court of Justice in January
2019. The Advocate General delivered her opinion to the European Court of Justice on 4 June 2020. In the
opinion, the Advocate General proposes that the European Court of Justice should uphold the fine of EUR
93.8 million imposed on the Company. The final judgment will be delivered on 25 March 2021. So called “follow-
on claims” for reimbursement of alleged losses, resulting from alleged violation of competition law, often arise
when decisions and fines issued by the European Commission are upheld by the European Court of Justice.
Health authorities in the UK and the Netherlands have taken formal protective steps against the Company with
the principal purpose of preventing potential claims from being time-barred under the applicable statutes of
limitation. The Company expects no further material development in these matters until after the European
Court of Justice has issued its final judgment.
In Canada, the Company is involved in three product liability class-action lawsuits relating to Cipralex
®
/Celexa
®
(two cases alleging various Celexa
®
-induced birth defects and one case against several SSRI manufacturers
(incl. H. Lundbeck A/S) alleging that SSRI (Celexa
®
/Lexapro
®
) induces autism birth defect); three relating to
Abilify Maintena
®
(alleging i.a. failure to warn about compulsive behavior side effects), and one relating to
Rexulti
®
(also alleging i.a. failure to warn about compulsive behavior side effects). The cases are in the
preliminary stages and as such there is significant uncertainty as to how these lawsuits will be resolved. The
Company strongly disagrees with the claims raised.
NOTES 10-12
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
94 / 105
12 CONTINGENT ASSETS AND CONTINGENT LIABILITIES – CONTINUED
In 2018, the Company entered into settlements with three of four generic companies involved in an Australian
federal court case, in which the Company was pursuing patent infringement and damages claims over the sale
of escitalopram products in Australia. The Company received AUD 51.7 million (DKK 242 million) in 2018. In
the Company’s case against the last of the four generic companies, Sandoz Pty Ltd, the Federal Court found
that Sandoz Pty Ltd had infringed the Company’s escitalopram patent between 2009 and 2012 and awarded
the Company AUD 26.3 million in damages. Sandoz’ appeal of the decision was heard in May 2019, and the
Full Federal Court has in August 2020 allowed Sandoz' appeal and decided that Sandoz is not liable for
damages. The company’s application for special leave to appeal the decision to the High Court will be heard
in February 2021.
Together with Takeda, the Company has instituted patent infringement proceedings against 16 generic
companies that have applied for marketing authorization for generic versions of Trintellix
®
in the U.S. Two
opponents have withdrawn and the Company has now settled with eight opponents. The cases against the six
remaining opponents continue. The trial with the six opponents was in late January 2021 and decision is
currently expected within seven months after the trial. The Company has strong confidence in its vortioxetine
patents. The FDA cannot grant marketing authorization to the generic companies unless they receive a
decision in their favor. The compound patent, including patent term extensions, will expire in the U.S. on 17
December 2026. The Company has other patents relating to vortioxetine with expiry in the period until 2032.
Together with Otsuka, the Company has instituted patent infringement proceedings against several generic
companies that have applied for marketing authorization for generic versions of Rexulti
®
in the U.S. The
Company has strong confidence in the Rexulti
®
patents. The FDA cannot grant marketing authorization in the
U.S. to the generic companies before the patents expire unless the generic companies receive decisions in
their favor.
Joint taxation
H. Lundbeck A/S is part of a Danish joint taxation scheme with Lundbeckfonden (Lundbeckfond Invest A/S
including subsidiaries), according to which the Company has partly a joint and several liability and partly a
secondary liability with respect to corporate income taxes, etc. for the jointly-taxed companies. In addition,
H. Lundbeck A/S has 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 these companies. However, in both cases
the secondary liability is capped at an amount equal to the share of the capital of the company directly or
indirectly owned by the ultimate parent company. The total tax obligation under the joint taxation scheme is
shown in the financial statements of Lundbeckfond Invest A/S.
Letters of intent
The Parent company has entered into agreements to cover operating losses in certain subsidiaries.
As collateral for bank guarantees, the Parent company has issued letters of intent to the banks in the amount
of DKK 6 million (DKK 6 million in 2019) of behalf of subsidiaries.
13 BANK DEBT AND BOND DEBT
Bank debt and bond debt falling due after more than five years from the balance sheet date amounted to DKK
3,699 million at 31 December 2020 (DKK 0 million in 2019).
14 PAYABLES TO SUBSIDIARIES
Payables to subsidiaries falling due after more than five years from the balance sheet date amounted to DKK
6,226 million at 31 December 2020 (DKK 2,064 million in 2019).
15 FINANCIAL INSTRUMENTS
Foreign currency management is handled by the Parent company. See note 20 Financial instruments in the
consolidated financial statements.
The fair value of derivatives at year-end is disclosed in note 20 Financial instruments in the consolidated
financial statements. The fair value adjustment recognized in equity is disclosed in the statement of changes
in equity in the financial statements of the Parent company. All fair value adjustments are initially recognized
in equity.
NOTES 12-15
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
95 / 105
16 AUDIT FEES
2020
2019
DKKm
DKKm
Statutory audit
4 3
Other opinions
- -
Tax consulting
3
-
Other
services 1 8
Total
8
11
At the Annual General meeting held on 24 March 2020, PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab was elected as Lundbeck’s external auditor. Deloitte Statsautoriseret
Revisionspartnerselskab was Lundbeck’s external auditor in 2019.
17 CONTRACTUAL OBLIGATIONS
Research and development milestones and collaborations
The Parent company has entered into a number of agreements relating to research and development.
According to the agreements, the Company is committed to pay certain milestones. At 31 December 2020,
potential future milestone payments covering the coming ten-year period totalled up to approximately DKK 300
million (approximately DKK 1,750 million in 2019). In addition, the Parent company is part of multi-year research
and development collaboration projects comprising minimum collaboration obligations in the order of DKK 1
million (DKK 10 million in 2019).
Sales milestones
The Company is committed to pay certain commercial sales milestones. The amount depends on future sales.
Other purchase obligations
The Parent company has undertaken purchase obligations in the amount of DKK 93 million (DKK 155 million
in 2019), the majority of which relates to service contracts. In addition, the Parent company has undertaken
purchase obligations relating to property, plant and equipment in the amount of DKK 82 million (DKK 83 million
in 2019). Furthermore, the Parent company has entered into service agreements amounting to
DKK 160 million (DKK 210 million in 2019).
18 RELATED PARTIES
For information on related parties exercising controlling influence on the Parent company, see note 23 Related
parties in the consolidated financial statements.
The Parent company is included in the consolidated financial statements of Lundbeckfonden.
The Parent company had transactions with subsidiaries during 2020. The Parent company’s share of
ownership of all subsidiaries is 100%. The Parent company did not enter into any transactions with other related
parties that were not on an arm’s length basis.
19 SUBSEQUENT EVENTS
See note 25 Subsequent events in the consolidated financial statements.
NOTES 16-19
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ANNUAL REPORT 2020
CONTENTS
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20 SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Parent company H. Lundbeck A/S have been prepared in accordance with the
provisions of the Danish Financial Statements Act for class D enterprises. The financial statements are
presented in Danish kroner (DKK). All amounts have been rounded to millions, unless otherwise indicated.
Differences relative to the accounting policies for the consolidated financial statements
The Parent company’s accounting policies for recognition and measurement are consistent with the accounting
policies for the consolidated financial statements with the exceptions stated below.
Statement of profit or loss
Income from investments in subsidiaries
Income from investments in subsidiaries includes dividends from subsidiaries, which are recognized in the
Parent company’s statement of profit or loss when the Parent company’s right to receive such dividends has
been approved. Further, income from investments in subsidiaries includes proceeds from liquidation of
subsidiaries and any impairment losses or reversals of impairment losses on investments in subsidiaries.
Exchange gains/losses
Exchange gains/losses on translation of receivables from and payables to subsidiaries that are considered part
of the overall investment in subsidiaries are recognized in profit or loss under financial income or financial
expenses.
Exchange gains/losses on that part of the bank debt in foreign currency which is used for hedging of the net
investments in subsidiaries and which provides an effective hedging of the exchange gains/losses of the net
investments are recognized in profit or loss under financial income or financial expenses.
Statement of financial position
Investments in subsidiaries
Investments in subsidiaries are measured at cost in the Parent company’s financial statements. Where the
recoverable amount of the investments is lower than cost, the investments are written down to this lower value.
In addition, cost is written down to the extent that dividends distributed exceed the accumulated earnings in
the subsidiary since the acquisition date.
Other financial assets
On initial recognition, investments are measured at cost, corresponding to fair value plus directly attributable
costs. Subsequently, they are measured at fair value at the balance sheet date. Any fair value adjustments on
equity investments recognized in other comprehensive income in the consolidated financial statements are
recognized under financial income or financial expenses in the Parent company’s statement of profit or loss.
Statement of changes in equity
Pursuant to the Danish Financial Statements Act, entries recognized in the statement of comprehensive
income in the consolidated financial statements are recognized directly in the statement of changes in equity
in the Parent company’s financial statements, except for entries concerning exchange gains/losses on
translation of receivables from and payables to subsidiaries, entries providing an effective hedge against
foreign exchange gains/losses on the net investment and entries concerning other financial assets.
Statement of cash flows
As allowed under section 86(4) of the Danish Financial Statements Act, no statement of cash flows has been
prepared as it is included in the consolidated statement of cash flows.
NOTE 20
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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Copenhagen, 4 February 2021
MANAGEMENT
STATEMENT
REGISTERED EXECUTIVE MANAGEMENT
Deborah Dunsire
President and CEO
Lars Bang
Executive Vice President,
Product Development &
Supply
Anders Götzsche
Executive Vice President,
CFO
Per Johan Luthman
Executive Vice President,
Research &
Development
Jacob Tolstrup
Executive Vice
President, Commercial
Operations
BOARD OF DIRECTORS
Lars Søren Rasmussen
Chairman of the Board
Lene Skole-Sørensen
Deputy Chairman
of the Board
Henrik Andersen
Jeffrey Berkowitz
Lars Erik Holmqvist
Jeremy Max Levin
Rikke Kruse Andreasen
Employee representative
Henrik Sindal Jensen
Employee representative
Ludovic Tranholm Otterbein
Employee representative
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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Report on the audit of the financial statements
Our opinion
Basis for opinion
Key audit matters
INDEPENDENT
AUDITOR’S
REPORTS
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
99 / 105
Key audit matter
How our audit addressed the key audit matter
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
100 / 105
Statement on Management review
Management’s responsibilities for the financial statements
Key audit matter - continued
How our audit addressed the key audit matter - continued
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
101 / 105
Auditor’s responsibilities for the audit of the financial statements
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
102 / 105
Report on compliance with the ESEF Regulation
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
Lars Baungaard
Torben Jensen
State Authorized Public Accountant
State Authorized Public Accountant
mne23331
mne18651
LUNDBECK
ANNUAL REPORT 2020
CONTENTS
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Reported
result
Amortization
of product
rights
Impairment
and inventory
valuation
Major
restructuring
Acquisition
and
integration
costs
Legal fees
and
settlements
Divestments/
sales
milestones
Core result
Core results
DKKm DKKm DKKm DKKm DKKm DKKm DKKm DKKm
1 January - 31 December 2020
Revenue
17,672
-
-
-
-
-
-
17,672
Cost of sales
4,166
(1,548)
(47)
-
-
-
-
2,571
Gross profit
13,506
1,548
47
-
-
-
-
15,101
Sales and distribution costs
5,946
-
-
-
-
-
-
5,946
Administrative expenses
966
-
-
-
-
-
-
966
Research and development costs
4,545
-
(792)
-
-
-
-
3,753
Other operating expenses, net
59
-
-
-
(59)
-
-
-
Profit from operations (EBIT)
1,990
1,548
839
-
59
-
-
4,436
Net financials, expenses
84
-
-
-
-
-
-
84
Profit before tax
1,906
1,548
839
-
59
-
-
4,352
Tax on profit for the year
325
244
11
-
14
-
-
594
Profit for the year
1,581
1,304
828
-
45
-
-
3,758
Earnings per share, basic (EPS) (DKK)
7.95
6.56
4.17
-
0.23
-
-
18.91
CORE
RECONCILIATION
Part of Management review
As a general rule, Lundbeck adjusts for amortization of
product rights and for each non-recurring item that
Management deems exceptional and which accumulates
or is expected to accumulate to an amount exceeding a
DKK 100 million threshold. Lundbeck’s core reporting is a
non-IFRS performance measurement. Lundbeck’s core
results, including core operating income (core EBIT) and
core EPS, exclude:
Amortization of product rights
Impairment of intangible assets and property, plant
and equipment as well as inventory valuation
adjustment
Major restructuring costs
Acquisition and integration costs, including:
• Accounting adjustments relating to the consolidation of
material acquisitions and disposals of associates,
products and businesses
• Costs associated with the integration of newly acquired
companies
• Retention costs
• Transaction costs
• Legal fees and settlements, including:
• Legal costs (external), charges (net of insurance
recoveries) and expenses relating to settlement of
litigations, government investigations and other
disputes
• Income from settlement of litigations and other disputes
LUNDBECK
ANNUAL REPORT 2020
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Divestments/milestones, including:
• Income/expenses from discontinued operations
• Gains/losses on divestments of assets
•
Received or expensed upfront sales and development
milestones
The adjusted core result is taxed at the underlying
corporate tax rate.
Reported
result
Amortization
of product
rights
Impairment
and inventory
valuation
Major
restructuring
Acquisition
and
integration
costs
Legal fees
and
settlements
Divestments/
sales
milestones
Core result
Core results
DKKm DKKm DKKm DKKm DKKm DKKm DKKm DKKm
1 January - 31 December 2019
Revenue
17,036
-
-
-
-
-
-
17,036
Cost of sales
3,840
(1,309)
-
-
-
-
-
2,531
Gross profit
13,196
1,309
-
-
-
-
-
14,505
Sales and distribution costs
5,514
-
-
-
-
-
-
5,514
Administrative expenses
899
-
-
-
-
-
-
899
Research and development costs
3,116
-
-
-
-
-
-
3,116
Other operating expenses, net
514
-
-
-
(514)
-
-
-
Profit from operations (EBIT)
3,153
1,309
-
-
514
-
-
4,976
Net financials, expenses
127
-
-
-
-
-
-
127
Profit before tax
3,026
1,309
-
-
514
-
-
4,849
Tax on profit for the year
713
182
-
-
87
-
-
982
Profit for the year
2,313
1,127
-
-
427
-
-
3,867
Earnings per share, basic (EPS) (DKK)
11.64
5.67
-
-
2.15
-
-
19.46
CORE
RECONCILIATION
CONTINUED
H. Lundbeck A/S
Ottiliavej
9
2500 Valby
Denmark
Corporate Communication
Tel. +45 36 30 13 11
information@lundbeck.com
www.lundbeck.com
CVR number 56759913
