First quarter 2009 report. Double digit revenue growth. Strong
performance by key products
H. Lundbeck A/S reports highest ever quarterly revenue of DKK 3,226
million, a growth of 15% in constant exchange rates, driven by strong
growth in Cipralex®, Ebixa® and Azilect®. The divestment of LifeCycle
Pharma contributes DKK 124 million to first quarter revenue.
* In mid-March Lundbeck acquired Ovation Pharmaceuticals, Inc.
The first new product from this acquisition - ATryn® - was launched
in May.
* Research & Development costs were DKK 717 million in the
period, up 37% compared with Q1 2008, driven by increased
investment in the late-stage pipeline. R&D costs now correspond to
22% of total revenue.
* Profit from operations (EBIT) was DKK 947 million,
corresponding to an EBIT margin of 29%. Operating profit before
depreciation and amortisation (EBITDA) was DKK 1,079 million.
Distribution of revenue Q1 2009 Q1 2008 Growth
DKKm DKKm Growth at CER
Cipralex® 1,363 1,216 12% 16%
Lexapro® 626 661 (5%) (1%)
Ebixa® 526 457 15% 17%
Azilect® 78 54 43% 49%
Europe 1,675 1,516 10% 12%
USA 687 661 4% 7%
International Markets 708 651 9% 13%
Total revenue 3,226 2,882 12% 15%
In mid-March 2009 Lundbeck acquired Ovation Pharmaceuticals, Inc.
(now Lundbeck Inc.). Lundbeck Inc. generated revenue of approx DKK
396 million in the first quarter of 2009, of which DKK 61 million
were recognised as Lundbeck revenue. The newly acquired company is
expected to deliver more than 25% top-line growth on a stand alone
basis in 2009.
Including Lundbeck Inc., Lundbeck expects revenue of DKK 13.1-13.6
billion and an EBITDA of DKK 3.5-3.7 billion. Previously Lundbeck's
guidance on EBIT for 2009 excluding Lundbeck Inc. was DKK 3-3.2
billion. Including one-off expenses of approx DKK 183 million due to
acquisition accounting Lundbeck now expects EBIT including Lundbeck
Inc. of DKK 2.8-3.0 billion. The expense of approx DKK 183 million
will have no impact on cash flow.
In connection with the interim report, Lundbeck's President and CEO
Ulf Wiinberg said:"In the first quarter we delivered on the strategic intent of
establishing ourselves in the biggest pharmaceutical market in the
world by acquiring US based Ovation. We are also pleased with the
revenue performance delivering double digit growth in the quarter,
where significant growth for our key products and principal markets
has been maintained."
Management review
Financial highlights and key figures
2009 2008 2008
Q1 Q1 FY
Financial highlights (DKKm)
Revenue 3,226 2,882 11,282
Profit from operations (EBIT) 947 925 2,354
Net financials 20 14 (28)
Profit before tax 968 922 2,283
Tax 271 247 620
Profit for the period 697 675 1,663
Equity 8,115 7,347 7,511
Assets 16,000 12,619 12,526
Cash flows from operating and investing
activities (1,802) 1,067 2,193
Property, plant and equipment investments,
gross 41 19 229
Key figures
EBIT margin (%)1 29.4 32.1 20.9
Return on capital employed (%) 11.5 11.4 30.0
Research & Development costs as a
percentage of revenue 22.2 18.1 26.5
Return on equity (%)1 8.9 9.3 22.8
Solvency ratio (%)1 50.7 58.2 60.0
Capital employed (DKKm) 10,056 9,242 9,438
Share data
Number of shares for the calculation of EPS
(million) 196.1 198.7 196.8
Number of shares for the calculation of
DEPS (million) 196.1 198.7 196.8
Earnings per share (EPS) (DKK)1 3.55 3.39 8.45
Diluted earnings per share (DEPS) (DKK)1 3.55 3.39 8.45
Cash flow per share (DKK)1 3.01 4.34 14.12
Net asset value per share (DKK)1 41.38 37.28 38.30
Market capitalisation (DKKm) 18,809 24,461 21,657
Share price end of period (DKK) 95.53 118.01 110.00
Other
Number of employees 5,686 5,107 5,318
1) Definitions according to the Danish Society of Financial Analysts'
Recommendations & Financial Ratios 2005
Lundbeck's development portfolio
Lundbeck is developing a number of new and promising pharmaceuticals
in the existing fields of specialties; depression, anxiety and
psychotic disorders - and in new areas such as epilepsy, stroke and
alcohol dependence. At the end of first quarter 2009 Lundbeck's
pipeline consisted of:
* Two compounds under FDA regulatory
review
* Six compounds in clinical phase III
* Five compounds in clinical phase
II
* Two compounds in clinical phase I
Pipeline progress is summarized as follows:
Regulatory review
In April 2009 the Psychopharmacology Drug Advisory Committee (PDAC)
appointed by the U.S. Food and Drug Administration (FDA) voted
unanimously that Serdolect® (sertindole) is efficacious in the
treatment of patients with schizophrenia. While data on possible
reduction of risk of suicide attempt were found of interest, they
were not adequate to support an indication as such. The majority of
the committee voted against use in the broad schizophrenia population
due to safety concerns, however a majority of the committee voted
that there may be subpopulations in which the therapy is beneficial
with appropriate labelling and risk management tools. Lundbeck will
work closely with the agency to define the appropriate indication and
risk management program to obtain approval of Serdolect®.
The FDA is not bound by the committee's recommendation. The target
Prescription Drug User Fee Act (PDUFA) date for the Serdolect®
application is 15 May 2009.
Lundbeck is still in active dialogue with the US FDA in order to
obtain final approval on Sabril® (vigabatrin) for the treatment of
refractory complex partial seizures and the treatment of infantile
spasms. Label discussions are progressing and approval is expected
mid-2009.
Clinical phase III
The results from the clinical phase II study on Lu AA21004 (mood
disorders) will be published at American Psychiatric Association
(APA) conference in San Francisco on 19 May 2009. The phase III
program is progressing as planned with the first headline data from
the clinical phase III studies to be communicated mid-2009. The
development programme now comprises more than 5,000 patients.
Lundbeck initiated the clinical phase III trial with desmoteplase for
the treatment of acute ischemic stroke (cerebral thrombosis) in
December 2008. The phase III trial consists of two placebo-controlled
trials, each enrolling approximately 320 patients. The second of
these trials is now ready to recruit patients. The trials have been
designed with the aim of measuring efficacy of one dose of
desmoteplase three to nine hours after the stroke occurred. The
efficacy of the treatment is assessed after 90 days.
Lundbeck launched three phase III trials enrolling more than 1,800
patients in total receiving nalmefene and placebo respectively in
December 2008. These trials are recruiting patients according to
plan. The first data are expected in the first half of 2011. Lundbeck
has global rights to the compound, except for South Korea.
Following the acquisition of Lundbeck Inc. the different pipeline
projects have been evaluated. The estimated filing period for IV
carbamazepine is 2010. According to the plans for patient recruitment
in the phase III trial for clobazam, Lundbeck expects to file an NDA
in the US during 2011. Clobazam is being developed for a severe type
of epilepsy called Lennox-Gastaut Syndrome.
Clinical phase II
Based on new pre-clinical data from the 52-week, long-term toxicology
study in minipigs of Lu AA39959 (bipolar depression), the
non-clinical safety data no longer support the dosing of patients
with 15 mg b.i.d. of Lu AA39959, but support dosing of patients with
a lower dose of Lu AA39959. Implementation of this change requires
that the study temporarily be put on hold, causing a delay to the
project.
Clinical phase I
An additional small multi-dose study has been initiated with Lu
AA24493 (carbamylated erythropoeitin or CEPO) focusing on safety and
pharmacokinetic in patients with acute ischemic stroke. The study
will enrol 24 patients with three active arms and a placebo group.
Revenue
Lundbeck's revenue climbed to DKK 3,226 million in Q1 2009, which is
the highest figure ever reported for a single quarter. Revenue rose
by 12% relative to Q1 2008 and by 15% at constant exchange rates. The
increase was driven by Lundbeck's key products: Cipralex®, Ebixa® and
Azilect®. Furthermore the divestment of LifeCycle Pharma (LCP)
contributed DKK 124 million.
Total revenue Q1 2009 Q1 2008 Growth Q4 2008
DKKm DKKm Growth at CER DKKm
Cipralex® 1,363 1,216 12% 16% 1,151
Lexapro® 626 661 (5%) (1%) 509
Ebixa® 526 457 15% 17% 475
Azilect® 78 54 43% 49% 80
Serdolect® 16 12 32% 36% 17
Other pharmaceuticals 462 428 8% 7% 371
Other revenue 155 54 185% 188% 49
Total revenue 3,226 2,882 12% 15% 2,653
The acquisition of Ovation Pharmaceuticals, Inc. (Lundbeck Inc.) was
given the final approval by the US competition authorities in the
middle of March. In this interim report, approximately two weeks of
financial results reported by Lundbeck Inc. in the USA are therefore
included in Lundbeck's financial statements. Revenue derived from
pharmaceuticals in the USA from Lundbeck Inc. is reported under"Other pharmaceuticals" in this interim report, amounting to DKK 61
million in the first quarter.
Revenue from Cipralex® (escitalopram) for the treatment of depression
and anxiety rose to DKK 1,363 million, an increase of 12%, thus
accounting for 42% of Lundbeck's total revenue, while Lexapro®
revenue (escitalopram, marketed in the USA) was down 5% in the
quarter to DKK 626 million compared with same period last year.
Lexapro® now accounts for 19% of total revenue. Ebixa® (memantine)
for the treatment of Alzheimer's disease generated first-quarter
revenue of DKK 526 million, an increase of 15% on the year-earlier
period. Revenue from Ebixa® represented 16% of total revenue. Revenue
from Azilect® (rasagiline) for the treatment of Parkinson's disease
rose 43% during the period to DKK 78 million, corresponding to 2% of
total revenue.
Other pharmaceuticals, which comprise Lundbeck's mature
pharmaceuticals, Circadin®, for the treatment of insomnia, and
revenue from Lundbeck Inc., rose to DKK 462 million because of the
inclusion of Lundbeck Inc. Exclusive of Lundbeck Inc., revenue from
other pharmaceuticals fell by 6% to DKK 401 million.
Other revenue rose to DKK 155 million due to the DKK 124 million
income from the sale of LCP.
Europe
Revenue in Europe accounted for 52% of Lundbeck's total revenue,
rising 12% at constant exchange rates to DKK 1,675 million during the
period. The increase was driven by Cipralex®, Ebixa® and Azilect®;
revenue of which rose by 13%, 16% and 47%, respectively, at constant
exchange rates relative to the year-earlier period. Revenue from
other pharmaceuticals declined 2% at constant exchange rates.
Revenue Europe Q1 2009 Q1 2008 Growth Q4 2008
DKKm DKKm Growth at CER DKKm
Cipralex® 913 823 11% 13% 830
Ebixa® 431 375 15% 16% 397
Azilect® 70 50 42% 47% 75
Serdolect® 11 7 44% 50% 10
Other pharmaceuticals 250 262 (5%) (2%) 251
Total revenue 1,675 1,516 10% 12% 1,564
Cipralex® generated first-quarter revenue of DKK 913 million and at
the end of February 2009 held a market share in value terms of 17.9%
in Europe, as compared with a market share of 15.5% a year earlier.
Cipralex® is still the most widely used branded antidepressant in
Europe, and in general shows growth in all markets.
Revenue from Ebixa® rose to DKK 431 million, and at the end of
February 2009 the product held 16.1% of the European market for
pharmaceuticals to treat Alzheimer's disease. This compares to a
market share of 15.6% at the same time in 2008. Memantine, the active
ingredient in Ebixa, is still the second-most prescribed
pharmaceutical in Europe for treating Alzheimer's disease.
First-quarter revenue of Azilect® amounted to DKK 70 million. At the
end of February 2009, Azilect® held 7.1% of the total European market
for pharmaceuticals to treat Parkinson's disease. This compares to a
market share of 4.5% at the same time in 2008.
USA
Lundbeck's first-quarter revenue in the USA rose to DKK 687 million.
Revenue from Lundbeck Inc., contributing from the middle of March to
the end of March 2009 only, was DKK 61 million during the period. In
aggregate, US revenue represented 21% of Lundbeck's total revenue.
Revenue USA Q1 2009 Q1 2008 Growth Q4 2008
DKKm DKKm Growth at CER DKKm
Lexapro® 626 661 (5%) (1%) 509
Other pharmaceuticals 61 - - - -
Total revenue 687 661 4% 7% 509
First-quarter revenue from Lexapro® fell to DKK 626 million, a
decline of 5% or 1% at constant exchange rates. On 28 February 2009,
Lexapro® held a market share in the USA of 24.6% (in value terms), as
compared with a market share of 23.0% at the same time last year.
In March, Forest Laboratories, which handles Lundbeck's sale of
Lexapro® in the USA, obtained approval for Lexapro® for the treatment
of depression in adolescents, which may contribute positively to
Lexapro® revenue until patent expiry in 2012. Prepayments from Forest
recorded in Lundbeck's balance sheet - the difference between the
invoiced price and the minimum price of Forest's inventories - was
DKK 545 million at 31 March 2009 compared with DKK 835 million at 31
March 2008. At 31 March 2009, inventories were on a level
corresponding to approximately six months of commercial supply.
In November 2008, the pharmaceutical Xenazine for the treatment of
Huntington's disease was launched in the USA, where approximately
20,000 to 25,000 patients suffer from the disease. As a first of its
kind, the pharmaceutical was very well received. At the end of Q1
2009, more than 1,300 unique patients had thus been treated with
Xenazine, and another approximately 400 patients were about to
commence treatment. Revenue derived from Xenazine in the USA amounted
to approximately USD 10 million in the first quarter of 2009.
Lundbeck has recognised Xenazine revenue in the US from the middle of
March to the end of March.
In May 2009 ATryn® was launched in USA for the treatment of patients
with hereditary anti-thrombin deficiency (HAD) to prevent thrombosis
during high risk situations like surgery and obstetrical procedures.
International Markets
Overall, first-quarter revenue in International Markets, which
comprise all markets other than Europe and the USA, rose to DKK 708
million. The increase was driven by the key products Cipralex® and
Ebixa®, revenue of which rose by 21% and 18%, respectively, at
constant exchange rates. Azilect® and Serdolect® have only been
launched in very few markets in the region and therefore contributed
with a relatively small share. International Markets represented 22%
of Lundbeck's total first-quarter revenue.
Revenue Q1 2009 Q1 2008 Growth Q4 2008
International Markets DKKm DKKm Growth at CER DKKm
Cipralex® 450 393 15% 21% 321
Ebixa® 95 82 16% 18% 78
Azilect® 7 5 53% 77% 6
Serdolect® 5 5 11% 14% 6
Other pharmaceuticals 151 166 (9%) (9%) 120
Total revenue 708 651 9% 13% 530
In Q4 2008 Cipralex®, which generated revenue of DKK 450 million in
first quarter 2009, had a market share of 10.8% of the aggregate
market for antidepressants in terms of value in International
Markets. This compares to a market share of 9.9% in Q4 2007.
Cipralex® market share in Canada has, as a result of the approval of
public reimbursement in the Ontario province in Q3 2008, had a steady
growth. Cipralex® had a market share in February 2009 of 7.9% in
Canada measured in value, compared with a stable share of
approximately 6.5% ahead of the reimbursement approval.
Ebixa® generated first-quarter revenue of DKK 95 million and held
10.9% of the total market in Q4 2008 in terms of value for
pharmaceuticals for the treatment of Alzheimer's disease in
International Markets, as compared with a market share of 10.8% in Q4
2007.
During the quarter Azilect® was launched in South Africa.
Expenses
Distribution of costs Q1 2009 Q1 2008 Q4 2008
DKKm DKKm Growth DKKm
Cost of sales 487 476 2% 460
Distribution 673 567 19% 689
Administration 401 392 2% 437
Research & Development 717 522 37% 854
Total costs 2,279 1,957 16% 2,441
Total cost of sales rose 2% during the period to DKK 487 million,
amounting to 15% of Lundbeck's total revenue, down from 17% in the
year-earlier period. The modest increase was partly due to higher
costs of goods sold in Lundbeck Inc. as a result of purchase price
accounting used in connection with the acquisition. The increase was
offset by a positive contribution from the close down of the
production site in Seal Sands, UK.
Distribution costs of DKK 673 million were 19% higher than in Q1 2008
primarily due to higher expenses in connection with the distribution
of Circadin® and due to a higher activity level for Azilect®
following the positive results of the ADAGIO study. Administrative
expenses increased by 2% to DKK 401 million and accounted for 12% of
total revenue in the first quarter compared with 14% for the first
quarter of 2008. SG&A costs were DKK 1,074 million, compared with DKK
959 million in the year-earlier period, and continuously
corresponding to 33% of revenue.
Research & Development costs (R&D) amounted to DKK 717 million, an
increase of 37% compared with the same period last year. The increase
was primarily due to the development in our late-stage pipeline, with
the Lu AA21004 and nalmefene studies as the biggest contributors to
the increase. First-quarter R&D costs accounted for 22% of total
revenue, compared with 18% in the year-earlier period.
Operating profit before depreciation and amortisation (EBITDA)
EBITDA was DKK 1,079 million for the period, up 1% compared with
first quarter 2008 (DKK 1,065 million). EBITDA margin for the period
was 33%.
Depreciation, amortisation and impairment charges
Depreciation, amortisation and impairment charges, which are included
in the individual expense categories, amounted to DKK 132 million,
which is 5% lower than in the same period of 2008.
Depreciation, amortisation and Q1 2009 Q1 2008 Q4 2008
impairment charges per expense
category DKKm DKKm Growth DKKm
Cost of sales 48 59 (19%) 51
Distribution 9 4 153% 9
Administration 16 22 (27%) 17
Research & Development 58 54 8% 106
Total depreciation, amortisation and
impairment charges 132 140 (5%) 182
The DKK 5 million increase in depreciation on distribution was driven
by the inclusion of Lundbeck Inc.
Profit from operations (EBIT)
EBIT in Q1 2009 amounted to DKK 947 million, an increase of 2% on the
same period of 2008 (DKK 925 million). The profit was positively
affected by the divestment of the ownership interests in LCP, which
contributed DKK 124 million.
Exclusive of the divestment of LCP, the EBIT margin was 27% for the
period, compared with 32% in the year-earlier period.
Net financials
Lundbeck generated net financial income of DKK 20 million in the
period, compared with DKK 14 million in 2008.
Net financials Q1 2009 Q1 2008 Q4 2008
DKKm DKKm DKKm
Net items relating to trading (4) 14 (18)
Accounting translation of currency items 6 (18) 26
Net currency items relating to financial 2 (4) 8
items
Unrealised gains concerning other
investments excl. exchange rate
adjustments - 1 (96)*
Net interest income 18 17 11
Net financials 20 14 (77)
* DKK 96 million owing to divestment of non-strategic investments in
private equity funds to LFI a/s.
Net items relating to trading were DKK (4) million, owing to a loss
on currency contracts in connection with the acquisition of Ovation
(Lundbeck Inc.). The amount for first quarter 2008 was significantly
higher due to a reclassification of hedging contracts. Accounting
translation of currency items was DKK 6 million in total, up DKK 24
million compared to the year-earlier period.
Net interest income, including realised and unrealised gains and
losses on the bond portfolio, amounted to DKK 18 million in Q1 2009,
as compared with net income of DKK 17 million in the same period of
2008. The item was positively affected by a DKK 7 million profit on
our bond portfolio, which was realised because of the acquisition of
Ovation (Lundbeck Inc.). In addition net financials were negatively
affected by lower net interests as a consequence of the acquisition.
Change in accounting policies in respect of foreign currency
translation for non-monetary assets and exchange differences arising
from the translation of foreign subsidiaries, had a positive effect
on net financials for the first quarter of 2008 of DKK 38 million.
For further details see "Change in accounting policies" (page 14).
Tax
The income tax expense for the period was DKK 271 million as against
DKK 247 million in the year-earlier period. The tax rate was 28%, up
from 27% last year. The higher tax rate was attributable to an
expected rise in foreign payable taxes compared with 2008.
Profit for the period
Profit after tax for the first quarter of 2009 was DKK 697 million,
up from DKK 675 million in the same period of last year. The
improvement was primarily due to higher operating income, including
the divestment of LCP.
Cash flows
Lundbeck's total cash flow for the first quarter was an outflow of
DKK 1,802 million, against an inflow of DKK 656 million in the
year-earlier period.
Cash flows Q1 2009 Q1 2008 Q4 2008
DKKm DKKm DKKm
Cash flows from operating activities 591 862 55
Cash flows from investing activities (2,393) 205 (13)
Cash flows from operating and investing
activities (1,802) 1,067 42
Cash flows from financing activities 1 (412) 31
Change in cash (1,802) 656 73
Cash at beginning of period 2,921 1,772 2,867
Unrealised gains 4 (13) (19)
Cash at end of period 1,123 2,415 2,921
Operating activities generated a cash inflow of DKK 591 million
compared with DKK 862 million in Q1 2008. The difference stems partly
from change in working capital during the quarter. Furthermore the
income from LCP is not recognised as cash flow from operating
activities, but is recognised under investing activities. Cash flows
from investing activities represented an outflow of DKK 2,393 million
in Q1 2009, against an inflow of DKK 205 million in the same period
of 2008 and were adversely affected in the amount of DKK 3,535
million due to the acquisition of Ovation (Lundbeck Inc.).
Lundbeck's total net investments exclusive of financial investments
amounted to DKK 72 million, against DKK 138 million in the
year-earlier period.
Financing activities generated cash inflow of DKK 1 million compared
with an outflow of DKK 412 million in Q1 2008. The decrease was due
the termination of our share buyback programme in 2008.
Cash at 31 March 2009 amounted to DKK 1,123 million, against DKK
2,921 million at the end of 2008. At the end of the period, Lundbeck
had interest-bearing net debt of DKK 766 million compared with
interest-bearing net cash of DKK 1,949 million at the end of 2008.
Balance sheet
At 31 March 2009, Lundbeck had total assets of DKK 16,000 million,
against DKK 12,526 million at the end of 2008. The increase is due in
particular to the acquisition of Ovation (Lundbeck Inc.)
Lundbeck's intangible assets rose to DKK 7,552 million from DKK 2,016
million at the end of 2008, strongly impacted by the acquisition of
Ovation (Lundbeck Inc.)
At 31 March 2009, Lundbeck's equity amounted to DKK 8,115 million,
corresponding to a solvency ratio of 50.7%, compared with 60.0% at
the end of 2008.
Hedging
Lundbeck hedges income from its products using currency hedging. As a
result of Lundbeck's currency hedging policy, foreign exchange losses
and gains on hedging transactions are allocated directly to the
hedged transaction. The hedging of the company's foreign exchange
income means that this income is in reality included in the financial
statements at the forward rates - most of that as part of revenue.
Hedging had a positive effect on profit of DKK 80 million in Q1 2009
compared with a situation where the income is not hedged and included
at the current rates of exchange during the period. The effect was a
DKK 17 million gain in the year-earlier period. The currency with the
most impact financially in Q1 2009 was the US dollar and of the total
effect DKK 68 million stems from the hedging of the dollar.
Lundbeck hedges the cash flow in US dollar on a rolling basis around
12 months in advance. The average rate for 2009 for the existing US
dollars hedging contracts is approximately USD/DKK 536. The
corresponding rate for 2008 was approximately USD/DKK 531. For the
next 12 months the average rate for existing US dollar hedging
contracts is approximately USD/DKK 553.
Financial guidance and forward looking statements
Following clearance by the Federal Trade Commission (FTC) of the
acquisition of Ovation (Lundbeck Inc.) in March, Lundbeck is now
providing financial guidance for 2009 including the new subsidiary,
Lundbeck Inc.
Lundbeck estimates revenue of DKK 13.1-13.6 billion in 2009, EBITDA
of DKK 3.5-3.7 billion and EBIT of DKK 2.8-3.0 billion. The guidance
includes one-off expenses of approximately DKK 183 million owing to
acquisition accounting.
The corporate tax rate is estimated at approximately 28% for 2009 and
is expected to increase to 29% in 2010.
Lundbeck continues to forecast high spending on R&D and even
including Lundbeck Inc., it is expected to account for 23-24% of
revenue in 2009.
Lundbeck's 2008* 2009
financial 2009 New
guidance DKKm Previous guidance guidance
DKKbn DKKbn
Revenue 11,282 12-12.5
13.1-13.6
EBITDA 3,417 --
3.5-3.7
EBIT 2,354 3.0-3.2
2.8-3.0
Tax rate 27.1% 28% Approx
28%
R&D ratio 26.5% 23-24%
23-24%
* As reported in the annual accounts, but restated to reflect new
accounting policies.
This announcement contains forward-looking statements that provide
current expectations or forecasts of events such as new product
launches, product approvals and financial performance.
Forward-looking statements are subject to risks, uncertainties and
inaccurate assumptions. This may cause actual results to differ
materially from expectations. Factors that may affect future results
include interest rate and exchange rate fluctuations, delay or
failure of development projects, production problems, unexpected
contract breaches or terminations, government-mandated or
market-driven price decreases for Lundbeck's 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
related interpretation thereof and unexpected growth in costs and
expenses.
Financial implications of the acquisition of Ovation
The acquisition of Ovation (Lundbeck Inc.) was cleared by the FTC and
announced on 19 March 2009. For 2009 it means that Lundbeck Inc. will
be incorporated into Lundbeck's financial statements with
approximately 9½ months in 2009 and with full impact the following
years.
The acquisition price was USD 900 million. Lundbeck has made an
upfront payment of USD 600 million in connection with closing of the
transaction. Additional payments of up to USD 300 million will be
paid upon the achievement of certain product regulatory milestones
relating to the approvals of Sabril® by the FDA.
On the balance sheet the purchase price will be allocated on the
following line items:
USDm DKKm
Assets
Goodwill 506 2,956
Other intangible assets 481 2,813
Tangible assets 5 29
Financial assets 35 206
Current assets 134 781
Liabilities
Non current liabilities (167) (974)
Current liabilities (94) (548)
Total purchase price 900 5,263
Due to IFRS accounting the full purchase price of USD 900 million is
incorporated in the pre acquisition balance sheet, despite the fact
that Lundbeck has only paid USD 600 million so far.
Intangible assets will be amortised with approximately USD 45 million
or approximately DKK 260 million annually. For 2009 the amortisation
of intangible assets in Lundbeck Inc. will be approximately DKK 150
million.
According to IFRS 3 Business Combinations inventory of the acquired
company must be recognised at fair value in the pre-acquisition
balance sheet. Fair value is equal to the selling prices less the sum
of the cost of selling the products and a reasonable profit
allowance. This means that until the current inventory is sold
Lundbeck will have a significantly lower margin on the Ovation
products. This accounting practice does not have any cash flow impact
and the profit and loss impact will only apply to 2009 where EBIT may
be reduced by up to approximately DKK 183 million.
In connection with the acquisition Lundbeck raised debt of DKK 2.5
billion, which is expected to be repaid within just over one year.
Interest rates on the debt are slightly below 8%. The remaining DKK
2.7 billion of the acquisition price was paid in cash. This will
result in increased interest expenses and lower interest income and
will impact the income statement negatively by approximately DKK 160
million in 2009.
Change in accounting policies
The interim report has been presented in accordance with IAS 34"Interim Financial Reporting" as adopted by the EU.
At 1 January 2009, the accounting policies were changed in respect of
foreign currency translation for non-monetary assets and exchange
differences arising from the translation of foreign subsidiaries.
Non-monetary assets acquired in foreign currencies are translated at
the exchange rates at the balance sheet date, whereas they were
previously translated at the exchange rates at the time of
acquisition. On recognition of foreign subsidiaries, non-monetary as
well as monetary items are translated at the exchange rates at the
balance sheet date. Exchange differences arising from the translation
of both the balance sheets and the income statements of the foreign
subsidiaries are recognised in the Group directly in equity. These
exchange differences were previously recognised under net financials
in the income statement.
The change in accounting policies concerning foreign currency
translation for non-monetary assets and exchange differences arising
from the translation of foreign subsidiaries has resulted in an
increase of the profit for 2008 of DKK 154 million, a decline in
equity for 2008 of DKK 81 million, and a decline in total assets for
2008 of DKK 81 million. For the first quarter of 2008, the change in
accounting policies caused a DKK 48 million profit increase, a
reduction in equity of DKK 147 million and a reduction of total
assets of DKK 147 million. The comparative figures have been restated
accordingly.
Other than as set out above, the accounting policies are unchanged
from those applied in the annual report for 2008, which contains a
more detailed description of the Group's accounting policies.
See appendix for a breakdown of the financial effects of the changes.
The interim report is unaudited.
Protection of patents and other intellectual property rights
A prerequisite for Lundbeck's continued substantial investments in
innovative pharmaceuticals is that intellectual property rights are
respected. Lundbeck believes that the Group's intellectual property
rights are valid and enforceable, and it is Lundbeck's policy to
enforce its intellectual property rights energetically, wherever they
may be violated.
Lundbeck is involved in pending patent trials in Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Hungary, the Netherlands,
Norway, Portugal, the UK, and the USA in respect of the Group's
intellectual property rights concerning escitalopram.
Decisions in key patent cases
At the beginning of 2009, Lundbeck has won three cases in Canada. As
a result of the decisions, generic escitalopram cannot be marketed in
Canada before the patent for escitalopram expires. The
composition-of-matter patent will expire in 2014. The decisions have
been appealed.
In 2009, Lundbeck also won an appeal case before the Supreme Court in
England. Unanimously adopted by all the judges in the case before the
House of Lords, the ruling determines that the composition-of-matter
patent behind escitalopram is valid and enforceable. The ruling is
final and conclusive.
Decisions Now
Lundbeck's overall objective is to be the company that makes the
biggest difference worldwide for patients with CNS diseases. We aim
to be a healthy and growing business and an attractive place to work,
to partner and to invest in - for employees, for the surrounding
community and for our shareholders. Lundbeck's Corporate Management
Group (CMG) has launched an ambitious multi-year development project
named Decisions Now which plays a decisive role in CMG's overall plan
for how Lundbeck is to achieve its overall objective. Decisions Now
is an aspiration-based development project, which means that all
sub-projects are aimed at maximising the outcome of the various
initiatives made in the project's priority areas. The project
involves five priority areas:
* Products - achieving full potential of marketed
pharmaceuticals
* Pipeline - maximising the value of new and innovative
pharmaceuticals
* Partners - intensifying growth through business development
and partnerships
* Performance - increasing efficiency and reducing costs
* People - developing a high performance culture and ensuring
consistent targets
Warrant and share programme for Executive Management and key
employees
In March 2009, Lundbeck established a warrant and a share programme
for the Executive Management and a number of key employees in Denmark
and abroad. 98 employees were granted a total of 534,058 warrants and
92,627 shares. The warrants and shares will vest at 16 March 2012
subject to the employee still being employed with Lundbeck. For
members of the Executive Management, award of the warrants and shares
is subject to H. Lundbeck A/S' ranking in a peer group of companies.
The warrants granted are recognised in the income statement for Q1
2009 at an expense corresponding to the market value at the time of
grant calculated according to the Black-Scholes formula for the
vesting period to date. Likewise the shares granted are recognised in
the income statement for Q1 2009 at an expense corresponding to the
market value at the time of grant for the vesting period to date.
The expense recognised in Q1 2009 regarding the 2009 warrant and
share programme is less than DKK 1 million.
Risk factors
Lundbeck's overall risk exposure is unchanged and reflects the risk
factors described in the annual report for 2008.
Conference call
Today at 2.00 pm (CET), Lundbeck will be hosting a conference call
for the financial community. You can listen to the conference on the
Group's website www.lundbeck.com under the section "Investors -
Presentations".
Income statement
2009 2008 2008 Q1 Q1 FY
DKKm DKKm DKKm
Revenue 3,226 2,882 11,282
Cost of sales 487 476 1,837
Distribution costs 673 567 2,459
Administrative expenses 401 392 1,642
Profit before Research & Development costs 1,665 1,447 5,344
Research & Development costs 717 522 2,990
Profit from operations (EBIT) 947 925 2,354
Income from investments in associates 1 (17) (43)
Net financials 20 14 (28)
Profit before tax 968 922 2,283
Tax on profit for the period 271 247 620
Profit for the period 697 675 1,663
Earnings per share (EPS) (DKK) 3.55 3.39 8.45
Diluted earnings per share (DEPS) (DKK) 3.55 3.39 8.45
Statement of recognised income and
expenses
2009 2008 2008
Q1 Q1 FY
DKKm DKKm DKKm
Profit for the period 697 675 1,663
Exchange differences regarding foreign subsidiaries (109) (99) (138)
Adjustment, deferred gains/losses, hedging (89) 167 43
Realised gains/losses, hedging 57 (35) (104)
Realised gains/losses, trading (transferred from
hedging) - (12) (16)
Other equity entries concerning associates - 5 1
Fair value adjustment of available-for-sale
financial assets 1 (8) (7)
Tax on income and expenses recognised in equity 45 (30) 19
Income and expenses recognised directly in equity (95) (12) (202)
Recognised income and expenses for the period 602 663 1,462
Balance
sheet 2009 2008 2008
31.03.2009 31.03.2008 31.12.2008
DKKm DKKm DKKm
Assets
Intangible assets 7,552 1,890 2,016
Property, plant and equipment 3,123 3,226 3,123
Financial assets 257 509 247
Non-current assets 10,933 5,625 5,386
Inventories 1,347 935 837
Receivables 2,544 2,479 2,223
Securities 53 1,165 955
Cash 1,123 2,415 2,921
Assets held for sale - - 205
Current assets 5,068 6,994 7,140
Assets 16,000 12,619 12,526
Equity and liabilities
Share capital 984 1,036 984
Share premium 224 224 224
Other reserves (545) (397) (437)
Retained earnings 7,452 6,484 6,740
Equity 8,115 7,347 7,511
Provisions 1,310 630 689
Debt 1,930 1,885 1,904
Non-current liabilities 3,240 2,515 2,594
Provisions 17 7 18
Bank and mortgage debt 12 10 23
Trade payables 682 602 867
Other payables 3,390 1,304 916
Prepayments from Forest 545 835 597
Current liabilities 4,645 2,757 2,421
Liabilities 7,886 5,272 5,015
Equity and liabilities 16,000 12,619 12,526
Statement of changes in equity at 31 March 2009
Share Share Other Retained Equity capital premium reserves earnings
DKKm DKKm DKKm DKKm DKKm
2009
Equity at 31.12.2008 984 224 - 6,384 7,592
Change in accounting
policies:
Exchange differences
regarding foreign
subsidiaries - - (437) 356 (81)
Equity at 01.01.2009 984 224 (437) 6,740 7,511
Recognised income and
expenses for the period - - (109) 711 602
Incentive programmes - - - 1 1
Other transactions - - - 1 1
Equity at 31.03.2009 984 224 (545) 7,452 8,115
2008
Equity at 31.12.2007 1,036 224 - 5,925 7,185
Change in accounting
policies:
Exchange differences
regarding foreign
subsidiaries - - (298) 202 (96)
Equity at 01.01.2008 1,036 224 (298) 6,127 7,089
Recognised income and
expenses for the period - - (99) 762 663
Buyback of treasury shares - - - (405) (405)
Other transactions - - - (405) (405)
Equity at 31.03.2008 1,036 224 (397) 6,484 7,347
Cash flow statement
2009 2008 2008
Q1 Q1 FY
DKKm DKKm DKKm
Profit from operations (EBIT) 947 925 2,354
Adjustments (19) 86 1,031
Working capital changes (289) (89) (88)
Cash flows from operations before financial
receipts and payments 639 922 3,296
Financial receipts and payments 70 38 11
Cash flows from ordinary activities 709 959 3,307
Income tax paid (118) (97) (527)
Cash flows from operating activities 591 862 2,780
Acquisition of company (3,535) - -
Investments in and sale of bonds 941 370 612
Investments in and sale of intangible assets,
property, plant and equipment and other
financial assets 201 (166) (1,199)
Cash flows from investing activities (2,393) 205 (587)
Cash flows from operating and investing
activities (1,802) 1,067 2,193
Cash flows from financing activities 1 (412) (1,016)
Change in cash (1,802) 656 1,177
Cash at beginning of period 2,921 1,772 1,772
Unrealised exchange differences for the
period 4 (13) (28)
Change for the period (1,802) 656 1,177
Cash at end of period 1,123 2,415 2,921
Interest-bearing net cash and cash
equivalents is composed as follows
Cash 1,123 2,415 2,921
Securities 53 1,165 955
Interest-bearing debt (1,942) (1,895) (1,927)
Interest-bearing net cash and cash
equivalents, end of period (766) 1,685 1,949
Acquisition
To comply with IFRS 3 Business Combinations the following information
is required as a consequence of the acquisition of Ovation
Pharmaceuticals, Inc. in March 2009.
In March 2009, Lundbeck acquired the US company Ovation
Pharmaceuticals, Inc. The company subsequently changed its name to
Lundbeck Inc.
Name
Ovation Pharmaceuticals, Inc.
Principal activity
Development and sale of pharmaceuticals
Date of acquisition
19 March 2009
Ownership interest acquired
100%
Voting share acquired
100%
The figures below represent a preliminary calculation. The
pre-acquisition balance sheet and transaction costs will not be
available until later.
The consideration for Ovation Pharmaceuticals, Inc. consists of an
upfront payment of USD 600 million (or approximately DKK 3.5 billion)
immediately upon closing of the transaction. Additional payments of
up to USD 300 million (or approximately DKK 1.7 billion) within one
year of closing are contingent upon the achievement of certain
product regulatory milestones relating to the approval of Sabril® by
the FDA. This amount is provided under other payables in the
consolidated balance sheet at 31 March 2009. The cost price paid in
connection with the acquisition of Ovation exceeds the fair value of
acquired identifiable assets, liabilities and contingent liabilities.
According to the preliminary calculation, this amount is DKK 2,956
million. This positive difference is primarily due to the realisation
of the strategic objective of establishing a commercial platform in
the USA, a highly experienced management team and sales force and
scientific and regulatory expertise.
Ovation is recognised in the consolidated income statement for Q1
2009 at a loss of DKK 26 million. If the company had been acquired as
of 1 January 2009, revenue for the group for Q1 2009 would have been
DKK 3.561 million and profit for the period DKK 902 million. The
amounts stated are exclusive of the effect of the purchase price
allocation, which is incorporated in the pre-acquisition balance
sheet.
After recognition of goodwill on the Ovation acquisition, total
consolidated goodwill amounts to DKK 3,668 million.
Carrying amount Fair value
under IFRS adjustment Fair value
DKKm DKKm DKKm
Assets
Intangible
assets ex. 570 2,243 2,813
goodwill
Property,
plant and 29 - 29
equipment
Financial
assets 206 - 206
Non-current
assets 805 2,243 3,047
Inventories 332 183 515
Receivables 266 - 266
Cash 113 - 113
Current
assets 710 183 894
Total assets 1,515 2,426 3,941
Liabilities
Provisions - 958 958
Debt 16 - 16
Non-current
liabilities 16 958 974
Trade
payables 16 - 16
Other
payables 515 18 532
Current
liabilities 530 18 548
Total
liabilities 546 976 1,522
Net assets 969 1,450 2,419
Goodwill on
acquisition 2,956
Adjustment,
cash (113)
Cash
consideration 5,263
Contingent
payment 1,728
Cash
consideration
paid as per 3,535
Q1 2009
Management statement
The Supervisory Board and the Executive Management have discussed and
adopted the interim report for the period 1 January - 31 March 2009
of H. Lundbeck A/S. The interim report is presented in accordance
with IAS 34 "Interim financial reporting" as adopted by the EU and
additional Danish disclosure requirements for the interim reports of
listed companies.
We consider the accounting policies applied to be appropriate.
Accordingly, the interim report gives a true and fair view of the
Group's assets, liabilities and financial position at 31 March 2009
and of the results of the Group's operations and cash flows for the
three months ended 31 March 2009.
In our opinion, the management's report gives a true and fair view of
developments in the activities and financial position of the Group,
the results for the period and of the Group's financial position in
general and describes fairly significant risk and uncertainty factors
that may affect the Group.
The interim report is unaudited.
Valby, 13 May 2009
Executive Management
Ulf Wiinberg Peter Høngaard Lars Bang
Andersen
President and CEO Executive Vice Executive Vice President
President
Anders Götzsche Anders Gersel Stig Løkke Pedersen
Pedersen
Executive Vice Executive Vice Executive Vice President
President, CFO President
Supervisory Board
Per Wold-Olsen Thorleif Krarup Egil Bodd
Chairman Deputy Chairman
Kim Rosenville Peter Kürstein Jørn Mayntzhusen
Christensen
Mats Pettersson Birgit Bundgaard Jes Østergaard
Rosenmeier
Financial calendar 2009
13 August Interim report for 2nd quarter
2009
3 November Interim report for 3rd quarter
2009
Lundbeck contacts
Investors: Media:
Jacob Tolstrup Mads Kronborg
Director, IR & Communication Media Relations
+45 36 43 30 79 +45 36 43 28 51
Palle Holm Olesen
Head of Investor Relations
+45 36 43 24 26
About Lundbeck
H. Lundbeck A/S (LUN.CO, LUN DC, HLUKY) is an international
pharmaceutical company highly committed to improve the quality of
life for people suffering from central nervous system (CNS)
disorders. For this purpose Lundbeck is engaged in the research and
development, production, marketing and sale of pharmaceuticals across
the world, targeted at disorders like depression and anxiety,
schizophrenia, insomnia, Huntington's, Alzheimer's and Parkinson's
diseases.
Lundbeck was founded in 1915 by Hans Lundbeck in Copenhagen, Denmark,
and employs today over 5.500 people worldwide. Lundbeck is one of the
world's leading pharmaceutical companies working with CNS disorders.
In 2008, the company's revenue was DKK 11.3 billion (approximately
EUR 1.5 billion or USD 2.2 billion). For more information, please
visit www.lundbeck.com.
Appendix - Changes in accounting policies
Effect of Reclassification
change of
Change in accounting Before After
policies adj. in accounting other operating adj.
- effect on income
statement DKKm policies Items1 DKKm
Q1 2008
Revenue 2,882 2,882
Cost of sales 476 476
Distribution costs 567 567
Administrative expenses 399 (7) 392
Research & Development 524 (1) 522
costs
Profit before other 917 1 7 925
operating items
Other operating items 7 (7) -
Profit from operations 924 1 - 925
(EBIT)
Income from investments (17) (17)
in associates
Net financials (24) 38 14
Profit before tax 883 39 - 922
Tax on profit for the 256 (9) 247
period
Profit for the period 627 48 - 675
Earnings per share (EPS) 3.15 3.39
(DKK)
Diluted earnings per 3.15 3.39
share (DEPS) (DKK)
FY 2008
Revenue 11,282 11,282
Cost of sales 1,837 1,837
Distribution costs 2,459 2,459
Administrative expenses 1,651 (9) 1,642
Research & Development 2,992 (2) 2,990
costs
Profit before other 2,342 2 9 2,354
operating items
Other operating items 9 (9) -
Profit from operations 2,352 2 - 2,354
(EBIT)
Income from investments (43) (43)
in associates
Net financials (185) 158 (28)
Profit before tax 2,123 160 - 2,283
Tax on profit for the 613 6 620
period
Profit for the period 1,510 154 - 1,663
Earnings per share (EPS) 7.67 8.45
(DKK)
Diluted earnings per 7.67 8.45
share (DEPS) (DKK)
1) The line item other operating items has been removed from the
income statement as it is considered immaterial for the Group. The
income and expenses previously included in this line have been
reclassified to administrative expenses in the comparative figures.
Change in accounting policies Effect of change
- effect on balance sheet - Before adj. in accounting After adj.
31.03.2008 DKKm policies DKKm
ASSETS
Intangible assets 2,000 (110) 1,890
Property, plant and equipment 3,289 (63) 3,226
Financial assets 483 25 509
Non-current assets 5,772 (147) 5,625
Current assets 6,994 - 6,994
Assets 12,766 (147) 12,619
EQUITY AND LIABILITIES
Share capital 1,036 1,036
Share premium 224 224
Other reserves - (397) (397)
Retained earnings 6,234 250 6,484
Equity 7,494 (147) 7,347
Liabilities 5,273 (1) 5,272
Equity and liabilities 12,766 (147) 12,619
Change in accounting policies Effect of change
- effect on balance sheet - Before adj. in accounting After adj.
31.12.2008 DKKm policies DKKm
ASSETS
Intangible assets 2,079 (63) 2,016
Property, plant and equipment 3,154 (30) 3,123
Financial assets 234 13 247
Non-current assets 5,467 (81) 5,386
Current assets 7,140 - 7,140
Assets 12,607 (81) 12,526
EQUITY AND LIABILITIES
Share capital 984 984
Share premium 224 224
Other reserves - (437) (437)
Retained earnings 6,384 356 6,740
Equity 7,592 (81) 7,511
Liabilities 5,015 - 5,015
Equity and liabilities 12,607 (81) 12,526
