Second quarter 2009 report - Lundbeck records 18% revenue growth.
Double digit growth in all regions
H. Lundbeck A/S (Lundbeck) reports second quarter revenue of DKK
3,432 million growing 18% in constant exchange rates compared to
second quarter 2008. Revenue in the US rising to DKK 1,025 million,
with Lundbeck Inc. for the first time contributing a full quarter.
* Key products Cipralex®, Ebixa® and Azilect® all experienced double
digit growth in constant exchange rates and continues to gain
market shares.
* Lundbeck Inc. reports second quarter revenue of DKK 400 million,
with Xenazine® i sales already contributing DKK 81 million.
* The performance of Xenazine® combined with the acquisition of
LifeHealth Limited strengthens the US platform and supports further
earnings from the second half of 2009 and onwards.
* Profit from operations (EBIT) was DKK 719 million, including
adjustments for acquisition accounting lowering EBIT with DKK 98
million. The EBIT margin for the period was 21%. Operating profit
before depreciation and amortisation (EBITDA) was DKK 872 million
corresponding to an EBITDA margin of 25%.
* The tax rate for the full year is now expected to be 25-26%, as
opposed to previously guided 28%.
* Lundbeck maintains the financial guidance for the full year.
Distribution of revenue Q2 2009 Q2 2008 Growth
DKKm DKKm Growth at CER*
Cipralex® 1,345 1,234 9% 12%
Lexapro® 625 692 (10%) (4%)
Ebixa® 539 467 15% 18%
Azilect® 88 63 40% 43%
Xenazine® 81 - - -
Europe 1,711 1,574 9% 10%
USA 1,025 692 48% 49%
International Markets 671 621 8% 13%
Total revenue 3,432 2,938 17% 18%
In connection with the interim report, Lundbeck's President and CEO
Ulf Wiinberg said:
"We are very pleased with the overall performance in the second
quarter. Our businesses in Europe and International Markets continue
to show high growth. Lundbeck Inc. is delivering solid results on the
back of the launch of Xenazine®. With our achievements in the first
half of the year we are now well under way to deliver on our
financial expectations for 2009."
Management review
Financial highlights and key figures
2009 2008 2009 2008 2008
Q2 Q2 H1 H1 FY
Financial highlights (DKKm)
Revenue 3,432 2,938 6,657 5,820 11,282
Profit from operations before
depreciation and
amortisation (EBITDA) 872 976 1,951 2,041 3,417
Profit from operations (EBIT) 719 365 1,666 1,290 2,354
Net financials (109) 2 (90) 16 (28)
Profit before tax 609 351 1,577 1,273 2,283
Tax 139 99 410 346 620
Profit for the period 470 252 1,167 927 1,663
Equity 8,101 6,874 8,101 6,874 7,511
Assets 16,984 12,261 16,984 12,261 12,526
Cash flows from operating and
investing activities 852 168 (950) 1,235 2,193
Property, plant and equipment
investments, gross 45 22 85 41 229
Key figures
EBIT margin (%)1 21.0 12.4 25.0 22.2 20.9
Return on capital employed
(%) 6.8 4.4 18.1 16.2 30.0
Research & Development costs
as a percentage of revenue 24.1 35.6 23.2 26.9 26.5
Return on equity (%)1 5.8 3.6 14.9 13.3 22.8
Solvency ratio (%)1 47.7 56.1 47.7 56.1 60.0
Capital employed (DKKm) 10,772 8,774 10,772 8,774 9,438
Share data
Number of shares for the
calculation of EPS (million) 196.1 196.4 196.1 197.6 196.8
Number of shares for the
calculation of DEPS (million) 196.1 196.4 196.1 197.6 196.8
Earnings per share (EPS)
(DKK)1 2.40 1.29 5.95 4.69 8.45
Diluted earnings per share
(DEPS) (DKK)1 2.40 1.29 5.95 4.69 8.45
Cash flow per share (DKK)1 4.60 4.23 7.61 8.57 14.12
Net asset value per share
(DKK)1 41.31 35.05 41.31 35.05 38.30
Market capitalisation (DKKm) 19,761 22,388 19,761 22,388 21,657
Share price end of period
(DKK) 100.37 108.01 100.37 108.01 110.00
Other
Number of employees 5,750 5,131 5,750 5,131 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 present Lundbeck's pipeline consists of:
Two compounds under FDA regulatory
review
Five compounds in clinical phase III
Five compounds in clinical phase
II
Two compounds in clinical phase I
Pipeline development is summarized as follows:
Regulatory review
In June Lundbeck received a Complete Response Letter (CRL) from the
US Food and Drug Administration (FDA) for Serdolect® (sertindole) for
the treatment of schizophrenia. The Agency's complete response
included a request for additional data to best understand the
appropriate patient population for which Serdolect® could be made
available. Lundbeck will engage with the FDA to determine the best
way forward.
Lundbeck is still in active dialogue with the 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
within months.
Clinical phase III
The results from the first three clinical trials in the phase III
development programme with Lu AA21004 in major depressive disorder
(MDD) showed that the low dosage (2.5 mg) did not reach significance
compared to placebo across studies, whereas 5 and 10 mg showed
promising results compared to placebo. In all of these trials, Lu
AA21004 was well tolerated and confirmed the previously observed
favourable safety profile. As a result, the most appropriate dose of
Lu AA21004 needs to be established. It is anticipated that this work
will postpone submission of the new drug application (NDA) in the US
with approximately 18-24 months. Lundbeck and Takeda will continue to
work with the US Food and Drug Administration (FDA) and other
regulatory agencies on the clinical development program and
submission plans.
It has recently been decided to stop all joint R&D activities for
Solvay's compound bifeprunox, as interim results on the ongoing phase
III trials showed that efficacy data did not support pursuing the
existing development strategy of stabilisation of non-acute patients
with schizophrenia. Lundbeck's financial investment in this clinical
phase III programme has been modest.
Furthermore, Lundbeck has desmoteplase, nalmefene, I.V. carbamazepine
and clobazam in clinical phase III development. The clinical phase
III studies for all the projects are enrolling patients and
progressing as planned.
Clinical phase II
In July Lundbeck reported positive headline results from a dose
finding clinical trial with the compound Lu AA24530 for the treatment
of major depressive disorder (MDD) demonstrating the potential value
of the compound. Lu AA24530 consistently produced statistically
significant improvements on the primary efficacy endpoint and on key
secondary endpoints compared to placebo. The combination of efficacy
and good tolerability for Lu AA24530 clearly supports further
development of the compound as a future treatment option for
physicians and patients.
Revenue
Lundbeck saw continued strong growth in key products and with
Lundbeck Inc. for the first time contributing a full quarter, revenue
for the second quarter reached DKK 3,432 million, growing 17% (18% in
constant exchange rates) compared with the same quarter last year.
Total revenue Q2 2009 Q2 2008 Growth Q1 2009
DKKm DKKm Growth at CER DKKm
Cipralex® 1,345 1,234 9% 12% 1,363
Lexapro® 625 692 (10%) (4%) 626
Ebixa® 539 467 15% 18% 526
Azilect® 88 63 40% 43% 78
Xenazine® 81 - - - 12
Serdolect® 17 14 17% 25% 16
Other
pharmaceuticals 713 416 71% 63% 450
Other revenue 24 51 (53%) (56%) 155
Total revenue 3,432 2,938 17% 18% 3,226
Revenue from Cipralex® (escitalopram) for the treatment of depression
and anxiety rose to DKK 1,345 million, an increase of 9%. Lexapro®
revenue, escitalopram marketed in the US by Forest Laboratories, Inc.
(Forest), was DKK 625 million for the quarter, down 10% compared with
the same period last year.
Ebixa® (memantine) for the treatment of Alzheimer's disease generated
second quarter revenue of DKK 539 million, an increase of 15% on the
year-earlier period. Lundbeck has marketing rights to Ebixa® in most
countries in the world apart from Japan and the US.
Revenue from Azilect® (rasagiline) for the treatment of Parkinson's
disease rose 40% during the period to DKK 88 million. Lundbeck has
commercial rights to Azilect in most European countries (in
co-promotion with Teva in France, Germany and the UK) and a few
countries outside Europe.
Xenazine® [1] (tetrabenazine) for the treatment of chorea associated
with Huntington's disease, generated revenue of DKK 81 million in the
second quarter. Xenazine® was launched in November 2008 in the US.
Other pharmaceuticals, which comprise Lundbeck's mature
pharmaceuticals, Circadin®, for the treatment of insomnia, and
revenue from Lundbeck Inc. (excl. Xenazine®), rose to DKK 713
million. Excluding Lundbeck Inc., revenue from other pharmaceuticals
fell to DKK 394 million during the period, decreasing 5% compared
with the second quarter of 2008.
Other revenue was DKK 24 million. The large decrease compared to last
quarter owes to an income of DKK 124 million from the divestment of
interests in LifeCycle Pharma in the first quarter of 2009.
Europe
Revenue in Europe rose 10% at constant exchange rates to DKK 1,711
million. The increase continued to be driven by Cipralex®, Ebixa® and
Azilect® growing 9%, 18% and 41%, respectively, at constant exchange
rates relative to the year-earlier period. Revenue from other
pharmaceuticals declined 6% at constant exchange rates.
Revenue Europe Q2 2009 Q2 2008 Growth Q1 2009
DKKm DKKm Growth at CER DKKm
Cipralex® 926 857 8% 9% 913
Ebixa® 448 387 16% 18% 431
Azilect® 80 58 39% 41% 70
Serdolect® 11 9 25% 31% 11
Other
pharmaceuticals 246 264 (7%) (6%) 250
Total revenue 1,711 1,574 9% 10% 1,675
Cipralex® generated second quarter revenue of DKK 926 million in
Europe and continues to gain market shares across most major markets.
Cipralex® is the most prescribed antidepressant in Europe measured in
value, and at the end of May 2009 Cipralex® held a market share in
value terms of 18.9%, as compared with a market share of 16.0% a year
earlier. The growth in market share is driven by the growing
understanding of Cipralex® as a leading antidepressant, as well as
the patent expiry on venlafaxine, the latter also resulting in flat
to negative growth in the antidepressant market as a whole measured
in value.
Revenue from Ebixa® rose to DKK 448 million during the period, and at
the end of May 2009 the product held 16.4% of the European
Alzheimer's market. This compares to a market share of 15.8% at the
same time in 2008. As a consequence of receiving public reimbursement
in Italy at the end of the first quarter 2009, Ebixa revenue in Italy
is experiencing very positive growth. Memantine, the active
ingredient in Ebixa, is continuously the second-most prescribed
pharmaceutical in Europe for the treatment of Alzheimer's disease.
Second quarter revenue from Azilect® amounted to DKK 80 million,
holding a market share in value of 7.6% at the end of May 2009 of the
total European Parkinson's market. This compares to a market share of
5.4% at the same time in 2008. There is an increasing interest among
physicians for the ADAGIO study. The ADAGIO study shows that Azilect®
may have an effect on disease progression.
USA
Lundbeck's second quarter revenue in the US rose to DKK 1,025
million, while revenue from Lundbeck Inc., for the first time
constituting a full quarter, was DKK 400 million for the period.
Revenue USA Q2 2009 Q2 2008 Growth Q1 2009
DKKm DKKm Growth at CER DKKm
Lexapro® 625 692 (10%) (4%) 626
Xenazine® 81 - - - 12
Other pharmaceuticals 319 - - - 49
Total revenue 1,025 692 48% 49% 687
Revenue from Lexapro® fell to DKK 625 million, a decline of 10% or 4%
at constant exchange rates. Lexapro® revenue is pressured by generic
competition in the US market, a market which currently is
experiencing limited growth. At the end of May 2009, Lexapro® held a
market share in the US of 23.8% in value terms, as compared with a
market share of 22.7% at the same time last year.
As the only branded antidepressant approved for the treatment of
major depression in adolescents, Lexapro® recently achieved FDA
approval for a medical condition that affects approximately 2 million
adolescents in the US. The adolescents claim is being launched and
will help to sustain the prescription level of Lexapro®.
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 563 million at 30 June 2009 compared
with DKK 889 million at 30 June 2008. At the end of June 2009,
inventories were on a level corresponding to approximately six months
of commercial supply.
Sales from Lundbeck Inc. reached DKK 400 million in the second
quarter corresponding to 82% growth compared to Ovation (now Lundbeck
Inc.) revenue in the second quarter last year (56% in constant
exchange rates). Revenue from Xenazine®, which was launched in
November last year, amounted to DKK 81 million for the quarter.
In July 2009 Lundbeck acquired additional rights to Xenazine® by
acquiring LifeHealth Limited (LifeHealth) in the UK, and as a
consequence reducing the royalty range paid to third party on
Xenazine® sales to approximately 40-47% down from 65-72%.
International Markets
Revenue in International Markets, which comprises all Lundbeck's
markets outside Europe and the US, rose to DKK 671 million. The
increase was driven by the key products Cipralex® and Ebixa®, revenue
from both products rising 18% at constant exchange rates. Azilect®
and Serdolect® are continuously only marketed by Lundbeck in a few
markets in the region and consequently contribute with a relatively
small share.
Revenue Q2 2009 Q2 2008 Growth Q1 2009
International Markets DKKm DKKm Growth at CER DKKm
Cipralex® 419 377 11% 18% 450
Ebixa® 91 81 13% 18% 95
Azilect® 8 5 53% 70% 7
Serdolect® 6 5 5% 15% 5
Other pharmaceuticals 148 152 (3%) (3%) 151
Total revenue 671 621 8% 13% 708
Cipralex® generated revenue of DKK 419 million in International
Markets, and despite continued generic competition in most major
markets, Cipralex® continues to show significant growth. The brand
now holds a market share in terms of value of 11.8% of the aggregate
market for antidepressants in International Markets (Q1 2009),
compared to a market share of 10.9% in Q1 2008.
Cipralex® sales in Canada continue to show growth after receiving
public reimbursement in the Ontario province. The brand now holds a
market share in terms of value of 8.6% compared to 6.5% in the
year-earlier period. Cipralex® in Canada now represents more than 20%
of Cipralex® sales in International Markets.
Ebixa® generated second quarter revenue of DKK 91 million and held
10.9% of the total market in terms of value for pharmaceuticals for
the treatment of Alzheimer's disease in International Markets (Q1
2009), as compared with a market share of 11.0% in Q1 2008. Ebixa®
continues to hold a stable market share in International Markets - a
market that continues to expand with significant growth rates.
Expenses
Total expenses for the period were DKK 2,713 million, up 5% compared
to second quarter last year and up 23% excluding Research &
Development (R&D) expenses. The increase in cost of sales and SG&A
costs (Selling, General and Administrative Expenses) is mainly due to
the inclusion of Lundbeck Inc. Costs in the remaining business
continues to be under control and is seeing low single digit growth.
Distribution of costs Q2 2009 Q2 2008 Q1 2009
DKKm DKKm Growth DKKm
Cost of sales 623 468 33% 487
Distribution 799 632 26% 673
Administration 464 427 9% 401
Research & Development 826 1,046 (21%) 717
Total costs 2,713 2,573 5% 2,279
Total cost of sales rose 33% to DKK 623 million amounting to 18% of
Lundbeck's total revenue, up from 16% in the year-earlier period.
Costs of sales for the period was affected by higher costs of goods
sold in Lundbeck Inc., as a result of purchase price accounting used
in connection with the acquisition of Ovation, impacting costs by DKK
98 million.
Distribution costs were DKK 799 million corresponding to 23% of
revenue and up 26% compared to the same quarter last year. The
increase is mainly due to the inclusion of Lundbeck Inc. and a
continued high spending on the promotion of Azilect® following the
results of the ADAGIO study. Administrative expenses increased by 9%
to DKK 464 million, accounting for 14% of total revenue compared with
15% for the second quarter of 2008. SG&A costs were DKK 1,263
million, compared with DKK 1,060 million in the year-earlier period,
and corresponding to 37% of revenue (36% in Q2 2008).
R&D costs for the quarter were DKK 826 million, a decrease of 21%
compared with the same period last year. Second quarter saw higher
spending on a number of phase three studies, while R&D costs for the
second quarter last year included the DKK 481 million write-down of
the rights to Flurizan®. R&D costs for the period accounted for 24%
of total revenue, compared with 36% in the year-earlier period.
Operating profit before depreciation and amortisation (EBITDA)
EBITDA was DKK 872 million compared with DKK 976 million for the
second quarter of 2008. EBITDA margin for the period was 25%.
Depreciation, amortisation and impairment charges
Depreciation, amortisation and impairment charges, which are included
in the individual expense categories, amounted to DKK 153 million,
which is 75% lower than in the same period of 2008. Amortisation for
the second quarter 2008 includes a DKK 481 million write-down of
Flurizan®.
Depreciation, amortisation and Q2 2009 Q2 2008 Q1 2009
impairment charges per expense
category DKKm DKKm Growth DKKm
Cost of sales 50 50 (1%) 48
Distribution 28 7 277% 9
Administration 18 16 11% 16
Research & Development 58 538 (89%) 58
Total depreciation, amortisation and
impairment charges 153 611 (75%) 132
Depreciation and amortisation included in distribution costs grew
277% compared to the same period last year. The large increase is
primarily explained by amortisation on product rights acquired in
connection with the acquisition of Ovation.
Profit from operations (EBIT)
Including adjustments for acquisition accounting lowering EBIT with
DKK 98 million, EBIT for the second quarter amounted to DKK 719
million, corresponding to an increase of 97% on the same period in
2008 (DKK 365 million). Second quarter 2008 was impacted by the
write-down of Flurizan®, which explains the majority of the growth in
EBIT.
The EBIT margin for the period was 21% compared with 12% in the
year-earlier period.
Net financials
Lundbeck generated a net financial loss of DKK 109 million in the
quarter, compared with a net income of DKK 2 million in 2008.
Net financials Q2 2009 Q2 2008 Q1 2009
DKKm DKKm DKKm
Net items relating to trading (19) - (4)
Accounting translation of currency items (56) 10 6
Net currency items relating to financial
items (75) 10 2
Unrealised gains concerning other investments
excl. exchange rate adjustments 1 4 -
Net interest income (35) (12) 18
Net financials (109) 2 20
Net items relating to trading were a net loss of DKK 19 million,
owing to reclassification of hedging contracts.
Accounting translation of currency items was DKK (56) million for the
quarter, primarily due to an increase in GBP/DKK and a decrease in
USD/DKK.
Net interest income, including realised and unrealised gains and
losses on the bond portfolio, amounted to a net loss of DKK 35
million, as compared with net loss of DKK 12 million in the same
period of 2008. Net financials were negatively affected by lower net
interests compared to 2008 as a consequence of the acquisition of
Ovation.
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 second quarter of 2008 of DKK 12 million.
For further details on change in accounting policies, see page 13.
Tax
The income tax expense for the period was DKK 139 million as compared
to DKK 99 million in the year-earlier period. The tax rate was 23%,
down from 28% last year.
Profit for the period
Profit after tax for the second quarter of 2009 was DKK 470 million,
up from DKK 252 million in the same period of last year. Profit for
second quarter 2008 was negatively affected by the write-down of
Flurizan®.
Cash flows
Lundbeck had a cash inflow during the quarter of DKK 1,128 million,
compared with an outflow of DKK 465 million in the year-earlier
period.
Cash flows Q2 2009 Q2 2008 Q1 2009
DKKm DKKm DKKm
Cash flows from operating activities 902 831 591
Cash flows from investing activities (50) (663) (2,393)
Cash flows from operating and investing
activities 852 168 (1,802)
Cash flows from financing activities 277 (633) 1
Change in cash 1,128 (465) (1,802)
Cash at beginning of period 1,123 2,415 2,921
Unrealised gains 4 6 4
Cash at end of period 2,256 1,955 1,123
Operating activities generated second quarter cash inflow of DKK 902
million compared with DKK 831 million in the same period last year.
Cash flows from investing activities represented an outflow of DKK 50
million, compared to an outflow of DKK 663 million in the same period
of 2008, which was influenced by the purchase of the rights to
Flurizan®.
Lundbeck's total net investments exclusive of financial investments
amounted to DKK 111 million in the second quarter, against DKK 569
million in the year-earlier period. Financial investments were an
inflow of DKK 61 million compared to an outflow of DKK 94 million in
the year-earlier period.
Cash flow from financing activities was an inflow of DKK 277 million,
which stems from a new loan of DKK 728 million and dividend pay out
of DKK 451 million. Second quarter 2008 saw an outflow of DKK 633
million, which was due to our share buyback programme, terminated in
May 2008, and payment of dividend amounting to DKK 504 million.
Cash at 30 June 2009 was DKK 2,256 million, against DKK 1,123 million
at the end of March 2009 and DKK 2,921 million at the end of 2008. At
the end of the period, Lundbeck had interest-bearing net debt of DKK
365 million compared with net debt of DKK 766 million at the end of
March 2009 and net cash of DKK 1,949 at the end of December 2008.
Balance sheet
At 30 June 2009, Lundbeck had total assets of DKK 16,984 million,
against DKK 16,000 million at the end of first quarter 2009 and DKK
12,526 at the end of 2008. The significant increase since December is
due to the acquisition of Ovation.
At 30 June 2009, Lundbeck's equity amounted to DKK 8,101 million,
corresponding to a solvency ratio of 47.7%, compared with 50.7% at
the end of March 2009 and 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. Hedging had a negative effect on profit of DKK 9
million in Q2 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 31 million gain in the year-earlier
period. The currency with the most impact financially in Q2 2009 was
the US dollar and of the total effect DKK (9) 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 the existing US dollar hedging
contracts is approximately USD/DKK 572.
Financial guidance and forward looking statements
Lundbeck maintains financial guidance for the full year and 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. As communicated in July, in
connection with the takeover of LifeHealth, Lundbeck anticipates
EBITDA to be in the high end of the guidance range.
However, as a consequence of the acquisition of Ovation and a change
in the geographical earnings split Lundbeck is now expecting a tax
rate for the full year 2009 of 25-26% as opposed to the previous
guidance of approximately 28%. Lundbeck also expects the group's tax
rate to be 25-26% for 2010.
The guidance includes one-off expenses of approximately DKK 183
million owing to acquisition accounting related to the acquisition of
Ovation and income of DKK 124 million from the divestment of
interests in LifeCycle Pharma.
Lundbeck continues to forecast an R&D ratio of 23-24% of revenue for
2009.
2008* 2009
Lundbeck's financial guidance guidance
DKKm DKKbn
Revenue 11,282 13.1-13.6
EBITDA 3,417 3.5-3.7
EBIT 2,354 2.8-3.0
Tax rate 27.1% 25-26%
R&D ratio 26.5% 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 rates 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.
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 second quarter of 2008, the change in
accounting policies caused a DKK 13 million profit increase, a
reduction in equity of DKK 119 million and a reduction of total
assets of DKK 120 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, UK, and the US in respect of the Group's
intellectual property rights concerning escitalopram.
Decisions in key patent cases
During the period the Full Court in Australia (second instance)
upheld the escitalopram product patent. The court also maintained the
first instance decision to deny a five year extension of the patent
on escitalopram in Australia. Lundbeck is in disagreement with the
latter part of the decision and will seek to appeal the decision to
the court of third instance (the highest court in Australia).
Lundbeck will, if winning the appeal, claim damages of any company
taking advantage of the decision. At present at least two generic
copies of Cipralex® has been launched in Australia.
In July 2009 Lundbeck and Forest entered into a settlement agreement
with Caraco Pharmaceuticals Laboratories, Ltd. (Caraco) and Sun
Pharmaceuticals Industries, Ltd. (Sun Pharmaceuticals) in a pending
patent infringement regarding the patent on escitalopram (Lexapro®)
in the US. Under the agreement Caraco will be able to enter the US
market as of the date that any third party generic, other than the
first filer or a generic authorised by Lundbeck or Forest, enters the
market. As part of the agreement, Lundbeck will gain license to a
family of patents and patent applications, owned by Sun
Pharmaceuticals, relating to a process for the production of
citalopram and escitalopram. Forest and Lundbeck will reimburse
certain of Caraco's legal costs in connection with these patent
litigations.
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 2009 2008 2008
Q2 Q2 H1 H1 FY
DKKm DKKm DKKm DKKm DKKm
Revenue 3,432 2,938 6,657 5,820 11,282
Cost of sales 623 468 1,110 944 1,837
Distribution costs 799 632 1,473 1,199 2,459
Administrative expenses 464 427 865 820 1,642
Profit before Research & Development
costs 1,545 1,410 3,210 2,858 5,344
Research & Development costs 826 1,046 1,543 1,568 2,990
Profit from operations (EBIT) 719 365 1,666 1,290 2,354
Income from investments in associates (1) (16) - (33) (43)
Net financials (109) 2 (90) 16 (28)
Profit before tax 609 351 1,577 1,273 2,283
Tax on profit for the period 139 99 410 346 620
Profit for the period 470 252 1,167 927 1,663
Earnings per share (EPS) (DKK) 2.40 1.29 5.95 4.69 8.45
Diluted earnings per share (DEPS)
(DKK) 2.40 1.29 5.95 4.69 8.45
Statement of recognised income and
expenses
2009 2008 2009 2008 2008
Q2 Q2 H1 H1 FY
DKKm DKKm DKKm DKKm DKKm
Profit for the period 470 252 1,167 927 1,663
Exchange differences regarding foreign
subsidiaries (190) 15 (299) (84) (138)
Adjustment, deferred gains/losses,
hedging 96 (19) 7 148 43
Realised gains/losses, hedging 56 (77) 113 (112) (104)
Realised gains/losses, trading
(transferred from hedging) - - - (12) (16)
Other equity entries concerning
associates - (9) - (3) 1
Fair value adjustment of
available-for-sale financial assets 1 (23) 2 (31) (7)
Tax on income and expenses recognised in
equity 3 24 48 (6) 19
Income and expenses recognised directly
in equity (35) (89) (130) (100) (202)
Recognised income and expenses for the
period 435 164 1,037 827 1,462
Balance
sheet
30.06.2009 30.06.2008 31.12.2008
DKKm DKKm DKKm
Assets
Intangible assets 7,219 1,965 2,016
Property, plant and equipment 3,064 3,111 3,123
Financial assets 219 544 247
Non-current assets 10,502 5,621 5,386
Inventories 1,342 931 837
Receivables 2,834 2,612 2,223
Securities 50 1,142 955
Cash 2,256 1,955 2,921
Assets held for sale - - 205
Current assets 6,482 6,640 7,140
Assets 16,984 12,261 12,526
Equity and liabilities
Share capital 984 1,036 984
Share premium 224 224 224
Other reserves (736) (382) (437)
Retained earnings 7,629 5,996 6,740
Equity 8,101 6,874 7,511
Provisions 1,323 577 689
Debt 1,920 1,892 1,904
Non-current liabilities 3,242 2,469 2,594
Provisions 20 6 18
Bank and mortgage debt 751 7 23
Trade payables 840 658 867
Other payables 3,467 1,356 916
Prepayments from Forest 563 889 597
Current liabilities 5,640 2,918 2,421
Liabilities 8,882 5,387 5,015
Equity and liabilities 16,984 12,261 12,526
Statement of changes in equity at 30 June 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 - - (299) 1,336 1,037
Distribution of dividend,
gross - - - (453) (453)
Distribution of dividend,
treasury shares - - - 2 2
Incentive programmes - - - 4 4
Other transactions - - - (447) (447)
Equity at 30.06.2009 984 224 (736) 7,629 8,101
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 - - (84) 911 827
Distribution of dividend,
gross - - - (531) (531)
Distribution of dividend,
treasury shares - - - 27 27
Buyback of treasury shares - - - (538) (538)
Incentive programmes - - - 1 1
Other transactions - - - (1,042) (1,042)
Equity at 30.06.2008 1,036 224 (382) 5,996 6,874
Cash flow statement
2009 2008 2009 2008 2008
Q2 Q2 H1 H1 FY
DKKm DKKm DKKm DKKm DKKm
Profit from operations (EBIT) 719 365 1,666 1,290 2,354
Adjustments 134 614 115 699 1,031
Working capital changes 189 (66) (100) (155) (88)
Cash flows from operations
before financial receipts and
payments 1,043 913 1,682 1,834 3,296
Financial receipts and
payments (84) (11) (14) 27 11
Cash flows from ordinary
activities 958 902 1,667 1,862 3,307
Income tax paid (57) (71) (175) (168) (527)
Cash flows from operating
activities 902 831 1,492 1,693 2,780
Acquisition of company - - (3,535) - -
Investments in and sale of
bonds 3 23 944 394 612
Investments in and sale of
intangible assets, property,
plant and equipment and other
financial assets (53) (686) 148 (852) (1,199)
Cash flows from investing
activities (50) (663) (2,443) (458) (587)
Cash flows from operating and
investing activities 852 168 (950) 1,235 2,193
Cash flows from financing
activities 277 (633) 277 (1,045) (1,016)
Change in cash 1,128 (465) (673) 190 1,177
Cash at beginning of period 1,123 2,415 2,921 1,772 1,772
Unrealised exchange
differences for the period 4 6 8 (7) (28)
Change for the period 1,128 (465) (673) 190 1,177
Cash at end of period 2,256 1,955 2,256 1,955 2,921
Interest-bearing net cash and
cash equivalents
is composed as follows
Cash 2,256 1,955 2,256 1,955 2,921
Securities 50 1,142 50 1,142 955
Interest-bearing debt (2,670) (1,900) (2,670) (1,900) (1,927)
Interest-bearing net cash and
cash equivalents,
end of period (365) 1,198 (365) 1,198 1,949
Management statement
The Supervisory Board and the Executive Management have discussed and
adopted the interim report for the period 1 January - 30 June 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 30 June 2009
and of the results of the Group's operations and cash flows for the
six months ended 30 June 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 August 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 President, Executive Vice Executive Vice
CFO President President
Supervisory Board
Per Wold-Olsen Thorleif Krarup Egil Bodd
Chairman Deputy Chairman
Kim Rosenville Christensen Peter Kürstein Jørn Mayntzhusen
Mats Pettersson Birgit Bundgaard Jes Østergaard
Rosenmeier
Financial calendar 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 Kasper Riis
Head of Investor Relations Media Relations
+45 36 43 24 26 +45 36 43 28 33
Magnus Thorstholm Jensen
Investor Relations Officer
+45 36 43 38 16
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.
Recent Corporate Releases from H. Lundbeck A/S
31 July Total number of voting rights
and size of share capital as of 31 July 2009 fter reduction of the
share capital of H. Lundbeck A/S
30 July Pipeline update - following
an interim analysis the studies with bifeprunox for the treatment of
schizophrenia is discontinued
7 July Lundbeck increases its share
of Xenazine® and strengthens the US profitability - transaction
immediately accretive
2 July Lu AA24530 shows positive
results in major depressive disorder phase II study
25 June Lundbeck receives FDA
Complete Response Letter on Serdolect® for the treatment of
schizophrenia
11 June Update on Lundbeck Inc. (US)
8 June Update on Lu AA21004 clinical
development programme in major depressive disorder (MDD)
18 May Lundbeck provides update on
NDA for Serdolect® for the treatment of schizophrenia
Please visit www.lundbeck.com for further information on the
releases.
Appendix - Changes in accounting policies
Effect of Reclassification
change of
Change in accounting Before adj. in other operating After
policies accounting adj.
- effect on income DKKm policies - Items1 - DKKm DKKm
statement DKKm
Q2 2008
Revenue 2,938 2,938
Cost of sales 469 (1) 468
Distribution costs 632 632
Administrative expenses 427 - 427
Research & Development 1,047 (1) 1,046
costs
Profit before other 363 2 - 365
operating items
Other operating items - - -
Profit from operations 363 2 - 365
(EBIT)
Income from investments (16) (16)
in associates
Net financials (9) 12 2
Profit before tax 338 14 - 351
Tax on profit for the 98 1 99
period
Profit for the period 240 13 - 252
Earnings per share 1.22 1.29
(EPS) (DKK)
Diluted earnings per 1.22 1.29
share (DEPS) (DKK)
H1 2008
Revenue 5,820 5,820
Cost of sales
945 (1) 944
Distribution costs
1,199 1,199
Administrative expenses
826 (7) 820
Research & Development
costs 1,570 (2) 1,568
Profit before other
operating items 1,280 3 7 1,290
Other operating items 7 (7) -
Profit from operations
(EBIT) 1,287 3 - 1,290
Income from investments
in associates (33) (33)
Net financials (33) 49 16
Profit before tax 1,221 53 - 1,273
Tax on profit for the
period 354 (8) 346
Profit for the period 867 61 - 927
Earnings per share
(EPS) (DKK) 4.39 4.69
Diluted earnings per
share (DEPS) (DKK) 4.39 4.69
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.
Effect of Reclassification
change of
Change in accounting Before in accounting other operating After
policies adj. adj.
- effect on income DKKm policies - Items1 - DKKm DKKm
statement DKKm
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.
30.06.2008 DKKm policies - DKKm DKKm
Assets
Intangible assets 2,048 (83) 1,965
Property, plant and equipment 3,173 (61) 3,111
Financial assets 520 24 544
Non-current assets 5,741 (120) 5,621
Current assets 6,640 6,640
Assets 12,381 (120) 12,261
Equity and liabilities
Share capital 1,036 1,036
Share premium 224 224
Other reserves - (382) (382)
Retained earnings 5,733 263 5,996
Equity 6,993 (119) 6,874
Liabilities 5,388 - 5,387
Equity and liabilities 12,381 (120) 12,261
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
[1] Xenazine is a registered trademark of Cambridge Laboratories
Limited (Ireland)
