Third quarter 2009 report - Lundbeck records 20% growth, driven by
Lundbeck Inc. and key products
H. Lundbeck A/S (Lundbeck) reports third quarter revenue of DKK 3,264
million growing 20% in constant exchange rates compared to the third
quarter of 2008. Revenue in the US was DKK 959 million growing 71%
(CER - constant exchange rates) compared to the same period last
year.
* Lundbeck Inc. reports third quarter revenue of DKK 359
million.
* Sabril® was approved by FDA in August for the treatment of
refractory complex partial seizures (rCPS) and infantile spasms
(IS) and launched during September.
* Ebixa® and Azilect® continue to show solid growth of 17% and
47% respectively. Cipralex® and Lexapro® revenue increasing 5% and
10% respectively.
* Profit from operations (EBIT) was DKK 784 million, impacted
by continued high level of investments in our late-stage pipeline.
Adjustments for acquisition accounting impacted EBIT negatively by
DKK 32 million. The reported EBIT margin for the period was 24%.
Operating profit before depreciation and amortisation (EBITDA) was
DKK 977 million corresponding to an EBITDA margin of 30%.
* Lundbeck maintains the financial guidance for the full year.
Distribution of revenue Q3 2009 Q3 2008 Growth
DKKm DKKm Growth at CER*
Cipralex® 1,258 1,228 2% 5%
Lexapro® 600 602 (0%) 10%
Ebixa® 548 480 14% 17%
Azilect® 93 65 43% 47%
Xenazine® 89 - - -
Europe 1,680 1,559 8% 9%
USA 959 602 59% 71%
International Markets 605 608 (1%) 6%
Total revenue 3,264 2,810 16% 20%
* Constant exchange rates
In connection with the third quarter report, Lundbeck's President and
CEO Ulf Wiinberg said:
"With the approval and launch of Sabril® in the US, Lundbeck Inc.
continues to deliver according to our expectations. We are also
pleased to see that our market position is strengthened in virtually
all markets and our key products continue to expand their market
shares around the world."
Management review
Financial highlights and key figures
2009 2008 2009 2008 2008
Q3 Q3 9M 9M FY
Financial highlights (DKKm)
Revenue 3,264 2,810 9,921 8,629 11,282
Profit from operations
before depreciation and 977 982 2,928 3,023 3,417
amortisation (EBITDA)
Profit from operations 784 852 2,450 2,142 2,354
(EBIT)
Net financials (30) 33 (119) 49 (28)
Profit before tax 754 884 2,331 2,157 2,283
Tax 149 272 559 618 620
Profit for the period 605 611 1,771 1,538 1,663
Equity 8,512 7,422 8,512 7,422 7,511
Assets 17,729 12,863 17,729 12,863 12,526
Cash flows from operating (1,456) 916 (2,406) 2,151 2,193
and investing activities
Property, plant and 86 71 171 112 229
equipment investments,
gross
Key figures
EBIT margin (%)1 24.0 30.3 24.7 24.8 20.9
Return on capital employed 6.6 10.4 23.4 26.0 30.0
(%)
Research & Development
costs 23.6 20.2 23.3 24.7 26.5
as a percentage of revenue
Return on equity (%)1 7.3 8.6 22.1 21.2 22.8
Solvency ratio (%)1 48.0 57.7 48.0 57.7 60.0
Capital employed (DKKm) 12,933 9,319 12,933 9,319 9,438
Share data
Number of shares for the 196.1 196.1 196.1 197.1 196.8
calculation of EPS
(million)
Number of shares for the 196.1 196.1 196.1 197.1 196.8
calculation of DEPS
(million)
Earnings per share (EPS) 3.08 3.12 9.03 7.81 8.45
(DKK)1
Diluted earnings per share 3.08 3.12 9.03 7.81 8.45
(DEPS) (DKK)1
Cash flow per share (DKK)1 4.63 5.26 12.24 13.83 14.12
Net asset value per share 43.40 37.84 43.40 37.84 38.30
(DKK)1
Market capitalisation 20,758 20,203 20,758 20,203 21,657
(DKKm)
Share price end of period 105.85 102.61 105.85 102.61 110.00
(DKK)
Other
Number of employees 5,782 5,187 5,782 5,187 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. Lundbeck's pipeline includes:
One compound approved by FDA in the third quarter
One compound under FDA regulatory
process
Five compounds in clinical phase III
Six compounds in clinical phase II
Two compounds in clinical phase I
Pipeline development is summarized as follows:
Regulatory approval
In August FDA approved Sabril® as the first therapy for the treatment
of infantile spasms (IS) and an important new adjunctive therapeutic
option for the approximately 30 to 36 percent of adults with complex
partial seizures (CPS) whose seizures remain uncontrolled despite use
of current antiepileptic therapies.
Sabril® is indicated as monotherapy for paediatric patients one month
to two years of age with IS for whom the potential benefits outweigh
the potential risk of vision loss. IS is characterized by spasms that
may occur in clusters of up to 100 at a time. Sabril® represents the
only treatment approved by the FDA to help manage this
difficult-to-treat condition.
Sabril® is also indicated as adjunctive therapy for adult patients
with refractory CPS who have inadequately responded to several
alternative treatments and for whom the potential benefits outweigh
the risk of vision loss. Sabril® is not indicated as a first-line
agent for CPS. This patient group is inherently difficult to treat
and is in need of additional treatment alternatives to help reduce
the number of seizures.
Sabril® was introduced in the US in September, with an extensive Risk
Evaluation and Mitigation Strategy (REMS) program as required by the
FDA.
Lundbeck has together with the FDA established a comprehensive REMS
to manage the risk of permanent vision loss associated with the
product. The Sabril REMS, which was a critical component in receiving
FDA approval, specifies elements, such as restricted product
distribution, required vision testing and mandatory risk-benefit
assessments, to manage the risk of vision loss associated with
Sabril®. Like all other antiepileptic drugs, the REMS also addresses
the risk for suicidality associated with the class.
Clinical phase III
The ongoing trials and the planning of subsequent clinical trials for
Lu AA21004 (mood disorders), with our partner Takeda Pharmaceuticals,
is progressing according to plan.
The phase III programme with nalmefene in alcohol misuse is
progressing as planned and the last patient in the long-term safety
study was enrolled in September. The filing in Europe is expected in
2011.
Patient recruitment in the phase III programme for desmoteplase is
developing according to plan with most sites in DIAS-3 now open. In
DIAS-4 all centres are expected to be open by early 2010. At a recent
review FDA has accepted a smaller effect size as relevant and
sufficient for determining significance. Therefore to be able to
detect a smaller difference both DIAS-3 and DIAS-4 will be expanded
to include more patients in the studies. This is not expected to have
an impact on the previous communicated timelines. If the studies are
positive desmoteplase could be eligible for fast track FDA review.
Lundbeck has finished recruiting patients in the ongoing 240-patient
clinical phase III programme with clobazam. The purpose of this study
is to evaluate the safety and efficacy of clobazam as adjunctive
therapy in the treatment of seizures, which lead to drop attacks
(drop seizures) in patients 2 to 60 years of age with Lennox-Gastaut
Syndrome. We expect to have data by mid-2010 and filing of NDA in the
US is expected in first half of 2011.
Following a meeting with FDA Lundbeck has received requests for
additional patients in the safety study on IV carbamazepine.
Therefore, an additional 100 patients will be included in the trial.
Timelines are currently being reassessed, and a NDA will not be
submitted in 2010 as originally planned.
Clinical phase II
Lu AA24530 is progressing according to plan. Based on the solid
clinical phase II data reported in July 2009 we expect to initiate
additional clinical studies during 2010.
The novel anti-psychotic zicronapine (Lu 31-130) has finished
recruiting in the ongoing clinical phase II study and we expect to
have and release data before the end of 2009.
The two phase II studies with Lu AA34893 in bipolar depression and
major depressive disorder (MDD) have been terminated as additional
investigation is needed to address pre-clinical findings.
Lu AA24493 is a tissue protective cytokine with potential for
addressing medical needs in a number of severe CNS diseases. To
explore efficacy parameters of the drug Lundbeck has in November 2009
initiated phase IIa clinical studies with this innovative project in
people suffering from Friedreich's ataxia. The objective of this
placebo-controlled trial is to provide efficacy signals via
biomarkers as well as serve to evaluate the safety and tolerability
of two weeks treatment with a fixed dose Lu AA24493 in patients with
Friedreich's ataxia. Lu AA24493 represents the first drug candidate
from Lundbeck using a biological marker as indication of efficacy.
In May 2009 we communicated that the clinical phase II study with Lu
AA39959 in bipolar disorder was suspended. Pre-clinical work is still
ongoing.
Revenue
Lundbeck recorded third quarter revenue of DKK 3,264 million growing
20% in constant exchange rates compared to third quarter last year.
Total revenue Q3 2009 Q3 2008 Growth Q2 2009
DKKm DKKm Growth at CER DKKm
Cipralex® 1,258 1,228 2% 5% 1,345
Lexapro® 600 602 (0%) 10% 625
Ebixa® 548 480 14% 17% 539
Azilect® 93 65 43% 47% 88
Xenazine® 89 - - - 81
Serdolect® 17 15 14% 27% 17
Other
pharmaceuticals 637 379 68% 66% 713
Other revenue 21 40 (48%) (47%) 24
Total revenue 3,264 2,810 16% 20% 3,432
Revenue from Cipralex® (escitalopram) for the treatment of depression
and anxiety rose to DKK 1,258 million, an increase of 2% and 5% in
constant exchange rates. Revenue from Cipralex® continues to increase
and market shares for the product continue to grow. However, in the
third quarter the growth has slowed down due to structural changes in
the Turkish healthcare system, which have resulted in inventory
reductions at wholesalers during the quarter.
Lexapro® revenue, escitalopram marketed in the US by Forest
Laboratories, Inc. (Forest), was DKK 600 million for the quarter and
marginally down compared with the same period last year but growing
10% in constant exchange rates
Ebixa® (memantine) for the treatment of Alzheimer's disease generated
third quarter revenue of DKK 548 million, an increase of 14% on the
year-earlier period, corresponding to 17% growth in constant exchange
rates. Lundbeck has the marketing rights to Ebixa® in most parts of
the world except for Japan and the US.
Revenue from Azilect® (rasagiline) for the treatment of Parkinson's
disease rose 43% during the period to DKK 93 million (47% in constant
exchange rates). Lundbeck has commercial rights to Azilect® in most
European countries (in co-promotion with Teva Pharmaceutical
Industries Inc. (Teva) in France, Germany and the UK) and a few
countries outside of Europe.
Xenazine® [1] (tetrabenazine) for the treatment of chorea associated
with Huntington's disease, generated revenue of DKK 89 million in the
third quarter. Xenazine® was launched in November 2008 in the US.
Other pharmaceuticals, which comprise Lundbeck's mature
pharmaceuticals and revenue from Lundbeck Inc. (excl. Xenazine®),
rose to DKK 637 million. Excluding Lundbeck Inc., revenue from other
pharmaceuticals fell to DKK 368 million during the period, decreasing
3% compared with the third quarter of 2008.
Other revenue was DKK 21 million. Down 48% compared to the third
quarter of 2008.
Europe
Revenue in Europe rose 9% at constant exchange rates to DKK 1,680
million. The increase was driven by continued growth in Cipralex®,
Ebixa® and Azilect® growing 9%, 15% and 46% respectively at constant
exchange rates relative to the year-earlier period. Revenue from
other pharmaceuticals was DKK 221 million and declined 10% at
constant exchange rates.
Revenue Europe Q3 2009 Q3 2008 Growth Q2 2009
DKKm DKKm Growth at CER DKKm
Cipralex® 908 844 8% 9% 926
Ebixa® 456 399 14% 15% 448
Azilect® 84 59 43% 46% 80
Serdolect® 11 9 17% 22% 11
Other pharmaceuticals 221 248 (11%) (10%) 246
Total revenue 1,680 1,559 8% 9% 1,711
Cipralex® generated third quarter revenue of DKK 908 million in
Europe and continues to gain market shares across most major markets.
Cipralex® is the leading antidepressant in Europe measured in value,
and at the end of August 2009 Cipralex® held a market share in value
terms of 19.4%, as compared with a market share of 16.2% a year
earlier. The growth in market share continues to be driven by a
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 456 million during the period, and at
the end of August 2009 the product held 16.8% of the European
Alzheimer's market, compared to a market share of 15.9% at the same
time in 2008. In Italy Ebixa® continues to experience very positive
growth since the product obtained reimbursement in April 2009. Ebixa®
has a market share of 20.8% of the Italian Alzheimer's market (August
2009) compared to a market share of 14.4% a year ago. Memantine, the
active ingredient in Ebixa®, is the second-most prescribed
pharmaceutical in Europe for the treatment of Alzheimer's disease.
Third quarter revenue from Azilect® amounted to DKK 84 million
growing 43% (46% at constant exchange rates) compared to the same
quarter last year. Azilect® now holds a market share in value of 7.6%
of the total European Parkinson's market (August 2009). This compares
to a market share of 5.7% at the same time in 2008. Azilect®
continues to take market shares in Europe, as it is increasingly
being perceived as an effective and easy-to-administer medication,
furthermore the proposed benefit of early treatment with Azilect® is
helping promotion of the drug.
In the quarter the ADAGIO study was published in New England Journal
of Medicine and in connection with the publication Professor Olivier
Rascol, Department of Clinical Pharmacology, University Hospital,
Toulouse, France and ADAGIO co-principal investigator, stated, "The
results of the ADAGIO study provide novel data to support the use of
Azilect® 1 mg daily as initial treatment of patients with Parkinson's
disease. The ADAGIO study, which utilized a novel trial design with
three primary endpoints, suggests that the drug has a positive impact
on slowing the progression of patients' disability, beyond its
already known symptomatic benefit."
Azilect® is the first and only product that have shown efficacy on
disease progression in clinical trials. The publication is an
important milestone and will ensure that the positive data is noticed
broadly in the Parkinson's disease community, among prescribers and
patients.
USA
Lundbeck's third quarter revenue in the US rose to DKK 959 million,
while revenue from Lundbeck Inc. was DKK 359 million for the period.
Revenue USA Q3 2009 Q3 2008 Growth Q2 2009
DKKm DKKm Growth at CER DKKm
Lexapro® 600 602 (0%) 10% 625
Xenazine® 89 - - - 81
Other pharmaceuticals 269 - - - 319
Total revenue 959 602 59% 71% 1,025
Revenue from Lexapro® was DKK 600 million, and flat compared to the
same quarter last year but growing 10% at constant exchange rates.
Revenue in third quarter 2008 was negatively affected by
approximately DKK 100 million due to a reduction of Lexapro®
inventories in the US. At the end of August 2009, Lexapro® held a
market share in the US of 23.8% in value terms, as compared with a
market share of 23.0% at the same time last year. The US market for
antidepressants altogether is currently losing value due to generic
versions of competing antidepressants gaining market shares.
Prepayments from Forest, recorded in Lundbeck's balance sheet as the
difference between the invoiced price and the minimum price of
Forest's inventories, was DKK 667 million at 30 September 2009
compared with DKK 806 million at 30 September 2008. At the end of
September 2009, inventories were on a level corresponding to below
seven months of commercial supply.
Sales from Lundbeck Inc. reached DKK 359 million in the third quarter
corresponding to 36% growth compared to Ovation (now Lundbeck Inc.)
revenue in the third quarter last year (27% in constant exchange
rates). Revenue from Xenazine® amounted to DKK 89 million for the
quarter, growing 11% compared to last quarter. Specialty pharmacies
were holding less inventory compared to the previous quarter, which
had a negative effect on reported sales.
At the end of the third quarter Sabril® was launched in the US for
the treatment of refractory complex partial seizures (rCPS) and
infantile spasms (IS). Sabril is the first treatment to be approved
by the FDA for the treatment of IS and is an important new adjunctive
therapeutic option for the approximately 30 to 36 percent of adults
with CPS whose seizures remain uncontrolled in spite of having many
antiepileptic therapies already available.
Sabril® is introduced in the market place, with an extensive Risk
Evaluation and Mitigation Strategy (REMS) program as required by the
FDA and created in collaboration with the agency. The initial launch
of the product is going according to plan and we are very pleased
with the high level of interest from the medical community evidenced
by the high number of physicians that have signed up to participate
in the programme.
International Markets
Revenue in International Markets, which comprises all Lundbeck's
markets outside Europe and the US, was up 6% in constant exchange
rates to DKK 605 million. Cipralex® contributed with negative growth
for the quarter, while Ebixa® continued to show strong growth rising
23% 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 Q3 2009 Q3 2008 Growth Q2 2009
International Markets DKKm DKKm Growth at CER DKKm
Cipralex® 350 384 (9%) (3%) 419
Ebixa® 93 81 15% 23% 91
Azilect® 9 6 39% 64% 8
Serdolect® 6 6 9% 32% 6
Other pharmaceuticals 147 132 12% 18% 148
Total revenue 605 608 (1%) 6% 671
Cipralex® generated revenue of DKK 350 million in International
Markets, falling 9% compared to same quarter last year, and 3% in
constant exchange rates. The decrease in DKK was primarily due to
loss of revenue in Australia, where several generic versions of
escitalopram have been launched during the quarter. Furthermore,
structural changes in the Turkish healthcare system, to take place
mid-November, have demanded a substantial price reduction on
pharmaceuticals and have resulted in inventory reductions at
wholesalers in Turkey during the quarter.
Excluding Australia and Turkey total revenue in International Markets
grew 17% in the third quarter of 2009 compared to the same quarter
last year.
Cipralex® holds a market share in terms of value of 11.8% of the
aggregate market for antidepressants in International Markets (Q2
2009), compared to a market share of 10.6% in Q2 2008.
In the third quarter Cipralex® received public reimbursement in
British Colombia, Canada, and consequently continues to show
considerable growth in this market. The brand now holds a market
share in terms of value in Canada of 8.9% (August 2009) compared to
6.6% in the year-earlier period.
Ebixa® generated third quarter revenue of DKK 93 million and held
10.5% of the total market in terms of value for pharmaceuticals for
the treatment of Alzheimer's disease in International Markets (Q2
2009), as compared with a market share of 10.9% in Q2 2008. Ebixa®
continues to hold a steady market share in International Markets
despite generic competition in most markets. International Markets
continues to maintain significant underlying volume growth as a
consequence of the growing maturity of the medical sector in the
majority of the region.
Revenue from other pharmaceuticals was DKK 147 million and up 18% in
constant exchange rates compared to Q3 2008. The increase was
primarily due to stock building in Russia and China and a weak third
quarter last year.
Expenses
Excluding costs related to Lundbeck Inc. and costs related to a staff
reduction carried out during the quarter, total costs at Lundbeck
grew only with 5% compared to third quarter last year. The reason for
the increase in costs is related to the acquisition of Lundbeck Inc.
Lundbeck Inc. is included in financial numbers for 2009 but not in
2008.
Including Lundbeck Inc., total expenses for the period were DKK 2,480
million, up 27% compared to third quarter last year.
Distribution of costs Q3 2009 Q3 2008 Q2 2009
DKKm DKKm Growth DKKm
Cost of sales 519 433 20% 623
Distribution 712 571 25% 799
Administration 480 385 25% 464
Research & Development 769 568 35% 826
Total costs 2,480 1,958 27% 2,713
Total cost of sales rose 20% to DKK 519 million amounting to 16% of
Lundbeck's total revenue, up from 15% 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 (Lundbeck Inc.),
impacting costs by DKK 32 million. During the first nine month of
2009 the total costs of DKK 171 million related to purchase price
accounting has now been booked. Initial expectations were that
purchase price accounting would amount to DKK 183 million but due to
the decline in the USD/DKK exchange rate the total purchase price
accounting amounts to DKK 171 million at the current exchange rate.
Distribution costs were DKK 712 million corresponding to 22% of
revenue and up 25% compared to the same quarter last year. The
increase is mainly due to the inclusion of Lundbeck Inc.,
amortisations of rights in relation to the acquisition of Lundbeck
Inc. and spending on the promotion of Azilect®. Administrative
expenses increased by 25% to DKK 480 million, accounting for 15% of
total revenue compared with 14% for the third quarter of 2008.
Administrative costs for the quarter contain provisions related to
the staff reduction carried out during the quarter. SG&A costs were
DKK 1,192 million, compared with DKK 957 million in the year-earlier
period, and corresponding to 37% of revenue (34% in Q3 2008).
R&D costs for the quarter were DKK 769 million, an increase of 35%
compared with the same period last year driven by investments in our
late-stage pipeline. Third quarter saw higher spending on a number of
phase three studies and R&D costs for the period accounted for 24% of
total revenue, compared with 20% in the year-earlier period.
Operating profit before depreciation and amortisation (EBITDA)
EBITDA was DKK 977 million compared with DKK 982 million for the
third quarter of 2008. EBITDA margin for the period was 30%.
Depreciation, amortisation and impairment charges
Depreciation, amortisation and impairment charges, which are included
in the individual expense categories, amounted to DKK 193 million,
increasing 48% compared to the same period of 2008.
Depreciation, amortisation and Q3 2009 Q3 2008 Q2 2009
impairment charges per expense
category DKKm DKKm Growth DKKm
Cost of sales 52 48 8% 50
Distribution 62 7 771% 28
Administration 18 16 9% 18
Research & Development 61 59 4% 58
Total depreciation, amortisation and
impairment charges 193 130 48% 153
The large increase in depreciation and amortisation included in
distribution costs compared to the same period last year is primarily
explained by amortisation on product rights acquired in connection
with the acquisition of Ovation (Lundbeck Inc.) and LifeHealth
Limited.
Profit from operations (EBIT)
Including adjustments for acquisition accounting lowering EBIT with
DKK 32 million, EBIT for the third quarter amounted to DKK 784
million, corresponding to a decrease of 8% on the same period in 2008
(DKK 852 million). The decrease is primarily a result of an increase
in depreciation and amortisation and higher spending on R&D.
The EBIT margin for the period was 24% compared with 30% in the
year-earlier period.
Net financials
Lundbeck generated a net financial loss of DKK 30 million in the
quarter, compared with a net income of DKK 33 million in 2008.
Net financials Q3 2009 Q3 2008 Q2 2009
DKKm DKKm DKKm
Net items relating to trading 2 (27) (19)
Accounting translation of currency items 9 38 (56)
Net currency items relating to financial
items 11 11 (75)
Unrealised gains concerning other investments
excl. exchange rate adjustments (10) (7) 1
Net interest income (31) 29 (35)
Net financials (30) 33 (109)
Net items relating to trading were DKK 2 million, owing to
reclassification of hedging contracts.
Accounting translation of currency items was DKK 9 million for the
quarter, primarily due to a decrease in GBP/DKK.
Net interest income, including realised and unrealised gains and
losses on the bond portfolio, amounted to a net loss of DKK 31
million, as compared with a net income of DKK 29 million in the same
period of 2008. Net interests were negatively affected by a lower
cash position compared to the same quarter 2008 as well interests
paid on loans related to the acquisition of Ovation (Lundbeck Inc.).
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 negative effect
on net financials for the third 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 149 million as compared
to DKK 272 million in the year-earlier period. The tax rate was 20%,
down from 31% third quarter last year.
Profit for the period
Profit after tax for the third quarter of 2009 was DKK 605 million
compared to DKK 611 million in the same period last year.
Cash flows
Lundbeck had a cash inflow during the quarter of DKK 297 million,
compared with an inflow of DKK 913 million in the year-earlier
period.
Cash flows Q3 2009 Q3 2008 Q2 2009
DKKm DKKm DKKm
Cash flows from operating activities 907 1,032 902
Cash flows from investing activities (2,363) (116) (50)
Cash flows from operating and investing
activities (1,456) 916 852
Cash flows from financing activities 1,752 (3) 277
Change in cash 297 913 1,128
Cash at beginning of period 2,256 1,955 1,123
Unrealised gains/losses 2 (2) 4
Cash at end of period 2,554 2,867 2,256
Operating activities generated third quarter cash inflow of DKK 907
million compared with DKK 1,032 million in the same period last year.
Cash flows from investing activities represented an outflow of DKK
2,363 million, compared with an outflow of DKK 116 million in the
same period of 2008 explained by the final payment for the
acquisition of Ovation (Lundbeck Inc.) and the acquisition of
LifeHealth Limited.
Lundbeck's total net investments exclusive of financial investments
amounted to a cash outflow of DKK 2,361 million in the third quarter
due to the acquisition of LifeHealth Limited and the additional
payment of USD 300 million (approximately DKK 1.6 billion) in
connection with the approval of Sabril® by the FDA, against a cash
outflow of DKK 95 million in the year-earlier period.
Cash flow from financing activities was an inflow of DKK 1,752
million, which primarily stems from new loans of DKK 1,744 million in
order to finance the additional payment regarding the acquisition of
Ovation (Lundbeck Inc.).
Cash at 30 September 2009 was DKK 2,554 million, against DKK 2,256
million at the end of June 2009 and DKK 2,867 million in the third
quarter of 2008. At the end of the period, Lundbeck had
interest-bearing net debt of DKK 1,818 million compared with net debt
of DKK 365 million at the end of June 2009 and net cash of DKK 1,949
million at the end of December 2008.
Balance sheet
At 30 September 2009, Lundbeck had total assets of DKK 17,729
million, against DKK 16,984 million at the end of second quarter 2009
and DKK 12,526 at the end of 2008. The significant increase since
December is due to the acquisition of Ovation (Lundbeck Inc.) and
LifeHealth Limited.
At 30 September 2009, Lundbeck's equity amounted to DKK 8,512
million, corresponding to a solvency ratio of 48.0%, compared with
47.7% at the end of June 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 76
million in Q3 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 46 million gain in the year-earlier
period. The currency with the most impact financially in the third
quarter 2009 was the US dollar and of the total negative effect DKK
69 million stems from the hedging of the US dollar, compared to a
positive effect of DKK 55 million in the third quarter of 2008.
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 546.
Financial guidance and forward-looking statements
Lundbeck guidance for the full year remains unchanged and reflects
the guidance that was reported in the interim report for the second
quarter 2009.
The guidance includes one-off expenses of approximately DKK 183
million owing to acquisition accounting related to the acquisition of
Ovation (Lundbeck Inc.) and income of DKK 124 million from the
divestment of interests in LifeCycle Pharma.
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 third quarter of 2008, the change in
accounting policies caused a decrease in profit of DKK 25 million, a
reduction in equity of DKK 85 million and a reduction of total assets
of DKK 85 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 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, Brazil, Bulgaria, Canada, Denmark, Finland, France,
Germany, Hungary, Israel, Lithuania, The Netherlands, Norway,
Portugal, Rumania, Slovenia, UK, and the US in respect of the Group's
intellectual property rights concerning escitalopram.
Decisions in key patent cases
Escitalopram
During the quarter the Federal Court of Justice in Germany confirmed
the patent of escitalopram. The judgement from the appeal instance,
ruled that the patent on Cipralex® in Germany is to be upheld until
June 2014. The decision can most likely not be appealed.
Memantine
In Canada Lundbeck and Merz GmbH has recently lost a case regarding
two patents covering the use of memantine and memantine in
combination with acetylcholinesterase inhibitors. Following the
decision generic versions of memantine may be approved. Lundbeck and
Merz are evaluating the outcome of the trial and opportunities for
further legal actions.
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
Q3 Q3 9M 9M FY
DKKm DKKm DKKm DKKm DKKm
Revenue 3,264 2,810 9,921 8,629 11,282
Cost of sales 519 433 1,629 1,377 1,837
Distribution costs 712 571 2,185 1,770 2,459
Administrative expenses 480 385 1,345 1,205 1,642
Profit before research and development
costs 1,552 1,420 4,762 4,277 5,344
Research and development costs 769 568 2,312 2,136 2,990
Profit from operations (EBIT) 784 852 2,450 2,142 2,354
Income from investments in associates - (2) - (34) (43)
Net financials (30) 33 (119) 49 (28)
Profit before tax 754 884 2,331 2,157 2,283
Tax on profit for the period 149 272 559 618 620
Profit for the period 605 611 1,771 1,538 1,663
Earnings per share (EPS) (DKK) 3.08 3.12 9.03 7.81 8.45
Diluted earnings per share (DEPS)
(DKK) 3.08 3.12 9.03 7.81 8.45
Statement of recognised income and
expenses
2009 2008 2009 2008 2008
Q3 Q3 9M 9M FY
DKKm DKKm DKKm DKKm DKKm
Profit for the period 605 611 1,771 1,538 1,663
Exchange differences regarding foreign
subsidiaries (238) 60 (537) (24) (138)
Adjustment, deferred gains/losses,
hedging 58 (137) 65 11 43
Realised gains/losses, hedging (60) (38) 53 (150) (104)
Realised gains/losses, trading
(transferred from hedging) - (3) - (16) (16)
Other equity entries concerning
associates - 1 - (2) 1
Fair value adjustment of
available-for-sale financial assets 9 8 11 (23) (7)
Tax on income and expenses recognised
in equity 34 45 82 39 19
Income and expenses recognised directly
in equity (196) (65) (326) (165) (202)
Recognised income and expenses for the
period 408 547 1,445 1,373 1,462
Balance
sheet
30.09.2009 30.09.2008 31.12.2008
DKKm DKKm DKKm
Assets
Intangible assets 7,688 1,975 2,016
Property, plant and equipment 3,048 3,109 3,123
Financial assets 202 575 247
Non-current assets 10,938 5,659 5,386
Inventories 1,444 886 837
Receivables 2,744 2,291 2,223
Securities 48 1,160 955
Cash 2,554 2,867 2,921
Assets held for sale - - 205
Current assets 6,792 7,204 7,140
Assets 17,729 12,863 12,526
Equity and liabilities
Share capital 981 984 984
Share premium 224 224 224
Other reserves (974) (322) (437)
Retained earnings 8,281 6,536 6,740
Equity 8,512 7,422 7,511
Provisions 1,113 643 689
Debt 2,672 1,893 1,904
Non-current liabilities 3,785 2,536 2,594
Provisions 17 6 18
Bank and mortgage debt 1,749 5 23
Trade payables 711 558 867
Other payables 2,288 1,530 916
Prepayments from Forest 667 806 597
Current liabilities 5,432 2,905 2,421
Liabilities 9,217 5,441 5,015
Equity and liabilities 17,729 12,863 12,526
Statement of changes in equity at 30 September 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 - - (537) 1,982 1,445
Distribution of dividend,
gross - - - (453) (453)
Distribution of dividend,
treasury shares - - - 2 2
Capital reduction and
cancellation of treasury
shares (4) - - 4 -
Incentive programmes - - - 7 7
Other transactions (4) - - (441) (444)
Equity at 30.09.2009 981 224 (974) 8,281 8,512
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 - - (24) 1,397 1,373
Distribution of dividend,
gross - - - (531) (531)
Distribution of dividend,
treasury shares - - - 27 27
Capital reduction and
cancellation of treasury
shares (52) - - 52 -
Buyback of treasury shares - - - (538) (538)
Incentive programmes - - - 2 2
Other transactions (52) - - (989) (1,041)
Equity at 30.09.2008 984 224 (322) 6,536 7,422
Cash flow statement
2009 2008 2009 2008 2008
Q3 Q3 9M 9M FY
DKKm DKKm DKKm DKKm DKKm
Profit from operations (EBIT) 784 852 2,450 2,142 2,354
Adjustments 110 164 225 863 1,031
Working capital changes 86 29 (13) (126) (88)
Cash flows from operations
before financial receipts and
payments 980 1,045 2,662 2,879 3,296
Financial receipts and
payments (24) 8 (38) 35 11
Cash flows from ordinary
activities 956 1,053 2,624 2,914 3,307
Income tax paid (49) (21) (224) (189) (527)
Cash flows from operating
activities 907 1,032 2,400 2,725 2,780
Acquisition of company (1,472) - (5,007) - -
Investments in and sale of
bonds (2) (18) 942 376 612
Investments in and sale of
intangible assets, property,
plant and equipment and other
financial assets (889) (98) (741) (950) (1,199)
Cash flows from investing
activities (2,363) (116) (4,806) (574) (587)
Cash flows from operating and
investing activities (1,456) 916 (2,406) 2,151 2,193
Cash flows from financing
activities 1,752 (3) 2,030 (1,047) (1,016)
Change in cash 297 913 (377) 1,104 1,177
Cash at beginning of period 2,256 1,955 2,921 1,772 1,772
Unrealised exchange
differences for the period 2 (2) 10 (9) (28)
Change for the period 297 913 (377) 1,104 1,177
Cash at end of period 2,554 2,867 2,554 2,867 2,921
Interest-bearing net cash and
cash equivalents
is composed as follows
Cash 2,554 2,867 2,554 2,867 2,921
Securities 48 1,160 48 1,160 955
Interest-bearing debt (4,421) (1,897) (4,421) (1,897) (1,927)
Interest-bearing net cash and
cash equivalents,
end of period (1,818) 2,129 (1,818) 2,129 1,949
Management statement
The Supervisory Board and the Executive Management have discussed and
adopted the interim report for the period 1 January - 30 September
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 September
2009 and of the results of the Group's operations and cash flows for
the nine months ended 30 September 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, 3 November 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
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
November 2, 2009 Lundbeck starts clinical phase IIa
with Lu AA24493 (cEPO) in Friedreich's ataxia in a study also
assessing efficacy via biomarkers
October 30, 2009 Novel agent for treatment of
Parkinson's disease - Lu 02-750 - enters Lundbeck's development
pipeline
September 23, 2009 Results of ADAGIO study with Azilect®
in Parkinson's disease published in The New England Journal of
Medicine
August 21, 2009 FDA grants marketing approval for
Lundbeck's Sabril® (vigabatrin)
Please visit www.lundbeck.com for further information on the
releases.
Appendix - Changes in accounting policies
Effect of Reclassification
change of
Change in in
accounting Before adj. accounting other operating After adj.
policies
- effect on policies -
income DKKm DKKm items1 - DKKm DKKm
statement
Q3 2008
Revenue 2,810 2,810
Cost of sales 432 1 433
Distribution 571 571
costs
Administrative 386 (1) 385
expenses
Research &
Development 567 0 568
costs
Profit before
other 853 (2) 1 852
operating
items
Other
operating 1 (1) -
items
Profit from
operations 854 (2) - 852
(EBIT)
Income from
investments in (2) (2)
associates
Net financials 45 (12) 33
Profit before 897 (13) - 884
tax
Tax on profit 260 12 272
for the period
Profit for the 637 (25) - 611
period
Earnings per
share (EPS) 3.25 3.12
(DKK)
Diluted
earnings per 3.25 3.12
share (DEPS)
(DKK)
1 January - 30
September 2008
Revenue 8,629 8,629
Cost of sales 1,377 1,377
Distribution
costs 1,770 1,770
Administrative
expenses 1,212 (7) 1,205
Research &
Development
costs 2,138 (2) 2,136
Profit before
other
operating
items 2,133 2 7 2,142
Other
operating
items 7 (7) -
Profit from
operations
(EBIT) 2,140 2 - 2,142
Income from
investments in
associates (34) (34)
Net financials 11 38 49
Profit before
tax 2,117 40 - 2,157
Tax on profit
for the period 614 4 618
Profit for the
period 1,503 35 - 1,538
Earnings per
share (EPS)
(DKK) 7.63 7.81
Diluted
earnings per
share (DEPS)
(DKK) 7.63 7.81
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.
30.09.2008 DKKm policies - DKKm DKKm
Assets
Intangible assets 2,040 (65) 1,975
Property, plant and equipment 3,143 (34) 3,109
Financial assets 561 14 575
Non-current assets 5,744 (85) 5,659
Current assets 7,204 7,204
Assets 12,948 (85) 12,863
Equity and liabilities
Share capital 984 984
Share premium 224 224
Other reserves - (322) (322)
Retained earnings 6,298 237 6,536
Equity 7,507 (85) 7,422
Liabilities 5,441 5,441
Equity and liabilities 12,948 (85) 12,863
Change in accounting policies Effect of change
- effect on balance sheet - Before adj. in accounting After adj.
31.12.2008 DKKm Policies - DKKm 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)
