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CONTENTS
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Our Business 3
Patient Perspective:
Ruled, but not ruined, by migraine 4
2021 IN BRIEF
Financial Highlights 6
2021 Key Events 7
Sustainability Highlights 8
Letter to Shareholders 9
OUR BUSINESS
Strategy Update 12
2021 Performance Review and 2022 Outlook 16
Our Science and Innovation 22
Markets and Products 29
Summary for the Group 2017-2021 32
GOVERNANCE
Corporate Governance 36
Sustainability and Compliance 38
Risk Management 41
Board of Directors 43
Executive Management 45
The Lundbeck Share 47
Consolidated financial statements 51
Financial statements of
the parent company 93
Management statement 104
Independent auditor’s reports 105
Also find our Sustainability Report,
Remuneration Report and Corporate
Governance Report on →
Lundbeck.com
Contents
MANAGEMENT REVIEW
FINANCIAL STATEMENTS
OTHER REPORTS
Front Page
Audrey Craven is an Irish national and has
been living with migraine most of her adult life.
Read her story on page 4.
Photo: Søren Svendsen, Sune Høegh, David Coleman,
and Joanna Janczur.
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PATIENT PERSPECTIVE:
RULED, BUT NOT RUINED,
BY MIGRAINE
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#2021 Key Events
#Sustainability Highlights
#Letter to Shareholders
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FINANCIAL
HIGHLIGHTS
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2021 KEY EVENTS
SUSTAINABILITY
HIGHLIGHTS
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We are well on our way with the strategic reorientation of our
business to discover and develop transformative medications for
indications in niche neurology and psychiatry treated by
specialists, and rare diseases in neurology, so we can best
deliver to patients and maintain a leadership position among
Europe based pharmaceutical companies of our size and scope.
As we continue to forge ahead with our Expand and Invest to
Grow strategy, we are pleased with our progress.
SH
OWING GOOD GROWTH MOMENTUM
We are effectively maximizing our existing brands, showing
good growth momentum across all regions of the world. Our
newest launch, Vyepti
®
is increasing pace in the U.S. and was
launched in the U.A.E. and Kuwait in 2021. It was also approved
in Canada, Australia, Singapore, Switzerland and is currently
under review in several countries around the world. We are
investing behind the global launch of Vyepti
®
as our first
independent global launch.
We ar
e expanding our brands through new indications
development for Vyepti
®
in episodic cluster headache and
Rexulti
®
in agitation in Alzheimer’s disease to further drive
growth. Rexulti
®
/Rxulti
®
was approved by the Food and Drug
Administration (FDA) in the U.S. after the submission of an
sNDA for the treatment of schizophrenia in pediatric patients 13
to 17 years of age.
Our largest brand, Brintellix
®
/Trintellix
®
, continues to grow, and
the most recent launch in Japan in 2019 has garnered 5.5%
market share in the anti-depressant market, just two years after
market entry.
ENSURING HIGHER PROBABILITIES OF SUCCESS
Three years ago, we set out to rebuild our pipeline and now we
have a more robust mid-stage pipeline, with several compounds
having moved into phase II in 2021. Multiple focused phase Ib
studies are guiding the future development of other promising
compounds within an interesting phase I portfolio. Our journey
to transform research and development (R&D) has strong
momentum. Last year, we identified four biological clusters that
our therapies of the future would address. We have stringently
focused our R&D projects around these promising areas of
central nervous system (CNS) biology and have implemented
stronger derisking through experimental medicine and
biomarker approaches to ensure higher probabilities of success
as compounds eventually move towards the mid- and late-stage
pipeline.
To accelerate our advancements into neuroimmunology, we
acquired a promising CD40L inhibitor from AprilBio, with a
phase I study expected to start in 2022. Earlier in the year, we
entered a strategic partnership with Rgenta Therapeutics to
explore RNA-targeted therapies in our four biological clusters.
We are also continuing our joint phase III studies with Otsuka
Pharmaceutical Co., Ltd. (Otsuka) of brexpiprazole for agitation
in Alzheimer’s disease and for the treatment of post-traumatic
stress disorder (PTSD).
PREPARING FOR THE FUTURE
As we execute our strategy, we will inevitably face challenges.
We are navigating a decline of revenue from Northera
®
post-
loss of exclusivity and Vyepti
®
’s pace of uptake has been
impacted by the pandemic. At the same time, we have ongoing
global industry changes that are putting increased pressure on
pricing.
We spent a good part of the year ensuring our business is best
prepared for the future to address these and other challenges
that may come our way. Although we have strong growth
prospects for the coming 5-7 years for the great portfolio of
existing brands we have today, we have taken steps to ensure
our business model and ways of working are most effective.
Usi
ng learnings from the pandemic and best practices in the
industry, we have taken action to reorient our business to
ensure it is better prepared to work using global technology
platforms and to develop globally available products. We have
also taken steps based on learnings from the pandemic to
ensure we are ready for a more digital future when it comes to
customer engagement.
LETTER TO
SHAREHOLDERS
Our Expand and Invest to Grow strategy
launched in 2019 is beginning to show
tangible results. We have made good
progress on expanding our early- and
mid-stage pipeline, based around our
expanded operating space. Our newest
strategic brand, Vyepti
®
, continues to
grow and gain momentum due to its
proven efficacy for patients.
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Throughout the year, the pandemic continued to impact our
ability to engage with healthcare providers and patients,
particularly in the U.S., which saw varying levels in vaccine
uptake across the country. Despite the pandemic impact
fluctuating to varying degrees in different geographies over the
course of the year, we are pleased with our results; overall the
strategic brands continued to grow in local currencies and
mature brands continued to perform well.
La
rs Søren Rasmussen
Chairman of the Board
W
e have great talent, aligned and dedicated to restoring brain
health. It is our team’s dedication to helping patients with brain
disease that has made Lundbeck successful in the past and will
ensure we are successful in the future. We want to take this
opportunity to thank Lundbeck´s employees for their dedication,
hard work and all that they do to ensure that Lundbeck is best
placed to restore brain health for decades to come.
D
eborah Dunsire
President and CEO
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#2021 Performance Review and 2022 Outlook
#Our Science and Innovation
#Markets and Products
Summary_for_the_Group 2017-2021
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DELIVERING ON OUR PROMISES
We have taken significant strides to expand our operating space
through the acquisitions of Abide and Alder in 2019, which gave
us the platforms needed to expand our areas of focus in
neuroscience. With the 2020 launch of Vyepti
®
 in the U.S. and
the global roll-out which was initiated in 2021, we are beginning
to establish a new frontier in migraine prevention and expanding
our presence into protein-based therapies. Furthermore, we are
continuously expanding our existing portfolio of medicines into
new markets.
T
he changes we made to how we approach R&D enables us to
de-risk our internal pipeline compounds in early development.
We utilize an experimental medicine approach to identify the
effects of a drug in carefully selected patient populations, to find
the most efficient clinical pathway powered by biomarkers and
study designs and advance the most promising drug candidates
into full development. 
The geographical expansion of Vyepti
®
 and the continuing
efforts to grow and expand Brintellix
®
/Trintellix
®
, Rexulti
®
/Rxulti
®
and Abilify Maintena
®
, along with several other life cycle
management projects, are all crucial to our future. 
W
e have made choices on where to accelerate and enhance
the use of digital within our operations and R&D. Also, we have
taken steps to fortify our winning culture with increased agility,
collaboration, diversity and inclusion. These are just a few of the
many actions that are helping us deliver on the promise of our
strategy to yield sustainable, long-term profitable growth. 
CREATING VALUE THROUGH OUR UNIQUE POSITION
Our goal continues to be providing innovative treatments for
patients that create value for Lundbeck. Achieving our fullest
potential as a mid-size, highly specialized pharmaceutical
company requires that we thoughtfully concentrate our efforts
where we can make the most difference for patients. 
While we maximize the great medicines and brands that we
already have, we simultaneously focus on growing our pipeline
with treatments for brain diseases for which there are few, if
any, treatment options. We operate within niche diseases
affecting subpopulations of people where there is a high, unmet
medical need. By focusing on niche and rare disease neurology
and psychiatry indications, we can best take advantage of our
size and strong relationships with specialist healthcare providers
to deliver powerful solutions to challenging diseases. 
We currently promote medicines that, in some countries, both
primary care physicians and specialists treat. We will continue
to promote these excellent medicines, working with our
partners to reach these larger numbers of physicians. 
Just as important to growing our pipeline and selling our
medicines, is the manufacturing of our medicines, whether
internally or via external contract manufacturing. We have
strong internal capabilities within small and large molecules to
support our R&D pipeline, including monoclonal antibody
design, process and formulation development capabilities, as
well as end-to-end internal small molecule manufacturing
facilities.
O
ur three priorities across Production, Development & Supply
remain quality, reliability and cost. We have a robust track-
record on all three parameters and ambitious goals to
continuously improve performance with a strong focus on
operational excellence and sustainable sourcing. 
We aim to build on what we have achieved and capitalize
further on the strong fundamentals that are deeply ingrained in
Lundbeck; our rich heritage of developing and producing life-
changing treatments for patients, our deep scientific knowledge
in psychiatry and neurology and our patient-centric mindset. We
will focus on embracing new biologies and technologies,
adjusting and learning as we forge ahead.  
STRATEGY UPDATE
Since launching our Expand and Invest
to Grow strategy in 2019, we continue
to make strong progress, fueled by our
purpose, to restore brain health so
every person can be their best.
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In the future, we will work with even more agility and
collaboration across geographies, simplifying our processes and
accelerating our ability to test and learn for faster, higher-quality
decision making. This will fully leverage our diverse talent,
knowledge and skillsets so that we can pursue solving
some of the biggest brain disease challenges with the greatest
patient reward. 
EXPAND AND INVEST TO GROW: OUR STRATEGIC
IMPERATIVES
Our strategic imperatives guide us towards reaching our
objective to expand and invest to grow. 
Maximize existing brands  
Our strategic brands continue to show solid growth, both in
volume and value, across all regions. At the same time, several
of our mature brands have shown remarkable resiliency. Our
commercial teams continue to accelerate our efforts in growing
our mature and strategic brands across more geographies,
thereby maximizing our existing brands to drive growth in the
coming years.  
O
ur strategic brands 
Brintellix
®
/Trintellix
®
 is a prescription medication used to treat
major depressive disorder (MDD). The brand delivered solid
growth in 2021 despite the flattening in total prescriptions of
MDD medications in the U.S. during the pandemic. 
Rexulti
®
/Rxulti
®
 is a prescription medication used as an
adjunctive therapy to antidepressants for the treatment
of MDD. We will continue to maximize this medication with
launches in hopefully six additional markets in 2022.  
Abilify Maintena
®
 is one of the most prescribed long
acting injectable treatments for patients with schizophrenia. In
some European countries it is the market leader. 
Vy
epti
®
is an infusion treatment for the prevention of migraine in
adults. This is our newest strategic brand, launched in the U.S.
in April 2020.
We will continue to expand our geographical reach with
approval in additional countries – in 2021 it was approved for
use in Australia, Canada, the U.A.E., Kuwait, Switzerland and
Singapore.
O
ur mature brands
Our portfolio of mature brands is large. In the U.S., Northera
®
,
Onfi
®
, Sabril
®
and Xenazine
®
 are declining after the initial loss to
generics. The larger group of mature brands is remarkably
resilient having high levels of trust and brand recognition in
many markets around the world. And some of the products show
continued growth, for example Cipralex
®
/Lexapro
®
. 
W
e continue our strong partnerships with Otsuka and Takeda
Pharmaceutical Company Limited (Takeda) to engage
healthcare professionals treating a broad range of psychiatric
diseases, with keen commercial execution against our portfolio
of strategic and mature brands. 
I
n the coming years, we will further strengthen and reinforce our
field force ensuring that they have the digital tools and
capabilities needed to help them to expand their networks and
collaborate even better with patients and customers. 
W
e continue to ensure patients receive the full benefit of our
medicines through continued clinical activities, life cycle 
management programs, proactive patient safety efforts, medical
activities and value positioning, and also through advocacy
efforts.   
Ex
pand operating space
We expanded our operating space through the acquisitions of
Alder and Abide in 2019, which have given us the platforms
needed to expand our areas of focus in neuroscience towards
targeted indication groups of niche and rare neurology and
psychiatry. Furthermore, we continue to invest in maximizing our
strategic brand franchises Brintellix
®
/Trintellix
®
, Rexulti
®
/Rxulti
®
,
Abilify Maintena
®
 and Vyepti
®
, and we are continuously
expanding our existing portfolio of medicines into new markets
and additional indications.
Figure 1: Lundbeck's strategic imperatives
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Most notably through the forthcoming global launch of Vyepti
®
and further indications in development for Vyepti
®
and
Rexulti
®
/Rxulti
®
. 
W
e have assessed and identified the most promising biological
clusters on which to focus our R&D efforts that enable us to
treat our targeted indication groups. These four biology clusters
are: 
1. H
ormonal / neuropeptide signaling: Targeting selected
pathways of pain signals and stress response;
2. Circuit / neuronal biology: Targeting neurotransmission /
synaptic dysfunction to restore brain circuits and reduce
ne
urological, psychiatric, and pain symptoms;
3. Neuroinflammation / neuroimmunology: Targeting
neuronal loss due to an overactive immune system,
relevant across many niche and rare neurological
disorders;
4. Protein aggregation, folding, and clearance: Targetin
g
ne
urodegenerative proteinopathies involved in a range of
neurodegenerative diseases, e.g. Alzheimer’s and
Parkinson’s as well as rare diseases.
Ou
r focus in niche and rare neurology and psychiatry provides
for a broad range of business development opportunities across
all stages of development. We will continue to pursue external
innovation through acquisitions, strategic partnerships and in-
licensing. Access to technologies and novel early-stage assets
will complement the four biological clusters and ensure we have
the best possible starting point for developing differentiated
medicines to patients with high unmet needs. Access to later-
stage products will seek to leverage our existing global
commercial infrastructure and provide for sustainable growth.  
R
ebuilding the pipeline
The R&D organization is transforming, adopting an agile
mindset to enable the team to be more flexible when necessary.
In this way, we will more effectively and efficiently rebuild our
pipeline with a balance of first-in-class and best-in-class drug
candidates, to enable a steady stream of breakthrough and
differentiated medicines across all phases of the pipeline. 
W
e continue to orient R&D towards specialist treated disease
indications that address high unmet needs in niche and rare
disease neurology and psychiatry. We will use our four
biological clusters in our in-house discovery research to target
the high unmet needs within our expanded operating
space and to deliver impactful neuroscience medicines of the
future.  Drawing on our experimental medicine expertise, we
now detect signals and gain more objective evidence to test
efficacy earlier in development – de-risking the path to the
market.  We complement the rebuild of our pipeline with the right
blend of external innovation, mix of acquisitions, partnerships
and licenses for new medicines that fit with our refined focus on
niche neuroscience indications. 
M
aintain focus on profitability
Safeguarding a consistent level of profitability ensures our ability
to make strategic investments in our business. We increase cost
efficiency across the organization whenever we can by further
leveraging the knowledge and capabilities in our Group
Business Services center (GBS) in Poland. 
W
e will continue to harness the power of technology and pull
digital capabilities into our ways of working to drive greater
efficiency. With our current product portfolio and projects in our
pipeline it is our ambition to reach an EBIT margin of more
than 25% by 2024. 
Enha
nce organizational agility and collaboration
We work as global function teams, building on each other’s
strengths and harnessing the full power of our functions and
departments across borders for greater outcomes. Working
cross-functionally and cross-geographically allows us full
clarity and alignment in terms of prioritization and decision
making and provides greater opportunity for our people through
the transfer of knowledge and talent development. We work in
alignment with our priorities and shared purpose, grounded in
our beliefs.
Figure 2: Lundbeck's R&D focus on four biological clusters
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We will continue to infuse the organization with more flexible
and agile ways of working both in terms of how we work and the
way we work, simplifying our processes and accelerating our
ability to test and learn for faster, higher-quality decision
making.
B
y leveraging digital technologies and capabilities where it can
make us faster and more effective, we can make the best use of
our talent and competencies across functions that will enable
the development of best or first-in-class products and get them
to patients faster. 
Ju
st as much as we need a global and cross functional working
organization, we need a diverse and inclusive one too. We aim
to enrich our decision making through diversity of thought
across all that we do. Diversity comes from having inclusive
teams made up of people with different perspectives and
experiences - and that comes from having an organization of
people with different nationalities, race, gender and sexual
orientation. We have a zero-tolerance approach to harassment,
racism and discrimination of any kind and clear processes for
employees and stakeholders to voice their concerns and have
them addressed. 
E
qually important, we will continue to ensure sustainable
business practices following leading environmental, social and
corporate governance criteria. Our ability to successfully deliver
on our strategy takes the entire Lundbeck team collaborating
around our shared purpose of restoring brain health, so every
person can be their best.  
OUR LO
NG-TERM AMBITION
Over the past two years, we have made strategic choices
around where we put our efforts across our entire business.
With the choices we made, we have lofty ambitions for what the
future should look like when we succeed. 
O
ur ambition is to be #1 in Brain Health in the eyes of the
patients we tirelessly serve – so what does that mean?  
WHAT DOES IT MEAN TO BE #1 IN BRAIN HEALTH?
We aim to be the leader in brain health, in the eyes of our
patients. We know we are well on our way when:
We have top quartile financial results in our peer
group. By focusing on our patients and our products, top
financial performance will follow.  
We have a premier neuroscience pipeline filled with
assets that will make a difference to our patients.  
We have an established and focused commercial
footprint around commercially attractive patient
segments in niche and rare neurology and psychiatry. 
We are best in class in terms of how we use digital
technologies to improve patient outcomes.  
We are a company leveraging diversity, where top
talents within neuroscience aspire to work
We continue to deliver sustainable growth in revenue
and profitability. 
And finally, we are on track to be carbon neutral
before 2050. Giving back to society is equally as
important as financial performance. 
The culmination of all this together is what will make us
#1 in Brain Health, serving the people who need new
medicines to help them conquer brain diseases. It will
take every brain being fully “in the game” to achieve it.
We continue to prioritize and act, year by year to stay on
track.
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Overall, revenue and EBIT reached mid-range of the financial
guidance provided in February 2021 as a result of solid product
sales.
R
evenue reached DKK 16,299 million in 2021. EBIT grew 1%
compared to 2020 and reached DKK 2,010 million. EBIT margin
reached 12,3%. Net profit ended at DKK 1,318 million for the
year (DKK 1,581 million in 2020), a decrease of 17%.
W
e continue to see strong growth in our strategic brands which
include Abilify Maintena
®
(schizophrenia), Brintellix
®
/Trintellix
®
(depression), Rexulti
®
/Rxulti
®
(depression/schizophrenia) and
our newest product, Vyepti
®
(prevention of migraine) which was
introduced in April 2020 in the U.S. In 2021, we continued the
global roll-out program. We expect to launch in additional 15
markets in 2022, incl. the E.U.
In aggregate, strategic brands grew 18% in local currencies
reaching DKK 9,287 million in 2021 or 57% of total revenue.
T
he newest product in the portfolio, Vyepti
®
, continues its strong
momentum since its launch in April 2020 in the U.S. and
reached DKK 492 million in 2021 compared to DKK 93 million in
2020.
In 2019, Lundbeck set up commercial operations in Japan in
order to co-commercialize Trintellix
®
together with Takeda. In
2021, the product continues to be very successful in Japan and
holds 5.5% market share after two years of being on the market,
making it one of the most successful Brintellix
®
/Trintellix
®
launches to date.
Lu
ndbeck’s early-stage pipeline continued to strengthen with
several projects entering first-in-man testing (phase I) and with
two projects entering Proof of Concept (phase II) testing, Lu
AF82422 and Lu AG09222. Additionally, the clinical program for
Vyepti
®
provided very positive results from the DELIVER trial.
Our top priority is to provide innovative treatments that create
value for patients as well as for Lundbeck.
No
w, with the global launch of Vyepti
®
, we are in the process of
building a migraine and specialty pain franchise and we are
transforming our R&D organization to build a pipeline around
high unmet medical needs, in specialist neuroscience
indications.
TOTAL REVENUE 2021
DKKm
2021
2020 Growth
Growth
in local
currencies
Abilify Maintena
®
2,420
2,271
7%
8%
Brintellix
®
/Trintellix
®
3,526
3,102
14%
16%
Rexulti
®
/Rxulti
®
2,849
2,620
9%
14%
Vyepti
®
492
93
429%
446%
Strategic brands
9,287
8,086
15%
18%
Cipralex
®
/Lexapro
®
2,346
2,380
(1%)
3%
Northera
®
665
2,553
(74%)
(72%)
Onfi
®
505
642
(21%)
(17%)
Sabril
®
657
777
(15%)
(11%)
Other pharmaceuticals
2,439
2,738
(11%)
(10%)
Other revenue
347
491
(29%)
(28%)
Effects from hedging
53
5
(960%)
-
Total revenue
16,299
17,672
(8%)
(5%)
2021 PERFORMANCE
REVIEW AND 2022
OUTLOOK
2021 saw continued solid growth of our
strategic brands, which mitigated the
impact from the loss of exclusivity on
Northera
®
in the U.S. early in the year.
We also saw continued solid revenue
growth in International Markets and in
Europe. We continue to make good
progress on our Expand and Invest to
Grow strategy and revitalizing our
pipeline.
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SALES PERFORMANCE
Revenue reached DKK 16,299 million in 2021 compared to DKK
17,672 million in 2020. The decline in sales is mainly a
consequence of generic erosion of Northera
®
. Excluding
Northera
®
, sales grew by 6% in local currencies. The strategic
brands (Abilify Maintena
®
, Brintellix
®
/Trintellix
®
, Rexulti
®
/Rxulti
®
and Vyepti
®
) grew 18% in local currencies and reached DKK
9,287 million or 57% of total revenue.
EURO
PE
Revenue reached DKK 3,499 million in 2021 compared to DKK
3,329 million in 2020. In general, Europe sees robust underlying
demand offsetting a continuous negative average price
development and continued generic erosion on the mature
product portfolio. The strategic brands increased by 14% in local
currencies and reached DKK 2,198 million or 63% of sales. The
largest markets in Europe are Spain, Italy, France, Switzerland
and Greece.
E
urope constituted 22% of total revenue (excluding effects from
hedging and Other revenue), which is a small increase from last
year.
A
bilify Maintena
®
is Lundbeck’s largest product in the region.
Sales uptake of Abilify Maintena
®
is robust with revenue
reaching DKK 1,175 million. Abilify Maintena
®
is the second
most prescribed long-acting injectable treatment for patients
with schizophrenia in many markets. Spain, Italy and France are
the largest European markets for Abilify Maintena
®
.
B
rintellix
®
/Trintellix
®
revenue grew 19% in local currencies
reaching DKK 998 million. Brintellix
®
is Lundbeck’s second
largest product in Europe and realized solid growth across many
markets. The solid growth in Europe has in some markets been
dampened by a negative impact from the COVID-19 pandemic.
Rexulti
®
/Rxulti
®
revenue reached DKK 25 million following a
growth of 39% in local currencies. The product was recently
launched in Italy, where it has a volume share of 0.6% by
October 2021*, and the Czech Republic, thereby adding to
growth. Rexulti
®
/Rxulti
®
is co-promoted with Otsuka in most
markets.
REVENUE
– EUROPE
DKKm
2021
2020 Growth
Growth
in local
currencies
Abilify Maintena
®
1,175
1,081
9%
9%
Brintellix
®
/Trintellix
®
998
837
19%
20%
Rexulti
®
/Rxulti
®
25
18
39%
39%
Strategic brands
2,298
1,936
14%
14%
Cipralex
®
530
523
(1%)
(2%)
Other pharmaceuticals
771
870
(11%)
(11%)
Total revenue
3,499
3,329
5%
5%
FINANCIAL
P
ERFORMANCE
2021 PRODUCT PORTFOLIO
Our strategic brands are Abilify Maintena
®
(schizophrenia), Brintellix
®
/Trintellix
®
(depression),
Rexulti
®
/Rxulti
®
(depression/schizophrenia) and
Vyepti
®
(migraine prevention).
Our product portfolio also includes Azilect
®
(Parkinson’s disease), Cipralex
®
/Lexapro
®
(depression), Ebixa
®
(Alzheimer’s disease),
Northera
®
(symptomatic neurogenic orthostatic
hypotension), Onfi
®
(Lennox-Gastaut syndrome),
Sabril
®
(epilepsy) and Xenazine
®
(chorea
associated with Huntington’s disease) as well as
other mature products.
Read more on pages 30-31.
*
IQVIA
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
18 / 111
NORTH AMERICA
Revenue reached DKK 8,245 million in 2021 compared to DKK
9,790 million in 2020. Sales were impacted by generic erosion
of mature neurology products, especially Northera
®
as well as
depreciation of currencies. Excluding Northera
®
, sales increased
by 4.7% reported. The COVID-19 pandemic continues to impact
business in the region and especially Trintellix
®
since that
product relies heavily on switches and new-to-brand
prescriptions which are significantly less likely in telehealth
visits. The strategic brands increased by 18% in local currencies
and reached DKK 6,022 million or 73% of sales. North America
constituted 52% of total revenue (excluding effects from hedging
and Other revenue), which is a small decrease from last year.
A
bilify Maintena
®
revenue reached DKK 1,019 million,
representing Lundbeck’s share of total net sales. In the U.S.,
Abilify Maintena
®
has a stable volume market share of around
21% and in Canada it reached 32.7% by October 2021
representing a slight increase from January 2021*.
T
rintellix
®
sales reached DKK 1,789 million in revenue for
Lundbeck representing a growth in local currencies of 9%. The
volume market share in the U.S. is unchanged at 0.9% by
October 2021. In Canada, the volume share has increased from
1.4% of the total anti-depressant market in January to 1.7% in
October 2021. The value market share of the total anti-
depressant market in the U.S. has increased from 24.2% to
26.7%. In Canada, the value market share of the total anti-
depressant market has increased from 7.7% in January 2021 to
10.1% in October*.
L
undbeck’s share of Rexulti
®
revenue reached DKK 2,725
million with a growth of 12% in local currencies. In the U.S.,
Rexulti
®
has a volume market share of 2.2% by October 2021
which is unchanged from January 2021*. However, the value
share has increased from 14.6% to 15.5%. In Canada, the
product has reached volume share of 3.1% representing a slight
increase. Patient data suggest that more than 3/4 of
prescriptions in the U.S. are prescribed for MDD.
Vyepti
®
was approved by the FDA on 21 February 2020 and in
Canada in January 2021 for the preventive treatment of
migraine in adults. The product was made available in the U.S.
on 6 April 2020 and reached sales of DKK 489 million in 2021 in
line with expectations. Vyepti
®
can be obtained via selected
specialty distributors and specialty pharmacies. Around 110
million insured U.S. individuals have access to Vyepti
®
without
any branded step-edits. In total, more than 235 million
individuals have access to Vyepti
®
. We expect to launch in
Canada in 2022. It is still early in the launch, and the uptake has
been affected by the general decline in physician-administered
medicines during the pandemic. Nonetheless, we see
increasing numbers of patients being treated with Vyepti
®
, and
we are encouraged by the positive feedback from clinicians and
patients, who have used the product, on the positive effects and
the ease of use. Based on the current momentum and the
positive feedback, we expect continued strong growth for the
product.
N
orthera
®
sales reached DKK 665 million for the year following
the launch of several generic versions in February 2021. Sabril
®
revenue reached DKK 657 million. Onfi
®
revenue reached DKK
505 million.
REVENUE
– NORTH AMERICA
DKKm
2021 2020 Growth
Growth
in local
currencies
Abilify Maintena
®
1,019
980
4%
7%
Trintellix
®
1,789
1,682
6%
9%
Rexulti
®
2,725
2,537
7%
12%
Vyepti
®
489
93
426%
443%
Strategic brands
6,022
5,292**
14%
18%
Northera
®
665
2,553
(74%)
(72%)
Onfi
®
505
642
(21%)
(17%)
Sabril
®
657
777
(15%)
(11%)
Other pharmaceuticals
396
526
(25%)
(24%)
Total revenue
8,245
9,790
(16%)
(12%)
*
IQVIA
**
In 2020
, Northera
®
was included in strategic brands and revenue from strategic
brands was therefore DKK 7,845 million.
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
19 / 111
INTERNATIONAL MARKETS
Revenue from International Markets, which comprises all
Lundbeck’s markets outside of Europe and North America,
reached DKK 4,155 million in 2021. The growth of 6% in local
currencies was driven by Rexulti
®
/Rxulti
®
and
Brintellix
®
/Trintellix
®
. The biggest markets are China, Japan,
South Korea, Australia and Brazil. China and Japan constitute
approximately 40% of the regional revenue. The strategic
brands increased by 27% in local currencies and reached DKK
1,067 million or 26% of sales. In local currencies, all products
grew compared to last year. Other pharmaceuticals declined by
5%.
I
nternational Markets constituted 26% of total revenue
(excluding effects from hedging and Other revenue), which is a
small decrease from last year.
A
bilify Maintena
®
reached DKK 226 million in revenue
representing a growth of 8% (4% in local currencies). Sales
mainly derived from Australia where Abilify Maintena
®
shows
robust sales performance.
B
rintellix
®
/Trintellix
®
reached DKK 739 million in revenue or an
increase of 32% in local currencies. Brintellix
®
/Trintellix
®
realized solid growth across several markets including China
and Japan. China, Brazil, Japan, South Korea and Mexico are
the largest markets for Brintellix
®
/Trintellix
®
in the region. In
China, Brintellix
®
has a value share of 1.4% by October 2021*.
In Japan, Trintellix
®
is showing very strong momentum and has
reached a volume market share of 5.5% by December 2021*.
R
exulti
®
/Rxulti
®
reached DKK 99 million in sales and grew by
55% in local currencies. In International Markets, the product
has its highest sales in Australia followed by Brazil.
Vy
epti
®
received approval in the U.A.E. in December 2020 and
in Kuwait in May 2021. In June 2021, The Australian
Therapeutic Goods Administration (TGA) approved Vyepti
®
for
the preventive treatment of migraine in adults with a very strong
label. Vyepti
®
was introduced in the U.A.E. towards the end of
September 2021.
C
ipralex
®
/Lexapro
®
generated revenue of DKK 1,699 million
representing a growth of 4% in local currencies. Japan, China,
South Korea, Brazil and Hong Kong are the largest markets for
Cipralex
®
/Lexapro
®
in the region.
O
ther pharmaceuticals generated revenue of DKK 1,389
million. Azilect
®
is promoted by Lundbeck in some countries in
Asia. Azilect
®
generated revenue of DKK 135 million following a
growth of 13%. Ebixa
®
generated revenue of DKK 397 million,
which is 20% lower compared to 2020 following the inclusion of
Ebixa
®
into Volume-Based Procurement (VBP) in China in the
fourth quarter of 2020.
REVENUE – INTERNATIONAL MARKETS
DKKm
2021 2020 Growth
Growth
in local
currencies
Abilify Maintena
®
226
210
8%
4%
Brintellix
®
/Trintellix
®
739
583
27%
32%
Rexulti
®
/Rxulti
®
99
65
52%
55%
Strategic brands
1,067
858
24%
27%
Cipralex
®
/Lexapro
®
1,699
1,730
(2%)
4%
Other pharmaceuticals
1,389
1,469
(5%)
(4%)
Total revenue
4,155
4,057
2%
6%
*
IQVIA
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
20 / 111
EXPENSES AND PROFITS
In 2021, total costs declined by 9% to DKK 14,289 million
compared to DKK 15,623 million last year. Adjusted for non-
core costs, total costs declined by 3% to DKK 12,782 million
mainly as a result of pandemic-related cost avoidance.
C
ost of sales declined by 12% to DKK 3,648 million in 2021 and
the gross margin was 77.6% compared to 76.4% in 2020. Cost
of sales was negatively impacted by the inclusion of Vyepti
®
amortizations, but reduced royalty costs mitigated some of the
effect. Sales and distribution costs were DKK 5,885 million, a
decline of 1% compared to 2020 mainly because of COVID-19-
related cost avoidance. Sales and distribution costs
corresponded to 36.1% of revenue, compared to 33.6% last
year. Administrative expenses declined 3% to DKK 933 million,
corresponding to 5.7% of total revenue. Selling, general &
administrative expenses (SG&A) for 2021 reached DKK 6,818
million compared to DKK 6,912 million in 2020. The SG&A ratio
for the period was 41.8%, compared to 39.1% last year.
R&D c
osts were 3,823 million for 2021 with a R&D ratio of
23.5%. Compared to 2020, the R&D costs declined 16%, while
adjusted for the impairment of foliglurax of DKK 792 million in
2020, the R&D costs increased by 2%.
T
otal operational costs (OPEX) reached DKK 10,641 million
compared to DKK 11,457 million in 2020. Adjusted for the
impairment of foliglurax product rights last year, OPEX
consequently did not change.
I
n 2021, Core EBIT* declined by 21% to DKK 3,517 million and
the Core EBIT margin was 21.6%. Reported EBIT reached DKK
2,010 million compared to DKK 1,990 million in 2020 which was
impacted by the impairment of the foliglurax product rights in
2020. The reported EBIT margin increased from 11.3% to
12.3%.
TAX
The effective tax rate for 2021 was 16.6% compared to 17.0% in
2020**. The tax rate is positively impacted by increased R&D
deductions in Denmark, foreign-derived intangible income (FDII)
benefits and recognition of tax credits in the U.S.
PR
OFIT AND EPS
Profit for 2021 reached DKK 1,318 million compared to DKK
1,581 million in 2020. The reported net profit corresponded to
an EPS of DKK 6.63 versus an EPS of DKK 7.96 last year. Core
EPS was DKK 12.57 for 2021, compared to a Core EPS of DKK
18.92 in 2020.
CAS
H FLOWS
Cash flows from operating activities amounted to DKK 2,272
million in 2021 compared to DKK 3,837 million in 2020. The
development compared to last year primarily relates to reduced
EBITDA due to Northera
®
loss of exclusivity, the Lonza liability
settlement, negative impact from working capital due to
inventory build-up and a higher cash tax payment related to
intercompany transfer of product rights in 2020.
Lundbeck’s net cash flows from investing activities were an
outflow of DKK 610 million in 2021 compared to an outflow of
DKK 467 million in 2020.
I
n 2021, the net cash outflow reached DKK 1,674 million
compared to an inflow of DKK 976 million in 2020. The net cash
flow is impacted by repayment of bank loans net of DKK 2,279
million.
N
et debt has decreased from DKK 4,106 million at year-end
2020 to DKK 3,189 million at the end of 2021. Interest bearing
debt was DKK 5,468 million at the end of 2021.
*
For definition of the measure “Core EBIT” and “Core EBIT margin”, see page
110
Core reconciliation
**
Please find Lundbeck’s tax policy on
https://www.lundbeck.com/content/dam/lundbeck
-com/masters/global-
site/pdf/Lundbeck_Tax_Policy_2022.pdf
LUNDBECK
ANNUAL REPORT 2021
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DIVIDEND
The Board of Directors proposes a dividend of 30% of net profit
for 2021 in line with our pay-out policy of 30-60%. This
corresponds to DKK 2.00 per share. The dividend pay-out is
subject to approval at the Annual General Meeting on 23 March
2022.
GUI
DANCE 2022
Lundbeck’s financial results for 2022 are expected to be driven
by the continued strong growth of Abilify Maintena
®
,
Brintellix
®
/Trintellix
®
, Rexulti
®
/Rxulti
®
and Vyepti
®
.
L
undbeck’s total revenue is expected to reach between DKK
16.7 billion and 17.3 billion in 2022. Core EBIT is expected to
reach between DKK 3.6 billion and 4.0 billion and EBIT is
expected to be in the range between DKK 2.2 billion and 2.6
billion.
Lu
ndbeck has foreign currency risks mainly in USD, CNY and
CAD. The financial guidance for 2022 is based on the current
hedging rates for those currencies; i.e. USD/DKK (6.34),
CNY/DKK (0.96) and CAD/DKK (5.01) and includes an
expected hedging loss of approximately DKK 200 million.
Based on our assumptions for product and geographical mix, it
is estimated that a 5% change of the USD/DKK exchange rate
will impact revenue by around DKK 250 million.
T
he financial guidance for 2022 is summarized below:
FINANCIAL GUIDANCE 2022
DKK
FY 2021 actual FY 2022 guidance
Revenue
16,299 m
16.7 – 17.3 bn
EBITDA
3,720 m
4.0 – 4.4 bn
Profit from operation (EBIT)
2,010 m
2.2 – 2.6 bn
Core EBIT
3,517 m
3.6 – 4.0 bn
DISCLIAMER
Forward-looking statements are subject to risks,
uncertainties and inaccurate assumptions. This may
cause actual results to differ materially from
expectations. Various factors may affect future
results, incl. interest rates and exchange rate
fluctuations, delay or failure of development
projects, production problems, unexpected contract
breaches or terminations, governance-mandated or
market-driven price decreases for products,
introduction of competing products, Lundbeck’s
ability to successfully market both new and existing
products, exposure to product liability and other
lawsuits, changes in reimbursement rules and
governmental laws, and unexpected growth in
expenses.
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
22 / 111
EXECUTING THE R&D STRATEGY
In 2021, Lundbeck advanced the R&D strategy established in
2020, sharpening our focus on leading-edge science, de-risking
and optimizing clinical development and supporting the
commercialization of truly global products.
C
entral to the approach of rebuilding the pipeline is the
utilization of an experimental medicine approach that allows us
to de-risk the pipeline and advance only the most promising
drug candidates into full development. We executed this
throughout the year and were able to initiate two important
studies: A phase II proof-of-concept study program of Lu
AF82422 for treatment of Multiple System Atrophy and a phase
II proof-of-concept study of Lu AG09222 for migraine
prevention.
W
e also advanced our ambition to become a truly global
developmental organization, registering and launching Vyepti
®
in a number of markets.
A
lso in 2021, we established several important partnerships that
strengthen our developmental capabilities through external
innovation. In October 2021, we entered into an agreement with
the South Korean biopharmaceutical company AprilBio and
gained exclusive worldwide rights to APB-A1 (now Lu
AG22515), a phase-I-ready biotherapeutic for the treatment of
neuroimmune diseases. Lu AG22515 is a novel and well-
differentiated anti-CD40 ligand (CD40L) antibody-like drug
candidate. Modulating the CD40L/CD40 interaction holds great
promise for treatment of a wide range of immune-related
nervous system disorders. The agreement bolsters our
neuroinflammation/neuroimmunology discovery platform,
strengthening the biology cluster focus of our future therapies.
I
n August 2021, we entered a strategic research collaboration
with the U.S.-based company Rgenta Therapeutics to discover
small molecules targeting RNA regulation and splicing of
disease-causing genes. Lundbeck gained access to technology
that targets RNA pathways, and with this exciting platform we
aim to pursue novel targets previously inaccessible.
DEVELOPMENTAL PIPELINE
We believe that what fuels innovative drug discovery is a focus
on the most promising science – to be in touch with and at the
leading edge of where the neuroscience field is headed in our
understanding of the brain and the pathophysiology that
underpins brain health.
T
hrough pursuit of novel targets within the four biological
clusters upon which we are focused, we are advancing truly
innovative solutions to areas of significant unmet need in brain
diseases.
HO
RMONAL / NEUROPEPTIDE SIGNALING
Eptinezumab – development and regulatory status
Eptinezumab is a monoclonal antibody (mAb) that binds to the
calcitonin gene-related peptide (CGRP), a neuropeptide
believed to play a key role in mediating and initiating migraine,
with high specificity and potency. Eptinezumab is administered
as a quarterly 30-minute intravenous (IV) infusion, providing
immediate and complete bioavailability.
I
n February 2020, Vyepti
®
(eptinezumab) was approved by the
FDA as the first FDA-approved IV treatment for the treatment of
migraine in adults. The recommended dose is 100 mg every 3
months; some patients may benefit from a dose of 300 mg.
Eptinezumab was subsequently approved in the U.A.E. in
December 2020, Canada in January 2021, Kuwait in May 2021,
Australia in June 2021, Singapore in September 2021 and
Switzerland in October 2021.
OUR SCIENCE AND
INNOVATION
Over the past year, we consistently
demonstrated leadership in the CNS
space through our unique approach to
science and innovation. It’s an
approach rooted in our commitment to
persist in a challenging space, shaped
by our agile mindset and defined by our
bold vision of better lives for people
with brain diseases.
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
23 / 111
In December 2020, the filling of eptinezumab was accepted by
the European Medicines Agency (EMA) for marketing
authorization application (MAA) review. In addition,
eptinezumab currently is under regulatory review in Argentina,
Brazil, Chile, Columbia, Indonesia, Israel, Hong Kong,
Philippines, Saudi Arabia, South Africa, Taiwan, Thailand and
the UK.
I
n November 2021, we announced positive results from
the phase IIIb DELIVER study assessing the efficacy and safety
of Vyepti
®
(eptinezumab) 100mg and 300mg IV infusion in
patients with chronic or episodic migraine who had experienced
two to four previous preventive treatment failures due to lack of
efficacy or intolerable side effects.
During the first half of 2021, Lundbeck initiated the SUNLIGHT
and SUNRISE phase III clinical trials. These trials will support
registration for migraine prevention in Asia, including China and
Japan, and are progressing as planned and are expected to
complete in 2022 and 2023.
I
n December 2020, Lundbeck initiated the ALLEVIATE phase III
clinical trial investigating the efficacy of eptinezumab in patients
with episodic cluster headache. The trial is progressing as
planned and is expected to complete in 2023. The primary
outcome in the trial is change from baseline in number of weekly
attacks, averaged over weeks 1-2.
L
u AG09222 (former ALD 1910)
Following supportive phase I target engagement data, a phase
II proof-of-concept study in migraine prevention commenced in
November 2021. Lu AG09222 is a monoclonal antibody (mAb)
designed to bind pituitary adenylate cyclase-activating
polypeptide (PACAP), thereby effectively preventing PACAP
from activating its receptors. PACAP has emerged as an
important signaling molecule in the pathophysiology of migraine
and represents an attractive novel target for treating migraine.
Lu AG09222 may hold potential as a migraine prevention
treatment and could provide another mechanism-specific
therapeutic option for migraine patients and their physicians.
CI
RCUITRY / NEURONAL BIOLOGY
Brexpiprazole – phase III in Alzheimer’s agitation
In April 2021, Lundbeck and Otsuka announced the decision to
continue the recruitment of patients in a third phase III clinical
trial of brexpiprazole in the treatment of agitation in patients with
dementia of the Alzheimer's type (NCT03548584). The decision
to continue the trial is based on the results of an independent
interim analysis, which support progressing the trial to the
planned full enrollment of 330 patients. The study is designed to
assess the safety, tolerability and efficacy of brexpiprazole in
the treatment of patients with agitation in Alzheimer’s dementia.
The trial consists of a continuous 12-week double-blind
treatment period with a 30-day follow-up. The trial population is
planned to include 330 male and female patients, aged 55–90
years, with a diagnosis of probable Alzheimer’s disease.
T
he continuation of the study enables Lundbeck and Otsuka to
further explore the efficacy of brexpiprazole to address the high
medical need in patients suffering from agitation in Alzheimer’s
type dementia. Completion of the trial is expected in the first half
of 2022.
T
he primary outcome in the study is change in the Cohen-
Mansfield Agitation Inventory (CMAI) Total score. The key
secondary outcome measure is change in the Clinical Global
Impression – Severity of Illness (CGI-S) score, as related to
symptoms of agitation.
LUNDBECK
ANNUAL REPORT 2021
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Brexpiprazole – phase III in Post-Traumatic Stress Disorder
(PTSD)
PTSD is a psychiatric disorder that can develop as a response
to traumatic events, such as interpersonal violence, combat, life-
threatening accidents or natural disasters.
Cor
e features of PTSD include a variety of symptoms, such as
re-experiencing phenomena (i.e. flashbacks and nightmares),
avoidance behavior, numbing (i.e. amnesia, anhedonia,
withdrawal, negativism) and increased arousal (i.e. insomnia,
irritability, poor concentration, hypervigilance). Psychiatric co-
morbidities are common, and PTSD sufferers can also present
with substance abuse, mood and other anxiety disorders,
impulsive and dangerous behavior and self-harm.
Lundbeck and Otsuka reported positive phase II data for the
combination treatment of brexpiprazole and sertraline for the
treatment of PTSD in November 2018. On basis of these data,
Lundbeck and Otsuka initiated two pivotal phase III trials
(NCT04124614; n=577 and NCT04174170; n=733),
investigating the use of brexpiprazole in combination with
sertraline in the treatment of PTSD subsequent to an End of
Phase II meeting with the FDA in May 2019. The execution of
those two ongoing studies is challenged by the COVID-19
pandemic, primarily impacting enrollment activities and
Lundbeck and Otsuka are exploring options on how best to
address these COVID-19 challenges.
B
rexpiprazole – sNDA for treatment of schizophrenia in
adolescents
In December 2021, the FDA approved Lundbeck’s and Otsuka’s
sNDA for the treatment of schizophrenia in adolescents with
Rexulti
®
(brexpiprazole). More specifically, Rexulti
®
/Rxulti
®
is
now approved for the treatment of schizophrenia in pediatric
patients 13 to 17 years of age.
C
urrently, Rexulti
®
is approved in the U.S. for treatment of
schizophrenia in adults and adjunctive treatment of major
depressive disorder in adults. The submission was completed
one year earlier than planned, with the hope of benefitting
adolescent patients with schizophrenia who need more
treatment options. The acceleration of the program was made
possible by doing an extrapolation analysis using data from prior
studies in adult patients, pharmacokinetic results from adult and
pediatric trials, and 6-month data from the ongoing open-label,
long-term trial in adolescent schizophrenia patients (Trial 331-
10-236).
A
ripiprazole – 2-Month Injectable (LAI) formulation
Dosing every second month can add important benefits in terms
of convenience for patients and may increase treatment
adherence as well as minimizing the risk of missing doses. It
may also reduce the potential need for medication monitoring by
healthcare professionals, family and caregivers.
I
n July 2019, Lundbeck and Otsuka initiated a pivotal phase 1b
study (NCT04030143) to determine the safety, tolerability and
pharmacokinetics of multiple-dose administrations of
aripiprazole to adult participants with schizophrenia or bipolar I
disorder. The study was an open-label, multiple-dose,
randomized, parallel-arm, multicenter study. In addition to the
assessment of safety and tolerability, the objective was to
establish the similarity of aripiprazole concentrations on the last
day of the dosing interval and the exposure in the last dosing
interval following the final administration of aripiprazole into the
gluteal muscle site. The study showed that the new 2-Month
formulation was safe and tolerable, and provided effective
plasma concentrations of aripiprazole for two months.
N
o further clinical studies are expected to be required and as a
next step the regulatory agencies in the U.S. and the EU will be
approached. Scale-up of manufacturing capacity is progressing
at Otsuka with regulatory submission gated on completing build
and validation of new manufacturing capacity at Otsuka.
Lu
ndbeck and Otsuka are planning to submit the aripiprazole 2-
Month injectable formulation to the EMA for MAA review by mid-
2022. In addition, Lundbeck and Otsuka will submit the New
Drug Application (NDA) for review by the FDA in mid-2022.
DECENTRALIZED CLINICAL TRIALS
In 2021, we maintained our COVID crisis-
management plans across our portfolio of ongoing
clinical trials. The goal was to provide continuity of
clinical trial supplies to patients and ensure patient
visits and study assessments were conducted as
planned.
Patient visits continued at clinics where possible
and remote visits were implemented in cases where
travel restrictions were in place.
In 2021, we also embarked on our first pre-planned
Hybrid Decentralized trial, where patients have the
choice of either visiting their trial site or selecting to
have remote visits in their own home setting.
The first study is the Lu AG09222 phase II
proof-of-concept study in migraine
prevention and we had first patient visits in
November 2021.
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
25 / 111
Lu AG06466 – phase Ib
Lu AG06466 (former ABX1431) is an inhibitor of the
monoacylglycerol lipase (MAGL) and selective modulator of the
endocannabinoid system. It works to reduce excessive
neurotransmission and neuroinflammation that are known
pathophysiological hallmarks for a range of psychiatric and
neurological disorders.
A
phase Ib study was initiated in September 2020 with the
purpose to investigate the effect of Lu AG06466 after multiple
doses in patients with PTSD (NCT04597450).
A
dditional phase Ib investigational studies were initiated in
fibromyalgia patients in June 2021 (NCT04974359), in multiple
sclerosis spasticity in September 2021 (NCT04990219), and in
focal epilepsy in September 2021 (NCT05081518).
T
rials across these indications will assess a variety of common
and innovative biomarkers to develop tools to help guide further
late-stage development and will guide decision making for future
development.
Lu A
F28996 – phase I
Lu AF28996 is a small molecule with agonistic properties
towards D1 and D2 receptors. Continuous D1 and D2 dopamine
receptor stimulation may play an important role in motor control
of Parkinson’s disease patients.
A Phase 1b study was initiated in February 2020 on Lu
AF28996 with the purpose to investigate the safety and
tolerability as well as pharmacokinetics of Lu AF28996 in
patients with Parkinson's disease (NCT04291859).
NE
UROINFLAMMATION / NEUROIMMUNOLOGY
With the October 2021 agreement with AprilBio, Lundbeck took
a significant leap forward in our neuroinflammation /
neuroimmunology discovery platform. Through the agreement,
we gained exclusive worldwide rights to APB-A1 (now Lu
AG22515), a phase-I-ready biotherapeutic for the treatment of
neuroimmune diseases.
L
u AG22515 is a novel and well-differentiated anti-CD40 ligand
(CD40L) antibody-like drug candidate. Modulating the
CD40L/CD40 interaction holds great promise for treatment of a
wide range of autoimmune-related CNS disorders.
PRO
TEIN AGGREGATION, FOLDING AND CLEARANCE
Lu AF82422 – phase II
Lu AF82422 is a monoclonal antibody (mAb) targeting the
pathological form of the protein alpha-synuclein that is believed
to play a pivotal role in the development and progression of
MSA, Parkinson’s disease and other neurodegenerative
disorders.
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By targeting pathological alpha-synuclein with an antibody that
will inhibit aggregation and potentially clear pathological alpha-
synuclein from the brain, the project aims to demonstrate delay
of disease progression with a therapeutic effect on disease
burden and function. A phase II proof-of-concept study program
on Lu AF82422 commenced in November 2021 to investigate
the safety and efficacy of Lu AF82422 in MSA. Orphan drug
designation for MSA was granted by EMA in April 2021.
Lu A
F87908 – phase I
Lu AF87908 is a monoclonal antibody (mAb) targeting the
pathological form of the hyper-phosphorylated tau protein, which
is believed to play a pivotal role in the development and
progression of Alzheimer’s disease and other tau-driven
neurodegenerative disorders (primary tauopathies). Lu AF87908
binds to a specific tau epitope (pS396-tau) which is a
dominating phosphorylation site in pathological tau.
A
Phase I program on Lu AF87908 commenced in September
2019 to investigate the safety and tolerability as well as
pharmacokinetics of a single dose of Lu AF87908, in healthy
subjects and patients with Alzheimer's disease (NCT04149860).
OT
HER PROJECTS
In July 2021, Lundbeck announced the licensing of global rights
for idalopirdine to Denovo Biopharma, including all rights to
develop, manufacture and commercialize idalopirdine for all
indications. Denovo Biopharma aims to explore idalopirdine
using its biomarker platform, applying a precision medicine
approach to develop innovative therapies. Lundbeck holds the
right to re-acquire idalopirdine, while the rights in China would
be shared with Denovo Biopharma. Idalopirdine was previously
developed by Lundbeck, in collaboration with Otsuka, for
cognitive symptoms in Alzheimer’s disease. The idalopirdine-
project did not reach a successful outcome in a phase III trial in
2017.
DIGITAL HEALTH TOOLS IN
CLINICAL TRIALS
In 2021, three different digital health tools were
implemented in four phase Ib studies of Lu
AG06466 and Lu AG06479. The digital health tools
include a sleep and seizure monitoring
actigraphy wristband, a sleep monitoring EEG
headband, and digital insoles that are placed in the
patient’s shoes for gait assessment.
The inclusion of these tools represents Lundbeck’s
aim to explore the benefits of digitally obtained
endpoints. The tools also allow Lundbeck to
combine sensor data and novel algorithms,
providing objective insights into previously
undiscovered domains.
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COMMITMENT TO DIVERSITY IN CLINICAL TRIALS
Lundbeck understands that brain diseases wreak havoc
without bias. Whether it be genetics, age, race, sex,
ethnicity, socioeconomics or access to healthcare,
understanding and fully evaluating the multitude of factors
that influence a person’s health are key to both the
development of good medicine and equitable advances in
brain health. As part of our ongoing commitment to sustain a
diverse clinical trial infrastructure, the Lundbeck Diversity
Steering Team established the below Clinical Trial Diversity
Principles and committed to tracking and monitoring
progress against them.
Develop & Execute a Clear Strategy to Achieve Diversity
in Our Trials Globally
We aim for each trial to be designed with intention to ensure
participants mirror the full diversity of the patient population
in the country or region AND the disease we are studying.
This will require a concentrated effort to involve
underrepresented populations in our marketed regions
through focused patient-inclusion criteria; attention to the
diversity of clinical trial sites and investigators; removal of
barriers that could impede the participation of certain groups
in clinical trials; and use of real-world data to inform
development efforts and improve understanding of diseases
and products.
Collaborate with Patient Advocacy Groups Choosing to
Make Diversity a Priority
Lundbeck has a longstanding focus on community outreach,
and we are committed to expanding partnerships with
organizations that possess a like-minded focus on diversity.
In collaboration with external partners, we strive to establish
trust with diverse patient and caregiver populations, gain
deeper insight into unmet patient needs and build
awareness about open clinical trials to further enhance the
diversity of our clinical trials.
Implement Integrated Oversight Approach to Inform,
Analyze and Act
We aim to continuously inform and reform our internal
thinking and processes by actively monitoring clinical trial
diversity targets and utilizing real-world data to ensure we
are driving inclusion of underrepresented populations in our
clinical trials.
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MARKETS AND
PRODUCTS
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SUMMARY FOR
THE GROUP
2017-2021
Statement of profit or loss (DKKm)
2021
2020
2019¹
2018¹
2017¹
Revenue
16,299
17,672
17,036
18,117
17,234
Research and development costs
3,823
4,545
3,116
3,277
2,705
Reversal of impairment loss
-
-
-
-
3,766
Operating profit before depreciation and amortization (EBITDA)
3,720
4,783
4,823
6,436
9,190
Profit from operations (EBIT)
2,010
1,990
3,153
4,846
8,174
Net financials, expenses
429
84
127
12
131
Profit before tax
1,581
1,906
3,026
4,834
8,043
Profit for the year
1,318
1,581
2,313
3,553
5,560
Assets (DKKm)
2021
2020
2019¹
2018¹
2017¹
Non-current assets
26,041
25,924
29,095
13,944
13,893
Inventories
2,775
2,163
2,204
1,753
1,376
Receivables
3,558
4,018
3,822
3,261
3,791
Cash, bank balances and securities
2
2,279
3,924
3,012
6,635
3,677
Total assets
34,653
36,029
38,133
25,593
22,737
Equity and liabilities (DKKm)
2021
2020
2019¹
2018¹
2017¹
Equity
18,279
16,973
16,782
16,833
15,117
Non-current liabilities
7,556
9,044
11,071
1,184
1,141
Current liabilities
8,818
10,012
10,280
7,576
6,479
Total equity and liabilities
34,653
36,029
38,133
25,593
22,737
Statement of cash flows (DKKm)
2021
2020
2019
2018
2017
Cash flows from operating activities
2,272
3,837
2,609
5,981
4,045
Cash flows from investing activities
(610)
(467)
(7,755)
(2,907)
(1,830)
Cash flows from operating and investing activities (free cash flow)
1,662
3,370
(5,146)
3,074
2,215
Cash flows from financing activities
(3,336)
(2,394)
4,548
(1,607)
(2,235)
Interest
-bearing debt, cash, bank balances and securities, net, year-end
– net cash/(net debt)
2
(3,189)
(4,106)
(6,566)
6,635
3,677
1) 2017-2019 have been restated to reflect the reversal of an impairment loss on the Rexulti
®
product rights in 2017.
2) In 2020 and 2021, securites amounted to DKK 0.
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Key figures
2021
2020
2019¹
2018¹
2017¹
EBIT margin (%)
12.3
11.3
18.5
26.7
47.4
Research and development ratio (%)
23.5
25.7
18.3
18.1
15.7
Return on equity (%)
7.5
9.4
13.8
22.2
44.8
Equity ratio (%)
52.7
47.1
44.0
65.8
66.5
Invested capital (DKKm)
21,468
21,079
23,348
10,198
11,440
Net debt/EBITDA
0.9
0.9
1.4
(1.0)
(0.7)
Effective tax rate (%)
16.6
17.0
23.6
26.5
30.9
Purchase of intangible assets, gross (DKKm)
202
114
88
1,149
480
Purchase of property, plant and equipment, gross (DKKm)
410
364
356
300
245
Purchase of financial assets, gross (DKKm)
-
17
18
1,524
1,509
Average number of employees
5,488
5,717
5,475
5,060
4,980
Share data
2021
2020
2019¹
2018¹
2017¹
Number of shares for the calculation of EPS (millions)
198.7
198.7
198.7
198.7
197.5
Earnings per share, basic (EPS) (DKK)
6.63
7.96
11.64
17.88
28.14
Earnings per share, diluted (DEPS) (DKK)
6.63
7.96
11.64
17.87
28.10
Proposed dividend per share (DKK)
2.00
2.50
4.10
12.00
8.00
Cash flows from operating activities per share, diluted (DKK)
11.44
19.31
13.13
30.09
20.44
Net asset value per share, diluted (DKK)
92.01
85.42
84.45
84.67
76.03
Market capitalization (DKKm)
33,626
41,582
50,660
56,825
62,700
Price/Earnings, diluted (DKK)
25.47
26.25
21.86
15.97
11.21
Price/Cash flow, diluted (DKK)
14.76
10.82
19.38
9.48
15.41
Price/Net asset value, diluted (DKK)
1.84
2.44
3.01
3.37
4.14
1) 2017-2019 have been restated to reflect the reversal of an impairment loss on the Rexulti
®
product rights in 2017.
SUMMARY FOR
THE GROUP
2017-2021
CONTINUED
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SUMMARY FOR
THE GROUP
2017-2021
CONTINUED
Definitions
Interest-bearing debt
Debt and financial instruments (including financial leases) carrying interest
Interest-bearing net cash
Cash, bank balances and securities less interest-bearing debt
EBIT margin
2
Profit from operations as a percentage of revenue
EBITDA
Profit before interest, tax, depreciation, amortization and gain on divestment of properties
Return on equity
2
Net profit/(loss) for the year as a percentage of shareholders’ equity (average)
Equity ratio
2
Shareholders’ equity, year-end, as a percentage of total assets
Invested capital
Shareholders’ equity, year-end, plus net interest-bearing debt
Net debt
Interest bearing debt less cash, bank balances and securities
Net debt/EBITDA
2
Net interest-bearing debt divided by EBITDA
Earnings per share, basic (EPS)
2
Net profit/(loss) for the year divided by average number of shares, excl. treasury shares
Earnings per share, diluted (DEPS)
2
Net profit/(loss) for the year divided by average number of shares, excl. treasury shares,
incl. warrants, fully diluted
Cash flows
from operating activities per share,
diluted
2
Cash flows from
operating activities divided by average number of shares, excl. treasury
shares, incl. warrants, fully diluted
Net asset value per share, diluted
Shareholder’s equity, year
-end, divided by number of shares, year-end, excl. treasury
shares, incl. warrants, fully diluted
Market capitalization
2
Total number of shares, year
-end, multiplied by the official price quoted on Nasdaq
Copenhagen, year-end
Price/Earnings, diluted
2
The official price quoted on Nasdaq Copenhagen, year
-end, divided by earnings per
share, diluted
Price
/Cash flows, diluted
2
The official price quoted on Nasdaq Copenhagen, year
-end, divided by cash flows from
operating activities per share, diluted
Price/Net asset value, diluted
The official price quoted on
Nasdaq Copenhagen, year-end, divided by net asset value
per share, diluted
EBITDA calculation (DKKm)
2021
2020
2019¹
2018¹
2017¹
EBIT
2,010 1,990 3,153 4,846 8,174
+ Depreciation, amortization and impairment losses
1,710
2,793
1,670
1,638
1,258
-
Gain on divestment of properties recognized in other operating
expenses, net
- - - (48)
(242)
EBITDA
3,720
4,783
4,823
6,436
9,190
1) 2017-2019 have been restated to reflect the reversal of an impairment loss on the Rexulti
®
product rights in 2017.
2) Definitions according to the Danish Finance Society's Recommendations & Financial Ratios.
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Corporate Governance
Sustainability and Compliance
Risk Management
Board of Directors
Executive Management
The Lundbeck Share
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Lundbeck has a two-tier board structure consisting of the Board
of Directors and the Executive Management. The two bodies
are separated, and no person serves as a member of both.
T
he Board of Directors has ten members, of which seven are
elected at the Annual General Meeting for a one-year term and
three are elected by Lundbeck’s employees for a four-year term.
The current members of the Board of Directors** bring deep
industry knowledge and solid top management experience to
Lundbeck, which are essential for the Board to perform its tasks.
Lu
ndbeck’s Board of Directors is responsible for approving the
corporate strategy and its implementation, setting goals for
Executive Management, and for ensuring that members of
Executive Management and other senior managers have the
right qualifications. The Board of Directors also evaluates
management performance and remuneration.
F
urthermore, the Board of Directors has the overall
responsibility for ensuring that adequate internal and external
controls are in place, and for identifying and addressing any
relevant risks. These responsibilities are defined in the Danish
Companies Act and stipulated in the rules of procedures for the
Board of Directors.
The Board of Directors regularly evaluates the Lundbeck’s
strategy, business, performance, financial strategies and
policies, and ensures that day-to-day management is carried out
in accordance with such policies.
The Board of Directors analyzes Lundbeck’s need for capital on
an ongoing basis, including an assessment of Lundbeck’s
capital structure.
T
here is no universal answer to the question of what the
optimum capital structure is for a specific company because the
relationship between equity and interest-bearing debt relies on
the specific characteristics that apply within the particular
industry in which the business operates and, by extension, the
operating and financial risk.
However, companies in the pharmaceutical industry are often
particularly well-funded which may be explained by the
extended development projects and risks associated with
research activities.
T
he Board of Directors pursues the policy that equity beyond
the level which, based on a conservative estimate, would be
considered sufficient to support the underlying business should
be distributed to the shareholders. The distribution to our
shareholders takes place through annual dividends and if
appropriate share buyback programs. Our dividend policy is
currently to pay out 30-60 % of the net profits as dividend to the
shareholders.
Th
e Board of Directors has established a self-evaluation
procedure covering, among other things, board composition,
contribution and results, Board agenda and discussions,
cooperation between the Board of Directors and Executive
Management, committee work and structure.
T
he 2021 Board evaluation was built on the previous
evaluations performed in 2019 and 2020 where all members of
the Board of Directors and Executive Management participated.
It was conducted as an in-house online survey and the result
showed an increase to an already high level of satisfaction with
the collaboration and interaction between the Board of Directors
and Executive Management. The collaboration was described
as transparent, constructive, effective, and involving.
T
he survey also included an update of the competencies on the
Board. We saw an increase of competencies and knowledge
relevant for the future strategic path of the company, e.g.
scientific knowledge and experience, which is now at a
satisfactory level.
M
ore details regarding the work performed by the Board of
Directors, the evaluation procedure and results hereof can be
found at www.lundbeck.com***. Also, the remuneration of
Lundbeck’s Executive Management and Board of Directors can
be found at www.lundbeck.com****.
CORPORATE
GOVERNANCE
Corporate governance concerns the
way Lundbeck is managed and
controlled, while creating value for both
the company and its
stakeholders. More
information on the mandatory annual
Corporate Governance report is
disclosed on www.lundbeck.com* in
accordance with section 107(b) in the
Danish Financial Statements Act.
*
https://www.lundbeck.com/content/dam/lundbeck
-com/masters/global-
site/pdf/corporate
-governance/2021/corporate_governance_report.pdf
**
Detailed description of the Board members and their competencies and
qualifications can be found on
https://www.lundbeck.com/global/about-us/our-
leadership/board
-of-directors
***
Detailed description of the Board of Directors
’ work, evaluation procedure and
results can be found on
https://www.lundbeck.com/global/about-us/corporate-
governance/board
-tasks
****
Detailed description of the remuner
ation can be found on
https://www.lundbeck.com/global/about-us/corporate-governance/remuneration
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DISCLOSURE REGARDING CHANGE OF CONTROL
The EU Takeover Bids Directive, as partially implemented in the
Danish Financial Statements Act, requires listed companies to
disclose information about significant agreements that may be
affected in case of a completed takeover bid, in particular in
relation to disclosure of change-of-control provisions.
Lu
ndbeck discloses that the Group has a major partnership
agreement in place under which an acquiring entity must divest
any competing product according to an agreed process and, in
the absence of such divesture, Lundbeck’s partner may
terminate the agreement. The Lundbeck Group may be met with
demands for repayment on its debt portfolio should
Lundbeckfond Invest A/S hold less than 50% of the share
capital or voting rights in H. Lundbeck A/S (change of control).
I
n the event Lundbeck is acquired or merges, certain Executive
Management members may, depending on the impact on their
position, be entitled to terminate employment with Lundbeck
with a three (3) months’ notice and receive a compensation of
up to eighteen (18) months’ remuneration.
G
iven the ownership structure of Lundbeck the risks are
considered remote. For information about the ownership
structure of Lundbeck, see page 47-48.
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Lundbeck’s sustainability activities aim to mitigate risks and
adverse impacts related to our business activities and contribute
to solving societal challenges where we can. We remain
committed to the UN Global Compact Principles and contribute
to addressing seven of the Sustainable Development Goals.
O
UR MOST MATERIAL SUSTAINABILITY ISSUES
Sustainability is an imperative to Lundbeck and an integral part
of our strategy and culture. Our most material sustainability
issues are reflected in the SDGs that we significantly impact.
Our biggest contribution to sustainable development, is our
medical treatments and the good health and wellbeing they
bring to people. Closely related to this is being compliant in all
aspects of patient safety and taking a strict stance on anti-
corruption in our collaborations with business partners,
healthcare professionals and regulators. Our other material
issues include taking a leading role in climate action,
environmental management in general, and promoting an
ethical, safe, motivating and inclusive culture in our entire value
chain.
M
ANAGING SUSTAINABILITY
Executive Management governs the sustainability strategy and
reviews progress on targets and approves new initiatives in
quarterly sessions. We continuously set ambitious targets,
report progress on the targets and disclose a set of externally
reviewed non-financial indicators across all areas of corporate
sustainability and business ethics compliance.
SU
STAINABILITY REVIEW OF 2021
Our activities related to the Access to Brain Health strategy
gained momentum in 2021. We successfully completed the first
year of our product donation partnership with International
Health Partners (IHP), shipping medicine for treatment of more
than 900 patients at NGO clinics in Lebanon, Gaza and the
West Bank. In December, we signed a Letter of Intent with IHP
covering the next three year outlining our shared aim to
increase access to brain health to vulnerable people in the
Middle east and Africa region.
One of the 2021 target for business ethics was that all
employees at work globally should complete the Annual Code of
Conduct training. This was achieved with a 99.7% completion
rate.
We announced last year that we will have net zero emissions no
later than 2050 and that we have set a new Science-Based
target to reduce carbon emissions drastically over the next 15
years. We will reduce carbon emissions from production and
company car fleet (scope 1 and 2) by almost two-thirds, and
work with our suppliers to reduce our carbon footprint outside
our premises (scope 3) by nearly a fifth. We can report
significant progress on reducing scope 1 and 2 and have
achieved a 16% reduction against the baseline year 2019. This
is mainly due to fewer emission from company cars, as sales
employees have been less on the road due to the COVID-19
pandemic.
SUSTAINABILITY
AND COMPLIANCE
In this section we present a short
summary of aspirations, management,
due diligence and targets.
We publish an annual Sustainability
Report at the same time as the release
of the Annual
Report. Here you can find
detailed information and an
Environmental, Social and Governance
(ESG) factbook. Our mandatory annual
statutory reporting on sustainability
and diversity of management in
accordance with section 99a, 99b, 99d
and 107d in the Danish Financial
Statements Act, and the EU Sustainable
Finance Taxonomy is in our
Sustainability Report*.
*
https://www.lundbeck.com/content/dam/lundbeck-com/masters/global-
site/pdf/Sustainability_Report_2021.pdf
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With regards to scope 3 emissions, we estimate an increase in
emissions by 28% compared to the baseline year of 2019. We
currently calculate the majority of our scope 3 emissions based
on fixed emission factors and spend data. As we have
increased our clinical trial and other service purchasing as part
of our business strategy, the calculated emissions have also
increased. In 2021, a detailed action plan for scope 3 has been
developed, including plans to progress actual emission data
collection setting reduction targets with main suppliers. With this
plan, we are confident that we will reach our 15-year reduction
target.
I
n 2021, we achieved a recycling rate of solvents used in our
production of 65%. This means we exceeded the target of 60%
for the year. We also exceeded our annual target of 62% for
recycling of general waste, achieving 74%.
Diversity & Inclusion is very important to Lundbeck and the level
of women in management remains high in 2021 with a gender
split for people managers globally of 42% women and 58%
men. From 2022, we set ourselves a tougher target to improve
the share of women in senior management and we will start
reporting on this KPI going forward.
A
ll in all, 8 out of 10 the sustainability targets for 2021 are
achieved or on track. More detailed information about our
sustainability policies, efforts and results is available in our
Sustainability Report*.
I
n 2021, we had a frequency of lost time accident rate of 6.5%,
not reaching our target of 5%. Even though a smaller share of
the accidents is serious, we are determined to bend this curve.
*
https://www.lundbeck.com/content/dam/lundbeck-com/masters/global-
site/pdf/Sustainability_Report_2021.pdf
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We pursue our business purpose guided by our Code of
Conduct that forms a fundamental part of our Sustainability
Strategy. The Code of Conduct conveys Lundbeck’s
commitments and the expectations to its employees for areas
that are critical to the pharmaceutical industry.
I
n 2021, we consolidated the global standards that assist us in
upholding the Code of Conduct into a concise Compliance
Program. It outlines the needed governance and continuous
activities, for instance the annual assessment of risk, training,
and monitoring, as well as management’s review of the
program’s effectiveness. It builds on the trust we have in our
employees and is founded on our core belief “Responsible – we
act with respect and integrity in everything we do”.
ETHICS BROUGHT TO LIFE BY PEOPLE
Our ethics are formed at the top in the Compliance Committee
with Executive Management members and key compliance
functions who review and maintain Lundbeck’s ethical
standards. The translation into operational requirements is
driven by our Global Compliance Organization consisting of
Headquarter compliance functions and the 17 Regional
Compliance Officers who represent our global affiliates.
Collectively, they help prevent misconduct, detect compliance
issues and take prompt corrective and preventive action. They
support Lundbeck’s Senior Management who are held
accountable for ethics and compliance within their organization.
E
very year, we invest in the development of global awareness
campaigns and specific compliance training. We involve people
from the global organization in the development to keep the
initiatives relevant, engaging and ensure people know how to
act.
O
ur audits and monitoring efforts aim to validate the
understanding of the requirements and capture suggestions for
improvements of processes and controls. Specific feedback is
provided to ensure local management ownership and follow-up.
La
stly, our Chief Compliance Officer provides regular briefings
on current developments at meetings within the Board of
Directors and more detailed within the Audit Committee.
STAYING ATTUNED WITH SOCIETAL EXPECTATIONS
The regulatory landscape Lundbeck operates in is constantly
changing. The Compliance Programs help us stay attuned with
societal expectations. As a recent example, we have defined
our Data Ethics Policy in response to an update in the Danish
Financial Statements Act.
Our
Data Ethics Policy states the principles we commit to apply
beyond staying compliant with current data protection
regulations. It is especially relevant in the development or
application of fast-moving, innovative digital technologies. The
Data Ethics Policy will help us make ethical and responsible
decisions on the use of data with maximal benefit and minimal
harm for individuals and society. You can read more and find
our Data Ethics Policy on Lundbeck.com*.
O
PEN DIALOGUE AND ACCESS TO RAISING CONCERNS
We encourage everyone to have ongoing dialogue on
compliance and ethics with their colleagues and manager.
However, we realize that some questions, dilemmas or
concerns might not be discussed openly. Our Compliance
Hotline** is a secure line that is open for everyone to raise
concerns about a potential violation of the Code of Conduct. It is
a cornerstone in our Compliance Program that helps protecting
Lundbeck.
A
ll reports are investigated in line with our global procedure that
safeguards individuals who report concerns, participate in
investigations or are suspected of misconduct. Our
investigations are guided by principles that manifest Lundbeck’s
beliefs, including:
• P
rotection of good-faith reporters against retaliation
• Confidentiality
• Cooperation
• Proportionality
• Communication
*
https://www.lundbeck.com/global/sustainability/responsible
-business-conduct
**
https://www.lundbeck.com/global/compliance-hotline
BUSINESS ETHICS AND
C
ODE OF CONDUCT
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RISK MANAGEMENT GOVERNANCE STRUCTURE
Lundbeck is exposed to risks throughout the value chain, from
the initial stages of developing innovative pharmaceuticals in
our in-house facilities to the proven pharmaceuticals reaching
the patients.
Lu
ndbeck’s risk management processes are continually updated
and adapted to match internal and external requirements, where
risks related to trends, global economic developments,
geopolitics and long-term forecasts are assessed as part of
Lundbeck’s long-term strategic planning. With this
understanding of the wider context and an accurate and
complete overview of Lundbeck’s activities and resources,
Executive Management has a clear basis for decision-making
on our overall risk-exposure and mitigating actions.
T
he overall responsibility of risk management lies with the
Board of Directors. Oversight of compliance within the
established enterprise risk management framework is delegated
to the Audit Committee.
RI
SK MANAGEMENT FRAMEWORK
In Lundbeck, enterprise risk management is considered an
integral part of doing business, which is reflected in the risk
management process.
T
he process starts in the decentralized teams within each
Executive Management areas, which have detailed and
extensive knowledge of the risks within their areas of
responsibility. They systematically identify, quantify, respond to
and monitor risks. They are ideally placed to mitigate our risk
exposure in the first instance.
E
ach area shares the risks with the central Risk Office on a
semi-annual basis. The central Risk Office provides the risk
framework and conducts interviews with management, risk
contributors and risk responsible individuals. This represents an
integral part in the alignment of risks reported to the Risk Office.
In cooperation with each Executive Management area, the Risk
Office assesses the likelihood of an event occurring and the
potential impact on the Group in terms of financial loss. The key
risk overview is presented to Executive Management for their
assessment and approval, before it is reported to the Audit
Committee and approved by the Board of Directors.
T
he corporate risk register kept by the Risk Office provides a
consolidated overview of Lundbeck’s risk exposure by detailing
each risk, risk category and type. The risk descriptions provide
details on the event, its current status, the status of the
response and the likelihood and potential impact. Our reporting
process defines six risk categories:
• Research and Development
• Market, Commercial, and Strateg
y
• S
upply, Quality and Product Safet
y
• I
T securit
y
• Leg
al and Complianc
e
• F
inancial
L
undbeck has developed a concise process covering day-to-day
risk identification, monitoring, mitigation and reporting within
each Executive Management area, all the way to the final
reporting to Executive Management. This process enables
Executive Management to control Lundbeck’s risk appetite
when deciding strategy and practice, and when making day-to-
day decisions.
RISK MANAGEMENT
Lundbeck’s risk management processes
ensure close monitoring, systematic risk
assessment and the ability to identify,
manage and report internal and
external risks in a changing
environment.
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KEY RISKS
RISK AREA
DESCRIPTION
POTENTIAL CONSEQUENCES
MITIGATING ACTIONS
RESEARCH AND
DEVELOPMENT
RISKS
Exposure to delays of regulatory approval
or failure in the development of new and
innovative medicines. Exposure to delays
is higher due to COVID-19.
I
ncreased regulatory requirements for
clinical trials.
Data requirements from production of
non-clinical and clinical studies.
Delays or failure of new products could impact patients who
cannot benefit from these products and decrease earnings
for the company and its shareholders.
D
elay in regulatory approval may impact the patient’s drug
access.
Issues with data integrity can lead to delays in studies and
production – ultimately leading to withdrawals and failure to
gain approval.
Clinical trials are run and evaluated throughout the research and development
phase.
O
ngoing evaluation of the product pipeline, regulatory requirements and product
benefit.
R
obust quality management system is in place to ensure consistent quality, data
integrity and the compliance of clinical trials and clinical safety activities.
MARKET
,
COMMERCIAL
AND
STRATEGY
RISKS
Price pressure, new legislation, regulation
of reimbursement and healthcare reforms
in key markets, etc.
M
arket dynamic change resulting from
COVID-19.
Market restrictions could impact patients’ access to Lundbeck
products.
C
hanges in market conditions and health care reforms could
affect the pricing landscape as well as rebates and discounts.
These changes could impact Lundbeck’s results.
Understanding the price development in main markets.
Wor
king with healthcare authorities around the world to document the value of our
pharmaceuticals.
M
onitor political developments and requirements.
SUPPLY, QUALITY
AND PRODUCT
SAFETY
RISKS
Disruption of production or supply or
unpredictable demand and stock-out.
Los
s of licenses to manufacture or sell
pharmaceuticals.
Defects in product quality or safety.
Product shortage, not giving patients needed access to the
pharmaceuticals they require.
Systems, policies and procedures are in place to ensure product supply, quality and
safety.
D
ual sourcing strategy and high level of safety stock of key products.
R
obust pharmacovigilance system.
IT SECURITY
RISKS
Cyber-attacks and cyber fraud.
S
ystem down-time.
Disruption or compromise of IT security could affect all parts
of Lundbeck’s operations and product supply to patients.
D
ata loss.
IT policies and procedures are in place to safeguard processes and data.
C
yber-attack testing is being performed on a regular basis.
Annual testing of IT disaster recovery plan.
LEGAL AND
COMPLIANCE
RISKS
Intellectual property rights.
No
n-compliance with laws, industry
standards, regulations and our Code of
Conduct.
Exposure to legal claims or
investigations.
Infringement of intellectual property rights could decrease
earnings for shareholders.
Los
s, expiration or invalidation of intellectual property rights
could decrease earnings for shareholders.
No
n-compliance with laws, industry standards, regulations, or
our Code of Conduct could affect our ‘license to operate’ and
impact our reputation and earnings for shareholders.
Policies are in place to safeguard intellectual property rights.
T
he Code of Conduct Compliance Program and global organization are pivotal in
sustaining our compliance culture. Ongoing monitoring is conducted, and annual
training is provided to all employees.
Third parties are committed to observe our legal and ethical standards in mutually
binding agreements and are subject to monitoring.
Global Compliance Hotline and investigation procedure.
FINANCIAL
RISKS
Fluctuations in exchange rates incl.
impact from currency devaluations.
Lundbeck’s cash flow and earnings could be impacted in
cases of fluctuations in key currencies.
Treasury policy.
Monitoring the financial exposure and hedging a significant part of Lundbeck’s
currency risk up to 18 months in advance.
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BOARD OF
DIRECTORS
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
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LUNDBECK
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CONTENTS
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EXECUTIVE
MANAGEMENT
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
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CONTENTS
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TURNOVER
Total trading in Lundbeck shares amounted to DKK 22.9 billion
in 2021, while the average daily turnover was DKK 91.1 million,
a decrease of 17% compared to 2020. A total of 117 million
shares were traded in 2021, equivalent to 464,493 shares per
day, a decrease of 7% compared to 2020.
L
undbeck has an American Depository Receipt (ADR) Level 1
program. The ADR volume decreased slightly during 2021. At
the end of 2021, 208,407 ADRs were outstanding, representing
0.1% of the total shares or 0.3% of the free float.
SHARE
CAPITAL
Lundbeck shares are listed on the Copenhagen Stock
Exchange, Nasdaq Copenhagen. All shares belong to the same
class and rank equally. The shares are negotiable and there are
no restrictions on their transferability. Each share has a nominal
value of DKK 5 and carries one vote. At the end of 2021,
Lundbeck’s total share capital amounted to DKK 996 million,
which is equivalent to 199.2 million shares.
COM
POSITION OF SHAREHOLDERS
According to the Lundbeck share register, the company had
approximately 66,000 shareholders at the end of 2021,
representing approximately 99% of the outstanding shares. The
Lundbeck Foundation (Lundbeckfond Invest A/S) is the
company’s largest shareholder, holding 137,351,918 shares at
the end of 2021, which equals 69% of the share capital and
voting rights.
The Lundbeck Foundation is the only shareholder to report a
holding in excess of 5% of the share capital. At the end of 2021,
investors in North America held 28% of the free float compared
to 32% in 2020; European (excl. Danish) investors held 27%
compared to 31% in 2020; Danish investors held 17%
compared to 14% in 2020; rest of the world held 2%, compared
to 4% in 2020, and other investors, incl. private, held 27%
compared to 19% in 2020.
In order to fund our long-term share-based incentive programs,
Lundbeck acquired treasury shares in 2021 at a value of DKK
34 million (DKK 29 million in 2020), corresponding to 144,000
shares (114,000 shares in 2020).
A
t the end of 2021, Lundbeck’s Board of Directors and
Executive Management held a total of 156,384 Lundbeck
shares compared to 137,883 Lundbeck shares by the end of
2020. The total number of shares in 2021 corresponds to 0.08%
of the total shares outstanding.
LUNDBE
CK AND THE EQUITY MARKET
Through the Investor Relations (IR) function, Lundbeck aspires
to provide a fair and accurate view of its activities by providing
ongoing communications with prospective and existing
shareholders and equity analysts. Through regular meetings
and dialogue, we convey relevant information about our vision
and goals, business areas and financial development.
In 2021, IR activity was materially impacted by the global
pandemic with lockdowns and travel restrictions. Lundbeck’s
Investor Relations team held more than 250 meetings, most of
them based on digital platforms such as Teams and Zoom.
Lundbeck has also participated/presented at 12 investor
conferences, again most of which were virtual.
Lundbeck is currently covered by 18 sell-side analysts, incl. the
major global investment banks that regularly produce research
reports on Lundbeck. A list of analysts covering Lundbeck is
available on www.lundbeck.com*.
After the announcement of our interim and full-year reports,
members of Lundbeck’s Executive Management and Investor
Relations team always conduct roadshows to inform investors
and analysts about the company’s latest developments. Our
investor presentations are available for download on
www.lundbeck.com**.
THE LUNDBECK
SHARE
2021 was an
eventful year for Lundbeck
with solid financial results and
continued progression against our
Expand and Invest to Grow strategy.
The Lundbeck share price began the
year at DKK 208.80 (closing price end
2020), reached a year high of DKK
258.10 (16 February), recorded a year
low of DKK 152.45 (14 December) and
ended the year at DKK 168.85. This is a
decrease of 19% for the year. In
comparison, the Danish OMXC25 index
increased by 17%, while the MSCI
European Pharmaceutical Index
increased by 20%.
*
https://www.lundbeck.com/global/investors/the
-share/analyst-coverage
**
https://www.lund
beck.com/global/investors/reports-and-presentations
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
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COMPOSITION OF OWNERSHIP, END 2021
STOCK PERFORMANCE 201
7-2021
COMPOSITION OF FREE FLOAT, END 2021
STOCK PERFORMANCE 20
21
Financial calendar 2022
23
March 2022
Annual General Meeting
2022
26 March 2022
Dividends for 2021 at
the disposal
of shareholders
11
May 2022
Financial statements for the first
three months of
2022
1
7 August 2022
Financial statements for the first six
months
of 2022
9
November 2022
Financial statements for the first
nine months
of 2022
LUNDBECK
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2021
2020
2019
2018
2017
Earnings per share, basic (EPS) (DKK) 6.63 7.96 11.64 17.88 28.14
Earnings per share, diluted (DEPS) (DKK) 6.63 7.96 11.64 17.87 28.10
Cash flow from operating activities per share, diluted (DKK) 11.44 19.31 13.13 30.09 20.44
Net asset value per share, diluted (DKK) 92.01 85.42 84.45 84.67 76.03
Proposed dividend per share (DKK) 2.00 2.50 4.10 12.00 8.00
Dividend payout ratio (%) 30 31 35 67 29
Dividend yield (%) 1.2 1.2 1.6 4.2 2.5
Share price, year-end (DKK) 168.85 208.80 254.4 285.4 315.0
Share price, high (DKK) 258.10 302.4 306.9 475.9 411.8
Share price, low (DKK) 152.45 178.15 217.2 257.0 315.0
Price/Earnings, diluted (DKK) 25.47 26.25 21.86 15.97 11.21
Price/Cash flow, diluted (DKK) 14.76 10.82 19.38 9.48 15.41
Price/Net asset value, diluted (DKK) 1.84 2.44 3.01 3.37 4.14
Market capitalization, year-end (DKKm) 33,626 41,582 50,660 56,825 62,700
Annual trading, million shares 117 108.9 84.4 99.2 107.7
Average trading per trading day, thousands of shares 464.5 435.7 340.4 400.1 429.2
SHARE RATIOS
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ANNUAL REPORT 2021
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SHARE FACTS
Number of shares, year-end 199,148,222
Share capital, year-end (DKK) 995,741,110
Nominal value per share (DKK) 5
Holding of treasury shares 502,115
Free float (%) 31
IPO 18 June 1999
Stock exchange Nasdaq Copenhagen
ISIN code DK0010287234
Ticker LUN.CO (Reuters), LUN DC (Bloomberg)
ADR-program Sponsored level 1 program
ADR trading code HLUYY
LUNDBECK
ANNUAL REPORT 2021
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NOTES
1 Basis of preparation 56
2 Revenue and segment information 57
3 Employee costs 58
4 Financial income and expenses 60
5 Income taxes 60
6 Intangible assets 64
7 Property, plant and equipment 67
8 Right-of-use assets and lease liabilities 68
9 Inventories 68
10 Trade receivables 68
11 Cash resources 69
12 Equity 70
13 Retirement benefit obligations and similar obligations 72
14 Incentive programs 74
15 Provisions 76
16 Contingent assets and contingent liabilities 76
17 Bank debt, bond debt and borrowings 78
18 Other payables 79
19 Financial instruments 79
20 Audit fees 83
21 Contractual obligations 84
22 Related parties 84
23 List of subsidiaries 85
24 Subsequent events 86
25 Significant accounting policies 87
CONSOLIDATED
FINANCIAL
STATEMENTS
CONTENTS
Statement of profit or loss 52
Statement of comprehensive income 52
Statement of financial position 53
Statement of changes in equity 54
Statement of cash flows 55
LUNDBECK
ANNUAL REPORT 2021
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CONSOLIDATED FINANCIAL STATEMENTS
2021
2020
Notes
DKKm
DKKm
Revenue
2
16,299
17,672
Cost of sales
3
3,648
4,166
Gross profit
12,651
13,506
Sales and distribution costs
3
5,885
5,946
Administrative expenses
3
933
966
Research and development costs
3
3,823
4,545
Other operating expenses, net
-
59
Profit from operations (EBIT)
2,010
1,990
Financial income
4
14
277
Financial expenses
4
443
361
Profit before tax
1,581
1,906
Tax on profit for the year
5
263
325
Profit for the year
1,318
1,581
Earnings per share, basic (EPS) (DKK)
12
6.63
7.96
Earnings per share, diluted (DEPS) (DKK)
12
6.63
7.96
2021
2020
Notes
DKKm
DKKm
Profit for the year
1,318
1,581
Actuarial gains/losses
13
(1)
(1)
Tax
12
-
1
Items that will not be reclassified subsequently to profit or loss
(1)
-
Exchange rate gains/losses on investments in foreign subsidiaries
960
(1,007)
Exchange rate gains/losses on additions to net investments in foreign
subsidiaries
(157)
(21)
Hedging of net investments in foreign subsidiaries
19
(127)
356
Deferred exchange gains/losses, hedging
19
(340)
313
Deferred fair value of interest rate swaps
19
63
(90)
Exchange gains/losses, hedging (transferred to revenue)
19
(53)
(5)
Tax
12
137
(124)
Items that may be reclassified subsequently to profit or loss
483
(578)
Other comprehensive income
482
(578)
Total comprehensive income
1,800
1,003
STATEMENT OF PROFIT OR LOSS
1 January
– 31 December
STATEMENT OF COMPREHENSIVE INCOME
1 January
– 31 December
LUNDBECK
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CONSOLIDATED FINANCIAL STATEMENTS
2021
2020
Notes
DKKm
DKKm
Goodwill
6
5,377
4,845
Product rights
6
17,097
17,632
Other rights
6
143
90
Projects in progress
6
133
171
Intangible assets
22,750
22,738
Land and buildings
7
1,179
1,219
Plant and machinery
7
467
444
Other fixtures and fittings, tools and equipment
7
165
122
Prepayments and assets under construction
7
612
492
Right-of-use assets
8
484
456
Property, plant and equipment
2,907
2,733
Other financial assets
57
116
Other receivables
134
104
Deferred tax assets
5
193
233
Financial and other assets
384
453
Non-current assets
26,041
25,924
Inventories
9
2,775
2,163
Trade receivables
10
2,459
2,553
Income taxes receivable
183
217
Other receivables
289
868
Prepayments
627
380
Receivables
3,558
4,018
Cash and bank balances
11
2,279
3,924
Current assets
8,612
10,105
Assets
34,653
36,029
2021
2020
Notes
DKKm
DKKm
Share capital
12
996
996
Foreign currency translation reserve
874
134
Hedging reserve
19
(162)
95
Retained earnings
16,571
15,748
Equity
18,279
16,973
Retirement benefit obligations
13
288
288
Deferred tax liabilities
5
1,448
1,614
Provisions
15
92
139
Bank debt and bond debt
17
4,783
5,397
Lease liabilities
8
453
416
Other payables
18
492
1,190
Non-current liabilities
7,556
9,044
Retirement benefit obligations
13
1
2
Provisions
15
1,405
1,672
Bank debt
17
-
2,000
Trade payables
3,914
3,740
Lease liabilities
8
86
77
Income taxes payable
519
675
Other payables
18
2,893
1,846
Current liabilities
8,818
10,012
Liabilities
16,374
19,056
Equity and liabilities
34,653
36,029
STATEMENT OF FINANCIAL POSITION –
ASSETS
A
t 31 December
STATEMENT OF FINANCIAL POSITION –
EQUITY AND LIABILITIES
A
t 31 December
LUNDBECK
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CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
At 31 December
Share capital
Foreign currency
translation reserve
Hedging
reserve
Retained earnings
Total equity
Notes DKKm DKKm DKKm DKKm DKKm
2021
Equity at 1 January
996
134
95
15,748
16,973
Profit for the year
-
- - 1,318 1,318
Other comprehensive income
12
-
740
(257)
(1)
482
Comprehensive income
-
740
(257)
1,317
1,800
Distributed dividends, gross
12
-
-
-
(498)
(498)
Dividends received, treasury shares
- - - 1 1
Buyback of treasury shares
12
-
-
-
(34)
(34)
Incentive programs
14
- - - 37 37
Tax on other transactions in equity
5
-
-
-
-
-
Other transactions
-
-
-
(494)
(494)
Equity at 31 December
996
874
(162)
16,571
18,279
2020
Equity at 1 January
996
882
(75)
14,979
16,782
Profit for the year
-
-
-
1,581
1,581
Other comprehensive income
12
-
(748)
170
-
(578)
Comprehensive income
-
(748)
170
1,581
1,003
Distributed dividends, gross
-
-
-
(816)
(816)
Dividends received, treasury shares
-
-
-
1
1
Capital increase through exercise of
warrants
-
-
-
1
1
Buyback of treasury shares
12
-
-
-
(29)
(29)
Incentive programs
14
-
-
-
30
30
Tax on other transactions in equity
5
-
-
-
1
1
Other transactions
-
-
-
(812)
(812)
Equity at 31 December
996
134
95
15,748
16,973
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CONSOLIDATED FINANCIAL STATEMENTS
2021
2020
Notes
DKKm
DKKm
Profit from operations (EBIT)
2,010
1,990
Adjustment for non-cash items:
Amortization, depreciation and impairment losses
1,710
2,793
Incentive programs
37
30
Change in provisions
(447)
(307)
Other adjustments
(152)
(39)
Change in working capital:
Change in inventories
(572)
(265)
Change in receivables
540
(428)
Change in short-term debt
(273)
675
Cash flows from operations before financial receipts and payments
2,853
4,449
Financial receipts
68
11
Financial payments
(200)
(298)
Cash flows from ordinary activities
2,721
4,162
Income taxes paid
(449)
(325)
Cash flows from operating activities
2,272
3,837
Purchase of intangible assets
6
(202)
(114)
Purchase of property, plant and equipment
7
(410)
(364)
Sale of property, plant and equipment
2
1
Purchase of other financial assets
-
(17)
Sale of other financial assets
-
27
Cash flows from investing activities
(610)
(467)
Cash flows from operating and investing activities (free cash flow)
1,662
3,370
2021
2020
Notes
DKKm
DKKm
Proceeds from loans and issue of bonds
17
400
3,701
Repayment of bank loans and borrowings
17
(3,123)
(5,169)
Repayment of lease liabilities
8
(82)
(83)
Buyback of treasury shares
12
(34)
(29)
Capital increase through exercise of warrants
-
1
Dividends paid in the financial year, net
(497)
(815)
Cash flows from financing activities
(3,336)
(2,394)
Net cash flows for the year
(1,674)
976
Cash and bank balances at 1 January
3,924
3,008
Unrealized exchange gains/losses on cash and bank balances
29
(60)
Net cash flows for the year
(1,674)
976
Cash and bank balances at 31 December
2,279
3,924
Interest
-bearing debt, cash and bank balances, net,
is composed as follows:
Cash and bank balances
11
2,279
3,924
Interest bearing debt
(5,468)
(8,030)
Interest
-bearing debt, cash and bank balances, net,
at 31 December – net cash/(net debt)
(3,189)
(4,106)
STATEMENT OF CASH FLOWS
At
31 December
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CONSOLIDATED FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
1.1 Reporting entity
H. Lundbeck A/S (herein denominated the “Parent company” or “Company”) is domiciled in Denmark. The
Company’s registered office is at Ottiliavej 9, 2500 Valby. These consolidated financial statements comprise
the Parent company and its subsidiaries (together referred to as the “Group” or “Lundbeck”). The Group is
engaged in research, development, production and sale of pharmaceuticals for the treatment of psychiatric
and neurological disorders. See note 2 Revenue and segment information.
1.2 Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial
Statements Act. The consolidated financial statements were approved by the Board of Directors and
authorized for issue on 9 February 2022.
The statement of financial position is also referred to as “balance sheet”.
Details of the Group’s accounting policies are included in note 25 Significant accounting policies and in note
1.7 New standards and amendments issued but not yet effective.
1.3 Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates (“the functional currency”).
The consolidated financial statements are presented in Danish kroner (DKK), which is also the functional
currency of the Parent company. All amounts have been rounded to the nearest DKK million, unless
otherwise indicated.
1.4 Principal accounting policies
The consolidated financial statements have been prepared to give a true and fair view of the Group’s financial
position at 31 December 2021 and financial performance for the year. The significant accounting policies are
described in note 25 Significant accounting policies. Management believes that the accounting policies listed
in note 1.5 Use of judgments and estimates are principal to the financial statements.
1.5 Use of judgments and estimates
In preparing the consolidated financial statements, Management has made estimates and judgments that
affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of estimates are
recognized prospectively.
Management believes that the following accounting estimates, assumptions and judgments are significant to
the consolidated financial statements.
Principal accounting policies
Key accounting estimates, assumptions and
judgments
Notes
Provision for discounts and rebates Estimate of discounts and rebates in the U.S. 2, 15
Income taxes and deferred income
taxes
Judgment and estimate of deferred tax assets and
liabilities and provision for uncertain tax positions
5
Impairment of product rights Estimate of the value-in-
use methodology for
impairment of product rights
6
Provisions for legal disputes,
contingent assets and liabilities
Estimate of ongoing legal disputes, litigations and
investigations
15,16
Other payables - contingent
consideration
Assumptions and estimates used in the calculation of
the fair value related to contingent consideration from
the businesses acquired in 2019
18
1.6 Changes in significant accounting policies
New and amended standards adopted by the group
Effective 1 January 2021, a number of amendments to the accounting standards were implemented.
None of the amendments have a material impact on the accounting policies and/or on the consolidated
financial statements, consequently, no changes to the accounting policies or retrospective adjustments have
been made as a result of adopting these standards and/or amendments.
NOTE 1
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CONSOLIDATED FINANCIAL STATEMENTS
1 BASIS OF PREPARATION - CONTINUED
1.7 New standards and amendments issued but not yet effective
A number of new standards and amendments are effective for annual periods beginning after 1 January
2021 though not mandatory for annual reporting periods ending on 31 December 2021. Earlier application is
permitted; however, the new or amended standards have not been early adopted by the Group.
The amended standards are as follows:
• A number of narrow-scope amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and
Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets and some annual
improvements on IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9
Financial Instruments and IFRS 16 Leases
• Classification of liabilities as current or non-current (Amendments to IAS 1 Presentation of Financial
Statements)
• Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2)
• Definition of Accounting Estimate (Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors)
• Amendment to IAS 12 Income taxes - deferred tax related to assets and liabilities arising from a single
transaction.
The Group expects to adopt the new standards, improvements, amendments and interpretations when they
become mandatory.
None of the amended standards are expected to have significant impact on the accounting policies and/or
on the consolidated financial statements.
1.8 European Single Electronic Format (ESEF)
The Annual Report is prepared in XHTML format, and the consolidated financial statements are tagged using
inline eXtensible Business Reporting Language (iXBRL). The iXBRL tags comply with the ESEF taxonomy,
which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the
IFRS Foundation. Where a financial statement line item is not defined in the ESEF taxonomy, an extension
to the taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for
extensions which are subtotals.
The Annual Report submitted to the Danish Financial Supervisory Authority consists of the XHTML document
together with certain technical files, all included in a ZIP file named HLUNDBECK-2021-12-31-en.zip.
2 REVENUE AND SEGMENT INFORMATION
The Group is engaged in research, development, production and sale of pharmaceuticals for the treatment
of psychiatric and neurological disorders, which is the Group’s single business (operating) segment. The
business segment reflects the way in which Management makes decisions and assesses the business
performance.
The Group is organized in geographical regions. The tables below show the Group’s revenue from external
customers broken down by key products and geographical regions.
Europe
North
America
International
Markets
Group
2021
DKKm
DKKm
DKKm
DKKm
Abilify Maintena
®
1,175 1,019 226 2,420
Brintellix
®
/Trintellix
®
998 1,789 739 3,526
Cipralex
®
/Lexapro
®
530 117 1,699 2,346
Northera
®
- 665 - 665
Onfi
®
- 505 - 505
Rexulti
®
/Rxulti
®
25 2,725 99 2,849
Sabril
®
- 657 - 657
Vyepti
®
- 489 3 492
Other pharmaceuticals
771 279 1,389 2,439
Revenue by product
3,499
8,245
4,155
15,899
Other revenue
347
Effects from hedging
53
Total revenue
16,299
Of this amount:
Royalty
775
Down payments and milestone received
13
NOTES 1-2
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CONSOLIDATED FINANCIAL STATEMENTS
2 REVENUE AND SEGMENT INFORMATION - CONTINUED
Europe
North
America
International
Markets
Group
2020
DKKm
DKKm
DKKm
DKKm
Abilify Maintena
®
1,081 980 210 2,271
Brintellix
®
/Trintellix
®
837 1,682 583 3,102
Cipralex
®
/Lexapro
®
523 127 1,730 2,380
Northera
®
- 2,553 - 2,553
Onfi
®
- 642 - 642
Rexulti
®
/Rxulti
®
18 2,537 65 2,620
Sabril
®
- 777 - 777
Vyepti
®
- 93 - 93
Other pharmaceuticals
870 399 1,469 2,738
Revenue by product
3,329
9,790
4,057
17,176
Other revenue
491
Effects from hedging
5
Total revenue
17,672
Of this amount:
Royalty
752
Down payments and milestone received
32
In 2021, Denmark generated local revenue from external customers in the country of domicile in the amount
of DKK 30 million (DKK 29 million in 2020). The U.S generated local revenue of DKK 7,456 million (DKK
8,804).
The U.S. and Denmark are the only countries where sales contribute 10% or more of total revenue.
In 2021, no single customer contributes 10% or more of total revenue. In 2020, one customer in the U.S.
contributed to approximately DKK 1.8 billion of total revenue.
2021
2020
Intangible assets and property, plant and equipment by geographic region
DKKm
DKKm
Denmark
11,070 11,452
USA
12,778 12,487
Other countries
1,809 1,532
Total
25,657
25,471
3 EMPLOYEE COSTS
2021
2020
Breakdown of employee costs
DKKm DKKm
Short-term employee benefits
3,996
4,249
Retirement benefits
256
244
Social security costs
332
353
Equity- and cash-settled incentive programs
41
34
Severance and other costs from restructuring activities
100
15
Total
4,725
4,895
For details on payments related to share-based incentive programs, see note 14 Incentive programs. For
details on provisions for severance and other costs from restructuring activities, see note 15 Provisions.
Employee costs for the year are included in the following functions in the statement of profit or loss:
2021
2020
Employee costs
DKKm
DKKm
Cost of sales
720 703
Sales and distribution costs
2,477 2,550
Administrative expenses
588 628
Research and development costs
940 1,014
Total
4,725
4,895
Information on employees
2021
2020
Average number of full-time employees in the financial year
5,488
5,717
Number of full-time employees at 31 December
In Denmark
1,751
1,728
In other countries
3,597
3,900
Total
5,348
5,628
NOTES 2-3
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CONSOLIDATED FINANCIAL STATEMENTS
3 EMPLOYEE COSTS – CONTINUED
Remuneration of the registered Executive Management
Salary
Cash
bonus
Pension
Other
benefits
Equity
-
and
cash
-
settled
incentive
programs
Total
Tax
indemni-
fication¹
Total
after tax
indemni
-
fication
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
2021
Deborah Dunsire¹, President and CEO
9.9 8.0 - 0.2 4.2 22.3 34.3 56.6
Lars Bang, Executive Vice President,
Product Development & Supply
4.1 1.3 1.1 0.2 2.3 9.0 - 9.0
Anders Götzsche, Executive Vice
President, CFO
5.1 1.6 1.3 0.2 0.5 8.7 - 8.7
Per Johan Luthman, Executive Vice
President, Research & Development
4.0 1.3 1.1 0.2 1.8 8.4 - 8.4
Jacob Tolstrup, Executive Vice
President, Commercial Operations
4.0 1.3 1.0 0.2 2.2 8.7 - 8.7
Total
27.1
13.5
4.5
1.0
11.0
57.1
34.3
91.4
2020
Deborah Dunsire¹, President and CEO
9.6 9.1 - 0.4 3.9 23.0 2.7 25.7
Lars Bang, Executive Vice President,
Product Development & Supply
4.0 1.8 1.1 0.2 2.2 9.3 - 9.3
Anders Götzsche, Executive Vice
President, CFO
5.0 2.4 1.3 0.2 2.3 11.2 - 11.2
Per Johan Luthman, Executive Vice
President, Research & Development
3.8 1.7 1.0 0.2 1.1 7.8 - 7.8
Jacob Tolstrup, Executive Vice
President, Commercial Operations
3.9 1.7 1.0 0.2 1.9 8.7 - 8.7
Total
26.3
16.7
4.4
1.2
11.4
60.0
2.7
62.7
1) According to the employment agreement with Deborah Dunsire, Lundbeck is entitled to pay the difference in taxation on investment return
from personal assets between the U.S. and Denmark.
Each of the registered Executive Management members participates in a short-term incentive program that
provides an annual cash bonus based on the achievement of predetermined targets for the preceding
financial year. The short-term incentive payment levels will be determined by the Board of Directors from
year to year. The CEO has a target of up to 100% and a maximum of up to 117% of the fixed annual base
salary. The other registered Executive Management members have a target of up to 33.33% and a maximum
of up to 50% of the fixed annual base salary. All registered Executive Management members may receive
payment below target and potentially no payment in case of performance below target.
Remuneration of key management personnel
2021
2020
DKKm DKKm
Short-term employee benefits
104
96
Retirement benefits
10
11
Other social security costs
1
1
Equity- and cash-settled incentive programs
12
11
Total
127
119
Key management personnel are defined as persons who report directly to the registered Executive
Management.
Remuneration of the Board of Directors
The total remuneration of the Board of Directors for 2021 amounted to DKK 8.5 million (DKK 7.5 million in
2020). The amount includes fees for participation in the Audit Committee of DKK 0.7 million (DKK 0.7 million
in 2020), the Remuneration Committee of DKK 0.7 million (DKK 0.7 million in 2020), the Scientific Committee
of DKK 0.9 million (DKK 0.7 million in 2020) and travel allowances of DKK 1.1 million (DKK 0.8 million in
2020) for board members with permanent residence outside of Europe. The remuneration for 2021 is
consistent with the remuneration approved at the Annual General Meeting held on 23 March 2021.
The members of the Board of Directors held a total of 44,113 Lundbeck shares at 31 December 2021
(47,313 shares in 2020).
The total remuneration of the chairman of the Board of Directors amounted to DKK 1.7 million (DKK 1.7
million in 2020). The total remuneration of the deputy chairman of the Board of Directors amounted to DKK
1.2 million (DKK 1.2 million in 2020). These amounts include fees for participation in Board committees.
NOTE 3
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CONSOLIDATED FINANCIAL STATEMENTS
4 FINANCIAL INCOME AND EXPENSES
2021
2020
DKKm DKKm
Interest income from financial assets measured at amortized costs
7
6
Gain on other financial assets, measured at fair value through profit or loss, incl. dividends
7
92
Fair value adjustment of contingent consideration
-
102
Exchange gains
-
76
Other financial income
-
1
Financial income
14
277
Interest expenses from financial liabilities measured at amortized costs
146 173
Interest expenses relating to lease
liabilities 7 8
Loss on other financial assets, measured at fair value through profit or loss, incl. dividends
65 12
Fair value adjustment of contingent consideration
133 99
Exchange losses
31 -
Other financial expenses
61 69
Financial expenses
443
361
Net financials, expenses
429
84
5 INCOME TAXES
Tax on profit for the year
2021
2020
DKKm DKKm
Current tax
342
735
Prior-year adjustments, current tax
(51)
1
Prior-year adjustments, deferred tax
36
(41)
Change in deferred tax for the year
(200)
(284)
Change in deferred tax as a result of changed income tax rates
(1)
36
Total tax for the year
126
447
Tax for the year is composed of:
Tax on profit for the year
263
325
Tax on other comprehensive income
(137)
123
Tax on other transactions in equity
-
(1)
Total tax for the year
126
447
For a specification of tax on comprehensive income, see note 12 Equity.
Uncertain tax positions
The Group operates in a multinational tax environment. Complying with tax rules can be complex as the
interpretation of legislation and case law may not always be clear or may change over time. In addition,
transfer pricing disputes with tax authorities may occur. Management’s judgments are applied to assess the
possible effect of exposures and the possible outcome of disputes or interpretational uncertainties.
Uncertain tax positions comprise of a liability of DKK 497 million and an asset of DKK 66 million (a liability of
DKK 484 million and an asset DKK 78 million in 2020). Management believes that the accrual is adequate.
However, the actual obligation may differ from the accrual made and depends on the outcome of litigations
and settlements with the relevant tax authorities.
NOTES 4-5
LUNDBECK
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CONSOLIDATED FINANCIAL STATEMENTS
5 INCOME TAXES - CONTINUED
Explanation of the Group’s effective tax rate
DKKm %
2021
Profit before tax
1,581
Calculated tax, 22%
348
22.0
Tax effect of:
Differences in the
income tax rates of foreign subsidiaries from the Danish corporate income
tax rate
33
2.1
Non-deductible expenses/non-taxable income and other permanent differences
72
4.6
Research and development incentives
(76)
(4.8)
Foreign-derived intangible income benefit
(32)
(2.0)
Non-deductible amortization of product rights
16
1.0
Change in valuation of net tax assets
(82)
(5.2)
Change in deferred tax as a result of changed income tax rates
(1)
(0.1)
Prior-year tax adjustments etc., total effect on operations
(15)
(1.0)
Effective tax/tax rate for the year
263
16.6
DKKm %
2020
Profit before tax
1,906
Calculated tax, 22%
419
22.0
Tax effect of:
Differences in the income tax rates of foreign subsidiaries from the Danish corporate income
tax rate
20
1.0
Non-deductible expenses/non-taxable income and other permanent differences
59
3.1
Research and development incentives
(69)
(3.6)
Foreign-derived intangible income benefit
(26)
(1.4)
Non-deductible writedown on intangible assets
111
5.8
Non-deductible amortization of product rights
101
5.3
Change in valuation of net tax assets
(286)
(15.0)
Change in deferred tax as a result of changed income tax rates
36
1.9
Prior-year tax adjustments etc., total effect on operations
(40)
(2.1)
Effective tax/tax rate for the year
325
17.0
NOTE 5
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CONSOLIDATED FINANCIAL STATEMENTS
5 INCOME TAXES – CONTINUED
Deferred tax balances
NOTE 5
Temporary differences between assets and liabilities as stated
in the consolidated financial statements and in the tax base
Balance at
1 January
Effect of foreign
exchange
differences
Adjustment of
deferred tax at
beginning of year
Additions through
acquisitions
Movements
during the year
Balance at
31 December
DKKm DKKm DKKm DKKm DKKm DKKm
2021
Intangible assets
12,836
744
71
-
(652)
12,999
Property, plant and equipment
728
8
(78)
-
122
780
Inventories
(75)
(2)
-
-
(54)
(131)
Provisions
(1,411)
(75)
20
(273)
133
(1,606)
Other items¹
(545)
(22)
(47)
39
(59)
(634)
Tax loss carryforwards etc.
(5,828)
(190)
211
-
(31)
(5,838)
Total temporary differences
5,705
463
177
(234)
(541)
5,570
Deferred (tax assets)/tax liabilities
1,385
88
36
(49)
(118)
1,342
Research and development incentives
(4)
-
-
-
(83)
(87)
Deferred (tax assets)/tax liabilities
1,381
88
36
(49)
(201)
1,255
2020
Intangible assets
15,708
(981)
5
-
(1,896)
12,836
Property, plant and equipment
753
(15)
6
-
(16)
728
Inventories
597
(15)
(582)
(178)
103
(75)
Provisions
(1,645)
102
49
(164)
247
(1,411)
Other items¹
(546)
36
(8)
-
(27)
(545)
Tax loss carryforwards etc.
(7,191)
380
366
164
453
(5,828)
Total temporary differences
7,676
(493)
(164)
(178)
(1,136)
5,705
Deferred (tax assets)/tax liabilities
1,831
(119)
(41)
(38)
(248)
1,385
Research and development incentives
(4)
-
-
-
-
(4)
Deferred (tax assets)/tax liabilities
1,827
(119)
(41)
(38)
(248)
1,381
1) Movements during the year include DKK 0 million (DKK
-1 million in 2020) recognized in equity.
LUNDBECK
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CONSOLIDATED FINANCIAL STATEMENTS
5 INCOME TAXES – CONTINUED
Management estimates future income according to budgets, forecasts, business plans and initiatives
scheduled for the coming years, which supports the recognition of deferred tax assets. When forecasting the
utilization of tax assets, the Group applies the same assumptions as for impairment testing. See note 6
Intangible assets.
Accordingly, at 31 December 2021, all deferred tax assets relating to tax losses carried forward in Denmark
from 2015, 2016, 2018 and 2021 were capitalized in the amount of DKK 884 million (DKK 777 million in
2020).
U.S. tax losses and tax credits stemming from acquisitions have been recognized at an amount of DKK 521
million (DKK 553 million in 2020) equalling the expected utilization within a foreseeable future, whereas an
amount of DKK 56 million (DKK 132 million in 2020) has not been recognized in the balance sheet.
Unrecognized deferred tax assets
2021
2020
DKKm DKKm
Unrecognized deferred tax assets at 1 January
184
507
Additions through acquisitions
-
-
Prior-year adjustments
-
(37)
Additions
8
1
Recognized
(90)
(287)
Unrecognized deferred tax assets at 31 December
102
184
Unrecognized deferred tax assets primarily relate to net operating losses and tax credits not expected to be
utilized within a foreseeable future.
NOTE 5
2021
2021
2021
2020
2020
2020
Deferred tax
assets
Deferred tax
liabilities
Net
Deferred tax
assets
Deferred tax
liabilities
Net
Deferred (tax assets)/tax liabilities
DKKm DKKm DKKm DKKm DKKm DKKm
Intangible assets
(107)
3,175
3,068
(105)
3,156
3,051
Property, plant and equipment
(5)
187
182
(8)
179
171
Inventories
(96)
53
(43)
(94)
68
(26)
Provisions
(384)
-
(384)
(339)
-
(339)
Other items
(202)
39
(163)
(195)
53
(142)
Tax loss carryforwards etc.
(1,318)
-
(1,318)
(1,330)
-
(1,330)
Research and development incentives
(87)
-
(87)
(4)
-
(4)
Deferred (tax assets)/tax liabilities
(2,199)
3,454
1,255
(2,075)
3,456
1,381
Offset within legal tax entities and jurisdictions
2,006 (2,006)
- 1,842 (1,842)
-
Total net deferred (tax assets)/tax liabilities
(193)
1,448
1,255
(233)
1,614
1,381
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CONSOLIDATED FINANCIAL STATEMENTS
6 INTANGIBLE ASSETS
Goodwill
Product
rights¹
Other
rights²
Projects in
progress²
Total
intangible
assets
Intangible assets
DKKm
DKKm
DKKm
DKKm
DKKm
2021
Cost at 1 January
4,845 30,253 1,731 171 37,000
Effect of foreign exchange differences
347 1,209 9 1 1,566
Transfers
- - 110 (121)
(11)
Additions
- 102 18 82 202
Additions through acquisitions, change in opening
balance
185 - - - 185
Disposals
- (90)
(29)
- (119)
Cost at 31 December
5,377
31,474
1,839
133
38,823
Amortization and impairment losses at 1 January
- 12,621 1,641 - 14,262
Effect of
foreign exchange differences - 572 8 - 580
Amortization
- 1,274 68 - 1,342
Disposals
- (90)
(21)
- (111)
Amortization and impairment losses at 31 December
-
14,377
1,696
-
16,073
Carrying amount at 31 December
5,377
17,097
143
133
22,750
1) In 2021, product rights not yet commercialized amounted to DKK 5,992 million (DKK 5,890 million in 2020).
2) Other rights and projects in progress include items such as the IT system SAP. The amounts include directly attributable internal expenses.
In 2021, Lundbeck adjusted the goodwill related to the acquisition of Alder BioPharmaceuticals (subsequently
renamed to Lundbeck Seattle BioPharmaceuticals, Inc.) due to the identification of accounting errors in the
purchase price allocation in prior years related to the fair value of a future milestone payment to a third party
of Alder BioPharmaceuticals of DKK 273 million (see note 18 Other payables) and an unrecognized
prepayment of DKK 39 million.
The 2021 changes to the purchase price allocation are (a) a net increase in goodwill of DKK 185 million, (b)
an increase in other payables of DKK 273 million, (c) an increase in prepayments of DKK 39 million, and
(d) a net decrease in deferred tax liabilities of DKK 49 million.
Due to immateriality, the accounting errors are recognized in 2021 and not as an adjustment to prior years.
Goodwill
Product
rights¹
Other
rights²
Projects in
progress²
Total
intangible
assets
Intangible assets
DKKm
DKKm
DKKm
DKKm
DKKm
2020
Cost at 1 January
5,278 31,610 1,826 134 38,848
Effect of foreign exchange differences
(409)
(1,357)
(12)
(1)
(1,779)
Transfers
- - 55 (55)
-
Additions
- - 21 93 114
Additions through acquisitions, change in
opening
balance
(24)
- - - (24)
Disposals
- - (159)
- (159)
Cost at 31 December
4,845
30,253
1,731
171
37,000
Amortization and impairment losses at 1 January
- 10,878 1,712 3 12,593
Effect of foreign exchange differences
- (597)
(10)
- (607)
Transfers
- - 3 (3)
-
Amortization
- 1,548 63 - 1,611
Impairment losses
- 792 - - 792
Disposals
- - (127)
- (127)
Amortization and impairment losses at 31 December
-
12,621
1,641
-
14,262
Carrying amount at 31 December
4,845
17,632
90
171
22,738
In 2020, Lundbeck changed the initial purchase price allocation relating to the acquisition of Alder
BioPharmaceuticals (subsequently renamed to Lundbeck Seattle BioPharmaceuticals, Inc.) due to
prepayments to a supplier expensed prior to the acquisition date and due to a reassessment of the inventory
valuation. This resulted in a decrease in goodwill of DKK 24 million, comprising of an increase in prepayments
of DKK 164 million and a decrease in inventories, net of tax, of DKK 140 million.
NOTE 6
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CONSOLIDATED FINANCIAL STATEMENTS
6 INTANGIBLE ASSETS - CONTINUED
Description of material product rights
Vyepti
®
Tthe eptinezumab product rights (Vyepti
®
), which is an investigational monoclonal antibody (mAb) for
migraine prevention targeting the calcitonin gene-related peptide (CGRP) was acquired in 2019. The value
of the product rights was DKK 13,421 million at the time of acquisition. The carrying amount of DKK 12,107
million, net of amortization, at 31 December 2021 (DKK 12,076 million in 2020) was affected by
developments in the USD/DKK exchange rate.
Rexulti
®
Rexulti
®
is a prescription medication used as an adjunctive therapy to antidepressants for the treatment of
MDD and as a treatment for adults with schizophrenia in certain markets. Rexulti
®
is co-marketed in a
partnership collaboration with Otsuka Pharmaceuticals Co., Ltd. The total carrying amount of the Rexulti
®
product rights amounted to DKK 2,497 million, net of amortization, at 31 December 2021 (DKK 2,823 million
in 2020).
Portfolio of compounds including the product rights to ABX-1431
A portfolio of compounds, including the product rights to ABX-1431; a first-in-class, small-molecule inhibitor
of monoacylglycerol lipase (MGLL) currently being investigated in clinical trials for the treatment of
neurological disorders, and various compounds in the pre-clinical phase, was acquired in 2019. The value of
the portfolio of compounds recognized as product rights was DKK 1,853 million at the time of acquisition.
During 2020, the Parent company H. Lundbeck A/S acquired all intellectual property rights from Lundbeck
La Jolla Research Center, Inc. The carrying amount at 31 December 2021 was DKK 1,871 million (DKK
1,871 million in 2020).
Amortization and impairment losses
Amortization and impairment losses for the year are included in the following functions in the statement of
profit or loss:
2021
2020
Amortization and impairment losses
DKKm
DKKm
Cost of sales
1,305 1,584
Sales and distribution costs
8 33
Administrative expenses
5 18
Research and development costs
32 800
Total
1,350
2,435
In March 2020, it was announced that the phase IIa study (AMBLED) of its novel selective positive allosteric
modulator of the glutamate 4 receptor (mGlu4 PAM), foliglurax, for the treatment of Parkinson's disease did
not meet the primary study endpoint. Consequently, Lundbeck recognized an impairment loss of DKK 792
million relating to the foliglurax product rights. The impairment loss was included in research and
development costs in 2020.
Impairment testing
Goodwill
The Group is considered a single cash-generating unit (CGU) as this is how Management makes decisions
and assesses business performance. All subsidiaries are considered fully integrated into the Group as no
entity has significant independent or separately identifiable inflow of cash. Most cash inflows are based on
the output from research and development activities performed by headquarters on behalf of the entire Group.
Accordingly, an impairment test is annually performed based on Lundbeck having one single CGU.
Product rights
In addition to the impairment test for goodwill (based on the CGU), the Group performs impairment tests of
product rights not yet commercialized and for product rights available for use, in case an indication of
impairment is identified.
Methodology
Goodwill
In the impairment test of the CGU, based on the fair value less cost of disposal, the market price of Lundbeck
is compared with its carrying amount.
Product rights
In the impairment tests of product rights, based on value-in-use, the discounted expected future cash flows
for the specific asset tested are compared with the carrying amount of the intangible asset. The expected
future cash flows are based on a forecast period, which is the period used by Management for decision
making, with due consideration of patent expiry.
The assumptions used in the impairment test are based on benchmarked external data and historical trends.
The key parameters in the calculation of the value-in-use are revenue, earnings, working capital, discount
rate and the preconditions for the cash flow period.
NOTE 6
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CONSOLIDATED FINANCIAL STATEMENTS
6 INTANGIBLE ASSETS - CONTINUED
Significant assumptions and estimates are applied to the discounted expected future cash flows from the
product right.
The four category elements in the table below are taken into consideration when determining the key
parameters for the value-in-use calculation.
Financial elements
Market elements
Prices
Healthcare reforms
Rebates
Price reforms
Quantities
Market access
Patient population
Pharma restrictions
Market shares
Launch success
Competition
Product positioning
Fill rates
Competing pharmaceuticals
Prescription rates
Generics on the market
Lundbeck costs (including promotion costs)
R&D elements
Other elements
R&D spend
Supply chain effectiveness
Collaborations
Strength and abilities of partners
Pipeline success rate
Product labelling
Liaison with regulatory bodies
The assumptions are based on past experience, external source of information and industry-relevant
observations for each product right.
The calculation of the value-in-use for product right is based on a discount rate after tax of 6.2% (7.3% in
2020).
2021 testing outcome
The impairment tests performed in 2021 did not result in the recognition of any impairment loss.
2020 testing outcome
The impairment tests performed in 2020 did not result in the recognition of any impairment loss other than
the impairment loss on the foliglurax product rights recognized in March 2020.
Impact of possible changes in key assumptions
If the budgeted revenue had been 5% lower than Management's estimates, the head room would continue
to be positive. If the discount rate after tax applied to cash flows had been 1% higher, the head room would
continue to be positive.
The sensitivity analyses are based on a change in an assumption while holding all other assumptions
constant. The method and types of assumptions used in preparing the sensitivity analyses did not change
compared to the prior period. The potential changes in key assumptions are considered within historic
variations experienced by the Group and thus considered reasonably possible.
NOTE 6
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CONSOLIDATED FINANCIAL STATEMENTS
7 PROPERTY, PLANT AND EQUIPMENT
Land and
buildings¹
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Prepayments
and assets
under
construction
Total
property,
plant and
equipment
Property, plant and equipment
DKKm
DKKm
DKKm
DKKm
DKKm
2021
Cost at 1 January
3,495 2,002 833 492 6,822
Effect of foreign exchange differences
- 2 11 (1)
12
Transfers
61 86 53 (189)
11
Additions
10 41 49 310 410
Disposals
(29)
(81)
(102)
- (212)
Cost at 31 December
3,537
2,050
844
612
7,043
Depreciation and impairment losses at 1 January
2,276 1,558 711 - 4,545
Effect of foreign exchange differences
- 1 9 - 10
Depreciation
109 100 49 - 258
Impairment losses
- 3 - - 3
Disposals
(27)
(79)
(90)
- (196)
Depreciation and impairment losses at
31 December
2,358
1,583
679
-
4,620
Carrying amount at 31 December
1,179
467
165
612
2,423
1) No land and buildings were mortgaged at 31 December 2021 and at 31 December 2020.
Land and
buildings¹
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Prepayments
and assets
under
construction
Total
property,
plant and
equipment
Property, plant and equipment
DKKm
DKKm
DKKm
DKKm
DKKm
2020
Cost at 1
January 3,381 1,906 853 419 6,559
Effect of foreign exchange differences
(1)
(6)
(16)
(2)
(25)
Transfers
91 68 21 (180)
-
Additions
29 46 34 255 364
Disposals
(5)
(12)
(59)
- (76)
Cost at 31 December
3,495
2,002
833
492
6,822
Depreciation and impairment losses at 1 January
2,176 1,468 717 - 4,361
Effect of foreign exchange differences
(1)
(5)
(7)
- (13)
Depreciation
104 100 45 - 249
Impairment losses
1 7 - - 8
Disposals
(4)
(12)
(44)
- (60)
Depreciation and impairment losses at
31 December
2,276
1,558
711
-
4,545
Carrying amount at 31 December
1,219
444
122
492
2,277
Depreciation and impairment losses
Depreciation and impairment losses for the year are included in the following functions in the statement of
profit or loss:
2021
2020
Depreciation and impairment losses
DKKm
DKKm
Cost of sales
159 152
Sales and distribution costs
34 26
Administrative expenses
21 31
Research and development costs
63 64
Total
277
273
NOTE 7
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CONSOLIDATED FINANCIAL STATEMENTS
8 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
2021
2020
Amounts recognized in profit or loss
DKKm DKKm
Expenses relating to short-term leases, not capitalized
2
2
Depreciation of right-of-use assets, land and buildings
83
85
Interest expenses relating to lease liabilities
7
8
Total
92
95
2021
2020
Land and buildings
DKKm DKKm
Cost at 1 January
596
545
Effect of foreign exchange differences
14
(20)
Additions
45
34
Disposals during the year
(11)
(19)
Adjustments to right-of-use assets during the year
61
56
Cost at 31 December
705
596
Depreciation and impairment losses at 1 January
140
69
Effect of foreign exchange differences
6
(6)
Depreciation
83
85
Depreciation and impairment on disposals
(8)
(8)
Depreciation and impairment losses at 31 December
221
140
Carrying amount at 31 December
484
456
Balance at
1 January
Cash outflow
Non-cash
flow
Balance at
31 December
Development in lease liabilities
DKKm
DKKm
DKKm
DKKm
2021
Lease liabilities
493 (82)
128 539
Total lease liabilities
493
(82)
128
539
2020
Lease liabilities
516
(83)
60
493
Total lease liabilities
516
(83)
60
493
The total cash outflow from recognized lease agreements amounted to DKK 89 million (DKK 91 million in
2020) and includes repayment of lease liabilities and interest.
The maturity analysis of lease liabilities is provided in the table ”Classification of and contractual maturity
dates for financial assets and financial liabilities” in note 19 Financial instruments.
9 INVENTORIES
2021
2020
DKKm DKKm
Raw materials and consumables
207
206
Work in progress
1,534
1,155
Finished goods and goods for resale
1,034
802
Total
2,775
2,163
Inventories recognized as cost of sales amounted to DKK 2,337 million (DKK 2,618 million in 2020).
Inventories of DKK 1,071 million at 31 December 2021 are expected to be recovered after more than 12
months (DKK 722 million in 2020).
10 TRADE RECEIVABLES
2021
2020
DKKm
DKKm
Trade receivables
2,484 2,579
Writedowns
(25)
(26)
Trade receivables, net
2,459
2,553
Credit risks
Lundbeck’s products are sold primarily to distributors of pharmaceuticals, pharmacies and hospitals. The
payment conditions for the customers, including credit periods and any payment of interest in case of non-
payment, vary, but are always based on industry practice in the relevant market. As a result of special trading
conditions in specific markets, the credit period may be up to approximately 200 days and for one customer
360 days. The weighted average credit period is approximately 50 days.
NOTES 8-10
LUNDBECK
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CONTENTS
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CONSOLIDATED FINANCIAL STATEMENTS
10 TRADE RECEIVABLES - CONTINUED
In April 2020, Lundbeck purchased a “key buyer” credit insurance covering around 100 of the largest
customers of the Group. The credit insurance was bought to protect against insolvency, protracted default
and political risk as a result of uncertainties created by the pandemic. The credit insurance was not renewed
in 2021 due to assessment that the pandemic did not materially increase the credit risk.
Changes to the Group’s customer portfolio are limited. When collaboration is established with a new
customer, credit assessment is done either by Lundbeck or an external credit rating agency. At the time of
revenue recognition, Lundbeck assesses the full lifetime expected credit losses. In addition, undue and due
receivables are analyzed in an ongoing process. Based on the credit assessment, receivables analysis,
historical and industry experience, it is estimated whether the receivables are recoverable or writedowns are
needed. Historically, losses on debtors have been insignificant.
Fluctuations in foreign exchange rates, including the impact from currency devaluations, represent an
inherent risk as Lundbeck also operates in volatile economies. Lundbeck monitors and takes action to
mitigate risks associated with receivables.
Market risks
The pharmaceutical market is characterized by the aim of authorities to reduce or cap healthcare costs in
general. Market changes such as price reductions and ever-earlier launch of generics may have a
considerable impact on the earnings potential of pharmaceuticals.
11 CASH RESOURCES
2021
2020
DKKm DKKm
Cash and bank balances
2,279
3,924
Liquidity risk and capital structure
The credit risk on cash and bank balances and derivatives (forward exchange contracts, currency options
and interest rate swaps) is limited as Lundbeck only deals with banks with a solid credit rating. The
counterparty risk towards banks with a short-term credit rating lower than A-1 (Standard & Poor’s) is kept to
a minimum, only allowing balances necessary for operating needs within the immediate future. To further
limit the risk of loss, internal limits have been defined for the credit exposure accepted towards the banks
with whom Lundbeck collaborates. Credit lines are part of the Treasury Policy.
The Treasury Policy covers financial resources, foreign currency exposure, interest rate risk, securities, loan
and bond portfolios as well as capitalization of subsidiaries. The Treasury Policy is presented to the Audit
Committee annually for subsequent approval by the Board of Directors. In addition, the Board of Directors
approves the framework for selecting financial collaboration partners and the credit lines and types of
transactions allowed.
Pursuant to its Treasury Policy, Lundbeck must ensure that a minimum of DKK 1.0 billion is held in cash or
cash equivalents. If this amount is not available in cash, fixed-term deposits or bonds, Lundbeck will enter
into committed credit facilities with its banking partners.
In 2019, Lundbeck entered into two loan agreements with its strategic banks; a revolving credit facility (RCF)
of EUR 1.5 billion and a term loan of DKK 2 billion. The term loan was repaid in February 2021, following a
year of strong cash flow generation.
The RCF expires in 2025 and has an option, at the lenders' discretion, to extend the maturity for up to one
additional year. The flexible structure of the RCF enables Lundbeck to repay the debt in full at short notice,
normally not more than three months, and still maintain the facility until expiration of the credit commitment.
The RCF is subject to covenants, and no breaches were encountered during the year.
At 31 December 2021, Lundbeck had unutilized committed credit facilities of DKK 10.1 billion. In addition,
Lundbeck has a number of uncommitted credit facilities to cover its day-to-day operations.
At 31 December 2021 and 31 December 2020, these credit facilities were unutilized.
NOTES 10-11
LUNDBECK
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CONSOLIDATED FINANCIAL STATEMENTS
11 CASH RESOURCES - CONTINUED
In October 2020, Lundbeck issued a seven-year eurobond in the amount of EUR 500 million with a fixed
coupon of 0.875%. The bond was issued under Lundbeck´s euro medium-term note (EMTN) program of
EUR 2 billion.
In addition, Lundbeck has a number of uncommitted credit facilities to cover the day-to-day operations. At 31
December 2021 and 31 December 2020, these credit facilities were unutilized.
When managing the capital structure, Lundbeck’s main objective is to support the Expand and invest to grow
strategy; use capital resources for required research and development and for investments to realize the
strategy; and to generate long-term attractive return for the shareholders. Lundbeck also wishes to be a
strong financial counterparty to debt providers and other stakeholders by maintaining the investment grade
credit rating (BBB-).
To maintain or adjust the capital structure, Lundbeck may adjust dividends paid to shareholders, return
capital to shareholders, issue new shares, sell assets to reduce debt or increase debt. To minimize the
refinancing risk, Lundbeck strives to have diversified funding, both in terms of duration and source.
Lundbeck defines capital as total equity and net interest-bearing debt (see notes 17 Bank debt, bond debt
and borrowings and 8 Right-of-use assets and lease liabilities) and after deducting cash resources. At 31
December 2021, total equity amounted to DKK 18,279 million compared with DKK 16,973 million at 31
December 2020. Net interest-bearing debt amounted to DKK 3,189 million at 31 December 2021 compared
with DKK 4,106 million at 31 December 2020.
12 EQUITY
Share capital
The share capital of DKK 996 million at 31 December 2021 is divided into 199,148,222 shares at a nominal
value of DKK 5 each.
2021
2020
Share capital
DKKm
DKKm
At 1 January
996 996
Capital increase through exercise of warrants
- -
At 31 December
996
996
2021
2020
Issued shares
Number Number
At 1 January
199,148,222
199,136,725
Capital increase through exercise of warrants
-
11,497
At 31 December
199,148,222
199,148,222
Treasury shares
Shares of
DKK 5 nom.
Nominal
value
Proportion of
share capital
Cost
Treasury shares
Number DKKm % DKKm
2021
Shareholding at 1 January
449,896
2
0.23
135
Share buyback
144,000
1
0.07
34
Shares used for funding incentive programmes
(91,781)
-
(0.05)
(31)
Shareholding at 31 December
502,115
3
0.25
138
2020
Shareholding at 1 January
435,019
2
0.22
135
Share buyback
114,000
1
0.06
29
Shares used for funding incentive programmes
(99,123)
(1)
(0.05)
(29)
Shareholding at 31 December
449,896
2
0.23
135
NOTES 11-12
LUNDBECK
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CONTENTS
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CONSOLIDATED FINANCIAL STATEMENTS
12 EQUITY - CONTINUED
The Parent company has only one class of shares, and all shares rank equally. The shares are negotiable
instruments with no restrictions on their transferability.
In 2021, the Parent company acquired treasury shares at a value of DKK 34 million (DKK 29 million in 2020),
corresponding to 144,000 shares (114,000 shares in 2020). The shares were acquired to fund Lundbeck’s
long-term share-based incentive programs. A total of 91,781 shares were used for this purpose in 2021
(99,123 shares in 2020).
The Board of Directors is authorized to issue new shares and raise the share capital of the Parent company
as set out in article 4 of the Parent company’s Articles of Association.
The share capital is in compliance with the capital requirements of the Danish Companies Act and the rules
of Nasdaq Copenhagen.
Distribution of profit
The Board of Directors is proposing distribution of dividends for 2021 of 30% (31% in 2020) of the net profit
for the year allocated to the shareholders, equivalent to DKK 2.00 per share (DKK 2.50 per share in 2020)
or DKK 398 million (DKK 498 million in 2020), inclusive of dividends on treasury shares. Total dividends are
based on the current share capital.
Earnings per share
2021
2020
Profit for the year (DKKm)
1,318
1,581
Average number of shares (‘000 shares)
199,148
199,146
Average number of treasury shares (‘000 shares)
(487)
(416)
Average number of shares, excl. treasury shares (‘000 shares)
198,661
198,730
Average number of warrants, fully diluted (‘000 warrants)
- 3
Average number of shares, fully diluted ('000 shares)
198,661
198,733
Earnings per share, basic (EPS) (DKK)
6.63
7.96
Earnings per share, diluted (DEPS) (DKK)
6.63
7.96
At 31 December 2021, no warrants were outstanding.
Tax on other comprehensive income
Before tax
Tax
After tax
DKKm DKKm DKKm
2021
Other comprehensive income recognized under foreign currency
translation reserve in the statement of changes in equity
Exchange rate gains/losses on investments in foreign subsidiaries
960
-
960
Exchange rate gains/losses on additions to net investments in foreign
subsidiaries
(157)
36
(121)
Hedging of net investments in foreign subsidiaries
(127)
28
(99)
Total
676
64
740
Other
comprehensive income recognized under hedging reserve in the
statement of changes in equity
Deferred exchange gains/losses, hedging
(340)
75
(265)
Deferred fair value of interest rate swaps
63
(14)
49
Exchange gains/losses, hedging (transferred to revenue)
(53)
12
(41)
Total
(330)
73
(257)
Other comprehensive income recognized under retained
earnings in the statement of changes in equity
Actuarial gains/losses
(1)
-
(1)
Total
(1)
-
(1)
Recognized in other comprehensive income
345
137
482
NOTE 12
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CONSOLIDATED FINANCIAL STATEMENTS
12 EQUITY - CONTINUED
Before tax
Tax
After tax
DKKm DKKm DKKm
2020
Other comprehensive income recognized under foreign currency
translation reserve in the statement of changes in equity
Exchange rate gains/losses on investments in foreign subsidiaries
(1,007)
-
(1,007)
Exchange rate gains/losses on additions to net investments in foreign
subsidiaries
(21)
3
(18)
Hedging of net investments in foreign subsidiaries
356
(79)
277
Total
(672)
(76)
(748)
Other comprehensive income recognized under hedging reserve in the
statement of changes in equity
Deferred exchange gains/losses, hedging
313
(69)
244
Deferred fair value of interest rate swaps
(90)
20
(70)
Exchange gains/losses, hedging (transferred to revenue)
(5)
1
(4)
Total
218
(48)
170
Other comprehensive income recognized under retained
earnings in the statement of changes in equity
Actuarial gains/losses
(1)
1
-
Total
(1)
1
-
Recognized in other comprehensive income
(455)
(123)
(578)
Exchange rate gains/losses on investments in foreign subsidiaries, a gain of DKK 960 million (a loss of DKK
1,007 million in 2020), and exchange rate gains/losses on additions to net investments in foreign subsidiaries,
a loss of DKK 157 million (DKK 21 million in 2020), are primarily driven by developments in USD/DKK and
GBP/DKK exchange rates.
13 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS
Defined contribution plans
The major defined contribution plans cover employees in Australia, Canada, Denmark, Finland, South Korea,
Sweden, the UK and the U.S. The cost of defined contribution plans, representing contributions to the plans,
amounted to DKK 246 million in 2021 (DKK 234 million in 2020).
Defined benefit plans
The Group has defined benefit plans in a few countries. The most important plans comprise current and
former employees in Germany and the UK.
The defined benefit plan in Germany is unfunded and administered by Lundbeck Germany. The defined
benefit plan in the UK is funded and constituted under a trust, whose assets are legally separated from the
Group. Both plans entitle the employees to an annual pension on retirement based on the service and salary
level until retirement.
2021
2020
Retirement benefit obligations and similar obligations
DKKm DKKm
Present value of defined benefit plans
539
530
Fair value of plan assets
(285)
(275)
Defined benefit plans at 31 December
254
255
Other obligations of a retirement benefit nature
35 35
Retirement benefit obligations and similar obligations at 31 December
289
290
Retirement benefit obligations and similar obligations break down as follows:
Non
-current obligations 288 288
Current obligations
1 2
Retirement benefit obligations and similar obligations at 31 December
289
290
NOTES 12-13
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CONSOLIDATED FINANCIAL STATEMENTS
13 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS – CONTINUED
Actuarial assumptions
The following were the key actuarial assumptions at the reporting date.
2021
2020
Key assumptions for the most significant plans
% %
Discount rate
1.00-1.80
0.70-1.70
Inflation rate
2.10-3.30
1.75-2.85
Pay rate increase
0-2.50
0.00-2.50
Pension increase
2.10-5.00
1.75-5.00
Age-weighted employee resignation rate
0-8
0-8
Expected return on plan assets
1.80
1.70
Assumptions regarding future mortality are set based on actuarial advice in accordance with published
statistics and experience in each country.
Sensitivity analysis
The most significant assumptions used in the calculation of the obligation for defined benefit plans are
discount rate and inflation rate. An increase in the discount rate of 0.25 of a percentage point would result in
a decrease in the obligation of approximately DKK 21 million, before tax (DKK 22 million in 2020) and vice
versa. An increase in the inflation rate of 0.25 of a percentage point would result in an increase in the
obligation of approximately DKK 8 million, before tax (DKK 8 million in 2020) and vice versa. The sensitivity
analysis indicates how a change in the individual assumptions would change the obligation. However, the
assumptions will most likely be correlated and consequently result in a different obligation.
2021
2020
Fair value of plan assets
DKKm DKKm
Shares
61
56
Bonds
40
38
Property
16
17
Insurance contracts
152
147
Other assets
16
17
Total
285
275
Shares, bonds, property and other assets are measured at fair value based on quoted prices in an active
market. Insurance contracts are not based on quoted prices in an active market.
The amounts recognized in the balance sheet and the movements in the net defined benefit obligation over
the year are as follows.
2021
2020
Change in present value of defined benefit plans
DKKm DKKm
Present value of defined benefit plans at 1 January
530
537
Effect of foreign exchange differences
20
(16)
Pension expenses
7
7
Interest expenses relating to the obligations
7
7
Experience adjustments
(7)
4
Adjustments relating to financial assumptions
4
9
Adjustments relating to demographic assumptions
(3)
-
Benefits paid
(20)
(19)
Employee contributions
1
1
Present value of defined benefit plans at 31 December
539
530
2021
2020
Change in fair value of plan assets
DKKm
DKKm
Fair value of plan assets at 1
January 275 275
Effect of foreign exchange differences
18 (13)
Interest income on plan assets
5 5
Experience adjustments
(7)
12
Administration fees
(1)
(1)
Contributions
8 7
Benefits paid
(14)
(11)
Employee contributions
1 1
Fair value of plan assets at 31 December
285
275
NOTE 13
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CONSOLIDATED FINANCIAL STATEMENTS
13 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS – CONTINUED
2021
2020
Net expense recognized in profit or loss
DKKm DKKm
Pension expenses
7
7
Finance costs
2
2
Administration fees
1
1
Total
10
10
2021
2020
Amount recognized in other comprehensive income
DKKm
DKKm
Actuarial (gains)/losses
1 1
2021
2020
DKKm DKKm
Realized return on plan assets
(2)
17
The benefit under unfunded defined benefit plans is paid directly by the Group. In some countries, the future
contribution to funded defined benefit plans depends on the development in salaries, administrative fees and
regular premiums, and in other countries on the surplus/deficit according to local requirements. The weighted
average duration of the obligation is 15 years (15 years in 2020). The expected contribution to defined benefit
plans for 2022 is DKK 12 million (DKK 14 million for 2021).
Other obligations of a retirement benefit nature
In 2021, an obligation of DKK 35 million (DKK 35 million in 2020) was recognized to cover other obligations
of a retirement benefit nature, which primarily include post-employment benefits in a number of subsidiaries.
These benefit payments are conditional upon specified requirements being met.
14 INCENTIVE PROGRAMS
In order to attract, retain and motivate key employees and align their interests with those of its shareholders,
Lundbeck has established a number of long-term incentive programs. Lundbeck uses equity- and cash-
settled programs.
Equity-settled programs
In 2021, equity-settled incentive programs consisted of restricted share units (RSUs).
In February 2021 (February 2020), Lundbeck established an RSU programme for Lundbeck’s registered
Executive Management and key employees, as part of Lundbeck’s recurring long-term incentive programme.
Four of the members of the registered Executive Management (four members for the 2020 program) and
135 key employees employed with H. Lundbeck A/S or a Lundbeck subsidiary were granted RSUs (131 key
employees for the 2020 program). The participants were selected on the basis of job level. All the RSUs vest
three years after grant (for the 2020 program will vest three years after grant). Vesting is subject to the Board
of Directors’ decision on vesting, to Lundbeck achieving certain strategic and financial targets specified by
the Board of Directors and to continuing employment with the Group during the vesting period. The fair value
of the RSUs has been calculated on the basis of a share price of DKK 250.97 (DKK 274.56 for the 2020
program) reduced by an expected dividend yield of 2.00% p.a. The fair value at the time of the grant was
DKK 236.21 per RSU (DKK 258.41 for the 2020 program).
The RSUs granted to the registered Executive Management and key employees in 2017 vested in 2021. The
RSUs granted to the registered Executive Management and key employees in 2016 vested in 2020.
RSU programs
2021
2020
2019
2018
2017
Number of persons included in the program
139
135
139
133
127
Total number of RSUs granted
160,273
139,119
127,899
107,321
131,516
Number of RSUs granted to the registered
Executive Management
34,781
29,923
28,128
24,783
47,911
Vesting date
01.02.24
01.02.23
01.02.22
01.02.22
01.02.21
Fair value at the date of grant, DKK
236.21
258.41
269.71
291.03
268.65
At 31 December 2021, no warrants were outstanding (no warrants in 2020). No new warrant programs were
granted in 2021. In 2020, all remaining warrants granted (from the 2012 program) were exercised or expired
and the weighted average share price of the warrants exercised during 2020 was DKK 284.52.
NOTES 13-14
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CONSOLIDATED FINANCIAL STATEMENTS
14 INCENTIVE PROGRAMS - CONTINUED
Warrant programs
Granted
in 2012
Number of persons included in the program
102
Total number of warrants granted
692,003
Number of warrants granted to the
registered Executive Management -
Vesting date
31.03.15
Exercise period begins
01.04.15
Exercise period ends
31.03.20
Exercise price, DKK
113.00
Fair value at the date of grant, DKK
24.11
Registered
Executive
Management
Executives
Other
Total
Average
exercise
price
Warrants
Number
Number
Number
Number
DKK
2020
1 January
- 3,458 23,527 26,985 113.00
Exercised
- (3,458)
(8,039)
(11,497)
113.00
Expired
- - (15,488)
(15,488)
113.00
31 December
-
-
-
-
Cash-settled programs
In 2021, the cash-settled programs consisted of restricted cash units (RCUs).
The cash-settled programs cannot be converted into shares because the value of the programs is distributed
as a cash amount.
In February 2021 (February 2020), Lundbeck established an RCU programme for the Chief Executive Officer
(CEO) and a few key employees in the US subsidiaries. The terms and conditions are similar to those
applying to the RSU programme granted to the registered Executive Management and key employees of the
Parent company and its non-U.S. subsidiaries in February the same year. The RCUs granted to the CEO, a
total of 33,621 (30,012 for the 2020 program), and the RCUs granted to the key employees, a total of 1,505
(1,526 for the 2020 program), will vest three years after grant (for the 2020 program will vest three years after
grant). Vesting is subject to the Board of Directors’ decision on vesting, to Lundbeck achieving certain
strategic and financial targets specified by the Board of Directors and to continuing employment with the
Group during the vesting period. The size of the amount depends on the value of the Lundbeck share on the
vesting date. The fair value at the time of the initial grant was DKK 250.97 per RCU (DKK 258.41 for the
2020 program).
The RCUs granted in 2017 vested in 2021, after which the program was settled. The RCUs granted in 2016
vested in 2020, after which the program was settled.
Fair value, liability and expense recognized in the statement of profit or loss
The RSUs granted are recognized in profit or loss for 2021 at an expense corresponding to the fair value at
the time of grant for the part of the vesting period that concerns 2021.
The total expense recognized in respect of equity-settled programs amounted to DKK 37 million (DKK 30
million in 2020). At 31 December 2021, the fair value of the remaining equity-settled programs was DKK 91
million (DKK 89 million in 2020).
The RCUs granted are recognized in the income statement at an expense corresponding to the value
adjustment for the year based on the performance of the Lundbeck share. The total expense recognized in
respect of cash-settled programs amounted to DKK 4 million (DKK 4 million in 2020) and covers all cash-
settled programs in force in 2021. At 31 December 2021, the total liability in respect of cash-settled programs
was DKK 11 million (DKK 7 million in 2020) and covers all cash-settled programs.
The total expense recognized in profit or loss for all incentive programs amounted to DKK 41 million in 2021
(DKK 34 million in 2020).
NOTE 14
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
76 / 111
CONSOLIDATED FINANCIAL STATEMENTS
15 PROVISIONS
Discounts
and rebates
Product
returns
Other
provisions
Total
DKKm
DKKm
DKKm
DKKm
2021
Provisions at 1 January
1,002 179 630 1,811
Effect of foreign exchange differences
76 10 21 107
Provisions charged
1,790 101 407 2,298
Provisions used
(1,945)
(205)
(498)
(2,648)
Unused provisions reversed
- - (71)
(71)
Provisions at 31 December
923
85
489
1,497
Provisions break down as follows:
Non
-current provisions - 38 54 92
Current provisions
923 47 435 1,405
Provisions at 31 December
923
85
489
1,497
Discounts and rebates
The most significant sales deductions are in the U.S. and comprise discounts and rebates given in connection
with sales under the U.S. Federal and State Government Healthcare programs, primarily Medicaid.
Management’s estimate of discounts and rebates is based on a calculation which includes a combination of
historical product/population utilization mix, price increases, program/market growth and state-specific
information. Further, the calculation of rebates involves legal interpretation of relevant regulations and is
subject to changes in interpretive guidance from governmental authorities. The obligations for discounts and
rebates are incurred at the time the sale is recorded; however, the actual rebate related to a specific sale
may be invoiced by the authorities six to nine months later. In addition to this billing time lag, there is no
statute of limitations for states to submit rebate claims; thus, rebate adjustments in any particular period may
relate to sales from a prior period. Moreover, when a product loses exclusivity, shifts in payer mix may cause
Medicaid claims/estimates to be more volatile.
Product returns
The Group has product return obligations normal for the industry. Management does not expect any major
losses from these obligations apart from the amount already recognized.
Other provisions
Of other provisions at 31 December 2021, DKK 253 million (DKK 161 million in 2020) relates to restructuring
programs. This amount includes the restructuring costs announced during 2021 of around DKK 200 million,
which was recognized in sales and distribution costs in October 2021.
In addition, other provisions comprise liabilities relating to items such as legal disputes.
16 CONTINGENT ASSETS AND CONTINGENT LIABILITIES
Pending legal proceedings
Lundbeck is involved in a number of legal proceedings, including patent disputes, the most significant of
which are described below. The outcome of these proceedings is not expected to have a material impact on
the financial position or cash flows beyond the amount already provided for in the financial statements, or it
is too uncertain to make a reliable provision. Such proceedings will, however, develop over time, and new
proceedings may occur which could have a material impact on the financial position and/or cash flows.
In June 2013, Lundbeck received the European Commission’s decision that agreements concluded with four
generic competitors concerning citalopram violated competition law. The decision included fining Lundbeck
EUR 93.8 million (approximately DKK 700 million). Lundbeck paid and expensed the fine in the third quarter
of 2013. In March 2021, the European Court of Justice rejected Lundbeck’s final appeal of the European
Commission’s decision. So-called “follow-on claims” for reimbursement of alleged losses, resulting from
alleged violation of competition law, often arise when decisions and fines issued by the European
Commission are upheld by the European Court of Justice. Health authorities in the UK and an umbrella
organization of Dutch health insurance companies have taken formal protective steps against Lundbeck with
the principal purpose of preventing potential claims from being time-barred under the applicable statutes of
limitation. In September 2021, the UK proceedings were transferred from the High Court to the Competition
Appeal Tribunal at the request of the parties. Lundbeck expects that the UK health authorities will now pursue
their alleged claims. Further, in late October 2021, Lundbeck received a writ of summons from a German
health care company claiming compensation for an alleged loss of profit plus interest payments, allegedly
resulting from Lundbeck’s conclusion of agreements with two of the four generic competitors, which were
comprised by the EU Court of Justice ruling. Lundbeck is preparing its defence and it may take several years
before a final conclusion is reached by the German courts. Lundbeck disagrees with the claims and will
defend itself against the claims.
NOTES 15-16
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
77 / 111
CONSOLIDATED FINANCIAL STATEMENTS
16 CONTINGENT ASSETS AND CONTINGENT LIABILITIES - CONTINUED
In Canada, Lundbeck is involved in three product liability class-action lawsuits relating to Cipralex
®
/Celexa
®
(two cases alleging various Celexa
®
-induced birth defects and one case against several SSRI manufacturers
(incl. Lundbeck) alleging that SSRI (Celexa
®
/Lexapro
®
) induces autism birth defect, three relating to Abilify
Maintena
®
(alleging i.a. failure to warn about compulsive behaviour side effects) and one relating to Rexulti
®
(also alleging i.a. failure to warn about compulsive behaviour side effects). The cases are in the preliminary
stages and as such there is significant uncertainty as to how these lawsuits will be resolved. Lundbeck
strongly disagrees with the claims raised.
In 2018, Lundbeck entered into settlements with three of four generic companies involved in an Australian
federal court case, in which Lundbeck was pursuing patent infringement and damages claims over the sale
of escitalopram products in Australia. Lundbeck received AUD 51.7 million (DKK 242 million) in 2018. In
Lundbeck’s case against the last of the four generic companies, Sandoz Pty Ltd, the Federal Court found
that Sandoz Pty Ltd had infringed Lundbeck’s escitalopram patent between 2009 and 2012 and awarded
Lundbeck AUD 26.3 million in damages. Sandoz’ appeal of the decision was heard in May 2019 and the Full
Federal Court has in August 2020 allowed Sandoz' appeal and decided that Sandoz is not liable for damages.
Lundbeck’s application for special leave to appeal the decision to the High Court was granted in February
2021, and the appeal was heard on 8 October 2021. A decision is expected within 3 – 6 months from the
hearing. If Lundbeck’s appeal is successful, the case will go back to the Federal Court for recalculation and
Lundbeck’s appeal of the Australian Patent Office’s decision to grant Sandoz a license will be restarted.
Together with Takeda, Lundbeck instituted patent infringement proceedings against 16 generic companies
in response to their filing of Abbreviated New Drug Applications (“ANDAs”) with the U.S. FDA seeking to
obtain marketing approval for generic versions of Trintellix
®
in the U.S. Two opponents have since withdrawn
and Lundbeck has settled with eight opponents. As communicated by Lundbeck in company release no. 706
dated 1 October 2021, the cases against the six remaining opponents (the “ANDA Filers”) has been decided
by the U.S. District Court for the District of Delaware (the ‘Court’). The Court found that Lundbeck’s patent
protecting the active ingredient in Trintellix
®
, vortioxetine (U.S. Patent No. 7,144,884) is valid. The active
ingredient patent expires on 17 June 2026, with an expected six-month paediatric exclusivity period
extending to 17 December 2026. Assuming the ruling is confirmed at appeal, final approval will not be granted
to the relevant ANDA Filers until after expiration of the active ingredient patent, including any extension or
additional periods of exclusivity. A total of seven other patents asserted at trial were found by the Court to be
valid or their validity was not challenged during the trial. The Court decided that none of the seven other
patents were infringed by the relevant ANDA Filers, except that Lupin was found to infringe a patent covering
Lundbeck’s process for manufacturing vortioxetine. Unless and until the Court’s ruling is reversed on appeal,
the patents found not infringed by a particular ANDA Filer will not prevent that ANDA Filer from receiving final
approval. For details on each of the patents comprised by the case, please see the company release no.
706. The Court’s decision has been appealed by Lundbeck to the U.S. Court of Appeals for the Federal
Circuit. Lupin has appealed with respect to the process patent and the ANDA Filers have cross appealed
with respect to the validity of two of the seven other patents.
Together with Otsuka Pharmaceutical, Lundbeck has instituted patent infringement proceedings against
several generic companies that have applied for marketing authorization for generic versions of Rexulti
®
in
the U.S. Lundbeck has strong confidence in the Rexulti
®
patents. The U.S. FDA cannot grant marketing
authorization in the U.S. to the generic companies before the patents expire, unless the generic companies
receive decisions in their favour. Trial is scheduled to begin on 25 July 2022. The compound patent, including
patent term extensions, will expire in the U.S. on 23 June 2029. A patent for the specific formulation used
will expire 12 September 2032.
Lundbeck received a Civil Investigative Demand (“CID”) from the U.S. Department of Justice (“DOJ”) in
March 2020. The CID seeks information regarding the sales, marketing, and promotion of Trintellix. Lundbeck
is cooperating with the DOJ.
In the U.S., Lundbeck is involved in three product liability lawsuits relating to Lexapro
®
(alleging Lexapro
®
induces birth defects). The cases are in the preliminary stages. Lexapro was marketed by Forest Labs. in
the U.S. Lundbeck will vigorously defend against the claims raised.
Joint taxation
H. Lundbeck A/S and Danish subsidiaries are part of a Danish joint taxation scheme with Lundbeckfonden
(Lundbeckfond Invest A/S including subsidiaries of Lundbeckfond Invest A/S), according to which the
Company has partly a joint and several liability and partly a secondary liability with respect to corporate
income taxes etc. for the jointly-taxed companies. In addition, H. Lundbeck A/S has partly a joint and several
liability and partly a secondary liability with respect to any obligations to withhold tax on interest, royalties and
dividends for these companies. However, in both cases the secondary liability is capped at an amount equal
to the share of the capital of the Company directly or indirectly owned by the ultimate parent company. The
total tax obligation under the joint taxation scheme is shown in the financial statements of Lundbeckfond
Invest A/S.
NOTE 16
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
78 / 111
CONSOLIDATED FINANCIAL STATEMENTS
17 BANK DEBT, BOND DEBT AND BORROWINGS
2021
2020
Bank debt and bond debt maturing within below periods from the balance sheet date
DKKm DKKm
Within one year
-
2,000
Between three and four years
1,083
1,698
After more than five years
3,700
3,699
Bank debt and bond debt at 31 December
4,783
7,397
Bank debt and bond debt break down as follows:
Non-current bank debt and bond debt
4,783
5,397
Current bank debt and bond debt
-
2,000
Bank debt and bond debt at 31 December
4,783
7,397
For maturity analysis of loans, see note 19 Financial instruments.
Currency
Expiry of
commitment
Fixed/
floating
Weighted
average
effective
interest rate
Amortized
cost
Nominal
value
Fair
value
% DKKm DKKm DKKm
2021
Bank loan
USD
Jun 2025
Floating
0.93
1,083
1,083
1,083
Issued bonds
EUR
Oct 2027
Fixed
0.88
3,700
3,718
3,755
Total
4,783
4,801
4,838
2020
Bank loan
DKK
Oct 2021
Floating
0.80
2,000
2,000
2,000
Bank loan
USD
Jun 2024
Floating
1.11
1,698
1,698
1,698
Issued bonds
EUR
Oct 2027
Fixed
0.88
3,699
3,720
3,781
Total
7,397
7,418
7,479
The DKK 2 billion bank loan was fully repaid in February 2021.
The USD funding has been swapped into fixed interest rates by interest rate swaps. The nominal amounts
of the interest rate swaps follow the expected repayment profile of the USD debt until they expire in 2023.
The total outstanding amount of the interest rate swaps as of 31 December 2021 was USD 305 million, and
the average interest rate was 1.56% for the fixed legs and 0.12% for the floating legs.
The eurobond is issued with a fixed coupon until October 2027.
Amortized cost is calculated as the proceeds received less instalments paid, plus or minus amortization of
capital gains or losses
Development in bank debt, bond debt and borrowings
Balance at
1 January
Cash
inflow
Cash
outflow
Non-cash
flow
Balance at
31 December
Development in bank debt, bond debt and
borrowings
DKKm
DKKm
DKKm
DKKm
DKKm
2021
Bank loans
3,698 400 (3,123)
108 1,083
Issued bonds
3,699 - - 1 3,700
Total bank debt and bond debt
7,397
400
(3,123)
109
4,783
2020
Bank loans
9,062 - (5,169)
(195)
3,698
Issued bonds
- 3,701 - (2)
3,699
Total bank debt and bond debt
9,062
3,701
(5,169)
(197)
7,397
NOTE 17
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
79 / 111
CONSOLIDATED FINANCIAL STATEMENTS
18 OTHER PAYABLES
2021
2020
DKKm DKKm
Contingent consideration
386
1,108
Other payables
106
82
Non-current payables
492
1,190
Contingent consideration
1,237
-
Other payables
1,656
1,846
Current payables
2,893
1,846
Contingent consideration recognized through acquisitions
As part of the acquisition of Alder BioPharmaceuticals, Inc. (subsequently renamed Lundbeck Seattle
BioPharmaceuticals, Inc.), Lundbeck is required to pay a contingent value right (CVR) of USD 2.00 per share
upon European approval of eptinezumab. The CVR has a value of up to USD 233 million (USD 236 million
in 2020). At 31 December 2021, the fair value of the CVR amounted to DKK 1,237 million (DKK 1,059 million
in 2020).
The CVR was recognized as a contingent consideration at fair value at the acquisition date. Key inputs to
the fair value of the CVR are the promise to pay a fixed price per share acquired, probability of success
weighted by the possible outcomes and Lundbeck’s WACC (weighted average cost of capital).
As part of the acquisition of Alder BioPharmaceuticals, Inc. (subsequently renamed Lundbeck Seattle
BioPharmaceuticals, Inc.), Lundbeck is required to pay a sales milestone dependent on predefined
milestones being reached. The fair value of contingent consideration is calculated as the discounted cash
outflows (DCF method) from future milestone payments, taking probability of success into consideration.
The probability of success of 83.2% used for the calculations of the fair value of the CVR and the sales target
milestone is based on the BIO/MedTracker 2016 publication.
As part of the acquisition of Abide Therapeutics, Inc., Inc. (subsequently renamed Lundbeck La Jolla
Research Center, Inc.), Lundbeck is required to pay up to USD 100 million in sales milestones (USD 150
million in 2020) dependent on predefined milestones being reached. At 31 December 2021, the fair value of
the contingent consideration amounted to DKK 60 million (DKK 49 million in 2020).
Contingent consideration is recognized at fair value. The calculation of the fair value is based on the
discounted cash flow method (DCF method) which comprises significant assumptions and estimates. Key
inputs are expected timing of payment (using a specific discount rate) and probability of success.
19 FINANCIAL INSTRUMENTS
Foreign currency risks
Foreign currency management is handled centrally by the Parent company. Currency management focuses
on risk mitigation and is carried out in conformity with the Group's Treasury Policy, as approved by the Board
of Directors. Foreign currency risks managed by derivatives and loans in 2021 comprise cash flow risk in
several currencies and USD translation risk emanating from net investments in foreign subsidiaries.
The Parent company hedges a part of the Group’s anticipated revenue in selected currencies for a period of
12-18 months using forward exchange contracts and currency options. Hedging is performed on a rolling
basis each month. The forward exchange contracts and currency options are classified as hedging
instruments when meeting the accounting criteria for hedge accounting according to IFRS 9 Financial
Instruments. Unhedged cash flows are sold spot. Changes in the fair value of all instruments meeting the
criteria for hedge accounting are recognized in the statement of comprehensive income as they arise,
together with the forward points and option premiums. At maturity of the hedge contracts, the final effect is
transferred from other comprehensive income and recognized in the profit or loss or balance sheet together
with the hedged item.
Forward exchange contracts and currency options that do not meet the hedge accounting criteria are
classified as trading contracts, and changes in the fair value are recognized under financial income or
financial expenses as they arise.
Cash flow timing and changes to the forecasted amounts are the main sources for evaluating the risk of
hedge ineffectiveness. When concluding a hedge transaction, and each time presenting the financial
statements thereafter, it is assessed whether the hedged exposure and the hedging instrument are still
financially correlated. If the hedged cash flows are no longer expected to be realised, the accumulated value
change is transferred to financial income or financial expenses.
Lundbeck did not have any hedge ineffectiveness in 2021 or 2020.
NOTES 18-19
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
80 / 111
CONSOLIDATED FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS - CONTINUED
Contract
amount
according to
hedge
accounting
Fair value
at year-end
recognized in
the statement
of comprehen-
sive income/
other
receivables
Fair value
at year-
end
recognized in
the statement
of comprehen
-
sive income/
other payables
Realized
exchange
gains/losses
for the year
recognized in
the statement
of profit or
loss/
statement
of financial
position
Average
hedge prices
of existing
forward
exchange
contracts
Maturity
Forward exchange contracts
(against DKK)
DKKm
DKKm
DKKm
DKKm
DKK
2021
CAD (sell position)
393 - (12)
(23)
499.04 Oct. 2022
CNY (sell position)
505 - (33)
(28)
95.53 Oct. 2022
JPY (sell position)
252 - (1)
14 5.69 Nov. 2022
USD (sell position)
3,030 1 (109)
116 631.25 Nov. 2022
Other currencies
1,136 15 (27)
(26)
Dec. 2022
Total
16
(182)
53
2020
CAD (sell position)
383 2 (1)
7 475.46 Dec. 2021
CNY (sell position)
458 3 (5)
- 91.71 Oct. 2021
JPY (sell position)
294 8 - 5 6.04 Oct. 2021
USD (sell position)
3,337 225 - (55)
648.01 Oct. 2021
Other currencies
1,172 14 (41)
48
Dec. 2021
Total
252
(47)
5
Contract
amount
according to
hedge
accounting
Fair value
at year-
end
recognized in
the statement
of comprehen-
sive income/
other
receivables
Fair value
at year-end
recognized in
the statement
of comprehen
-
sive income/
other
payables
Realized
exchange
gains/losses
for the year
recognized in
the statement
of profit or
loss/
statement
of financial
position
Average
hedge price
range
of existing
option
contracts
1
Maturity
Currency option contracts
(against DKK)
DKKm
DKKm
DKKm
DKKm
DKK
2021
AUD (sell position)
82 1 (2)
-
462.18
- 498.24
Nov. 2022
CAD (sell
position) 137 - (2)
-
498.99
- 536.51
Dec. 2022
JPY (sell position)
43 - - - 5.49 - 6.01
Oct. 2022
USD (sell position)
571 1 (15)
-
634.07
- 670.85
Nov. 2022
2
(19)
1) Lundbeck's option structures all consist of a
purchased put option and a sold call option, which protects against downside movements in
currency and limits the upside. The hedge price range is shown net of premium.
Net foreign exchange contracts, trading
There were no outstanding forward exchange contracts relating to trading at 31 December 2021 and no
material impact from trading contracts was recognized in financial income or financial expenses in 2021.
Hedges of net investment
Lundbeck has hedged part of the translation risk emanating from its net investments in foreign subsidiaries
in the U.S. by taking out bank debt in USD. Thereby, Lundbeck decreases the negative impact that a weaker
USD would have on the value of its U.S. assets, as a decrease in the value of the debt portfolio will offset
part of this impact. Lundbeck designates the USD bank debt as hedge of net investment, and the exchange
rate adjustments are recognized in other comprehensive income. The hedges of net investment are
considered to be effective as long as the carrying amount of the net assets in the foreign operation is (at
least) equal to the notional amount on the hedging instrument. For more information about the net investment
hedges, see note 17 Bank debt, bond debt and borrowings.
NOTE 19
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
81 / 111
CONSOLIDATED FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS - CONTINUED
Estimated impact from financial instruments on profit for the year and equity from a 5% increase in
year-end exchange rates of the major currencies
CAD
CNY
USD
DKKm DKKm DKKm
2021
Profit for the year
3
3
9
Equity
(23)
(32)
(235)
2020
Profit for the year
4
(2)
(78)
Equity
(18)
(25)
(330)
The shown sensitivities only comprise impact from Lundbeck’s financial instruments and reflect a relative
change of the exchange rates at 31 December 2021 and 2020.
The sensitivity analysis includes derivatives, bank loans, trade receivable, trade payables, intercompany
lending and borrowing as those are the financial instruments where the Group has the most currency
exposure.
The profit impact comprises financial instruments that remained open at the balance sheet date and which
have an impact on profit in the current financial year. It includes foreign exchange differences relating to intra-
group balances that are not eliminated in the consolidated financial statements. The calculation of the
estimated impact is based on the functional currency of the entities where the financial instruments are
located. The profit impact is limited as the largest liabilities are exchange rate adjusted in other
comprehensive income, being part of Lundbeck’s hedging structure.
The equity impact includes financial instruments that remained open at the balance sheet date and which
are exchange rate adjusted in other comprehensive income. The equity effect in 2021 and 2020 primarily
consists of exchange rate adjustments on bank loans in USD (for 2020 also including cross-currency swaps)
that are designated as hedges of net investment and foreign exchange differences on outstanding cash flow
hedging contracts.
Due to Denmark’s long-standing fixed exchange rate policy against the euro and the expected continuation
of this policy, the foreign currency risk for euro is considered immaterial, and euro is therefore not included
in the table above.
Interest rate risks
Lundbeck ensures that the interest rate risk is managed according to the Treasury Policy. Interest rate risk
relates mainly to outstanding interest-bearing debt with floating interest rates.
Interest rate risk management is handled centrally by the Parent company. Through the Group’s Treasury
Policy, the Board of Directors has approved the limits for borrowing and investment. Loans secured by
property must be approved by the Board of Directors. Only a limited part of the total loan portfolio is allowed
to have floating interest rates, and to hedge the interest rate risk on loans, the Board of Directors has
approved the use of Interest Rate Swaps (IRS), Caps, Floors and Forward Rate Agreements (FRAs).
Lundbeck’s exposure to interest rate risk is low, as the EUR 500 million bond has a fixed coupon and the
USD funding has been swapped into fixed interest through interest rate swaps. For more information about
interest rate swaps, see note 17 Bank debt, bond debt and borrowings
.
An interest rate change on bank debt and bond debt, including interest rate swaps, of +/- 1 percentage point
would decrease/increase profit for the year before tax by DKK 2 million (DKK 15 million in 2020) and
increase/decrease equity by DKK 19 million at 31 December 2021 (DKK 56 million in 2020).
The below table includes undiscounted cash flows, including interest payments, and assumes that the
liabilities will be repaid at their contractual maturity dates.
See note 18 Other payables for details on the obligations relating to contingent consideration and
note 17 Bank debt, bond debt and borrowings for details on the bank debt and bond debt.
NOTE 19
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
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CONSOLIDATED FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS - CONTINUED
Classification of and contractual maturity dates for financial assets and financial liabilities
Within 1 year
Between
1 and 5 years
After 5 years
Total
Effective
interest
rates
2021
DKKm
DKKm
DKKm
DKKm
%
Financial assets
Derivatives to hedge future cash flows
- FX 19 - - 19 0
Derivatives to hedge future cash flows
- interest 5 4 - 9 0-2
Derivatives to hedge net investments
- - - - 0-2
Financial assets measured at FVTOCI¹
24
4
-
28
Other financial assets
- - 57 57 0
Other financial assets measured at FVTPL²
-
-
57
57
Receivables³
2,707 134 - 2,841 0
Cash and bank balances
2,279 - - 2,279 (1)-10
Financial assets measured at amortized cost
4,986
134
-
5,120
Total financial assets
5,010
138
57
5,205
Financial liabilities
Derivatives to hedge future cash flows - FX
202
-
-
202
0
Derivatives to hedge future cash flows - interest
24
9
-
33
0-2
Financial liabilities measured at FVTOCI¹
226
9
-
235
Contingent consideration⁴
1,237
33
353
1,623
Other financial liabilities measured at FVTPL²
1,237
33
353
1,623
Bank and bond debt
45
1,260
3,751
5,056
0-2
Lease liabilities
86
266
187
539
1-8
Trade and other payables
5,320
101
-
5,421
0
Financial liabilities measured at amortized cost
5,451
1,627
3,938
11,016
Total financial liabilities
6,914
1,669
4,291
12,874
1) Fair value through other comprehensive income.
2) Fair value through profit or loss.
3) Including other receivables recognized in non-current assets.
4) See note 18 Other payables.
Within 1 year
Between
1 and 5 years
After 5 years
Total
Effective
interest
rates
2020
DKKm
DKKm
DKKm
DKKm
%
Financial assets
Derivatives to hedge future cash flows
- FX 252 - - 252 0
Derivatives to hedge future cash flows
- interest 15 7 - 22 0-2
Derivatives to hedge net investments
209 - - 209 0-2
Financial assets measured at FVTOCI¹
476
7
-
483
Other financial assets
- - 116 116 0
Other financial assets measured at FVTPL²
-
-
116
116
Receivables³
2,941 104 - 3,045 0
Cash and bank balances
3,924 - - 3,924 (1)-10
Financial assets measured at amortized cost
6,865
104
-
6,969
Total financial assets
7,341
111
116
7,568
Financial liabilities
Derivatives to hedge future cash flows - FX
47
-
-
47
0
Derivatives to hedge future cash flows - interest
46
58
-
104
0-2
Financial liabilities measured at FVTOCI¹
93
58
-
151
Contingent consideration⁴
-
1,087
21
1,108
Other financial liabilities measured at FVTPL²
-
1,087
21
1,108
Bank and bond debt
2,063
1,865
3,786
7,714
0-2
Lease liabilities
77
229
187
493
1-8
Trade and other payables
5,896
82
-
5,978
0
Financial liabilities measured at amortized cost
8,036
2,176
3,973
14,185
Total financial liabilities
8,129
3,321
3,994
15,444
NOTE 19
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CONSOLIDATED FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS - CONTINUED
Level 1
Level 2
Level 3
Financial assets and financial liabilities measured
or disclosed at fair value
DKKm DKKm DKKm
2021
Financial assets
Other financial assets¹
22
-
35
Derivatives¹
-
41
-
Total
22
41
35
Financial liabilities
Contingent consideration¹
-
-
1,623
Derivatives¹
-
243
-
Bank debt²
-
1,083
-
Bond debt²
3,755
-
-
Total
3,755
1,326
1,623
2020
Financial assets
Other financial assets¹
81
-
35
Derivatives¹
-
697
-
Total
81
697
35
Financial liabilities
Contingent consideration¹
-
-
1,108
Derivatives¹
-
365
-
Bank debt²
-
3,698
-
Bond debt²
3,781
-
-
Total
3,781
4,063
1,108
1) Measured at fair value.
2) Disclosed at fair value.
The fair value of securities is based on publicly quoted prices of the invested assets. The fair value of
derivatives is calculated by applying recognized measurement techniques, whereby assumptions are
based on the market conditions prevailing at the balance sheet date. The fair value of contingent
consideration is calculated as the discounted cash outflows (DCF method) from future milestone payments,
taking probability of success into consideration. The fair value adjustment of contingent consideration
amounts to a net loss of DKK 133 million and is the result of changes in the time value of the contingent
value rights and of the sales milestones dependent on predefined milestones being reached. Total
contingent consideration amounted to DKK 1,623 million at 31 December 2021 (DKK 1,108 million at 31
December 2020). Besides the fair value adjustment and the adjustment of the sales milestone (see note 18
Other payables), the only change in contingent consideration is exchange rate adjustments of DKK 109
million.
The carrying amount of other receivables, trade receivables, prepayments, bank debt, other debt, trade
payables and other payables is believed to be equal to or close to fair value.
20 AUDIT FEES
2021
2020
DKKm DKKm
Statutory audit
9
10
Assurance engagements other than audit
1
-
Tax advisory
2
4
Other services
4
1
Fee to PricewaterhouseCoopers
16
15
The fee for non-audit services provided to the Group by PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab, Denmark, amounted to DKK 3 million (DKK 4 million in 2020) and consisted of
people service project, other assurance services and other accounting and tax advisory services.
Certain subsidiaries of the Group are not subject to audit by PricewaterhouseCoopers.
NOTES 19-20
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CONSOLIDATED FINANCIAL STATEMENTS
21 CONTRACTUAL OBLIGATIONS
Research and development milestones and collaborations
The Group has entered into a number of agreements relating to research and development as well as other
collaborations. According to the agreements, Lundbeck is committed to pay certain milestones. At 31
December 2021, potential future milestone payments covering the coming ten-year period totalled up to DKK
1,031 million (DKK 300 million in 2020).
Sales milestones
Lundbeck is committed to pay certain commercial sales milestones. The amounts depend on future sales.
Other purchase obligations
The Group has undertaken purchase obligations relating to property, plant and equipment in the amount of
DKK 68 million (DKK 126 million in 2020).
22 RELATED PARTIES
Lundbeck’s related parties
• The Parent company’s principal shareholder, Lundbeckfonden (Lundbeckfond Invest A/S), Scherfigsvej 7,
2100 Copenhagen, Denmark.
• Companies in which Lundbeckfonden exercises controlling influence, including ALK-Abelló A/S and
Falck A/S.
• Members of the Parent company’s registered Executive Management and Board of Directors as well as
close relatives of these persons.
• Companies in which members of the Parent company’s registered Executive Management and Board of
Directors as well as close relatives of these persons exercise controlling influence.
Transactions and balances with Lundbeckfonden
There have been the following transactions and balances with Lundbeckfonden:
• Payment of dividends of DKK 343 million in 2021 (DKK 563 million in 2020).
• Payment of provisional tax of DKK 28 million in 2021 (DKK 101 million in 2020) for the Parent company
and Danish subsidiaries.
• Refund of residual tax of DKK 131 million in 2021 (DKK 64 million in 2020) for the Parent company and
Danish subsidiaries.
• Interest income of DKK 1 million in 2021 (expense of DKK 1 million in 2020).
Lundbeckfonden exercises controlling influence on H. Lundbeck A/S.
Transactions and balances with the ALK group
There have been no transactions or balances with the ALK group.
Transactions and balances with the Falck group
There have been no material transactions or balances with the Falck group.
Transactions and balances with the registered Executive Management and the Board of Directors
In addition to the transactions with members of the registered Executive Management and the Board of
Directors outlined in notes 3 Employee costs and 14 Incentive programs, the Parent company has paid
dividends on shares held by members of the registered Executive Management and the Board of Directors
in H. Lundbeck A/S. At 31 December 2021 and 31 December 2020, there were no balances with the
registered Executive Management and the Board of Directors.
Transactions and balances with other related parties
Other than the above, there have been no material transactions or balances with other related parties.
NOTES 21-22
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CONSOLIDATED FINANCIAL STATEMENTS
23 LIST OF SUBSIDIARIES
The list below shows the subsidiaries in the Group.
Share of voting rights
and ownership
Purpose
%
Lundbeck Argentina S.A., Argentina
Sales and distribution
100
Lundbeck Australia Pty Ltd, Australia, including
Sales and distribution
100
-
CNS Pharma Pty Ltd, Australia
Sales and distribution
100
Lundbeck Austria GmbH, Austria
Sales and distribution
100
Lundbeck S.A., Belgium
Sales and distribution
100
Lundbeck Brasil Ltda., Brazil
Sales and distribution
100
Lundbeck Canada Inc., Canada
Sales and distribution
100
Lundbeck Chile Farmacéutica Ltda., Chile
Sales and distribution
100
Lundbeck (Beijing) Pharmaceuticals Consulting Co., Ltd., China
Sale
services 100
Lundbeck Colombia S.A.S., Colombia
Sales and distribution
100
Lundbeck Croatia d.o.o., Croatia
Sale services
100
Lundbeck Czech Republic s.r.o., Czech Republic
Sales and distribution
100
Lundbeck Export A/S, Denmark
Sales and
distribution 100
Lundbeck Pharma A/S, Denmark
Sales and distribution
100
Lundbeck Eesti A/S, Estonia
Sales and distribution
100
OY H. Lundbeck AB, Finland
Sales and distribution
100
Lundbeck SAS, France
Sales and distribution
100
Sofipharm
SA, France, including
Other
100
-
Laboratoire Elaiapharm SA, France
Production
100
Lundbeck GmbH, Germany
Sales and distribution
100
Lundbeck Hellas S.A., Greece
Sales and distribution
100
Lundbeck HK Limited, Hong Kong
Sales and
distribution 100
Lundbeck Hungária KFT, Hungary
Sales and distribution
100
Lundbeck India Private Limited, India
Sales and distribution
100
Lundbeck (Ireland) Ltd., Ireland
Sales and distribution
100
Lundbeck Israel Ltd., Israel
Sales and
distribution 100
Lundbeck Italia S.p.A., Italy
Sales and distribution
100
Lundbeck Pharmaceuticals, Italy S.p.A., Italy, including
Production
100
-
Archid S.A., Luxembourg
Sales and distribution
100
Lundbeck Japan K.K., Japan
Sale services
100
Lundbeck Korea Co., Ltd., Republic of Korea
Sales and distribution
100
SIA Lundbeck Latvia, Latvia
Sale services
100
Share of voting rights
and ownership
Purpose
%
UAB Lundbeck Lietuva, Lithuania
Sale services
100
Lundbeck
Malaysia SDN. BHD., Malaysia
Sales and distribution
100
Lundbeck México, SA de CV, Mexico
Sales and distribution
100
Lundbeck B.V., The Netherlands
Sales and distribution
100
Prexton Therapeutics B.V., The Netherlands, including
Other
100
-
Prexton Therapeutics S.A., Switzerland
Other
100
Lundbeck New Zealand Limited, New Zealand
Other
100
H. Lundbeck AS, Norway
Sales and distribution
100
Lundbeck Pakistan (Private) Limited, Pakistan
Sales and distribution
100
Lundbeck America
Central S.A., Panama
Sales and distribution
100
Lundbeck Peru S.A.C., Peru
Sales and distribution
100
Lundbeck Philippines Inc., Philippines
Sales and distribution
100
Lundbeck Business Service Centre Sp.z.o.o., Poland
Other
100
Lundbeck Poland
Sp.z.o.o., Poland
Sales and distribution
100
Lundbeck Portugal
- Produtos Farmacêuticos Unipessoal Lda,
Portugal
Sales and distribution
100
Lundbeck Romania SRL, Romania
Sales and distribution
100
Lundbeck RUS LLC, Russian Federation
Sale
services 100
Lundbeck Singapore PTE. LTD., Singapore
Sales and distribution
100
Lundbeck Slovensko s.r.o., Slovakia
Sales and distribution
100
Lundbeck Pharma d.o.o., Slovenia
Sales and distribution
100
Lundbeck South Africa (Pty) Limited, South
Africa, including
Sales and distribution
100
-
H. Lundbeck (Proprietary) Limited, South Africa
Other
100
Lundbeck España S.A., Spain
Sales and distribution
100
H. Lundbeck AB, Sweden
Sales and distribution
100
Lundbeck (Schweiz) AG,
Switzerland
Sales and distribution
100
Lundbeck İlaç Ticaret Limited Şirketi, Turkey
Sales and distribution
100
Lundbeck Group Ltd. (Holding), UK, including
Other
100
-
Lundbeck Limited, UK
Sales and distribution
100
-
Lundbeck Pharmaceuticals Ltd., UK
Other
100
-
Lifehealth Limited, UK
Other
100
-
Lundbeck UK LLP, UK¹
Other
100
NOTE 23
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CONSOLIDATED FINANCIAL STATEMENTS
23 LIST OF SUBSIDIARIES – CONTINUED
Share of voting rights
and ownership
Purpose
%
Lundbeck USA Holding LLC, USA,
including
Other
100
-
Lundbeck LLC, USA, including
Sales and distribution
100
- Chelsea Therapeutics International, Ltd., USA, including
Other
100
- Lundbeck NA Ltd., USA
Other
100
- Lundbeck Pharmaceuticals LLC, USA
Other
100
- Lundbeck Research USA, Inc., USA
Other
100
- Lundbeck La Jolla Research Center, Inc., USA, including
Research and development
100
- Abide Therapeutics (UK) Limited, UK
Other
100
- Lundbeck Seattle BioPharmaceuticals, Inc., USA, including
Research and development
100
- Alder Biopharmaceuticals Pty., Ltd., Australia
Other
100
- Alder Biopharmaceuticals Limited, Ireland
Other
100
- Alderbio Holdings LLC ("ANEV"), USA
Other
100
Lundbeck de Venezuela, C.A., Venezuela
Sales and distribution
100
1) Lundbeck UK LLP is owned by Lundbeck Group Ltd. (Holding),
Lundbeck Limited and Lifehealth Limited, all of which have H. Lundbeck A/S
as their direct or ultimate parent company.
24 SUBSEQUENT EVENTS
In January 2022, Lundbeck announced that the European Commission has granted marketing
authorization for Vyepti
®
in the European Union (EU) for the prophylactic treatment of migraine in adults
who have at least four migraine days per month. The approval follows the positive opinion on 11 November
2021 from the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use
(CHMP). The marketing authorization is valid in all EU Member States, Iceland, Norway, and Liechtenstein.
The approval will result in an increase in the fair value of the contingent consideration payable of
approximately DKK 300 million, which will be expensed as financial items in 2022.
NOTES 23-24
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CONSOLIDATED FINANCIAL STATEMENTS
25 SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the following accounting policies to all periods presented in these
consolidated financial statements, unless otherwise mentioned (see note 1.7 New standards and
amendments issued but not yet effective).
Basis of consolidation
The consolidated financial statements comprise the Parent company H. Lundbeck A/S and entities controlled
by the Parent company.
Translation of foreign currency
On initial recognition, transactions denominated in foreign currencies are translated at standard rates which
approximate the exchange rates at the transaction date. Exchange differences arising between the exchange
rates at the transaction date and the exchange rates at the date of payment are recognized in profit or loss
under financial income or financial expenses.
Receivables, payables and other monetary items denominated in foreign currencies that have not been
settled at the balance sheet date are translated at the exchange rates at the balance sheet date. The
differences between the exchange rates at the balance sheet date and the rates at the time of recognition or
settlement are recognized in profit or loss under financial income or financial expenses.
On recognition of foreign subsidiaries having a functional currency different from that used by the Parent
company, items in the profit or loss are translated at monthly average exchange rates, and non-monetary
and monetary balance sheet items are translated at the exchange rates at the balance sheet date. Exchange
differences arising when translating the profit or loss and the balance sheet of foreign subsidiaries are
recognized in other comprehensive income.
Exchange gains/losses on translation of receivables from and payables to subsidiaries that are considered
part of the Parent company’s overall net investment in subsidiaries are recognized in other comprehensive
income.
Exchange gains/losses on that part of the bank debt in foreign currency which is used for hedging of the net
investments in subsidiaries and which provides an effective hedging of the exchange gains/losses of the net
investments are recognized in other comprehensive income
Statement of cash flows
The consolidated statement of cash flows is presented in accordance with the indirect method and shows
the composition of cash flows, divided into operating, investing and financing activities, and cash and bank
balances at the beginning and end of the year.
Cash comprises cash and bank balances.
Cash flows denominated in foreign currencies, including cash flows in foreign subsidiaries, are translated at
the average exchange rates for the year as they approximate the actual exchange rates at the date of
payment. Cash and bank balances at year-end are translated at the exchange rates at the balance sheet
date, and the effect of exchange gains/losses on cash and bank balances is shown as a separate line item
in the statement of cash flows.
Financial instruments
Forward exchange contracts and other derivatives are initially recognized in the balance sheet at fair value
on the contract date and subsequently remeasured at fair value at the balance sheet date. The fair value of
derivatives is determined by applying recognized measurement techniques, whereby assumptions are based
on the market conditions prevailing at the balance sheet date. Positive and negative fair values are included
in other receivables and other payables, respectively.
Changes in the fair value of derivatives classified as hedging instruments and meeting the criteria for hedge
accounting are recognized in other comprehensive income. On recognition of hedged items, income and
expenses relating to such hedging transactions are transferred from other comprehensive income and
recognized in the same line item as the hedged item.
Changes in the fair value of derivatives not qualifying for hedge accounting are recognized in the statement
of profit or loss under financial income or financial expenses as they arise.
Securities, equity investments recognized in other financial assets, derivatives and contingent consideration
measured at fair value are classified according to the fair value hierarchy as belonging to levels 1-3
depending on the valuation method applied.
NOTE 25
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CONSOLIDATED FINANCIAL STATEMENTS
25 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Statement of profit or loss
Revenue
Revenue comprises invoiced sales less expected return of goods for the year, discounts, rebates and
revenue-based taxes. Revenue is recognized when the goods are delivered at the agreed destination (point
in time), meaning that control of products has transferred to the buyer and it is probable that the Group will
collect the consideration to which it is entitled for transferring the products.
Revenue is measured at the amount of consideration to which the Group expects to be entitled to in exchange
for transferring the products. Revenue is recognized net of sales deductions, including product returns as
well as discounts, rebates and revenue based taxes.
Moreover, revenue includes licensing income and royalties from out-licensed products, non-refundable down
payments and milestone payments relating to research and development collaborations, and income from
collaborations on commercialization of products.
Sales-based licensing and royalty income from out-licensed products are recognized in profit or loss under
revenue, when the Group provides access to its product rights as it exists throughout the license period. As
the performance obligations are satisfied over time, revenue is also recognized over time.
When the Group provides a customer the right to use the product rights as it exists at the point in time at
which the license is granted, revenue is recognized at a point in time when control is transferred to the
licensee and the license period begins when the customer's rights to the intellectual property is transferred.
Non-refundable down payments and milestone payments received relating to research collaborations are
recognized in profit or loss under revenue.
Cost of sales
Cost of sales comprises cost of goods sold, which includes the cost of raw materials, transportation costs,
consumables and goods for resale, direct labour and indirect costs of production, including operating costs,
and amortization/depreciation and impairment losses relating to product rights and manufacturing facilities.
Sales and distribution costs
Sales and distribution costs comprise costs incurred for the sale and distribution of the Group’s products sold
during the year. This includes costs incurred for sales campaigns, training and administration of the sales
force and for direct distribution, marketing and promotion. Also included are salaries and other costs for the
sales, distribution and marketing functions, amortization/depreciation and impairment losses and other
indirect costs.
Administrative expenses
Administrative expenses comprise expenses incurred for the management and administration of the Group,
i.e. salaries and other expenses relating to e.g. management, HR, IT and finance functions as well as
amortization/depreciation and impairment losses and other indirect costs.
Research and development costs
Research and development costs comprise costs incurred for the Group’s research and development
functions, i.e. employee costs, amortization/depreciation and impairment losses and other indirect costs as
well as costs relating to research and development collaborations.
Research costs are always recognized in profit or loss as they are incurred.
Due to a very long development period and the significant uncertainties inherent in the development of new
products, development costs are expensed as incurred in line with industry practice. Consequently, the
development costs do not qualify for capitalization as intangible assets until marketing approval by a
regulatory authority is obtained or considered highly probable.
Other operating expenses
Other operating expenses comprise other income and expenses relating to operating activities of a
secondary nature to the Group. Other operating expenses include integration and transaction costs relating
to material acquisitions, income and expenses relating to legal settlements and material gains and losses on
the sale or retirement of items of property, plant and equipment.
Financial income and financial expenses
Financial income and financial expenses include interest income and expenses, net gain or loss on securities
and other financial assets, including dividends, fair value adjustment of contingent consideration, fair value
adjustment of other financial liabilities, foreign currency gains or losses and other financial income and
expenses.
Interest income or expense is recognized using the effective interest method.
NOTE 25
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CONSOLIDATED FINANCIAL STATEMENTS
25 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Income tax
The Parent company and Danish subsidiaries are jointly taxed with the principal shareholder,
Lundbeckfonden (Lundbeckfond Invest A/S), and its Danish subsidiaries. The current Danish corporate
income tax liability is allocated among the companies of the tax pool in proportion to their taxable income (full
allocation subject to reimbursement in respect of tax losses).
Tax for the year, which consists of the year’s current tax and the change in deferred tax, is recognized in the
statement of profit or loss as regards the amount that can be attributed to the net profit or loss for the year,
in other comprehensive income as regards the amount that can be attributed to items in other comprehensive
income, and in equity as regards the amount that can be attributed to items in equity. The effect of foreign
exchange differences on deferred tax is recognized in the statement of financial position as part of the
movements in deferred tax.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the Group operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and considers whether it is probable that a tax authority
will accept an uncertain tax treatment. The Group measures its tax balances based on either the most likely
amount or the expected value, depending on which method provides a better prediction of the resolution of
the uncertainty.
Current tax for the year is calculated based on the income tax rates and rules applicable at the reporting date.
Current tax payables and receivables, including contributions payable and receivable under the Danish joint
taxation scheme, are recognized in the balance sheet, computed as tax calculated on the taxable income for
the year adjusted for provisional tax paid.
Deferred tax is recognized on all temporary differences between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not recognized on temporary differences arising either on initial
recognition of goodwill or from a transaction that is not a business combination, if the temporary difference
ascertained at the time of the initial recognition affects neither the financial result nor the taxable income. The
tax value of the assets is calculated based on the planned use of the individual assets.
Deferred tax is measured on the basis of the income tax rates and tax rules in force in the respective countries
at the balance sheet date. Changes in deferred tax resulting from changed income tax rates or tax rules are
recognized in profit or loss.
Deferred tax assets, including the tax value of tax loss carryforwards, are recognized in the balance sheet at
the value at which the assets are expected to be realized, either through an offset against deferred tax
liabilities or as net tax assets to be offset against future positive taxable income.
Changes in deferred tax concerning expenses for share-based payments are generally recognized in profit
or loss. However, if the amount of the tax deduction exceeds the related cumulative expense, it indicates that
the tax deduction relates not only to an operating expense, but also to an equity item. In such a case, the
excess of the associated current or deferred tax is recognized directly in equity.
Deferred tax in respect of recaptured losses previously deducted in foreign subsidiaries is recognized on the
basis of a specific assessment of each individual subsidiary.
Balances on interest deductibility limitations calculated according to the provisions of the Danish Corporation
Tax Act are allocated between the jointly-taxed companies according to a joint taxation agreement and are
allocated between the companies that are subject to deductibility limitation in proportion to their share of the
total limitation. Deferred tax liabilities in respect of these balances are recognized in the balance sheet,
whereas deferred tax assets are recognized only if the criteria for recognition of deferred tax assets are met.
Statement of financial position
Intangible assets
Goodwill
On initial recognition, goodwill is measured and recognized as the excess of the cost over the fair value of
the acquired assets, liabilities and contingent liabilities.
Development projects
Development costs are recognized in profit or loss as they are incurred unless the conditions for capitalization
have been met. Development costs are capitalized only if the development projects are clearly defined and
identifiable and where the technical rate of utilization of the project, the availability of adequate resources
and a potential future market or development opportunity can be demonstrated. Furthermore, such costs are
capitalized only where the intention is to manufacture, market or use the project, when the cost can be
measured reliably and when it is probable that the future earnings can cover production, sales and distribution
costs, administrative expenses and development costs.
After completion of the development work, development costs are amortized over the estimated useful life.
The maximum amortization period for development projects protected by intellectual property rights is
consistent with the remaining patent protection period of the rights concerned. Ongoing development projects
are tested for impairment at least annually or when there is indication of impairment.
NOTE 25
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CONSOLIDATED FINANCIAL STATEMENTS
25 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Product rights and other intangible assets
Acquired intellectual property rights in the form of product rights, patents, licences, customer relationships
and software are measured at cost less accumulated amortization and impairment losses. The cost of
software comprises the cost of planning, labor and costs directly attributable to the project.
Product rights are amortized over the economic lives of the underlying products, which in all material aspects
follow the patent terms, which are currently between five and fifteen years. Other rights are amortized over
the period of agreement. Amortization commences when the asset is ready to be brought into use.
Amortization is recognized in profit or loss under cost of sales and research and development costs,
respectively.
Borrowing costs to finance the manufacture of intangible assets are recognized in the cost price, if such
borrowing costs relate to the production period. Other borrowing costs are expensed.
Gains and losses on the disposal of development projects, patents and licences are measured as the
difference between the selling price less cost to sell and the carrying amount at the time of sale. In general,
amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
Property, plant and equipment
Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses.
Land is not depreciated.
Cost includes the costs of purchase and expenses directly attributable to the purchase until the asset is ready
for use. The cost of self-constructed assets includes costs directly attributable to the construction of the asset.
Borrowing costs to finance the construction of property, plant and equipment are recognized in the cost price,
if such borrowing costs relate to the production period. Other borrowing costs are expensed.
Property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the
assets:
• Buildings 30 years
• Installations 10 years
• Plant and machinery 3-10 years
• Other fixtures and fittings, tools and equipment 3-10 years
• Leasehold improvements, max. 10 years
Depreciation methods, useful lives and residual values are reassessed annually and adjusted if appropriate.
Costs incurred that increase the recoverable amount of an asset are added to the value of the asset as an
improvement and are depreciated over the estimated useful life of the improvement.
Gains or losses on the sale or retirement of items of property, plant and equipment are calculated as the
difference between the carrying amount and the selling price less cost to sell or discontinuance costs. Gains
and losses are recognized in profit or loss; normally in a separate line item or, if considered immaterial to the
understanding of the consolidated financial statements, in the same line item as the associated depreciation.
Right-of-use assets are initially measured at cost, which comprises the initial amount of the liability adjusted
for any lease payments made at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the
site on which it is located, less any lease incentives.
Subsequently, the right-of-use asset is depreciated using the straight-line method from the commencement
date to the end of the lease term. Depreciation is recognized in profit or loss. Right-of-use assets are
presented as part of property, plant and equipment.
Impairment
Intangible assets with indefinite useful lives, intangible assets not yet available for use and goodwill acquired
in a business combination are not subject to amortization and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they may be impaired. The annual impairment
test is performed irrespective of whether there is any indication of impairment.
Intangible assets and property, plant and equipment in use with finite useful lives are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
NOTE 25
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CONSOLIDATED FINANCIAL STATEMENTS
25 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and
value-in-use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from other
assets or groups of assets (cash-generating unit). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Impairment losses are reversed only if the assumptions and estimates underlying the impairment calculation
have changed. Indications of impairment or reversal of impairment include the following:
• Research and development results for a product
• Changes in expected cash flows due to lower sales expectations
• Changes in technology
• Changes in assumptions about future use
• Changes in market and legal risks
• Changes in cost structure
Other financial assets
Equity investments that are not investments in associates are classified as other financial assets.
On initial recognition, equity investments are measured at fair value. Subsequently, they are measured at
fair value at the balance sheet date, and changes to the fair value are recognized under financial income or
financial expenses or in other comprehensive income according to an individual decision for each equity
investment.
Inventories
Raw materials, packaging and goods for resale are measured at the latest known cost at the balance sheet
date, which is equivalent to cost computed according to the FIFO method. Work in progress and finished
goods manufactured by Lundbeck are measured at cost, i.e. the cost of raw materials, consumables, direct
labor and indirect costs of production. Indirect costs of production include materials, labor, maintenance of
and depreciation on machines, factory buildings and equipment used in the manufacturing process as well
as the cost of factory administration and management. Indirect costs of production are allocated based on
the normal capacity of the production plant.
Inventories are written down to net realizable value if it is lower than the cost price. The net realizable value
of inventories is calculated as the selling price less costs of completion and costs incurred to execute the
sale. The net realizable value is determined having regard to marketability, obsolescence and expected
selling price developments.
Receivables
Current receivables comprise trade receivables and other receivables arising in the Group’s normal course
of business.
Other receivables recognized in financial assets are financial assets with fixed or determinable cash flows
that are not quoted in an active market and are not derivative financial instruments.
On initial recognition, receivables are measured at fair value and subsequently at amortized cost, which
usually corresponds to the nominal value less writedowns to counter the risk of losses. Writedowns are
calculated using the ‘full lifetime expected credit losses’ method, whereby the likelihood of non-fulfilment
throughout the lifetime of the financial instrument is taken into consideration. A provision account is used for
this purpose.
Securities
On initial recognition, securities (including the bond portfolio), which are included in the Group’s documented
investment strategy for excess liquidity and recognized under current assets, are measured at fair value.
Subsequently, the securities are measured at fair value at the balance sheet date. The fair value is based on
officially quoted prices of the invested assets. Both realized and unrealized gains and losses are recognized
in profit or loss under financial income or financial expenses.
Equity
Dividends
Proposed dividends are recognized as a liability at the time of adoption of the dividend resolution at the
Annual General Meeting (the time of declaration). Dividends expected to be paid in respect of the year are
included in the line item Profit for the year in the statement of changes in equity.
Treasury shares
Acquisition and sale of treasury shares as well as dividends are recognized directly in equity under retained
earnings.
Share-based payments
Share-based incentive programs in which shares are granted to employees and in which employees may
opt to buy shares in the Parent company (equity-settled programs) are measured at the equity instruments’
fair value at the date of grant and recognized under employee costs as and when the employees obtain the
right to receive/buy the shares. The offsetting item is recognized directly in equity under retained earnings.
NOTE 25
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
92 / 111
CONSOLIDATED FINANCIAL STATEMENTS
25 SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Share price-based incentive programs in which employees have the difference between the agreed price
and the actual share price settled in cash (cash-settled programs) are measured at fair value at the date of
grant and recognized under employee costs as and when the employees obtain the right to such difference
settlement. The cash-settled programs are subsequently remeasured on each balance sheet date and upon
final settlement, and any changes in the fair value of the programs are recognized under employee costs.
The offsetting item is recognized under liabilities until the time of the final settlement.
Retirement benefit obligations and similar obligations
Defined contribution plans
Payments to defined contribution plans are recognized in profit or loss at the due date, and any contributions
payable are recognized in the balance sheet under current liabilities.
Defined benefit plans
The present value of the Group’s liabilities relating to future pension payments under defined benefit plans
is measured on an actuarial basis once a year on the basis of the pensionable period of employment up to
the time of the actuarial valuation. The calculation of present value is based on assumptions of future
developments of salary, interest, inflation, mortality and disability rates and other factors. Present value is
computed exclusively for the benefits to which the employees have earned entitlement through their
employment with Lundbeck. Pension expenses, finance costs and administration fees are recognized in
profit or loss under employee costs. Actuarial gains and losses are recognized in other comprehensive
income as they are calculated and cannot subsequently be recycled through profit or loss.
The present value of the defined benefit plan liability is recognized less the fair value of the plan assets, and
any net obligation is recognized in the balance sheet under non-current liabilities. Any net asset is recognized
in the balance sheet as a financial asset, taking into consideration, where relevant, the provisions of IFRIC
14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.
Provisions
Provisions mainly consist of provisions for discounts and rebates, product returns, pending lawsuits and
restructuring. A provision is a liability of uncertain timing or amount.
Unsettled discounts and rebates are recognized as provisions, when the timing or amount is uncertain.
Where absolute amounts are known, the discounts and rebates are recognized as trade payables.
Return obligations imposed on the Group are recognized as provisions in the balance sheet.
Amounts relating to pending lawsuits are recognized when the outflow is probable and the amount is
measured as the best estimate of the costs required to settle the liabilities at the balance sheet date.
In connection with restructurings in the Group, provisions are made only for liabilities set out in a specific
restructuring plan on the basis of which the parties affected can reasonably expect that the Group will carry
out the restructuring, either by starting to implement the plan or announcing its main components.
Debt
Bank debt and bond debt are recognized at the time of raising of the loan/issuing of the bonds at the fair
value of the proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are
measured at amortized cost, which is equivalent to the capitalized value when the effective rate of interest is
used. The difference between the proceeds and the nominal value is recognized in profit or loss under
financial income or financial expenses over the loan period.
Other payables
Other payables include contingent consideration, payables to shareholders, debt to public authorities, etc.
Contingent consideration is recognized as part of the business combination and is recognized at fair value
considering the passage of time and changes in the applied probability of success. The fair value is assessed
at each reporting date and the effect of any adjustments relating to the timing of payment and the probability
of success is recognized under financial income or financial expenses.
Payables to shareholders and other debts are measured at amortized cost.
Lease liabilities
Lease liabilities are recognized at the present value of future payments in accordance with the lease
agreements and include the present value of future payments relating to reasonably certain extensions.
Interest on the lease liabilities is calculated using Lundbeck’s incremental borrowing rate and recognized
under financial income or financial expenses. The lease liabilities are reduced by any instalments paid to the
lessor.
Lundbeck uses the same incremental borrowing rate for lease agreements with similar characteristics.
Changes to lease agreements after initial recognition are accounted for either as a modification to an existing
agreement, a separate agreement or a partial disposal depending on the nature of the change. Changes will
result in changes to both the lease liability and the right-of-use asset.
NOTE 25
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
93 / 111
NOTES
1 Revenue 97
2 Employee costs 97
3 Investments in subsidiaries 97
4 Financial income and expenses 98
5 Income taxes 98
6 Distribution of profit 98
7 Intangible assets 99
8 Property, plant and equipment 99
9 Right-of-use assets and lease liabilities 100
10 Inventories 100
11 Provisions 100
12 Contingent assets and contingent liabilities 101
13 Bank debt and bond debt 102
14 Payables to subsidiaries 102
15 Financial instruments 102
16 Audit fees 102
17 Contractual obligations 102
18 Related parties 102
19 Subsequent events 103
20 Significant accounting policies 103
FINANCIAL
STATEMENTS OF THE
PARENT COMPANY
CONTENTS
Statement of profit or loss 94
Statement of financial position 95
Statement of changes in equity 96
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
94 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
2021
2020
Notes
DKKm
DKKm
Revenue
1
11,298
10,733
Cost of sales
2
2,732
2,532
Gross profit
8,566
8,201
Sales and distribution costs
2
3,247
3,110
Administrative expenses
2
634
648
Research and development costs
2
3,600
5,027
Other operating expenses, net
-
8
Profit from operations (EBIT)
1,085
(592)
Income from investments in subsidiaries
3
223
757
Financial income
4
256
743
Financial expenses
4
617
273
Profit before tax
947
635
Tax on profit for the year
5 127 (80)
Profit for the year
6
820
715
STATEMENT OF PROFIT OR LOSS
1 January
– 31 December
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
95 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
2021
2020
Notes DKKm DKKm
Product rights
7
9,357
9,850
Other rights
7
122
68
Projects in progress
7
104
132
Intangible assets
9,583
10,050
Land and
buildings
8
993 1,040
Plant and machinery
8
180
197
Other fixtures and fittings, tools and equipment
8
50
25
Prepayments and assets under construction
8
425
295
Right
-of-use assets
9
188
194
Property, plant and equipment
1,836
1,751
Investments in subsidiaries
3
10,539 10,534
Receivables from subsidiaries
5,839
4,819
Other investments
56
114
Other receivables
4
4
Financial assets
16,438
15,471
Non-current assets
27,857
27,272
Inventories
10
1,848
1,303
Trade receivables
709
587
Receivables from subsidiaries
2,006
1,388
Joint taxation contribution
48
130
Other receivables
115 747
Prepayments
116
84
Receivables
2,994
2,936
Cash and bank balances
1,263
3,171
Current assets
6,105
7,410
Assets
33,962
34,682
2021
2020
Notes
DKKm
DKKm
Share capital
996
996
Proposed dividends
398
498
Hedging reserve
(81)
176
Retained earnings
12,567
12,144
Equity
13,880
13,814
Deferred tax liabilities
5
239
137
Bank debt and bond debt
13
4,783
5,397
Lease liabilities
9
174
182
Payables to subsidiaries
14
9,066
6,226
Other payables
20
20
Non-current liabilities
14,282
11,962
Provisions
11
240
132
Bank debt
-
2,000
Trade payables
2,062
2,092
Lease liabilities
9
14
13
Payables to subsidiaries
2,786
3,791
Other payables
698
878
Current liabilities
5,800
8,906
Liabilities
20,082
20,868
Equity and liabilities
33,962
34,682
STATEMENT OF FINANCIAL POSITION –
ASSETS
A
t 31 December
STATEMENT OF FINANCIAL POSITION –
EQUITY AND LIABILITIES
A
t 31 December
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
96 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
Share
capital
Proposed
dividends
Hedging
reserve
Retained
earnings
Equity
Notes
DKKm
DKKm
DKKm
DKKm
DKKm
Equity at 1 January
996
498
176
12,144
13,814
Profit for the year
6
-
398
-
422
820
Distributed dividends, gross
-
(498)
-
-
(498)
Dividends received, treasury shares
- - - 1 1
Deferred exchange gains/losses,
hedging
-
-
(340)
-
(340)
Deferred fair value of
interest rate
swaps
- - 63 - 63
Exchange gains/losses, hedging
(transferred to revenue)
-
-
(53)
-
(53)
Buyback of treasury shares
-
-
-
(34)
(34)
Incentive programs
-
-
-
34
34
Tax on transactions in equity
5
- - 73 - 73
Equity at 31 December
996
398
(81)
12,567
13,880
See note 12 Equity in the consolidated financial statements.
STATEMENT OF CHANGES IN EQUITY
At
31 December
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
97 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
1 REVENUE
2021
2020
Revenue by region
DKKm DKKm
Europe
3,761
3,636
North America
4,994
4,806
International markets
2,338
2,187
Total
11,093
10,629
Other revenue
152
99
Effects from hedging
53
5
Total revenue
11,298
10,733
2 EMPLOYEE COSTS
2021
2020
Breakdown of employee costs
DKKm
DKKm
Short
-term employee benefits 1,396 1,456
Retirement benefits
125
126
Social security costs
20 27
Equity
- and cash-settled incentive programs 34 29
Severance and other costs from restructuring activities
100
2
Total
1,675
1,640
Employee costs for the year are included in the following functions in the statement of profit or loss:
2021
2020
Employee costs
DKKm DKKm
Cost of sales
428
414
Sales and distribution costs
177
105
Administrative expenses
347
391
Research and development costs
723
730
Total
1,675
1,640
Information on employees
2021
2020
Average number of full-time employees in the financial year
1,721
1,738
Number of full-time employees at 31 December
1,732
1,709
Remuneration of the Registered Executive Management
See notes 3 Employee costs and 14 Incentive programs in the consolidated financial statements.
Remuneration of the Board of Directors
See note 3 Employee costs in the consolidated financial statements.
Incentive programs
See note 14 Incentive programs in the consolidated financial statements.
3 INVESTMENTS IN SUBSIDIARIES
2021
DKKm
Cost at 1 January
10,738
Capital contributions to subsidiaries
5
Cost at 31 December
10,743
Impairment at 1 January
204
Impairment at 31 December
204
Carrying amount at 31 December
10,539
In 2021, income from investments in subsidiaries relates to dividends amounting to DKK 223 million. In 2020,
income from investments in subsidiaries related to dividends received, proceeds from liquidation of subsidiaries
and impairment losses recognized related to investments in subsidiaries amounting to DKK 757 million.
See note 23 List of subsidiaries in the consolidated financial statements for an overview of subsidiaries.
NOTES 1-3
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
98 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
4 FINANCIAL INCOME AND EXPENSES
2021
2020
DKKm DKKm
Financial income
256
743
Financial expenses
617
273
Net financials, expenses/(income)
361
(470)
In 2021, out of total financial income and expenses, DKK 246 million (DKK 233 million in 2020) and DKK 49
million (DKK 56 million in 2020), respectively, are related to intra-group interest income and expenses.
Financial income and financial expenses are impacted by a net exchange loss of DKK 163 million relating to
translation of receivables from and payables to subsidiaries that are considered part of the overall investment
in subsidiaries. Further, financial income and financial expenses are impacted by a loss of DKK 127 million
relating to the translation of external loans used for hedging net investments in foreign operations in the U.S.
5 INCOME TAXES
Tax on profit for the year
2021
2020
DKKm
DKKm
Current tax, joint taxation contribution
3 12
Prior
-year adjustments, current tax (51)
(2)
Prior-year adjustments, deferred tax
47
8
Change in deferred tax for the year
55 (49)
Total tax for the year
54
(31)
Tax for the year is composed of:
Tax on profit for the year
127 (80)
Tax on
transactions in equity (73)
49
Total tax for the year
54
(31)
Deferred tax balances
Temporary differences between assets and liabilities as
stated in the financial statements and in the tax base
Balance at
1 January
Adjustment of
deferred
tax at
beginning
of year
Movements
during
the year
Balance at
31 December
DKKm
DKKm
DKKm
DKKm
Intangible assets
3,715
68
1,025
4,808
Property, plant and equipment
471 (68)
28 431
Inventories
350 - 13 363
Other items
(381)
-
(119)
(500)
Tax loss carryforwards etc.
(3,532)
210 (695)
(4,017)
Total temporary differences
623
210
252
1,085
Deferred (tax assets)/tax liabilities
137
47
55
239
The major assumptions relating to the recognition and measurement of tax assets are described in
note 5 Income taxes in the consolidated financial statements.
2021
2020
Movements in deferred tax
DKKm
DKKm
Balance at 1 January
137 178
Movements related to transactions recognized in profit or loss
102 (41)
Balance at 31 December
239
137
6 DISTRIBUTION OF PROFIT
2021
2020
Proposed distribution of profit for the year
DKKm DKKm
Proposed dividends for the year
398
498
Transferred to/from distributable reserves
422
217
Total profit for the year
820
715
Proposed dividend per share (DKK)
2.00
2.50
See note 12 Equity in the consolidated financial statements for details on treasury shares.
NOTES 4-6
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
99 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
7 INTANGIBLE ASSETS
Product
rights¹
Other
rights²
Projects in
progress²
Total
intangible
assets
Intangible assets
DKKm
DKKm
DKKm
DKKm
Cost at 1 January
16,441
1,659
132
18,232
Transfers
- 99 (99)
-
Additions
102 16 71 189
Disposals
(89)
(25)
-
(114)
Cost at 31 December
16,454
1,749
104
18,307
Amortization and impairment losses at 1 January
6,591 1,591 - 8,182
Amortization
594
57
-
651
Disposals
(88)
(21)
- (109)
Amortization and impairment losses at 31 December
7,097
1,627
-
8,724
Carrying amount at 31 December
9,357
122
104
9,583
1) At 31 December 2021, product rights not yet
commercialized amounted to DKK 6,341 million (DKK 6,239 million in 2020).
2) Other rights and projects in progress primarily include items such as the IT system SAP. The amounts include directly attr
ibutable internal
expenses.
For details on material product rights and impairment testing, see note 6 Intangible assets in the consolidated
financial statements.
8 PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Prepayments
and assets
under
construction
Total
property,
plant and
equipment
Property, plant and equipment
DKKm
DKKm
DKKm
DKKm
DKKm
Cost at 1 January
3,176 1,135 531 295 5,137
Transfers
41 22 36 (99)
-
Additions
6
10
3
229
248
Disposals
(28)
(80)
(63)
- (171)
Cost at 31 December
3,195
1,087
507
425
5,214
Depreciation and impairment losses at
1 January
2,136
938
506
-
3,580
Depreciation
93 44 14 - 151
Impairment losses
- 3 - - 3
Disposals
(27)
(78)
(63)
-
(168)
Depreciation and impairment losses at
31 December
2,202
907
457
-
3,566
Carrying amount at 31 December
993
180
50
425
1,648
Pledged assets
No land and buildings were mortgaged at 31 December 2021. No other assets have been pledged.
NOTES 7-8
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
100 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
9 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
2021
2020
Amounts recognized in profit or loss
DKKm DKKm
Expense relating to short-term leases, not capitalized
2
1
Depreciation of right-of-use assets, land and buildings
13
13
Total
15
14
2021
2020
Land and buildings
DKKm DKKm
Cost at 1 January
220
216
Adjustment to right-of-use assets during the year
7
4
Cost at 31 December
227
220
Depreciation and impairment losses at 1 January
26
13
Depreciation
13
13
Depreciation and impairment losses at 31 December
39
26
Carrying amount at 31 December
188
194
2021
2020
Maturity analysis of lease liabilities
DKKm DKKm
Within 1 year
14
13
Between 1 year and 5 years
54
52
After 5 years
120
130
Lease liabilities at 31 December
188
195
10 INVENTORIES
2021
2020
DKKm
DKKm
Raw materials and consumables
162 143
Work in progress
1,342 868
Finished goods and goods for resale
344
292
Total
1,848
1,303
11 PROVISIONS
2021
DKKm
Provisions at 1 January
132
Provisions charged
284
Provisions used
(125)
Unused provisions reversed
(51)
Provisions at 31 December
240
The Parent company has entered into agreements with individual subsidiaries, under which the Parent
company will cover expected losses and obligations concerning the restructuring programs. The provisions in
the Parent company therefore cover such losses and obligations.
At 31 December 2021, provisions of DKK 240 million (DKK 132 million in 2020) related to restructuring
programs.
NOTES 9-11
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
101 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
12 CONTINGENT ASSETS AND CONTINGENT LIABILITIES
Pending legal proceedings
H. Lundbeck A/S (the “Company”) is involved in a number of legal proceedings, including patent disputes, the
most significant of which are described below. The outcome of these proceedings is not expected to have a
material impact on the financial position or cash flows beyond the amount already provided for in the financial
statements, or it is too uncertain to make a reliable provision. Such proceedings will, however, develop over
time, and new proceedings may occur which could have a material impact on the financial position and/or cash
flows.
In June 2013, the Company received the European Commission’s decision that agreements concluded with
four generic competitors concerning citalopram violated competition law. The decision included fining the
Company EUR 93.8 million (approximately DKK 700 million). The Company paid and expensed the fine in the
third quarter of 2013. In March 2021, the European Court of Justice rejected the Company’s final appeal of the
European Commission’s decision. So-called “follow-on claims” for reimbursement of alleged losses, resulting
from alleged violation of competition law, often arise when decisions and fines issued by the European
Commission are upheld by the European Court of Justice. Health authorities in the UK and an umbrella
organization of Dutch health insurance companies have taken formal protective steps against the Company
with the principal purpose of preventing potential claims from being time-barred under the applicable statutes
of limitation. In September 2021, the UK proceedings were transferred from the High Court to the Competition
Appeal Tribunal at the request of the parties. The Company expects that the UK health authorities will now
pursue their alleged claims. Further, in late October 2021, the Company received a writ of summons from a
German health care company claiming compensation for an alleged loss of profit plus interest payments,
allegedly resulting from the Company’s conclusion of agreements with two of the four generic competitors,
which were comprised by the EU Court of Justice ruling. The Company is preparing its defense and it may take
several years before a final conclusion is reached by the German courts. The Company disagrees with the
claims and will defend itself against the claims.
In Canada, the Company is involved in three product liability class-action lawsuits relating to Cipralex
®
/Celexa
®
(two cases alleging various Celexa
®
-induced birth defects and one case against several SSRI manufacturers
(incl. the Company) alleging that SSRI (Celexa
®
/Lexapro
®
) induces autism birth defect, three relating to Abilify
Maintena
®
(alleging i.a. failure to warn about compulsive behaviour side effects) and one relating to Rexulti
®
(also alleging i.a. failure to warn about compulsive behaviour side effects). The cases are in the preliminary
stages and as such there is significant uncertainty as to how these lawsuits will be resolved. The Company
strongly disagrees with the claims raised.
In 2018, the Company entered into settlements with three of four generic companies involved in an Australian
federal court case, in which the Company was pursuing patent infringement and damages claims over the sale
of escitalopram products in Australia. The Company received AUD 51.7 million (DKK 242 million) in 2018. In
the Company’s case against the last of the four generic companies, Sandoz Pty Ltd, the Federal Court found
that Sandoz Pty Ltd had infringed the Company’s escitalopram patent between 2009 and 2012 and awarded
the Company AUD 26.3 million in damages. Sandoz’ appeal of the decision was heard in May 2019 and the
Full Federal Court has in August 2020 allowed Sandoz' appeal and decided that Sandoz is not liable for
damages. The Company’s application for special leave to appeal the decision to the High Court was granted
in February 2021, and the appeal was heard on 8 October 2021. A decision is expected within 3 – 6 months
from the hearing. If the Company’s appeal is successful, the case will go back to the Federal Court for
recalculation and the Company’s appeal of the Australian Patent Office’s decision to grant Sandoz a license
will be restarted.
Together with Takeda, the Company instituted patent infringement proceedings against 16 generic companies
in response to their filing of Abbreviated New Drug Applications (“ANDAs”) with the U.S. FDA seeking to obtain
marketing approval for generic versions of Trintellix in the U.S. Two opponents have since withdrawn and the
Company has settled with eight opponents. As communicated by the Company in company release no. 706
dated 1 October 2021, the cases against the six remaining opponents (the “ANDA Filers”) has been decided
by the U.S. District Court for the District of Delaware (the ‘Court’). The Court found that the Company’s patent
protecting the active ingredient in Trintellix
®
, vortioxetine (U.S. Patent No. 7,144,884) is valid. The active
ingredient patent expires on 17 June 2026, with an expected six-month paediatric exclusivity period extending
to 17 December 2026. Assuming the ruling is confirmed at appeal, final approval will not be granted to the
relevant ANDA Filers until after expiration of the active ingredient patent, including any extension or additional
periods of exclusivity. A total of seven other patents asserted at trial were found by the Court to be valid or their
validity was not challenged during the trial. The Court decided that none of the seven other patents were
infringed by the relevant ANDA Filers, except that Lupin was found to infringe a patent covering the Company’s
process for manufacturing vortioxetine. Unless and until the Court’s ruling is reversed on appeal, the patents
found not infringed by a particular ANDA Filer will not prevent that ANDA Filer from receiving final approval.
For details on each of the patents comprised by the case, please see the company release no. 706. The Court’s
decision has been appealed by the Company to the U.S. Court of Appeals for the Federal Circuit. Lupin has
appealed with respect to the process patent and the ANDA Filers have cross appealed with respect to the
validity of two of the seven other patents.
Together with Otsuka Pharmaceutical, the Company has instituted patent infringement proceedings against
several generic companies that have applied for marketing authorization for generic versions of Rexulti
®
in the
U.S. The Company has strong confidence in the Rexulti
®
patents. The U.S. FDA cannot grant marketing
authorization in the U.S. to the generic companies before the patents expire, unless the generic companies
receive decisions in their favour. Trial is scheduled to begin on 25 July 2022. The compound patent, including
patent term extensions, will expire in the U.S. on 23 June 2029. A patent for the specific formulation used will
expire 12 September 2032.
NOTE 12
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
102 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
12 CONTINGENT ASSETS AND CONTINGENT LIABILITIES - CONTINUED
Joint taxation
The Parent company is part of a Danish joint taxation scheme with Lundbeckfonden (Lundbeckfond Invest A/S
including subsidiaries), according to which the Company has partly a joint and several liability and partly a
secondary liability with respect to corporate income taxes, etc. for the jointly-taxed companies. In addition, the
Parent company has partly a joint and several liability and partly a secondary liability with respect to any
obligations to withhold tax on interest, royalties and dividends for these companies. However, in both cases
the secondary liability is capped at an amount equal to the share of the capital of the company directly or
indirectly owned by the ultimate parent company. The total tax obligation under the joint taxation scheme is
shown in the financial statements of Lundbeckfond Invest A/S.
Letters of intent
The Parent company has entered into agreements to cover operating losses in certain subsidiaries.
As collateral for bank guarantees, the Parent company has issued letter of intent to the banks in the amount of
DKK 7 million (DKK 6 million in 2020) on behalf of subsidiaries.
13 BANK DEBT AND BOND DEBT
Bank debt and bond debt falling due after more than five years from the balance sheet date amounted to
DKK 3,700 million at 31 December 2021 (DKK 3,699 million in 2020).
14 PAYABLES TO SUBSIDIARIES
Payables to subsidiaries falling due after more than five years from the balance sheet date amounted to DKK
9,066 million at 31 December 2021 (DKK 6,226 million in 2020).
15 FINANCIAL INSTRUMENTS
Foreign currency management is handled by the Parent company. See note 19 Financial instruments in the
consolidated financial statements.
The fair value of derivatives at year-end is disclosed in note 19 Financial instruments in the consolidated
financial statements. The fair value adjustment recognized in equity is disclosed in the statement of changes
in equity in the financial statements of the Parent company. All fair value adjustments are initially recognized
in equity.
16 AUDIT FEES
2021
2020
DKKm
DKKm
Statutory audit
3 4
Assurance
engagements other than audit 1 -
Tax advisory
2
3
Other services
3 1
Fee to PricewaterhouseCoopers
9
8
17 CONTRACTUAL OBLIGATIONS
Research and development milestones and collaborations
The Parent company has entered into a number of agreements relating to research and development as well
as other collaborations. According to the agreements, the Company is committed to pay certain milestones. At
31 December 2021, potential future milestone payments covering the coming ten-year period totalled up to
DKK 1,031 million (DKK 300 million in 2020).
Sales milestones
The Company is committed to pay certain commercial sales milestones. The amount depends on future sales.
Other purchase obligations
The Company has undertaken purchase obligations relating to property, plant and equipment in the amount of
DKK 48 million (DKK 82 million in 2020).
18 RELATED PARTIES
For information on related parties exercising controlling influence on the Parent company, see note 22 Related
parties in the consolidated financial statements.
The Parent company is included in the consolidated financial statements of Lundbeckfonden.
NOTES 12-18
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
103 / 111
FINANCIAL STATEMENTS OF THE P
ARENT COMPANY
18 RELATED PARTIES - CONTINUED
The Parent company had transactions with subsidiaries during 2021. The Parent company’s share of
ownership of all subsidiaries is 100%. The Parent company did not enter into any transactions with other related
parties that were not on an arm’s length basis.
19 SUBSEQUENT EVENTS
See note 24 Subsequent events in the consolidated financial statements.
20 SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Parent company H. Lundbeck A/S have been prepared in accordance with the
Danish Financial Statements Act applying to enterprises in reporting class D. The financial statements are
presented in Danish kroner (DKK). All amounts have been rounded to the nearest DKK million, unless
otherwise indicated.
The accounting policies for the financial statements of the Parent company remain unchaged from the previous
financial year.
Differences relative to the accounting policies for the consolidated financial statements
The Parent company’s accounting policies for recognition and measurement are consistent with the accounting
policies for the consolidated financial statements with the exceptions stated below. For a description of the
accounting policies of the Group, please refer to the consolidated financial statements.
Statement of profit or loss
Income from investments in subsidiaries
Income from investments in subsidiaries includes dividends from subsidiaries, which are recognized in the
Parent company’s statement of profit or loss when the Parent company’s right to receive such dividends has
been approved. Further, income from investments in subsidiaries includes proceeds from liquidation of
subsidiaries and any impairment losses or reversals of impairment losses on investments in subsidiaries.
Exchange gains/losses
Exchange gains/losses on translation of receivables from and payables to subsidiaries that are considered part
of the overall investment in subsidiaries are recognized in profit or loss under financial income or financial
expenses.
Exchange gains/losses on that part of the bank debt in foreign currency which is used for hedging of the net
investments in subsidiaries and which provides an effective hedging of the exchange gains/losses of the net
investments are recognized in profit or loss under financial income or financial expenses.
Statement of financial position
Investments in subsidiaries
Investments in subsidiaries are measured at cost in the Parent company’s financial statements. Where the
recoverable amount of the investments is lower than cost, the investments are written down to this lower value.
In addition, cost is written down to the extent that dividends distributed exceed the accumulated earnings in
the subsidiary since the acquisition date.
Other financial assets
On initial recognition, investments are measured at cost, corresponding to fair value plus directly attributable
costs. Subsequently, they are measured at fair value at the balance sheet date. Any fair value adjustments on
equity investments recognized in other comprehensive income in the consolidated financial statements are
recognized under financial income or financial expenses in the Parent company’s statement of profit or loss.
Statement of changes in equity
Pursuant to the Danish Financial Statements Act, entries recognized in the statement of comprehensive
income in the consolidated financial statements are recognized directly in the statement of changes in equity
in the Parent company’s financial statements, except for entries concerning exchange gains/losses on
translation of receivables from and payables to subsidiaries, entries providing an effective hedge against
foreign exchange gains/losses on the net investment and entries concerning other financial assets.
Statement of cash flows
In accordance with the exemption clause in section 86(4) of the Danish Financial Statements Act, no separate
statement of cash flows has been prepared for the Parent company as it is included in the consolidated
statement of cash flows.
NOTES 18-20
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
104 / 111
The Board of Directors and the registered Executive Management have
today considered and adopted the Annual Report of H. Lundbeck A/S
for the financial year 1 January – 31 December 2021.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the EU and further requirements in the Danish Financial
Statements Act, and the Parent company financial statements have
been prepared in accordance with the Danish Financial Statements Act.
Management review has been prepared in accordance with the Danish
Financial Statements Act.
I
n our opinion, the consolidated financial statements and the Parent
company financial statements give a true and fair view of the financial
position at 31 December 2021 of the Group and the Parent company
and of the results of the Group and Parent company operations and
consolidated cash flows for the financial year 1 January - 31 December
2021.
In our opinion, Management review includes a true and fair account of
the development in the operations and financial circumstances of the
Group and the Parent company, of the results for the year and of the
financial position of the Group and the Parent company as well as a
description of the most significant risks and elements of uncertainty
facing the Group and the Parent Company.
We
recommend that the Annual Report be adopted at the Annual
General Meeting.
In our opinion, the Annual Report of H. Lundbeck A/S for the financial
year 1 January to 31 December 2021 identified as HLUNDBECK-2021-
12-31-en.zip is prepared, in all material respects, in compliance with the
ESEF Regulation.
We r
ecommend that the Annual Report be approved at the Annual
General Meeting.
Copenhagen, 9 February 2022
MANAGEMENT
STATEMENT
REGISTERED EXECUTIVE MANAGEMENT
Deborah Dunsire
President and CEO
Lars Bang
Executive Vice President,
Product
, Development &
Supply
Anders Götzsche
Executive Vice President,
CFO
Per Johan Luthman
Executive Vice President,
Research & Development
Jacob Tolstrup
Executive Vice President,
Commercial Operations
BOARD OF DIRECTORS
Lars Søren Rasmussen
Chairman of the Board
Lene Skole-Sørensen
Deputy Chairman
Santiago Arroyo
Jeffrey Berkowitz
Lars Erik Holmqvist
Jeremy Max Levin
Ilse Dorothea Wenzel
Rikke Kruse Andreasen
Employee representative
Henrik Sindal Jensen
Employee representative
Ludovic Tranholm Otterbein
Employee representative
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
105 / 111
Report on the audit of the financial statements
Our opinion
In our opinion, the consolidated financial statements (pages 51-92) give
a true and fair view of the group’s financial position at 31 December
2021 and of the results of the group’s operations and cash flows for the
financial year 1 January to 31 December 2021 in accordance with
International Financial Reporting Standards as adopted by the EU and
further requirements in the Danish Financial Statements Act.
Moreover, in our opinion, the Parent company financial statements
(pages 93-103) give a true and fair view of the Parent company’s
financial position at 31 December 2021 and of the results of the Parent
company’s operations for the financial year 1 January to 31 December
2021 in accordance with the Danish Financial Statements Act.
Our opinion is consistent with our Auditor’s Long-form Report to the
Audit Committee and the Board of Directors.
What we have audited
The consolidated financial statements of H. Lundbeck A/S for the
financial year 1 January to 31 December 2021 comprise the
consolidated statement of profit or loss and statement of
comprehensive income, the consolidated statement of financial position,
the consolidated statement of changes in equity, the consolidated
statement of cash flows and the notes, including summary of significant
accounting policies.
The Parent company financial statements of H. Lundbeck A/S for the
financial year 1 January to 31 December 2021 comprise the statement
of profit or loss, the statement of financial position, the statement of
changes in equity, and the notes, including summary of significant
accounting policies.
Collectively referred to as the “financial statements”.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (ISAs) and the additional requirements applicable in Denmark.
Our responsibilities under those standards and requirements are further
described in the Auditor’s responsibilities for the audit of the financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the International
Ethics Standards Board for Accountants’ International Code of Ethics
for Professional Accountants (IESBA Code) and the additional ethical
requirements applicable in Denmark. We have also fulfilled our other
ethical responsibilities in accordance with these requirements and the
IESBA Code.
To the best of our knowledge and belief, prohibited non-audit services
referred to in Article 5(1) of Regulation (EU) No 537/2014 were not
provided.
Appointment
We were first appointed auditors of H. Lundbeck A/S on 24 March 2020
for the financial year 2020. We have been reappointed annually by
shareholder resolution for a total period of uninterrupted engagement
of 2 years, including the financial year 2021.
Key audit matters
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements for
2021. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
INDEPENDENT
AUDITOR’S
REPORTS
To the shareholders of H. Lundbeck A/S
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
106 / 111
Key audit matter
How our audit addressed the key audit matter
Sales deductions in the U.S.
As of 31 December 2021, Management has recognized a
provision for discounts and rebat
es of DKK 923 million (2020: DKK
1,002 million).
The Group provides rebates and discounts to customers in the
U.S. that fall under certain government mandated reimbursement
arrangements, of which the most significant is Medicaid. These
arrangements result
in deductions to gross sales in arriving at net
revenue. The period passing between the sales to distributors and
payment of the related rebates under the U.S. Federal and State
Government Healthcare programs may be several months and
require the unsettle
d amounts to be recognized as a provision.
We focused on these arrangements because they are complex
and require significant estimation by Management in establishing
an appropriate provision for the unsettled amounts. This includes
estimation of sales vol
umes subject to the rebates, estimation of
applicable rebate percentages, and estimation of the lag time
described above.
We refer to note 1.5, 15 and 25 in the consolidated financial
statements.
We evaluated and tested relevant controls related to the provision for
rebates and discounts in the U.S., including applicable IT systems and
Management’s monitoring controls.
We obtained Management’s calculations under the reimbursement
arrangements and evaluated the accuracy of the calculations made.
Further, we assessed and tested key data inputs and significant
assumptions and recalculated the rebate percentages.
We obtained and assessed the Group’s estimate of the period from sale to
payment of rebates, and rebate percentages applied, and inquired
Management about their estimation process.
We considered the Group’s historical provisions by comparing the actual
rebate with the rebate percentage estimate used by Management to
recognize the provision, including performing a retrospective review of the
prior period provision compared to subsequent payments to evaluate the
accuracy of Management’s estimate and to identify any potential
management bias.
We evaluated the presentation and disclosures of sales deductions in the
U.S. in the consolidated financial statements.
Impairment of product rights
As of 31 December 2021, the Group has product rights of DKK
17,097 million (2020: DKK 17,632). Product rights are tested when
there is an i
ndication of impairment, and product rights not yet
commercialized are tested annually for impairment.
The recoverability of the carrying value of product rights is
contingent on future cash flows and/or the outcome of research
and development
activities. The determination of the recoverable
amounts includes significant estimates, which are highly sensitive
and depend upon key assumptions, including the probability of
technical and regulatory success, amount and timing of projected
future cash f
lows, patent expiry, and discount rate assumptions.
Changes in these assumptions could have an impact on the
recoverable amount of product rights.
We focused on this area as the amounts involved are material and
there is a risk that the product rights wil
l be impaired if the key
assumptions deviate negatively from the expectations.
We refer to note 1.5, 6 and 25 in the consolidated financial
statements.
We evaluated the design and tested the operating effectiveness of the
Group’s controls for assessing impairment indicators and the recoverability
of the carrying value of product rights.
For product rights with impairment indicators and product rights not yet
commercialized, we among others:
•
Tested Management’s process for determining the recoverable amount;
•
Evaluated the appropriateness of the methodology used in the
i
mpairment tests;
•
Evaluated Management’s assumptions used in the impairment tests,
including the probability of technical and regulatory success, amount and
timing of projected future cash flows, and impact of the expiry of patents;
•
Tested the underlying data used in the impairment tests, including
reconciliation of the cash flows to Management approved Long Term Plan
and forecasts; and
•
Included our in-house valuation experts to assess the valuation
t
echniques used and to assist with the evaluation of certain key
assumptions, including the discount rates applied.
Moreover, we
evaluated the disclosures of impairment testing in the
consolidated financial statements.
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
107 / 111
Statement on Management review
Management is responsible for Management review (pages 3-50 and
pages 110-111, respectively).
Our opinion on the financial statements does not cover Management
review, and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read Management review and, in doing so, consider
whether Management review is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
Moreover, we considered whether Management review includes the
disclosures required by the Danish Financial Statements Act.
Based on the work we have performed, in our view, Management
review is in accordance with the consolidated financial statements and
the Parent company financial statements and has been prepared in
accordance with the requirements of the Danish Financial Statements
Act. We did not identify any material misstatement in Management
review.
Management’s responsibilities for the financial statements
Management is responsible for the preparation of consolidated financial
statements that give a true and fair view in accordance with
International Financial Reporting Standards as adopted by the EU and
further requirements in the Danish Financial Statements Act and for the
preparation of Parent company financial statements that give a true and
fair view in accordance with the Danish Financial Statements Act, and
for such internal control as Management determines is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, Management is responsible for
assessing the Group’s and the Parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
Management either intends to liquidate the Group or the Parent
company or to cease operations, or has no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs and the additional requirements applicable in
Denmark will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with ISAs and the additional
requirements applicable in Denmark, we exercise professional
judgment and maintain professional skepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Group’s and the Parent company’s internal
control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by Management.
• Conclude on the appropriateness of Management’s use of the going
concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s and the
Parent company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
108 / 111
or conditions may cause the Group or the Parent company to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events
in a manner that gives a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the group to
express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that
we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the audit
of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Report on compliance with the ESEF Regulation
As part of our audit of the financial statements we performed
procedures to express an opinion on whether the Annual Report of H.
Lundbeck A/S for the financial year 1 January to 31 December 2021
with the filename HLUNDBECK-2021-12-31-en.zip is prepared, in all
material respects, in compliance with the Commission Delegated
Regulation (EU) 2019/815 on the European Single Electronic Format
(ESEF Regulation) which includes requirements related to the
preparation of the annual report in XHTML format and iXBRL tagging
of the consolidated financial statements.
Management is responsible for preparing an annual report that
complies with the ESEF Regulation. This responsibility includes:
• The preparing of the annual report in XHTML format;
• The selection and application of appropriate iXBRL tags, including
extensions to the ESEF taxonomy and the anchoring thereof to
elements in the taxonomy, for all financial information required to be
tagged using judgment where necessary;
• Ensuring consistency between iXBRL tagged data and the
consolidated financial statements presented in human-readable
format; and
• For such internal control as Management determines necessary to
enable the preparation of an annual report that is compliant with the
ESEF Regulation.
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
109 / 111
Our responsibility is to obtain reasonable assurance on whether the
annual report is prepared, in all material respects, in compliance with
the ESEF Regulation based on the evidence we have obtained, and to
issue a report that includes our opinion. The nature, timing and extent
of procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material departures from the requirements
set out in the ESEF Regulation, whether due to fraud or error. The
procedures include:
• Testing whether the annual report is prepared in XHTML format;
• Obtaining an understanding of the company’s iXBRL tagging process
and of internal control over the tagging process;
• Evaluating the completeness of the iXBRL tagging of the consolidated
financial statements;
• Evaluating the appropriateness of the company’s use of iXBRL
elements selected from the ESEF taxonomy and the creation of
extension elements where no suitable element in the ESEF taxonomy
has been identified;
• Evaluating the use of anchoring of extension elements to elements in
the ESEF taxonomy; and
• Reconciling the iXBRL tagged data with the audited consolidated
financial statements.
In our opinion, the Annual Report of H. Lundbeck A/S for the financial
year 1 January to 31 December 2021 with the file name HLUNDBECK-
2021-12-31-en.zip is prepared, in all material respects, in compliance
with the ESEF Regulation.
Hellerup, 9 February 2022
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR No 3377 1231
INDEPENDENT
AUDITOR’S
REPORTS
CONTINUED
Lars Baungaard
Torben Jensen
State Authorized Public Accountant
State Authorized Public Accountant
mne23331
mne18651
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
110 / 111
Reported
result
Amortization
of product
rights
Impairment
and inventory
valuation
Major
restructuring
Acquisition
and
integration
costs
Legal fees
and
settlements
Divestments/
sales
milestones
Core result
Core results
DKKm DKKm DKKm DKKm DKKm DKKm DKKm DKKm
1 January - 31 December 2021
Revenue
16,299
-
-
-
-
-
-
16,299
Cost of sales
3,648
(1,274)
-
(37)
-
-
-
2,337
Gross profit
12,651
1,274
-
37
-
-
-
13,962
Sales and distribution costs
5,885
-
-
(162)
-
-
-
5,723
Administrative expenses
933
-
-
(31)
-
-
-
902
Research and development costs
3,823
-
-
(3)
-
-
-
3,820
Other operating expenses, net
-
-
-
-
-
-
-
-
Profit from operations (EBIT)
2,010
1,274
-
233
-
-
-
3,517
Net financials, expenses
429
-
-
-
-
-
-
429
Profit before tax
1,581
1,274
-
233
-
-
-
3,088
Tax on profit for the year
263
276
-
51
-
-
-
590
Profit for the year
1,318
998
-
182
-
-
-
2,498
Earnings per share, basic (EPS) (DKK)
6.63
5.02
-
0.92
-
-
-
12.57
CORE
RECONCILIATION
Part of Management review
As a general rule, Lundbeck adjusts for amortization of
product rights and for each non
-
recurring item that
Management deems exceptional and which accumulates or
is expected to accumulate to an amount exceeding a DKK
100 million threshold. Lundbeck’s core reporting is a non-
IFRS performance measurement. Lundbeck’s core results,
including core operating income (core EBIT) and core EPS,
exclude:
Amortization of product rights
Impairment of intangible assets and property, plant and
equipment as well as inventory valuation adjustment
Major restruc
turing costs
Acquisition and integration costs, including:
•
Accounting adjustments relating to the consolidation of
material acquisitions and disposals of associates
,
products and businesses
•
Costs associated with the integration of newly acquired
companies
• Retention costs
• Transaction costs
• Legal fees and settlements, including:
•
Legal costs (external), charges (net of insurance
recoveries) and expenses relating to settlement of
litigations, government investigations and other disputes
• Income from se
ttlement of litigations and other disputes
LUNDBECK
ANNUAL REPORT 2021
CONTENTS
111 / 111
Divestments/milestones, including:
• Income/expenses from discontinued operations
• Gains/losses on divestments of assets
•
Received or expensed upfront sales and development
milestones
The adjusted core result is taxed at the underlying corporate
tax rate.
Reported
result
Amortization
of product
rights
Impairment
and inventory
valuation
Major
restructuring
Acquisition
and
integration
costs
Legal fees
and
settlements
Divestments/
sales
milestones
Core result
Core results
DKKm DKKm DKKm DKKm DKKm DKKm DKKm DKKm
1 January - 31 December 2020
Revenue
17,672
-
-
-
-
-
-
17,672
Cost of sales
4,166
(1,548)
(47)
-
-
-
-
2,571
Gross profit
13,506
1,548
47
-
-
-
-
15,101
Sales and distribution costs
5,946
-
-
-
-
-
-
5,946
Administrative expenses
966
-
-
-
-
-
-
966
Research and development costs
4,545
-
(792)
-
-
-
-
3,753
Other operating expenses, net
59
-
-
-
(59)
-
-
-
Profit from operations (EBIT)
1,990
1,548
839
-
59
-
-
4,436
Net financials, expenses
84
-
-
-
-
-
-
84
Profit before tax
1,906
1,548
839
-
59
-
-
4,352
Tax on profit for the year
325
244
11
-
14
-
-
594
Profit for the year
1,581
1,304
828
-
45
-
-
3,758
Earnings per share, basic (EPS) (DKK)
7.96
6.56
4.17
-
0.23
-
-
18.92
CORE
RECONCILIATION
Part of Management review
CONTINUED
H. Lundbeck A/S
Ottiliavej
9
2500
Valby
Denmark
Corporate Communication & Public Affairs
Tel. +45 36 30 13 11
information@lundbeck.c
om
www.lundbeck.com
CVR number 56759913
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