Third quarter 2009 report - Lundbeck records 20% growth, driven by
Lundbeck Inc. and key products
(Thomson Reuters ONE) - H. Lundbeck A/S (Lundbeck) reports third quarter revenue of DKK 3,264million growing 20% in constant exchange rates compared to the thirdquarter of 2008. Revenue in the US was DKK 959 million growing 71%(CER - constant exchange rates) compared to the same period lastyear.* Lundbeck Inc. reports third quarter revenue of DKK 359 million.* Sabril® was approved by FDA in August for the treatment of refractory complex partial seizures (rCPS) and infantile spasms (IS) and launched during September.* Ebixa® and Azilect® continue to show solid growth of 17% and 47% respectively. Cipralex® and Lexapro® revenue increasing 5% and 10% respectively.* Profit from operations (EBIT) was DKK 784 million, impacted by continued high level of investments in our late-stage pipeline. Adjustments for acquisition accounting impacted EBIT negatively by DKK 32 million. The reported EBIT margin for the period was 24%. Operating profit before depreciation and amortisation (EBITDA) was DKK 977 million corresponding to an EBITDA margin of 30%.* Lundbeck maintains the financial guidance for the full year.Distribution of revenue Q3 2009 Q3 2008 Growth DKKm DKKm Growth at CER*Cipralex® 1,258 1,228 2% 5%Lexapro® 600 602 (0%) 10%Ebixa® 548 480 14% 17%Azilect® 93 65 43% 47%Xenazine® 89 - - -Europe 1,680 1,559 8% 9%USA 959 602 59% 71%International Markets 605 608 (1%) 6%Total revenue 3,264 2,810 16% 20%* Constant exchange ratesIn connection with the third quarter report, Lundbeck's President andCEO Ulf Wiinberg said:"With the approval and launch of Sabril® in the US, Lundbeck Inc.continues to deliver according to our expectations. We are alsopleased to see that our market position is strengthened in virtuallyall markets and our key products continue to expand their marketshares around the world."Management reviewFinancial highlights and key figures 2009 2008 2009 2008 2008 Q3 Q3 9M 9M FYFinancial highlights (DKKm)Revenue 3,264 2,810 9,921 8,629 11,282Profit from operationsbefore depreciation and 977 982 2,928 3,023 3,417amortisation (EBITDA)Profit from operations 784 852 2,450 2,142 2,354(EBIT)Net financials (30) 33 (119) 49 (28)Profit before tax 754 884 2,331 2,157 2,283Tax 149 272 559 618 620Profit for the period 605 611 1,771 1,538 1,663Equity 8,512 7,422 8,512 7,422 7,511Assets 17,729 12,863 17,729 12,863 12,526Cash flows from operating (1,456) 916 (2,406) 2,151 2,193and investing activitiesProperty, plant and 86 71 171 112 229equipment investments,grossKey figuresEBIT margin (%)1 24.0 30.3 24.7 24.8 20.9Return on capital employed 6.6 10.4 23.4 26.0 30.0(%)Research & Developmentcosts 23.6 20.2 23.3 24.7 26.5as a percentage of revenueReturn on equity (%)1 7.3 8.6 22.1 21.2 22.8Solvency ratio (%)1 48.0 57.7 48.0 57.7 60.0Capital employed (DKKm) 12,933 9,319 12,933 9,319 9,438Share dataNumber of shares for the 196.1 196.1 196.1 197.1 196.8calculation of EPS(million)Number of shares for the 196.1 196.1 196.1 197.1 196.8calculation of DEPS(million)Earnings per share (EPS) 3.08 3.12 9.03 7.81 8.45(DKK)1Diluted earnings per share 3.08 3.12 9.03 7.81 8.45(DEPS) (DKK)1Cash flow per share (DKK)1 4.63 5.26 12.24 13.83 14.12Net asset value per share 43.40 37.84 43.40 37.84 38.30(DKK)1Market capitalisation 20,758 20,203 20,758 20,203 21,657(DKKm)Share price end of period 105.85 102.61 105.85 102.61 110.00(DKK)OtherNumber of employees 5,782 5,187 5,782 5,187 5,3181) Definitions according to the Danish Society of Financial Analysts'Recommendations & Financial Ratios 2005.Lundbeck's development portfolioLundbeck is developing a number of new and promising pharmaceuticalsin the existing fields of specialties; depression, anxiety andpsychotic disorders - and in new areas such as epilepsy, stroke andalcohol dependence. Lundbeck's pipeline includes:One compound approved by FDA in the third quarterOne compound under FDA regulatoryprocessFive compounds in clinical phase IIISix compounds in clinical phase IITwo compounds in clinical phase IPipeline development is summarized as follows:Regulatory approvalIn August FDA approved Sabril® as the first therapy for the treatmentof infantile spasms (IS) and an important new adjunctive therapeuticoption for the approximately 30 to 36 percent of adults with complexpartial seizures (CPS) whose seizures remain uncontrolled despite useof current antiepileptic therapies.Sabril® is indicated as monotherapy for paediatric patients one monthto two years of age with IS for whom the potential benefits outweighthe potential risk of vision loss. IS is characterized by spasms thatmay occur in clusters of up to 100 at a time. Sabril® represents theonly treatment approved by the FDA to help manage thisdifficult-to-treat condition.Sabril® is also indicated as adjunctive therapy for adult patientswith refractory CPS who have inadequately responded to severalalternative treatments and for whom the potential benefits outweighthe risk of vision loss. Sabril® is not indicated as a first-lineagent for CPS. This patient group is inherently difficult to treatand is in need of additional treatment alternatives to help reducethe number of seizures.Sabril® was introduced in the US in September, with an extensive RiskEvaluation and Mitigation Strategy (REMS) program as required by theFDA.Lundbeck has together with the FDA established a comprehensive REMSto manage the risk of permanent vision loss associated with theproduct. The Sabril REMS, which was a critical component in receivingFDA approval, specifies elements, such as restricted productdistribution, required vision testing and mandatory risk-benefitassessments, to manage the risk of vision loss associated withSabril®. Like all other antiepileptic drugs, the REMS also addressesthe risk for suicidality associated with the class.Clinical phase IIIThe ongoing trials and the planning of subsequent clinical trials forLu AA21004 (mood disorders), with our partner Takeda Pharmaceuticals,is progressing according to plan.The phase III programme with nalmefene in alcohol misuse isprogressing as planned and the last patient in the long-term safetystudy was enrolled in September. The filing in Europe is expected in2011.Patient recruitment in the phase III programme for desmoteplase isdeveloping according to plan with most sites in DIAS-3 now open. InDIAS-4 all centres are expected to be open by early 2010. At a recentreview FDA has accepted a smaller effect size as relevant andsufficient for determining significance. Therefore to be able todetect a smaller difference both DIAS-3 and DIAS-4 will be expandedto include more patients in the studies. This is not expected to havean impact on the previous communicated timelines. If the studies arepositive desmoteplase could be eligible for fast track FDA review.Lundbeck has finished recruiting patients in the ongoing 240-patientclinical phase III programme with clobazam. The purpose of this studyis to evaluate the safety and efficacy of clobazam as adjunctivetherapy in the treatment of seizures, which lead to drop attacks(drop seizures) in patients 2 to 60 years of age with Lennox-GastautSyndrome. We expect to have data by mid-2010 and filing of NDA in theUS is expected in first half of 2011.Following a meeting with FDA Lundbeck has received requests foradditional patients in the safety study on IV carbamazepine.Therefore, an additional 100 patients will be included in the trial.Timelines are currently being reassessed, and a NDA will not besubmitted in 2010 as originally planned.Clinical phase IILu AA24530 is progressing according to plan. Based on the solidclinical phase II data reported in July 2009 we expect to initiateadditional clinical studies during 2010.The novel anti-psychotic zicronapine (Lu 31-130) has finishedrecruiting in the ongoing clinical phase II study and we expect tohave and release data before the end of 2009.The two phase II studies with Lu AA34893 in bipolar depression andmajor depressive disorder (MDD) have been terminated as additionalinvestigation is needed to address pre-clinical findings.Lu AA24493 is a tissue protective cytokine with potential foraddressing medical needs in a number of severe CNS diseases. Toexplore efficacy parameters of the drug Lundbeck has in November 2009initiated phase IIa clinical studies with this innovative project inpeople suffering from Friedreich's ataxia. The objective of thisplacebo-controlled trial is to provide efficacy signals viabiomarkers as well as serve to evaluate the safety and tolerabilityof two weeks treatment with a fixed dose Lu AA24493 in patients withFriedreich's ataxia. Lu AA24493 represents the first drug candidatefrom Lundbeck using a biological marker as indication of efficacy.In May 2009 we communicated that the clinical phase II study with LuAA39959 in bipolar disorder was suspended. Pre-clinical work is stillongoing.RevenueLundbeck recorded third quarter revenue of DKK 3,264 million growing20% in constant exchange rates compared to third quarter last year.Total revenue Q3 2009 Q3 2008 Growth Q2 2009 DKKm DKKm Growth at CER DKKmCipralex® 1,258 1,228 2% 5% 1,345Lexapro® 600 602 (0%) 10% 625Ebixa® 548 480 14% 17% 539Azilect® 93 65 43% 47% 88Xenazine® 89 - - - 81Serdolect® 17 15 14% 27% 17Otherpharmaceuticals 637 379 68% 66% 713Other revenue 21 40 (48%) (47%) 24Total revenue 3,264 2,810 16% 20% 3,432Revenue from Cipralex® (escitalopram) for the treatment of depressionand anxiety rose to DKK 1,258 million, an increase of 2% and 5% inconstant exchange rates. Revenue from Cipralex® continues to increaseand market shares for the product continue to grow. However, in thethird quarter the growth has slowed down due to structural changes inthe Turkish healthcare system, which have resulted in inventoryreductions at wholesalers during the quarter.Lexapro® revenue, escitalopram marketed in the US by ForestLaboratories, Inc. (Forest), was DKK 600 million for the quarter andmarginally down compared with the same period last year but growing10% in constant exchange ratesEbixa® (memantine) for the treatment of Alzheimer's disease generatedthird quarter revenue of DKK 548 million, an increase of 14% on theyear-earlier period, corresponding to 17% growth in constant exchangerates. Lundbeck has the marketing rights to Ebixa® in most parts ofthe world except for Japan and the US.Revenue from Azilect® (rasagiline) for the treatment of Parkinson'sdisease rose 43% during the period to DKK 93 million (47% in constantexchange rates). Lundbeck has commercial rights to Azilect® in mostEuropean countries (in co-promotion with Teva PharmaceuticalIndustries Inc. (Teva) in France, Germany and the UK) and a fewcountries outside of Europe.Xenazine® [1] (tetrabenazine) for the treatment of chorea associatedwith Huntington's disease, generated revenue of DKK 89 million in thethird quarter. Xenazine® was launched in November 2008 in the US.Other pharmaceuticals, which comprise Lundbeck's maturepharmaceuticals and revenue from Lundbeck Inc. (excl. Xenazine®),rose to DKK 637 million. Excluding Lundbeck Inc., revenue from otherpharmaceuticals fell to DKK 368 million during the period, decreasing3% compared with the third quarter of 2008.Other revenue was DKK 21 million. Down 48% compared to the thirdquarter of 2008.EuropeRevenue in Europe rose 9% at constant exchange rates to DKK 1,680million. The increase was driven by continued growth in Cipralex®,Ebixa® and Azilect® growing 9%, 15% and 46% respectively at constantexchange rates relative to the year-earlier period. Revenue fromother pharmaceuticals was DKK 221 million and declined 10% atconstant exchange rates.Revenue Europe Q3 2009 Q3 2008 Growth Q2 2009 DKKm DKKm Growth at CER DKKmCipralex® 908 844 8% 9% 926Ebixa® 456 399 14% 15% 448Azilect® 84 59 43% 46% 80Serdolect® 11 9 17% 22% 11Other pharmaceuticals 221 248 (11%) (10%) 246Total revenue 1,680 1,559 8% 9% 1,711Cipralex® generated third quarter revenue of DKK 908 million inEurope and continues to gain market shares across most major markets.Cipralex® is the leading antidepressant in Europe measured in value,and at the end of August 2009 Cipralex® held a market share in valueterms of 19.4%, as compared with a market share of 16.2% a yearearlier. The growth in market share continues to be driven by agrowing understanding of Cipralex® as a leading antidepressant, aswell as the patent expiry on venlafaxine, the latter also resultingin flat to negative growth in the antidepressant market as a wholemeasured in value.Revenue from Ebixa® rose to DKK 456 million during the period, and atthe end of August 2009 the product held 16.8% of the EuropeanAlzheimer's market, compared to a market share of 15.9% at the sametime in 2008. In Italy Ebixa® continues to experience very positivegrowth since the product obtained reimbursement in April 2009. Ebixa®has a market share of 20.8% of the Italian Alzheimer's market (August2009) compared to a market share of 14.4% a year ago. Memantine, theactive ingredient in Ebixa®, is the second-most prescribedpharmaceutical in Europe for the treatment of Alzheimer's disease.Third quarter revenue from Azilect® amounted to DKK 84 milliongrowing 43% (46% at constant exchange rates) compared to the samequarter last year. Azilect® now holds a market share in value of 7.6%of the total European Parkinson's market (August 2009). This comparesto a market share of 5.7% at the same time in 2008. Azilect®continues to take market shares in Europe, as it is increasinglybeing perceived as an effective and easy-to-administer medication,furthermore the proposed benefit of early treatment with Azilect® ishelping promotion of the drug.In the quarter the ADAGIO study was published in New England Journalof Medicine and in connection with the publication Professor OlivierRascol, Department of Clinical Pharmacology, University Hospital,Toulouse, France and ADAGIO co-principal investigator, stated, "Theresults of the ADAGIO study provide novel data to support the use ofAzilect® 1 mg daily as initial treatment of patients with Parkinson'sdisease. The ADAGIO study, which utilized a novel trial design withthree primary endpoints, suggests that the drug has a positive impacton slowing the progression of patients' disability, beyond itsalready known symptomatic benefit."Azilect® is the first and only product that have shown efficacy ondisease progression in clinical trials. The publication is animportant milestone and will ensure that the positive data is noticedbroadly in the Parkinson's disease community, among prescribers andpatients.USALundbeck's third quarter revenue in the US rose to DKK 959 million,while revenue from Lundbeck Inc. was DKK 359 million for the period.Revenue USA Q3 2009 Q3 2008 Growth Q2 2009 DKKm DKKm Growth at CER DKKmLexapro® 600 602 (0%) 10% 625Xenazine® 89 - - - 81Other pharmaceuticals 269 - - - 319Total revenue 959 602 59% 71% 1,025Revenue from Lexapro® was DKK 600 million, and flat compared to thesame quarter last year but growing 10% at constant exchange rates.Revenue in third quarter 2008 was negatively affected byapproximately DKK 100 million due to a reduction of Lexapro®inventories in the US. At the end of August 2009, Lexapro® held amarket share in the US of 23.8% in value terms, as compared with amarket share of 23.0% at the same time last year. The US market forantidepressants altogether is currently losing value due to genericversions of competing antidepressants gaining market shares.Prepayments from Forest, recorded in Lundbeck's balance sheet as thedifference between the invoiced price and the minimum price ofForest's inventories, was DKK 667 million at 30 September 2009compared with DKK 806 million at 30 September 2008. At the end ofSeptember 2009, inventories were on a level corresponding to belowseven months of commercial supply.Sales from Lundbeck Inc. reached DKK 359 million in the third quartercorresponding to 36% growth compared to Ovation (now Lundbeck Inc.)revenue in the third quarter last year (27% in constant exchangerates). Revenue from Xenazine® amounted to DKK 89 million for thequarter, growing 11% compared to last quarter. Specialty pharmacieswere holding less inventory compared to the previous quarter, whichhad a negative effect on reported sales.At the end of the third quarter Sabril® was launched in the US forthe treatment of refractory complex partial seizures (rCPS) andinfantile spasms (IS). Sabril is the first treatment to be approvedby the FDA for the treatment of IS and is an important new adjunctivetherapeutic option for the approximately 30 to 36 percent of adultswith CPS whose seizures remain uncontrolled in spite of having manyantiepileptic therapies already available.Sabril® is introduced in the market place, with an extensive RiskEvaluation and Mitigation Strategy (REMS) program as required by theFDA and created in collaboration with the agency. The initial launchof the product is going according to plan and we are very pleasedwith the high level of interest from the medical community evidencedby the high number of physicians that have signed up to participatein the programme.International MarketsRevenue in International Markets, which comprises all Lundbeck'smarkets outside Europe and the US, was up 6% in constant exchangerates to DKK 605 million. Cipralex® contributed with negative growthfor the quarter, while Ebixa® continued to show strong growth rising23% at constant exchange rates. Azilect® and Serdolect® arecontinuously only marketed by Lundbeck in a few markets in the regionand consequently contribute with a relatively small share.Revenue Q3 2009 Q3 2008 Growth Q2 2009International Markets DKKm DKKm Growth at CER DKKmCipralex® 350 384 (9%) (3%) 419Ebixa® 93 81 15% 23% 91Azilect® 9 6 39% 64% 8Serdolect® 6 6 9% 32% 6Other pharmaceuticals 147 132 12% 18% 148Total revenue 605 608 (1%) 6% 671Cipralex® generated revenue of DKK 350 million in InternationalMarkets, falling 9% compared to same quarter last year, and 3% inconstant exchange rates. The decrease in DKK was primarily due toloss of revenue in Australia, where several generic versions ofescitalopram have been launched during the quarter. Furthermore,structural changes in the Turkish healthcare system, to take placemid-November, have demanded a substantial price reduction onpharmaceuticals and have resulted in inventory reductions atwholesalers in Turkey during the quarter.Excluding Australia and Turkey total revenue in International Marketsgrew 17% in the third quarter of 2009 compared to the same quarterlast year.Cipralex® holds a market share in terms of value of 11.8% of theaggregate market for antidepressants in International Markets (Q22009), compared to a market share of 10.6% in Q2 2008.In the third quarter Cipralex® received public reimbursement inBritish Colombia, Canada, and consequently continues to showconsiderable growth in this market. The brand now holds a marketshare in terms of value in Canada of 8.9% (August 2009) compared to6.6% in the year-earlier period.Ebixa® generated third quarter revenue of DKK 93 million and held10.5% of the total market in terms of value for pharmaceuticals forthe treatment of Alzheimer's disease in International Markets (Q22009), as compared with a market share of 10.9% in Q2 2008. Ebixa®continues to hold a steady market share in International Marketsdespite generic competition in most markets. International Marketscontinues to maintain significant underlying volume growth as aconsequence of the growing maturity of the medical sector in themajority of the region.Revenue from other pharmaceuticals was DKK 147 million and up 18% inconstant exchange rates compared to Q3 2008. The increase wasprimarily due to stock building in Russia and China and a weak thirdquarter last year.ExpensesExcluding costs related to Lundbeck Inc. and costs related to a staffreduction carried out during the quarter, total costs at Lundbeckgrew only with 5% compared to third quarter last year. The reason forthe increase in costs is related to the acquisition of Lundbeck Inc.Lundbeck Inc. is included in financial numbers for 2009 but not in2008.Including Lundbeck Inc., total expenses for the period were DKK 2,480million, up 27% compared to third quarter last year.Distribution of costs Q3 2009 Q3 2008 Q2 2009 DKKm DKKm Growth DKKmCost of sales 519 433 20% 623Distribution 712 571 25% 799Administration 480 385 25% 464Research & Development 769 568 35% 826Total costs 2,480 1,958 27% 2,713Total cost of sales rose 20% to DKK 519 million amounting to 16% ofLundbeck's total revenue, up from 15% in the year-earlier period.Costs of sales for the period was affected by higher costs of goodssold in Lundbeck Inc., as a result of purchase price accounting usedin connection with the acquisition of Ovation (Lundbeck Inc.),impacting costs by DKK 32 million. During the first nine month of2009 the total costs of DKK 171 million related to purchase priceaccounting has now been booked. Initial expectations were thatpurchase price accounting would amount to DKK 183 million but due tothe decline in the USD/DKK exchange rate the total purchase priceaccounting amounts to DKK 171 million at the current exchange rate.Distribution costs were DKK 712 million corresponding to 22% ofrevenue and up 25% compared to the same quarter last year. Theincrease is mainly due to the inclusion of Lundbeck Inc.,amortisations of rights in relation to the acquisition of LundbeckInc. and spending on the promotion of Azilect®. Administrativeexpenses increased by 25% to DKK 480 million, accounting for 15% oftotal revenue compared with 14% for the third quarter of 2008.Administrative costs for the quarter contain provisions related tothe staff reduction carried out during the quarter. SG&A costs wereDKK 1,192 million, compared with DKK 957 million in the year-earlierperiod, and corresponding to 37% of revenue (34% in Q3 2008).R&D costs for the quarter were DKK 769 million, an increase of 35%compared with the same period last year driven by investments in ourlate-stage pipeline. Third quarter saw higher spending on a number ofphase three studies and R&D costs for the period accounted for 24% oftotal revenue, compared with 20% in the year-earlier period.Operating profit before depreciation and amortisation (EBITDA)EBITDA was DKK 977 million compared with DKK 982 million for thethird quarter of 2008. EBITDA margin for the period was 30%.Depreciation, amortisation and impairment chargesDepreciation, amortisation and impairment charges, which are includedin the individual expense categories, amounted to DKK 193 million,increasing 48% compared to the same period of 2008.Depreciation, amortisation and Q3 2009 Q3 2008 Q2 2009impairment charges per expensecategory DKKm DKKm Growth DKKmCost of sales 52 48 8% 50Distribution 62 7 771% 28Administration 18 16 9% 18Research & Development 61 59 4% 58Total depreciation, amortisation andimpairment charges 193 130 48% 153The large increase in depreciation and amortisation included indistribution costs compared to the same period last year is primarilyexplained by amortisation on product rights acquired in connectionwith the acquisition of Ovation (Lundbeck Inc.) and LifeHealthLimited.Profit from operations (EBIT)Including adjustments for acquisition accounting lowering EBIT withDKK 32 million, EBIT for the third quarter amounted to DKK 784million, corresponding to a decrease of 8% on the same period in 2008(DKK 852 million). The decrease is primarily a result of an increasein depreciation and amortisation and higher spending on R&D.The EBIT margin for the period was 24% compared with 30% in theyear-earlier period.Net financialsLundbeck generated a net financial loss of DKK 30 million in thequarter, compared with a net income of DKK 33 million in 2008.Net financials Q3 2009 Q3 2008 Q2 2009 DKKm DKKm DKKmNet items relating to trading 2 (27) (19)Accounting translation of currency items 9 38 (56)Net currency items relating to financialitems 11 11 (75)Unrealised gains concerning other investmentsexcl. exchange rate adjustments (10) (7) 1Net interest income (31) 29 (35)Net financials (30) 33 (109)Net items relating to trading were DKK 2 million, owing toreclassification of hedging contracts.Accounting translation of currency items was DKK 9 million for thequarter, primarily due to a decrease in GBP/DKK.Net interest income, including realised and unrealised gains andlosses on the bond portfolio, amounted to a net loss of DKK 31million, as compared with a net income of DKK 29 million in the sameperiod of 2008. Net interests were negatively affected by a lowercash position compared to the same quarter 2008 as well interestspaid on loans related to the acquisition of Ovation (Lundbeck Inc.).Change in accounting policies in respect of foreign currencytranslation for non-monetary assets and exchange differences arisingfrom the translation of foreign subsidiaries, had a negative effecton net financials for the third quarter of 2008 of DKK 12 million.For further details on change in accounting policies, see page 13.TaxThe income tax expense for the period was DKK 149 million as comparedto DKK 272 million in the year-earlier period. The tax rate was 20%,down from 31% third quarter last year.Profit for the periodProfit after tax for the third quarter of 2009 was DKK 605 millioncompared to DKK 611 million in the same period last year.Cash flowsLundbeck had a cash inflow during the quarter of DKK 297 million,compared with an inflow of DKK 913 million in the year-earlierperiod.Cash flows Q3 2009 Q3 2008 Q2 2009 DKKm DKKm DKKmCash flows from operating activities 907 1,032 902Cash flows from investing activities (2,363) (116) (50)Cash flows from operating and investingactivities (1,456) 916 852Cash flows from financing activities 1,752 (3) 277Change in cash 297 913 1,128Cash at beginning of period 2,256 1,955 1,123Unrealised gains/losses 2 (2) 4Cash at end of period 2,554 2,867 2,256Operating activities generated third quarter cash inflow of DKK 907million compared with DKK 1,032 million in the same period last year.Cash flows from investing activities represented an outflow of DKK2,363 million, compared with an outflow of DKK 116 million in thesame period of 2008 explained by the final payment for theacquisition of Ovation (Lundbeck Inc.) and the acquisition ofLifeHealth Limited.Lundbeck's total net investments exclusive of financial investmentsamounted to a cash outflow of DKK 2,361 million in the third quarterdue to the acquisition of LifeHealth Limited and the additionalpayment of USD 300 million (approximately DKK 1.6 billion) inconnection with the approval of Sabril® by the FDA, against a cashoutflow of DKK 95 million in the year-earlier period.Cash flow from financing activities was an inflow of DKK 1,752million, which primarily stems from new loans of DKK 1,744 million inorder to finance the additional payment regarding the acquisition ofOvation (Lundbeck Inc.).Cash at 30 September 2009 was DKK 2,554 million, against DKK 2,256million at the end of June 2009 and DKK 2,867 million in the thirdquarter of 2008. At the end of the period, Lundbeck hadinterest-bearing net debt of DKK 1,818 million compared with net debtof DKK 365 million at the end of June 2009 and net cash of DKK 1,949million at the end of December 2008.Balance sheetAt 30 September 2009, Lundbeck had total assets of DKK 17,729million, against DKK 16,984 million at the end of second quarter 2009and DKK 12,526 at the end of 2008. The significant increase sinceDecember is due to the acquisition of Ovation (Lundbeck Inc.) andLifeHealth Limited.At 30 September 2009, Lundbeck's equity amounted to DKK 8,512million, corresponding to a solvency ratio of 48.0%, compared with47.7% at the end of June 2009 and 60.0% at the end of 2008.HedgingLundbeck hedges income from its products using currency hedging. As aresult of Lundbeck's currency hedging policy, foreign exchange lossesand gains on hedging transactions are allocated directly to thehedged transaction. Hedging had a negative effect on profit of DKK 76million in Q3 2009 compared with a situation where the income is nothedged and included at the current rates of exchange during theperiod. The effect was a DKK 46 million gain in the year-earlierperiod. The currency with the most impact financially in the thirdquarter 2009 was the US dollar and of the total negative effect DKK69 million stems from the hedging of the US dollar, compared to apositive effect of DKK 55 million in the third quarter of 2008.Lundbeck hedges the cash flow in US dollar on a rolling basis around12 months in advance. The average rate for 2009 for the existing USdollars hedging contracts is approximately USD/DKK 536. Thecorresponding rate for 2008 was approximately USD/DKK 531. For thenext 12 months the average rate for the existing US dollar hedgingcontracts is approximately USD/DKK 546.Financial guidance and forward-looking statementsLundbeck guidance for the full year remains unchanged and reflectsthe guidance that was reported in the interim report for the secondquarter 2009.The guidance includes one-off expenses of approximately DKK 183million owing to acquisition accounting related to the acquisition ofOvation (Lundbeck Inc.) and income of DKK 124 million from thedivestment of interests in LifeCycle Pharma. 2008* 2009Lundbeck's financial guidance guidance DKKm DKKbnRevenue 11,282 13.1-13.6EBITDA 3,417 3.5-3.7EBIT 2,354 2.8-3.0Tax rate 27.1% 25-26%R&D ratio 26.5% 23-24%* As reported in the annual accounts, but restated to reflect newaccounting policies.This announcement contains forward-looking statements that providecurrent expectations or forecasts of events such as new productlaunches, product approvals and financial performance.Forward-looking statements are subject to risks, uncertainties andinaccurate assumptions. This may cause actual results to differmaterially from expectations. Factors that may affect future resultsinclude interest rates and exchange rate fluctuations, delay orfailure of development projects, production problems, unexpectedcontract breaches or terminations, government-mandated ormarket-driven price decreases for Lundbeck's products, introductionof competing products, Lundbeck's ability to successfully market bothnew and existing products, exposure to product liability and otherlawsuits, changes in reimbursement rules and governmental laws andrelated interpretation thereof and unexpected growth in costs andexpenses.Change in accounting policiesThe interim report has been presented in accordance with IAS 34"Interim Financial Reporting" as adopted by the EU.At 1 January 2009, the accounting policies were changed in respect offoreign currency translation for non-monetary assets and exchangedifferences arising from the translation of foreign subsidiaries.Non-monetary assets acquired in foreign currencies are translated atthe exchange rates at the balance sheet date, whereas they werepreviously translated at the exchange rates at the time ofacquisition. On recognition of foreign subsidiaries, non-monetary aswell as monetary items are translated at the exchange rates at thebalance sheet date. Exchange differences arising from the translationof both the balance sheets and the income statements of the foreignsubsidiaries are recognised in the Group directly in equity. Theseexchange differences were previously recognised under net financialsin the income statement.The change in accounting policies concerning foreign currencytranslation for non-monetary assets and exchange differences arisingfrom the translation of foreign subsidiaries has resulted in anincrease of the profit for 2008 of DKK 154 million, a decline inequity for 2008 of DKK 81 million, and a decline in total assets for2008 of DKK 81 million. For the third quarter of 2008, the change inaccounting policies caused a decrease in profit of DKK 25 million, areduction in equity of DKK 85 million and a reduction of total assetsof DKK 85 million. The comparative figures have been restatedaccordingly.Other than as set out above, the accounting policies are unchangedfrom those applied in the annual report for 2008, which contains amore detailed description of the Group's accounting policies.See appendix for a breakdown of the financial effects of the changes.The interim report is unaudited.Protection of patents and other intellectual property rightsA prerequisite for Lundbeck's continued investments in innovativepharmaceuticals is that intellectual property rights are respected.Lundbeck believes that the Group's intellectual property rights arevalid and enforceable, and it is Lundbeck's policy to enforce itsintellectual property rights energetically, wherever they may beviolated. Lundbeck is involved in pending patent trials in Australia,Austria, Belgium, Brazil, Bulgaria, Canada, Denmark, Finland, France,Germany, Hungary, Israel, Lithuania, The Netherlands, Norway,Portugal, Rumania, Slovenia, UK, and the US in respect of the Group'sintellectual property rights concerning escitalopram.Decisions in key patent casesEscitalopramDuring the quarter the Federal Court of Justice in Germany confirmedthe patent of escitalopram. The judgement from the appeal instance,ruled that the patent on Cipralex® in Germany is to be upheld untilJune 2014. The decision can most likely not be appealed.MemantineIn Canada Lundbeck and Merz GmbH has recently lost a case regardingtwo patents covering the use of memantine and memantine incombination with acetylcholinesterase inhibitors. Following thedecision generic versions of memantine may be approved. Lundbeck andMerz are evaluating the outcome of the trial and opportunities forfurther legal actions.Risk factorsLundbeck's overall risk exposure is unchanged and reflects the riskfactors described in the annual report for 2008.Conference callToday at 2.00 pm (CET), Lundbeck will be hosting a conference callfor the financial community. You can listen to the conference on theGroup's website www.lundbeck.com under the section "Investors -Presentations".Income statement 2009 2008 2009 2008 2008 Q3 Q3 9M 9M FY DKKm DKKm DKKm DKKm DKKmRevenue 3,264 2,810 9,921 8,629 11,282Cost of sales 519 433 1,629 1,377 1,837Distribution costs 712 571 2,185 1,770 2,459Administrative expenses 480 385 1,345 1,205 1,642Profit before research and developmentcosts 1,552 1,420 4,762 4,277 5,344Research and development costs 769 568 2,312 2,136 2,990Profit from operations (EBIT) 784 852 2,450 2,142 2,354Income from investments in associates - (2) - (34) (43)Net financials (30) 33 (119) 49 (28)Profit before tax 754 884 2,331 2,157 2,283Tax on profit for the period 149 272 559 618 620Profit for the period 605 611 1,771 1,538 1,663Earnings per share (EPS) (DKK) 3.08 3.12 9.03 7.81 8.45Diluted earnings per share (DEPS)(DKK) 3.08 3.12 9.03 7.81 8.45Statement of recognised income andexpenses 2009 2008 2009 2008 2008 Q3 Q3 9M 9M FY DKKm DKKm DKKm DKKm DKKmProfit for the period 605 611 1,771 1,538 1,663Exchange differences regarding foreignsubsidiaries (238) 60 (537) (24) (138)Adjustment, deferred gains/losses,hedging 58 (137) 65 11 43Realised gains/losses, hedging (60) (38) 53 (150) (104)Realised gains/losses, trading(transferred from hedging) - (3) - (16) (16)Other equity entries concerningassociates - 1 - (2) 1Fair value adjustment ofavailable-for-sale financial assets 9 8 11 (23) (7)Tax on income and expenses recognisedin equity 34 45 82 39 19Income and expenses recognised directlyin equity (196) (65) (326) (165) (202)Recognised income and expenses for theperiod 408 547 1,445 1,373 1,462Balancesheet 30.09.2009 30.09.2008 31.12.2008 DKKm DKKm DKKmAssetsIntangible assets 7,688 1,975 2,016Property, plant and equipment 3,048 3,109 3,123Financial assets 202 575 247Non-current assets 10,938 5,659 5,386Inventories 1,444 886 837Receivables 2,744 2,291 2,223Securities 48 1,160 955Cash 2,554 2,867 2,921Assets held for sale - - 205Current assets 6,792 7,204 7,140Assets 17,729 12,863 12,526Equity and liabilitiesShare capital 981 984 984Share premium 224 224 224Other reserves (974) (322) (437)Retained earnings 8,281 6,536 6,740Equity 8,512 7,422 7,511Provisions 1,113 643 689Debt 2,672 1,893 1,904Non-current liabilities 3,785 2,536 2,594Provisions 17 6 18Bank and mortgage debt 1,749 5 23Trade payables 711 558 867Other payables 2,288 1,530 916Prepayments from Forest 667 806 597Current liabilities 5,432 2,905 2,421Liabilities 9,217 5,441 5,015Equity and liabilities 17,729 12,863 12,526Statement of changes in equity at 30 September 2009 Share Share Other Retained Equity capital premium reserves earnings DKKm DKKm DKKm DKKm DKKm2009Equity at 31.12.2008 984 224 - 6,384 7,592Change in accountingpolicies:Exchange differencesregarding foreignsubsidiaries - - (437) 356 (81)Equity at 01.01.2009 984 224 (437) 6,740 7,511Recognised income andexpenses for the period - - (537) 1,982 1,445Distribution of dividend,gross - - - (453) (453)Distribution of dividend,treasury shares - - - 2 2Capital reduction andcancellation of treasuryshares (4) - - 4 -Incentive programmes - - - 7 7Other transactions (4) - - (441) (444)Equity at 30.09.2009 981 224 (974) 8,281 8,5122008Equity at 31.12.2007 1,036 224 - 5,925 7,185Change in accountingpolicies:Exchange differencesregarding foreignsubsidiaries - - (298) 202 (96)Equity at 01.01.2008 1,036 224 (298) 6,127 7,089Recognised income andexpenses for the period - - (24) 1,397 1,373Distribution of dividend,gross - - - (531) (531)Distribution of dividend,treasury shares - - - 27 27Capital reduction andcancellation of treasuryshares (52) - - 52 -Buyback of treasury shares - - - (538) (538)Incentive programmes - - - 2 2Other transactions (52) - - (989) (1,041)Equity at 30.09.2008 984 224 (322) 6,536 7,422Cash flow statement 2009 2008 2009 2008 2008 Q3 Q3 9M 9M FY DKKm DKKm DKKm DKKm DKKmProfit from operations (EBIT) 784 852 2,450 2,142 2,354Adjustments 110 164 225 863 1,031Working capital changes 86 29 (13) (126) (88)Cash flows from operationsbefore financial receipts andpayments 980 1,045 2,662 2,879 3,296Financial receipts andpayments (24) 8 (38) 35 11Cash flows from ordinaryactivities 956 1,053 2,624 2,914 3,307Income tax paid (49) (21) (224) (189) (527)Cash flows from operatingactivities 907 1,032 2,400 2,725 2,780Acquisition of company (1,472) - (5,007) - -Investments in and sale ofbonds (2) (18) 942 376 612Investments in and sale ofintangible assets, property,plant and equipment and otherfinancial assets (889) (98) (741) (950) (1,199)Cash flows from investingactivities (2,363) (116) (4,806) (574) (587)Cash flows from operating andinvesting activities (1,456) 916 (2,406) 2,151 2,193Cash flows from financingactivities 1,752 (3) 2,030 (1,047) (1,016)Change in cash 297 913 (377) 1,104 1,177Cash at beginning of period 2,256 1,955 2,921 1,772 1,772Unrealised exchangedifferences for the period 2 (2) 10 (9) (28)Change for the period 297 913 (377) 1,104 1,177Cash at end of period 2,554 2,867 2,554 2,867 2,921Interest-bearing net cash andcash equivalentsis composed as followsCash 2,554 2,867 2,554 2,867 2,921Securities 48 1,160 48 1,160 955Interest-bearing debt (4,421) (1,897) (4,421) (1,897) (1,927)Interest-bearing net cash andcash equivalents,end of period (1,818) 2,129 (1,818) 2,129 1,949Management statementThe Supervisory Board and the Executive Management have discussed andadopted the interim report for the period 1 January - 30 September2009 of H. Lundbeck A/S. The interim report is presented inaccordance with IAS 34 "Interim financial reporting" as adopted bythe EU and additional Danish disclosure requirements for the interimreports of listed companies.We consider the accounting policies applied to be appropriate.Accordingly, the interim report gives a true and fair view of theGroup's assets, liabilities and financial position at 30 September2009 and of the results of the Group's operations and cash flows forthe nine months ended 30 September 2009.In our opinion, the management's report gives a true and fair view ofdevelopments in the activities and financial position of the Group,the results for the period and of the Group's financial position ingeneral and describes fairly significant risk and uncertainty factorsthat may affect the Group.The interim report is unaudited.Valby, 3 November 2009Executive ManagementUlf Wiinberg Peter Høngaard Lars Bang AndersenPresident and CEO Executive Vice Executive Vice President PresidentAnders Götzsche Anders Gersel Stig Løkke Pedersen PedersenExecutive Vice President, Executive Vice Executive ViceCFO President PresidentSupervisory BoardPer Wold-Olsen Thorleif Krarup Egil BoddChairman Deputy ChairmanKim Rosenville Christensen Peter Kürstein Jørn MayntzhusenMats Pettersson Birgit Bundgaard Jes ÿstergaard RosenmeierLundbeck contactsInvestors: Media:Jacob Tolstrup Mads KronborgDirector, IR & Communication Media Relations+45 36 43 30 79 +45 36 43 28 51Palle Holm Olesen Kasper RiisHead of Investor Relations Media Relations+45 36 43 24 26 +45 36 43 28 33Magnus Thorstholm JensenInvestor Relations Officer+45 36 43 38 16About LundbeckH. Lundbeck A/S (LUN.CO, LUN DC, HLUKY) is an internationalpharmaceutical company highly committed to improve the quality oflife for people suffering from central nervous system (CNS)disorders. For this purpose Lundbeck is engaged in the research anddevelopment, production, marketing and sale of pharmaceuticals acrossthe world, targeted at disorders like depression and anxiety,schizophrenia, insomnia, Huntington's, Alzheimer's and Parkinson'sdiseases.Lundbeck was founded in 1915 by Hans Lundbeck in Copenhagen, Denmark,and employs today over 5,500 people worldwide. Lundbeck is one of theworld's leading pharmaceutical companies working with CNS disorders.In 2008, the company's revenue was DKK 11.3 billion (approximatelyEUR 1.5 billion or USD 2.2 billion). For more information, pleasevisit www.lundbeck.com.Recent Corporate Releases from H. Lundbeck A/SNovember 2, 2009 Lundbeck starts clinical phase IIawith Lu AA24493 (cEPO) in Friedreich's ataxia in a study alsoassessing efficacy via biomarkersOctober 30, 2009 Novel agent for treatment ofParkinson's disease - Lu 02-750 - enters Lundbeck's developmentpipelineSeptember 23, 2009 Results of ADAGIO study with Azilect®in Parkinson's disease published in The New England Journal ofMedicineAugust 21, 2009 FDA grants marketing approval forLundbeck's Sabril® (vigabatrin)Please visit www.lundbeck.com for further information on thereleases.Appendix - Changes in accounting policies Effect of Reclassification change ofChange in inaccounting Before adj. accounting other operating After adj.policies- effect on policies -income DKKm DKKm items1 - DKKm DKKmstatementQ3 2008Revenue 2,810 2,810Cost of sales 432 1 433Distribution 571 571costsAdministrative 386 (1) 385expensesResearch &Development 567 0 568costsProfit beforeother 853 (2) 1 852operatingitemsOtheroperating 1 (1) -itemsProfit fromoperations 854 (2) - 852(EBIT)Income frominvestments in (2) (2)associatesNet financials 45 (12) 33Profit before 897 (13) - 884taxTax on profit 260 12 272for the periodProfit for the 637 (25) - 611periodEarnings pershare (EPS) 3.25 3.12(DKK)Dilutedearnings per 3.25 3.12share (DEPS)(DKK)1 January - 30September 2008Revenue 8,629 8,629Cost of sales 1,377 1,377Distributioncosts 1,770 1,770Administrativeexpenses 1,212 (7) 1,205Research &Developmentcosts 2,138 (2) 2,136Profit beforeotheroperatingitems 2,133 2 7 2,142Otheroperatingitems 7 (7) -Profit fromoperations(EBIT) 2,140 2 - 2,142Income frominvestments inassociates (34) (34)Net financials 11 38 49Profit beforetax 2,117 40 - 2,157Tax on profitfor the period 614 4 618Profit for theperiod 1,503 35 - 1,538Earnings pershare (EPS)(DKK) 7.63 7.81Dilutedearnings pershare (DEPS)(DKK) 7.63 7.811) The line item "Other operating items" has been removed from theincome statement as it is considered immaterial for the Group. Theincome and expenses previously included in this line have beenreclassified to administrative expenses in the comparative figures. Effect of Reclassification change ofChange in accounting Before in accounting other operating Afterpolicies adj. adj.- effect on income DKKm policies - items1 - DKKm DKKmstatement DKKmFY 2008Revenue 11,282 11,282Cost of sales 1,837 1,837Distribution costs 2,459 2,459Administrative expenses 1,651 (9) 1,642Research & Development 2,992 (2) 2,990costsProfit before other 2,342 2 9 2,354operating itemsOther operating items 9 (9) -Profit from operations 2,352 2 - 2,354(EBIT)Income from investments (43) (43)in associatesNet financials (185) 158 (28)Profit before tax 2,123 160 - 2,283Tax on profit for the 613 6 620periodProfit for the period 1,510 154 - 1,663Earnings per share (EPS) 7.67 8.45(DKK)Diluted earnings per 7.67 8.45share (DEPS) (DKK)1) The line item "Other operating items" has been removed from theincome statement as it is considered immaterial for the Group. Theincome and expenses previously included in this line have beenreclassified to administrative expenses in the comparative figures.Change in accounting policies Effect of change- effect on balance sheet - Before adj. in accounting After adj.30.09.2008 DKKm policies - DKKm DKKmAssetsIntangible assets 2,040 (65) 1,975Property, plant and equipment 3,143 (34) 3,109Financial assets 561 14 575Non-current assets 5,744 (85) 5,659Current assets 7,204 7,204Assets 12,948 (85) 12,863Equity and liabilitiesShare capital 984 984Share premium 224 224Other reserves - (322) (322)Retained earnings 6,298 237 6,536Equity 7,507 (85) 7,422Liabilities 5,441 5,441Equity and liabilities 12,948 (85) 12,863Change in accounting policies Effect of change- effect on balance sheet - Before adj. in accounting After adj.31.12.2008 DKKm Policies - DKKm DKKmAssetsIntangible assets 2,079 (63) 2,016Property, plant and equipment 3,154 (30) 3,123Financial assets 234 13 247Non-current assets 5,467 (81) 5,386Current assets 7,140 7,140Assets 12,607 (81) 12,526Equity and liabilitiesShare capital 984 984Share premium 224 224Other reserves - (437) (437)Retained earnings 6,384 356 6,740Equity 7,592 (81) 7,511Liabilities 5,015 5,015Equity and liabilities 12,607 (81) 12,526[1] Xenazine is a registered trademark of Cambridge LaboratoriesLimited (Ireland)http://hugin.info/130085/R/1352025/327024.pdfhttp://hugin.info/130085/R/1352025/327025.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 03.11.2009 - 07:59 Uhr
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