Annual report 2004

• Lundbeck’s revenue amounted to DKK 9,733 million in 2004, an increase of 9% measured in local currencies and a decline of 2% measured in Danish kroner relative to 2003.
• Sales of Lundbeck’s new products (Cipralex®/Lexapro® and Ebixa®) amounted to DKK 4,803 million, corresponding to 52% of total revenue in 2004 (excluding the DKK 421 million payment from Merck & Co., Inc. in Q1 2004) and 61% in the fourth quarter.
• Lundbeck’s combined costs fell by 8% to DKK 7,158 million.
• Profit from operations was DKK 2,575 million, an increase of 21%. Adjusted for the Merck payment, profit from operations rose 1%.
• Cash flows from operating and investing activities (free cash flow) amounted to DKK 2,434 million.
• The company forecast a profit from operations of approximately DKK 2.2 billion in 2005.
• For 2006 and 2007, Lundbeck forecast a yearly growth in profit from operations of more than 12% - and the company’s net profit ratio is expected to reach 25% in 2007.
  

Financial highlights 2004

Outlook for 2005
Profit from operations for 2005 is forecast at approximately DKK 2.2 billion. We expect to maintain our profit from operations at the 2004 level in spite of adverse movements in the exchange rate of the US dollar – from an average hedged exchange rate of DKK 6.68 in 2004 to an average hedged exchange rate of DKK 5.97 in 2005, or a drop of 11%.

In 2005, Lundbeck is expected to incur costs that are on a level with the costs (nominal value) incurred in the 2003 financial year. Adjusted for the DKK 421 million payment from Merck in connection with the agreement to develop and commercialise gaboxadol in the USA, our net profit ratio rose to 23% in 2004, and we expect to maintain this level in 2005. This stabilisation of the company’s profitability reflects a turning point following several years of intense generic competition in the European markets in particular. Also, we have set the course for the 25% net profit ratio target which the company considers a satisfactory medium-term target

 

Following several years of large investment in expanding our research facilities and production plant, 2004 marked a turning point in our level of investment and, by extension, our ability to generate free cash flows. For 2005, we continue to anticipate strong cash flows in spite of a higher level of investment in 2005, an anticipated DKK 550 million, compared with DKK 244 million in 2004.

Financial targets for 2006 and 2007

 

Growth in profit from operations of more than 12%
The target is for growth in profit from operations of more than 12% for each of the years 2006 and 2007. We expect to reach this target through increased revenue from products in the company’s portfolio and continued cost awareness.

 

Net profit ratio of 25% in 2007
Lundbeck has defined a net profit ratio target of 25%, a target which the company finds satisfactory in the medium term. In 2006, the company expects to increase its net profit ratio to above the level realised in the transition years 2004-2005.

Lundbeck’s targets are defined on the assumption of fixed exchange rates, i.e. a DKK/USD exchange rate of 5.70.

 

Financial guidance and targets