EU markets after patent expiration in 2009. – Registration dossiers for Roflumilast (Daxas®) tablets, a first-in-cla&nbs...
Nycomed at a glance
Nycomed is a privately owned, global, market-driven pharmaceutical company with a differentiated portfolio of branded medicines in gastrointestinal, respiratory and inflammatory diseases, pain, osteoporosis and tissue management. An extensive range of OTC products completes the portfolio. Nycomed has strong platforms in Europe and in fast-growing markets such as Russia/CIS and Latin America. Expanding in emerging markets and in-licensing are cornerstones of the company’s growth strategy. Nycomed actively seeks partnerships in its core areas as well as throughout the value chain.
NYCOMED’S GLOBAL REACH AT THE END OF 2009
28th
largest pharmaceutical company
www.nycomed.com
Nycomed Annual Report 2009
Nycomed S.C.A. SICAR 412F Route d’ Esch L-1030 Luxembourg
Nycomed Annual Report 2009
associates worldwide
€ 3.2 bn turnover in 2009
16th biggest provider of OTC medicines
Nycomed S.C.A. SICAR
12,000
>50
markets where Nycomed subsidiaries are present
Nycomed at a glance
Nycomed is a privately owned, global, market-driven pharmaceutical company with a differentiated portfolio of branded medicines in gastrointestinal, respiratory and inflammatory diseases, pain, osteoporosis and tissue management. An extensive range of OTC products completes the portfolio. Nycomed has strong platforms in Europe and in fast-growing markets such as Russia/CIS and Latin America. Expanding in emerging markets and in-licensing are cornerstones of the company’s growth strategy. Nycomed actively seeks partnerships in its core areas as well as throughout the value chain.
NYCOMED’S GLOBAL REACH AT THE END OF 2009
28th
largest pharmaceutical company
www.nycomed.com
Nycomed Annual Report 2009
Nycomed S.C.A. SICAR 412F Route d’ Esch L-1030 Luxembourg
Nycomed Annual Report 2009
associates worldwide
€ 3.2 bn turnover in 2009
16th biggest provider of OTC medicines
Nycomed S.C.A. SICAR
12,000
>50
markets where Nycomed subsidiaries are present
Financial highlights and key figures
TOTAL NET TURNOVER
ADJUSTED EBITDA
€ million
€ million
Turnover in 2009
€ million
Europe
2009
2008
2007
Pro forma (unaudited)** 2006 2006
1,714.6
1,801.0
Latin America
290.9
310.7
305.1
Russia/CIS
343.4
329.9
268.4
Asia-Pacific, Africa, Middle East
212.2
174.3
152.6
19.7
North America
379.6
407.5
452.1
377.2
Out-licensing
353.2
337.2
436.1
471.8
80.8
73.7
82.1
22.9
144.9
14.9
25.2
3,228.0
3,348.0
3,497.4
869.9
3,394.4
507.9
747.5
Total net turnover*
1,845.0
(12 months) (unaudited) 2005
1,568.0
Contract manufacturing
625.1
(8 months) 2005
387.3
571.6
313.9 221.9
221.9
105.7
150.7
895.2
884.6
959.6
349.9
905.6
266.3
369.3
Gross profit
2,332.7
2,463.4
2,537.8
520.1
2,488.8
241.6
378.2
288.0
352.0
353.8
46.0
217.2
-36.8
-16.5
-15.3
-475.7
-76.5
-156.1
-361.0
-75.0
-88.7
Operating income (EBIT) Financial result Net result/profit
232.7
-77.9
235.4
-83.4
-97.8
-86.5
-81.0
EBITDA
999.1
1,142.8
997.1
168.0
869.1
44.6
90.5
1,074.6
1,207.6
1,222.2
180.8
933.0
110.7
156.7
Adjusted EBITDA Balance sheet Total assets Change in working capital
7,885.7
7,972.3
8,390.7
9,176.5
9,176.5
2,350.7
2,350.7
-95.7
-111.8
24.5
-41.1
-17.1
-35.2
-58.1
Capital expenditures
-232.2
-175.8
-200.9
-30.3
-121.3
-16.6
-20.7
Total equity
1,538.8
1,321.3
1,380.6
1,232.4
1,232.4
819.4
819.4
Cash flow Operating activities Sale/purchase of business activities
715.6
811.4
475.8
-64.0
519.9
16.8
20.7
-6.1
-238.0
-68.5
-4,089.3
-4,089.3
-748.3
-784.5
Other investment activities
-228.0
-171.0
-135.7
-53.3
-130.4
-29.4
-39.9
Financing activities
-237.2
-382.3
-460.3
4,837.9
-114.4
807.6
827.3
Net cash flow
244.3
20.0
-188.7
631.2
275.1
46.7
23.6
Adjusted EBITDA in 2009
3,500
1,400
3,000
1,200
2,500
1,000
2,000
800
1,500
600
1,000
400
500
200
0
0 2005*
Cost of sales
€ 3.2 bn
2006*
Altana Pharma
2007
2008
2009
2005*
2006*
2007
Altana Pharma
Nycomed
€ 1.1 bn
2008
Our vision is to become the preferred pharmaceutical company by being responsive, reliable and focusing on results.
2009
Nycomed
* combined proforma non-audited turnover of Altana Pharma and Nycomed before acquisition of Altana Pharma
NET TURNOVER BY REGION (2009)
NET TURNOVER BY PRODUCT AREA (2009)
€ million
€ million
343.4 +4.1% (+17.1% LC) Russia/CIS 290.9 -6.4% (+4.6% LC) Latin America
310.0 +13.8% (+6.1% LC) Nycomed US
1,568.0 -8.6% (-7.2% LC) Europe
3,228 -3.6%
212.2 +21.7% (+20.9% LC) Asia-Pacific, Africa and Middle East
353.2 +4.7% (-0.7% LC) Outlicensing
3,228 -3.6%
664.5 -6.1% (-0.8% LC) Regional and local Rx
80.8 +9.6% (+8.8% LC) Contract Manufacturing
379.6 -6.9% (-9.9% LC) North America
1,216.2 -8.2% (-7.4% LC) Gastrointestinal
553.9 +6.6% (+9.7% LC) Specialty products
343.2* -6.6% (+0.2% LC) OTC * Not including Calcium OTC (part of Specialty products) and Pantoprazole OTC (part of Gastrointestinal)
Our mission is to bring medicines that matter to patients and healthcare providers.
140.2 -10.3% (-14.7% LC) Respiratory
PRODUCT AREAS
Ratios Gross profit margin
72.3%
73.6%
74.1%
59.8%
74.9%
47.6%
50.6%
EBITDA margin
31.0%
34.1%
28.5%
19.3%
25.6%
8.8%
12.1%
Adjusted EBITDA margin
33.3%
36.1%
34.9%
20.8%
27.5%
21.8%
21.0%
Number of employees
12,043
11,657
11,683
3,821
12,741
3,252
3,252
* Due to an adjustment to geographical regions, the split of Net Turnover changed compared with the Annual Report of 2008. ** Nycomed acquired Altana Pharma AG on 29 December 2006. The pro forma key figures for 2006 present the combined Group as if the acquisition had taken place on 1 January 2006.
Gastrointestinal
Portfolio built around Nycomed’s biggest-selling product, Pantoprazole (acid-related gastrointestinal disorders)
Specialty products
Products primarily for specialist doctors, including Instanyl® (breakthrough cancer pain), Calcium D3 (osteoporosis), TachoSil® (surgical patch) and Preotact® (osteoporosis)
Respiratory
Products for respiratory and related conditions, such as Alvesco® (asthma) and Omnaris® (allergic rhinitis)
OTC
Broad portfolio of over-the-counter products marketed in Europe and emerging markets
Regional and local Rx
Portfolios adapted to local needs, primarily composed of branded generics
Nycomed US
Dermatology products for the US market
Actovegin®, Alvesco®, Controloc®, Daxas®, Eparema®, Hepatalgina®, Hypnogen®, Instanyl®, Matrifen®, Neosaldina®, Omnaris®, Optesia®, Pantozol Control®, Preotact®, Protonix®, Riopan®, TachoSil®, Xefo® and Xymelin®/Zymelin® are registered trademarks of Nycomed. Avonex® is a registered trademark of Biogen. Britomar®, Ceraxon® and Eneas® are registered trademarks of Ferrer. Curosurf® is a registered trademark of Chiesi. Lodoz® is a registered trademark of Merck Sante. Maxalt® is a registered trademark of MSD. Mesacol MMX® and Mesavancol® are registered trademarks of Giuliani. Sylodix® is a registered trademark of Recordati. Xamiol® is a registered trademark of
KEY PRODUCTS (THERAPEUTIC AREAS AND REVENUES IN 2009)
Pantoprazole Gastrointestinal € 1,216 million
Actovegin
®
Blood flow disturbances € 109 million
LEO Pharma.
Calcium D3 Osteoporosis € 109 million
TachoSil
®
General tissue sealing € 98 million
Alvesco
®
Asthma € 56 million
Preotact Osteoporosis € 54 million
®
Matrifen
®
Pain € 37 million
Xefo
®
Pain € 36 million
Omnaris
®
Allergic rhinitis € 14 million
Financial highlights and key figures
TOTAL NET TURNOVER
ADJUSTED EBITDA
€ million
€ million
Turnover in 2009
€ million
Europe
2009
2008
2007
Pro forma (unaudited)** 2006 2006
1,714.6
1,801.0
Latin America
290.9
310.7
305.1
Russia/CIS
343.4
329.9
268.4
Asia-Pacific, Africa, Middle East
212.2
174.3
152.6
19.7
North America
379.6
407.5
452.1
377.2
Out-licensing
353.2
337.2
436.1
471.8
80.8
73.7
82.1
22.9
144.9
14.9
25.2
3,228.0
3,348.0
3,497.4
869.9
3,394.4
507.9
747.5
Total net turnover*
1,845.0
(12 months) (unaudited) 2005
1,568.0
Contract manufacturing
625.1
(8 months) 2005
387.3
571.6
313.9 221.9
221.9
105.7
150.7
895.2
884.6
959.6
349.9
905.6
266.3
369.3
Gross profit
2,332.7
2,463.4
2,537.8
520.1
2,488.8
241.6
378.2
288.0
352.0
353.8
46.0
217.2
-36.8
-16.5
-15.3
-475.7
-76.5
-156.1
-361.0
-75.0
-88.7
Operating income (EBIT) Financial result Net result/profit
232.7
-77.9
235.4
-83.4
-97.8
-86.5
-81.0
EBITDA
999.1
1,142.8
997.1
168.0
869.1
44.6
90.5
1,074.6
1,207.6
1,222.2
180.8
933.0
110.7
156.7
Adjusted EBITDA Balance sheet Total assets Change in working capital
7,885.7
7,972.3
8,390.7
9,176.5
9,176.5
2,350.7
2,350.7
-95.7
-111.8
24.5
-41.1
-17.1
-35.2
-58.1
Capital expenditures
-232.2
-175.8
-200.9
-30.3
-121.3
-16.6
-20.7
Total equity
1,538.8
1,321.3
1,380.6
1,232.4
1,232.4
819.4
819.4
Cash flow Operating activities Sale/purchase of business activities
715.6
811.4
475.8
-64.0
519.9
16.8
20.7
-6.1
-238.0
-68.5
-4,089.3
-4,089.3
-748.3
-784.5
Other investment activities
-228.0
-171.0
-135.7
-53.3
-130.4
-29.4
-39.9
Financing activities
-237.2
-382.3
-460.3
4,837.9
-114.4
807.6
827.3
Net cash flow
244.3
20.0
-188.7
631.2
275.1
46.7
23.6
Adjusted EBITDA in 2009
3,500
1,400
3,000
1,200
2,500
1,000
2,000
800
1,500
600
1,000
400
500
200
0
0 2005*
Cost of sales
€ 3.2 bn
2006*
Altana Pharma
2007
2008
2009
2005*
2006*
2007
Altana Pharma
Nycomed
€ 1.1 bn
2008
Our vision is to become the preferred pharmaceutical company by being responsive, reliable and focusing on results.
2009
Nycomed
* combined proforma non-audited turnover of Altana Pharma and Nycomed before acquisition of Altana Pharma
NET TURNOVER BY REGION (2009)
NET TURNOVER BY PRODUCT AREA (2009)
€ million
€ million
343.4 +4.1% (+17.1% LC) Russia/CIS 290.9 -6.4% (+4.6% LC) Latin America
310.0 +13.8% (+6.1% LC) Nycomed US
1,568.0 -8.6% (-7.2% LC) Europe
3,228 -3.6%
212.2 +21.7% (+20.9% LC) Asia-Pacific, Africa and Middle East
353.2 +4.7% (-0.7% LC) Outlicensing
3,228 -3.6%
664.5 -6.1% (-0.8% LC) Regional and local Rx
80.8 +9.6% (+8.8% LC) Contract Manufacturing
379.6 -6.9% (-9.9% LC) North America
1,216.2 -8.2% (-7.4% LC) Gastrointestinal
553.9 +6.6% (+9.7% LC) Specialty products
343.2* -6.6% (+0.2% LC) OTC * Not including Calcium OTC (part of Specialty products) and Pantoprazole OTC (part of Gastrointestinal)
Our mission is to bring medicines that matter to patients and healthcare providers.
140.2 -10.3% (-14.7% LC) Respiratory
PRODUCT AREAS
Ratios Gross profit margin
72.3%
73.6%
74.1%
59.8%
74.9%
47.6%
50.6%
EBITDA margin
31.0%
34.1%
28.5%
19.3%
25.6%
8.8%
12.1%
Adjusted EBITDA margin
33.3%
36.1%
34.9%
20.8%
27.5%
21.8%
21.0%
Number of employees
12,043
11,657
11,683
3,821
12,741
3,252
3,252
* Due to an adjustment to geographical regions, the split of Net Turnover changed compared with the Annual Report of 2008. ** Nycomed acquired Altana Pharma AG on 29 December 2006. The pro forma key figures for 2006 present the combined Group as if the acquisition had taken place on 1 January 2006.
Gastrointestinal
Portfolio built around Nycomed’s biggest-selling product, Pantoprazole (acid-related gastrointestinal disorders)
Specialty products
Products primarily for specialist doctors, including Instanyl® (breakthrough cancer pain), Calcium D3 (osteoporosis), TachoSil® (surgical patch) and Preotact® (osteoporosis)
Respiratory
Products for respiratory and related conditions, such as Alvesco® (asthma) and Omnaris® (allergic rhinitis)
OTC
Broad portfolio of over-the-counter products marketed in Europe and emerging markets
Regional and local Rx
Portfolios adapted to local needs, primarily composed of branded generics
Nycomed US
Dermatology products for the US market
Actovegin®, Alvesco®, Controloc®, Daxas®, Eparema®, Hepatalgina®, Hypnogen®, Instanyl®, Matrifen®, Neosaldina®, Omnaris®, Optesia®, Pantozol Control®, Preotact®, Protonix®, Riopan®, TachoSil®, Xefo® and Xymelin®/Zymelin® are registered trademarks of Nycomed. Avonex® is a registered trademark of Biogen. Britomar®, Ceraxon® and Eneas® are registered trademarks of Ferrer. Curosurf® is a registered trademark of Chiesi. Lodoz® is a registered trademark of Merck Sante. Maxalt® is a registered trademark of MSD. Mesacol MMX® and Mesavancol® are registered trademarks of Giuliani. Sylodix® is a registered trademark of Recordati. Xamiol® is a registered trademark of
KEY PRODUCTS (THERAPEUTIC AREAS AND REVENUES IN 2009)
Pantoprazole Gastrointestinal € 1,216 million
Actovegin
®
Blood flow disturbances € 109 million
LEO Pharma.
Calcium D3 Osteoporosis € 109 million
TachoSil
®
General tissue sealing € 98 million
Alvesco
®
Asthma € 56 million
Preotact Osteoporosis € 54 million
®
Matrifen
®
Pain € 37 million
Xefo
®
Pain € 36 million
Omnaris
®
Allergic rhinitis € 14 million
Recent Achievements
– A comprehensive strategy for Pantoprazole, including the launch of an OTC presentation, resulted in solid sales performance in major EU markets after patent expiration in 2009. – Registration dossiers for Roflumilast (Daxas®) tablets, a first-in-class treatment for chronic obstructive pulmonary disease (COPD), were submitted to the EMEA and FDA in 2009. – Instanyl®, an innovative therapy for breakthrough cancer pain, had a very positive market response in the first European markets after launch in Q4 of 2009. – In Central and Eastern Europe (CEE), the product portfolio was strengthened in 2009 by the acquisition of 20 branded generics. – In 2009, Nycomed opened offices in Singapore and Dubai to expand its presence in fast-growing emerging markets in Asia and the Middle East. – In 2010, a dedicated Nycomed marketing and sales organisation was created in Turkey to tap into the dynamic growth rates of that market. – Construction of a pharmaceutical manufacturing plant in Russia, Nycomed’s biggest market, will begin in 2010. – The production of active pharmaceutical ingredients at a state-of-the-art plant in India will help Nycomed to create a global supply chain with a competitive edge.
Contents
CEO Letter
4
On track
Strategy
6
Positioned for continued success in a rapidly changing environment A unique pipeline strategy and continuous life-cycle management
Management Report
10
Management Statement
18
Statement by the Board of Directors of the General Partner
Corporate Governance
20
Financial Statements
22
Contacts Starting points for building partnerships with Nycomed
110
Nycomed is in a good shape to take advantage of growth opportunities. Håkan Björklund, Chief Executive Officer of Nycomed
4
Nycomed Annual Report 2009
CEO Letter
On track Nycomed demonstrated its resilience in 2009 with net turnover reaching €3,228 million. Key Products and most emerging markets grew strongly despite the economic downturn. While the loss of exclusivity for pantoprazole in key European markets in May showed the anticipated impact on sales, the post-expiry performance was robust. Our key development project, roflumilast (Daxas), has been progressing well. It was submitted to EMEA and FDA and we are working closely with our partner Forest Laboratories on the US commercialisation of the product. In September, full results from four phase III trials were published in the medical journal The Lancet and presented at the European Respiratory Society meeting in Vienna. The results reinforce our confidence in the drug’s strong commercial prospects. Instanyl has been introduced to European markets since September and we are seeing faster market penetration than for recent competitor launches.
For 2010, our focus will be on pantoprazole, roflumilast and the emerging markets. We expect further decreases in sales of pantoprazole, our best-selling product, which we continue to support. The launch of roflumilast will be crucial for the long-term, as will be our growth in emerging markets and we dedicate our efforts accordingly. We are continuously looking into managing our costs. Nycomed is in a good shape to take advantage of the opportunities lying ahead of us.
Håkan Björklund Chief Executive Officer (CEO)
We are also continuing to strengthen our position in emerging markets. With the acquisition of a portfolio of 20 branded generic products, Nycomed strengthened its position in the faster growing markets of Central and Eastern Europe. In Russia, we will build a new production facility by 2014.
Nycomed Annual Report 2009
5
Strategy
Positioned for continued success in a rapidly changing environment – Solid presence in Europe and fast-growing emerging markets – R&D partnerships leverage innovation from biotechs – Broad range of prescription drugs, OTC products and branded generics
A privately owned, mid-sized company with 12,000 employees, Nycomed has unique strengths based on a long tradition of partnerships, a strong presence in Europe and fastgrowing emerging markets, and a differentiated product portfolio. Because of its size and entrepreneurial culture, Nycomed has the agility to seize attractive external opportunities at every point in the pharmaceuticals value chain. At the same time, the company possesses the critical mass in R&D know-how and commercial operations to bring a new molecule all the way from the laboratory bench to the market. Nycomed’s management is making the most of this strategic positioning by fostering empowerment throughout the organisation and encouraging intelligent risk-taking. A good example is Instanyl®, a treatment for breakthrough cancer pain. While the active ingredient, fentanyl, has been on the market for decades, Nycomed’s development team combined it with an innovative delivery method to address an unmet medical need – an example of the company’s focus on ‘medicines that matter’. Results from the first markets after launch in 2009 show that Instanyl® has significant commercial potential. Strong in Europe and emerging markets Nycomed has a unique global profile. From its origins in Norway 136 years ago, the company has grown dynamically in Europe where its knowledge of diverse healthcare systems and a complex regulatory environment is a competitive advantage. In two biggest pharmaceutical markets, the United States and Japan, Nycomed relies on external partners to commercialise its products. Furthermore, Nycomed is well represented in emerging markets – which is of increasing importance as growth is outpacing the developed
6
Nycomed Annual Report 2009
countries. Russia/CIS has become Nycomed’s biggest market and there is solid growth in Eastern Europe. The opening of an office in Singapore underlines the company’s determination to expand in Asia. In fast-growing Turkey, Nycomed is launching a dedicated sales organisation. And the opening of an office in Dubai will help to realise further potential in the Middle East. In Latin America, Nycomed already has a strong presence in Brazil, Argentina and Mexico, and there has been rapid expansion in the region’s third largest market, Venezuela. Partners complement our strengths The classical method for pharmaceutical companies to discover and develop new products is to rely on their own internal R&D pipeline. Nycomed takes the opposite approach: a smaller research organisation and a full-fledged development capability that builds on external partnerships to generate the majority of future products. This strategic direction allows Nycomed to focus on alliances with smaller biotech companies, which have increasingly become the engine of innovation for new drugs. An experienced Business Development department works hand in hand with R&D to evaluate these opportunities. There are compelling reasons why companies see Nycomed as a preferred partner. When some pharma companies in-license or acquire a new molecule, it does not receive the same priority as internal pipeline projects. Nycomed has a proven track record of co-developing molecules that maximise the commercial potential for both partners. Since Nycomed’s most important regional market is Europe, it is often easier to reach agreements with US biotech companies whereby these then maintain their commercial rights to products in the United States. The Nycomed tradition of strong partnerships extends beyond R&D
Strategy
to out-licensing agreements, such as the one concluded in 2009 with Forest Laboratories to market roflumilast in the United States. Differentiated product portfolio Nycomed’s dynamic growth in emerging markets is closely linked to a decentralised organisation with empowered country and regional managers. The company’s product portfolio is diversified to make optimal use of growth opportunities. Key products in gastrointestinal, respiratory and specialty areas are expected to contribute to sales globally. Over-the-counter (OTC) as well as local and regional portfolios for prescription products are adapted to local requirements and customer preferences.
At both the corporate and local level, there is an ongoing evaluation of opportunities to inlicense or acquire brands. Our proven ability to increase sales of local brands and the capacity to supply products to 100 countries means that other companies often approach Nycomed to market their products. Nycomed’s successful launch of OTC and branded generic versions of Pantoprazole are part of a strategy to achieve resilient sales performance for this blockbuster product after patent expiration in Europe in 2009. The company’s objective is to maintain Pantoprazole as an important pillar of the business.
Our place in the pharmaceutical industry
VOLUME-DRIVEN – Global coverage – Large target groups (physicians) – Blockbuster focus
TECHNOLOGY-DRIVEN – Research focus – Selected technologies – Limited marketing capabilities
NYCOMED – Market-driven – Flexible product portfolio – Strong regional profile – Focus on partnering DISEASE-DRIVEN – Selected therapeutic areas – Limited target groups (specialists) – R&D focus
GENERIC-DRIVEN – Large volumes with low margins – Fast to market – Production and development driven
As a mid-sized pharmaceutical company, Nycomed has the agility to seize opportunities sometimes overlooked by volume-driven companies, but still has enough R&D and marketing muscle to be a valuable partner for technology-driven biotechs. Nycomed’s broad portfolio of prescription drugs, OTC products and branded generics maximises opportunities and diversifies risks – a significant advantage over companies narrowly focused on one therapeutic area or low-margin manufacturers of generics.
Nycomed Annual Report 2009
7
Strategy
A unique pipeline strategy and continuous life-cycle management – Focus on R&D partnerships and early-stage compounds – Life-cycle management maximises potential of marketed products – Core areas of inflammation, respiratory, gastrointestinal and pain
Nycomed’s global R&D organisation comprises 1,000 employees in four sites: Roskilde (Denmark), Constance and Willinghusen (Germany), and Mumbai (India). The R&D strategy relies on a unique blend of internal and external resources. The company maintains in-house development capabilities from early pre-clinical stages through successive phases of clinical research all the way to registration. It has a proven track
– Pipeline shows an increasing emphasis on biological therapies
8
Nycomed Annual Report 2009
record of extending the life of drugs already on the market with new formulations and medical indications. As a core part of the R&D strategy, Nycomed aims to fill a majority of its pipeline with drugs acquired through in-licensing agreements through joint development with external partners. The company is thus in a better position to reap the benefits of exciting discoveries that are increasingly made by biotech firms.
Strategy
Nycomed looks for business opportunities at all stages of development, including early stages where the risks of failure are perhaps higher, but there are more projects to choose from with a better value proposition. Nycomed has also emphasised the discovery and development of prescription drugs that address the needs of specialist doctors, where the highest growth rates in the pharma industry are expected in the coming years.
While Nycomed’s past growth in prescription pharmaceuticals has come primarily from small molecules that can be chemically synthesised as an oral tablet, there is now an increased trend toward biologicals (larger molecules that are usually injected) in the R&D pipeline. New drug candidates in the core therapeutic areas of inflammation, respiratory, gastrointestinal and pain come from both categories. In Phase I, two small molecules – a PDE4 inhibitor and a PDE5 inhibitor – leverage the in-house expertise in inflammatory and respiratory diseases generated by the development of roflumilast, an innovative treatment for chronic obstructive pulmonary disease (COPD).
PHASE I
PHASE II
PHASE III
Registration
PDE4 inhibitor Inflammation
Optesia® Incisional pain Partner: Durect
Alendronate effervescent Osteoporosis Partner: EffRx
Roflumilast (Daxas®), COPD Partner: Forest Laboratories (USA) Mitsubishi Tanabe Pharma (Japan)
PDE5 inhibitor Respiratory
Veltuzumab Rheumatoid arthritis Partner: Immunomedics
Teduglutide Short bowel syndrome Partner: NPS
MT203 Inflammation Partner: Micromet
Ciclesonide HFA nasal Allergic rhinitis Partner: Sepracor
Our pipeline is built from our own research and through co-developments with partners. Nycomed development Nycomed development, local out-licensing Co-development with partners
Nycomed Annual Report 2009
9
Management Report
Management Report – Resilient performance despite pantoprazole patent expiry in Europe – Strong growth of Key Products and in most emerging markets – Roflumilast (Daxas®) submitted to EMEA and FDA for treatment of COPD – Instanyl® for breakthrough cancer pain launched in Europe with very positive market response
FINANCIAL HIGHLIGHTS Total net turnover for 2009 fell by 3.6% (-0.6% on a comparable basis) to €3,228.0 million (2008: €3,348.0 million). Adjusted EBITDA in 2009 decreased 11.0%, (-3.8% on a comparable basis) to €1,074.6 million (2008: €1,207.6 million). When stating comparable results in this management report, effects of upfront payments have been excluded, as well as currency effects. The performance was driven by strong growth of Key Products and in most emerging markets. This was offset by the negative impact of pantoprazole’s patent expiry in Europe, the economic downturn, and adverse currency fluctuations. Adjusted EBITDA decreased proportionally more than turnover due to pantoprazole and currency effects.
One-time effects in 2008 and 2009 had an impact on the result. In the first half of 2008, Nycomed received a payment of $150 million (€100.9 million) from Sepracor for the ciclesonide United States licensing agreement, and payments of €20 million in third quarter 2008 for the divested oncology assets. In 2009, Nycomed received a payment of $100 million (€70.7 million) from Forest Laboratories for the commercialisation rights to roflumilast in the United States. Overall costs remained flat, with decreased R&D expenses balanced by slightly rising marketing and sales and administration costs. This development mainly reflects the shift in priorities for roflumilast, moving from development to launch preparation, and costs to manage the pantoprazole loss of exclusivity.
KEY FIGURES
Net turnover
Full Year 2009 € million
Full Year 2008 € million
Change
3,228.0
3,348.0
-3.6%(2) -0.6%(1)
Gross profit
2,332.8
2,463.4
Margin
72.3%
73.6%
-1.8%
Operating income (EBIT)
288.0
352.0
-18.2%
EBITDA
999.1
1,142.8
-12.6%
Margin
31.0%
34.1%
-9.1%
1,074.6
1,207.6
-11.0%(2)
Adjusted EBITDA(3)
-5.3%
-3.8%(1) Margin
33.3%
36.1%
For full results and an explanation of adjusted EBITDA, please see page 15. (1)
10
On a comparable basis: in local currencies and excluding one-time effects
(2)
In local currencies, net turnover decreased 1.8% and adjusted EBTIDA decreased 8.7%
(3)
EBITDA adjusted for integration costs/restructuring and warrants, please see page 15
Nycomed Annual Report 2009
-7.8%
Management Report
BUSINESS REVIEW Regional performance* Total net turnover decreased by 1.8% for 2009. Excluding the impact of one-off payments, net turnover was broadly in line with last year in local currencies (-0.6%). European and North American turnover declined as expected, driven by the loss of exclusivity for pantoprazole in Canada and most of Europe. Strong performances in Russia/CIS, Latin America, Asia-Pacific, Africa, and the Middle East helped to partly offset the economic downturn and pantoprazole patent losses. Total net turnover, excluding pantoprazole and one-time effects, grew by 4.3% in 2009. Europe Sales in Europe declined as a result of the pantoprazole patent expirations in 12 European countries in May 2009. Despite losses of exclusivity in those major markets, Nycomed has managed to defend the position of pantoprazole in important markets such as Italy and Germany. Furthermore, strong performance continued in countries where no patent protection has existed, such as Greece and several Central and Eastern European countries. Despite the overall year on year decline, total pantoprazole sales were in line with expectations. In 2009, total European net turnover decreased by 7.2%. pantoprazole was the main driver of the decrease. Excluding pantoprazole, European net turnover for the year decreased by 0.3%. Latin America Latin America saw a strong performance, especially at the end of the year. The main contribution came from Venezuelan sales of pantoprazole, as well as activities in Brazil focused on the Rx portfolio. Sales of pantoprazole continued to be a very important driver of growth in Latin America. The growth was offset by the development in Mexico, where substantial stocks had accumulated in the distribution channel since 2008, partly as a result of generics substitution at the pharmacy level. Nycomed has actively reduced these stocks and has implemented a new commercial approach to the point of sales.
While sales for the entire year were significantly below our expectations, the fourth quarter showed signs of normalisation. Currency movements had a strong negative impact on the reported result in this region. Net turnover in Latin America in 2009 increased by 4.6%.
NYCOMED’S GLOBAL REACH
North America Latin America Europe Russia/CIS Asia-Pacific, Africa and Middle East
REGIONAL PERFORMANCE Region
Net Turnover Full Year 2009 € million
Net Turnover Full Year 2008 € million
Change
Change in local currencies
Europe
-7.2%
1,568.0
1,714.6
-8.6%
Latin America
290.9
310.7
-6.4%
4.6%
Russia/CIS
343.4
329.9
4.1%
17.1%
Asia-Pacific, Africa, Middle East
212.2
174.3
21.7%
20.9%
North America
379.6
407.5
-6.9%
-9.9%
Out-licensing
353.2
337.2
4.7%
-0,7%
80.8
73.7
9.6%
8.8%
3,228.0
3,348.0
-3.6%
-1.8%
3,157.3
3,247.1
-2.8%
-0.6%
Contract manufacturing Total Total excluding one-time effects(1) (1)
One-time payments for US rights to roflumilast (Forest Laboratories, US $100.0 million / €70.7 million, 2009) and ciclesonide (Sepracor, $150 million / €100.9 million, 2008)
*Unless otherwise noted, turnover in the “Business Review” section is stated in local currencies
Nycomed Annual Report 2009
11
Management Report
Russia/CIS Russia/CIS experienced difficult market conditions due to the economic downturn. Nevertheless, sales in the region grew strongly, mainly due to the strong performance of local and regional Rx products. Currency movements had a strong negative impact on the reported result in this region. Russia/CIS net turnover in 2009 increased by 17.1%. In Russia, which accounts for more than two thirds of the region’s sales, growth in local currency was 26.2% during the year, driven by strong performance in Rx products. Asia-Pacific, Africa, Middle East Asia-Pacific, Africa and Middle East continued to show significant growth throughout the year. Strong pantoprazole sales in Australia and China helped to drive performance, as did sales in Egypt. South Africa benefited from the impact of full consolidation of the South African subsidiary following buyout of the joint venture partner. Asia-Pacific, Africa and Middle East net turnover in 2009 increased by 20.9%. North America The development of sales in North America was dominated by the generic erosion of pantoprazole in Canada. This was partly offset by increased sales at Nycomed US, helped by the acquisition of Bradley. North American net turnover in 2009 decreased by 9.9%. Out-licensing Out-licensing turnover rose in 2009, driven mainly by pantoprazole sales through Wyeth (a fully owned subsidiary of Pfizer). Overall, pantoprazole has continued to regain US market share since the introduction of Wyeth’s own generic, partially offsetting the losses incurred by the patent infringements. The one-time payments from Sepracor (2008) and Forest (2009) had a negative impact on turnover when comparing 2009 to 2008.
12
Nycomed Annual Report 2009
Net turnover from out-licensing in 2009 remained broadly flat at -0.7%. Excluding the impact from the one-time milestone and execution payments, sales grew by 16.3%. Contract Manufacturing Total net turnover from Contract Manufacturing for 2009 was up 8.8%. The increase was driven mainly by our ability to utilise excess capacity in European sites. PRODUCT PERFORMANCE Product performance was dominated by the loss of exclusivity for pantoprazole, partly offset by the strong performance of other Key Products. Specialty products grew by 9.7% in 2009. Key Products excluding pantoprazole and one-time effects grew by 12.0% in 2009. Growth was primarily driven by strong performances in Actovegin®, Matrifen®, TachoSil®, Preotact®, and Circadin®. Calcium sales have remained stable despite the negative impact of the economic downturn, particularly in the CIS countries. Since September, Instanyl® for the treatment of breakthrough pain has been introduced to European markets, with a very positive response from authorities and prescribers. The sales in the first couple of months show faster market penetration than recent competitor launches, a good indicator for future success. Total OTC sales excluding the US dermatology portfolio grew by 1.4% in 2009. With a growth of 4.7%, the fourth quarter performance shows a trend towards recovery after the economic downturn. Main contributors to this were pantoprazole OTC (see below) and the success of the respiratory OTC category due to increased winter pathologies.
Management Report
Pantoprazole (Gastrointestinal) Pantoprazole sales demonstrated continued resilience after patent expirations in major EU countries in May 2009. Sales and volumes of pantoprazole in the loss-of-exclusivity countries were in line with Nycomed’s expectations. This robust post-expiry performance is due to the adoption of tailored strategic approaches in each country. Sales in Italy benefitted from an early price reduction. In Belgium and Germany, varieties to compete on price with generic proton pump inhibitors were introduced successfully. Nycomed is benefitting from a trend to switch to the molecule pantoprazole (i.e., sales of Nycomed brands and generics taken together) at the expense of other generic proton pump inhibitors. Growth of pantoprazole in the Latin American markets was 14.7% in 2009. It was impacted by the situation in Mexico (see Regional Performance: Latin America). Total net turnover of pantoprazole decreased by 7.4%. Nycomed remains confident in its ability to generate sustained long-term turnover from pantoprazole, although sales in 2010 will be impacted by the full-year effect of the European loss of exclusivity (LOE) in May 2009 and further LOEs in Australia and Switzerland during 2010. For 2010, further price erosion is expected, most notably through newly introduced public tenders in the German market. Pantoprazole OTC (Pantozol Control®) After having received European marketing authorisation in June 2009 for pantoprazole OTC (Pantozol Control®), Nycomed has launched the product in 14 countries so far, and it has performed above expectations. In Germany, Pantozol control® acquired a 7% market share of the total heartburn market three months after launch, which makes it one of the leading OTC proton pump inhibitors.
PRODUCT PERFORMANCE Area
Net Turnover Full Year 2009 € million
Net Turnover Full Year 2008 € million
Change
Change in local currencies
1,216.2
1,324.8
-8.2%
-7.4%
553.9
519.4
6.6%
9.7%
69.5
55.5
25.3%
34.8%
Gastrointestinal Specialty Products Respiratory Respiratory one-time(2)
70.7
100.9
-29.9%
-37.3%
140.2
156.4
-10.3%
-14.7%
1,910.3
2,000.6
-4.5%
-3.7%
OTC(1)
343.2
367.4
-6.6%
0.2%
Regional and local Rx
664.5
707.7
-6.1%
-0.8%
Nycomed US
310.0
272.3
13.8%
6.1%
3,228.0
3,348.0
-3.6%
-1.8%
3,157.3
3,247.1
-2.8%
-0.6%
417.5
441.4
-5.4%
0.6%
Subtotal Respiratory Subtotal Key Products
Total Total excluding one-time Respiratory(2) Total OTC(1) (1)
“OTC” does not include calcium OTC and pantoprazole OTC, which are included in Specialty
Products and Gastrointestinal, respectively. “Total OTC” includes calcium OTC and pantoprazole OTC. (2)
One-time payments for US rights to roflumilast (Forest Laboratories, US $100.0 million (€70.7
million), 2009) and ciclesonide (Sepracor, 2008).
The other markets are also showing very encouraging reactions and Nycomed anticipates that this positive trend will continue. To foster commercialisation, Nycomed has entered into a co-marketing agreement with Novartis, which will introduce Pantoloc Control® in pharmacies across 14 European countries later in 2010. Pantoprazole US Nycomed and its licensee Wyeth (a fully owned subsidiary of Pfizer) remain convinced of the validity and enforceability of its US pantoprazole patent and will continue to pursue litigation vigorously.
Nycomed Annual Report 2009
13
Management Report
KEY EVENTS Roflumilast (Daxas®) Nycomed filed marketing authorisation applications for Daxas® in Europe in May and in the US in July, as a once-daily oral treatment for patients with COPD. Subject to approval by the regulatory authorities, the first launches of the product are expected in 2010. In August, Nycomed announced an exclusive agreement with Forest Laboratories for the development, manufacturing and commercialisation of roflumilast in the United States. Nycomed will retain marketing rights to roflumilast in all other markets than the US. Under the terms of the agreement, Nycomed has received a payment of US $100.0 million (€70.7 million) and will receive additional milestone payments based on defined regulatory and commercialisation achievements. Results of four placebo-controlled Phase III trials of roflumilast in COPD were published in the medical journal The Lancet in August and presented in September at the European Respiratory Society Congress in Vienna. Data showed significant improvement in lung function and reductions in exacerbations. It demonstrated that roflumilast works independently of current treatments and provides additional benefits when combined with current standard bronchodilator therapy. These results confirm our confidence in the strong commercial prospects for roflumilast. Pantoprazole OTC (Pantozol Control®) After having received European marketing authorisation in June 2009 for pantoprazole OTC (Pantozol Control®), Nycomed has launched the product in 14 countries so far, and it has performed above expectations. To foster commercialisation, Nycomed has entered into a co-marketing agreement with Novartis, which will introduce Pantoloc Control® in pharmacies across 14 European countries later in 2010. Instanyl® In June, Instanyl® has been approved for the treatment of breakthrough cancer pain in Europe. Since September, the product has been introduced to European markets, with a very
14
Nycomed Annual Report 2009
positive response from authorities and prescribers. Sales in the first couple of months show faster market penetration than recent competitor launches, a good indicator for future success. Expanded indication for TachoSil® In February Nycomed received an expanded indication for TachoSil®, its innovative surgical patch, from the European Medicines Agency (EMEA). Previously, TachoSil was approved for haemostasis (control of bleeding) in surgery. With the new expanded indication, it becomes the first and only dual action patch approved for haemostasis and tissue sealing as well as for suture support in vascular surgery. Effervescent alendronate in-licensed In January, Nycomed and EffRx announced a licensing agreement on EffRx’ drug EX101 (effervescent alendronate) for the treatment of osteoporosis. Under the agreement, Nycomed received the exclusive rights to develop, manufacture and commercialise the effervescent formulation of alendronate for the treatment of osteoporosis in a large number of countries worldwide. EX101 presents a significant enhancement to Nycomed’s osteoporosis portfolio. Acquisition of CEE portfolio from Sanofi-Aventis and Zentiva Nycomed has completed its purchase from Sanofi-Aventis and Zentiva of 20 branded generic products in several Central and Eastern European (CEE) countries. Announced in July, the deal provides Nycomed with additional products in the Czech Republic, Slovakia, Romania, Hungary, Estonia and Bulgaria, with a total annual turnover of approximately €17.0 million. Investment in new Russian pharmaceutical production plant In September, Nycomed announced its decision to invest in a state-of-the-art pharmaceutical production plant for local products near the city of Yaroslavl in Russia. Total investments over the next five years will be between €65 million to €75 million. Construction starts in 2010 and the plant will start production in 2014.
Management Report
KEY INCOME MEASURES
Net sales Royalties/other income
01.01.09 -31.12.09 € million
01.01.08 -31.12.08 € million
3,109.2
3,191.8
118.8
156.2
3,228.0
3,348.0
Cost of sales
-895.2
-884.6
Gross profit
2,332.7
2,463.4
Net turnover
Sales and marketing expenses
-931.5
916.2
Amortisation of fair value adjustments on patents and rights from acquisitions
-579.7
646.0
1,511.2
-1,562.2
Research and development expenses
-198.6
-224.7
Administrative expenses
-260.0
-257.2
Total sales and marketing expenses
Integration/restructuring costs/transaction costs Operating income
-75.0
-67.3
288.0
352.0
Financial income
258.0
279.0
Financial expenses
-273.3
-754.6
Profit/loss before tax
272.7
-123.5
Income tax
-39.9
45.7
232.7
-77.9
232.7
-77.9
Net financial items
15.3
475.7
Income tax expense (benefit)
39.9
-45.7
Depreciation and amortisation
711.1
790.7
999.1
1,142.7
70.4
61.1
Net result for the year EBITDA/Adjusted EBITDA Net result for the year Adjustments
EBITDA Adjustments Integration/restructuring and project costs (excluding depreciation already in EBITDA) Warrants Adjusted EBITDA
5.1
3.8
1,074.6
1,207.6
Nycomed Annual Report 2009
15
Management Report
FINANCIAL RESULTS Net turnover Total net turnover in 2009 declined by 3.6% to €3,228 million (2008: €3,348 million). Excluding one-time effects (Sepracor and Forest) and currency fluctuation, net turnover only declined 0.6% in 2009. Performance was driven by strong growth of Key Products and in most emerging markets. This was offset by the negative impact of pantoprazole’s patent expiry in Europe, the economic downturn, and adverse currency fluctuations. For more details please refer to the previous sections.
16
€110.5 million in 2008). Furthermore, total net financial items for 2009 comprised unrealised foreign exchange gain of €168.9 million (a loss of €267.9 million in 2008), which primarily related to revaluation of debt denominated in US dollar and Norwegian kroner. As some of the USD debt was swapped into EUR, part of this unrealised foreign exchange gain was offset by a negative market value of the cross currency swaps. Finally, net financial items also comprised amortisation of financing fees of €17.0 million and other financial expenses of €10.0 million.
Cost of sales In 2009, cost of sales increased 1.2% to €895.2 million. As percentage of net sales, cost of goods sold increased 1.1 percentage points to an average of 28.8% for this period. The change in cost of sales is primarily a result of the continued shift in product portfolio, caused by the patent expiry for pantoprazole in Europe.
Income taxes Corporate income tax expenses for 2009 increased by €85.6 million from an income of €45.7 million to an expense of €39.9 million mainly as a result of increased profit before tax. The income tax expense is determined through the country specific tax rates and the effect of non-deductible items, withholding taxes, adjustments for uncertain tax provisions, tax on dividends received and impact from change of tax rates.
Operating expenses For 2009 operating expenses decreased 0.6% or €8.0 million as compared to 2008. This was mainly driven by the decline in research and development costs by €26.1 million due to completion of the roflumilast studies in 2008. This decrease was balanced out by a slight increase in marketing and sales expenses, as well as a slight increase in administration expenses. The development in marketing expenses reflects the increased costs for pantoprazole and investments for emerging market opportunities.
Net result for the year The net result for 2009 amounts to €232.7 million, an increase of €310.7 million compared to 2008, which is mainly the effect of an improved net financial expense of €460.3 million to €15.3 million for 2009. This improvement is partially offset by deterioration of the operating result by €64 million, which is the effect of the decrease in gross profit by €130.7 million, partially offset by lower expenses of €66.7 million, mainly amortisation of fair value adjustments.
Financial items Total net financial items for 2009 amounted to an expense of €15.3 million compared to an expense of €475.6 million in 2008, a decrease of €460.3 million. The 2009 net financial items comprised interest income and other financial income of €13.5 million (€22.4 million in 2008), third party interest expenses of €216.0 million (€347.8 million in 2008) and net gain from derivatives of €11.6 million (net gain of
Adjusted EBITDA Adjusted EBITDA, which is an important measure of Nycomed’s performance, totalled €1,074.6 million in 2009, which is 11.0% below 2008. Excluding the currency fluctuation and the one-time effects for Sepracor in 2008 and Forest in 2009, the decrease was only 3.8%, reflecting the development of pantoprazole and the situation in Mexico (see Regional Performance: Latin America).
Nycomed Annual Report 2009
Management Report
Cash flow Cash flow from operating activities showed an inflow of €715.6 million compared to an inflow of €811.4 million in 2008. EBITDA decreased by €143.6 million, which was partly offset by a positive impact in provisions and working capital. Cash flow from investing activities showed an outflow of €234.1 million, compared to an outflow of €409.1 million in 2008. The outflow included €6.1 million in 2009 for the acquisition of the remaining 50% of Nycomed Madaus (Pty) Ltd (South Africa), while in 2008 the outflow for acquisition in subsidiaries amounted to €238.1 million, which was mainly related to the acquisition of Bradley Pharmaceuticals Inc. (United States). The outflow related to intangible assets of €161.6 million, compared to an outflow of €119.5 in 2008, is mainly due to acquisition of patents and rights during the year. The outflow related to tangible assets amounting to €70.6 million in 2009 compared to €56.3 million in 2008 is mainly related to investments in our production facilities. Cash flow from financing activities showed a net outflow of €237.2 million compared to a net outflow of €382.3 million in 2008. An amount of €235.8 million relates to the payment of instalments at the end of June and December on the senior credit facility. In addition, the cash flow from financing activities was impacted by the €88.8 million net effect from the sales and purchase activity of own debt during the period. Furthermore, Nycomed has drawn the restructuring facility which resulted in a cash inflow of €318.4 million. Net interest expenses amounted to €209.7 million for the year 2009. The closing of part of the cross currency swaps resulted in an outflow of €11.2 million. Capital resources Nycomed also expects to generate significant cash flow in 2010 to support the strategy and services of debt. As of the end of December 2009, Nycomed had a cash position of €747.7 million compared to a cash position of €496.7 million at the end of 2008.
As of the end of December 2009, Nycomed had a total senior debt of €4,450.6 million (excluding the local debt of €0.3 million and the effect of the outstanding financing fees of €53.7 million), compared to €4,575.9 million at the end of 2008 (excluding the local debt of €7.1 million and the effect of the outstanding financing fees of €70.4 million). Nycomed has committed facilities of €443.4 million under the In-Licensing / Restructuring Facility, which have been fully drawn as at 31 December 2009. Nycomed has a committed revolver facility of €250 million, which remains un-drawn. OUTLOOK FOR 2010 Nycomed’s development in 2010 will be dependent on the development of pantoprazole, especially in Europe and the United States. In Europe, we expect further decline of pantoprazole sales, due to increased cost control measures. Depending on approval from EU and US authorities, the launch of roflumilast (Daxas®) will be a key event for the long-term future of the company. Nycomed will also expand in the fast-growing emerging markets. The development in 2010 will also be dependent on external factors such as the economic situation, health policy decisions and currency fluctuations. Overall, Nycomed expects a decline in total net turnover in 2010 compared to 2009. All these statements are based on current plans, estimates and projections. By their nature, the above-mentioned forward-looking statements involve inherent risks and uncertainties, both general and specific. Nycomed states that different factors may cause actual results to significantly differ from those contained in the above-mentioned forwardlooking statements.
Nycomed Annual Report 2009
17
Management Statement
Statement by the Board of Directors of the General Partner The Board of Directors of the General Partner, Nycomed Luxco Société Anonyme has prepared the accompanying consolidated financial statements of Nycomed S.C.A. SICAR which comprise consolidated statements of financial position as of 31 December 2009, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, a description of accounting policies and other notes thereto. These consolidated financial statements do not constitute statutory annual reports of Nycomed S.C.A. SICAR.
We consider the accounting policies used appropriate and the accounting estimates made reasonable. To the best of our belief, the consolidated financial statements include the information, which is relevant for an assessment of Nycomed S.C.A. SICAR´s consolidated financial position. Against this background, it is our opinion that the consolidated financial statements give a true and fair view of the consolidated financial position and consolidated results of operations and cash flows for the years ended 31 December 2009. Luxembourg, 12 March 2010
The accompanying consolidated financial statements were discussed and approved on today’s date. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
Approved by the Board of Directors of the General Partner, Nycomed S.A.
Toni Weitzberg
Kristoffer Melinder
18
Thompson Dean
Håkan Björklund
Nycomed Annual Report 2009
Colin Taylor
Newton Aguiar
Carl-Gustav Johansson
Independent Auditor’s Report TO THE SHAREHOLDERS OF NYCOMED S.C.A. SICAR SOCIÉTÉ EN COMMANDITE PAR ACTIONS SOUS LA FORME D'UNE SOCIÉTÉ D'INVESTISSEMENT EN CAPITAL À RISQUE LUXEMBOURG We have audited the accompanying consolidated financial statements of Nycomed S.C.A. SICAR, which comprise the consolidated statement of financial position as at 31 December 2009, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. The General Partner’s responsibility for the consolidated financial statements The General Partner is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Responsibility of the “réviseur d’entreprises” Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted by the “Institut des Réviseurs d’Entreprises”. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgement of the “réviseur d’entreprises”, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the “réviseur d’entreprises” considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the General Partner, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of Nycomed S.C.A. SICAR as of 31 December 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Luxembourg, 12 March 2010 ERNST & YOUNG Société Anonyme Réviseur d’entreprises Olivier Jordant
Nycomed Annual Report 2009
19
Corporate Governance
Corporate Governance
20
As a privately owned company, we have obligations to our financial stakeholders. In accordance with our financial arrangements, we prepare financial reports that comply with set standards.
– The Development Portfolio Committee decides which projects enter development. It also reviews development projects and makes decisions on development prorammes and levels of investment.
CORPORATE STRUCTURE Nycomed S.C.A. SICAR was established on 30 November 2006 in Luxembourg. Nycomed S.A. is the general partner company and the sole manager of Nycomed S.C.A. SICAR and is, therefore, formally the management of the Nycomed Group. The Board of Directors of the general partner company consists of the individuals listed in the Board of Directors section. The Board is elected at the Annual General Meeting. The Board appoints and supervises the Executive Committee, and oversees the Company’s performance and results. Daily management is carried out by the Executive Committee. In addition to the Executive Management and the Audit Committee, there are four other committees:
– The Licensing Committee determines the in- and out-licensing strategy, approves licensing opportunities and reviews the performance of licensing partnerships.
Nycomed Annual Report 2009
– The Commercialisation and Lifecycle Management Committee reviews and decides on Lifecycle Management (LCM) plans, agrees on LCM projects and decides on global strategy and launch plans for key products. – The Risk Management Committee (RMC): please see note 4
Corporate Governance
Nycomed has an independent internal audit function that reports directly to the Nycomed Audit Committee, which approves the functions charter, audit plan and budget. The internal audit function provides independent and objective assurance with regard to internal controls and governance. All subsidiaries are internally audited, with audit visits occurring at least every second year.
SHAREHOLDERS There are two classes of shares. There are no differences in voting rights and all shareholders are entitled to have matters considered at the Annual General Meeting. For details of management incentive programmes, please refer to the Financial Statements section.
The internal audit activity conforms with the International Standards for the Professional Practice of Internal Auditing. The internal audit function was assessed complying with the highest ‘Generally Conforms’ classification in an external evaluation for compliance with the above standards. The evaluation was performed by a Past Chairman of the International Internal Audit Standards Board.
Nycomed Annual Report 2009
21
Financial Statements
Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER Note
ASSETS
31.12.09 € thousand
31.12.08 € thousand
Non-current assets 5
Patents and rights and currently marketed products
2,589,553
2,955,903
5
Goodwill
2,175,180
2,158,971
5
Development projects in progress
441,506
487,278
5,206,239
5,602,152
Total property, plant and equipment
617,508
623,837
Other investments in shares and bonds
36,945
31,716
6,778
7,676
113,439
96,516
5,980,909
6,361,897
Total intangible assets 6 14
Other receivables 12
Deferred tax assets TOTAL NON-CURRENT ASSETS Current assets
7
Inventories
494,103
434,922
8
Trade receivables
16
560,022
578,669
Income tax receivable
14,293
18,040
Other receivables and prepayments
82,840
70,178
Marketable securities
5,916
11,886
747,643
496,704
TOTAL CURRENT ASSETS
1,904,817
1,610,399
TOTAL ASSETS
7,885,726
7,972,296
Cash
22
Nycomed Annual Report 2009
Financial Statements
Note
EQUITY AND LIABILITIES
9
Capital stock
10
Reserves Equity attributable to equity holders of the parent Non-controlling interests TOTAL STOCKHOLDERS’ EQUITY
31.12.09 € thousand
31.12.08 € thousand
16,646
16,646
1,483,538
1,269,773
1,500,184
1,286,419
38,627
34,883
1,538,811
1,321,302
Non-current liabilities 11
Pension commitments
309,661
288,081
12
Deferred tax
870,219
970,054
13
Provisions
87,557
60,099
Deferred income and other non-current liabilities
89,951
7,217
Financial institutions
4,092,945
4,274,750
TOTAL NON-CURRENT LIABILITIES
5,450,333
5,600,201
14
Current liabilities 14
Financial institutions
304,271
237,776
Trade payables
229,017
265,033
39,354
49,809
16
Income tax payable
13
Provisions
181,922
209,497
Other payables
102,159
203,531
Deferred income
39,859
85,147
896,582
1,050,793
TOTAL LIABILITIES
6,346,915
6,650,994
TOTAL EQUITY AND LIABILITIES
7,885,726
7,972,296
TOTAL CURRENT LIABILITIES
Nycomed Annual Report 2009
23
Financial Statements
CONSOLIDATED INCOME STATEMENT 1 JANUARY - 31 DECEMBER Note
Net sales 18
Royalties/other income
01.01.08 - 31.12.08 € thousand
3,109,215
3,191,763
118,756
156,241
Net turnover
3,227,971
3,348,004
Cost of sales
-895,244
-884,557
2,332,727
2,463,447
-931,541
-916,170
GROSS PROFIT Sales and marketing expenses Amortisation of fair value adjustments on patents and rights from acquisitions
-579,666
-646,000
-1,511,207
-1,562,170
Research and development expenses
-198,642
-224,733
Administrative expenses
-259,984
-257,154
-74,942
-67,350
287,952
352,040
Total sales and marketing expenses
21
01.01.09 - 31.12.09 € thousand
Integration/restructuring/transaction costs OPERATING INCOME
22
Financial income
258,000
279,010
23
Financial expense
-273,283
-754,632
PROFIT/LOSS BEFORE TAX
272,669
-123,582
Income tax
-39,928
45,654
NET RESULT FOR THE YEAR
232,741
-77,928
226,970
-75,870
24
Attributable to: Equity holders of the parent Non-controlling interests
5,771
-2,058
232,741
-77,928
Earnings per share €
€
25
Basic earnings per share
17.04
-5.70
25
Diluted earnings per share
16.03
-5.70
24
Nycomed Annual Report 2009
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/LOSS 1 JANUARY - 31 DECEMBER 01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
232,741
-77,928
-2,303
-9,951
4,971
-5,291
-15,241
-6,125
-
37,265
683
2,490
-5,634
-3,520
Total other comprehensive income/loss
-17,524
14,868
Total comprehensive income/loss for the year, net of tax
215,217
-63,060
209,886
-61,394
5,331
-1,666
Note
Net result for the year Unrealised result on cash flow hedging, interest rate swaps Unrealised gain/loss on investments available for sale 11
Change in actuarial gains and losses Other comprehensive income/loss
24
Tax on comprehensive income Exchange differences on translation of foreign operations
Attributable to: Equity holders of the parent Non-controlling interests
Nycomed Annual Report 2009
25
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS‘ EQUITY 1 JANUARY - 31 DECEMBER Attributable to equity holders of the parent Capital Reserves stock (note 10) Total € thousand € thousand € thousand
Note
Stockholders’ equity as of 1 January 2008 20
9
Total equity € thousand
16,677
1,326,386
1,343,063
37,553
1,380,616
Share-based payments
-
3,677
3,677
100
3,777
Effect of changes in non-controlling interests and investors' contribution
-
1,104
1,104
-1,104
-
-31
-
-31
-
-31
16,646
1,331,167
1,347,813
36,549
1,384,362
Net result for the year
-
-75,870
-75,870
-2,058
-77,928
Total other comprehensive income/loss
-
14,476
14,476
392
14,868
Total comprehensive income/loss for the year, net of tax
-
-61,394
-61,394
-1,666
-63,060
16,646
1,269,773
1,286,419
34,883
1,321,302
Share cancellation
Stockholders’ equity as of 31 December 2008
26
Non-controlling interests € thousand
Nycomed Annual Report 2009
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS‘ EQUITY 1 JANUARY - 31 DECEMBER Attributable to equity holders of the parent Capital Reserves stock (note 10) Total € thousand € thousand € thousand
Note
Stockholders’ equity as of 1 January 2009 20
Non-controlling interests € thousand
Total equity € thousand
16,646
1,269,773
1,286,419
34,883
1,321,302
Share-based payments
-
5,013
5,013
129
5,142
Effect of changes in non-controlling interests and investors' contribution
-
-1,134
-1,134
-1,716
-2,850
16,646
1,273,652
1,290,298
33,296
1,323,594
Net result for the year
-
226,970
226,970
5,771
232,741
Total other comprehensive income/loss
-
-17,084
-17,084
-440
-17,524
Total comprehensive income/loss for the year, net of tax
-
209,886
209,886
5,331
215,217
16,646
1,483,538
1,500,184
38,627
1,538,811
Stockholders’ equity as of 31 December 2009
Nycomed Annual Report 2009
27
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS 1 JANUARY – 31 DECEMBER Note
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
287,952
352,040
Cash flow from operating activities Operating income Adjustments to reconcile operating profit to net cash flow 6
Depreciation and impairment of property, plant and equipment
5
Amortisation and impairment of intangible assets Movements in provisions, pensions and other liabilities
20
16
Share-based payments
86,835
93,424
624,358
697,260
-15,413
-54,786
5,142
3,777
Other adjustments
-6,384
561
Change in working capital
-95,719
-111,776
Income taxes received (paid)
-171,190
-169,141
Net cash flow from operating activities
715,581
811,359
-6,104
-238,076
-161,601
-119,494
Cash flow from investing activities 27 5
Acquisition of subsidiaries Purchase of intangible assets Proceeds from sale of intangible assets
6
Purchase of tangible assets Proceeds from sale of tangible assets Purchase of other investments Net cash flow used in investing activities
28
Nycomed Annual Report 2009
2,032
1,968
-70,553
-56,295
4,672
2,835
-2,535
-
-234,089
-409,062
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS 1 JANUARY – 31 DECEMBER Note
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Cash flow from financing activities Repayment of senior credit facility
-235,795
-248,261
Drawn restructuring facility
318,413
-
Acquisition of own shares from minority holders
-2,850
-
Repayment of local bank borrowings
-7,667
-10,749
Sale of debt
173,691
-
-262,069
-33,884
13,777
21,208
-223,510
-337,838
-11,216
227,192
-237,226
-382,332
Net cash flow
244,266
19,965
Cash as of 1 January
496,704
484,232
6,673
-7,493
747,643
496,704
Debt buy-back Financial income received 26
Financial expenses paid Realised net foreign exchange gain on unwinding of cross-currency swaps Net cash flow used in financing activities
Currency translation adjustments Cash as of 31 December
The classifications of the prior year figures have been restated. Financial income received and financial expenses paid relate primarily to the financing activities, which were previously classified as cash flows from operating activities and have consequently been classified as cash flows from financing activities.
Nycomed Annual Report 2009
29
Financial Statements Index Notes
Index Notes Notes 1. General overview 2. Significant accounting estimates and judgements 3. General accounting policies 4. Risk management 5. Intangible assets 6. Property, plant and equipment 7. Inventories 8. Trade receivables 9. Capital stock 10. Reserves 11. Pension commitments 12. Deferred tax 13. Provisions 14. Financial risk and derivative financial instruments 15. Capital management 16. Income tax receivable/payable 17. Segment reporting 18. Royalties/other income 19. Amortisation/Depreciation of intangible assets and property, plant and equipment 20. Employee costs 21. Integration/restructuring/transaction costs 22. Financial income 23. Financial expenses 24. Income tax 25. Earnings per share 26. Financial expenses paid 27. Business combinations 28. Related party transactions 29. Audit fees 30. Contingent liabilities, guarantee commitments, etc. 31. Subsequent events 32. List of subsidiaries
30
Nycomed Annual Report 2009
Page 31 32 35 47 50 52 54 55 56 57 58 61 64 66 79 80 81 83 84 85 88 89 90 91 92 93 94 98 102 103 107 108
Financial Statements Note 1
1. General overview Nycomed S.C.A. SICAR (hereafter “Nycomed” or “the Company”) together with its subsidiaries (“the Group”) is a global, market-driven pharmaceutical company with a differentiated portfolio of branded medicines for hospitals, specialists and general practitioners. An extensive range of OTC products completes the portfolio. Its key areas of activity are gastroenterology, respiratory and inflammatory diseases, pain, osteoporosis and tissue management. In all these areas it aims to develop and market products with medical utility. Nycomed has strong platforms in Europe and in fast-growing markets such as Russia/CIS and Latin America. In-licensing is a cornerstone of the Group’s growth strategy and Nycomed actively seeks partnerships in its core areas as well as throughout the value chain.
Nycomed is privately owned and has its corporate headquarters in Zurich, Switzerland. There are production sites in Austria, Belgium, Brazil, Denmark, Estonia, Finland, Germany, India, Mexico, Norway, Poland and the USA. Nycomed’s R&D facilities are based in Germany, Denmark and India. Nycomed S.C.A. SICAR (“the Company”) was incorporated in Luxembourg on 30 November 2006 as a partnership limited by shares (“société en commandite par actions”) under the form of an investment company in risk capital (SICAR) subject to Luxembourg law for an unlimited period of time. The registered address of the company is 412F, route d’ Esch L-1030 Luxembourg. The General Partner of the Company and the sole manager in Nycomed S.C.A. SICAR is Nycomed S.A. The shares of Nycomed S.C.A. SICAR are held by Nordic Capital (controlling party), Credit Suisse, Coller International Partners and Avista plus some minor shareholders with less than 5% ownerships.
Nycomed Annual Report 2009
31
Financial Statements Note 2
2. Significant accounting estimates and judgements The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. This forms the basis for making judgements about the reported carrying amounts of assets and liabilities and of revenues and expenses that may not be readily apparent from other sources. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Some of these policies require a high level of judgement, because the areas are either especially subjective or complex. Estimates are used when accounting for sales returns, rebates, discounts and incentives, depreciation, amortisation, employee benefits, restructuring and other provisions, contingencies, share-based payments, post-employment benefit obligations, capitalised development costs and any asset impairments. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
32
Nycomed Annual Report 2009
Management believes the following are the significant accounting estimates and related judgements used in the preparation of its consolidated financial statements: – Indirect production cost and inventories – Deferred taxes – Impairment testing of goodwill and other intangible assets – Sales and revenue recognition – Research and development expenses – Business combinations Indirect production cost and inventories Work in progress and finished goods are recognised at cost measured by using the average weighted price method. Cost comprises direct production costs such as raw materials, consumables, energy and labour and indirect production costs such as employee costs, depreciation and maintenance. The indirect production costs are measured based on a standard cost method, which approximates cost, and are reviewed regularly in order to ensure relevant measures of utilisation, production, lead-time and other relevant factors. Changes in the parameters for the calculation of indirect production costs, including utilisation levels and production lead-time, could have an impact on the gross margin and the overall valuation of inventories. Deferred taxes Management’s judgement is required in determining the Group’s provision for income taxes, deferred tax assets and liabilities, and the extent to which deferred tax assets can be recognised. The Group recognises deferred tax assets if it is probable that sufficient taxable income will be available in the future, against which the temporary differences and unused tax losses can be utilised.
Financial Statements Note 2
Impairment testing of goodwill and other intangible assets The Group determines whether goodwill and other intangible assets comprising patents, rights and development projects are impaired, at least on an annual basis or more frequently if there is an indication that they may be impaired. An impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of an asset. This requires estimation of the value in use of the overall business and of some separate intangible assets. Estimating the value in use requires the Group to make estimates of the expected future cash flows. Those cash flows do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash-generating unit being tested. In the case of intangible assets the period used is based on the shorter of the period of patent protection or the economic life of the asset. Estimation of the recoverable amount of the overall business and other intangible assets also requires the use of a suitable discount rate in order to calculate the present value of those cash flows, estimation of future cash inflows and the growth rate used for extrapolation purposes. Actual outcomes could vary significantly from such estimates of discounted future cash flows. Factors such as closure of facilities, the presence or absence of competition or lower than anticipated sales of products with capitalised rights could result in shortened useful lives or impairment. Changes in the discount rates could also lead to impairments.
Sales and revenue recognition In certain circumstances, the Group enters into long-term out-licensing contracts, including contracts with multiple elements that provide an upfront payment in lieu of future royalty payments. These agreements may also involve certain future obligations, which will give rise to additional milestone payments. Revenue is only recognised when, in management´s judgement, the significant risks and rewards of ownership have been transferred and when the Group does not retain any continuing managerial involvement or effective control over the goods sold. Refundable upfront payments are recorded as deferred revenue and recognised in income over the contractual period as the refundability lapses. Upfront payments that are attributable to subsequent research and/or development activities are recognised as deferred revenue and released to income over subsequent periods on the basis of the performance of the conditions specified in the agreement. Non-refundable payments that are not attributable to subsequent research and/or development activities or other obligations on the Group are recognised as other income when the contracts are signed. Up-front fees in connection with licensing agreements are recognised as income over the period to which they relate. When accounting for contracts with multiple elements, management exercises judgement in separating the contracts into separate elements, which, based on the underlying substance of the elements, are accounted for separately. Elements are accounted for separately only if reasonable support exists for the consideration of the various elements.
Nycomed Annual Report 2009
33
Financial Statements Note 2
Provisions for discounts, rebates to customers and customer returns are estimated on the basis of historical data and provided for in the period in which the related sales are recognised and reflected in net sales. Research and development expenses Research and development expenses comprise expenses that relate to the Group’s research and development functions, including wages and salaries, depreciation and other overheads. Any milestone payments to third parties in respect of research and development activities performed by those parties are recognised in the income statement, or are capitalised as appropriate, in the period in which the milestones are reached. Research expenses are charged to the income statement as incurred. Development expenses are capitalised if certain criteria are met and they are likely to generate future economic benefits. In making this assessment, management uses considerable judgement in assessing whether all the necessary regulatory approvals, public registration and marketing authorisations will be received, technological and economical feasibility is confirmed, the costs related to the development of the product are readily measurable, and future economic benefits are likely to be generated. The management basis for making this assessment is further described in note 3 under intangible assets. As at 31 December 2009, Nycomed has capitalised €122.2 million in internal development which is primarily related to Daxas (2008: €75.4 million).
34
Nycomed Annual Report 2009
Business combinations Where the Group acquires control of another business, the cost of the acquisition has to be allocated to the assets, liabilities and other contingent liabilities of the acquired business, with any residual value recorded as goodwill. This process involves management making an assessment of the fair value of these items. Management judgement is particularly involved in the recognition and measurement of the following items at fair value: – Intellectual property: this may include patents, licenses, trademarks and similar rights for currently marketed products, and also the rights and scientific knowledge associated with projects that are currently in research or development phases, and requires the projection of estimated future cash inflows and outflows and relevant risks, the terminal value of these assets, discount rates and weighted average costs of capital, – Contingencies such as legal and environmental matters, – Contingent consideration arrangements, – The recoverability of any accumulated tax losses previously incurred by the acquired company. In all cases management makes an assessment based on the underlying economic substance of the items concerned, and not only on the contractual terms, in order to fairly present these items. However, the assessments are highly subjective and sensitive to the assumptions used.
Financial Statements Note 3
3. General accounting policies The consolidated financial statements of Nycomed S.C.A. SICAR (hereafter “the Company”), registered in Luxembourg, as of 31 December 2009 and for the year then ended comprise the Company and its subsidiaries (collectively, “the Group”). Basis of preparation The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The consolidated financial statements have been prepared on a historical cost basis, except for availablefor-sale financial assets, financial assets and liabilities (including derivative financial instruments) that have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in the fair value attributable to the risks that are being hedged in effective hedge relationships. The consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (€ thousand) except when otherwise indicated. Basis of consolidation The consolidated financial statements comprise the financial statements of Nycomed S.C.A. SICAR (the parent company) and all the companies in which Nycomed S.C.A. SICAR directly or indirectly owns more than 50% of the voting rights, or in some other way has a controlling influence (subsidiaries). Nycomed S.C.A. SICAR and these companies are referred to as “the Group”. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the sub-
sidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions are eliminated in full. The Group accounts for its investments in joint ventures using the proportionate consolidation method as permitted under IAS 31 “Financial Reporting of Interests in Joint Ventures”. Changes in accounting policies or effect of new pronouncements The accounting policies adopted are consistent with those of the previous financial year except for the application of the new IFRS standards and interpretations mentioned below. Except where mentioned below, adoption of these revised IFRS standards and interpretations did not have any effect on the recognition and measurement in the consolidated financial statements of the Group. However, they did give rise to additional disclosures. Changes in accounting policies that arise from the application of the new or revised IFRS standards and interpretations are applied retrospectively, unless otherwise specified in the transitional requirements of the particular standard or interpretation. Retrospective application requires that the results of the comparative period and the opening balances of that period are restated as if the new accounting policy had always been applied. In some cases the transitional requirements of the particular standard or interpretation specify that the changes are to be applied prospectively. Prospective application requires that the new accounting policy only be applied to the result of the current period and the comparative period is not restated. In addition, comparatives have been reclassified or extended from the previously reported results to take into account any presentational changes.
Nycomed Annual Report 2009
35
Financial Statements Note 3
The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2009: – IFRS 2 “Share-based Payment: Vesting Conditions and Cancellations” (effective 1 January 2009) – IFRS 3 “Business Combinations” (Revised) and IAS 27 “Consolidated and Separate Financial Statements” (Amended) (effective 1 July 2009 – early adopted) – IFRS 7 “Financial Instruments: Disclosures” (effective 1 January 2009) – IFRS 8 “Operating Segments” (effective 1 January 2009) – IAS 1 “Presentation of Financial Statements” (effective 1 January 2009) – IAS 23 “Borrowing costs” (revised) (effective 1 January 2009) – IAS 32 “Financial Instruments: Presentation” and IAS 1 “Puttable Financial Instruments and Obligations Arising on Liquidation” (effective 1 January 2009) – IFRIC 9 “Reassessment of Embedded Derivatives” and IAS 39 “Financial Instruments: Recognition and Measurement – Embedded Derivatives” (Amended) (effective for periods ending on or after 30 June 2009) – IFRIC 13 “Customer Loyalty Programmes” (effective 1 July 2008) – IFRIC 16 “Hedges of a Net Investment in a Foreign Operation” (effective 1 October 2008) – IFRIC 18 “Transfers of Assets from Customers” (effective 1 July 2009) – Improvements to International Financial Reporting Standards (2008 and 2009) IFRIC 15 “Agreements for the Construction of Real Estate” (effective 1 January 2009) is not applicable to the Group. When the adoption of the standard or interpretation is deemed to have an impact on the financial statements or performance of the Group, its impact is described below: Amendments to IFRS 2 “Share-based Payment – Vesting Conditions and Cancellations” (effective 1 January 2009): the amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service
36
Nycomed Annual Report 2009
conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. IFRS 3 “Business combinations” (revised) and IAS 27 “Consolidated and Separate Financial Statements” (amended), (effective 1 July 2009). The Group early adopted these revised and amended standards as of 1 January 2009. IFRS 3R will be applied prospectively to business combinations for which the acquisition date is on or after 1 January 2009. The more significant changes in accounting for business combinations are the following: – Entities have a choice, for each business combination entered into, to measure non-controlling interests in the acquiree either at fair value or at their proportionate interests in the acquiree´s net assets. – In step acquisitions, previously held interests are remeasured to fair value at the date of the subsequent acquisition and this value is included in calculating goodwill. Any gain or loss arising from the remeasurement is recognised in profit or loss. – Acquisition-related costs are to be expensed through profit or loss at the time that such services are received. – Contingent liabilities of the acquiree are recognised at their fair value if there is a present obligation that arises from a past event and its fair value can be measured reliably, regardless of the probability of a cash flow arising. – The acquirer reassesses all assets and liabilities acquired to determine their classification or designation as required by other standards. The implementation of this revised standard resulted in an increase of the net result for 2009 of €4.1 million.
Financial Statements Note 3
IAS 27 (amended) requires that a change in the ownership interest of a subsidiary without loss of control is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions no longer give rise to goodwill, nor to a gain or loss. Furthermore, the amended standard changed the accounting for losses incurred by a subsidiary with non-controlling interests as well as the loss of control of a subsidiary. The changes in IFRS 3 (revised) and IAS 27 (amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests. IFRS 8 “Operating segments” (effective 1 January 2009): the standard requires disclosure of information enabling the evalution of the nature and financial effects of the business activities in which the Group engages and the economic environments in which it operates. Based on the financial information reported to the Group’s Chief operating decision maker, Nycomed has identified one operating segment for the whole Group, as it is managed as a fully integrated business. Information on revenues and noncurrent assets is disclosed by geographical area. Amendments to IAS 1 “Presentation of Financial Statements” (effective 1 January 2009): the standard separates owner and non-owner changes in equity. Therefore, the statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented as a single line. In addition, the standard introduces a statement of comprehensive income presenting all items of income and expense recognised in the income statement, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group has decided to present two statements. In May 2008 and April 2009 the IASB issued amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. None of these Improvements to IFRSs has a significant effect on the Group’s financial statements.
Except as described above, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by Group entities. Significant accounting policies Foreign currency translation, functional and presentation currency The consolidated financial statements are presented in euros, which is Nycomed’s functional and presentation currency. A functional currency is designated for each entity in the Group. The functional currency is the currency used in the primary economic environment in which the individual entity operates. Transactions denominated in currencies other than the functional currency are transactions in foreign currency. Since 1 January 2008 the Russian entities have used the Russian rouble as functional currency, as major parts of net turnover and costs are denominated in roubles. In previous years, the US dollar was the functional currency. On 1 January 2009 Slovakia introduced the euro to replace the Slovakian koruna as the official country currency. Consequently the functional currency of Nycomed s.r.o. was changed from the Slovakian koruna to the euro. Translation of transactions and balances Transactions in foreign currencies are initially recorded in the functional currency using the currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the closing functional currency rate of exchange ruling at the reporting date. All differences are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges attributable to exchange differences on those borrowings are also dealt with in equity.
Nycomed Annual Report 2009
37
Financial Statements Note 3
Non-monetary items, which are measured in terms of historical cost in a foreign currency, are translated using the exchange rates as at the dates of the initial transactions. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation of financial statements and Group companies For consolidation purposes, the income statements of foreign subsidiaries with functional currencies other than the euro are translated at transaction rates, and assets and liabilities are translated using the closing rate at the reporting date. Transaction rates are calculated as the average rates of the individual month to the extent that this does not provide a materially different picture. Exchange rate differences are recognised directly in equity. Business combinations Enterprises acquired during the year are recognised in the consolidated financial statements from the date when control commences. Enterprises disposed of or liquidated are recognised in the consolidated income statement until the date when control ceases or the entity is liquidated. Acquisitions of enterprises in which the Group obtains control are accounted for using the purchase method. The purchase price is measured as the fair value of the assets given and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination, are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. Identifiable intangible assets are recognised insofar as they are separable or arise from contractual rights and a reliable fair value can be calculated. The amount of deferred tax resulting from the restatement is recognised. The excess of the cost of acquisition over the fair value of the acquired assets, liabilities and contingent liabilities is capitalised as goodwill. Goodwill is tested annually for impairment – the first impairment test is performed before the expiry of the year of acquisition. Upon the
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Nycomed Annual Report 2009
acquisition, goodwill is allocated to the cashgenerating units, subsequently providing a basis for the impairment test. If the initial accounting for a business combination can be determined only provisionally by the end of the period in which the combination is effected, adjustments made within twelve months of the acquisition date to the provisional fair value of acquired assets, liabilities and contingent liabilities or cost of the acquisition, are reported as adjustments to the initial goodwill. The adjustment is calculated as if it was recognised at the acquisition date. The effect of the adjustment is recognised in equity, and the comparative figures are restated. Subsequent realisation of deferred tax assets not recognised on acquisition will result in the recognition in the income statement of the tax benefit concurrently with a write-down of the carrying amount of goodwill to the amount that would have been recognised if the deferred tax asset had been recognised at the time of the acquisition. Changes in the ownership interest of a subsidiary without loss of control are accounted for transactions with owners in their capacity as owners and are therefore accounted for in equity, without giving rise to goodwill. For each business combination entered into, the choice is made to measure non-controlling interests in the acquiree either at fair value or at their proportionate interests in the acquiree´s net assets. In step acquisitions, previously held interests are remeasured to fair value at the date of the subsequent acquisition and this value is included in calculating goodwill. Any gain or loss arising from the remeasurement is recognised in profit or loss. Acquisition-related costs are expensed through profit or loss at the time that such services are received. Contingent liabilities of the acquiree are recognised at their fair value if there is a present obligation that arises from a past event and its fair value can be measured reliably, regardless of the probability of a cash flow arising.
Financial Statements Note 3
Gains or losses on the disposal or liquidation of subsidiaries and associates are measured as the difference between the sale or liquidation proceeds and the carrying amount of net assets, including goodwill at the date of disposal plus anticipated disposal or liquidation costs. Entities in which the Group and external shareholders have agreed to exercise joint control over significant financial and operational policies are accounted for using the proportionate consolidation method. Business combinations taking place earlier than 2009 have been accounted for in accordance with IFRS 3 as of 2004. The main differences between IFRS 3 as of 2004 and IFRS 3 revised are explained on page 36. A list of all the subsidiaries is presented separately. Balance sheet Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost, less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets
with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Intangible assets are amortised except for goodwill and development projects in progress. For further information see below. Development costs Development costs of an individual project are recognised as an intangible asset when the Group can demonstrate: – the technical feasibility of completing the intangible asset so that it will be available for use or sale; – its intention to complete and its ability to use or sell the asset; – how the asset will generate future economic benefits; – the availability of resources to complete the asset; and – the ability to measure reliably the expenditure during development. If these criteria are not achieved, the development costs for the individual project are recognised as expenses when they are incurred. Regulatory approval or the reasonable prospects of obtaining regulatory approval is used as a critical measure of the Group’s ability to use, sell or derive probable future economic benefits from an intangible asset. Unless there are strong indications that a development project will receive regulatory approval in the foreseeable future, all development costs are expensed. Given the inherent uncertainties in the regulatory approval process, it may not be possible to estimate the prospects of obtaining regulatory approval correctly. Each of the following is considered as providing indications that a product will receive regulatory approval in the foreseeable future:
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Financial Statements Note 3
– the product is a generic substitute of an approved product; – the product is approved in other countries with similar approval requirements; – the product is in Phase III clinical trials and additional persuasive factors support the previous clinical trial results and indicate a high probability of approval; or – the product substance is closely based on a known product substance or existing product. Development projects in process are evaluated for impairment annually, or more frequently if circumstances indicate that impairment is possible. Completed development projects are transferred to "Patents and rights and currently marketed products" and are then amortised over the life of the associated product. Amortisation begins when the product becomes marketable. For distribution rights to pharmaceutical products that are acquired from third parties, prior to receipt of regulatory approval to market the products, the price normally reflects the expectations about the probability that the expected future economic benefits embodied in the asset will flow to the entity. The conditions of recognition and measurability are considered to be always satisfied and the costs are capitalised consistently. These rights are amortised on a straight-line basis over their estimated useful life once the product has begun to be distributed. Intangible assets are subject to an impairment test when events or circumstances indicate that impairment may exist. The amortisation periods are generally as follows: Completed development projects and patent and distribution rights: 2-30 years Goodwill Goodwill is initially measured at cost as described in the accounting policy for Business combinations. Following initial recognition, goodwill is measured at cost less any accumulated impairment
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losses. Goodwill is reviewed for impairment annually or more frequently if events or circumstances indicate that the carrying value may be impaired. Property, plant and equipment Property, plant and equipment are measured at cost, less accumulated depreciation and impairment losses. Costs comprise the purchase price and any costs directly attributable to the asset purchase until the asset is available for use. Depreciation is generally calculated on a straight-line basis over the expected useful lives of the assets, as follows: Buildings: 5-50 years Machinery and equipment: 2-14 years Other property, plant and equipment: 1-20 years Land is not depreciated. The depreciation base is determined taking into account the residual value of the asset. The residual value is determined at the time of acquisition and is reviewed annually. If the residual value exceeds the carrying value of the asset, depreciation ceases. The carrying values of property, plant and equipment are tested for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is recognised in the income statement in the year the asset is derecognised. The assets’ residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each financial year-end. When expenditure extends the useful life of an asset, its cost is recognised in the carrying amount of property, plant and equipment if the recognition criteria are satisfied.
Financial Statements Note 3
Impairment If an asset does not generate cash flows that are largely independent of cash flows from other assets, the Group determines the recoverable amount of the cash-generating unit to which it belongs. A cash-generating unit is the smallest identifiable group of assets for which cash flows can be identified and measured. Nycomed considers the total business to be one cash-generating unit as the cash flows from individual brands, products, other assets or geographical areas are not clearly identifiable. As such, Nycomed tests impairment at Group level. Impairment of goodwill is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. An impairment test is conducted in respect of the carrying value of intangible, tangible and financial assets, and where write-downs are required, the book value is written down to the higher of the fair value less costs to sell and the value in use, which is the present value of future cash flows in connection with continued use. Consequently, intangible and tangible assets are written down in the income statement in those cases where the book value exceeds the higher of the expected future cash flows from the undertaking or the assets to which the goodwill is related and the fair value less costs to sell. The carrying value of financial assets is written down if, as a result of a change in the expected cash flows, the present value of such cash flows is lower than the carrying value. When computing the present value, the original effective rate of interest is applied. If, subsequently, the present value of written-down financial assets increases, the write-down is reversed. Such reversal of previous impairments does not result in financial assets being measured at a higher value than the amortised cost.
Investments and other financial assets Financial assets in the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace. Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial assets held for trading are recognised in the income statement. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method.
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Financial Statements Note 3
Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the two preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired. In this case, the cumulative gain or loss previously reported in equity is recognised in the income statement. The fair value of financial assets that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For financial assets where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument (which is substantially the same), discounted cash flow analysis, and option pricing models. Inventories Inventories are measured at the lower of cost in accordance with the weighted average price method and the net realisable value. Provision for obsolescence, and remaining production and selling costs are deducted from the expected selling price, when estimating the net realisable value of inventories. The cost of manufactured, finished and semifinished products includes raw materials, direct labour, other production materials and production overheads. Production overheads include indirect labour and materials, repairs, maintenance and depreciation costs related to property, plant and equipment used in the production process, and costs related to production administration and management.
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Goods for resale include the purchase price and related transportation costs. Trade and other receivables Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Allowances are made on the basis of probability of default. Assets classified as held for sale When the carrying amount of a non-current asset or group of assets (“disposal group”) is expected to be recovered principally through a sale transaction rather than through continuing use, the asset or disposal group is classified as held for sale and reported separately under current assets. Any related liabilities are similarly reported separately under current liabilities. Immediately before being classified as held for sale, the assets are valued in accordance with applicable IFRSs. Immediately after classification as held for sale, the assets are valued at the lower of their carrying amount and fair value less costs to sell, with any reduction in value being reported as an impairment loss. Non-current assets classified as held for sale are no longer depreciated or amortised, but their carrying value is assessed for impairment until they are sold. Cash and cash equivalents Cash and short-term deposits comprise cash at banks and on hand and short-term deposits, with an original maturity of three months or less. Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received, less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the amortisation process.
Financial Statements Note 3
Income taxes Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that are enacted or substantively enacted by the reporting date. Deferred tax Deferred tax is recognised using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: – where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or – in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised, except: – where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
– in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Sales tax Income, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.
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Financial Statements Note 3
The net amount of sales tax recoverable from, or payable to, the taxation authority is included in receivables or payables in the statement of financial position. Dividends The proposed dividend for the year is shown as a separate item within shareholders’ equity. There were no such dividends proposed or paid in any of the periods presented. Employee benefits and pensions Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. Pension provisions The Group operates a number of defined benefit and defined contribution plans in its subsidiaries. The costs for the year for defined benefit plans are determined using the projected unit credit method. This reflects services rendered by employees to the dates of valuation and is based on actuarial assumptions primarily regarding discount rates used in determining the present value of benefits, projected rates of remuneration growth, and long-term expected rates of return for plan assets. The impact from differences between assumptions and actual events, and effects of changes in actuarial assumptions (actuarial gains/losses) are recognised in the period they occur and charged to equity net of deferred tax. The defined benefit liability is the aggregate of the present value of the defined benefit obligation, including recognition of all actuarial gains and losses, and the fair value of plan assets out of which the obligations are to be settled directly. The Group’s contributions to the defined contribution plans are charged to the income statement in the year to which they relate.
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Share-based payments Nycomed operates equity-settled, share-based compensation plans. The cost of equity-settled transactions with employees is measured by reference to the fair value at grant date, measured using the BlackScholes option pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). If there are no vesting conditions, the fair value is expensed in full at the grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event occurring before or at the
Financial Statements Note 3
reporting date, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Financial liabilities Generally, financial liabilities, which also include trade payables, amounts owed to associated enterprises and other liabilities, are measured at amortised cost unless specifically mentioned otherwise. Derivative financial instruments The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially measured at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are included in other receivables when the fair value is positive and in other payables when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are recognised in net profit or loss for the year. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. In general, Nycomed does not apply hedge accounting under the specific rules of IAS 39 to forward exchange contracts and other derivative financial instruments, except for interest rate swaps applied to maintain a reasonable balance between fixed and floating interest rate risk. Income statement
fair value of the sale of goods excluding value added tax, and after deduction of provisions for trade discounts, rebates, allowances and returned products. Revenue from the sale of goods is recognised when all the following specific conditions have been satisfied: – Nycomed has transferred to the buyer the signficant risks and rewards of ownership of goods; – Nycomed retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; – the amount of revenue can be measured reliably; – it is probable that the economic benefit associated with the transaction will flow to Nycomed; and – the costs incurred, or to be incurred, in respect of the transaction can be measured reliably. These conditions are usually met by the time the products are delivered to the customer with regard to revenue from product sales. For royalty income related to the licensing of product rights, these conditions are usually met when royalties become payable; royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreement. Cost of sales Cost of sales consists of variable production costs, including raw materials, other production materials and direct labour costs. In addition, cost of sales includes fixed production overhead costs such as indirect labour and materials, repairs, maintenance and depreciation costs related to property, plant and equipment used in the production process and costs related to production administration and management.
Sales and revenue recognition The Group derives revenue from two primary revenue streams, namely product sales and the licensing of product rights. Sales represent the
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Financial Statements Note 3
Sales and marketing expenses Sales and marketing expenses comprise all expenditures incurred in connection with selling and marketing of the Group’s products, including distribution costs and amortisation of intangible assets. Amortisation of fair value adjustments on patents and rights from acquisitions Amortisation of fair value adjustments on patents and rights from acquisitions includes the fair value adjustments on brands in connection with purchase price allocations related to the acquisitions of Nycomed A/S and Altana Pharma AG. Administrative expenses Administrative expenses comprise costs relating to the Group’s management, administration, office premises and depreciation. Integration/restructuring costs Integration/restructuring costs represent mainly severance, consulting and other similar one-time expenses as an effect of corporate restructuring. Financial income and expenses Financial income and expenses comprise interest, amortisation of financing costs, realised and unrealised exchange gains and losses, and other financial expenses. The unrealised exchange gains and losses include changes in the fair value of derivatives designated as fair value hedges. Income tax Income tax is allocated to the relevant fiscal year and recognised in the income statement or statement of comprehensive income, as applicable. Income tax comprises current tax as well as deferred tax. Consolidated cash flow statement The consolidated cash flow statement is prepared using the indirect method, and the cash flows are classified by operating, investing and financing activities.
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Cash flow from operating activities Cash flow from operating activities is calculated as the operating income or loss, adjusted for non-cash items, changes in working capital and taxes paid or refunded. Working capital consists of current assets (excluding income tax receivable, marketable securities and cash), less current liabilities (excluding financial institutions, provisons and income tax payable). Cash flow from investing activities Cash flow from investing activities comprises the purchases and sales of non-current assets including investments in enterprises. The purchase prices are measured at cost, including distribution rights and goodwill. Cash flow from financing activities Cash flow from financing activities comprises payments to and from shareholders, the raising and repayment of debt to financial institutions, and other current and non-current liabilities of a financing nature. Segment reporting The determination of the Group’s operating segments is based on the organisation units for which information is reported to the Group management. The chief operating decision maker (CODM) effectively running the business is the Executive Committee (Excom) consisting of the CEO and his Senior Executive Direct Reports. Group management has identified only one operating segment, because the Group is managed as a fully integrated business, whereby manufacturing and research are important upstream activities. Without those, there would be no marketing and sales. Risk is managed on an integrated basis.
Financial Statements Note 4
4. Risk management Nycomed operates in a highly competitive and regulated business area. Specific risks are inherent in the Group product range and business model. RISK MANAGEMENT PROCESS Overseen by its Risk Management Committee, RMC, representing senior managers from all functions of the group, Nycomed has implemented a systematic, integrated approach to continually assess a wide range of functional and cross-functional risks and opportunities. The objectives of Integrated Risk Management is to provide assurance that risks are adequately understood and subsequently managed to an acceptable level. The aim is that all major functions and entities assess their most significant strategic risks and work out action plans or processes to manage these risks. Significant risks and action plans are reported to RMC on a quarterly basis and consolidated into the Group Risk Register. Group Risk Register and action plan are challenged by RMC and Management if applicable. FINANCIAL RISKS Financial risks at Nycomed are managed centrally. The overall objectives and policies for Nycomed's financial risk management are outlined in a Treasury Policy. The Group does not engage in financial transactions or risk exposures that are not related to mitigating underlying business driven risk. Only transactions that are justified for covering risks are allowed. Consequently, Nycomed does not enter into speculative positions through the use of derivative financial instruments. Nycomed is currently exposed to currency fluctuations which could have an impact on profits. Nycomed uses derivatives with the aim of limiting losses from fluctuations in the exchange rate of the euro against other currencies, especially the US dollar, the Mexican peso, the Brazilian real, the Russian roubles, the Norwegian kroner, the Danish kroner, the Japanese yen or the Canadian dollar. Only forward exchange deals and currency swaps are used. These are transacted exclusively with banks that have defined credit ratings.
CURRENCY RISK RELATED TO DEBT A part of the outstanding debt in Nycomed is denominated in US dollar in order to mitigate the risk related to the current cash flow and the US dollar value of Nycomed in a potential future transaction. With the purpose of preserving a part of the unrealised gain on this part of the debt the Group entered into four cross currency swaps during the first half-year of 2008. Since then, part of those swaps have been re-struck or closed. During 2008 and 2009, the Group invested part of the cash in buying back its own debt. The nominal value of the bought back debt is €179.6 million as at 31 December 2009 (31 December 2008: €54.8 million). FOREIGN EXCHANGE The Group’s main objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with the changes in market foreign currency rates. Currency risk can be classified in two categories: transaction risk and translation risk. The Group’s transaction risk primarily relates to the potential change in value of future operations and cash flows resulting from changes in currency rates. Translation risk is related to the translating of potential change in carrying value of assets and liabilities in foreign currencies. The Group is mainly exposed with regard to the US dollars, Mexican pesos, Brazilian reals, Russian roubles, Norwegian kroner, Danish kroner, Japanese yen and Canadian dollars. INTEREST Nycomed has a significant level of debt with a variable interest rate. Changes in interest rates affect the Group´s income statement as well as the statement of financial position. The overall objective of interest rate risk management is to limit the negative impact on earnings from interest rate fluctuations. In accordance with the Senior Facility Agreement at least 50.0% of the interest rate risk was swapped into a fixed interest rate before 31 March 2007. The duration of the hedge should be at least two years. As per 31 December 2009, 60% of our debt was hedged using interest rate swaps which all expire at the end of September 2010.
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Financial Statements Note 4
CREDIT Nycomed continuously monitors and evaluates credit risk on outstanding payments. In general, the Group estimates the risk to be limited for countries in the EU. In Russia/CIS, the payment conditions are cash payment or 90-day payment terms. During 2009, Nycomed continued the strict control and close follow-up on outstanding payments. Nycomed has had very few defaulted payments in this region since the rouble crisis in 1998. The company maintains that this region is subject to higher than average political and economic risk and it continues to make every effort to secure payment from its customers. The company tries to cover outstanding payments through insurance companies. As at 31 December 2009, Nycomed had €113.6 million outstanding receivables from customers in Russia/CIS, of which 45.5% was covered by credit insurance (31 December 2008: €97.5 million, of which 50.5% was covered). The Group also evaluates on a continuous basis its credit risk on financial counterparties. WORKING CAPITAL Due to the current rate of growth in countries with higher than average outstanding payments – like Russia/CIS and Latin America, the company is experiencing increased pressure on its working capital and longer cycles. During 2008/2009 Nycomed experienced some prolongation in the payment terms within the industry in CIS/Russia. INSURANCE Nycomed has an extensive insurance programme providing coverage for the risk of damage to employees, assets, and profitability resulting from occurrences beyond our control. Damage caused by Nycomed is included in the insurance programme as well. The risks are regularly assessed in order to obtain appropriate insurance cover on competitive terms. COMMERCIAL RISKS One of the key responsibilities of the executive management is to continuously assess and discuss business risks. The Board discusses the commercial risks outlined below on a case-bycase basis.
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Listed below are examples of the current, most relevant risks (i.e. where the combination of impact and vulnerability is highest), along with countermeasures. BUSINESS ENVIRONMENT Nycomed´s business is subject to extensive government regulation, control and approval. In addition, continued cost-control efforts by governments and managed-care organisations may lead to lower pricing and reimbursement levels. Nycomed regularly undertakes thorough evaluations of the potential impact these scenarios could have on its product development and marketing activities. Pricing and reimbursement evaluations are also conducted before the Group enters into any agreements to in-license new products. Nycomed’s operations in some countries and regions are subject to a high degree of political and economical risk. Russia/CIS is currently one of the largest and fastest growing markets and Nycomed remains vigilant and highly focused in this particular region. Financial risk management is an important tool to minimise risk in the short term. In the longer term, Nycomed is building up operations in emerging markets with significant growth potential. IN-LICENSING Nycomed’s strategy for expanding its product base is to acquire project assets or licenses at all stages of research, development and commercialisation. In-licensing is performed globally and on a local level. The majority of the future pipeline is expected to come from agreements and collaborations with partners. Nycomed’s commercial and R&D organisation is prepared to meet specific needs for partnering projects. This puts the Group in a favourable position for gaining access to product ideas in an increasingly competitive in-licensing environment. Therefore, future growth and success depends on the ability to identify in-license, acquire, develop and market new products. Before licensing a new product, its commercial potential, along with the product’s medical utility, and its potential risks, are assessed by a team of specialists who produce a detailed evaluation report. In this way, Nycomed seeks to ensure that the
Financial Statements Note 4
decision-making process results in commercially viable, profitable investments. Dependency on the development competencies, the commitment and the financial situation of co-development partners are risk factors that we assessed prior to a final decision. Having agreed on a collaboration, Nycomed and the partner dedicate project managers and executive teams to expedite implementation and execution. Nycomed’s focus on projects for in-licensing may increase risk if a key product faces unexpected clinical, regulatory or competitive challenges. To minimise this risk, the Group seeks to thoroughly evaluate a project’s feasibility before engaging in a collaboration arrangement and to establish an efficient sourcing process with the ability to rapidly screen opportunities. PEOPLE As a value driven company Nycomed strives to empower its employees. It wants to create a challenging and inspiring working environment that encourages participation and engagement. Highly qualified and motivated employees are key for Nycomed. To be attractive for new staff and retain its employees in the long term, Nycomed recognises and rewards performance, and offers a multitude of further development and training programmes. Nycomed encourages transparent objectives and the clarification of each individual’s contribution to company performance, so that all resources are focused on common goals. In this context, Nycomed has introduced a global performance review system for senior executives – linked to the variable compensation system “Allegro”. This system takes into account Nycomed´s global business performance, the local company’s success and the achievement of individual objectives. In this way, the company creates a further incentive for attaining its corporate objectives. Through the Nycomed Academy, managers and senior levels of staff are offered the opportunity to continuously develop and excel in important management and leadership skills, as well as globally align their knowledge and understanding of the corporate strategy. To ensure Nycomed is proactive in a constantly changing environment, change management
training courses offered by Nycomed Academy provide the opportunity and resources to equip management with the necessary tools to be key drivers in the change process. In addition to the training and development initiatives, the Academy offers management the opportunity to exchange knowledge and experience in an interdisciplinary and international manner, these events offer participants an effective setting to develop internal networks ensuring the capturing and sharing of best practice. SAFETY, HEALTH & ENVIRONMENT Nycomed adheres to the extensive and stringent environmental protection and safety regulations in Europe as well as in the other markets in which it is active. The company has aligned its Safety, Health & Environment (SHE) policies to cover the full extent of our activities. In addition it will implement the principles of SHE managementsystems of “Responsible Care” – a worldwide initiative aimed at protecting natural resources. Two of the Group´s Competence Centres and the German R&D unit are certified in accordance with EMAS and ISO14001. Nycomed has implemented a worldwide quality standard for safety, health and environment, which is a part of the Nycomed quality management system. In light of increasing costs and competitive pressure, efficient environmental protection is becoming more and more important. Thus appropriate management systems help the Group to improve its resource and energy efficiency and to avoid waste, resulting in a systematically exploited cost reduction potential relevant to environmental protection. Nycomed embraces the idea that every accident is avoidable and aims for a working environment free of accidents. Adequate management systems help to reduce the number of absence days and the number of events causing severe damage in order, ultimately, to minimise risks and to improve the company’s economic efficiency. Business activities to achieve the Group´s SHEstandards are managed by the local site manager and involve management and employees by encouraging them to act in a sustainable way, whilst at the same time maintaining profitability and competitiveness.
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Financial Statements Note 5
5. Intangible assets
Patents and rights and currently marketed products € thousand
Goodwill € thousand
Development projects in progress € thousand
Total € thousand
Cost as of 1 January 2008
4,008,399
2,080,813
574,825
6,664,037
Currency translation effect
-52,555
-10,693
2,172
-61,076
Additions
37,368
-
82,126
119,494
Additions from acquisition of subsidiaries
175,753
95,101
7,181
278,035
Disposals
-3,936
-
-136
-4,072
Transfers/corrections
96,369
-6,250
-81,604
8,515
4,261,398
2,158,971
584,564
7,004,933
707,476
6,250
-
713,726
-1,156
-
115
-1,041
597,701
-
-
597,701
7,387
-
92,171
99,558
-913
-
-
-913
-5,000
-6,250
5,000
-6,250
Amortisation as of 31 December 2008
1,305,495
-
97,286
1,402,781
Carrying value as of 31 December 2008
2,955,903
2,158,971
487,278
5,602,152
Cost as of 1 January 2009
4,261,398
2,158,971
584,564
7,004,933
Currency translation effect
44,917
16,021
-1,014
59,924
100,435
-
61,166
161,601
11,519
333
-
11,852
Disposals
-9,494
-145
-32,978
-42,617
Transfers
94,006
-
-94,006
-
Cost as of 31 December 2009
4,502,781
2,175,180
517,732
7,195,693
Amortisation as of 1 January 2009
1,305,495
-
97,286
1,402,781
3,893
-
242
4,135
616,758
-
-
616,758
Cost as of 31 December 2008 Amortisation as of 1 January 2008 Currency translation effect Amortisation Impairment Disposals Transfers/corrections
Additions Additions from acquisition of subsidiaries
Currency translation effect Amortisation Impairment
-
-
7,600
7,600
Disposals
-8,930
-
-32,890
-41,820
Transfers
-3,988
-
3,988
-
Amortisation as of 31 December 2009
1,913,228
-
76,226
1,989,454
Carrying value as of 31 December 2009
2,589,553
2,175,180
441,506
5,206,239
50
Nycomed Annual Report 2009
Financial Statements Note 5
Additions from acquisition of subsidiaries are intangible assets acquired in connection with the acquisition of Nycomed Madeus (Pty) Ltd., for additional details please refer to note 27, Business combinations. There were no significant disposals in the reporting period. The disposal of goodwill relates to an adjustment of the goodwill from the acquistion of Bradley Pharmaceutical, Inc. resulting from an adjustment of the deferred taxes from the pre-acquisition period. In 2009 and 2008 impairment losses were recognised in connection with several development projects. In 2008 impairment losses of €56.6 million were recognised for one development project due to negative results from clinical trials. Impairment test As a result of the impairment tests and the internal valuations of the business as a whole, there is no basis for recognising impairment loss on goodwill or other intangible assets at the reporting date apart from the impairment losses on several projects as mentioned above. Impairment tests are conducted at least annually and in connection with management´s strategy review. In the impairment tests, the discounted values of future cash flows are compared with
the carrying amounts. Future cash flows are based on the budget for 2010, strategic plans for the years 2011-2014 and projections for the following years. Important parameters are sales, EBIT, working capital and growth assumptions subsequent to the budget and strategic plan period. Budget and strategic plans build on specific commercial assessments of the business entities and the relevant products while projections that go beyond 2014 build on general parameters for perpetual growth rates. The growth rate used to extrapolate cash flow projections beyond the period covered by the most recent budgets/forecasts is 1.5% (2008: 1.5%). For discounted cash flow calculations a discount rate of 9.7% before tax (2008: 9.8%) has been applied. With regard to the assessment of value-in-use of the capitalised assets, management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of the assets to materially exceed its recoverable amount.
The carrying value of goodwill comprises balances arising on acquisition of the following companies: 31.12.09 € thousand
Nycomed A/S Altana Pharma AG Bradley Pharmaceuticals Inc, Nycomed Madaus Proprietary Limited Carrying values as of 31 December
31.12.08 € thousand
642,237
642,237
1,427,388
1,407,608
105,143
109,126
412
-
2,175,180
2,158,971
Nycomed Annual Report 2009
51
Financial Statements Note 6
6. Property, plant and equipment
Land and buildings € thousand
Machinery and equipment € thousand
Other property, plant and equipment € thousand
Cost as of 1 January 2008
366,095
233,835
132,067
30,947
762,944
Currency translation effect
-15,904
-15,923
-12,287
-508
-44,622
Additions
5,554
15,810
20,496
14,435
56,295
Disposals
-1,824
-2,360
-13,109
-480
-17,773
Transfers/corrections
-7,187
11,692
14,529
-17,204
1,830
346,734
243,054
141,696
27,190
758,674
Depreciation as of 1 January 2008
22,594
44,413
10,487
-
77,494
Currency translation effect
-5,094
-9,972
-9,454
14
-24,506
Depreciation
17,784
32,596
34,751
2,086
87,217
Impairment
1,035
5,172
-
-
6,207
Disposals
-1,109
-2,214
-11,576
-
-14,899
Transfers/corrections
-1,256
1,510
3,070
-
3,324
33,954
71,505
27,278
2,100
134,837
312,780
171,549
114,418
25,090
623,837
Cost as of 31 December 2008
Depreciation as of 31 December 2008 Carrying value as of 31 December 2008
52
Nycomed Annual Report 2009
Assets under construction and prepayments for assets € thousand
Total € thousand
Financial Statements Note 6
Land and buildings € thousand
Machinery and equipment € thousand
Other property, plant and equipment € thousand
Cost as of 1 January 2009
346,734
243,054
141,696
27,190
Currency translation effect
11,649
12,237
8,114
-51
31,949
Additions
6,010
14,116
15,540
34,887
70,553
Additions from acquisition of subsidiaries
Assets under construction and prepayments for assets € thousand
Total € thousand
758,674
-
-
113
-
113
Disposals
-2,321
-2,395
-5,863
-925
-11,504
Transfers
3,653
7,710
2,378
-13,741
-
365,725
274,722
161,978
47,360
849,785
33,954
71,505
27,278
2,100
134,837
4,107
7,768
6,119
-
17,994
Depreciation
15,142
37,019
32,029
-
84,190
Impairment
2,646
-
-
-
2,646
Cost as of 31 December 2009 Depreciation as of 1 January 2009 Currency translation effect
Additions from acquisition of subsidiaries
-
-
78
-
78
Disposals
-342
-1,723
-5,403
-
-7,468
Transfers
-
-238
238
-
-
55,507
114,331
60,339
2,100
232,277
310,218
160,391
101,639
45,260
617,508
Depreciation as of 31 December 2009 Carrying value as of 31 December 2009
Additions to property, plant and equipment, amount to €70.6 million.
There were no significant disposals in the reporting period.
Significant additions include special projects and central services data centre at Nycomed GmbH, Germany, and laboratory and production expansion together with some system upgrades at Nycomed US Inc.
The impairments in 2009 and 2008 relate to the optimisation and restructuring of manufacturing facilities.
Nycomed Annual Report 2009
53
Financial Statements Note 7
7. Inventories 31.12.09 € thousand
31.12.08 € thousand
Raw materials and packaging
117,742
99,109
Semi-finished goods
116,551
92,079
244,969
227,128
Finished goods Prepayment for goods Total The amount of write-down of inventories recognised as an expense (recognised in cost of sales) during the period Amount of reversal of write-down of inventories during the year
14,841
16,606
494,103
434,922
20,789
13,379
3,011
665
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
19,380
15,689
Inventory scrap and inventory provision Inventory provision as of 1 January Currency translation effect Additions Reversal
640
-504
22,886
14,978
-3,011
-665
Utilisation
-12,268
-10,118
Inventory provision as of 31 December
27,627
19,380
Please also see note 30 – Pledge over inventory in Norway
54
Nycomed Annual Report 2009
Financial Statements Note 8
8. Trade receivables 31.12.09 € thousand
31.12.08 € thousand
580,995
589,740
312
322
Trade receivables Trade accounts receivable - Sales to third parties Trade accounts receivable - Royalties Trade accounts receivable - Others
30
755
581,337
590,817
-21,315
-12,148
560,022
578,669
428,282
447,139
73,880
68,177
Overdue 31 to 60 days
4,763
16,836
Overdue 61 to 90 days
10,772
9,758
Overdue 91 to 360 days
25,284
23,685
Due 1 year to 2 years
8,859
7,553
Overdue more than 2 years
8,182
5,521
560,022
578,669
217,232
288,017
7,499
8,607
83,088
57,759
Gross total trade receivables Allowance for doubtful accounts Net total trade receivables Ageing analysis trade receivables Neither past due nor impaired Overdue 1 to 30 days
Total trade receivables Trade receivables by currency Euro Swiss franc US dollar Japanese yen
5,988
4,004
Brazilian real
27,478
24,430
Swedish krone
4,139
4,153
Danish krone
13,760
12,173
Canadian dollar
5,546
11,615
Australian dollar
14,462
10,398
Mexican peso
17,492
23,819
Russian rouble
88,834
74,683
Other
74,504
59,011
560,022
578,669
Total trade receivables
Nycomed Annual Report 2009
55
Financial Statements Note 9
9. Capital stock 01.01.09 -31.12.09
01.01.08 -31.12.08
400,016,000
400,016,000
13,316,572
13,341,371
Number of ordinary shares of par value €1.25 each Authorised Issued and fully paid Number as of 1 January Number cancelled Number as of 31 December
-
-24,799
13,316,572
13,316,572
1
1
€ thousand
€ thousand
16,646
16,677
Number of management shares without par value Issued as of 1 January and 31 December
Capital stock value Value as of 1 January Value cancelled Value as of 31 December
-
-31
16,646
16,646
The issued capital stock comprises 13,316,572 ordinary shares of par value €1.25 each and 1 management share without par value. The management share does not carry any right to dividends.
56
Nycomed Annual Report 2009
Financial Statements Note 10
10. Reserves
As of 1 January 2008
Share premium € thousand
Retained earnings € thousand
Foreign currency reserve € thousand
Other reserves € thousand
Total reserves € thousand
1,363,939
1,383,869
65,524
-129,182
43,728
Share-based payments (note 20)
-
-
-
3,777
3,777
Unrealised result on cash flow hedging, interest rate swaps
-
-
-
-9,951
-9,951
Unrealised gain/loss on investments held for sale
-
-
-
-5,291
-5,291
Change in actuarial gains and losses (note 11)
-
-
-
-6,125
-6,125
Other comprehensive income
-
-
-
37,265
37,265
Tax on other comprehensive income (note 24)
-
-
-
2,490
2,490
Exchange differences on translation of foreign operations
-
-
-3,520
-
-3,520
Net result for the year
-
-77,928
-
-
-77,928
1,383,869
-12,404
-132,702
65,893
1,304,656
As of 31 December 2008 Attributable to: Equity holders of the parent
1,269,773
Non-controlling interests
34,883 1,304,656
As of 1 January 2009
1,383,869
-12,404
-132,702
65,893
Share-based payments (note 20)
-
-
-
5,142
5,142
Effect of changes in non-controlling interests and investors' contribution
-
-
-
-2,851
-2,851
Unrealised result on cash flow hedging, interest rate swaps
-
-
-
-2,303
-2,303
Unrealised gain/loss on investments held for sale
-
-
-
4,971
4,971
Change in actuarial gains and losses (note 11)
-
-
-
-15,241
-15,241
Tax on other comprehensive income (note 24)
-
-
-
683
683
Exchange differences on translation of foreign operations
-
-
-5,634
-
-5,634
Net result for the year
-
232,741
-
-
232,741
1,383,869
220,337
-138,336
56,294
1,522,164
As of 31 December 2009
1,304,656
Attributable to: Equity holders of the parent
1,483,538
Non-controlling interests
38,627 1,522,165
The other reserves include cash flow hedging reserves, actuarial gains and losses, unrealised gains and losses on available-for-sale investments and the related tax effects.
Nycomed Annual Report 2009
57
Financial Statements Note 11
11. Pension commitments Many employees in Nycomed are covered by retirement plans, primarily defined contribution plans or alternatively defined benefit plans. Nycomed entities sponsor these plans either directly or by contributing to independently administered funds. The nature of such plans varies according to legal regulations, fiscal requirements and economic conditions of the countries in which the employees are employed, and the benefits are generally based on the employees´ remuneration and years of service. Defined benefit plans comprise Nycomed subsidiaries in Norway, Austria, Switzerland, France, Germany, Belgium, Netherlands, Italy, USA, Canada and Mexico.
Post-employment benefit plans are usually funded by payments from Nycomed entities and by employees to funds independent of the Group. Where a plan is unfunded, a liability for the obligation is recognised in the statement of financial position. The following tables summarise the components of net benefit expense recognised in the consolidated income statement and the funded status and amounts recognised in the consolidated statement of financial position for the respective plans.
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Current service cost
15,879
16,132
Interest cost on benefit obligation
20,854
19,857
-5,613
-5,569
-
792
-1,157
-
29,963
31,212
10,986
-15,600
5,613
5,569
421,800
374,185
Expected return on plan assets Past service cost Amount recognised on curtailment/settlement Net benefit expense Actual return on plan assets Expected return on plan assets Defined benefit obligation as of 31 December Fair value of plan assets as of 31 December Recognised as pension obligation in the statement of financial position
58
Nycomed Annual Report 2009
112,139
86,104
309,661
288,081
Financial Statements Note 11
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Defined benefit obligation as of 1 January
374,185
386,156
Interest cost
20,854
19,857
Current service cost
15,879
16,132
Changes in the present value of the defined benefit obligation are as follows:
Past service cost Employees’ contributions Benefits paid Actuarial (gains)/losses
-
792
2,104
963
-17,588
-15,215
20,613
-15,044
Exchange differences on foreign plans
5,074
-5,803
Reclassifications
4,572
-13,452
Curtailments Settlements Defined benefit obligation as of 31 December
-
-73
-3,893
-128
421,800
374,185
Changes in the fair value of plan assets are as follows: Fair value of plan assets as of 1 January
86,104
97,210
Expected return on plan assets
5,613
5,569
Contributions by employer
9,663
10,765
Employees’ contributions
2,104
963
-3,028
-2,648
Actuarial gains/(losses)
5,372
-21,169
Exchange differences on foreign plans
3,213
-3,085
Reclassifications
5,834
-1,624
Benefits paid
Settlements
-2,736
123
112,139
86,104
31.12.09 € thousand
31.12.08 € thousand
34,208
25,184
Bonds
34,611
32,067
Cash
3,500
1,442
Property
6,990
4,796
Fair value of plan assets as of 31 December
Major categories of plan assets Equities
Other
32,830
22,615
Total
112,139
86,104
Nycomed Annual Report 2009
59
Financial Statements Note 11
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Expense related to post employment benefits recognised in the income statement Cost of sales
8,627
8,472
Sales and marketing expenses
4,856
9,074
Research and development expenses
7,722
4,925
Administrative expenses
5,746
7,831
Other
3,012
910
Total
29,963
31,212
The actuarial assumptions used in the actuarial computations and valuations vary from country to country due to local economic and social conditions. The weighted-average assumptions used are as follows:
Assumptions
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
%
%
Discount rate
5.2
5.7
Expected rate of return on assets
5.9
6.5
Future salary increases
2.9
4.1
Future pension increases
1.4
2.0
The weighted-average assumptions for the discount rate decreased in 2009 by the amount of 0.5 in comparison with the prior year. All the rest of the indicators were reduced as well significantly. Amounts for the current and previous four periods are as follows: 31.12.09 € thousand
31.12.08 € thousand
31.12.07 € thousand
31.12.06 € thousand
421,800
374,185
386,156
378,710
66,716
112,139
86,104
97,210
89,321
35,272
309,661
288,081
288,946
289,389
31,444
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Cumulative amount as of 1 January
-18,050
-11,925
Recognised during the period
-15,241
-6,125
-33,291
-18,050
Defined benefit obligation Plan assets Net pension commitment
31.12.05* € thousand
* 2005 figures are not adjusted for the Altana acquisition
Actuarial gain and losses recognised directly in other comprehensive income:
Cumulative amount as of 31 December
Management best estimate of contributions expected to be paid to the plan during 2010 is €11.1 million.
60
Nycomed Annual Report 2009
The overall expected rate of return on assets is determined based on the market expectations prevailing on that date, applicable to the period over which the obligation is to be settled.
Financial Statements Note 12
12. Deferred tax
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
873,538
1,138,934
756
10,996
Currency translation effect
7,695
-10,637
Adjustment prior years
2,826
20,367
-122,856
-284,147
Provision as of 1 January Deferred tax in subsidiaries acquired
Deferred tax income relating to the origination and reversal of temporary differences Recognition of previously unrecognised deferred tax assets Deferred tax recognised in other comprehensive income Provision as of 31 December
-4,396
-
-783
-1,975
756,780
873,538
31.12.09 € thousand
31.12.08 € thousand
Deferred tax relates to:: Intangible assets
788,749
937,944
Property, plant and equipment
33,106
36,700
Financial fixed assets
10,877
8,423
Current assets
-43,276
-42,032
Provisions
-52,610
-28,378
Non-current liabilities
-24,082
-28,663
Tax loss carry-forwards
-25,162
-57,209
Unamortised financing costs Foreign exchange gains/losses Deferred income for tax purposes Provision as of 31 December
7,776
10,055
67,862
30,459
-6,460
6,239
756,780
873,538
870,219
970,054
Allocation of deferred tax: Deferred tax liabilities Deferred tax assets
113,439
96,516
756,780
873,538
Nycomed Annual Report 2009
61
Financial Statements Note 12
Recognised in income statement € thousand
Recognised in other comprehensive income € thousand
31 December 2008 € thousand
1 January 2008 € thousand
Subsidiaries acquired € thousand
Subsidiaries disposed € thousand
Currency translation effect € thousand
1,090,206
10,996
-
-17,947
-145,311
-
937,944
40,875
-
-
-
-4,175
-
36,700
1,512
-
-
-
6,911
-
8,423
Current assets
-20,325
-
-
-
-25,476
3,769
-42,032
Provisions
-35,212
-
-
-
8,997
-2,163
-28,378
Non-current liabilities
-16,255
-
-
-
-12,408
-
-28,663
Tax loss carry-forwards
-35,438
-
-
-
-21,771
-
-57,209
Unamortised financing costs
14,096
-
-
-
-4,041
-
10,055
Foreign exchange gains/losses
91,931
-
-
7,310
-65,201
-3,581
30,459
Intangible assets Property, plant and equipment Financial fixed assets
Deferred income for tax purposes
7,544
-
-
-
-1,305
-
6,239
1,138,934
10,996
-
-10,637
-263,780
-1,975
873,538
Recognised in income statement € thousand
Recognised in other comprehensive income € thousand
31 December 2009 € thousand
1 January 2009 € thousand
Subsidiaries acquired € thousand
Subsidiaries disposed € thousand
Currency translation effect € thousand
937,944
756
-
11,484
-162,769
1,334
788,749
36,700
-
-
-
-3,594
-
33,106
8,423
-
-
-
2,454
-
10,877
-42,032
-
-
-
-1,244
-
-43,276
Provisions
-28,378
-
-
-
-20,579
-3,653
-52,610
Non-current liabilities
-28,663
-
-
-
4,581
-
-24,082
Tax loss carry-forwards
-25,162
Intangible assets Property, plant and equipment Financial fixed assets Current assets
-57,209
-
-
-
32,047
-
Unamortised financing costs
10,055
-
-
-
-2,279
-
7,776
Foreign exchange gains/losses
30,459
-
-
-3,789
39,656
1,536
67,862
Deferred income for tax purposes
62
6,239
-
-
-
-12,699
-
-6,460
873,538
756
-
7,695
-124,426
-783
756,780
Nycomed Annual Report 2009
Financial Statements Note 12
Deferred tax assets mainly relate to tax loss carry-forwards in Denmark and Norway (only 2008) and timing differences in Denmark, Germany, Norway and the US (only 2008). Deferred tax assets of €25,162 thousand as of December 2009 (2008: €57,209 thousand) have been recognised for all unused tax losses to the extent that future taxable profits will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Nycomed has net operating loss carry-forwards in Denmark with unlimited expiration of €217,796 thousand in 2009 and €235,059 thousand in 2008 which have not been recognised as deferred tax assets.
At 31 December 2009, unremitted earnings of €688 million (2008: €643 million) have been retained by subsidiary companies for reinvestment. No deferred tax liability has been recognised for the potential income tax consequences that would result upon the distribution of these earnings. If these earnings were remitted, an income tax charge could result based on the tax statutes currently in effect. It is not practicable to estimate the amount of the unrecognised deferred tax liabilities for these undistributed earnings. At 31 December 2009 a deferred tax liability of €4,058 thousand (2008: €1,366 thousand) was recognised for taxes that will be payable on the expected remittance of earnings of certain of the Group's subsidiaries. There are no income tax consequences to Nycomed of paying dividends to its shareholders.
Nycomed Annual Report 2009
63
Financial Statements Note 13
13. Provisions
Employees € thousand
Sales and marketing € thousand
Warranty € thousand
Other € thousand
Restructuring € thousand
Total € thousand
Provisions as of 1 January 2008
97,608
57,570
3,363
68,445
47,421
274,407
Currency translation effect
-1,466
8,120
-457
3,465
795
10,457
Addition from acquisition of subsidiaries
53
785
-
166
1,398
2,402
Arising during the year
90,018
45,810
3,063
50,760
11,231
200,882
Utilised during the year
-57,368
-50,258
-84
-37,784
-26,752
-172,246
Unused amount reversed
-12,546
-10,295
-642
-15,601
-7,222
-46,306
116,299
51,732
5,243
69,451
26,871
269,596
116,299
51,732
5,243
69,451
26,871
269,596
1,734
541
118
929
-385
2,937
204
887
-
48
-
1,139
74,043
50,422
3,341
71,098
15,659
214,563
Utilised during the year
-71,381
-55,102
-1,696
-47,588
-17,628
-193,395
Unused amount reversed
-15,432
-5,224
-547
-330
-3,828
-25,361
105,467
43,256
6,459
93,608
20,689
269,479
75,314
51,732
1,377
61,439
19,635
209,497
Other provisions as of 31 December 2008 Provisions as of 1 January 2009 Currency translation effect Addition from acquisition of subsidiaries Arising during the year
Provision as of 31 December 2009 Current 2008 Non-current 2008
40,985
-
3,866
8,012
7,236
60,099
116,299
51,732
5,243
69,451
26,871
269,596
Current 2009
63,726
37,755
2,762
58,453
19,226
181,922
Non-current 2009
41,741
5,501
3,697
35,155
1,463
87,557
105,467
43,256
6,459
93,608
20,689
269,479
Provision as of 31 December 2008
Provision as of 31 December 2009
The employee-related provisions encompass accruals for special bonuses, as well as anniversary and paid vacation. Provisions for sales and marketing pertain primarily to sales bonuses and commissions. Provisions for warranty cover commitments in connection with goods delivered and services rendered.
64
Nycomed Annual Report 2009
The items included in other provisions are primarily related to pending litigation and legal cost, professional fees, clinical trials and research.
Financial Statements Note 13
MATURITY PROVISION TABLE: Due < 1 years € thousand
Due < 2 years € thousand
Due < 3 years € thousand
Due < 4 years € thousand
Due < 5 years € thousand
Due after 5 years € thousand
Without Maturity € thousand
Total Maturity € thousand
Employees
75,314
11,945
5,008
5,146
6,986
1,100
10,800
116,299
Sales and marketing
51,732
-
-
-
-
-
-
51,732
2008
Warranty Other Restructuring
1,377
798
737
222
225
37
1,847
5,243
61,439
1,326
1,298
1,046
2,297
-
2,045
69,451
19,635
5,529
192
184
175
1,156
-
26,871
209,497
19,598
7,235
6,598
9,683
2,293
14,692
269,596
Due < 1 years € thousand
Due < 2 years € thousand
Due < 3 years € thousand
Due < 4 years € thousand
Due < 5 years € thousand
Due after 5 years € thousand
Without Maturity € thousand
Total Maturity € thousand
Employees
63,726
8,104
4,192
3,835
12,411
1,543
11,656
105,467
Sales and marketing
37,755
-
-
1,000
1,501
3,000
-
43,256
2,762
453
444
527
446
58
1,769
6,459
Other
58,453
25,201
670
669
-
-
8,615
93,608
Restructuring
19,226
202
195
189
182
695
-
20,689
181,922
33,960
5,501
6,220
14,540
5,296
22,040
269,479
Total 2008
2009
Warranty
Total 2009
Nycomed Annual Report 2009
65
Financial Statements Note 14
14. Financial risk and derivative financial instruments
66
MARKET RISK
CURRENCY RISK
The Group is exposed to market risk, primarily related to foreign exchange and interest rates. Management actively monitors these exposures. The Group has established strategies to hedge fluctuations in exchange rates and interest rates. The Group’s objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in market interest rates and foreign currency exchange rates. The Group does not engage in financial transactions or risk exposures that are not related to the hedging of underlying business-driven risks.
The Group is exposed to currency fluctuations which have an impact on profits. The Group uses derivative financial instruments with the aim of limiting losses from fluctuations in the exchange rate of the euro against other currencies, especially the US dollar, the Mexican peso, the Brazilian real, the Russian rouble, the Danish kroner, the Norwegian kroner, the Japanese yen or the Canadian dollar. Only forward exchange deals and currency swaps are used. These are transacted exclusively with banks that have defined credit ratings.
Nycomed Annual Report 2009
Financial Statements Note 14
Liabilities to financial institutions The senior debt facilities can be specified as stated below: Currency
Maturity
Effective interest rate
31.12.09 € thousand
31.12.08 € thousand
Non-current A-tranche
USD
2013
IBOR + 1.50%
872,036
1,180,423
B-tranche
USD & EUR
2014
IBOR + 2.25%
1,310,740
1,326,516
C-tranche
USD & EUR
2015
IBOR + 3.00%
1,310,740
1,326,516
Second lien/D-tranche
EUR
2016
IBOR + 5.00%
425,000
425,000
In-licensing/Restructuring facility
EUR
2014
IBOR + 1.50%
394,150
125,000
Local debt Debt buy-back
230
1,999
-179,637
-54,820
4,133,259
4,330,634
Current A-tranche
USD
2010/2009
IBOR + 1.50%
268,319
247,238
In-licensing/Restructuring facility
EUR
2010
IBOR + 1.50%
49,263
-
Local debt
59
5,059
317,641
252,297
4,450,900
4,582,931
Financing fees non-current
-40,314
-55,884
Financing fees current
-13,370
-14,521
-53,684
-70,405
4,397,216
4,512,526
4,092,945
4,274,750
304,271
237,776
4,397,216
4,512,526
Total debt Financing fees
Total debt to financial institutions including financing fees Split between current and non-current Non-current Current Total
Nycomed Annual Report 2009
67
Financial Statements Note 14
Currency risk related to Senior Facility Agreement
purpose to preserve a part of the unrealised gain on this part of the debt, Nycomed entered into four cross currency swaps during the first half-year of 2008. Since then, part of those swaps have been re-struck or closed. Cross currency swaps are not accounted for as IAS 39 hedging.
A part of the outstanding debt in Nycomed is denominated in USD in order to mitigate the current cash flow and the USD value of Nycomed in a potential exit. Within the
Cross currency swaps used to hedge USD denominated debt Market value as of 31 December
Currency
Notional amount thousand
31.12.09 € thousand
EUR/USD cross currency swap
EUR
500,000
-51,013
-37,845
EUR/USD cross currency swap
EUR
500,000
-
-40,747
EUR/USD cross currency swap
EUR
250,000
-25,369
-18,825
EUR/USD cross currency swap
EUR
250,000
-
-20,374
EUR/USD cross currency swap
EUR
50,000
-5,204
-
-81,586
-117,791
68
Nycomed Annual Report 2009
31.12.08 € thousand
Financial Statements Note 14
Currency risk related to sales transactions
Impact of fair value hedges under IAS 39
Foreign exchange forwards are used to protect against exposures to variability in future cash flows on highly probable forecast sales transactions. The maturity dates of the foreign exchange derivatives are all within one year.
For the year ended 31 December 2009, the Group did not recognise any amount in the income statement (2008: the Group recognised a loss of €152 thousand) as no foreign exchange derivative financial instruments were designated as being fair value hedges under IAS 39. The total effect on the income statement on hedged items attributable to the hedged risk amounted to €0.00 (2008: gain of €161 thousand).
When the criteria for hedge accounting are met, foreign exchange derivatives are treated as cash flow hedges until the hedged item is recorded in the income statement. Afterwards, they are treated as fair value hedges. Changes in value from the derivatives therefore are initially recognised directly in equity in the revaluation reserve and are transferred to the income statement when forecast sales transactions affect the income statement. At 31 December 2009, there were no outstanding foreign exchange derivatives designated as either cash flow or fair value hedges (2008: no outstanding foreign exchange derivatives designated as either cash flow or fair value hedges). All fair values of derivative financial instruments in the Group are provided by banks. The calculations from the banks are based on mark to market model. Impact of cash flow hedges under IAS 39 Amounts recognised in equity during the period were €0.00 (2008: €0.00); amounts removed from equity and included in the income statement during the period were €0.00 (2008: €–2,636 thousand). There are no foreign exchange derivatives designated for hedge accounting under IAS 39 at 31 December 2009 and at 31 December 2008.
Currency risk can be classified in two categories: transaction risk and translation risk: The Group's transaction risk primarily relates to the potential change in value of future operations and cash flows resulting from changes in currency rates. Translation risk is related to the translating of potential change in booked value of assets and liabilities in foreign currencies. Nycomed is mainly exposed with regard to the US dollar, the Canadian dollar, the Brazilian real, the Mexican peso, the Russian rouble, the Norwegian kroner, the Danish kroner and the Japanese yen. The Group's main objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with the changes in market foreign currency rates. Risk management is intended to limit the short-term negative impact on earnings and cash flows from exchange rate fluctuations. Consequently, the Group enters into various contracts, which change in value as foreign exchange rates change, to preserve the value of Group assets, and mitigate currency-related increases in its commitments. Forward contracts are entered into to hedge receivables, payables and cash flows in foreign currencies. There are no foreign exchange derivatives designated for hedge accounting under IAS 39 at 31 December 2009.
Nycomed Annual Report 2009
69
Financial Statements Note 14
The following schedule presents forward contracts not designated for hedge accounting under IAS 39. FINANCIAL RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS, CONTINUED Outstanding forward contracts by currency*
31.12.09 € thousand Fair value
31.12.09 € thousand Nominal value
31.12.08 € thousand Fair value
31.12.08 € thousand Nominal value
CAD
177
7,932
-
-
CHF
-
-
222
7,071
Purchases of currency
CZK
-38
4,533
-55
2,605
DKK
-4,347
58,129
-6,984
57,727 1,905
GBP
-
-
-51
MXN
-
-
-139
8,318
SEK
-
-
-12
2,760
-4,208
70,594
-7,019
80,386
CHF
-898
57,871
-
-
DKK
-
-
-
6,225 -
Total purchases of currency Sales of currency
JPY
15
751
-
MXN
-79
7,927
-
-
NOK
-2,106
38,554
2,409
22,564
PLN
-116
13,400
-
-
SEK
-102
14,709
-
-
USD Total sales of currency *Hedge accounting has not been applied for forward contracts entered after 1 January 2008.
70
Nycomed Annual Report 2009
-
62,474
-
64,669
-3,286
195,686
2,409
93,458
Financial Statements Note 14
Sensitivity analysis Nycomed has operations in many countries with exposures in many currencies. After performing a detailed currency risk analysis, Nycomed management believes that the major currency risk is based on fluctuation in EUR/USD, EUR/NOK and EUR/RUB.
The following table demonstrates the sensitivity to a reasonably possible change in the USD, NOK and RUB exchange rates, with all other variables held constant, of the Group's profit before tax due to changes in fair values of monetary assets and liabilities. The table does not take into consideration any interest rate derivatives and foreign currency derivatives.
31.12.09
31.12.08 Increase/ decrease in exchange rate
Effect on profit and loss before tax € thousand
Increase/ decrease in exchange rate
Effect on profit and loss before tax € thousand
EUR/USD
10%
56,116
EUR/USD
10%
11,844
EUR/NOK
10%
EUR/RUB
10%
-61,080
EUR/NOK
10%
-59,982
-14,279
EUR/RUB
10%
-12,225
EUR/USD EUR/NOK
-10%
-68,587
EUR/USD
-10%
-14,475
-10%
74,654
EUR/NOK
-10%
73,311
EUR/RUB
-10%
17,453
EUR/RUB
-10%
14,942
Increase/ decrease in exchange rate
Effect on profit and loss before tax € thousand
-3,233
Currency risk related to forward covers The following table demonstrates the sensitivity to a reasonably possible change in the
currency fluctuations, with all other variables held constant, of the Group's profit before tax due to changes in fair values of derivative financial instruments.
31.12.09
31.12.08 Increase/ decrease in exchange rate
Effect on profit and loss before tax € thousand
USD/DKK
10%
-6,247
USD/DKK
5%
EUR/NOK
10%
3,503
EUR/NOK
5%
1,073
EUR/CHF
5%
2,756
USD/DKK
-5%
3,233
USD/DKK
-10%
6,247
EUR/NOK
-5%
-1,186
EUR/NOK
-10%
-4,282
EUR/CHF
-5%
-3,046
Forwards
Forwards
Nycomed Annual Report 2009
71
Financial Statements Note 14
INTEREST RATE RISK Nycomed has a significant level of debt with a variable rate of interest. Changes in interest rates affect the income statement as well as the statement of financial position as a part of the variable debt is hedged with derivative instruments (see below). The overall objective of interest rate risk management is to limit the negative impact on earnings and on the balance sheet from interest rate fluctuations.
In accordance with the terms of the Senior Facility Agreement at least 50% of the interest rate risk was swapped into fixed interest before 31 March 2007. As per 31 December 2009, 60.0% (31 December 2008: 76.0%) of Nycomed's debt calculated in EUR was hedged using interest rate swaps which all expire at the end of September 2010.
Interest rate risk related to loans, interest rate swaps and cross currency swaps The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Group's profit before tax and equity. 31.12.08 Increase/ decrease in basis points
*Effect on equity from interest rate swaps before tax € thousand
Effect on profit and loss from cross currency swaps before tax € thousand
Effect on profit and loss from loan before tax € thousand
USD
50
19
-1,700
-11,768
EUR
50
5
1,832
-11,112
USD
-50
-19
1,649
11,768
EUR
-50
-5
-1,782
11,112
Increase/ decrease in basis points
*Effect on equity from interest rate swaps before tax € thousand
Effect on profit and loss from cross currency swaps before tax € thousand
Effect on profit and loss from loan before tax € thousand
31.12.09
USD
50
4,347
-843
-9,803
EUR
50
5,082
929
-12,450
USD
-50
-4,396
845
9,803
EUR
-50
-5,114
-931
12,450
*If Nycomed no longer qualifies for hedge accounting changes in value would be shown in the income statement
72
Nycomed Annual Report 2009
Financial Statements Note 14
The table below discloses the fair value of the financial instruments applied to swap the interest rate for the individual tranches of the debt.
Interest rate swaps used to hedge variable rate debt Market value as of 31 December
Currency
Notional amount thousand
31.12.09 € thousand
31.12.08 € thousand
A-Tranche, maturity 31.03.09
USD
1,002,588
-
-6,276
A-Tranche, maturity 31.03.09
USD
605,901
-
-2,840
B-Tranche & C-Tranche, maturity 31.03.09
USD
656,775
-
-4,065
B-Tranche & C-Tranche, maturity 31.03.09
USD
394,065
-
-1,836
B-Tranche , C-Tranche & D-Tranche, maturity 31.03.09
EUR
1,587,500
-
-4,096
A-Tranche, maturity 30.09.10
USD
1,012,469
-4,373
-
B-Tranche, C-Tranche, D-Tranche and Restructuring, maturity 30.09.10
EUR
1,000,000
-9,080
-
B-Tranche, C-Tranche, D-Tranche and Restructuring, maturity 30.09.10
EUR
1,000,000
-8,060
-
-21,513
-19,113
Total
At 31 December 2009 all interest rate swaps were designated as cash flow hedges in accordance with IAS 39. Changes in value from those derivatives therefore are recognised directly in equity. Before interest rate swaps were designated as cash flow hedges, changes in fair value were recognised directly in the income statement. At 31 December 2009, the fair values of outstanding interest rate swap derivative financial instruments designated as cash flow hedges were €–21,513 thousand (2008: €–19,113 thousand).
Impact of cash flow hedges under IAS 39 Interest rate derivative financial instruments: Amounts recognised in equity during the period were €–2,303 thousand (2008: €–12,587 thousand). For 2009, there were no amounts recognised in the income statement for hedge instruments (2008: € –237 thousand).
All fair values of derivative financial instruments in the Nycomed Group are provided by banks. The calculation from the banks are based on mark to market model.
Nycomed Annual Report 2009
73
Financial Statements Note 14
CREDIT RISK
LIQUIDITY RISK
Nycomed continuously monitors and evaluates credit risk on outstanding payments. In general, Nycomed estimates the risk to be limited for countries in the EU. In Russia/CIS, the payment conditions are cash payment or 90-day payment terms. During 2009, Nycomed continued its strict control and close follow-up on outstanding payments. Nycomed has had very few defaulted payments in this region since the Rouble crisis in 1998. Nycomed maintains that this region is subject to higher than average political and economic risk and continues to make every effort to secure payment from Nycomed's customers. Nycomed tries to cover outstanding payments through insurance companies. As at 31 December 2009, Nycomed had €113.6 million outstanding receivables from customers in Russia/CIS, of which 45.5% was covered by credit insurance (31 December 2008: €97.5 million, of which 50.5% was covered). Except for the insured amount, the maximum exposure to the credit risk of financial assets at the balance sheet date is reflected by the carrying values included in the Group's balance sheet.
Cash management decisions are concerned with the effective utilisation of cash resources and deals with actions related to managing:
Working capital Due to the current rate of growth in countries with higher than average outstanding balances like Russia/CIS and Latin America, Nycomed is experiencing increased pressure on its working capital and longer cycles. During 2008/2009 Nycomed experienced some prolongation in the payment terms within the industry in Russia/CIS.
74
Nycomed Annual Report 2009
– Cash pools – Intercompany invoicing and intercompany procedure – Cash transfer It is the Group's policy to centralise the liquidity within Group Treasury and minimise cash held at banks locally. The subsidiaries are part of cash pools for various currencies. For currencies where there is no cash pool implemented, a manual transfer process takes place. Nycomed subsidiaries minimise local cash at banks and only maintain a cash position sufficient to run the daily business. It is the intention of the group that all excess cash will be streamed up to the parent company. Short-term borrowing needs of subsidiaries are covered by internal current account overdraft facilities in the In-House Bank or by intercompany loans. Alternatively an external borrowing can be established in countries where internal loans are not permitted due to currency regulation etc.
Financial Statements Note 14
Contractual maturities of financial liabilities The following table demonstrates a maturity analysis for financial liabilities. It shows the remaining contractual maturities on an undiscounted basis: FINANCIAL LIABILITIES Up to 1 year € thousand
31.12.08 From 1 to 5 years € thousand
Over 5 years € thousand
Non-current liabilities Loans under Senior Facility Agreement
-
2,038,210
3,306,877
Cross Currency Swaps
-
154,326
-
Bank borrowings (overdraft facility)
-
1,999
-
Current liabilities Loans under Senior Facility Agreement
459,537
-
-
Cross Currency Swaps
29,448
-
-
Interest Rate Swaps
19,364
-
-
5,059
-
-
265,033
-
-
778,441
2,194,535
3,306,877
Bank borrowings (overdraft facility) Trade payables
Up to 1 year € thousand
31.12.09 From 1 to 5 years € thousand
Over 5 years € thousand
Non-current liabilities Loans under Senior Facility Agreement
-
2,914,364
1,721,337
Cross Currency Swaps
-
86,662
-
Bank borrowings (overdraft facility)
-
232
-
445,034
-
-
Current liabilities Loans under Senior Facility Agreement Cross Currency Swaps Interest Rate Swaps Bank borrowings (overdraft facility) Trade payables
CAPITAL RESOURCES Nycomed expects to generate significant cash flow to support the strategy and servicing of debt in 2010 as well. As of the end of December 2009, Nycomed had a cash position of €747.6 million compared to a cash position of €496.7 million at the end of 2008. As of the end of December 2009, Nycomed had a total senior debt of €4,450.6 million (excluding the local debt of €0.3 million and the effect of the outstanding financing fees of
-
-
-
25,282
-
-
59
-
-
229,017
-
-
699,392
3,001,258
1,721,337
€–53.7 million), compared to €4,575.9 million at the end of 2008 (excluding the local debt of €7.1 million and the effect of the outstanding financing fees of €–70.4 million). Nycomed has committed facilities of €443.4 million under the In-Licensing/Restructuring Facility, which are fully drawn as at 31 December 2009. In addition, Nycomed has a revolving facility of €250 million, which remains undrawn. Thereof €6.6 million are allocated to an ancillary facility.
Nycomed Annual Report 2009
75
Financial Statements Note 14
Classification of financial instruments The following table shows a comparison by category of carrying amount and fair values of the financial instruments of the Group, which are included under the following captions in the statement of financial position: YEAR ENDED 31 DECEMBER 2008 Cash
Available FVtPL 1) for sale designated
FVtPL 1) - Fair value - Held-to- Loans and Other held for designated maturity receivables financial Total Fair value trading for hedge liabilities accounting € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand
FINANCIAL ASSETS Non-current assets Other investments in shares and bonds
-
26,782
4,934
-
-
-
-
-
31,716
31,716
Other receivables
-
-
-
-
-
-
7,676
-
7,676
7,676
Trade receivables
-
-
-
-
-
-
578,669
-
578,669
578,669
Other receivables and prepayments
-
-
-
173
-
-
14,601
-
14,774
14,774
- thereof foreign exchange derivatives
-
-
-
173
-
-
-
-
173
173
Marketable securities
-
7,009
4,877
-
-
-
-
-
11,886
11,886
496,704
-
-
-
-
-
-
-
496,704
496,704
-
-
-
-
-
-
- 4,274,750 4,274,750 2,646,8652)
Financial institutions
-
-
-
-
-
-
-
237,776
237,776
163,6052)
Trade payables
-
-
-
-
-
-
-
265,033
265,033
265,033
Other payables
-
-
-
117,984
19,113
-
-
22,971
160,068
160,068
- thereof foreign exchange derivatives
-
-
-
117,984
-
-
-
-
117,984
117,984
- thereof interest rate derivatives
-
-
-
-
19,113
-
-
-
19,113
19,113
Current assets
Cash FINANCIAL LIABILITIES Non-current liabilities Financial institutions Current liabilities
1)
FVtPL stands for Fair value through profit or loss.
2)
The fair value of the financial institutions is derived from bank valuations. The total debt from Senior facility agreement has been extrapolated with the average of the recently traded portions.
Cross currency swaps are reported as foreign exchange derivatives.
76
Nycomed Annual Report 2009
Financial Statements Note 14
YEAR ENDED 31 DECEMBER 2009 Cash
Available FVtPL 1) for sale designated
FVtPL 1) - Fair value - Held-to- Loans and Other held for designated maturity receivables financial Total Fair value trading for hedge liabilities accounting € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand € thousand
FINANCIAL ASSETS Non-current assets Other investments in shares and bonds
-
32,011
4,934
-
-
-
-
-
36,945
36,945
Other receivables
-
-
-
-
-
-
6,778
-
6,778
6,778
Trade receivables
-
-
-
-
-
-
560,022
-
560,022
560,022
Other receivables and prepayments
-
-
-
193
-
-
20,743
-
20,936
20,936
- thereof foreign exchange derivatives
-
-
-
193
-
-
-
-
193
193
Marketable securities
-
4,196
1,720
-
-
-
-
-
5,916
5,916
747,643
-
-
-
-
-
-
-
747,643
747,643
non-current liabilities
-
-
-
81,586
-
-
-
-
81,586
81,586
- thereof foreign exchange derivatives
-
-
-
81,586
-
-
-
-
81,586
81,586
Financial institutions
-
-
-
-
-
-
-
Financial institutions
-
-
-
-
-
-
-
304,271
304,271
285,4892)
Trade payables
-
-
-
-
-
-
-
229,017
229,017
229,017
Other payables
-
-
-
7,668
21,513
-
-
24,500
53,681
53,681
Current assets
Cash FINANCIAL LIABILITIES Non-current liabilities Deferred income and other
4,092,945 4,092,945 3,844,9232)
Current liabilities
- thereof foreign exchange derivatives
-
-
-
7,668
-
-
-
-
7,668
7,668
- thereof interest rate derivatives
-
-
-
-
21,513
-
-
-
21,513
21,513
1)
FVtPL stands for Fair value through profit or loss.
2)
The fair value of the financial institutions is derived from bank valuations. The total debt from Senior facility agreement has been extrapolated with the average of the recently traded portions.
Cross currency swaps are reported as foreign exchange derivatives.
Nycomed Annual Report 2009
77
Financial Statements Note 14
Valuation methods of financial instruments The following table shows the fair value of financial instruments recorded at fair value at 31 December analysed by the methodology of fair value estimation. YEAR ENDED 31 DECEMBER 2008 Prices actively quoted € thousand
Prices sourced from observable date or market corroboration € thousand
Prices based on models and other valuation methods € thousand
Total
24,660
-
7,056
31,716
Other receivables and prepayments
-
173
-
173
- thereof foreign exchange derivatives
-
173
-
173
6,828
181
4,877
11,886
Other payables
-
137,097
-
137,097
- thereof foreign exchange derivatives
-
117,984
-
117,984
- thereof interest rate derivatives
-
19,113
-
19,113
Prices actively quoted
Prices sourced from observable date or market corroboration € thousand
€ thousand
FINANCIAL ASSETS Non-current assets Other investments in shares and bonds Current assets
Marketable Securities FINANCIAL LIABILITIES Current liabilities
YEAR ENDED 31 DECEMBER 2009
€ thousand
Prices based on models and other valuation methods € thousand
Total
€ thousand
FINANCIAL ASSETS Non-current assets Other investments in shares and bonds
29,883
-
7,062
36,945
-
193
-
193
Current assets Other receivables and prepayments - thereof foreign exchange derivatives
-
193
-
193
4,032
164
1,720
5,916
Deferred income and other non-current liabilities
-
81,586
-
81,586
- thereof foreign exchange derivatives
-
81,586
-
81,586
Other payables
-
29,181
-
29,181
- thereof foreign exchange derivatives
-
7,668
-
7,668
- thereof interest rate derivatives
-
21,513
-
21,513
Marketable securities FINANCIAL LIABILITIES Non-current liabilities
Current liabilities
78
Nycomed Annual Report 2009
Financial Statements Note 15
15. Capital management
Interest-bearing debt Senior credit facilities excl. financing fees Cash and short term deposits
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
4,450,610
4,575,873
-747,643
-496,704
3,702,967
4,079,169
Equity including minority interests
1,538,811
1,321,302
Total capital
1,538,811
1,321,302
Capital and net debt
5,241,778
5,400,471
Net turnover
3,227,971
3,348,004
999,146
1,142,724
1,074,647
1,207,644
Net debt
EBITDA Adjusted EBITDA *
* Adjusted EBITDA adds back the integration/restructuring cost (excl. depreciation), the inventory step-up and the warrants to EBITDA
The primary objective of Nycomed Group´s capital management is to ensure, that the Group is able to fulfil all its obligations as set out in the Senior Facility Agreement. Financial covenants are calculated and reported to the syndicate of banks with a compliance certificate on a quarterly basis. The following covenants are tested on a quarterly basis: Leverage - Total Net Debt/Adjusted EBITDA (total debt included in the governance calculation is adjusted as it is shown above). Fixed Charge Coverage - Cash flow/Total Funding Costs. Interest Cover - Adjusted EBITDA/Total Net Interest. In addition, a maximum amount related to the yearly spending on capital expenditures is imposed on the Group. The covenants are all met up to 31 December 2009.
Nycomed is rated by Standard & Poors and Moody´s. As of 31 December 2009 our ratings were +B/stable and B2 (for 2008 our ratings were +B/stable and B2, respectively). In accordance with the Group's capital management policies Nycomed has not proposed or paid any dividend in any of the periods presented.
Nycomed Annual Report 2009
79
Financial Statements Note 16
16. Income tax receivable/payable 31.12.2009 € thousand
Provision as of 1 January
31.12.2008 € thousand
31,769
-7,573
Transfer from other assets/ liabilities as of 1 January
212
-2,750
Current tax in subsidiaries acquired
391
-1,579
Currency translation effect Income taxes paid during the year Adjustment prior years
-575
-4,799
-171,190
-169,141
-5,163
-29,662
169,517
247,788
100
-515
25,061
31,769
Income tax payable
39,354
49,809
Income tax receivable
14,293
18,040
25,061
31,769
Current tax expense for the year Current tax recognised in other comprehensive income Accrued as of 31 December Allocation of income tax
80
Nycomed Annual Report 2009
Financial Statements Note 17
17. Segment reporting Nycomed consists of one operating segment under IFRS 8 "Operating Segments" as this is how the Nycomed Chief Operating Decision Maker (CODM) effectively manages the business. CODM means the Nycomed Executive Committee (ExCom), consisting of the CEO and his Senior Executive direct reports. Nycomed's pharmaceutical business is one operating segment because it is managed as a
fully-integrated business, whereby manufacturing and research are important upstream activities. Without those there would be no marketing and sales. Risk is managed on an integrated global basis. The numbers presented in the table below represent net turnover from external customers.
NET TURNOVER PER REGION
Europe
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
1,996,572
2,117,971
Latin America
296,289
318,203
Russia/CIS
343,395
329,988
Asia-Pacific, Africa, Middle East
212,150
174,303
North America
379,565
407,539
3,227,971
3,348,004
Total
The net turnover from external customers above is based on the location of the customer. A significant customer for the Group in North America is Wyeth (now part of the Pfizer Group).
Nycomed Annual Report 2009
81
Financial Statements Note 17
NON-CURRENT ASSETS 31.12.09 € thousand
31.12.08 € thousand
Europe Germany
2,803,295
3,185,645
Denmark
1,381,102
1,484,566
Norway
50,154
38,659
Austria
50,490
51,206
Other
91,394
21,746
Mexico
300,355
308,441
Brazil
333,735
269,151
1,150
604
7,105
4,184
26,638
10,805
Latin America
Other (Latin America) Russia/CIS Asia-Pacific, Africa, Middle East North America USA
775,921
849,096
Other
2,409
1,886
Total
5,823,747
6,225,989
Non-current assets consist of total property, plant and equipment and total intangible assets held by the Group in the countries in which the
82
Nycomed Annual Report 2009
Group conducts its business. If assets in an individual foreign country are considered material, those assets are disclosed separately.
Financial Statements Note 18
18. Royalties/other income
Royalties Other income Royalties/other income
Other income in 2009 comprises a payment of €70.7 million received from Forest Laboratories for the US rights for development, manufacturing and commercialisation of roflumilast. The remaining amount includes €27.4 million for other income from contract manufacturing, R&D services, know how transfer payments (Astra Zeneca) and premium income from the re-insurance activity.
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
17,395
16,171
101,361
140,070
118,756
156,241
Other income in 2008 comprises an execution payment of €100.9 million received from Sepracor in connection with the granting of exclusive development and marketing rights for the ciclesonide product family in the United States. The remaining amount includes termination fees from various business partners.
Nycomed Annual Report 2009
83
Financial Statements Note 19
19. Amortisation/Depreciation of intangible assets and property, plant and equipment 01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Amortisation/depreciation and write down of non-current assets is included in the income statement as follows: Cost of sales
41,531
40,802
630,885
703,317
Research and development expenses
14,282
14,041
Administrative expenses
19,913
26,317
Restructuring cost
4,582
6,207
711,193
790,684
Sales and marketing expenses
Total
84
Nycomed Annual Report 2009
Financial Statements Note 20
20. Employee costs
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
580,720
565,253
Salaries and wages, etc, are included in the Group’s total expenses at the following amounts: Wages and salaries for the employees Pension
38,349
44,010
Other social security costs
98,315
105,758
Warrants
5,142
3,777
722,526
718,798
Cost of sales
176,530
174,668
Sales and marketing expenses
318,395
312,636
Research and development expenses
109,472
104,985
Administrative expenses
99,560
101,306
Restructuring
18,569
25,203
722,526
718,798
Average number of employees
11,975
11,695
Total number of employees
12,043
11,657
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
8,759
6,979
Total Salaries and wages etc, are included in the income statement as follows:
Total
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits Post-employment pension benefits Termination benefits Shared-based payments
193
180
-
1,688
3,353
2,940
12,305
11,787
Nycomed Annual Report 2009
85
Financial Statements Note 20
EMPLOYEE COSTS, CONTINUED During 2009 Nycomed bought back 17,544 shares and 16,885 warrants from members of the management group that left the company during the year. The share price level for the shares in Nycomed applied in connection with the 2006 acquisition was the basis for the buyback of the shares and warrants. In April 2009 Nycomed granted the executive management team and a group of other employees warrants corresponding to 1.2% of the current capital stock at the time of granting the warrants, in total 175,000 warrants. Each warrant corresponds to one share. The exercise price is based on the share price level for the shares in Nycomed applied in connection with the 2006 acquisition plus €20 per share. The warrants can be utilised in the period from the time of granting the warrants and the following 7.2 years. €5,142 thousand was expensed in the income statement in 2009 for this programme. The market value for the warrants was calculated using the Black Scholes option pricing model. The main assumptions were as follows: – The expected volatility of 38.6% was calculated based on historical data for comparable companies. – The risk free interest rate is 1.7% and the share price used is the price for the Nycomed shares in connection with the 2006 acquisition. – The expected life of the warrants was set to 3 years and no expected dividend was included in the calculation. During 2008 Nycomed bought back 12,182 shares and 12,100 warrants from members of the management group that left the company during the year. The share price level for the
86
Nycomed Annual Report 2009
shares in Nycomed applied in connection with the 2006 acquisition was the basis for the buy-back of the shares and warrants. In October 2008 Nycomed granted the executive management and a group of other employees warrants corresponding to 1.0% of the current capital stock at the time of granting the warrants, in total 140,000 warrants. Each warrant corresponds to one share. The exercise price is based on the share price level for the shares in Nycomed applied in connection with the 2006 acquisition plus €20 per share. The warrants can be utilised in the period from the time of granting the warrants and the following 5.7 years. €3,777 thousand was expensed in the income statement in 2008 for the warrants. The market value for the warrants was calculated using the Black-Scholes option pricing model. The main assumptions as follows: – The expected volatility of 34% was calculated based on historical data for comparable companies. – The risk-free interest rate is 2.82% and the share-price used is the price for the Nycomed shares in connection with the 2006 acquisition. – The expected life of the warrants was set to 3 years and no expected dividend was included in the calculation. The executive committee has a total of 146,660 shares and 420,475 warrants as of 31 December 2009. The Group´s CEO has 58,976 shares and 175,100 warrants. The CEO´s contract is subject to a six month termination clause. If the Board of Directors terminates the contract, he will receive severance pay for 18 months in addition to salary during the notice period.
Financial Statements Note 20
Management
Nycomed S.C.A SICAR
Total
Warrants as of 1 January 2008
553,602
59,252
612,854
Issued in 2008
140,000
-
140,000
2,800
-2,800
-
-12,100
12,100
-
684,302
68,552
752,854
Sold to managers Re-acquired in 2008 Warrants as of 31 December 2008 Issued in 2009
175,000
-
175,000
Re-acquired in 2009
-16,885
16,885
-
842,417
85,437
927,854
Warrants as of 31 December 2009
Nycomed Annual Report 2009
87
Financial Statements Note 21
21. Integration/restructuring/transaction costs
Integration cost related to acquisitions
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
4.564
33.279
10.084
5.660
Cost related to restructuring of production facilities
17.004
27.764
Others
43.290
647
TOTAL
74.942
67.350
Restructuring cost relating to markets/areas
The amounts reported in integration/restructuring for 2008 and 2009 relate to several items: – The cost for the integration of acquisitions relates to the acquisition of Bradley and Altana. – The restructuring cost of markets and areas occured due to the reorganisation of the marketing and sales organisations in several counties.
88
Nycomed Annual Report 2009
– The restructuring cost for production facilities includes the cost for the closure of factories in Denmark and Finland as well as efficiency programs for other production facilities. – Other costs include €27.9 million for onetime transaction costs in 2009.
Financial Statements Note 22
22. Financial income
01.01.09 - 31.12.09 € thousand
Interest income from bank deposits Realised gains on financial assets or financial liabilities at fair value through profit or loss
01.01.08 - 31.12.08 € thousand
13,399
21,208
219
227,192
Unrealised gains on financial assets or financial liabilities at fair value through profit or loss
11,354
-
Unrealised gain from debt buy back
40,921
20,935
Unrealised currency exchange gains
78,942
-
Unrealised currency exchange gains on intercompary loans
89,947
-
23,112
8,501
106
1,174
258,000
279,010
Realised currency exchange gains Other financial income Total
Nycomed Annual Report 2009
89
Financial Statements Note 23
23. Financial expenses
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Interest expenses on financial liabilities classified at amortised costs
-215.973
-347.778
Realised currency exchange losses
-25.809
-
Unrealised currency exchange losses
-3
-141.118
Unrealised currency losses on intercompany loans
-
-126.785
Unrealised losses on financial assets or financial liabilities at fair value through profit or loss
-
-116.667
Realised losses on financial assets or financial liabilities - hedge accounting
-
-389
Amortised financing fees
-17.025
-16.071
Other financial expenses
-10.006
-5.824
-4.467
-
-273.283
-754.632
Unrealised loss on debt buy back Total
90
Nycomed Annual Report 2009
Financial Statements Note 24
24. Income tax
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
Current tax expense for the year
-169,517
-247,788
Deferred tax income relating to the origination and reversal of temporary differences
122,856
284,147
Recognition of previously unrecognised deferred tax assets
4,396
-
Adjustment prior years (current tax)
5,163
29,662
-2,826
-20,367
-39,928
45,654
Adjustment prior years (deferred tax) Total Income tax related to comprehensive income Actuarial gains and losses
3,653
2,163
Unrealised result on cash flow hedging, interest rate swaps
-1,636
3,581
Adjustment of value of intangibles
-1,334
-
-
-3,254
683
2,490
Income before tax
272,669
-123,582
Tax calculated at applicable tax rate (28.59% for 2009 and 29.63% for 2008)
-77,956
36,617
11,761
-5,390
Exchange rate adjustment of internal gain on inventory
Analysis of income tax:
Non-deductible interest expenses and non-taxable interest income Non-deductible expenses related to warrant programme
-1,354
-1,058
Other non-deductible expenses
-7,078
-9,452
Withholding tax, tax on dividends and non-deductible loss on sale of shares
-5,451
-12,966
50
5,839
Impact of changes in tax rates Tax credits Adjustments for uncertain tax provisions Recognition of previously unrecognised deferred tax assets Other Higher / (lower) tax rates in foreign subsidiaries Adjustment of tax concerning prior years Total - effective income tax rate 14.6% (2008: 36.9%)
1,781
6,353
17,984
10,000
4,396
-
545
1,177
13,057
5,239
2,337
9,295
-39,928
45,654
The analysis of Nycomed's tax rate has been presented using the Luxembourg tax rate of 28.59% for 2009 and 29.63% for 2008 as the applicable tax rate. Nycomed considers this more meaningful than using a weighted average tax rate.
Nycomed Annual Report 2009
91
Financial Statements Note 25
25. Earnings per share Basic earnings per share amounts are calculated by dividing the net result for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net result attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Potential dilutive effects arise from the exercise of outstanding warrants if the consolidated net result is positive.
01.01.09 31.12.09
01.01.08 31.12.08
Basic earnings per share Net result attributable to ordinary equity holders of the parent (in thousand euros) Weighted average number of shares Basic earnings per share (in euros)
226,970
-75,870
13.316,572
13.316,572
17.04
-5.70
Diluted earnings per share Net result attributable to ordinary equity holders of the parent (in thousand euros) Weighted average number of shares Dilutive effect of warrants Diluted weighted average number of shares used for calculating diluted earnings per share Diluted earnings per share (in euros)
92
Nycomed Annual Report 2009
226,970
-75,870
13,316,572
13,316,572
842,417
-
14,158,989
13,316,572
16.03
-5.70
Financial Statements Note 26
26. Financial expenses paid
Interest related to Senior Credit Facilities Other financial expenses Foreign exchange gain/losses
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
-217,875
-345,414
-5,635
-
-
7,576
-223,510
-337,838
Nycomed Annual Report 2009
93
Financial Statements Note 27
27. Business combinations Acquisition of 50% of Nycomed Madaus Pty. Ltd On 6 March 2009 Nycomed acquired the 50% of the shares in Nycomed Madaus Pty. Ltd, South Africa, which it did not already hold. Prior to that date Nycomed was a 50% venturer in the company and consolidated it 50% using the
proportionate consolidation method. Nycomed Madaus Pty. Ltd is engaged in the commercialisation of pharmaceutical products in the territory of South Africa, Swaziland, Lesotho, Namibia, Botswana and Indian Ocean Islands and other countries.
The fair values of identifiable assets, liabilities and contingent liabilities at the acquisition date were: 50% recognised on acquisition € million
Fair value € million
Fair value adjustments € million
5.8
11.5
11.5
-
-
0.1
-
0.1
Deferred tax asset
0.1
0.2
-
0.2
Inventories
1.1
2.1
-
2.1
Patents and rights Furniture and equipment
Receivables
Carrying amount € million
1.1
2.1
-
2.1
Prepaid taxes
0.2
0.3
-
0.3
Cash
1.9
3.7
-
3.7
10.2
20.0
11.5
8.5
Deferred tax liability
1.6
3.2
3.2
-
Other provisions
0.5
1.0
-
1.0
Trade payables
0.3
0.5
-
0.5
Other liability
0.1
0.1
-
0.1
Total liabilities
2.5
4.8
3.2
1.6
15.2
8.3
6.9
Total assets
Fair value of net assets
7.7
Goodwill arising on acquisition
0.3
Purchase price
8.0
The net cash flow from the acquisition is as follows: Cost of acquisition
8.0
Less: cash acquired (50%)
1.9
Net cash outflow
6.1
Nycomed early adopted IFRS 3 revised, "Business Combinations", for 2009. Consequently 100% of the fair value adjustments were taken into account at the date when the Group acquired control of the company.
94
Nycomed Annual Report 2009
If the acquisition had occurred on 1 January 2009, the revenue for the Group for the year ended 31 December 2009 would have been €1.1 million higher and the net result would have been unchanged.
Financial Statements Note 27
Acquisition of Bradley Pharmaceuticals On 21 February 2008 Nycomed US Inc. acquired all the shares of Bradley Pharmaceuticals, Inc., “Bradley”, and its subsidiaries for €239.1 million ($349.6 million). Bradley was a company focused on niche therapeutic markets in the United States. With this acquisition, Nycomed US will expand the line of dermatological products currently offered through its PharmaDerm Division and thereby increase market coverage and drive future growth. Nycomed decided not to early adopt IFRS 3 revised for 2008, and consequently the Bradley acquisition was accounted for under IFRS 3 "Business Combinations". IFRS 3 requires the allocation of the cost of an acquisition to identifiable assets, liabilities and contingent liabilities to be completed within a period of twelve months from the acquisition date. The Group considered the following approaches when estimating the fair value of the assets and liabilities acquired: the income approach, the market approach and the cost approach. – The income approach indicates the fair value of an asset based on the projected annual cash flows that the asset can be expected to generate over its remaining useful life. The projected annual cash flows are then discounted to a present value equivalent by applying a rate of return appropriate to the risk of the asset; – The market approach estimates the fair value of an asset by comparing it to market transactions of other similar assets. The time of sale, physical characteristics, conditions of
sale, location and other factors are considered for the comparable asset. The market price of the comparable asset is then adjusted to indicate the fair value of the asset; and – The cost approach is based on the theory that a prudent investor would pay no more for an asset than the amount for which the asset could be replaced. To the extent that the asset being valued provides less utility than the new asset, replacement cost is reduced for such factors as physical deterioration and functional or economic obsolescence. The selection of the appropriate valuation approach is based on the nature and specific characteristics of the underlying asset or liability that is valued. For the valuation of the assets acquired in relation to the acquisition of Bradley, the income approach was applied by considering an appropriate discount rate. This was computed by considering an industry-based weighted average cost of capital and the internal rate of return implied by the fair value of the operating business enterprise value of Bradley. As Bradley prepared its financial statements according to accounting principles generally accepted in the United States of America, it would be impractical to disclose the carrying amounts of the Bradley assets and liabilities at acquisition date on an IFRS basis as required by IFRS 3.67.
Nycomed Annual Report 2009
95
Financial Statements Note 27
The fair values of identifiable assets, liabilities and contingent liabilities at the date of acquisition were: Recognised on acquisition € million
Goodwill Bradley Pharmaceuticals Inc.
Fair value adjustment € million
Carrying amount € million
-
-18.8
18.8
Patent and rights Bradley Pharmaceuticals Inc.
62.0
-42.9
104.9
Patent and rights
113.8
113.8
-
7.2
7.2
-
-
-0.1
0.1
In process research and development Property and equipment. net Inventories
4.2
-1.3
5.5
Other assets and prepayments
2.0
-0.8
2.8
Trade receivables
7.9
2.2
5.7
Deferred tax asset
14.9
3.8
11.1
Prepaid taxes
1.5
-2.5
4.0
Auction rate bonds
5.2
-0.3
5.5
Cash
1.0
-
1.0
219.7
60.3
159.4
47.4
9.8
37.6
Total assets Accruals Accounts payable
2.9
-0.1
3.0
Deferred tax liability
25.4
24.5
0.9
Total liabilities
75.7
34.2
41.5
144.0
26.1
117.9
Fair value of net assets Goodwill arising on acquisition Purchase price
95.1 239.1
The cost of the acquisition was €239.1 million and comprises: Net cash
232.0
Acquisition costs Total cost of acquisition
7.1 239.1
The net cash flow from the acquisition is as follows: Total cost of acquisition
239.1
Less: cash acquired
1.0
Net cash outflow
238.1
96
Nycomed Annual Report 2009
Financial Statements Note 27
Identifiable intangible assets were valued using the income approach. An amount of €183.0 million was allocated primarily to existing products. The Group amortises the existing products over 4-10 years. The excess of cost over fair value of net tangible and intangible assets amounted to €95.1 million and was allocated to goodwill. The goodwill recognised on the acquisition is primarily attributable to the synergies expected to be achieved from integration of Bradley into the existing business divisions. The synergies include reduction in combined sales force expense, reduction in general and administration expenses and revenue upside by opportunity to cross sell products.
Nycomed US Inc. existing divisions and, as such, Bradley results are not accounted for separately from Nycomed US Inc. Therefore, disclosure of Bradley results post-acquisition is not feasible. The acquisition of Bradley and the related application of purchase accounting adjustments and financing transactions have affected and will continue to affect Nycomed's results of operations following the acquisition. If the acquisition had occurred on 1 January 2008, management estimates that revenue for the Group for the year ended 31 December 2008 would have been €11.0 million higher, while the result for the year would have been €5.7 million lower.
The results of operations of Bradley were included in the financial statements of the Group commencing on 22 February 2008. Subsequent to the acquisition, Nycomed US Inc. merged Bradley and its subsidiaries into the Nycomed US Inc. legal entity. In addition, Bradley products have been managed as part of
Nycomed Annual Report 2009
97
Financial Statements Note 28
28. Related party transactions Related parties with a significant interest comprise group enterprises including all parent companies and associated enterprises, including such enterprises´ supervisory boards, executive boards and executive officers and members of their families. Furthermore, related parties include enterprises and companies in which
the aforementioned persons have significant interests. In the period disclosed, there were no related party transactions with members of the supervisory or executive boards, executive officers, significant shareholders other than those stated in note 20.
BOARD OF DIRECTORS Name
Nationality
Toni Weitzberg
Swedish
Born
1950
Remuneration as board member
Nycomed shares held
Other board membership
Chairman of
-
Synphora AB
Atos Medical AB
Permobile AB
Convatec
Atos Medical AB
-
-
Chairman of the Board Håkan Björklund
Swedish
1956
-
Chief Executive Officer Thompson Dean
Shares:
58,976
Warrants: 175,100 US
1958
-
-
Coloplast Danisco A/S IWCO Holding
-
VWR Inc. Convatec Carl-Gustaf Johansson
Swedish
1937
USD 50,000
Warrants: 3,000
–
Avaris AB Imed AB NeuroNova AB
Kristoffer Melinder
Swedish
1971
-
-
Convatec
-
Colin Taylor
Canadian
1962
-
-
Glacier Luxembourg Two S.a.r.l.
-
Supervisory Board of Grohe AG and Grohe Beteiligungs GmbH and Director of Glacier G.P. The Queens School University (Canada) EATG S.a.r.l. EATG Cayman Limited EATG (Debtco) Limited EATG (Bidco) Limited Guala Closures SpA Newton Aguiar
US
1964
-
-
Glacier G.P. Guala Closures SpA Supervisory Boards of Grohe AG and Grohe Betwiligungs GmbH NextPharma
98
Nycomed Annual Report 2009
-
Financial Statements Note 28
EXECUTIVE COMMITTEE Name
Nationality
Born
Number of years in industry
Academic degrees
Håkan Björklund
Swedish
1956
25
PhD in Neuroscience from Karolinska Institute, Sweden
Norwegian
1956
18
MSc in Business from Lund University, Sweden
Belgian
1958
24
Electromechanical Engineering degree from the University
Chief Executive Officer Runar Bjørklund Chief Financial Officer Charles Depasse Executive Vice President
of Brussels, Belgium and an MBA from New York
Human Resources
University, USA
Anders Ullman
Swedish
1956
19
Executive Vice President
Physician and clinical pharmacologist with an MD and PhD from the University of Gothenburg, Sweden
Research and Development Kerstin Valinder
Swedish
1960
25
Executive Vice President
University Certificate in Journalism from the University of Gothenburg, Sweden
Business Development Michael Kuner
German
1958
20
Executive Vice President
Law graduate from University of Freiburg, Germany Admitted to the German Bar
General Counsel Barthold Piening
German
1958
21
PhD in Pharmaceutical Chemistry from Kiel University,
Executive Vice President
Germany, and an MBA from WHU Koblenz, Germany, and
Operations
Northwestern University, Chicago, Ill., USA
Guido Oelkers
German
1965
24
PhD in Strategic Management from University of South
Executive Vice President
Australia, Adelaide, MA in Economics, Southbank University,
Commercial Operations
London, and German University Degree in Business Administration (Dipl - Betriebswirt), Mainz, Germany
Nycomed Annual Report 2009
99
Financial Statements Note 28
The following tables provide the total amount of transactions, which have been entered into with related parties for the relevant financial year.
Sales to related parties € thousand
Purchases from related parties € thousand
Amounts owed by related parties € thousand
Amounts owed to related parties € thousand
Entities with controlling interest Nordic Capital 2009
-
225.0
-
8.0
2008
-
1,950.0
-
-
Joint venture in which the Group is a venturer: Nycomed Madaus (Pty) Ltd (South Africa) - 50% (until 6 March 2009) 2009
71.5
-
-
299.0
2008
-
1,095.4
-
370.0
2009
12,805.0
390.0
386.5
386.0
2008
13,834.0
108.0
-
-
Zydus Nycomed Healthcare Private Ltd (India) - 50%
Loans from related parties € thousand
Loans to related parties € thousand
Interest/Dividends received by related parties € thousand
Interest/Dividends paid to related parties € thousand
Joint venture in which the Group is a venturer: Zydus Nycomed Healthcare Private Ltd (India) - 50%
100
Nycomed Annual Report 2009
2009
-
-
4,382.0
-
2008
-
1,754.0
-
6.7
Financial Statements Note 28
Terms and conditions of transactions with related parties, the sales to and purchases from related parties are made at normal market prices. Outstanding balances at year-end are unsecured and interest-free, and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2009, Nycomed S.C.A. SICAR has
not recorded any impairment of receivables relating to amounts owed by related parties (no changes with respect to 2008). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
As of 31 December 2009, the following shareholders held more than 5% of the collective shareholdings of Nycomed S.C.A. SICAR Luxembourg, the ultimate parent company. SHAREHOLDERS Share ownership
Share ownership (fully diluted)
Nordic Capital*
42.7%
38.7%
Nordic Capital V, L.P.
24.0%
21.8%
8.3%
7.5%
Nordic Capital VI, Beta L.P.
9.7%
8.8%
Other coinvestors - below 5%
0.7%
0.6%
Nordic Capital VI, Alpha L.P.
Credit Suisse (DLJMB)
25.9%
23.5%
DLJMB Overseas Partners III, C.V.
18.0%
16.3%
Other co-investors - below 5%
7.9%
7.2%
Coller International Partners
9.7%
8.8%
Coller International Partners IV Limited as nominee for Coller International Partners IV-D, L.P., Coller International Partners IV-E, L.P. and Coller German Investors GmbH & Co. KG
5.3%
4.8%
Other co-investors - below 5%
4.4%
4.0%
Avista
6.6%
6.0%
ACP Nycom Holdings, LLC
6.6%
6.0%
15.1%
23.0%
100.0%
100.0%
Others (less than 5% ownership)
*Controlling interest through shareholders´ agreement
Nycomed Annual Report 2009
101
Financial Statements Note 29
29. Audit fees
Audit fees, Ernst & Young
01.01.09 - 31.12.09 € thousand
01.01.08 - 31.12.08 € thousand
2,708
3,231
Audit fees, other
42
-
Total audit fees
2,750
3,231
Fees for other services, Ernst & Young
6,293
717
Total fees other services
6,293
717
Total
9,043
3,948
102
Nycomed Annual Report 2009
Financial Statements Note 30
30. Contingent liabilities, guarantee commitments, etc. Contractual obligations The Group rents and leases property, company cars and equipment used in its operations. These leases are classified as either operating
or finance leases. The lease contracts expire on various dates in the future. Future minimum lease payments for non-cancelable operating leases were:
Operating leases 31.12.09 € thousand
Operating leases 31.12.08 € thousand
Within one year
33,763
31,886
Between one and two years
27,573
23,725
Between two and three years
18,030
17,406
Between three and four years
9,527
9,872
Between four and five years
5,261
6,012
Lease and rent commitments expiring within the following periods as from the reporting date:
After five years
Approximately 20% of the operating lease obligations represent rent or leasing of buildings in the United States and the United Kingdom,
4,323
11,208
98,477
100,109
Operating leases 31.12.09 € thousand
Operating leases 31.12.08 € thousand
which are partially counter-reflected in a provision for onerous contracts based on restructuring in the US and the UK.
COMMITMENTS AND GUARANTEES
Commitments for capital expenditures and other purchase obligations Total
12,642
9,680
12,642
9,680
Nycomed Annual Report 2009
103
Financial Statements Note 30
CONTINGENT LIABILITIES, GUARANTEE COMMITMENTS, etc., CONTINUED
Except for Nyco Holdings 2 ApS, the shares of these entities have been pledged in favour of the banks.
The following legal entities are borrowers or guarantors under the Senior Facilities Agreement and therefore liable under that agreement for the full amount or part of the amount.
The shares of the following additional legal entities are pledged to the banks: OY Leiras Finland AB, Nycomed Austria GmbH, Nycomed Pharma GmbH (Austria). Nycomed Danmark, Nycomed Pharma (Norway) and Nycomed Christiaens SCA (Belgium) have also granted security over receivables, registered bonds, floating charges over business equipment and inventory and real property. The Danish entities have also registered negative pledges in the personal register.
Nyco Holdings 3 ApS, Denmark Nycomed Danmark ApS, Denmark Nycomed Germany Holding GmbH, Germany Nycomed AB, Sweden Nycomed Holding GmbH, Austria Nycomed Christiaens B.V., Netherlands Nycomed Christiaens SCA, Belgium Nycomed Holding ApS, Denmark Nyco Holdings 2 ApS, Denmark Nyco Holdings Belgium SPRL, Belgium Nycomed Pharma AS, Norway Nycomed Finland Holding OY, Finland Nycomed Pharma Ltda., Brazil Nycomed Belgium SCA/CVA, Belgium Nycomed Canada Inc., Canada Nycomed Asset Management, Germany Nycomed GmbH, Germany Unipharma GmbH, Germany Nycomed S.A. de C.V., Mexico Nycomed B.V., Netherlands Nycomed Pharma S.A., Spain Nycomed US, Inc., USA Nycomed Norway Holding AS, Norway Nycomed Sweden Holding AB, Sweden Nycomed Deutschland GmbH, Germany Nycomed France SAS, France Selskab No 26812305 APS, Denmark Purchase Vehicle of November 10, 2008 ApS, Denmark
104
Nycomed Annual Report 2009
Financial Statements Note 30
The total debt covered by such guarantees as of 31 December 2009 is €4,450,609 thousand (2008: €4,575,873 thousand). The assets covered by these guarantees as of 31 December are set out below: 31.12.09 € thousand
31.12.08 € thousand
Mortgage of property, plant and equipment Property mortgage over property in Norway (Nycomed Pharma AS)
23,011
18,945
Property mortgage over property in Roskilde (Nycomed Danmark ApS)
20,280
21,363
Pledge over plant and equipment in Norway (Nycomed Pharma AS)
15,493
13,705
Property mortgage over property in Brazil (Nycomed Pharma Ltda,)
26,135
21,778
115,470
119,119
6,157
6,275
206,546
201,185
Property mortgage over property in Konstanz (Nycomed GmbH) Pledge over plant and equipment in Mexico (Nycomed S,A, de C,V,) Total Securities over other current assets Pledge over inventory in Norway (Nycomed Pharma AS)
19,264
14,893
Receivables in Belgium (Nycomed Christiaens SCA)
79,056
93,596
Receivables in Norway (Nycomed Pharma AS)
14,128
11,106
Deposits on specific bank accounts in Norway (Nycomed Pharma AS)
12,484
4,228
240,708
245,127
59.290
68,332
-
108
424.930
437,390
Receivables in Austria under intra group agreement (Nyco Holdings 3 ApS) Pledge over registrated bonds in Belgium Account pledge (Nyco Holdings 2 ApS) Total
The above securities are to some extent limited to certain amounts. However, the limitation generally exceeds the value of the assets so that the limitation does not actually limit or reduce the security granted to the banks. Mortgages on the property St. Hede Roskilde Jorder 54, totalling €33,594 thousands have been registered to the mortgagor and are held by Nordea AB as security for bank debt. Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements and restructuring, differences arising between the actual results and the assumptions made,
or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group will establish provisions, based on reasonable estimates, for possible consequences of audits by the taxing authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible taxing authority. Currently management believes that it is not probable that the unresolved tax disputes with taxing authorities in various jurisdictions would lead to any material additional tax liabilities.
Nycomed Annual Report 2009
105
Financial Statements Note 30
Contingencies In connection with the 2005 acquisition, certain contingent notes have been issued to the former shareholders as part of the transaction. The aggregate principal amount of the contingent notes will be an amount equal to 30% of the financial value to Nycomed of a final judicial decision or settlement related to claims made by Nycomed against a certain third-party pharmaceutical company relating to the alleged infringement by such third party of intellectual property rights relating to a particular substance or product, to which Nycomed has exclusive rights pursuant to a development and license agreement. The contingent notes are not current obligations for Nycomed A/S but would become obligations of Nycomed A/S only upon the successful outcome of patent infringement proceedings that a subsidiary of Nyco Holdings ApS has commenced. The subsidiary has a contingent asset in this connection. From time to time the Group may be party to legal proceedings in the ordinary course of business. The Group decides from case to case whether it will settle the matter or whether it will defend itself (due to the general or strategic importance of the case to the Group). Protonix® sales in the United States in 2008 were adversely affected by the “at risk” launches of generic pantoprazole by Teva and Sun. Nycomed believes the Protonix® compound Patent is strong and will continue to vigorously pursue its litigation against Teva, Sun and other
106
Nycomed Annual Report 2009
infringing generics. Nycomed will seek to recover its lost profits and other damages resulting from the infringing sales of generic products. In the opinion of management, the ultimate resolution of any threatened or pending litigation will not have a material effect on the Group’s financial position or results of operations. The Group maintains liability insurance in an effort to reduce the impact of negative judgements in legal matters. The Group has entered into long-term contracts for the purchase of raw materials for certain strategic products in order to secure supplies. Furthermore, certain of the Group´s in-licensing agreeements require purchase of minimum quantities. The Group has certain other contingent liabilities resulting from claims, performance guarantees and other commitments incident to the ordinary course of business. Management believes that the probable resolution of any other contingencies will not materially impact the financial position or results of operations. Based on a tax assessment towards our Indian subsidiary Zydus Nycomed Pharma Healthcare Pvt. Ltd stating an amount of €5.35 million a contingent liability exists. An objection was raised against this tax assessment. We consider the legal enforceability of this claim as improbable. Nycomed owns 50% of the shares in this company.
Financial Statements Note 31
31. Subsequent events There are no events after the reporting period which require disclosure in accordance with IAS 10 "Events after the Reporting Period".
Nycomed Annual Report 2009
107
Financial Statements Note 32
32. List of subsidiaries
The table below contains information on the subsidiaries included in the consolidated financial statements as of 31 December, 2009 Company
Country
Nominal Capital (in thousands)
Nycomed S.A.
Argentina
ARS
Nycomed Pty. Ltd.
Australia
AUD
Nycomed Holding GmbH
Austria
Nycomed Austria GmbH
Austria
Nycomed East Europe Marketing Service GmbH
Equity
17,751
100%
451
100%
EUR
64
100%
EUR
10,602
100%
Austria
EUR
37
100%
Chemisch Pharmazeutische Forschungs GmbH
Austria
EUR
37
100%
B.N.S. Pharma Vertriebsges.m.b.H.
Austria
EUR
37
100%
Nycomed Pharma GmbH
Austria
EUR
600
100%
Nycomed Christiaens SCA/CVA
Belgium
EUR
5,578
100%
Nyco Holdings Sprl
Belgium
EUR
19
100%
Nycomed Belgium SCA/CVA
Belgium
EUR
436
100%
Nycomed Pharma Ltda.
Brazil
BRL
23,826
100%
Nycomed Canada Inc.
Canada
CAD
6,000
100%
Nycomed d.o.o
Croatia
HRK
20
100%
Nycomed s.r.o.
Czech Republic
CZK
1,000
100%
Selskab NO 26 81 23 05 APS
Denmark
DKK
4,470
100%
Nyco Holdings 2 ApS
Denmark
DKK
745
100%
Nyco Holdings 3 ApS
Denmark
DKK
745
100%
Nycomed Holding ApS
Denmark
DKK
10,200
100%
ApS KBIL 38 NR 2505
Denmark
DKK
125
100%
Nycomed Danmark ApS
Denmark
DKK
800,000
100%
Nettopharma ApS
Denmark
DKK
125
100%
Purchase Vehicle of November 10, 2008 ApS
Denmark
EUR
20
100%
Nyco Holdings ApS
Denmark
DKK
1,118
100%
Nycomed A/S
Denmark
DKK
99
100%
Nycomed SEFA AS
Estonia
EEK
2,200
100%
Oy Leiras Finland AB
Finland
EUR
1,322
100%
Nycomed Finland Holding OY
Finland
EUR
44,000
100%
Nycomed France S.A.S.
France
EUR
920
100%
Nycomed Germany Holding GmbH
Germany
EUR
10,000
100%
Nycomed GmbH
Germany
EUR
70,000
100%
Nycomed Asset Management GmbH
Germany
EUR
5,625
100%
Nycomed Deutschland GmbH
Germany
EUR
2,000
100%
Nycomed Re Insurance AG
Germany
EUR
7,500
100%
Byk Tosse Arzneimittel GmbH
Germany
EUR
30
100%
Schnetztor Verlag mbH
Germany
EUR
30
100%
Unipharma GmbH
Germany
EUR
30
100%
Byk Diagnostica (Verwaltung) GmbH
Germany
EUR
1,050
100%
Nycomed Hellas, Pharmaceutical, Commercial & Industrial S.A.
Greece
EUR
2,700
100%
Nycomed Pharma KFT
Hungary
HUF
3,000
100%
108
Nycomed Annual Report 2009
Financial Statements Note 32
Company
1)
Country
Nominal Capital (in thousands)
Equity
Zydus Nycomed Healthcare Private Limited
India
INR
200,000
50%
Nycomed Pharma Private Limited
India
INR
333,916
100%
Nycomed Products Ltd.
Ireland
EUR
100
100%
Nycomed Italia S.r.l.
Italy
EUR
110
100%
Nycomed S.p.A.
Italy
EUR
1,500
100%
Nycomed Japan K.K.
Japan
JPY
20,000
100%
Nycomed Korea Co., Ltd.
Republic of Korea
KRW
500,000
100%
Nycomed Latvia SIA
Latvia
LVL
4
100%
Nycomed UAB
Lithuania
LTL
10
100%
Nycomed Malaysia SDN. BHD
Malaysia
MYR
2,178
100%
Nycomed Admin. S.A. de C.V
Mexico
MXN
1,000
100%
Nycomed Operaciones S.A. de C.V
Mexico
MXN
1,000
100%
Nycomed Pharma S.A.de C.V
Mexico
MXN
50
100%
Nycomed S.A. de C.V.
Mexico
MXN
1,741
100%
Byk Gulden S.A. de C.V.
Mexico
MXN
1,000
100%
Nycomed Christiaens B.V.
Netherlands
EUR
445
100%
Nycomed BV
Netherlands
EUR
10,000
100%
Nycomed Pharma AS
Norway
NOK
79,200
100%
Nycomed Norway Holding AS
Norway
NOK
120
100%
Nycomed Pharma Sp.z.o.o
Poland
PLN
191,333
100%
Nycomed Sp. z o.o.
Poland
PLN
81
100%
Nycomed Portugal Lda. - Produtos Químicos e Farmacêuticos
Portugal
EUR
249
100%
Nycomed Pharma SRL
Romania
RON
4
100%
SC Ruby de Tacos S.R.L.
Romania
RON
3
100%
Nycomed Closed Joint Stock Company
Russia
RUB
540
100%
Nycomed Distribution Center T.O.O
Russia
RUB
10
100%
Nycomed Siberia Limited Liability Company
Russia
RUB
291
100%
Nycomed Production Company Limited Liability Company
Russia
RUB
75,000
100%
Nycomed Holdings (Asia Pacific) Pte. Ltd.
Singapore
SGD
1,000
100%
Nycomed s.r.o.
Slovakia
EUR
8
100%
Nycomed Madaus Proprietary Limited
South Africa
ZAR
1,400
Nycomed Pharmaceuticals (Pty) Ltd
South Africa
ZAR
1,400
Nycomed Spain SL
Spain
EUR
503
100%
Nycomed Pharma S.A.
Spain
EUR
1,214
100%
Nycomed AB
Sweden
SEK
2,000
100%
Nycomed Sweden Holding AB
Sweden
EUR
11
100%
Nycomed Sweden Holding 1 AB
Sweden
EUR
95,564
100%
Nycomed Sweden Holding 2 AB
Sweden
EUR
138
97.49%
Nycomed Pharma AG
Switzerland
CHF
500
100%
Nycomed International Management GmbH - Switzerland
Switzerland
CHF
1,500
100%
Nycomed Re Insurance AG
Switzerland
CHF
15,500
100%
Altana Ilac Ticaret Limited Sirketi
Turkey
TRY
15
100%
Nycomed UK Limited
UK
GBP
300
100%
Altana Pharma Limited
UK
GBP
500
100%
Nycomed Ukraine LLC
Ukraine
USD
10
100%
Nycomed US Inc.
USA
USD
4,000
100%
Nycomed Venezuela S.R.L.
Venezuela
VEF
2
100%
Until 6 March 2009. Afterwards 100%
2)
50% 1) 100%2)
Starting 6 March 2009.
Nycomed Annual Report 2009
109
Contacts
Starting points for building partnerships with Nycomed Investor Relations Christian B. Seidelin Phone +41 44 555 11 04
[email protected] Media Relations Tobias Cottmann, Beatrix Benz Phone +41 44 555 15 10
[email protected]
Nycomed International Management GmbH Thurgauerstrasse 130 8152 Glattpark / Opfikon (Zurich) Switzerland Phone +41 44 555 10 00 www.nycomed.com
Corporate Communications Walter Vaterlaus Phone +41 44 555 15 03
[email protected]
DEFINITIONS OF KEY FIGURES AND FINANCIAL RATIOS EBITDA Adjusted EBITDA
= =
Earnings before interest, tax, depreciation and amortisation EBITDA adjusted for inventory step-up values as a result of purchase accounting, restructuring, integration and transaction costs and the effect from the warrants programme
Gross profit margin EBITDA margin Adjusted EBITDA margin
= = =
Gross profit x 100/Total net turnover EBITDA x 100/Total net turnover Adjusted EBITDA x 100/Total net turnover
110
Nycomed Annual Report 2009
Financial highlights and key figures
TOTAL NET TURNOVER
ADJUSTED EBITDA
€ million
€ million
Turnover in 2009
€ million
Europe
2009
2008
2007
Pro forma (unaudited)** 2006 2006
1,714.6
1,801.0
Latin America
290.9
310.7
305.1
Russia/CIS
343.4
329.9
268.4
Asia-Pacific, Africa, Middle East
212.2
174.3
152.6
19.7
North America
379.6
407.5
452.1
377.2
Out-licensing
353.2
337.2
436.1
471.8
80.8
73.7
82.1
22.9
144.9
14.9
25.2
3,228.0
3,348.0
3,497.4
869.9
3,394.4
507.9
747.5
Total net turnover*
1,845.0
(12 months) (unaudited) 2005
1,568.0
Contract manufacturing
625.1
(8 months) 2005
387.3
571.6
313.9 221.9
221.9
105.7
150.7
895.2
884.6
959.6
349.9
905.6
266.3
369.3
Gross profit
2,332.7
2,463.4
2,537.8
520.1
2,488.8
241.6
378.2
288.0
352.0
353.8
46.0
217.2
-36.8
-16.5
-15.3
-475.7
-76.5
-156.1
-361.0
-75.0
-88.7
Operating income (EBIT) Financial result Net result/profit
232.7
-77.9
235.4
-83.4
-97.8
-86.5
-81.0
EBITDA
999.1
1,142.8
997.1
168.0
869.1
44.6
90.5
1,074.6
1,207.6
1,222.2
180.8
933.0
110.7
156.7
Adjusted EBITDA Balance sheet Total assets Change in working capital
7,885.7
7,972.3
8,390.7
9,176.5
9,176.5
2,350.7
2,350.7
-95.7
-111.8
24.5
-41.1
-17.1
-35.2
-58.1
Capital expenditures
-232.2
-175.8
-200.9
-30.3
-121.3
-16.6
-20.7
Total equity
1,538.8
1,321.3
1,380.6
1,232.4
1,232.4
819.4
819.4
Cash flow Operating activities Sale/purchase of business activities
715.6
811.4
475.8
-64.0
519.9
16.8
20.7
-6.1
-238.0
-68.5
-4,089.3
-4,089.3
-748.3
-784.5
Other investment activities
-228.0
-171.0
-135.7
-53.3
-130.4
-29.4
-39.9
Financing activities
-237.2
-382.3
-460.3
4,837.9
-114.4
807.6
827.3
Net cash flow
244.3
20.0
-188.7
631.2
275.1
46.7
23.6
Adjusted EBITDA in 2009
3,500
1,400
3,000
1,200
2,500
1,000
2,000
800
1,500
600
1,000
400
500
200
0
0 2005*
Cost of sales
€ 3.2 bn
2006*
Altana Pharma
2007
2008
2009
2005*
2006*
2007
Altana Pharma
Nycomed
€ 1.1 bn
2008
Our vision is to become the preferred pharmaceutical company by being responsive, reliable and focusing on results.
2009
Nycomed
* combined proforma non-audited turnover of Altana Pharma and Nycomed before acquisition of Altana Pharma
NET TURNOVER BY REGION (2009)
NET TURNOVER BY PRODUCT AREA (2009)
€ million
€ million
343.4 +4.1% (+17.1% LC) Russia/CIS 290.9 -6.4% (+4.6% LC) Latin America
310.0 +13.8% (+6.1% LC) Nycomed US
1,568.0 -8.6% (-7.2% LC) Europe
3,228 -3.6%
212.2 +21.7% (+20.9% LC) Asia-Pacific, Africa and Middle East
353.2 +4.7% (-0.7% LC) Outlicensing
3,228 -3.6%
664.5 -6.1% (-0.8% LC) Regional and local Rx
80.8 +9.6% (+8.8% LC) Contract Manufacturing
379.6 -6.9% (-9.9% LC) North America
1,216.2 -8.2% (-7.4% LC) Gastrointestinal
553.9 +6.6% (+9.7% LC) Specialty products
343.2* -6.6% (+0.2% LC) OTC * Not including Calcium OTC (part of Specialty products) and Pantoprazole OTC (part of Gastrointestinal)
Our mission is to bring medicines that matter to patients and healthcare providers.
140.2 -10.3% (-14.7% LC) Respiratory
PRODUCT AREAS
Ratios Gross profit margin
72.3%
73.6%
74.1%
59.8%
74.9%
47.6%
50.6%
EBITDA margin
31.0%
34.1%
28.5%
19.3%
25.6%
8.8%
12.1%
Adjusted EBITDA margin
33.3%
36.1%
34.9%
20.8%
27.5%
21.8%
21.0%
Number of employees
12,043
11,657
11,683
3,821
12,741
3,252
3,252
* Due to an adjustment to geographical regions, the split of Net Turnover changed compared with the Annual Report of 2008. ** Nycomed acquired Altana Pharma AG on 29 December 2006. The pro forma key figures for 2006 present the combined Group as if the acquisition had taken place on 1 January 2006.
Gastrointestinal
Portfolio built around Nycomed’s biggest-selling product, Pantoprazole (acid-related gastrointestinal disorders)
Specialty products
Products primarily for specialist doctors, including Instanyl® (breakthrough cancer pain), Calcium D3 (osteoporosis), TachoSil® (surgical patch) and Preotact® (osteoporosis)
Respiratory
Products for respiratory and related conditions, such as Alvesco® (asthma) and Omnaris® (allergic rhinitis)
OTC
Broad portfolio of over-the-counter products marketed in Europe and emerging markets
Regional and local Rx
Portfolios adapted to local needs, primarily composed of branded generics
Nycomed US
Dermatology products for the US market
Actovegin®, Alvesco®, Controloc®, Daxas®, Eparema®, Hepatalgina®, Hypnogen®, Instanyl®, Matrifen®, Neosaldina®, Omnaris®, Optesia®, Pantozol Control®, Preotact®, Protonix®, Riopan®, TachoSil®, Xefo® and Xymelin®/Zymelin® are registered trademarks of Nycomed. Avonex® is a registered trademark of Biogen. Britomar®, Ceraxon® and Eneas® are registered trademarks of Ferrer. Curosurf® is a registered trademark of Chiesi. Lodoz® is a registered trademark of Merck Sante. Maxalt® is a registered trademark of MSD. Mesacol MMX® and Mesavancol® are registered trademarks of Giuliani. Sylodix® is a registered trademark of Recordati. Xamiol® is a registered trademark of
KEY PRODUCTS (THERAPEUTIC AREAS AND REVENUES IN 2009)
Pantoprazole Gastrointestinal € 1,216 million
Actovegin
®
Blood flow disturbances € 109 million
LEO Pharma.
Calcium D3 Osteoporosis € 109 million
TachoSil
®
General tissue sealing € 98 million
Alvesco
®
Asthma € 56 million
Preotact Osteoporosis € 54 million
®
Matrifen
®
Pain € 37 million
Xefo
®
Pain € 36 million
Omnaris
®
Allergic rhinitis € 14 million
Nycomed at a glance
Nycomed is a privately owned, global, market-driven pharmaceutical company with a differentiated portfolio of branded medicines in gastrointestinal, respiratory and inflammatory diseases, pain, osteoporosis and tissue management. An extensive range of OTC products completes the portfolio. Nycomed has strong platforms in Europe and in fast-growing markets such as Russia/CIS and Latin America. Expanding in emerging markets and in-licensing are cornerstones of the company’s growth strategy. Nycomed actively seeks partnerships in its core areas as well as throughout the value chain.
NYCOMED’S GLOBAL REACH AT THE END OF 2009
28th
largest pharmaceutical company
www.nycomed.com
Nycomed Annual Report 2009
Nycomed S.C.A. SICAR 412F Route d’ Esch L-1030 Luxembourg
Nycomed Annual Report 2009
associates worldwide
€ 3.2 bn turnover in 2009
16th biggest provider of OTC medicines
Nycomed S.C.A. SICAR
12,000
>50
markets where Nycomed subsidiaries are present
