Assets
| Type | Time | Amount | Unit |
|---|
Revenue
| Type | Start date | End date | Amount | Unit |
|---|
XML
See the xml submitted here:
No XML document available for this report.
Separator
The full data:
Erhvervsstyrelsen
17 mar. 2014
Content
Financial highlights and key ratios for the ALK Group
About ALK
Highlights
Management's review
Operational review
Markets and products
Pipeline and partnerships
Strategy and targets
Outlook for 2014
Financial review
Risk management
Corporate Social Responsibility (CSR)
Shareholder information
Corporate governance
Board of Directors and Board of Management
Statement by Management on the annual report
Independent auditor's report
Consolidated financial statements 2013
Income statement
Statement of comprehensive income
Cash flow statement
Balance sheet
Equity
Notes to fhe consolidated financial statements
List ofcompanies in the ALK Group
Definitions
Parent company financial statements 2013
Income statement
Balance sheet
Equity
Notes to the parent company financial statements
Financial highlights and key ratios
by the quarter for the ALK Group
> N
AJ UT 07
13
14
16
19
22
24
26
28
29
30
32
32
33
34
36
37
57
58
59
61
62
64
65
69
Management's review ep
Financial highlights and key ratios
for the ALK Group"
DKK DKK DKK DKK DKK EUR EUR
Amountsin DKKm/EURMmM" 2013 2012 2011 2010 2009 2013 2012
Income statement
Revenue 2,244 2,345 2,348 2,159 1,972 301 314
Operating profit before depreciation (EBITDA) before special items 258 306 406 287 260 35 41
Operating profit before depreciation (EBITDA) 236 242 406 287 260 32 32
Operating profit (EBIT) before special items 131 182 299 192 175 18 2u
Operating profit (EBIT) 109 118 299 192 175 15 16
Net fmancial items (5) (5) 22 15 15 (1) (1)
Profit before tax (EBT) 104 113 321 207 190 14 15
Net profit, continuing operations 61 54 200 128 118 8 7
Net profit, past discontinued operations - 155 - - - - 21
Net profit 61 209 200 128 118 8 28
Average number of employees 1,804 1,828 1,724 1,612 1,513 1,804 1,828
Balance sheet"
Total assets 3,268 3,295 3,355 2,833 2,655 438 442
Invested capital 2,104 1,974 1,639 1,713 1,504 282 265
Equity 2,249 2,257 2,163 2,011 1,924 301 303
Cash flow and investments
Depreciation, amortisation and impairment 127 124 107 95 85 17 17
Cash flow from operating activities 146 91 431 274 260 20 12
Cash flow from investing activities (231) (243) (160) (345) (258) (31) (33)
- ofwhich investment in tangible assets (186) (183) (118) (138) (187) (25) (25)
- ofwhich acquisitions of companies and operations - - - (178) (23) - ”
Free cash flow (85) (152) 271 (71) 2 (11) (20)
Information on shares
Proposed dividend 51 51 51 51 51 7 7
Share capital 101 101 101 101 101 14 14
Shares in thousands of DKK 10 each 10,128 10,128 10,128 10,128 10,128 10,128 10,128
Share price, at year end - DKK/EUR 614 389 321 322 409 82 52
Net asset value per share - DKK/EUR 222 223 214 199 190 30 30
Key figures
Gross margin - % 69 72 74 70 70 69 72
EBITDA margin before special items - % 11 13 17 13 13 11 13
EBITDA margin - % 11 10 17 13 13 11 10
Return on equity (ROE) - % 3 9 10 7 6 3 9
ROAIC - % 5 6 18 12 12 5 6
Pay-out ratio - % 84 24 26 40 43 84 24
Earnings per share (EPS) - DKK/EUR 6,31 21.45 20.21 12.91 11.85 0.85 2.87
Earnings per share (EPS), continuing operations - DKK/EUR 6.31 5.54 20.21 12.91 11.85 0.85 0,74
Earnings per share (DEPS), diluted - DKK/EUR 6.24 21.35 20.21 12.91 11.85 0.84 2.86
Earnings per share (DEPS), diluted, continuing operations - DKK/EUR 6.24 5.51 20.21 12.91 11,85 0.84 0,74
Cash flow per share (CFPS) - DKK/EUR 15.11 9.34 43.49 27.65 26.11 2.01 1.25
Cash flow pr. share (CFPS), continuing operations - DKK/EUR 15.11 9,34 43.49 27.65 26.11 2.01 1.25
Price earnings ratio (PE) 97 18 16 25 35 97 18
Share price/Net asset value 2.8 1.7 1.5 1.6 2.1 2,8 1.7
Revenue growth - %
Organic growth (4) (1) (5) 4 9 (4) (1)
Exchange rate differences - 1 (1) 2 (1) - 1
Acquisitions - - 4 5 - -
9
Total growth revenue (4) - 9 9 (4) -
x
Management's review comprises pages 1-27 as well as Financial highlights and key ratios for the ALK Group on page 69,
=. Financial highlights and key ratios stated in EUR constitute supplementary information to the annual report. The exchange rate used in translating from DKK to EUR is the exchange
rate ruling at31 December 2013 (EUR 100 = DKK 746).
"+ The figures have been restated to reflectihe implementation ofthe amendment fo IAS19 cf. note 1.
Definitions: see page 58
1403174EogSN63098
Management's review
Averel UNA.
ALK is a global research-driven pharmaceutical company focusing on allergy
prevention, diagnosis and treatment. Our mission is to improve the quality of life
by preventing and curing allergy. ALK is the world leader in allergy immunotherapy
- aunigue treatment of the underlying cause of allergy. The treatment induces
a protective immune response which provides sustained symptom relief and
has the potential fo reduce the risk of developing asthma. ALK offers allergy
immunotherapy products as injections, sublingual drops and sublingual fablets,
the most recent, best documented and most convenient treatment. Among other
things, the product portfolio also includes an adrenaline auto-injector for the
treatment of severe allergic reactions (anaphylaxis).
SLIT-tablets:
Employees
Revenue DKK
> - . > billion
patients in clinical
development
programmes
Approx.
In recent years, ALK has invested — ALK has approximately 1,800 ALK has entered into partnerships
more than 20% of its revenue in employees with subsidiaries, with Merck & Co., Inc. (MSD
research and development of production facilities and outside the USA and Canada)
new, evidence-based allergy distributors worldwide. The and Torii Pharmaceutical Co.,
immunotherapy products. Our company is headqguartered in Ltd. to develop, register and
pipeline comprises sublingual Hørsholm, Denmark, and listed commercialise SLIT-tablets
immunotherapy tablets (SLIT- on NASDAQ OMX Copenhagen in North America and Japan,
tablets) against ragweed, (OVENI respectively.
house dust mite and free pollen
allergies, and ALK has already
launched a SLIT-tablet against
grass pollen allergy in Europe and
Canada.
elg eLs
in Canada, Mexico and
the USA
V
BESES
BE UTEN
Japan
Production
ø Distributors
e Subsidiaries in Austria, Canada,
Denmark (Nordic), France,
Germany, Ifaly, the Netherlands,
Poland, Spain, Switzerland, the UK
and the USA, Sales offices in China,
Finland, Norway and Sweden
Total revenue - by product line Total revenue - by market
(52 5%
Ofher products
and services 77%
Fe Øg SCIT/SLIT-
Hi (ellers
SLIT-tablets ; bak DA
OLele Loe
America
International
lee 81%
lol es
Find more information at www. alk.net
aa Management's review
Highlights
Comparative financial figures for the same
period last year are shown in brackets.
Growth rates for revenue are stated in local
currencies, unless otherwise indicated.
Q4 2013
Revenue and operating profit (EBITDA) in
Q4 were inline with expectations and ALK
met its full-year outlook. AIT sales grew
by 3%, driven by Germany, France, fhe
Nordic region, North America and China.
SLIT-tablets experienced renewed growth
in Europe. As anticipated, Group revenue
decreased 2% due to lower milestone
payments and a product recall for Jext?.
Despite costs related to the recall and
lower partner income, EBITDA before
special items increased by 15% as a result
of improved organisational efficiencies
and lower capacity cosis. Key figures are
as follows:
+ Group revenue was DKK 593 million (615)
. 2% growth in sales of SCIT and SLIT-
drops
+ 10% growth in sales of SLIT-tablets
(GRAZAX?) in Europe
24% decline in revenue from other prod-
ucts and services caused by the Jext?
product recall
. EBITDA before special items of DKK 110
million (96)
Total revenue by product line
10%
SCIT/SLIT-drops 13%
EH SLIT-tablets
M Other products
and services
77%
i
Full-year 2013
2013 was characterised by challenging
European markets but ALK succeeded in
increasing its market shares and grow-
ing its European revenue. Product sales
outside Europe also continued to grow.
Significant progress was made towards
the approval ofthe first two SLIT-tablets in
the USA (GRASTEK"" and RAGWITEK""), and
the new SLIT-tablet - targeting house dust
mite-induced allergic rhinitis and allergic
asthma - is on course for a European filing
in2014.
+ Group revenue declined 4% to DKK
2,244 million as a result oflower mile-
stone payments
Revenue grew by 1% in Europe and 21%
in North America
Sales of SCIT and SLIT-drops were stable
at DKK 1,719 million
SLIT-tablet sales in Europe were stable
with an upturn in Q4
ore EET AUT SE
3% 81%
Europe 16% /
HH North America
HM international
markets
- 19% growth in sales of other products
and services
& EBITDA before special items of DKK 258
million (306)
e EBITDA after special items of DKK 236
million (242)
Outlook for 2014
ALK expects to grow revenue and increase
EBITDA in 2014. EBITDA is expected to be
DKK 225-400 million before special items
and income from product supply and
potential sales royalties in North America.
The higher end ofthis range assumes three
product development milestone pay-
ments from Merck, ALK's partner for North
America. Additionally, ALK may recognise
income from product supply and sales roy-
alties in North America which have not been
included in this outlook. Revenue, excluding
SLIT-tablets and related milestone pay-
ments in North America, is projected to be
DKK 2.15-2.2 billion. Further details on the
Outlook can be seen on page 13.
New revenue segmentation
ALK has changed the presentation of
revenue to reflect its business priorities.
The new breakdown illustrates revenue in
ALK's three main geographies as well as
its three main product groups.
Europe: ALK's sales of products, services,
etc. in Europe.
North America: ALK's product sales inthe
USA, Canada and Mexico as well as Income
streams from fhe partnership with Merck
for North America.
Internationalt markets: ALK's product
sales in China, other overseas markets
as well as income streams from partner-
ships in overseas markets, including the
partnership with Torii in Japan.
SCIT and SLIT-drops: ALK's aggregated
sales of subcutaneous injection-based al-
lergy immunotherapy (SCIT) products and
sublingual drop-based allergy immuno-
therapy products (SLIT-drops).
SLIT-tablets: ALK's sales of sublingual
tablet-based allergy immunotherapy
products (previously termed AIT tablets)
as well as revenue from partnerships, in-
cluding product supply, reimbursements,
milestones and royalties.
Other products and services: ALK's rev-
enue from adrenaline pens, diagnostics,
other products and services.
Comparative financial figures from 2012
have been restated to reflectthis new
breakdown. Please refer to Note 3 for ad-
ditional information.
Management's review
Management's review
Operational review
ALK specialises in the development and
manufacture of allergy immunotherapy
(AIT) products for the prevention and
treatment of allergy. As the world's largest
manufacturer of AIT products, the compa-
ny works to extend access to its products
to patients worldwide, while continuing to
develop convenient, clinically documented
products that advance allergy treatment.
The majority of ALK's current global sales
come from Europe via the company's own
sales and distribution network. Inthe USA
and Japan, ALK is working with strategic
partners Merck and Torii to register and
launch its innovative SLIT-tablet portfolio
inthe world's two largest pharmaceutical
markets. ALK also has its own presence in
North America and China and its products
are available in other countries via a net-
work of distributors.
2013 was characterised by significant
pipeline-progress as well as the first two
SLIT-tablets in North America (GRASTEK""
and RAGWITEK") moving closer to a pos-
sible market introduction.
Increased market share in Europe
European revenue accounted for 81% of
Group revenue in 2013 (77% in2012).
Although several countries saw low or
negative market growth, ALK succeeded
in increasing its overall market share
and grew overall European product
sales as a consequence of increased AIT
product sales in selected markets and
the recently launched adrenaline auto-
injector Jext?,
Throughout Europe, newer products
such as SLITone! FRA, AVANZ?, Jext? and
GRAZAX? increased their proportion of
overall sales, an important factor in ALK's
move to simplify its portfolio by phasing
out lower-volume products.
Growth in other markets
ALK's revenue in non-European markets
accounted for 19% of total revenue (23%
in2012). The most important overseas
market was North America, where ALK
grew sales of diagnostic products and al-
lergen extracts, ALK also increased sales
in China and in a number of minor markets
operated by distributors.
In addition to overseas product sales, ALK
recognised income from its partners in
North America and Japan, although ata
lower level than in 2012.
If remains a strategic priority to grow non-
European revenue and to increase access
to overseas markets, which are expected
to offer greater growth potential ihan
Europe for the foreseeable future.
A breakdown of ALK's revenue on markets
and products can be seen on pages 7-8.
Facts and glossary:
Immunotherapy treats the cause of allergy
Allergy immunotherapy (AIT) is a treat-
ment which can both reduce allergic symp-
toms and treat the underlying cause ofa
specific allergy. AIT also holds the poten-
tialto prevent the progression of allergic
disease into asthma or other allergies.
AIT works by increasing the body's im-
munological tolerance fo specific allergens
following repeated administrations of high
doses ofthe relevant allergen. As a result,
the basic immunological response to the
allergen is altered.
Allergy immunotherapy can be adminis-
tered in three different ways:
Subcutaneous injection-based allergy
immunotherapy (SCIT): Administered
as aseries of injections by an allergy
specialist, SCIT is the most common form
” of allergy immunotherapy in Europe and is
currently the dominant treatment option
in North America. Elsewhere, allergy im-
munotherapy is rare in Japan, and is inits
infancy in China. '
1403174EogSN63100
Sublingual drop-based allergy im-
munotherapy (SLIT-drops): SLIT-drops,
applied under the tongue, offer a more
convenient treatment option as patients
can use the drops at home. SLIT-drops
are particularly suitable for patients who
experience discomfort with SCIT or have a
fear of needles. SLIT-drops are common
in a few European countries, most notably
France. SLIT-drops are rare in North
America and Japan.
Sublingual tablet-based allergy
immunotherapy (SLIT-tabtlets): SLIT-
tablets are supported by extensive clinical
evidence demonstrating their safety,
efficacy and disease-modifying charac-
teristics. As with SLIT-drops, tablets can
be faken at home. ALK's tablet for grass
allergy is available in Europe under the
trade name GRAZAX? and has recently
been approved and launched in Canada
under the trade name GRASTEK?. Inthe
USA, the tablet is currently being reviewed
by the US Food and Drug Administration
(FDA) following a registration application
by Merck. The proposed trade name ofthe
tablet in the USA is GRASTEK"", Merck has
also filed a US registration application for
a tablet to treat ragweed-induced alltergy
(proposed trade name RAGWITEK””) and
further tablets are in development for pa-
tients in Europe, North America and Japan.
ALK's product portfolio comprises all three
types of treatment - SCIT, SLIT-drops and
SLIT-tablets - and covers the most com-
mon allergies, including grass, ragweed,
house dust mite, tree (birch), cat, bee and
Wasp.
SCIT-products and SLIT-drops are com-
monly administered on a named patient
basis by allergy specialists. Named
patient products are used under the
responsibility ofthe prescribing doctor
and produced specifically for a named
patient. SLIT-tablets are standardised and
approved for use under prescription from
a doctor with expertise in the treatment of
allergies.
oa Management's review
Partner progress in North America
2013 saw important progress towards the
company's goal of globalising its SLIT-
tablet portfolio, with two Biologic License
Applications (BLAs) submitted by ALK's
partner Merck.
The first ofthese, for GRASTEK"", was
reviewed by the Allergenic Products Advi-
sory Committee ofthe US Food and Drug
Administration (FDA) on 12 December.
The committee voted unanimously that
the available data support the product's
efficacy and safety in patients aged five to
65 years.
The BLA for RAGWITEK”" was also referred
fo a meeting ofthe Allergenic Products
Advisory Committee, held on 28 January
2014. The committee voted that the avai-
lable data support the efficacy and safety
ofRAGWITEKT.
The US allergy immunotherapy market is
currently dominated by injection-based
SCIT treatments which are prepared by
specialists for individual patients. If ap-
proved, the new tablet products would
bethe first in their class, representing an
important advance for allergy immuno-
therapy treatment in the USA.
Details on partnership progress can be
seen on pages 9-11.
Working to unlock allergic asthma
Development work continues on the SLIT-
tablet range, to cover further allergens,
and to support entry into additional
markets.
In 2013, two important Phase III clinical
trials with the house dust mite SLIT-tablet
both yielded positive results. House dust
mites are the most common cause of al-
lergy in the world and are an important
risk factor for the development of allergic
asthma. This new product, which targets
house dust mite-induced allergic rhinitis
and allergic asthma, remains on course for
a European regulatory filing during 2014.
The potential of SLIT-tablets in asthma
prevention is also being investigated ina
five-year GRAZAX? trial, due to complete
in 2015, which is looking at preventing the
development of grass allergy into allergic
asthma in children and adolescents.
Details on ALK's own development pro-
grammes can be seen on pages 9-11.
Scaling up production capacity
In anticipation ofthe launch and take-up
ofthe new SLIT-tablets in Europe, the
USA and Japan, ALK has scaled up active
ingredient production for the grass and
ragweed products and is investing in
future capacity for house dust mites.
Strategic development
ALK's strategy plan, Focus 2016, was
launched in 2012. Tangible results include
progress in developing and commercial-
ising the SLIT-tablet portfolio, and the
early realisation ofsavings following the
streamlining of ALK's business structure
and simplification of its product supply
network. A full progress report can be seen
on page 12.
Management's review
Markets and products
The world market for allergy
immunotherapy
In 2013, estimated global sales of allergy
immunotherapy (AIT) products remained
largely unchanged at approximately DKK
5,8 billion. The landscape is still dominat-
ed by Europe and the USA which, together,
account for approximately 95% of global
sales (95). Within this picture, sales in Eu-
rope declined slightly while sales in North
America and Internafional markets grew.
In Europe, approximately 1.5 million pa-
tients are being treated using allergy im-
munotherapy - more than athird ofthese
with ALK products. Despite this success, it
is estimated that several million additional
patients, who experience moderate to se-
vere allergy symptoms, would also benefit
from treatment. Outside Europe, approxi-
mately 900,000 patients are being treated
with ALK products or products based on
allergen exftracts from ALK; the vast major-
ity inthe USA where, in all, almost three
million patients are being treated with
products prepared by specialists using
allergen extracts.
At a global level, SCIT continues fo be
the dominant treatment with SLIT-drops
currently the second most widely used.
The heartland for SLIT-drops is in certain
parts of central and southern Europe, but
in several markets their use is in decline
as unregistered products face fighter
regulation.
The market for SCIT and SLIT-drops re-
mains relatively fragmented, with a num-
ber oflocal manufacturers. Meanwhile, the
market for SLIT-tabtets is divided among
justtwo manufacturers.
ALK has an estimated one-third ofthe
global allergy immunotherapy market
and accounts for 60% of global SLIT-tablet
sales. These assessments are based on
internal analyses and estimates.
European markets
Over recent years, several European
countries have legislated to restrict pricing
and reimbursement of medicines. At the
1403174EogSN63101
same time, economic hardship in southern
Europe has forced some patients to hold
back from treating their allergies because
they would have to pay asubstantial part
ofthe costs themselves.
This trend continued in 2013, when small
price cuts were mandated in Sweden and
Finland, while in the Netherlands, aufhor-
ities raised the level of patient co-payment
by 50% for all prescription drugs, while
also moving to phase out any unregistered
allergy immunotherapy products. One
piece of positive news came from Ger-
many, with the new government announc-
ing that, from 1 January 2014, ifwould
partly ease the mandatory rebate that was
introduced in 2010.
The demand for clinical data in support
of older products is not just limited fo the
Netherlands, but is part of a Europe-wide
trend. Although this has placed increased
demands on the industry, the move
towards thoroughly documented products
is expected to benefit ALK in the long run.
This is because, unlike many of its smaller
competitors, ALK is able to make the
necessary investments to meet the more
stringent regulations.
One consequence of the move to tighter
regulation will be the creation of further
opportunities for newer products, such
as the company's SLIT-tablet portfolio. To
capitalise on this, ALK will allocate further
resources to market shaping activities in
2014 ahead ofthe anticipated launch of
the SLIT-tablet against house dust mite-
induced respiratory diseases.
Market conditions outside Europe
Inthe USA and Japan - the world's two
largest markets for pharmaceutical
products - ALK's partnerships with Merck
and Torii will be instrumental in unlocking
the potential for allergy immunotherapy
treatment.
Japan in particular, has an underdevel-
oped allergy immunotherapy market,
despite having one ofthe highest preva-
lences of allergies in the world. Several
other markets, including China, also
experience a rapidly increasing number of
allergy sufferers.
Global sales of AIT products were
approximately DKK 5.8 billion in 2013
7% 53%
EH SCT
il SLIT-drops
ml SLIT-tablets
140%
ALK's revenue by geographies
Europe
In 2013, revenue in Europe grew by 1% to
DKK 1,827 million (1,809). Europe fhus
accounted for 81% of ALK's total revenue
(77). Growth was primarily attributable to
the adrenaline auto-injector Jext?.
Although still influenced by difficult market
conditions, ALK's European AIT sales
stabilised and generated full-year revenue
of DKK 1,699 million (1,704) with sales
estimated to have outgrown fhe under-
lying markets. In the latter part ofthe year,
AIT sales showed early signs ofan upturn
in some markets, particularly Germany.
As a result, SCIT/SLIT-drop sales grew by
2% in Q4 while SLIT-tablet sales grew by
10% in Q4.
Nevertheless, conditions in Germany,
which is Europe's largest allergy immuno-
therapy market, continued to be affected
by earlier political austerity measures and
increased regulatory requirements. Des-
pite these challenges, ALK is estimated to
have increased its German market share
against a slightly declining market, asa
result ofthe various growth initiatives that
were announced in late-2012.
Sales in France, the second largest al-
lergy immunotherapy market in Europe,
continued to grow. The growth initia-
tives introduced in 2012 contributed to
this development. Consequently, ALK is
estimated to have gained market share.
In September 2012, ALK entered into a co-
promotion agreement with MSD (known as
Merck in the USA and Canada) for GRAZAX"
in France. This agreement came to an end
inDecember 2013.
AIT sales also grew in fhe Nordic region
(Denmark, Sweden, Norway and Finland)
and in eastern Europe. Sales continued to
aa Managemeut's review
Revenue - by market
O 2012 E 20135
DKKM (% = growth mn local currencies)
2,000 TX
1,600
1,200
800
+21%
U00 EH TER
o | mi
Europe North international
America markets”
= Revenue from International markets also includes
income from partners, such as milestone payments.
Revenue - by product line
B 2012 EH 2013
DKKM
2,000
(% = growth In local currencies)
+0%
1,600
1,200
800
400 de
H +19%
0
SCIT/SLIT- SLIT- Other products
drops tablets” and services
= Revenue from SLIT-tablets also includes income from
partners, such as milestone payments.
decline in Italy, largely due to the eco-
nomic crisis and reduced public medicine
reimbursement, while in Spain, the market
conditions showed early signs of recovery.
North America
Revenue in North America grew by 21% to
DKK 356 million (300) and the region ac-
counted for 16% of ALK's fotalrevenue (13).
Growth was fuelled by a milestone payment
from Merck as well as increased product
supply to Merck ahead ofthe anticipated
2014 productlaunches. ALK's own product
sales also showed robust growth.
Sales of allergen extracts to specialists in
the USA and Canada grew by 6% to DKK
176 million and sales of other products,
such as PRE-PEN?, which is the only
FDA-approved penicillin allergy skintest
reagent, also recorded a 6% growth.
International markets
Revenue in International markets
amounted to DKK 61 million (236) which
represents 3% of ALK's total revenue (10).
The decline was entirely caused by signifi-
cantly lower milestone payments. Product
sales from ALK's Chinese franchise
continued fo grow by double digits and
ALK also increased its shipments to minor
distributor-operated markeis in the Middle
East, Asia and Africa.
ALK's revenue by product line
SCIT and SLIT-drops
Aggregate revenue from SCIT and SLIT-
drops totalled DKK 1,719 million (1,721),
so that SCIT and SLIT-drops accounted for
77% of ALK's total revenue (73%).
Overall, SCIT sales grew in the Nordic
region, Benelux, France, eastern Europe,
North America and China, among others.
In Germany, Europe's largest market for
SCIT products, sales stabilised during the
first half ofthe year and grew in the second
half. Sales ofthe AVANZ? product line
grew by 27%, driven by increased market
penetration. Together with Alutard SQ,
the AVANZ? product line accounted for 88%
of SCIT sales in Europe, clearly benefiting
from ALK's efforts to simplify its prod-
uct portfolio to focus on higher-volume
products.
Overall SLIT-drop sales declined in all
major markets except for France, which
is Europe's largest SLIT-drop market. In
the Netherlands, Europe's second largest
market for these products, sales were sig-
nifitcantly impacted by the reimbursement
changes described above. The newer
SLITone" TRA product line contributed
positively in markets where the product is
available.
SLIT-tablets
Total revenue from SLIT-tablets was DKK
298 million (428). SLIT-tablets thus ac-
counted for 13% of ALK's total revenue
(18). The decrease was entirely caused by
significantly lower milestone paymenfs;
product sales in Europe were stable and
product supply to North America has started
to build up.
Sales of GRAZAX? amounted to DKK 199
million (201) with underlying volume growth
of 7%. Sales in Q2 and Q3 were negatively
impacted by distributors reducing their
invenfories. However, in Q4 distributors
started rebuilding inventories and sales
grew in Benelux, the Nordic region and
Germany, among others - atrend thatis
expected to continue.
Revenue in North America more than
doubted to DKK 90 million (41) as aresult
of milestone payments, reimbursement
for R&D activities and increased product
supply ahead of Merck's anticipated prod-
uctlaunches in 2014. ALK recognised a
milestone payment of USD 5 million (29) in
Q1 when Merck submitted a BLA fo the FDA
for RAGWITEK”.
Revenue in International markets (Japan)
decreased to DKK 9 million (186) as
expected. Revenue in 2013 related to re-
imbursement paymenis for R&D activities
carried out for Torii, while 2012 revenue
also included significant one-time mile-
stone payments.
Other products and services
Sales of other products (adrenaline auto-
injectors, diagnostics and other products)
grew by 19% to DKK 227 million (196) and
accounted for 10% of ALK's total revenue
(8). Growth was driven by the adrenaline
auto-injector Jext? in Europe. Sales ofother
products also developed steadily through-
out the year, particularly in North America,
while sales of diagnostics showed a down-
wards trend, as expected.
Sales ofthe adrenaline auto-injector, Jext?,
nearly doubled in the first three quarters
and Jext? continued fo gain market shares.
In October, Jext? was estimated to have
gained almost 20% (moving annual total)
ofthe European adrenaline auto-injector
market. In early November, ALK identified a
production issue estimated to have affected
less than 0.04% ofthe pens produced from
March to October. To ensure patient safety,
ALK decided to recall all products in the af-
fected batches and temporarily suspend the
production, marketing and sales of Jext?.
ALK has taken decisive steps to restore sup-
ply afthe highest quality standards in 2014.
Management's review
Pipeline and partnerships
Together with its partners, ALK continues
to pursue ever more convenient and effect-
ive allergy immunotherapy diagnostics
and freatments for patients.
To date, the SLIT-tablet portfolio has seen
more than 35 clinical development trials
involving in excess of 15,000 patients
throughout Europe, Japan and the USA.
These ftrials have consistently demon-
strated significant reductions in allergy
symptoms and the need for symptom-
relieving medicines such as antihistamines
and steroids.
In 2013, two Biologic License Applications
(BLAS) - for GRASTEK"" and RAGWITEK"
- were submitted to the FDA by ALK's
partner Merck. Following positive Advisory
Committee meetings for both, decisions
from the FDA are expected during the first
halfof 2014.
Meanwhile, positive results from two
Phase III trials with a SLIT-tablet for house
dust mite allergy confirmed plans for a
European regulatory filing in 2014.
ALK development programmes
for Europe and International
markets
ALK's development programmes made
substantial progress in 2013.
House dust mite SLIT-tablet
House dust mite-induced respiratory
diseases, such as allergic rhinitis and
asthma, are the most prevalent allergy-
induced diseases inthe world. In 2013,
ALK's SLIT-tablet against house dust
mite-induced respiratory diseases saw
positive results from two pivotal Phase
Il clinical trials, known as the MERIT and
MITRAtrials.
The MERIT trial, involving 992 patients
from 12 countries, evaluated the tab-
let's efficacy and safety in the treatment
of house dust mite allergic rhinitis. It
met its primary endpoint by showing a
statistically significant reduction in rhinitis
symptoms and symptomatic medication
use compared to placebo, coupled witha
favourable safety profile.
The MITRA trial, involving 834 patients
from 13 countries, evaluated the tablet's
efftcacy and safety in the treatment of
house dust mite allergic asthma. Patients
received inhaled corticosteroids (ICS) until
the last part ofthe trial, when ICS use was
reduced by 50% for three months, and then
completely withdrawn for a further three
months. This trial also met its primary end-
point with the tablet showing a reduction of
more than 30% in the risk ofa moderate to
severe asthma exacerbation during the ICS
reduction phase.
The results from both trials will form a key
part of ALK's registration application in
Europe which is scheduled for the second
halfof2014.
GRAZAX? Asthma Prevention
Allergic children have a risk of developing
asthma that is up to seven times higher
Key milestones in clinical development in 2013
Primary endpoint metin
Primary endpoint — Primary endpoint Merck Phase Ilb trial for house
metinALK Phase — metinALK Phase Primary dust mite SLIT-tablet
Il trial for SLIT- Il trialfor SLIT- endpoint
tablet against tablet against metin ALK Merck reports data from
house dust mite- house dust mite- Phase Il GRASTEK”" Phase lil trial atthe
induced allergic induced allergic trialfortree … American College of Allergy,
rhinitis asthma SLIT-tablet Asthma & Immunology
X K
AA ARR e . o NER 0868 oo -
N re /
Mercksubmits Mercksubmitsa — Merck BLA for FDA announces Torii initiates el FDA's Allergenic Prod-
a BLA for BLA for RAG- submifs RAGWITEK" an Advisory Phase I frial ucts Advisory Committee
GRASTEK" in … WITEK” inthe USA aBLAfor accepted for Committee will — for SLIT-tablet recommends approval of
the USA RAGWITEK" review inthe reviewthe BLA againstJapanese = Merck's BLA for GRASTEK""
BLA for GRASTEK" inCanada USA for GRASTEK" —… cedar tree pollen-
accepted for re- induced hay fever FDA announces an Advi-
view inthe USA sory Committee will review
the BLA for RAGWITEK""
1403174EogSN63102
DD Manogement's review
R&D pipeline (SLIT-tablets)
Product Geography Pre-clinical Phase I Phase li Phase III Filing (exp.) Marketed
GRAZAX" Europe
Grass ARC!
GRASTEKY 2 North America me
Grass ARC
GRAZAX? Europe || (2016)
Asthma prevention
RAGWITEKM -" North America —
Ragweed ARC
HDM+ SLIT-tablet — Europe ml (2014)
HDM asthma
HDM SLIT-tablet — Europe ml (2014)
HDM rhinitis
HDM SLIT-tablet? — North America ml (n.d.)"
HDM rhinitis
HDM SLIT-table? — Japan mk (n.d.)
HDM asthma
HDM SLIT-tablet" — Japan ml (n.d.)
HDM rhinitis
Tree SLIT-tablet Europe [1] (n.d.)
Tree ARC
Japanese cedar Japan ] (n.d.)
SLIT-tablet
Cedar tree ARC
7 ARC: allergic rhinoconjunctivitis
2 Merck holds the product rights for the North American markets
3 RAGWITEK" is currently only developed for North America
fhan the general population. ALK's frial
into fhe potential of GRAZAX? in prevent-
ing grass allergy from developing info
allergic asthma involves approximately
800 children in 11 countries and runs for
five years until late-2015. ifthe results are
positive, the trial will further strengthen
the competitive profile of SLIT-tablets.
Tree SLIT-tablet
After grass and house dust mite, allergy
against pollen from frees such as birch,
hazel, alder and oak is the third most
common allergy in Europe. In 2013, ALK
successfully completed a Phase II clinic-
al trial into tree pollen allergy. The trial
involved 637 adults and adolescents with
moderate-to-severe free pollen induced
allergic rhinoconjunctivitis. Results were
positive, with the treatment being well-
tolerated and showing a clinically relevant
effect. The planning ofthe next steps inthe
clinical development is in progress.
4 HDM: house dust mite
$ n.d.: not disclosed
Named patient products
ALK conducts development activities for
important legacy products to meet evolv-
ing regulatory requirements. In a Phase |Il
trial conducted in Germany for AVANZ?
Grass, however, results were affected by
amild pollen season. Following discus-
sion with the German authorities, ALK has
decided to conducta new trial in 2014 fo
further strengthen the product documen-
tation.
Merck partnership: SLIT-tablets
in North America
ALK's strategic partnership with Merck
covers the development, registration and
commercialisation of SLIT-tablets against
grass pollen, ragweed and house dust
mite allergy in North America.
$ Torii holds the productrights for the Japanese market
Ofthe 60 million people estimated to suffer
from allergy in North America, an esti-
mated 20 million have been diagnosed as
suffering from moderate-to-severe allergy
to grass pollen, ragweed or house dust
mites. Yet today, just an estimated fhree
million are treated with subcutaneous
injection-based allergy inmunotherapy
(SCIT) - and no FDA-approved product is
available to US patients for these aller-
gens.
Inthe absence of other freatment options,
the North American allergy market is
currenfly dominated by antihistamines,
steroid treatments and SCIT products; the
so-called 'allergy shots".
GRASTEK”
In March, Merck's Biologic License Ap-
plication (BLA) for fhe SLIT-tablet against
grass pollen allergy, with the proposed
trade name of GRASTEK", was accepted
Management's review
for review by the FDA. The application was
based on results from an extensive clinical
development programme, including the
largesttrial of SLIT-tablets to date. This
Phase lil trial, which included 1,501 North
American patients, demonstrated fhat the
use of GRASTEK"" significantly reduced
nasal and eye symptoms as wellas the
need for symptom-relieving medication.
In December, the FDA's Allergenic Products
Committee voted unanimously that the
available data support the efficacy and
safety of GRASTEK"" in patients aged five to
65 years, assuming that adrenaline auto-
injectors are made available for patients
at home.
RAGWITEK"
The seasonal ragweed allergy is almost
as widespread in North America as grass
pollen allergy.
In May, Merck's BLA for the SLIT-tablet
against ragweed allergy, with the
proposed trade name of RAGWITEK””,
was accepted for review by the FDA. The
submission followed two successful Phase
Ul trials in 2011, and 22012 safety trial
in approximately 900 patients. These
demonstrated that RAGWITEK”" is well-
tolerated and reduces patients” allergy
symptoms and their use of symptom
relieving medication.
In December, the FDA announced fhaf fhe
RAGWITEK"" BLA would be referred to a
meeting ofthe Allergenic Products Com-
mittee. On 28 January 2014, the commit-
tee voted that the available data support
the efficacy and safety of RAGWITEK"".
HDM SLIT-tablet
An estimated 45% of North American al-
lergy sufferers are affected by house dust
mite allergy.
In 2013, Merck concluded a Phase lib clin-
ical trial for a house dust mite SLIT-tablet.
The trial evaluated dose-related efficacy,
safety and tolerability in adults and con-
1403174EogSN63103
firmed that the tablet significantly reduces
allergic rhinitis symptoms. Merck is initiat-
ing a Phase fil trialin 1,500 patients, which
may subsequently form the basis for a
BLA in the USA. The trialis scheduled to
complete in 2015.
Torii partnership: SLIT-tablets
and other products in Japan
Japan is the second largest pharma-
ceutical market in the world, where an
estimated 25-35 million people suffer from
allergy or asthma caused by Japanese
cedar pollen or house dust mites. Japan
has a higher level of diagnosed allergic
rhinitis than anywhere in the world, Never-
theless, allergy immunotherapy has yet to
gain a foothold in the market.
ALK's parfnership with Torii covers the de-
velopment, registration and commercial-
isation of SLIT-tablets against house dust
mite-induced allergy and allergic asthma.
It also covers ALK's existing SCIT products
against house dust mite allergy, diagnos-
tics and the development of a SLIT-tablet
against Japanese cedar pollen allergy.
HDM SLIT-tablet
Torii is undertaking two parallel, pivotal
Phase H1/ UI clinical trials involving 1,800
patients to investigate fhe safety and
efficacy ofthe HDM SLIT-tablet in the treat-
ment of house dust mite-induced allergic
rhinitis (hay fever) and allergic asthma.
These frials are similar in design to the
MERIT and MITRA frials that ALK success-
fully completed in Europe in 2013 (see
page 9). The Torii trials are expected to
complete in 2014.
Japanese cedar SLIT-tablet
Torii has initiated the clinical development
of a SLIT-tablet against Japanese cedar-
induced allergic rhinitis. A Phase I clinical
trial investigating safety and tolerability
has been completed and the next steps
inthe development are currently under
planning.
Expected news in 2014
Completion/reporting of trials
« HDM SLIT-tablet for allergic rhinitis,
Phase II/Ill in Japan
+ HDM SLIT-tablet for allergic asihma,
Phase II / Ill in Japan
. Scientific presentation of data from
MERIT and MITRA trials in Europe
Registration applications
& FDA decision on the GRASTEK""
SLIT-tablet application
s FDA decision on the RAGWITEK'"
SLIT-tablet application
. Application to the European Medicines
Agency for the HDM SLIT-tablet
New clinical trials
& Phase Ill trial with the HDM SLIT-tablet
inthe USA
Phase !1/IIl trial with the cedar SLIT-
tablet in Japan
. Phase lil chamber trial with AVANZ?
Grass in Europe.
ØD Manugement'e raview
Strategy and targets
Inlate-2012, ALK introduced Focus 2016,
an updated strategy plan defining the
company's development fhrough fo 2016.
It set out actions in three areas, each of
which has seen significant progress:
Simplify: Reduce the ALK portfolio to focus
on fewer products with greater volumes,
with production consolidated at fewer pro-
duction facilities and a more streamlined
business structure.
Bytheend of 2016, ALK expects to have
eliminated around 60% of its 2010 Euro-
pean portfolio, while in North America,
similar measures are being taken, albeit
more slowly.
In 2016, production will be centralised in
Denmark (SCIT and SLIT-tablets), France
(SLIT-drops), Spain (diagnostics, packag-
ing and distribution), New York (allergy im-
munotherapy products for North America)
and Idaho (raw materials).
Meanwhile, ALK's IT, Finance and Human
Resources have been consolidated into
global functions, and the Sales and Mar-
keting function restructured.
In all, Simplify initiatives are expected to
yield annual net savings of DKK 100 million
in 2016. Restructuring costs of DKK 86 mil-
lion associated with these initiatives have
been recognised in 2012-13.
Focus 2016 in brief
Innovate: Expand the range ofmarketed
SLIT-tablets and update the range of SCIT
and SLIT-drops. Atthe same time, reduce
research and development expenses as a
percentage of overall revenue.
As its expanded range of SLIT-tablets
moves closer fo launch, ALK is investigat-
ing new therapeutic indications, such as
the treatment and prevention of allergic
asthma. It is also strengthening documen-
tation for SCIT and SLIT-drop products.
However, as SLIT-tablet development work
reduces and post-launch revenue grows,
R&D spend, which peaked at more than
20% of revenue, will gradually be reduced
so that, by 2016, itis expected fo stabilise
at around 15% of revenue.
ALK will also look at whether more closely
aligning certain SLIT-tablet development
activities with partners could exploit any
additional savings.
Grow: Invest to capture market share in
existing markets, while also expanding
into new markets - either directly or via
partnerships. In addition, promote a wider
recognition and adoption ofallergy im-
munotherapy.
Growth is being targeted fhrough a blend
of new product launches and investments
to capture market shares in key markets,
such as Germany and France. Meanwhile,
Financial targets
Since 2011, ALK has been targeting
revenue of. DKK 3 billion and operating
profit (EBITDA) corresponding to 25%
ofrevenue by 2015. The achievement of
these financial targets is subject to several
factors, some of which are outside ALK's
control. Most significantly, the combina-
tion of harsher than anticipated European
market conditions, and uncertainty around
the timing, pricing, launch and subse-
quent commercial success of SLIT-tablets
in North America. In consequence, ALK is
suspending its guidance on 2015 financial
targets with the intention of revisiting fhem
when it has a clearer picture of the unfold-
ing situation in North America.
SLIT-tablet launches by partners in North
America and Japan are expected to bring
in sales royalties and income from tablet
supply.
Elsewhere, ALK is supporting work to
promote allergy treatment knowledge at
both a global and nationallevel, and plans
to expand its existing business in China
and to expand into other selected growth
markets.
Strategic premises
Strategic initiatives
Objective
Contrasting markets
« Negative growth in Europe
+ Potential in North America and Japan
e Opportunities in emerging markets
Complex business
e Many products
. Multiple production sites
e Organisation and processes
Ready for growth
e Robust financial base
& Marketleader
e Strategic partnerships
e Strengthened organisation
Simplify
. Optimise product portfolio
& Consolidate production
. Streamline business
Innovate
& Competitive SLIT-tablet portfolio
Next generation vaccines
Grow
e Gain market shares in Europe
. Launch SLIT-tablets in North America
and Japan
e Expansion to emerging markets
» Extend the knowledge of allergy immu-
notherapy among doctors and pafients
Globalisation
. Expanding leading position in Europe
8 SLIT-tablet portfolio developed
« SLIT-tablets in North America and Japan
e ALKin new markets
Improved efficiency
e Streamlining products, production and
business structures
Financial progress
o improved operating profit
e Annualnet savings of DKK 100 million
in2016
. R&D costs moving towards 15% of
revenue
Managementf's review
Outlook for 2014
ALK expects to grow revenue and increase
operating profit (EBITDA) in 2014.Asa
result, EBITDA is expected to be between
DKK 225-400 million before special items
and income from product supply and
potential sales royalties in North America.
The higher end ofthis range assumes the
recognition ofthree product development
milestone paymenis from ALK's North
American partner Merck. In addition to
this, the partnership with Merck may po-
tentially yield income streams from prod-
uct supply and sales royalties which have
not been included in the stated range.
Revenue, excluding SLIT-tablets in
North America
ALK's revenue, excluding SLIT-tablets
and related milestone payments in North
America, is projected to show low single-
digit growth and to generate revenue
of DKK 2.15-2.2 billion. However, sales
development trends in individual markets
are expected to vary greatly. Sales of Jext?
adrenaline auto-injectors are forecast to
remain largely unchanged versus 2013
due to the recent product recall.
In Europe's largest allergy market, Ger-
many, the new government has decided
to partially revoke the AMNOG legislation
on pharmaceutical pricing, which was
introduced in 2010, Amongst other things,
AMNOG introduced a mandatory 16% sales
rebate for all prescription drugs and estab-
lished a moratorium which fixed drug prices
af 2009 levels. However, with effect from 1
January 2014, the rebate willbe reduced
to 7%. This change alone is expected to
improve ALK's 2014 revenue and earnings
by DKK 50-52 million, assuming sales are at
a similar levelto 2013. The positive effect of
this has been included in the outlook.
Even so, most of ALK's European mar-
kets are still expected fo be affected by
the continuing austerity measures that
have restricted access fo medicines and
affected the markets negatively over
recent years. Consequently, for Europe as
awhole, ALK anticipates slightly negative
market growth, but expects to continue to
outgrow this underlying trend by increas-
ing market shares. Meanwhile, overseas
markets, however, are expected to offer
more substantial rates of growth.
1403174EogSN63104
SLIT-tablets in North America (partner
income)
ALK is entitled to milestone payments from
Merck, which are conditional upon the US
Food and Drug Administration's (FDA's)
granting of marketing authorisations
for GRASTEK”" and RAGWITEK"" as well
as Merck's initiation oftreatmentin the
planned Phase III trial with the house dust
mite SLIT-tablet.
Furthermore, the partnership with Merck
in North America may potentially yield
additional income streams from product
supply and royalties related to sales of
GRASTEK"" and RAGWITEK”" inthe USA and
Canada. These income streams will most
likely be limited in 2014 as the products
have not yet been approved by the FDA.
In addition, they are subjectto a number
of factors outside of ALK's control, such
as launch time, product pricing, market
uptake, etc. Atthis stage, ALK therefore
finds it appropriate not to provide specific
guidance for product supply and sales
royalties. ALK will provide regular updates
onthese factors during 2014.
Cost structure
Production costs are expected to increase
as capacity is built up for the production of
Jext? and fhe SLIT-tablet range. Addition-
ally, ALK will also be experiencing increas-
ing depreciations.
Capacity costs are forecast to remain at
the same level as in 2013. R&D expenses
are projected to decrease after the
completion of a variety of SLIT-tablet
development activities. Sales and market-
ing expenses are expected to increase,
reflecting new market-shaping and growth
efforts, including European pre-launch
activities for the house dust mite SLIT-
tablet. Finally, administrative expenses
are expected fo stay unchanged following
adecrease of 5% in 2013.
ALK continues to benefit from efforts to
improve profitability through a simplifica-
tion of business and production structure,
including the series of measures under-
taken as part ofthe Simplify programme,
announced in 2012.
Operating income (EBITDA)
EBITDA before special items is estimated
to amount fo DKK 225-400 million with the
higher end ofthis range reflecting the fullt
inclusion ofthe three product develop-
ment milestone payments from Merck.
Additionally, ALK may recognise income
from product supply and sales royalties
in North America. The simplification ofthe
production and business structures under
the Simplify programme will entail minor
restructuring costs, which will be reported
ina'special items" line.
Investments
The cash flow effect from investments
(CAPEX) is expected to total DKK 200-250
million. These investments are particularly
targeted atthe continued development
of production capacity for the SLIT-tablet
range and the Jext" adrenaline auto-
injectors. Also included are investments
associated with the consolidation of
production under the Simplify programme.
Free cash flow is expected to be positive,
subject to the above-mentioned milestone
payments from Merck.
The outlook is based on current foreign
exchange rates.
Forward-looking statements
This report contains forward-looking
statements, including forecasts of future
revenue and operating profit, as well
as expected business-related evenis.
Such statements are subject to risks and
uncertainties as various factors, some
ofwhich are beyond ALK's control, may
cause actual results and performance to
differ materially from the forecasts made
inthis report. Without being exhaustive,
such factors include general economic
and business-related conditions includ-
ing legal issues, uncertainty relating to
demand, pricing, rejimbursement rules,
partners' plans and forecasts, fluctuations
in exchange rates, reliance on suppliers,
as well as market structure. An additional
factor would be the consequences of
potential side effects from the use of ALK's
products, as allergy inmunotherapy may
be associated with allergic reactions of dif-
fering extents, duration and severity.
0 Managemerit'e review
Financialreview!?
Revenue
Full-year revenue of DKK 2,244 million
(2,345) was in line with the expectations of
a.DKK 2.2-2.25 billion revenue, which was
forecast in ALK's nine-month interim report
in November. The revenue decline of 4% in
both DKK and local currencies was due to
lower milestone payments from parfners.
ALK grew its product sales in Europe, North
America, China and overseas markets.
Revenue, excluding SLIT-tablet related in-
come from pariners in North America and
Japan, totalled DKK 2,145 million (2,118).
SLIT-tablet related income from partners
in North America and Japan oppositely
declined fo 99 million (227) as there were
fewer events triggering milestone pay-
ments in 2013.
A breakdown of revenue by geographies
and products can be seen on pages 7-8.
Costs
Cost of sales totalled DKK 697 million
(648). Gross profit fellto DKK 1,547 million
(1,697), corresponding to a gross margin
0f 69% (72). The decline was caused by
fewer milestone payments, changed prod-
uct sales mix, increasing depreciations
and costs to prepare production for SLIT-
tablets as wellas costs related to the Jext?
product recall in Q4. Costs associated with
the recallimpacted full-year gross margin
negatively by approximately 1 percentage
point.
Total capacity costs decreased by 6% to
DKK 1,417 million (1,515). The decrease
was mainly the result ofsavings follow-
ing the streamlining of ALK's business
structure under the Simplify programme.
Research and development expenses
were also impacted by lower activity fol-
lowing the finalisation of certain SLIT-tab-
let development activities. R&D expenses
decreased 9%, sales and marketing
expenses declined 5% and administrative
expenses were reduced by 5%. Exchange
rates had no material impact on capacity
costs.
Earnings
Operating profit before depreciation
and amortisation (EBITDA) before
special items amounted to DKK 258 million
(306), which mafched the expectations of
approximately DKK 250 million forecast
in ALK's nine-month interim report in
November.
The decline relative to 2012 was antici-
pated and primarily attributable to lower
milestone payments from partners. This
impact was largely offset by a stronger
(NSSS
DB. SCIT/SLIT-drops (CAGR: 3%)
Other products and services (CAGR: -6%)
EH SLIT-tablets (CAGR: 12%)
than expecied improvement in ALK's
operating profit following efforts to drive
profitability and reduce capacity costs.
The EBITDA margin fell from 13%t0 11%.
After special items of DKK 22 million
(64) for restructuring under the Simplify
programme, reported EBITDA amounted
to DKK 236 million (242). Exchange rates
had no material impact on operating
profit. Reported EBIT was DKK 109 million
(118) corresponding to an EBIT margin of
5% (5).
Net financials were a loss of DKK 5 million
(5), as financial income of. DKK 20 million,
mainly related to the net gain ofshares
sold in DBV Technologies, was offset by
interest expenses etc. of DKK 13 million
and unrealised exchange rate losses of
DKK 12 million mainly related fo USD.
Income tax amounted fo DKK 43 million
(59), corresponding to an effective tax rate
of 41% (52). The tax rate was affected by
restructuring activities under the Simplify
programme and the geographical distri-
bution of income.
Net profit from continuing operations
was DKK 61 million (54). Earnings per
share (EPS) based on continuing oper-
ations amounted to DKK 6.31(5.54).
Net profit was DKK 61 million (209) and
the decrease was entirely attributable
to the DKK 155 million adjustment ofthe
Gross profit
O Gross profit MH Costofsates
— Gross margin
DKKM
2,000
1,600
1,200
800
400
øl N
2009 2010
2011 2012 2013
1 Growth rates for revenue are stated as growth in local currencies, unless otherwise indicated
DKKM %
2,500 ————————————————— 80
2,100 75
1,700 70
1,300 65
900 [ 60
500 55
2009 2010 2011 2012 2013
Management's review
gain on the divestment of Chr. Hansen A/S
which ALK recognised in 2012. Net profit
provides areturn on eduity of2.7% (9.5),
corresponding to earnings per share (EPS)
ofDKK 6.31 (21.45).
Cash flow
Cash flow from operating activities was
an inflow of DKK 146 million (91), while
cash flow from investments was an outfiow
of DKK 231 million (243) primarily relating
to the expansion of ALK's production in
France, build-up of production capacity
for SLIT-tablets and Jexi? as well as the
on-going consolidation ofthe production
network.
Free cash flow for the year was an outflow
of DKK 85 million (152). Cash flow from
financing was an outflow of DKK 74 mil-
lion (120) relating fo the share buy-back
programme, which was completed in Feb-
ruary, the distribution of ordinary dividend
and exercise of share options.
Afthe end ofthe year, cash and cash
equivalents totalled DKK 312 million (477).
Equity
Equity stood af DKK 2,249 million (2,257)
atthe end ofthe year and the equity ratio
was 69% (68).
Research and development
EH Research and development expenses
Events after the end of the
financial year
On 28 January 2014, the Allergenic Prod-
ucts Advisory Committee ofthe US Food
and Drug Administration (FDA) voted that
the available data support the efficacy and
safety of Merck's RAGWITEK". In addition
to that, no events have occurred from the
balance sheet date untilthe publication of
this annual report that have not already
been recognised and sufficiently stated in
the annual report, and which materially
affectthe assessment of ALK's results and
financial position.
Sales, marketing and administration
O Administrative expenses
MH EBITDA before special items
DEN
—… Percentage ofrevenue MH Sales and marketing expenses — EBITDA margin before special items
— Percentage ofrevenue
DKKM % DKKM % DKKM %
500 50 1,000 46 500 25
400 40 800 44 400 20
300 30 600 u2 300 15
200 20 400 40 200 10
100 10 200 38 100 5
0 0 0 36 0 0
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
1403174EogSN63105
DD Managemant's review
Risk management
Doing business in the pharmaceutical
industry is subject to risk. ALK's Board
ofManagement is responsible for the
ongoing management of risk, including
risk mapping, assessment of probabilities
and potential consequences and launch of
risk-reducing measures. In 2013, Board of
Management has established a Risk Com-
mittee to assistits overall responsibility of
risk management. Reporting fo the Board
of Directors” Audit Committee is done onan
annual basis.
The following risks are of particular signifi-
cance to ALK.
Commercial risks
Risks related to research and
development
The future success of ALK depends on
the company's ability fo maintain current
products and successfully identify, develop
and market new, innovative drugs, which
involves significant risks. A pharmaceut-
ical drug must be subjected to very exten-
sive and lengthy clinical trials to docu-
ment aspects such as safety and efficacy
before it can be approved for marketing.
Inthe course ofthe development process,
the outcome of these trials is subject to
significant risks. Even though substantial
resources are invested in the development
process, the trials may produce negative
results. Delays in obtaining regulatory
approvals - or failure to obtain such ap-
provals - may also have a major impact on
the ability of ALK fo achieve its long-term
goals. ALK and its collaborative partners
perform thorough risk assessments of the
research and development programmes
throughout the development and registra-
tion processes to optimise the probability
ofthe products reaching the market.
Risks related to market
conditions
Regulation and price control
ALK's products are subject to a large
number of statutory and regulatory
requirements with respect to issues such
as safety, efficacy and production. In
most ofthe countries in which ALK oper-
ates, prescription drugs are subject to
reimbursement from and price control by
national authorities. This often results in
major price differences in the individual
markets. Regulatory requirements and
intervention, as well as price control, may
therefore have a significant impact on the
company's earnings capacity.
Commercialisation
If ALK and its partners succeed in develop-
ing new products and obtaining regulatory
approval for them, the ability to generate
revenue depends on the products being
accepted by doctors and patients. The
degree of market acceptance ofa new
product or drug candidate depends on
a number of factors, including demon-
stration of clinical efficacy and safety,
cost-effectiveness, convenience and ease
of administration, potential advantage
over alternative treatment methods,
competition and marketing and distribu-
tion support. IFALK's new products fail to
achieve market acceptance, this could
have a significant influence on the com-
pany's ability to generate revenue. ALK
regularly conducts extensive surveys of
market conditions and similar factors and
spends significant resources on providing
information on its products to doctors and
patients. Commercialisafion is a crucial
part ofthe company's strategic basis and
strategic activities.
ALK's products may be associated with
allergic reactions of varying exfent, dura-
tion and severity. Ifsuch events occur in
unexpected situafions, they may have an
impact on the company's earnings and
sales. Due to the potentially serious con-
sequences, itis crucialfor ALK to keep an
eye on product quality and safety, both in
clinicat development and in sales and mar-
keting activities. If, despite the high level of
quality and safety, a situation should occur
in which itis necessary fo recall a product,
ALK has set up procedures to ensure that
this can be done swiftly and efficiently.
Competition
ALK operates in markets characterised
by intense competition. If, for instance,
a compefitor launches a new and more
effective treatment of allergy, it may
have a material impact on ALK's sales.
A competitive market may also lead to
market-driven price reductions just as the
regulatory authorities may dictate price
reductions. Both competition and price
are risks that may have a material impact
on ALK's ability to achieve its long-term
goals. ALK therefore monitors economic
developments, the competitive situation
and initiatives on all important markets.
Risks related to infrastructure
Production and quality
ALK has concentrated most of its pro-
duction capacity at plants in Denmark,
France, Spain and the USA. Although the
plants are located in areas that have not
historically been hit by natural disasters,
this geographical diversification calls for
risk planning in order fo avoid emergency
situations, such as lack of or poor access
to raw materials, for instance pollen.
This planning includes the prevention of
unwanted events and preventive inventory
managemenf; an example is the build-up
of contingency inventories in order to en-
sure an unbroken chain of production.
Production and manufacturing processes
are also subjected to periodic and routine
inspections by the regulatory author-
ities as a regular part oftheir monitoring
process in order to ensure that all manu-
facturers observe the prescribed require-
ments and standards. Meeting these
quality standards is a prerequisite for the
company's competitive strength. ALK's
production processes and quality stand-
ards have been developed and optimised
over many years.
Dependence on third parties
ALK has partnership agreements with third
parties with a view to commercialising the
company's products on a number of mar-
kets and with parties supplying important
input for key production processes. Al-
though there are financial incentives for all
of ALK's partners to fulfil fheir contractual
obligations, there can be no assurance
that they will actually do so. The factors
that motivafe ALK's partners to develop
and commercialise products may be af-
fected by conditions and decisions beyond
ALK's control. The agreements with
Managementt's review
Merck & C0o., Inc. and Torii Pharmaceut-
ical Co., Ltd. enfitte ALK to receive certain
milestone payments. These payments will
depend on continuing favourable results
inthe development ofthe pharmaceutical
products to which ALK's partners hold the
license rights. Moreover, reliance on sup-
pliers and third-party manufacturers en-
tails risks which ALK would not be subject
to ifthe company possessed the necessary
in-house manufacturing capabilities. Such
risks include but are not limited to:
+ Reliance on athird party for regulatory
compliance and quality assurance.
Possible breach ofa manufacturing
agreement by athird party due fo fac-
tors beyond ALK's control and influence.
Reliance on the ability of a third party
to deliver and scale up the volume of
production.
ALK manages these risks through con-
tractualrelations, thorough planning and
monitoring and through joint steering
committees that work together with these
external parties.
Risks related to key employees
ALK is dependent on being able to attract
and retain employees in key positions. A
loss of key employees may have a mater-
ial impact on the company's market and
research efforts. ALK manages this risk,
among other things, by continuously of-
fering its staff professional development
opportunities and competitive compensa-
tion.
Risk related to business ethics
and legal
Business ethics
ALK's reputation is essential for operating
within the pharmaceutical industry. ALK
aims to maintain its good reputation by
acting in compliance with all applicable
regulation and legislation. ALK strives to
act professionally, honestly and with high
integrity throughout the company in rela-
tion fo the stakeholders from customers,
employees and shareholders to society,
suppliers and partners.
1403174EogSN63106
Patents and intellectual property rights
Patenis and other intellectual property
rights are important for developing and
retaining ALK's competitive strength. The
riskthat ALK infringes patents or trade-
mark rights held by other companies, as
well as the risk that other companies may
attempt to infringe the patents and trade-
mark rights of ALK are monitored and, if
necessary, suitable measures are taken.
Risks related to financial
reporting
ALK's risk management and internal
controls related to financial reporting
are designed to effectively controlthe
risk of material misstatements. Detailed
description of ALK's internal controls
and risk management system in rela-
tion fo financial reporting processes
is included in fhe Statutory Corporate
Governance Statement, cf. section 107b
of the Danish Financial Statement Act
available at the company's website:
http://ir.alk-abetlo.com/risk.cfm.
Financial risks
Due to the nature ofits operations, invest-
ments and financing, ALK is exposed
to fluctuations in exchange rates and
interest rates. The ALK Group's financial
risks are managed centrally, based on
policies approved by the Board of Direct-
ors. The objective of ALK's financial risk
management is to reduce the sensitivity of
earnings to fluctuations in exchange rates,
interest rates, liquidity and changes in
credit rating. Group policy is to refrain from
active financial speculation. See Note 28
inthe consolidated financial statements of
this annual report for a specification ofthe
Group's hedging of currency, interest rate
and credit risks and the use of derivative
financial instruments.
Foreign exchange risk
The general objective of ALK's foreign
exchange risk management is to limit and
delay any adverse impact of exchange
rate fluctuations on earnings and cash
flows and thus increase the predictability
ofthe financial results.
The most significant financial risk in ALK
relates to exchange rate fluctuations. The
greatest exposure is to USD and GBP, In
2013, 15% of ALK's revenue was denom-
inated in USD, 2% in GBP and 74% in EUR.
ALK's sales are not deemed to be exposed
to EUR due to Denmark's participation in
the European exchange rate cooperation.
SST TEST ere KE
increase in exchange rates
DKkKm Revenue EBITDA
USD approx. +50 approx. +20
GBP approx. +5 approx. 0
The sensitivities are estimated on the basis ofthe
current exchange rates.
The table above shows the estimated
effect ofa 10% increase inthe USD and
GBP exchange rates on revenue and
EBITDA levels, respectively. Exchange rate
risks relating to operations are primar-
ily hedged by matching receipts and
payments in the same currencies and by
forward exchange contracts and options.
Moreover, ALK is exposed to exchange
rate risks when intercompany balances
and net assets of foreign subsidiaries are
translated into DKK. in accordance with
the accounting policies, such currency
translation adjustments are recognised in
the income statement and in other com-
prehensive income, respectively.
Foreign exchange exposure relating to fu-
ture transactions and assets and liabilities
is evaluated and hedged by instruments
such as forward exchange contracts. This
serves to limit the impact on fhe financial
results of any exchange rate fluctuations.
The exchange rate exposure relating to net
investments in foreign subsidiaries is not
hedged by forward exchange contracts.
Interest rate and liquidity exposure
Atthe end ofthe financial year, net
interest-bearing assets stood at approxi-
mately DKK 300 million. Achange in the
interest rate level by 1 percentage point
would, consequentfly, correspond to a
change in interest income of approximate-
ly DKK 3 million. It is not expected that the
(18) Managemeut's review
Net assets by currency as at
31 December 2013
9%
DO DKK . 43%
o H
mM EUR 23%
Mi USD
ME Other
25% ør
Net assets are defined as assets less liabilities.
interest rate exposure will be hedged as
this is not considered financially viable.
Cash is invested in credit-worthy, li-
quid, interest-bearing instruments with
relatively short duration. The liquidity risk
is considered to be minimal due to the
company's current capital structure.
Credit exposure
The credit exposure in connection with
financial instruments is managed by
contracting only with institutions with sat-
isfactory credit-worthiness, in Denmark as
well as abroad, In accordance with ALK's
credit-risk policy, such institutions must
have an acknowledged credit rating.
Trade receivables are monitored closely
af the local level and are distributedona
number of markets and customers. The
creditriskis therefore considered fo be
low.
Management's review
Corporate Social Responsibility (CSR)
Ås an international pharmaceutical
company, ALK has an important social
responsibility. ALK strives to live up to this
responsibility and be recognised by its
stakeholders as a reliable and responsible
company characterised by professional-
ism, honesty and integrity.
ALK's policy for social responsibility is
focused on the four areas below:
1. Prevention, diagnosis and
treatment of allergy
ALK is the world leader in allergy immuno-
therapy. ALK therefore has a particular
responsibility and is strongly committed
inits efforts to fight allergy. ALK makes
its knowledge and resources available to
promote the prevention, diagnosis and
treatment of allergy. ALK cooperates with
all relevant stakeholders to fight allergy,
including the public authorities and private
and public institutions, as well as NGOs.
A special focus area of ALK's social com-
mitmentis children suffering from allergy,
including their risk of developing asthma.
In2013, ALK sponsored a project to
raise awareness on respiratory allergy
undertaken by the European Federation
of Allergy and Airways Diseases Patients'
Associations (EFA). The sponsorship was
initiated in 2012, Within the framework of
this sponsorship EFA has published a 'Call
to Action”, encouraging European polit-
icians and other decision makers to ensure
improvements of prevention, diagnosis
and freatment of allergy. As part of ALK's
activities during the annual European
Academy of Allergy and Clinical Immun-
ology (EAACI) congress, ALK promoted
the Call to Action issued by EFA. During the
congress, EFA furthermore presented the
results of an Austrian pilot project inves-
tigating ifpharmacies can play an active
role in diagnosis of allergy. This project
was also supported by the ALK sponsor-
ship to EFA.
In 2013, ALK's afflliates, in coopera-
tion with patient associations, medical
societies and authorities, have also
undertaken other activities fo increase
awareness of allergy and patients" ac-
cess to treatment and to make relevant
information available to patients and their
relatives.
The cooperation with EFA, EAACI and the
local acfivities will also continue in 2014.
2. Production/environment
ALK works systematically to improve
working environment and environmental
conditions in every area ofthe company,
supported by the local SHE (Safety, Health,
Environment) organisations at all produc-
tion sites. ALK has been environmentally
certified (ISO 14001) in Denmark since
2007 and was recertified for another three
years in 2013. The other production sites
in Spain, France, the Netherlands, the USA
and Canada adhere to the SHE standards.
in 2009, the Management adopted global
long-term goals for the SHE-related activi-
ties focusing on the reduction ofenergy
consumption, including COz emissions.
The objective is that absolute energy con-
sumption in 2014 will not have increased
compared to the consumption in 2008!
while CO-z emissions will have decreased
by atleast 15%.
In 2013, ALK in Denmark has converted
more than half of the electricity consump-
tion (about 20% ofthe total energy con-
sumption) to come from a COz neutralen-
ergy source - power from wind turbines?
- thereby reducing the CO; emission with
more than 1,000 tonnes.
Production changes in the USA and build-
ing activities in France in 2013 have a
significant impact on the energy consump-
tion. To make the energy consumption
comparable, baseline (year 2008) has
fo be adjusted due to these changes and
expansions. By end of 2013, it was not yet
possible to calculate and adjust for the
changes according to the guidelines from
the Greenhouse Gas Protocol. Data are
therefore missing in the table Non-finan-
cial key figures. The energy consumption
inrealterms has increased by 8%.
A number of energy-saving projects were
implemented in 2013. Examples are
ventilation improvements, new roof coat-
ing decreasing building temperature and
improvement of a cooling system.
In 2013, ALK received no complaints and
experienced no unintended spills. Specific
waste water contents exceed the limits
at one site where ALK is in close dialogue
with fhe local authorities and action will be
taken, All other legislative requirements
are in compliance.
3. Ethical conduct
In 2009, ALK launched its ALK Code of Con-
duct in order to support professionalism,
honesty and integrity throughoutthe com-
pany and in relation with customers, em-
ployees, shareholders, society, suppliers
and partners. All employees are required
to adhere to ALK's Code of Conduct.
ALK's commitment to managing human
rights in our business is contained in
the ALK Code of Conduct. Inthe Code of
Conduct we describe the requirements
we have established for our actions and
behaviours. We supportthe UN Global
Compact's 10 principles, notleastinthe
areas of human and labour rights, the
environment and anti-corruption and we
have integrated these principles in the ALK
Code of Conduct. To see ALK's Code of Con-
duct please visit http://www.alk-abello.
com/aboutalk/csr/businessethics/
Pages/home.aspx.
1 Consumption and emissions in 2008 will be adjusted in terms of establishment of new production sites, closure of old production sites, acquisitions, etc., inline with guidelines
prepared in accordance with the principles ofthe Global Greenhouse Gas Protocol,
2 ALKhas in 2013 bought RECS-certificates (Renewable Energy Certificate System) equivalent to 3,479 MWh.
1403174EogSN63107
a) Managerent's review
In 2013, the ALK Code of Conducft was
updated. The updated version will be
launched in 2014.
In September 2013, ALK launched a
whistleblower scheme, ALK Alertline,
giving employees with knowledge of po-
tentially desftructive or illegal acts related
to ALK's activities the opportunity to report
their observations. The scheme mini-
mises the risk of illegalities and irregular-
ities within the areas of financial crime,
environmental pollution or inappropriate
conduct, as well as other circumstances
that may be to the detriment of ALK.
No reports have been filed through the ALK
Alertline in 2013.
4, Employees
ALK employs 1763 employees, of whom
672 are employed in Denmark. ALK wishes
to continue fo be an atfractive workplace
that can attract and retain the compe-
fent, well-functioning and committed
employees who are ALK's most important
resource, To obtain this ALK works system-
atically to improve safety and the working
environment, including the psychosocial
working environment, and to develop an
organisation, culture and management
that encourage professional and personal
development. In this way we also ensure
thatthe human rights of our employees
are respected.
Safety
In ALK we have along tradition of working
systematically to improve working environ-
ment and conditions.
ALK in Denmark has been health and
safety certified (OHSAS 18001) since
2007 and in 2013, ALK was recertified for
another three years.
In 2009, Management adopted global and
long-term goals for the improvement of
safety and well-being at work. The goal is
to reduce the number of absence days per
employee dueto incidents atworkon a
continuous basis.
In 2013, fhe number of days of absence
due to work-related injuries decreased
to 0.053 days per employee, whichisa
reduction of 21% compared to the average
for the preceding three years.
Organisation, culture and management
Over the past four years, ALK has worked
to establish a performance culture. To
further strengthen the ability to execute
the strategy and fo support a uniform
performance management process, a
new IT tool PerformIT was introduced in
2013. This tool documents for all employ-
ees whatthey are accountable for, how
they are performing and what they should
develop to improve even more.
Inspring 2013, the integrated Engage-
ment and Leadership Survey was run with
aresponse rate of91%. The results of
the survey have been discussed through-
out the organisation in order to further
improve and promote the positive and
productive working environment.
In addition, ALK reviews the organisation
on an annual basis to determine whether
the structure, resources and competences
are fitto reach the strategic goals.
Diversity
ALK seeks diversity as one of the pre-
requisites for the company's success and
this naturally includes equal opportunities
for men and women fo pursue a manage-
ment career in ALK.
At present, there are no women on fhe
Board of Directors elected by the general
meeting. ALK aims for a gender represen-
Diversity af management levels
Diversity at management levels Total Women Men
First-line managers 221 51% (113) 19% (108)
Mid-level managers 86 34% (29) 66% (57)
Functional managers 25 12% (3) 88% (22)
Business managers 5 0% (0) 100% (5)
Total 337 43% (145) 57% (192)
Breakdown of employees by employee group
2009 2010 2011 2012 2013
Production 539 569 609 642 648
Research and development 290 330 371 407 366
Sales, marketing and administration 725 795 801 806 749
Total 1,554 1,694 1,781 1,855 1,763
Management's review
tation of one or two women out ofthe six
members elected by the general meeting.
The goal is to be met by 2017.
Presently, there are no women on the
Board of Management while there are
three women among the 25 functional
managers. However, among first-line
managers and mid-level managers the
share of women is considerably higher.
The share of women is 34% among mid-
level managers and 51% among first-line
managers, including e.g. R&D team lead-
ers. Overall, women account for 43% of the
managers employed with ALK.
In 2014, ALK will continue its efforts and
commitment towards equal opportunities
for women and men at all management
levels.
One way fo ensure this is to consider both
male and female candidates in connec-
tion with internal and external executive
recruitment and that atleast one candidate
from the under-represented sex is on the
short list when recruiting for management
positions. Furthermore, it willbe ensured
that both women and men are part of ALK's
talent pools for management positions.
ALK wishes fo have more attention to
women's career progression and devel-
opment and will offer female managers
participation in networks or mentoring
schemes.
When conducting the yearly Organisation-
alReview, ALK will have increased focus
on monitoring the share of women af all
management levels.
Non-financial key figures;
2008 2009 2010 2011 2012 2013
Working environment
Accidents with absence (number) 10 3 4 8 13 11
Accidents with absence (days/full-time employees) 0.157 0.074 0.094 0.062 0.045 0.053
Resource consumption
Energy (MWh) - in realterms 25,603 30,272 34,986 36,530 37,368 40,390
Energy (MWh): - adjusted 37,400 37,837 37,502 37,584 37,368 -
100% 101% 100% 100% 100% -
Water (m3) 62,320 90,369 102,048 97,230 99,151 111,125
Emissions
CO- (tonnes) - in realterms 7,606 8,829 9,945 10,409 10,396 9,172
COz (tonnes)" - adjusted 11,888 11,163 11,180 10,747 10,396 -
100% 91% 914% 90% 87% -
Wastewater (m2) 53,737 56,956 65,535 68,825 72,068 74,120
Waste disposal
Waste (tonnes) 342 324 467 479 571 578
For recycling (%) 38 34 34 32 34 34
Production sites
Årea (m?) 46,060 56,443 58,457 58,525 61,587 68,526
3 Data from production sites in Hørsholm, Madrid, Vandeuil, Varennes, Lelystad, Port Washington, Round Rock, Post Falls, Spring Mills and Mississauga,
4 To make figures comparable, base year (2008) has been adjusted in terms of establishment of new production sites, closure of old production sites and acquisitions. By end
of 2013 it was not yet possible to calculate and adjust for the changes.
1403174EogSN63108
ad Managemert's review
Shareholder information
The aim of ALK is that the share price
should give a fair presentation of and
reflect the company's actual and expected
ability to create shareholder value. ALK
would furthermore like the share to be
liquid and to have a sound foundation
for an efficient pricing and trading in the
share. In order to further these objecfives,
ALK seeks to provide timely, accurate and
relevant information on matters of im-
portance to the assessment ofthe share,
including strategy, operations, perfor-
mance, expectations, goals, research and
development as well as markets.
Ownership
Atthe end of the year, the company had
12,999 registered shareholders - a little
less than fhe previous year (13,302). The
registered shareholders still own approxi-
mately 95% of the share capital.
ALK's holding of treasury shares rep-
resented 4,6% (4.5%) after the share
Core data for the share
Share capital DKK 101,283,600
Nominal value per share DKK 10
Number of A shares 920,760 units with 10 votes per share
Number of B shares 9,207,600 units with 1 vote per share
Stock Exchange NASDAQ OMX Copenhagen
Ticker symbol ALKB
Indices CX4500 (healthcare), OMXCMCGI (MidCap) and OMXCP] (all)
ISIN DK0060027142
Bloomberg code ALKB.DC
Reuters code ALKB. CO
Notified shareholdings of 5% or more of the company's shares
Registered office Shares, number interest Votes
The Lundbeck Foundation — Hellerup, Denmark 920,720 A shares
3,158,935 B shares 40.3% 67.2%
ATP" Hillerød, Denmark 620,169 B shares 6.1% 3.4%
= The Danish Labour Market Supplementary Pension
Relative share price development 2013
= ALK | — Stallergenes (main competitor) — OMX Nordic Mid Cap — OMXC20
Price (Indexed fo 100)
160
ANT
150 7
140
130
120 Å
SES
SEEST
VRÅ VT
ge
110
mo CÉ2
NNE Va JFTRAA
He df
Jan Feb Mar Apr May
Source: FactSet Prices
June
July Aug Sep Oct Nov Dec
buy-back during the year as a hedge of
incentive schemes. From May 2012 to Feb-
ruary 2013, ALK purchased 110,632 own
shares amounting to approximately DKK
42 million under the programme initiated
on 15 May 2012, of which a total of 13,529
shares amounting to approximately DKK
5.5 million were purchased in 2013.
Twenty ofthe thirty largest shareholders
are international investors from North
America, the UK and Scandinavig, in
particular. The international ownership
is considered to have remained largely
unchanged at approximately 23%, repre-
senting 40% of the free float ofthe share
capital.
Shareholder return
ALK aims at providing long-term share-
holder return fhrough an increased share
price, pay-out of dividends and purchase
of own shares.
Atthe beginning ofthe year, the price of
the ALK share was DKK 389 and at the
end ofthe year the price was DKK 614.
Including payment of dividend for the year
of DKK 5 per share, the return onthe ALK
share was 60%. In comparison, the Danish
benchmark OMXC20 index increased by
24% and the Nordic MidCap index by 37%.
Dividend and capital structure
The Board of Directors will submit a recom-
mendation for fhe dividend on the basis
of ALK's actual earnings, risks, strategy,
capital resources, investment plans and
future prospects. Atthe annual general
meeting to be held in March 2014, the
Board of Directors intends to propose an
unchanged dividend of DKK 5 per share.
The Board of Directors considers ALK's
capital structure to be appropriate for the
time being relative to the company's strat-
egy. ALK is well-consolidated, with strong
liquidity, reasonable debt obligations and
stable earnings relating to operations. lt
is therefore possible to make considerable
investments in research and develop-
ment, and the financial strength facilitates
acaquisitions.
Management's review
Liquidity ofthe share
On average, the volume of shares traded
during 2013 was 9,036 shares per day
compared to 7,815 shares per day the pre-
vious year, Measured in value fhe volume
oftraded shares was higher compared to
2012 with afurnover per trading day of
approximately DKK 4.4 million. Approxi-
mately 90% ofthe trading in the ALK share
took place at NASDAQ OMX Copenhagen,
and the most active stockbrokers were
Nordea Bank, Danske Bank, Nordnet Bank,
Sydbank, Deutsche Bank, Jyske Bank and
Morgan Stanley Bank, which together ac-
counted for 55% of the turnover.
Investor Relations
Based on the IR Policy, ALK continuously
works to strengthen the dialogue with
shareholders, analysts, potential inves-
tors, the media and other stakeholders.
Inthis dialogue, ALK aims at being open,
available, service-minded and balanced in
accordance with good Investor Relations
practice and the provisions for companies
listed on NASDAQ OMX Copenhagen. The
IR Policy is available at www.alk-abello.
com/investor.
Following publication of interim financial
statements, ALK hosts telephone confer-
ences for investors, analysts and the
media, The conference can be accessed
real-time by all interested parties viathe
website. Furthermore, during the year
members of the Board of Management
and Investor Relations are available
for one-on-one meetings, conferences,
seminars and other dialogues. In 2013,
ALK had approximately 250 individual
meetings with analysts and investors, and
ALK also participated in various confer-
ences and seminars. With specific focus
on private investors ALK has, among
other things, published the e-newsletter
eNewseALK.
ALK is followed by analysts from 12 Scandi-
navian, English, Dutch and German stock-
brokers who regularly make comments
and recommenddafions on the share. The
list is available on the website.
During the year, ALK published 30 com-
pany releases (27) as well as weekly
1403174EogSN63109
status notifications under the share buy-
back programmes. All releases and status
notifications are available on the website.
The responsibility for IR rests with the
Board of Management and Per Plotnikof,
Director IR & Strategic Planning, is respon-
sible for the day-to-day IR tasks.
Website and InvestorPortal
ALK provides easy and equal access to in-
formation via the website www.alk-abello.
com/investor, which is updated regularly
with company releases, e-newsletters,
reports, presentations, telephone confer-
ences, share price etc. ALK encourages
interested parties to register for a news
service whereby itis possible to receive
material by e-mail upon publication.
Registered shareholders have access to
ALK's InvestorPortal. On the portal, share-
holders can see their holding ofregistered
ALK shares, register for the general meet-
ing, cast votes in advance ofthe general
meeting and order material. On the portal,
shareholders should enter their e-mail
addresses to receive the notice convening
the general meeting as well as ofher news
from ALK via e-mail.
Annual general meeting in 2014
The annual general meeting will be held
on 12 March at 4.00 p.m. atthe company's
address: Bøge Allé 1, 2970 Hørsholm,
Denmark.
Financial calendar 2014
Annual general meeting 12 March
Payment of dividend 18 March
Three-month interim report (Q1) 8 May
Six-month interim report(Q2) 13 August
Nine-month interim report (Q3) 14 November
The Lundbeck Foundation
The Lundbeck Foundation is the largest
and controlling shareholder of ALK, own-
ing 67% of the votes (40% of the capital). It
is an active industrial foundation estab-
lished in 1954 by Grete Lundbeck, widow
ofthe founder of Lundbeck, The objective
ofthe Foundation is in part to maintain and
expand the activities of Lundbeck as well
as of the Foundation's other subsidiaries
and portfolio companies through active
value-adding ownership, and in part to
provide grants for scientific research of
the highest international quality in order
to make a significant difference to human
health and life. Grants are given based on
external peer review and independently of
ALK and Lundbeck.
In addition to its ownership of ALK, the
Foundation also has controlling share-
holdings in Lundbeck and Falck and
manages its portfolio of financial invest-
menfs through Lundbeckfond invest and
Lundbeckfond Ventures. The Foundation
annually grants between DKK 400-500 mil-
lion to support medical research and edu-
cational and communication activities. The
Lundbeck Foundation has in recent years
increased its focus on personal grants.
The Foundafion's latest initiative, Lund-
beckfond Emerge, works to accelerate
the commercialisation of early scientific
projects by way of investment and active
project participation.
For further information on the Foundation,
please visifwww.lundbeckfonden.com.
eNnewsQØALK
Sign up for ALK's electronic newsletter at
www.alk-abello.com/media/Pages/
Newsletter.aspx
or scan the QR-code.
"P
5]
spg else ge
Hrlg
SD RE
Fl
ØD Management'e review
Corporate governance
The Board of Directors defines the stra-
tegic framework for ALK's action plans and
activities on fhe basis of objectives, strat-
egies and policies. Furthermore, on behalf
ofthe shareholders, the Board of Directors
supervises the organisation, monitors pro-
cedures and responsibilities and sees that
the company is managed appropriately
and in accordance with legislation and fhe
articles of association.
The Board of Directors appoints a Board of
Management to undertake the day-to-day
management of ALK. The Board of Direct-
ors sets outthe terms and tasks ofthe
Board of Management, supervises its work
and seeks a consftructive dialogue with
the Board of Management regarding the
implementation of the selected strategies
and the development ofthe company.
The Board of Directors is authorised to let
ALK acquire up to 10% ofthe Company's
own B shares. Furthermore, the Board
of Directors is authorised fo increase
the share capital by up to nominally DKK
10,128,360 new shares - the ratio being
up to nominally DKK 920,760 A shares and
DKK 9,207,600 B shares. Both authorisa-
tions are valid for the period untilthe next
annual general meeting in 2014.
The Board of Directors also has a standing
authorisation to decide to pay extraordin-
ary dividend, and, finally, the Board of
Directors may issue warrants until 2016,
granting the Board of Management and
key employees the right to subscribe for up
to 280,000 8 shares.
Composition of the Board of Directors
The Board of Directors consists of nine
members - six members elected by
fhe shareholders at the annual general
meeting and fhree members elected by
the company's employees. The members
elected by the shareholders are elected for
a one-year term and the members elected
by the employees for a four-year term. The
age limit is 70 years.
Atthe annual general meeting in 2013,
Jakob Riis was elected as a new mem-
ber instead of Lars Holmqvist. The other
members were re-elected. The Board
of Directors subsequently elected Steen
Riisgaard as Chairman and Christian Dyvig
as Vice Chairman.
The members ofthe board committees
elected by the Board of Directors are listed
on page 26.
The composition of ALK's Board of Direct-
øors is generally established with the em-
phasis on the members having experience
from the management of international
companies, particular regard being given
to their insight into the management and
globalisation ofR&D driven companies.
The Board of Directors is deemed to have
the competences that are relevant to
further the development of ALK.
None ofthe members elected by the
shareholders have previously been em-
ployed with ALK, and none ofthem have an
interest in ALK other than the interests they
may have as shareholders. Three ofthe
members elected by the shareholders are
affiliated with ALK's principalshareholder,
fhe Lundbeck Foundation, while the other
three are independent. Allthe members"
profiles can be seen on page 26.
Corporate Governance
Since 2005, the Committee on Corporate
Governance has drawn up a set ofrecom-
mendations on corporate governance
that has been adopted by NASDAQ OMX
Copenhagen. The recommendations are
generally in compliance with the practice
ofthe OECD. ALK's Board of Directors has
continuously taken the Committee's rec-
ommenddations into consideration.
In 2013,the Committee on Corporate
Governance presented a new set ofrecom-
mendations. ALK has considered allthe
Committee's 47 guidelines in a'comply or
explain' review available on ALK's website
at http:/ /ir.alk-abello.com/guidelines.cifm.
ALK is in full compliance with allthe guide-
lines but two where the company complies
partially: According to the guidelines,
the remuneration ofeach member ofthe
Board of Directors and Board of Manage-
ment should be disclosed in detail in the
annual report. The remuneration for each
member ofthe Board of Directors is dis-
closed but for the Board of Management
only the total remuneration is disclosed.
In addition, ALK describes the share op-
tions and conditionalshares granted to
each member of Board of Management,
however, ALK believes thaf the disclosure
of each Board of Management member's
individual salary and bonus would consti-
tute an invasion of their personal privacy.
The decisive factor is for the shareholders
to be abte to consider the overall remuner-
afion and its development. This is shown
in Note 4. Furthermore, the Charter ofthe
Nomination Committee is currently not
available on the company's website.
The Board of Directors? activities
The Board of Directors” work follows a
calendar, ensuring the consideration of all
relevant topics over the year. In 2013, the
Board of Directors held seven meetings
(six meetings in 2012), the meeting in Sep-
tember being a two-day seminar focusing
on strategy including the progress ofthe
Focus 2016 strategy. The Audit Committee
and the Remuneration Committee both
met three times (three meetings in 2012).
The new Scientific Committee met twice in
2013.
Atthe end of the year, the Board of Direct-
ors evaluated their work and their co-
operation with the Board ofManagement.
The evaluation was based on a question-
naire and on individual interviews with the
Board members as well as the members of
the Board of Management. The interviews
were conducted with fhe aid of an external
consultant who presented the results at
the Board of Directors" meeting in Novem-
ber. In general, the Board of Directors and
the Board of Management considered
the cooperation excellent. The evaluation
identified a number of topics Board of
Directors would like fo focus more on. One
topic, Risk management, has already been
discussed in the Audit Committee as well
as the Board of Directors. The other topics
willbe discussed in 2014.
In addition, fhe Audit Committee and the
Remuneration Committee evaluated their
work and their cooperation with the Board
of Management. The outcome ofthe evalu-
ation was very positive.
Directors? fees
The directors" fees were unchanged in
2013. The fees were approved by the
annualgeneral meeting in March. The
base fee is DKK 275,000, the Vice Chair-
man receiving double the amount and the
Chairman getting three times the base fee.
In addition, the members of the Remu-
Management's review
neration Committee, the Audit Commitfee
and the Scientific Committee receive a fee
of DKK 100,000 - the Chairman ofeach
Committee receiving DKK 150,000. The
Board of Directors recommends to the
annual general meeting that the fees be
maintained in 2014. The members of the
Board of Directors are not offered any
share options, conditional shares or ofher
incentive plans.
The Board of Directors” shares in ALK
Holdingasat Changes
31 December during
2013 theyear
Steen Riisgaard Q -
Christian Dyvig” 0 -
Jacob Kastrup 8 -
Thorleif Krarup” 700 -
Anders Gersel Pedersen 0 -
Jakob Riis 550 +550
Dorthe Seitzberg 102 -
Katja Barnkob Thalund 24 -
Jes Østergaard” 227 -
Total 1,611 +550
= Christian Dyvig, Thorleif Krarup and Jes Øster-
gaard are affliated with the Lundbeck Foundation
which owns 40.3% of ALK.
Board of Management remuneration
The remuneration ofthe Board of Manage-
ment is approved by the annual general
meeting. The remuneration is a combi-
nation of fixed and performance-based
pay fo ensure attraction and retention of
key persons. Afthe same time the Board
of Management is given an incentive to
The Board of Management's ownership interests in ALK as at 31 December 2013
create shareholder value through parfly
incentive-based pay.
In addition to the fixed wages, pension
and usual non-pay benefits, the Board of
Management is eligible for a cash bonus
restricted to six and four months, respec-
tively, ofthe base salary ofthe President
and CEO and the other members of the
Board ofManagement.
Moreover, Board ofManagement and
other key employees are granted share
options and conditional shares. The value
ofthe share options and conditional
shares may not exceed 30% ofthe individ-
ual member ofthe Board of Management's
total base salary plus pension.
The granis to the Board ofManagement
appear from the below table and are
described in detailin Note 5. The total
remuneration ofthe Board ofManagement
appears in Note 4.
Atthe annual general meeting in 2014, the
Board of Directors will propose amend-
ments to the guidelines for incentive pay
to the Board of Management. The Board
proposes fhatin addition to the fixed
wages, pension and usual benefits, the
Board of Management is eligible for a cash
bonus restricted to nine and six months,
respectively, ofthe base salary ofthe
President and CEO and the other members
ofthe Board of Management. Moreover,
the total value ofthe share options and
conditional shares may not exceed 30% of
the Board ofManagement's total salaries
plus pension.
Changes Net changes Con- … Changes
during during the ditional during
Shares the year Options year? shares the year
Jens Bager 11,713 - 84,650 +7,300 3,750 +1,850
Henrik Jacobi 8 - 51,975 +4,150 2,100 +1,050
Flemming Steen Jensen 127 - 51,675 +3,850 2,050 +1,000
Søren Niegel 500 - 12,000 +5,000 1,875 +825
Flemming Pedersen 1,116 - U2,700 +6,700 2,150 +1,100
Total 13,464 " 243,000 +27,000 11,925 +5,825
£ The figure indicates the net movement in the course of the year, i,e, options granted less expired options
Other facts
Other facts concerning ALK's corpo-
rate governance, including its annual
general meeting, management, articles
of association, reporting, remuneration,
trade in own shares, etc., are available
on ALK's website at
www.alk-abello.com/investor
1403174EogSN63110
D Mnnagemeni's review
Board of Directors and Board of Management
Board of Directors
Steen Rusgaard
Steen Riisgaard (1951)
Chairman
Board member since 2011
Member of the Audit Com-
mittee
Member of the Remunera-
tion Committee
Competences
Management and board
work as well as experi-
ence in research and de-
velopment and sales and
marketing in international
companies.
Directorships
COWI Holding A/S, Chair-
man
Egmont International Hold-
ing A/S, Vice Chairman
Novo A/S
ROCKWOOL International
A/S, Chairman
Xellia Pharmaceutical A/S,
Chairman
The Egmont Foundation,
Vice Chairman
The Novo Nordisk Founda-
tion
The Willum Foundation
Aarhus University
Christian Dyvig
Jakob Rus
Christian Dyvig (1964)"
Vice Chairman
The Lundbeck Founda-
tion, CEO
Board member since 2012
Competences
Extensive international
experience from the finan-
cial sector with special
focus on acquisitions and
expertise in strategic
ownership.
Directorships
H. Lundbeck A/S, Vice
Chairman
FIH Erhvervsbank A/S,
Chairman
CP Dyvig & Co.
Jacob Kastrup (1961)
Board member since 2011
Project Coordinator,
ALK-Abellå A/S
Employee-elected
Jacob Kastrup
Bonne mr
Dorthe Seitzberg
Thorleif Krarup (1952)"
Board member since 2005
Chairman of the Audit
Committee
Competences
Experience in manag-
ing large international
companies. Financial and
economic expertise. Ex-
tensive board experience
from listed companies in
Denmark, the UK and USA.
Directorships
Bisca A/S
Exiqon A/S, Chairman
Falck A/S, Vice Chairman
H. Lundbeck A/S
The Lundbeck Foundation
Katja Barnkob Thalund
Anders Gersel Pedersen
(1951)
H. Lundbeck A/S, Execu-
tive Vice President
Board member since 2005
Member ofthe Remunera-
tion Committee
Chairman of the Scientific
Committee
Competences
Experience in manage-
ment, innovation and
research and develop-
ment inthe international
pharmaceutical industry.
Directorships
Bavarian Nordic A/S
Genmab A/S, Vice Chair-
man
Jakob Riis (1966)
Novo Nordisk A/S, Execu-
tive vice president
Board member since 2013
Member of the Audit Com-
mittee
Competences
Experience in manage-
ment, sales and marketing
inthe international
pharmaceutical industry.
Directorships
Copenhagen Institute of
Interaction Design, Chair-
man
Jes Østergaard
Dorthe Seitzberg (1968)
Board member since 2011
Manager, Clinical Devel-
opment, ALK-Abellé A/S
Employee-elected
Katja Barnkob Thalund
(1969)
Board member since 2011
Senior CMC Project Man-
ager, ALK-Abellé A/S
Employee-elected
Jes Østergaard (1948)"
Board member since 2011
Chairman ofthe Remu-
neration Committee
Competences
Extensive experience in
management of interna-
tional companies within
biotech, pharmaceuticals
and diagnostics as well
a5 board experience from
listed companies.
Directorships
H. Lundbeck A/S
Scion DTU A/S
+ These board members are not regarded as independent in the sense of the definition contained in the Danish recommendations on Corporate Governance.
ms
Management's review ØD
Board ofManagement
|:
Ge
+
add: dt
Jens Bager Henrik Jacobi Flemming Steen Jensen Søren Niegel Flemming Pedersen
Jens Bager (1959) Henrik Jacobi (1965) Flemming Steen Jensen Søren Niegel (1971) Flemming Pedersen
President & CEO Executive Vice President (1961) Executive Vice President (1965)
Research 5 Development Executive Vice President Commercial Operations CFO & Executive Vice
Directorships Product Supply President
Ambu a/s, Chairman Finance, IT, IR & Business
Directorships Development
QAtor A/S, Chairman
Directorships
MBIT A/S
1403174EogSN63111
AD Statement by Management on the Ommuol report
Statement by Management on the annual report
The Board of Directors and the Board of
Management have today considered
and approved the annual report of
ALK-Abellå A/S for the financial year
1 January to 31 December 2013.
The consolidated financial statements
have been prepared in accordance
with Internafional Financial Reporting
Standards as adopted by the EU, and the
prepared in accordance with Danish dis-
closure requirements for listed companies.
In our opinion, the consolidated finan-
cial statements and fhe parent financial
statements give a true and fair view ofthe
Group's and the Parent's financial position
at31 December 2013 as well as oftheir
financial performance and the Group's
cash flow for the financial year 1 January
and performance ofthe Group's and the
Parent's business and of their position as
well as the Parent's financial position and
the financial position as a whole ofthe en-
fities included in the consolidated financial
statements, together with a description of
the principal risks and uncertainties that
the Group and the Parent face.
We recommend the annual report for
financialstatements of the parent com- to 31 December 2013.
pany have been prepared in accordance
with the Danish Financial Statements Act.
In addition, the annual report has been
adoption atthe annual general meeting.
We believe that the management review
contains a fair review ofthe development
Hørsholm, 5 February 2014
Flemming Steen Jensen
Executive Vice President
Product Supply
Flemming Pedersen
CFO, Execttive Vice President
Finance, IT, IR & Business
Development
SørenNiegel
Executive Vice President
Commercial Operations
Executive Vice President
Research & Development
Board of
| (EC
(Zee (zæ
Christia vig cob Kastru
Vice Chair
n
A JE ae VE æ
Anders Gersel Pedersen Jakob Riis
6 .
ber Åh AT
øl CH Thalund es Østergaar!
Prsertæ av eBepta af the Orrirus
Independent auditor's report
Independent auditor's report
To the shareholders of ALK-Abellé A/S
Report on the consolidated financial
statements and parent financial
statements
We have audited the consolidated
financial statements and parent financial
statements of ALK-Abellé A/S for the finan-
cial year 1 January to 31 December 2013,
which comprise the income statement,
balance sheet, statement of changes in
equity and notes, including the account-
ing policies, for the Group as well as for
the Parent, and the statement of compre-
hensive income and cash flow statement
for the Group. The consolidated financial
statements are prepared in accordance
with International Financial Reporting
Standards as adopted by the EU and
Danish disclosure requirements for listed
companies and the parent financial state-
ments are prepared in accordance with
the Danish Financial Statements Act.
Management's responsibility for the
consolidated financial statements and
parent financial statements
Management is responsible for the prep-
aration of consolidated financial state-
ments that give atrue and fair view in
accordance with International Financial
Reporting Standards as adopted by the EU
and Danish disclosure requirements for
listed companies as well as the prepara-
tion of parent financial statements that
give a true and fair view in accordance
with the Danish Financial Statements Act,
and for such internal control as Manage-
ment determines is necessary to enable
the preparation of consolidated financial
statements and parent financial state-
ments that are free from material mis-
statement, whether due to fraud or error.
Copenhagen, 5 February 2014
Deloitte
Statsautoriseret Revisionspartnerselskab
1403174EogSN63112
Auditor's responsibility
Our responsibility is to express an opinion
onthe consolidated financial statements
and parent financial statements based
on our audit. We conducted our audit in
accordance with International Standards
on Auditing and additional requirements
under Danish audit regulation. This re-
quires that we comply with ethical require-
ments and plan and perform the audit
to obtain reasonable assurance about
whether the consolidated financial state-
ments and parent financial statements are
free from material misstatement.
An audit involves performing proce-
dures to obtain audit evidence aboutthe
amounts and disclosures in the consolidat-
ed financial statements and parent finan-
cial statements. The procedures selected
depend on the auditor's judgement, in-
cluding the assessment of the risks of ma-
terial misstatements ofthe consolidated
financial statements and parent financial
statements, whether due to fraud or error.
In making those risk assessments, the
auditør considers internal control relevant
to the entity's preparation of consolidated
financial statements and parent financial
statements that give atrue and fair view in
order to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
onthe effectiveness ofthe entity's internal
control. An audit also includes evaluating
the appropriateness of accounting policies
used and the reasonableness of account-
ing estimates made by Management, as
well as the overall presentation ofthe con-
solidated financial statements and parent
financial statements.
[hat Farah
Martin Faarborg
State Authorised Public Accourfant
We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Our audit has not resulted in any qualifica-
tion.
Opinion
In our opinion, the consolidated financial
statements give atrue and fair view ofthe
Group's financial position at 31December
2013, and ofthe results ofits operations
and cash flows for the financial year 1
January fo 31 December 2013 in accord-
ance with International Financial Report-
ing Standards as adopted by the EU and
Danish disclosure requirements for listed
companies.
Further, in our opinion, the parent financial
statements give a true and fair view ofthe
Parent's financial position af 31December
2013, and of the results of its operations
for the financial year 1 January to 31
December 2013 in accordance with the
Danish Financial Statements Act.
Statement on management's review
Pursuant to the Danish Financial State-
ments Act we have read the manage-
ment's review. We have not performed any
further procedures in addition fo the audit
ofthe consolidated financial statements
and parent financial statements.
Onthis basis, itis our opinion thatthe in-
formation provided inthe managemenf's
review is consistent with the consolidated
financial statements and parent financial
statements.
Consolidated
Hnancial stafements
2013
Consolidated financial statements
Content
Consolidated financial statements
Income statement 32
Statement of comprehensive income 32
Cash flow statement 33
Balance sheet - Assets 34
Balance sheet - Equity and liabilities 35
Equity 36
Notesto the consolidated financial statements
1. Accounting policies 37 16. Receivables from affliates 49
2 Significant accounting estimates and judgemenis — 42 17 Receivables and prepayments 50
3 Segment information 43 18 Cash and cash equivalents 50
4 Staff costs 4 19 Share capital and earnings per share 50
5 Share-based payments 44 20 Pensions and similar liabilities 51
6 Depreciation, amortisation and impairment 46 21 Mortgage debt, bank loans and financial loans 52
7. Special items 46 22 Other provisions 53
8 Financialincome and expense 46 23 Other current liabilities 53
9 Tax on profit for the year, continuing operations 46 24 Changes in working capital 53
10. Past discontinued operations 46 25 Contingent liabilities and commitments 53
11 Intangible assets 47 26 Operating lease liabilities 53
12 Property, plantand equipment 48 27. Finance lease liabilities 53
13 Deferred tax 49 28 Exchange rate, interest rate and credit exposure
14 Securities and receivables 49 and the use of derivative financial instruments 54
15 Inventories 49 29 Feestothe ALK Group's auditors 56
30 Related parties 56
List of companies in the ALK Group 57
Definitions 58
1403174EogSN63113
& Consolidated financial statements
Income statement
Amounts in DKKm Note 2013
Revenue 3 2,244
Cost of sales 4-7,15 697
Gross profit 1,547
Research and development expenses 4-7 463
Sales and marketing expenses 4-7 762
Administrative expenses 4-7 192
Other operating income 2
Other operating expenses 1
Operating profit (EBIT) before special items 131
Special items 7 (22)
Operating profit (EBIT) 109
Financial income 8 20
Financial expenses 8 25
Profit before tax (EBT) 104
Tax on profit, continuing operations 9 43
Net profit, continuing operations 61
Net profit, past discontinued operations 10 -
Net profit 61
Earnings per share (EPS) 19
Earnings per share (EPS) - DKK 6.31
Earnings per share (EPS), continuing operations - DKK 6.31
Earnings per share (DEPS), diluted - DKK 6.24
Earnings per share (DEPS), diluted, continuing operations - DKK 6.24
Amounts in DKKm Nofe 2013
Net profit 61
Other comprehensive income
Items that willnot subsequently be reclassified to the Income statement:
Actuarial profit/ (loss) on pension plans 20 3
Tax related to actuarial profit/ (loss) on pension plans -
Items that willsubsequently be reclassified to the Income statement, when specific conditions are met:
Foreign currency translation adjustment of foreign affiliates (18)
Fair value adjustment of financial assets available for sale 10
Gain on sale of financial assets availabte for sale recognised in financial income (20)
Tax related to other comprehensive income, that will subsequently be reclassified to the Income statement 9 5
Other comprehensive income (20)
Total comprehensive income 41
Consolidated financial statements &
Cash flow statement
Amounts in DKKm Note 2013 2012
Net profit 61 209
Adjustments
Change in provisions and payables from past discontinued operations - (155)
Tax on profit 9 43 59
Financialincome and expenses 5 5
Share-based payments 5 14 11
Depreciation, amortisation and impairment 6 127 124
Change in provisions (6) 70
Changes in working capital 24 6 (81)
Net financial items, paid 14 4
Income taxes, paid (118) (155)
Cash flow from operating activities 146 91
Additions, intangible assets 11 (67) (60)
Additions, tangible assets 12 (186) (183)
Change in other financial assets 14 22 -
Cash flow from investing activities (231) (243)
Free cash flow (85) (152)
Dividend paid to shareholders ofthe parent (49) (49)
Purchase of treasury shares (6) (69)
Exercise of share options 5 (14) -
Change in financial liabilities (5) (2)
Cash flow from financing activities (74) (120)
Net cash flow (159) (272)
Cash and cash equivalents beginning ofyear 4177 754
Unrealised gain/ (loss) on foreign currency and financial assets carried as cash and cash equivalents (6) (5)
Net cash flow (159) (272)
Cash and cash equivalents year end 18 312 477
The cash flow statement has been adjusted to the effect that exchange rate adjustments in foreign subsidiaries are not included inthe statement. Asa
result, the individual figures in the cash flow statement cannot be reconciled directly to the income statement and balance sheet.
1403174FogSN63114
ad Consolidated financial statements
Balance sheet - Assets
31 Dec. 31 Dec. 31 Dec.
Amounts in DKKm Note 2013 2012 2011
Non-current assets
Intangible assets
Goodwill 11 407 409 408
Other intangible assets 11 267 240 211
674 649 619
Tangible assefs
Land and buildings 12 610 644 561
Plant and machinery 12 265 254 176
Other fixtures and equipment 12 60 63 62
Property, plant and equipment in progress 12 470 362 437
1,405 1,323 1,236
Other non-currents assets
Securities and receivables 14 24 56 35
Deferred tax assets 13 136 82 69
160 138 104
Totalnon-current assets 2,239 2,110 1,959
Current assets
Inventories 15 336 295 291
Trade receivables 17 224 248 254
Receivables from affliates 16 57 61 -
Income tax receivables 12 12 30
Other receivables 17 58 U6 31
Prepayments 17 30 46 36
Cash and cash equivalents 18 312 477 754
Total currents assets 1,029 1,185 1,396
Total assets 3,268 3,295 3,355
Consolidated financial statements &
ob Balance sheet - Equity and liabilities
31 Dec. 31 Dec. 31 Dec.
Amounts in DKKm Note 2013 - 2012 2011
Equity
Share capital 19 101 101 101
Currency translation adjustment (27) (9) (9)
Retained earnings 2,175 2,165 2,071
Total equity 2,249 2,257 2,163
Liabilities
Non-current liabilities
Mortgage debt 21 22 24 25
Bank loans and financial loans 21 300 303 305
Pensions and similar liabilities 20 147 144 98
Other provisions 22 15 7 142
Deferred tax liabilities 13 33 19 21
517 497 591
Current liabilities
Morigage debt 21 2 1 1
Bank loans and financial loans 21 3 4 3
Trade payables 23 100 136 147
Income taxes 28 17 61
Other provisions 22 34 54 -
Other payables 23 335 329 315
Prepayments - - 74
502 541 601
Total liabilities 1,019 1,038 1,192
Total equity and liabilities 3,268 3,295 3,355
1403174EogSN63115
aa Consolidated financial statements
EqQUITY
Currency
Share translation Retained Total
Amounts in DKKm capital adjustment earnings equity
Equity af 1 January 2013 101 (9) 2,192 2,284
Effect of change in accounting policies - - (27) (27)
Adjusted equity at 1 January 2013 101 (9) 2,165 2,257
Net profit - - 61 61
Other comprehensive income - (18) (2) (20)
Total comprehensive income - (18) 59 U1
Share-based payments - - 14 14
Share options settled ” - (14) (14)
Purchase of treasury shares - - (6) (6)
Tax related to items recognised directin equity - - 6 6
Dividend paid - - (51) (51)
Dividend on treasury shares - - 2 2
Other transactions - ” (49) (49)
Equity at31 December 2013 101 (27) 2,175 2,249
Equity at 1 January 2012 101 (9) 2,075 2,167
Effect of change in accounting policies - - (4) (4)
Adjusted equity at 1 January 2012 101 (9) 2,071 2,163
Net profit - - 209 209
Other comprehensive income - - (8) (8)
Total comprehensive income - - 201 201
Share-based payments - - 11 11
Purchase oftreasury shares - - (69) (69)
Dividend paid - - (51) (51)
Dividends on treasury shares - - 2 2
Other transactions - - (107) (107)
Equity af31 December 2012 101 (9) 2,165 2,257
Consolidated financial stfatements
er»
Notes to the consolidated financial stafements
1 Accounting policies
General
The consolidated financial statements for
the period 1 January - 31 December 2013
have been prepared in accordance with the
International Financial Reporting Standards
(IFRS) as adopted by the EU and additional
Danish disclosure requirements for annual
reports of listed companies. Additional Danish
disclosure requirements for the annual reports
are imposed by the Statutory Order on Adop-
tion of IFRS issued under the Danish Financial
Statements Act.
The consolidated financial statements are
presented in Danish kroner (DKK), which is
considered the primary currencies ofthe
Group's activities and the functional currency
ofthe parent company.
The consolidated financial statements are
presented on a historical cost basis, apart from
certain financial instruments which are meas-
ured at fair value. Otherwise, the accounting
policies are as described below.
The accounting policies are unchanged from
last year except for the changes described
below.
The accounting policies have been changed
with respect to the implementation ofthe
amendment to IAS 19: Employee Benefits and
implementation ofthe amendmentto IAS 1:
Presentation of Financial statements.
Due to the implementation ofthe amendment
to lAS 19, ALK has ceased using the "cor-
ridor method” for actuarial gains and losses.
In future, changes in the expected pension
obligations and plan assets willbe recognised
immediately in other comprehensive income.
Previously, the "corridor method” made it pos-
sible to defer recognition of certain actuarial
gains and losses. The comparative figures
for 2012 have been restated accordingly and
accumulated actuarial gains and losses are
recognised directly in equity. The total effect
ofimmediately recognised actuarial gains
and losses in the statement of comprehensive
income is recognised in Q4, The effect on equity
is presented inthe table below:
Amounts in DKKm . 2013 2012
Equity, beginning of
year, previous policy 2,284 2,167
Deferred actuarial
losses, reversed ' (40) (5)
Deferred tax 13 1
Equity, beginning
of year, new policy 2,257 2,163
1403174EogSN63116
For the 2013 financial year, equity was reduced
by DKK 27 million, the pension liability was
increased by DKK 40 million and the deferred
tax asset was increased by DKK 13 million. For
the 2012 financial year, the change in account-
ing policy decreased equity by DKK 4 million,
increased the pension liability by DKK 5 million
and increased the deferred iax asset by DKK 1
million.
Implementation of IAS 19 did not have any
effect on profit before tax, tax, and profit for the
year or earnings per share.
Implementation ofthe amendmentto IAS 1 af-
fects fhe presentation of other comprehensive
income. Items are grouped based on whether
they are to be reversed fhrough the income
statement or not.
Effect of new financial reporting standards
The ALK Group has implemented all new and
amended standards and interpretations
(IFRIC) which are effective for the financial year
2013.
A number ofIFRS standards, amended
standards and IFRIC interpretations which are
effective on or after 1 January 2014 have not
been implemented, Itis estimated that these
standards and interpretations are deemed to
have no material impact on the consolidated
financial staftements in the coming years.
The consolidated financial statements
The consolidated financial statements com-
prise the financial statements of ALK-Abelld
A/S (the parent company) and companies
(subsidiaries) controlled by the parent com-
pany. The parent company is considered to
control a subsidiary when it holds, directly and
indirectly, more than 50% ofthe voting rights
ør is otherwise able to exercise or actually exer-
cises a controlling influence.
Basis of consolidation
The consolidated financial statements are
prepared on the basis of the financial state-
ments of ALK-Abellé A/S and its subsidiaries.
The consolidated financial statements are
prepared as a consolidation of items of a uni-
form nature. The financial statements used for
consolidation are prepared in accordance with
the Group's accounting policies.
On consolidation, intra-group income and ex-
penses, intra-group balances and dividends,
and gains and losses arising on intra-group
transactions are eliminated.
Business combinations
Newly acquired or newly established com-
panies are recognised in the consolidated
financial statements from the date of acquisi-
tion or establishment. The date of acquisition is
the date when control ofthe company actually
passes to the Group. Companies sold or dis-
continued are recognised in the consolidated
income statement up to the date of disposal.
The date of disposal is the date when control of
fhe company actually passes to athird party.
Acquisitions are accounted for using the pur-
chase method, according to which the identifi-
able assets, liabilities and contingent liabilities
of companies acquired are measured at fair
value at the date of acquisition. Non-current
assets held for sale are, however, measured at
fair value less expected costs to sell.
Restructuring costs are only recognised in the
take-over balance sheet ifthey represent a
liability to the acquired company. The tax effect
ofrevaluations is taken into account.
The cost of a company is the fair value of the
consideration paid. Ifthe final determination of
the consideration is conditional on one or more
future events these are recognised at their fair
value as ofthe acquisition date.
Costs that can be attributed directly to the
transfer of ownership are recognised inthe
income statement when they are defrayed.
As a general rule, adjustments to estimates
of conditional consideration are recognised
directly to the income statemeni,
lfthe fair value ofthe acquired assets or li-
abilities subsequently proves different from the
values calculated at the acquisition date, cost
is adjusted for up to 12 months after the date of
acquisition.
Any excess of the cost of an acquired company
over the fair value ofthe acquired assets, li-
abilities and contingent liabilities (goodwill) is
recognised as an asset under intangible assets
and tested for impairment at least once a year.
lfthe carrying amount of an asset exceeds its
recoverable amount, the asset is written down
to the lower recoverable amount.
In connection with the fransition to IFRS in
2005/06, the ALK Group chose fo apply the
optional exemption in IFRS 1, under which busi-
ness combinations effected before 1 Septem-
ber 2004 are not adjusted in accordance with
the provisions of IFRS, except that identifiable
intangible assets acquired in business com-
binations are separated from the calculated
goodwill and recognised as separate items
under infangible assets.
Gains or losses on disposal of subsidiaries
Gains or losses on disposal of subsidiaries are
stated as the difference between the disposal
amount and the carrying amount ofnet assets
a Consolidated financial statements
Notes to the consolidated financial statements
1 Accounting policies (continued)
including goodwill at the date of disposal,
accumulated foreign exchange adjustments
recognised in other comprehensive income,
and anticipated disposal costs. The disposal
amount is measured as the fair value ofthe
consideration received.
Foreign currency translation
On initial recognition, transactions denomi-
nated in currencies other than the Group's
functional currency are translated at average
exchange rates, which are an approximation
ofthe exchange rates at the transaction date.
Receivables and debt and other monetary
items not settled afthe balance sheet date are
translated at the closing rate.
Exchange rate differences between the
exchange rate atthe date ofthe transaction
and the exchange rate at the date of payment
or the balance sheet date, respectively, are
recognised inthe income statement under
financial items. Tangible assets and intangible
assets, inventories and other non-monetary
assets acquired in foreign currency and meas-
ured based on historical cost are translated
atthe exchange rates at the transaction date.
Non-monetary items revalued at fair value are
translated at fhe exchange rates atihe revalu-
ation date.
On recognition in the consolidated financial
statements of subsidiaries whose financial
statements are presented in a functional cur-
rency other than DKK, the income statements
are translated at average exchange rates for
the respective months, unless these deviate
materially from the actual exchange rates at
thetransaction dates. In that case, the actual
exchange rates are used. Balance sheet items
are translated at the exchange rates at the
balance sheet date. Goodwill is considered to
belong to the acquired company in question
and is translated at the exchange rate afthe
balance sheet date.
Exchange rate differences arising on the trans-
lation of foreign subsidiaries' opening balance
sheet items fo the exchange rates at the bal-
ance sheet date and on the translation ofthe
income statements from average exchange
rates to exchange rates af the balance sheet
date are recognised in other comprehensive
income.
Foreign exchange rate adjustment of receiva-
bles or debtto subsidiaries which are consid-
ered part ofthe parent company's overall in-
vestment in the subsidiary in question are also
recognised in other comprehensive income in
the consolidated financial statements.
Derivative financial instruments
Derivative financialinstruments are measured
at fair value on initial recognition. Subse-
quently, they are measured aft fair value at the
balance sheet date.
Changes in the fair value of derivative financial
instruments designated as and qualifying for
recognition as fair value hedges of arecog-
nised asset or a recognised liability are recog-
nised inthe income statement together with
any changes in the value ofthe hedged asset or
hedged liability.
Changes in the fair value of derivative financial
instruments designated as and qualifying for
recognition as effective hedges of future trans-
actions are recognised in other comprehensive
income. When the hedged transactions are re-
alised, cumulative changes are recognised as
part ofthe cost of the transactions in question.
Changes in the fair value of derivative financial
instruments used to hedge net investments in
foreign subsidiaries are recognised in other
comprehensive income to the extent that the
hedge is effective. On disposal of the foreign
subsidiary in question, the cumulative changes
are transferred to the income statement.
For derivative financialinstrumenis that do not
qualify for hedge accounting, changes in fair
value are recognised as financial items in the
income stafement as they occur.
Share-based incentive plans
Share-based incentive plans (equity-settled
share-based payments) which comprise share
option plans and conditional share plans are
measured at the grant date at fair value and
recognised in fhe income statement under the
respective functions over the vesting period.
The balancing item is recognised in equity.
The fair value of share opfions is determined
using the Black & Schotes-model.
The share option agreement entitled ALK to
demand cash settlement of the options. Cash
settled share options are recognised as other
liabilities and adjusted to fair value when ALK
has an obligation to settte in cash. The subse-
quent adjustment to fair value is recognised in
the income statement under financial income
or financial expenses.
Tax
Tax on the profit for the year comprises the
year's current tax and changes in deferred tax.
The tax expense relating to the profit/loss for
the year is recognised in the income sfate-
ment, and the tax expense relating to items
recognised in other comprehensive income and
directly in equity, respectively, is recognised
in other comprehensive income or directly in
equity. Exchange rate adjustments of deferred
tax are recognised as part ofthe adjustment of
deferred tax for the year.
Current tax payable and receivable is recog-
nised in the balance sheet as the expected tax
on the taxable income for the year, adjusted for
tax paid on account.
The current tax charge for the year is calculated
based on the tax rates and rutes enacted at the
balance sheet date.
Deferred tax is measured using the balance
sheet liability method on alltemporary differ-
ences between the carrying amount and the
tax base of assefs and liabilities. However,
deferred tax is not recognised on temporary
differences relating to the initial recognition of
goodwillor the initial recognition ofatransac-
tion, apart from business combinations, and
where the temporary difference existing atthe
date of initial recognition affects neither profit/
loss for the year nor taxable income. Deferred
tax is calculated based on the planned use
of each asset and settlement of each liability,
respectively. Deferred tax is measured using
the tax rates and tax rules that, based on
legislation enacted or in reality enacted atthe
balance sheet date, are expected fo apply in
the respective countries when the deferred
tax is expected to crystallise as current tax.
Changes in deferred tax as a result ofchanged
tax rates or rules are recognised in the income
statement, in other comprehensive income or
in equity, depending on where the deferred fax
was originally recognised. Deferred tax related
to equity transactions is recognised in equity.
Deferred tax assets, including the tax value of
tax loss carry-forwards, are recognised in the
balance sheet at the value at which the asset
is expected to be realised, either through a
set-off against deferred tax liabilities or as net
assets fo be offset against future positive tax-
able income. Af each balance sheet date, itis
reassessed whether itis likely thatthere will be
sufficient future taxable income for the deferred
tax asset to be uiilised.
The parent company is included in national
jointly taxation with the Lundbech Foundation
and its Danish subsidiaries. The tax charge
for the year is allocated among the jointly
taxed companies in proportion to the taxable
incomes of individual companies, taking into
account taxes paid.
Consolidated financial statements
Notes to the consolidated financial statements
1 Accounting policies (continued)
Income statement
Revenue
Revenue from the sale of goods for resale
and manufactured goods is recognised in the
income statement if delivery and the transfer of
riskto the purchaser have taken place.
Revenue is measured as the fair value ofthe
consideration received or receivable.
Revenue is measured exclusive of VAT, taxes
etc. charged on behalf ofthird parties and less
any commissions and discounts in connection
with sales.
Furthermore, revenue includes licence income
and royalties from outlicensed products as well
as up-front payments, milestone paymentis and
other revenues in connection with research and
development partnerships. These revenues
are recognised when it is probable that future
economic benefits will flow to the ALK Group
and these benefits can be measured reliably.
Non-refundable payments that are not atfribut-
able to subsequent research and development
activities are recognised when the related right
is obtained, whereas payments attributable
to subsequentresearch and development
activities are recognised over the term of
the activities. When combined contracts are
entered into, the elements of the contracts
are identified and assessed separately for ac-
counting purposes.
Cost of sales
The item comprises cost of sales and produc-
tion costs incurred in generating the revenue
for the year, Costs for raw materials, consuma-
bles, goods for resale, production staff and a
proportion of production overheads, including
maintenance and depreciation, amortisa-
tion and impairment of tangible assets and
intangible assets used in production as well as
operation, administration and management
of factories are recognised in cost of sales and
production costs. In addition, the costs and
write-down to net realisable value of obsolete
and slow-moving goods are recognised.
Research and development expenses
The item comprises research and develop-
ment expenses, including expenses incurred
for wages and salaries, amortisation and
other overheads as well as costs relating to
research parinerships. Research expenses
are recognised in the income statement when
incurred. Due to the long development periods
and significant uncertainties in relation to the
development of new products, including risks
regarding clinical trials and regulatory approv-
als, itis fhe assessment that most ofthe ALK
Group's development expenses do not meet
1403174EogSN63117
the capitalisation criteriain IAS 38, Intangible
Assets. Consequently, development expenses
are generally recognised in the income state-
ment when incurred. Development expenses
relating fo individual minor development
projects running for short-term periods and
subjectto limited risk are capitalised under
other intangible assets.
Sales and marketing expenses
The item comprises selling and marketing ex-
penses, including salaries and expenses relat-
ing to sales staff, advertising and exhibitions,
depreciation, amortisation and impairment
losses on the tangible assets and intangible
assets used in the sales and marketing process
as well as other indirect costs.
Administrative expenses
The item comprises expenses incurred for
management and administration, including
expenses for administrative staffand man-
agemenr, office expenses and depreciation,
amortisation and impairment losses on the
tangible assets and intangible assets used in
administration.
Other operating income and other
operating expenses
Other operating income and other operating
expenses comprise income and expenses of
asecondary nature relative fo the principal
activities ofthe ALK Group.
Specialitems
Special items include significant income and
expenses of a special nature in terms ofthe ALK
Group's revenue-generafing operating activi-
ties, such as the cost of extensive restructuring,
as well as gains or losses arising from dispos-
als inthis connection which have a material
effect over a given period,
These items are shown separately in order
to give a more true and fair view ofthe ALK
Group's operating profit.
Financial items
Financial items comprise interest receivable
and interest payable, the interest element
of finance lease payments, realised and
unrealised gains and losses on securities, cash
and cash equivalentis, liabilities and foreign
currency transactions, mortgage amortisation
premium/ allowance etc. and supplements/
allowances under the on-account tax scheme.
Interest income and expenses are accrued
based on the principal and the effective rate of
interest. The effective rate of interest is the dis-
count rate to be used on discounting expected
future payments in relation to the financial as-
set or the financial liability so that their present
value corresponds to the carrying amount of
the asset or liability, respectively.
Discontinued operations
Discontinued operations are major business
areas or geographical areas which have been
sold or which are held for sale according to an
overall plan. The result of discontinued opera-
tions are presented as a separate item in the
income statement, consisting ofthe activitiy's
operating profit/loss after tax and any gains or
losses on fair value adjustments or sale ofthe
related assets.
Past discontinued operations are adjustments
to discontinued operations in prior years.
Balance sheet
Goodwill
On initial recognition, goodwillis measured
and recognised as the excess ofthe cost of
the acquired company over the fair value of
the acquired assets, liabilities and contingent
liabilities, as described under Business Com-
binations. In addition, goodwill on acquisition
of investments in subsidiaries from minority
interests is recognised.
On recognition of goodwill, the goodwill
amount is allocated fo those ofthe ALK Group's
activities that generate separate cash flows
(cash-generating units). The determination
of cash-generating units is based onthe ALK
Group's management structure and internal
financial management and reporting.
Goodwill is not amortised, but is tested for
impairment at least once a year, as described
below.
Intangible assets
Acquired intellectual properiy rights inthe form
of patents, brands, licenses, software, cus-
tomer base and similar rights are measured
at cost less accumulated amortisation and
impairment.
Interest expenses on loans to finance the
manufacture of intangible assets are included
in cost ifthey relate to the production period.
Ofher borrowing costs are taken to the income
statement.
The cost of software includes costs of planning
work, including direct salaries.
Such acquired intellectual property rights are
amortised on a straight-line basis over the
contract period, not exceeding 10 years. ifthe
actual useful life is shorter than either the re-
maining life or the contract period, the asset is
amortised over this shorter useful life. Acquired
ao Consolidated financial statements
Notes fo the consolidated financial statements
1 Accounting policies (continued)
intellectual property rights are written down to
their recoverable amount where this is lower
than the carrying amount, as described below.
Individual minor development projects running
for short-term periods and subject to limited
risk are capitalised under other intangible
assets as described under 'Research and
development expenses' and are measured
at cost less accumulated amortisation and
impairment.
Intangible assets with indeterminable useful
lives are not amortised, but are tested for
impairment at least once a year. To the extent
that the carrying amount ofthe assets exceeds
the recoverable amount, the assets are written
down to this lower amount, as described below.
Tangible assets
Land and buildings, plant and machinery and
other fixtures and equipment are measured
at cost less accumulated depreciation and
impairment. Land is not depreciated.
Cost comprises the purchase price and any
costs directly attributable to fhe acquisifion and
any preparation costs incurred untilthe date
when the asset is available for use.
The cost of assets held under finance leases is
determined as the lower ofthe fair value ofthe
assets and the present value of future minimum
lease payments.
interest expenses on loans to finance the
manufacture oftangible assets are included
in cost ifthey relate to the production period.
Other borrowing costs are taken fo the income
statement.
The depreciation base is cost less the estimat-
ed residual value at the end ofthe useful life.
The residual value, estimated atthe acquisition
date and reassessed annually, is determined
as the amount the company expects to obtain
for the asset less costs of disposal.
The cost of an asset is divided into smaller
components that are depreciated separately if
such components have different useful lives.
Assets are depreciated on a straight-line basis
over their estimated useful lives as follows:
Buildings 25-50 years
Plant and machinery 5-10 years
Other fixtures and equipment 5-10 years
Depreciation methods, useful lives and residual
values are reassessed once a year. Tangible
assets are written down to the recoverable
amount, iflower, cf. below.
Impairment of tangible assets and
intangible assets
The carrying amounts of tangible assets and
intangible assets with determinable useful
lives are reviewed atthe balance sheet date to
determine whether there are any indications of
impairment. If such indications are found, the
recoverable amount of the asset is calculated
to determine any need for an impairment write-
down and, ifso, the amount of the writedown.
For intangible assets with indeterminable use-
fullives and goodwill, the recoverable amount
is calculated annually, regardless ofwhether
any indications ofimpairment have been found.
Ifthe asset does not generate any cash flows
independently of other assets, fhe recoverable
amount is calculated for the smallest cash-
generating unitthafincludes the asset.
The recoverable amount is calculated as the
higher ofthe fair value less costs to sell and the
value in use of the asset or the cash-generating
unit, respectively. In determining the value in
use, the estimated future cash flows are dis-
counted fo their present value, using a discount
rate reflecting current market assessments of
the time value of money as well as risks that are
specific to the asset or the cash-generafing unit
and which have not been taken into account in
the estimated future cash flows.
Ifthe recoverable amount of the assetorthe
cash-generating unit is lower than the carrying
amount, the carrying amount is written down to
the recoverable amount. For cash-generating
units, the write-down is allocated insucha
way that goodwill amounts are written down
first, and any remaining need for write-down is
allocated to other assets in the unit, although
no individual assets are written down to a value
lower than their fair value less costs to sell.
Impairment write-downs are recognised in
the income statement. Ifwrite-downs are
subsequently reversed as a result of changes
inthe assumptions on which the calculation of
the recoverable amount is based, the carrying
amount of the asset or the cash-generating
unitis increased to the adjusted recoverable
amount, not, however, exceeding the carrying
amount that the asset or cash-generating unit
would have had, had the write-down not been
made. Impairment of goodwillis not reversed.
Other long-term financial assets
Other securities and receivables that are ac-
counted for as tong-term financial assets are
measured at fair value. Adjustments are recog-
nised directly in other comprehensive income.
Inventories
Inventories are measured at cost determined
under the FIFO method or net realisable value
where this is lower.
Cost comprises raw materials, goods for
resale, consumables and direct payroll costs
as well as fixed and variable production
overheads. Variable production overheads
comprise indirect materials and payroll costs
and are allocated based on predetermined
costs ofthe goods actually produced. Fixed
production overheads comprise maintenance
of and depreciation on the machines, factory
buildings and equipment used in the manu-
facturing process as well as the cost of factory
management and administration. Fixed pro-
duction overheads are allocated based on the
normal capacity ofthe production plant.
The net realisable value of inventories is
calculated as the expected selling price less
completion costs and costs incurred in making
the sale.
Receivables
On initial recognition, receivables are meas-
ured at fair value, and subsequently they are
measured at amortised cost. Receivables are
written down for anticipated losses. An impair-
ment account is used for this purpose.
Prepayments
Prepayments are recognised as an asset and
comprise incurred costs relating to subsequent
financial years. Prepayments are measured
at cost.
Dividend
Dividend is recognised as a liability when
adopted by the shareholders at the annual
general meeting.
Treasury shares
Acquisition and sales sums arising onthe
purchase and sale oftreasury shares and
dividends on treasury shares are recognised
directly in retained earnings under equity.
Pension liabilities etc.
The ALK Group has entered into pension agree-
ments and similar agreements with some ofthe
Group's employees.
In respect of defined contribution plans, the
Group pays in fixed contributions to independ-
ent pension funds etc. The contributions are
recognised in the income statement during
the period in which the employee renders the
related service. Payments due are recognised
as a liability in the balance sheet.
In respect of defined benefit plans, the Group is
required to pay an agreed benefit in connection
Consolidated financial statements
Notes to the consolidated financial statements
1 Accounting policies (continued)
with the retirement ofthe employees covered
by the plan, e.g. inthe form of a fixed amount or
a percentage ofthe salary at retirement.
For defined benefit plans, an annual actuarial
assessment is made ofthe net present value
of future benefits to which the employees have
earned the right through their past service for
the Group and which will have to be paid under
the plan. The Projected Unit Credit Method is
applied to determine net present value.
The net present value is calculated based on
assumptions of the future developments of sal-
ary, interest, inflation, mortality and disability
rates.
The net present value of pension liabilities is
recognised in the balance sheet, after deduc-
tion of the fair value of any assets attached to
the plan, as either plan assets or pension li-
abilities, depending on whether the net amount
is an asset or a liability, as described below.
Ifthe assumptions made with respect ta dis-
count factor, inflation, mortality and disability
are changed, or ifthere is a discrepancy be-
tween the expected and realised return on plan
assets, actuarial gains or losses occur. These
gains and losses concerning previous financial
years are recognised in other comprehensive
income.
Provisions
Provisions are recognised when, as a conse-
quence of a past event during the financial year
or previous years, the Group has a legal or
constructive obligation, and itis likely that set-
tlement ofthe obligation willrequire an outflow
ofthe company's financial resources.
Provisions are measured as the best estimate
ofthe costs required to settle the obligations
atthe balance sheet date. Provisions with an
expected term of more than a year after the
balance sheet date are measured at present
value.
Mortgage debt
Morigage debtis recognised on the raising
of a loan at cost, equalling fair value ofthe
proceeds received, net oftransaction costs
incurred. Subsequently, morigage debt is
measured at amortised cost.
1403174EogSN63118
Lease liabilities
Lease liabilities regarding assets held under
finance leases are recognised in the balance
sheet as liabilities and measured at the incep-
tion ofthe lease afthe lower ofthe fair value of
the leased asset and the present value of future
lease payments.
On subsequent recognition, lease liabilities are
measured at amortised cost. The difference
between the present value and the nominal
value oflease payments is recognised inthe
income statement over the term ofthe lease as
a finance charge.
Lease payments regarding operating leases
are recognised inthe income statementon a
straight-line basis over the term ofthe lease.
Other financial liabilities
Other financial liabilities, including bank and
financial loans and trade payables, are on
initial recognition measured at fair value.
The liabilities are subsequently measured at
amortised cost.
Deferred income
Deferred income comprises income received
relating fo subsequent financial years. De-
ferred income is measured at cost.
Other accounting information
Cash flow statement
The cash flow statement ofthe Group is pre-
sented using the indirect method and shows
cash flows from operating, investing and
financing activities as well as cash and cash
equivalents afthe beginning and the end ofthe
financial year.
The cash effect of acquisitions and divestments
is shown separately under cash flows from
investing activities. In the cash flow statement,
cash flows concerning acquired companies are
recognised from the date of acquisition, while
cash flows concerning divested companies are
recognised untilthe date of divestment.
Cash flows from operating activities are stated
as operating profit, adjusted for non-cash
operating items and changes in working capi-
tal, less the income tax paid during the year
attributable to operating activities.
Cash flows from investing activities comprise
påayments in connection with acquisition and
divestment of companies and financial assets
as wellas purchase, development, improve-
ment and sale of intangible assets and tangible
assets.
Cash flows from financing activities comprise
changes to the parent company's share capital
and related costs as well as the raising and
repayment of loans, instalments on interest-
bearing debt, purchase oftreasury shares and
payment of dividends.
Cash flows in currencies other than the func-
tional currency are recognised in the cash flow
statement using average exchange rates for
the individual months ifthese are areasonable
approximation of the actual exchange rates at
the transaction dates. Ifthis is notthe case, the
actual exchange rates for the specific days in
questions are used.
Cash and cash eguivalents comprise cash and
short-term securities subject to an insignificant
risk of changes in value less any overdraft
facilities that are an integral part ofthe Group's
cash management,
Segment reporting
Based on the internal reporting used by the
Board of Management to assess the results
of operations and altocation ofresources, the
company has identified one operating segment
'Allergy treatment", which is in accordance
with the way the activities are organised and
managed. In addition, the disclosures in the
financialstatements include a breakdown of
revenue by product line and a geographical
breakdown of revenue and non-current assets.
Definitions and ratios
The key ratios have been calculated in accord-
ance with 'Recommendations and Financial
Ratios 2010" issued by the Danish Association
of Financial Analysts.
Key ratios and definitions are shown on the
covers of the annual report and page 58,
respectively.
ØD Consolidated financ:al statements
Notes to the consolidated financial statements
2 Significant accounting estimates and judgements
Inthe preparation of the annual report accord-
ing to generally accepted accounting princi-
ples, Managernent is required to make certain
estimates as many financial statement items
cannot be reliably measured, but must be esti-
mated. Such estimates comprise judgements
made on the basis ofthe most recent informa-
tion available at the reporting date. If may be
necessary to change previous estimates as a
result of changes fo the assumptions on which
the estimafes were based or due to supple-
mentary information, additional experience or
subsequent events.
Similarly, the value of assets and liabilities
often depends on future evenis fhat are
somewhat uncertain. In that connection, itis
necessary to set out e.g. a course of events
that reflects Management's assessment of the
most probable course of events. In the financial
statements for 2013, Management considers
the following esfimates and related judge-
ments materialto the assets and liabilities
recognised in the financial statements.
Recoverable amount of goodwill
The assessment of whether goodwill is im-
paired requires a determination ofthe value
in use of the cash-generating units to which
the goodwill amounts have been allocated.
The determination ofthe value in use requires
estimates ofthe expected future cash flows of
each cash-generating unit and a reasonable
discount rate. A31 December 2013, the carry-
ing amount of goodwillis DKK 407 million (DKK
409 million af31 December 2012).
Indirect production overheads
Indirect production overheads (IPO) are meas-
ured onthe basis ofthe standard cost method.
The basis of standard costs is reassessed regu-
larly to ensure fhat standard costs are adjusted
for changes in the utilisation of production
capacity, production fimes and other relevant
factors. Changes in the method of determining
standard costs may significantly affect gross
margin and the valuation of inventories.
As at 31 December 2013, the value of IPO is
DKK 67 million (DKK 54 million at 31 December
2012) on inventories.
Tax
Management is required to make an estimate
inthe recognition of deferred tax assets and
liabilities. The ALK Group recognises deferred
tax assets ifit is probable that they can be set
off against future taxable income. At31 Decem-
ber 2013, the value of deferred tax assets and
liabilities is DKK 103 million (DKK 63 million at
31 December 2012).
Provisions and contingent assets and
liabilities
Management assesses provisions, contingent
assets and contingent liabilities as well as likely
outcome of pending or probable lawsuits etc.
on an ongoing basic. The result depends on
future events, which by nafure are uncertain.
In assessment on the likely outcome of lawsuits
and tax disputes etc., management bases its
assessment on established legal precedenis
and external legal advisørs. In connection with
restructuring, an assessment of the employee
obligations and other liabilities occurring in
connection with restructuring has been taken
into account.
As at31 December 2013, others provisions
amounts to DKK 49 million (2012: DKK 61
million). Other provisions mainly include provi-
sions for restructuring and Jext" recall.
Consolidated financial statements (45)
i Notes fo the consolidated financial statements
3 Segment information
Based on the internal reporting which Management uses to assess profit and allocation ofresources, the company has identified one business area
"Allergy treatment” which is in compliance with the organisation and management ofthe activities. Even though revenue within the business area "Al-
lergy treatment” can be divided by product lines and markets, the main part of the activities within production, research and development, sales and
marketing and administration are shared by the ALK Group as a whole.
ALK has changed the presentation ofrevenue to reflect its business priorities. The new breakedown illustrates revenue in ALK's three main geographies
as well as its three main product groups.
North International
Europe America markets Total
Amounts in DKkm 2013 2012 2013 2012 2013 2012 2013 2012
SCIT/SLIT-drops 1,500 1,503 176 172 43 46 1,719 1,721
SLIT-tablets 199 201 90 41 9 186 298 428
Other products and services 128 105 90 87 ” 9 4 227 196
Totalrevenue 1,827 1,809 356 300 61 236 2,244 2,345
Sale of goods 2,147 2,109
Royalties 1 1
Milestone and upfront payments 36 148
Services 60 87
Totalrevenue 2,244 2,345
Oftotalrevenue, DKK 39 million (2012: DKK 40 million) derived from Denmark.
The ALK Group's non-current assets except non-current financial assets are distributed among the following geographical markets:
North International
Europe America markets Total
Amounts in DKKm 2013 2012 2013 2012 2013 2012 2013 2012
Non-current assets 1,688 1,613 391 359 ” - 2,079 1,972
Of total non-current assets, DKK 611 million are assets in Denmark (2012: DKK 589 million). The geographical information on assets is based on asset
location.
1403174EogSN63119
DD Consolidated financial statements
Notes fo the consolidated financial statements
U Staff costs
Amounts in DKKm 2013 2012
Wages and salaries 869 939
Pensions, cf. note 20 79 78
Other social security costs, etc. 115 120
Share-based payments, cf. note 5 13 11
Total 1,076 1,148
Staff costs are allocated as follows:
Cost of sales 279 274
Research and development expenses 234 248
Sales and marketing expenses 373 400
Administrative expenses 139 145
Included in the cost of assets 36 20
Special items cf. note 7 15 61
Total 1,076 1,148
Remuneration to Board
of Management
Salaries 16 17
Cash bonuses 2 4
Pensions 1 1
Calculated costs regarding
share-based payments, cf. note 5 5 4
Total 24 26
Remuneration fo Board of Directors
Remuneration to the Board of Directors" 4 4
Employees
Average number 1,804 1,828
Number year end 1,763 1,855
>” Thetotalremuneration to the Board of Directors includes remuneration for
participation in the audit committee DKK 350 thousand (2012: 275 thousand),
the Remuneration Committee DKK 350 thousand (2012: 350 thousand) and the
Scientific Committee DKK 112 thousand (2012: 0).
5 Share-based payments
Amounts in DKKm 2013 2012
Cost of share-based payments 14 11
Total 14 11
Cost for the year regarding share-based
payments are recognised as follows:
Cost ofsales 3 2
Research and development expenses 3 3
Sales and marketing expenses 3 3
Administrative expenses 4 3
Financial expenses 1 ”
Total 14 11
The total cost of share-based payment for 2013 includes a financial ex-
pense of. DKK 1 million due to fhe exercise and settlement of 2008-2010
plans granted to other key employees.
Share option plans
The ALK Group has established share option plans for the Board of
Management and a number of key employees as a part of aretenfion
program.
Each share option entitles the holder to acquire one existing B share of
DKK 10 nominal value in the company. The right to exercise the option
is subject to the holder of the option not having resigned at the time of
exercise. No other vesting conditions apply. The option can be exer-
cised only during a period of four weeks after the publication of annual
reports or interim financial statements. Share options are considered
sufficiently covered by treasury shares.
Specification of outstanding options:
Board of Average
Manage- Other key exercise
ment personnel Total price
2013 Units Units Unifs DKK
Outstanding
options at
1 January 216,000 372,475 588,475 440
Additions 35,500 53,500 89,000 464
Exercised - (77,700) (77,700) 409
Expired (8,500) (17,725) (26,225) 993
Cancellations - (9,075) (9,075) 393
Outstanding
options at
31 December 243,000 321,475 564,475 416
At 31 December 2013 the total number of vested share options
amounts to 182,150 units.
The Board of Directors decided that share options exercised in 2013
were to be settled by cash settlement. A total of 77,700 share options
were exercised and total påyment amounted to DKK 14 million (2012:
DKK 0).
Board of Average
Manage- Other key exercise
ment personnel Total price
2012 Units Units Units DKK
Outstanding
options af
1 January 236,825 351,525 588,350 483
Additions 40,250 60,750 101,000 440
Expired (18,000) (35,800) (53,800) 882
Cancellations (43,075) (4,000) — (47,075) 441
Outstanding
options at
31 December 216,000 372,475 588,475 440
At 31 December 2012 the total number of vested share options
amounts to 134,875 units.
Consolidated financial statements
Notes to the consolidated financial statements
5 Share-based payments (continued)
Outstanding options have the following characteristics:
Exercise
Options price Vested Exercise
Units DKK as per periode
2007 Plan 23,850 799 1 Nov 2010 1 Nov 2010
1 Nov 2014
2008 Plan 29,300 544 1Nov2011 1Nov2011
1 Nov 2015
2009 Plan 31,100 492 1Nov2012 1Nov2012
1 Nov 2016
2010 Plan 95,000 356 1Nov2013 1Nov 2013
1 Nov 2017
2011 Plan 198,700 342 1Nov2014 iNov2014
1 Nov 2018
2012 Plan 98,550 435 1 May 2015 1 May 2015
1 May 2019
2013 Plan 87,975 464 1Mar2016 1Mar2016
1 Mar 2020
Outstanding at
31 December 564,475
2013 2012
Average remaining life of outstanding
share options at year end (years) 0.9 1.2
Exercise prices for outstanding share
options at year end (DKK) 342-799. 339-1,005
The calculated market price at the grant date is based on the Black &
Scholes model for valuation of options.
The assumptions for the calculation ofthe market price of share op-
tions atthe grant date are as follows:
2013 2012
Plan Plan
Average share price (DKK) ” 420 399
Average exercise price (DKK)" U64 440
Expected volatility rate 24%p.a. 22% p.a.
Expected option life 5 years 5 years
Expected dividend per share 5 5
Risk-free interest rate 1.30%p.a. 1.49% p.a.
Calculated market price of granted
share options (DKK) 69 61
The expected volatility rate is based on the historical volatility (meas-
ured over 12 months)
= The exercise price is equivalent to the average market price ofthe company's
share for the five trading days immediately preceding the date of grant and is
increased by 2.5% p.a. and reduced by dividends pald.
1403174EogSN63120
Conditional shares
The ALK Group has established conditional shares plans for the Board
of Management and anumber of key employees as a part ofareten-
tion programme. Conditional shares will be available three years after
the date of grant, provided that ALK achieves the targets for vesting.
Boardof Other key
Management personnel Total
2013 Units Units Units
Outstanding conditional .
shares at 1 January 6,100 9,200 15,300
Additions 5,825 8,775 14,600
Cancellations - (700) (700)
Outstanding conditional
shares at 31 December 11,925 17,275 29,200
Boardof Other key
Management personnel Total
2012 Units Units Units
Outstanding conditional
shares at 1 January - - -
Additions 6,100 9,200 15,300
Cancellations - - -
Outstanding conditional
shares at31 December 6,100 9,200 15,300
The conditional shares have been granted atthe average market
price ofthe company's share for the five trading days immediately
preceding the date of grant. The conditial shares have been granted at
DKK 420 per share (2012: DKK 399). Conditional shares are consid-
ered sufficiently covered by treasury shares.
Outstanding conditional shares have the following characteristics:
Conditinal
share Vested
units as per
2012 Plan 14,900 1 May 2015
2013 Plan 14,300 1Mar2016
Outstanding at
3t December 29,200
DD Consolidated financial statements
Notes to the consolidated financial statements
6 Depreciation, amortisation and impairment
9 Tax on profit for the year, confinuing operations
Amounts in DKKm 2013 2012 Amounts in DKKM 2013 2012
Depreciation and amortisation are Current income tax 75 61
allocated as follows: Adjustment of deferred tax (29) (3)
Cost of sales 65 62 Prior year adjustments (3) 1
Research and development expenses 12 13 Total 43 59
Sales and marketing expenses 21 20
Administrative expenses 29 29 Profit before tax 104 113
Total 127 124
Income tax, tax rate of 25% 26 28
. Effect of deviation of foreign subsidiaries'
7 Special items tax rate relative to Danish tax rate 34 32
Non-taxable income (6) (2)
Amounts in DKKm 2013 2012 Non-deductible expenses 5 7
Prior year adjustments (3) 1
Severance pay etc. 15 61 Other taxes and adjustments (13) (7)
Ofher restructuring expenses 7 3 Tax on profit for the year,
Total 92 64 continuing operations 43 59
Ifspecial items had been recognised in
operating profit before special items,
they would have been included in
the following items:
Cost of sales 8 5
Research and devetopment expenses 7 6
Sales and marketing expenses 3 4y
Administrative expenses 4 9
Total 22 64
Special items represent one-off costs associated with the initiatives
to streamline the business structure under the Simplify programme
initiated in 2012.
8 Financialincome and expense
Amounts in DKKm 2013 2012
Interestincome - 9
Gains on avaliable-for-sale
financial assets 20
Financial income from financial assets 20 9
not measured at fair value inthe
income statement
Total financial income 20 9
Interest expenses 11 11
Other financial expenses 2 -
Financial expenses relating to 13 11
financial liabilities not measured
at fair value inthe income statement
Currency loss, net 12 3
Total financial expense 25 14
Tax related fo equity and other comprehensive income of. DKK 11 mil-
lion (2012 expense DKK 5 million) relates to fair value adjustments.
10 Past discontinued operations
In connection with the divestment ofthe ingredients business, Chr.
Hansen A/S, in 2005, ALK-Abellé A/S assumed the usual representa-
tions and warranties towards the buyer, and a provision of DKK 140
million was recognised to cover specific risks. Furthermore, specific
debt obligations related to the sale were recognised.
On expiry ofthe warranty period atthe end of July 2012, the Manage-
ment assessed the company's liabilities towards the buyer, which
resulted in a reversal ofthe provision of DKK 140 million and an adjust-
ment of debt obligations by. DKK 15 million. The total amount of DKK
155 million was recognised as an adjustment ofthe original gain on
the divestment of Chr. Hansen A/S and was presented separately in
the income statement as Net profit, past discontinued operations. The
recognition did not affected the company's cash flows or tax.
Consolidated financial statements ØD
1 Notes to the consolidated financial statements
11 Intangible assets
Patents,
trademarks
Amounts in DKKM Goodwill Software and rights Other Total
2013
Cost beginning of year 129 231 178 78 916
Currency adjustments (2) - (3) (1) (6)
Additions - 22 11 34 67
Transfer to/from other groups - - 13 (13) -
Cost year end 427 253 ' 199 98 977
Amortisation and impairment beginning ofyear 20 184 55 8 267
Amortisation for the year - 13 17 6 36
Amortisation and impairment year end 20 197 72 14 303
Carrying amount year end 1407 56 127 84 674
Patents,
trademarks
Amounts in DKKm Goodwill Software and rights Other Total
2012
Cost beginning of year 428 209 162 59 858
Currency adjustments 1 - 1 - 2
Additions - 22 15 19 56
Disposals - (4) - - (4)
Transfer 10/from other groups - 4 - - 4
Cost year end 429 231 178 78 916
Amortisation and impairment beginning ofyear 20 177 40 2 239
Amortisation for the year - 11 15 6 32
Amortisation on disposals - (4) - - (4)
Amortisation and impairment year end 20 184 55 8 267
Carrying amount year end 409 17 123 70 649
Goodwill has been subjected to an impairment test is submitted to the Audit Committee for subsequent approval by the Board of Directors. The impair-
ment test performed in 2013 revealed no need for an impairment write-down of goodwill.
Goodwill has been tested at an agreegated level as the ALK Group is considered as one CGU as individual companies and business units in ALK cannot
be evaluated separately due to value adding processes is generated across corporations and entities, Inthe calculation of the value in use of cash-
generating units, the cash flows in the latest, Management-approved budget for the coming financial year have been used. The key parameters in the
calculation of the value in use are revenue, earnings, working capital, discount rate and the preconditions for the terminal period. For financial years
after the budget period, the cash flows in fhe most recent budget period have been extrapolated adjusted for a growth factor of 2% during the terminal
period. Estimated growth in revenue is based on historical data and expectations on future changes in the market.
The discount rate used is 10% after tax, 12% before tax (2012: 10% after tax, 12% before tax).
The additions for the year include software development in progress DKK 11 million (2012:.DKK 15 million).
Other intangible assets concern minor finished development projects and development projects in progress.
1403174EogSN63121
A Consolidated financial statements
Notes to the consolidated financial statements
12 Property, plant and equipment
Other fixtures Property, plant
Land and Plant and and and equipment
Amounts in DKKm buildings” machinery equipment in progress Total
2013
Cost beginning ofyear 905 469 228 362 1,964
Currency adjustments (8) (3) (1) (5) (17)
Additions 1 15 9 161 186
Disposals (3) (1) (4) - (8)
Transfer to/from other groups 5 37 6 (48) -
Costyear end 900 517 238 470 2,125
Depreciation and impairment beginning ofyear 261 215 165 - 641
Currency adjustments (2) (2) - - (4)
Depreciation for the year 34 40 17 - 91
Depreciation of disposals (3) (1) (4) - (8)
Depreciation and impairment year end 290 252 178 ” 720
Carrying amount year end 610 265 60 470 1,405
of which financing costs -
of which assets held under finance leases 124
Value ofland and buildings subject to mortgages 153
Other fixtures Property, plant
Land and Plantand and and equipment
Amounts in DKKM buildings” machinery equipment in progress Total
2012
Cost beginning ofyear 788 368 223 437 1,816
Currency adjustments (2) - - (1) (3)
Addiftions q 11 8 164 187
Disposals (3) (15) (14) - (32)
Transfer to/from other groups 118 105 11 (238) (4)
Costyear end 905 469 228 362 1,964
Depreciation and impairment beginning ofyear 227 192 161 - 580
Depreciation for the year 36 38 18 - 92
Depreciation of disposals (2) (15) (14) - (31)
Depreciation and impairment year end 261 215 165 - 641
Carrying amount year end 644 254 63 362 1,323
of which financing costs -
of which assets held under finance leases 129
Value ofland and buildings subject to mortgages 152
= Land and buildings in Denmark include buildings on land leased from Scion DTU A/S, Hørsholm, The lease period for this land is unlimited.
Consolidated financial statements ED
1 Notes to the consolidated financial statements
|
13 Deferred tax
Tax losses
Intangible Tangible Current carried
Amounts in DKKM assets assets assets Liabilities forward Total
2013
Carrying amount beginning of year (17) (28) 52 38 18 63
Recognised in the income statement, net (2) 11 31 (17) 6 29
Recognised in other comprehensive income, net - - 5 - - 5
Recognised in equity, net - - - 6 - 6
Carrying amount year end (19) (17) 88 27 24 103
2012
Carrying amount beginning of year (15) (16) 59 6 13 47
Recognised in the income statement, net (2) (12) (7) 19 5 3
Recognised in other comprehensive income, net - - - 13 - 13
Carrying amount year end (17) (28) 52 38 18 63
Deferred tax at 31 December 2013 consists of deferred tax assets of DKK 136 million (2012: DKK 82 million) and deferred tax liabilities of DKK 33 million
(2012;.DKK 19 million).
Deferred tax is recognised as tax assets in the balance sheet, since it is assessed to be probable that sufficient future taxable income will be generated
for the deferred tax asset to be utilised.
ALK-Abellé A/S is included in nationat jointty taxation with the Lundbeck Foundation and its Danish subsidiadries,
14 Securities and receivables 15 Inventories
Amounts in DKKM 2013 2012 Amounts in DKKm 2013 2012
Beginning ofyear 36 35 Raw materials and consumables 118 97
Additions - 1 Work in progress 111 95
Disposals (22) - Manufactured goods and goods for resale 107 103
Year end 14 36 Total 336 295
Revaluation and impairment Amount of write-down of inventories
beginning of year 20 - during the year 34 12
Revaluation for the year 10 20 Amount of reversal of write-down of
Disposals (20) - inventories during the year 1 2
Revaluation and impairment year end 10 20
The total consumption of materials included in cost of sales amounted
Carrying amount year end 94 56 to DKK 207 million (2012: DKK 174 million).
16 Receivables from affiliates
Amounts in DKKm 2013 2012
Beginning ofyear 61 -
Additions 57. 61
Disposals (61) -
Year end 57 61
Carrying amount year end 57 61
1403174EogSN63122
ea) Consolidated financial statements
Notes to the consolidated financial statements
17 Receivables and prepayments
19 Share capital and earnings per share
Amounis inDKKm 2013 2012 Amounts in DKKm 2013 2012
Trade receivables (gross) 235 258 Share capital
The share capital consists of:
Allowances for doubtful trade receivables: Ashares, 920,760 shares of
Balance beginning ofyear 10 10 DKK 10each 9 9
Change in allowances during the year 2 - Bshares, 9,207,600 shares of
. . DKK 10 each 92 92
Realised losses during the year (1) - j malval 701 77
Provision for doubiful trade receivables 11 10 Total nominal value
year end .
Each A share carries 10 votes, whereas
each B share carries 1 vote.
Trade receivables (net) 22Uu 248
Treasury shares"
Allowances for doubtful trade receivables Treasury shares beginning of year
are based on an individual assesment (B-shares), units 454,820 262,954
ofreceivables. Purchase of treasury shares, units 13,529 191,866
Treasury shares year end (B-shares),
Trade receivables (net) can be specified units 468,349 454,820
as follows:
Proportion of share capital year end 4.6% 4,5%
Not due 178 185 Nominal value year end 4.7 4,5
Overdue by: Market value year end 288 175
Between 1 and 179 days 37 51
Between 180 and 360 days 5 10 Earnings per share
More than 360 days 4 2 The calculation of earnings per share is
Trade receivables (net) 224 248 based on the following:
Other receivables Net profit 61 209
VAT and other taxes 22 22 Net profit, continuing operations 61 54
Miscellaneous receivables 36 24 Net profit, past discontinued operations - 155
Total 58 16
ota Number in units:
Average number of issued shares 10,128,360 10,128,360
Prepayments
. Average number of treasury shares (468,219) (383,088)
Operating expenses 24 35
i 3 4 Average number of shares used for
nsurance calculation of earnings per share 9,660,141 9,745,272
Other prepayments 3 7
Total 30 46 Average dilutive effect of outstanding
share options 114,384 42,716
The carrying amount is equivalent to the fair value ofthe assets. Average number of shares used for
calculation of diluted earningspershare 9,774,525 9,787,988
Earnings per share (EPS),
18 Cash and cash equivalents continuing operations 6.31 5.54
Earnings per share (EPS),
É past discontinued operations - 15,91
12
Amounfs in DKKm 2013 20 Earnings per share (EPS) 6.31 21.15
Securities subject to insignificant Diluted earnings per share (DEPS),
risk ofchanges in value 157 435 continuing operations 6.24 5,51
Cash and bank deposits 155 42 Diluted earnings per share (DEPS),
Cash and cash equivalents 312 477 past discontinued operations - 15.84
Earnings per share (DEPS), diluted 6.24 21.35
= According to aresolution passed by the company in general meeting, the com-
pany is allowed to purchase treasury shares, equalto 10% ofthe share capital.
The company has purchased treasury shares in connection with the Issuance of
share-based payments.
Consolidated financial statements
Notes to the consolidated financial statements
20 Pensions and similar liabilities
The ALK Group has entered into defined contribution plans as well as
defined benefit plans.
In defined contribution plans, the employer is obliged to pay a certain
contribution to a pension fund or the like but bears no risks regarding
the future development in interest, inflation, mortality, disability rates
etc. regarding the amount to be paid to the employee.
In defined benefit plans the employer is obliged to pay a certain
payment when a pre-agreed event occurs. The employer bears the
risks regarding the future development in interest, inflation, mortality,
disability rates etc. regarding the amount to be paid to the employee.
The ALK Group has defined benefit plans in Germany, The Netherlands
and Switzerland.
Amounts in DKKm 2013 2012
Costs related to defined
contribution plans 65 66
Costs related to defined benefit plans 14 12
Present value of funded
pension obligations 39 45
Fair value of plan assets (34) (39)
Funded pension obligations, net 5 6
Present value of unfunded
pension obligations 121 116
Pension obligations 126 122
Similar liabilities 21 22
Pension obligations and similar
obligations, year end 147 144
Defined benefit plans:
Provisions for defined benefit plans
beginning of year 122 80
Contributions to plan assets —— (7) (5)
Actuarial (gain) /loss (3) 35
Recognised in the current financial year 14 12
ØObligation regarding defined
benefit plans, year end 126 122
The actuarial calculations at
the balance sheet date are based
on the following factors:
Average discount rate used ”3.1% 3.,1%
Expected return on plan assets 2.9% 2.9%
Expected future rate of salary increase "2.0% 2.0%
Sensitivity analysis:
The table below shows the sensitivity
of the pension obligations to changes
inthe key assumptions:
Sensitivity related to discount rate, .
effect if 1% decrease 22
Sensitivity related to salary increase, '
effect if 1% increase 5
Sensitivity related to life expectancy,
effectif+ 1 year 5
The latest actuarial calculation ofthe pension obligations related to
the defined benefit plans was made at 31 December 2013.
1403174EogSN63123
Amounts in DKKMm 2013 2012
Change in present value offunded
pension obligations
Present value offunded pension
obligations beginning ofyear 45 31
Interest expenses relating to
the obligations 2 1
Actuarial (gains) /losses (4) 9
Other (gains) /expenses 4 4
Benefit payments from plan assets (4) -
Present value of funded pension
obligations year end 43 45
Change in fair value of plan assets”
Fair value of plan assets beginning of year 39 27
Contributions 7
Other expenses (1) (1)
Actuarial gains/ (losses) (3) 8
Expected return on plan assets "en 1
Benefit payments from plan assets (4) ”
Fair value of plan assets year end 38 39
Change in present value of unfunded
pension obligations
Present value of unfunded pension
obligations beginning of year 116 76
Pension expenses 3 3
Interest expenses relating to
the obligations 4 3
Actuarial (gains)/losses (2) 34
Present value of unfunded pension
obligations year end 121 116
The pension obligations are expected
to fall due as follows:
0-1 years 4
1-5 years 16
Over 5 years 106
Total 126
The expected contribution for 2014 for the defined benefit plans is
DKK 14 million (2013: DKK 14 million).
= Plan assets solely consist of assets placed in pension companies. Assets is by
the pension companies placed in Investments classified as other assets than
shares, bonds and property, and are not measured at quoted prices.
9 Consolidated financial statements
Notes to the consolidated financial statements
21 Mortgage debt, bank loans and financial loans
Amounts in DKKm 2013 2012
Debtto mortgage credit institutions secured by real property
Mortgage debt is due as follows:
Within 1 year 2 1
From 1-5 years 7 8
After 5 years 15 16
Total 24 25
Bank loans and financial loans
Bank loans and financial loans are due as follows:
Within 1 year 3 4
From 1-5 years 300 303
After 5 years - -
Total 303 307
Effective Carrying
Fixed/ interest rate amount Fair value
Amounts in DKKM Currency Expiry date Floating % DKKM DKKm
31 December 2013
Mortgage debt
Morigage debt DKK 2026 Floating 2.0 24 24
Total 24 24
Bank loans and financial loans
Leasing debt EUR, USD 2014-2016 Floating 3.5 5 5
Other bank loans and financial loans EUR 2016 Fixed 3.1 298 298
Total 303 303
31 December 2012
Mortgage debt
Mortgage debt DKK 2028 Fixed 4.0 25 25
Total 25 25
Bank loans and financial loans
Leasing debt EUR, USD 2014-2016 Floating 3.5 9 8
Other bank loans and financial loans EUR 2016 Fixed 3.1 298 298
Total 307 306
Consolidated financial statements
Notes to the consolidated financial statements
22 Other provisions
Amounts in DKKm 2013 2012
Other provisions beginning ofyear 61 142
Provisions made during the year 37 60
Used during the year 48 7
Reversals during the year 1 141
Other provisions year end 49 61
Other provisions are recognised
as follows:
Non-current liabilities 15 7
Current liabilities 34 54
Other provisions year end 19 61
23 Other current liabilities
Amounts in DKKm 2013 2012
Trade payables 100 136
Other payables
Salaries, holiday payments, etc. 186 181
VAT and other taxes 33 30
Miscellaneous payables 116 118
Total 335 329
The carrying amount is equivalent to the fair value of the liabilities.
24 Changes in working capital
Amounts in DKKM 2013 2012
Change in inventories (44) (5)
Change in receivables 83 (19)
Change in short-term payables .— (33) (57)
Cash flow from changes in
working capital 6 (81)
1403174EogSN63124
25 Contingent liabilities and commitments
Contingent liabilities
The Board of Management assesses that the oufcome of pending
claims and other disputes will have no material impact onthe ALK
Group's financial position.
Liabilities relating to research and development projects and asset
acquirements are estimated at DKK 28 million as af31 December 2013
(31 December 2012: DKK3 million).
Jointtaxation scheme
ALK-Abell6 A/S is part of a Danish joint taxation scheme with the
Lundbeck Foundation. As from the 2013 financial year, the company
has partly a joint and several liability and partly a secondary liability
with respect to income taxes etc. for the jointly-taxed companies, and
as from 1 July 2012 it also has parftly a joint and several liability and
partly a secondary liability with respect to any obligations to withhold
tax on interest, royalties and dividends for these companies. However,
in both cases the secondary liability is capped at an amount equalto
the share ofthe capital oftihe company direcily or indirectly owned by
the ultimate parent company.
Commitments
For information on land and buildings provided as security vis-å-vis
credit institutions, see note 12.
Amounts in DKKm 2013 2012
Collaterals and guarantees 13 13
26 Operating lease liabilities
Amounts in DKKm 2013 2012
Minimum lease payments recognised
inthe Income statement 49 47
The total future minimum lease payments
cf. interminable lease agreements:
Within 1 year 45 42
From 1-5 years . 68 62
After 5 years 29 10
Total 142 114
27 Finance lease liabilities
Amounts in DKKm 2013 2012
Finance lease liabilities are due as follows:
Within 1 year 2 3
From 1-5 years 3 5
After 5 years - -
Total 5 8
Amortisation premium for future expensing - 1
Present value of finance lease liabilities 5 7
Finance lease concern lease of building.
oa Consolidated financial statements
Notes to the consolidated financial statements
28 Exchange rate, interest rate and credit exposure and the use of derivative financial instruments
Financial risk management policy
As aresult ofits operations, its investments and its financing, the ALK Group is exposed to exchange and interest rate changes. For further information
of exchange rate, interest rate and credit exposure see page 17. ALK-Abellé A/S manages the ALK Group's financial risks centrally and coordinates the
ALK Group's cash management, including the raising of capital and investment of excess cash. The ALK Group complies with a policy, approved by the
Board of Directors, to maintain a low risk profile, ensuring that the ALK Group is only exposed to exchange rate, interest rate and creditrisk in connec-
tion with its commercial activities.
Exchange rate exposure
The ALK Group mainly hedges its foreign exchange rate exposure through matching of payments received and paid inthe same currency and through
forward exchange rate contracts and currency options.
Interest rate exposure
The ALK Group does not hedge its interest rate exposure, as this is not considered to be financially viable.
Credit exposure
According to the Group's credit risk policy, all major customers and other business partners are credit rated regularly.
Sensitivities in 2013 inthe event ofa 10% increase in exchange rates
Amounts in DKKM Revenue EBITDA Equity
31 December 2013
USD approx. 30 approx. 10 approx. 40
GBP approx. 5 approx. 0 approx. 0
31 December 2012
USD approx. 25 approx. 5 approx. 40
GBP approx. 5 approx. 0 approx. 0
Exchange rate exposure - recognised assets and liabilities
The ALK Group uses hedging instruments in the form of forward exchange contracis and currency options to hedge recognised assefs and liabilities.
Hedging of recognised assets and liabilities mainly comprises cash and cash equivalents, receivables and financial liabilities.
Cash and Amount
Amounts inDKKMmM securities Receivables Liabilities hedged Net position
31 December 2013
DKK 195 128 (257) - 66
USD 30 46 (10) - 6å
EUR 57 209 (726) - (460)
GBP 4 5 (9) - -
SEK 2 10 (12) - -
Other 24 7 (5) - 26
Total 312 405 (1,019) - (502)
31 December 2012
DKK 4413 97 (220) - 320
USD - 63 (36) - 27
EUR 13 267 (748) - (468)
GBP 5 12 (12) - 5
SEK 1 8 (10) - (1)
Other 15 22 (12) - 25
Total 477 469 (1,038) - (92)
Consolidated financial statements SS
Notes to the consolidated financial stafements
28 Fnange pe, interest rate and credit exposure and the use of derivative financial instruments
continue
Exchange rate exposure — future transactions
The ALK Group hedges exchange rate exposure regarding future sales and purchases of goods in the coming six months by means of forward exchange
contracts and currency options in accordance with the ALK Group's policy.
The ALK Group has the following open contracts as of31 December 2013 related to cash flow hedge (2012: no open exchange rate hedging contracts).
Value adjustment
recognised
inother
Contract comprehensive
Amounts in DKKm value Fair value income
31 December 2013
Currency options, USD 159 1 -
interest rate exposure
Concerning the ALK Group's financial assets and financial liabilities, the earlier ofthe contractual revaluation and redemption dates are as follows.
Effective interest rates are stated on the basis ofthe current level of interest rates on the balance sheet date. Future expected interestis not included in
the overview.
Revaluation/payment date Ofthese, Effective
Within From After fixed interest
Amounis in DKKM 1 year 1-5 years 5 years Total interest rate %”
31 December 2013
Securities and receivables - 2 22 24 -
Trade receivables 224 - - 224 -
Other receivables 157 - - 157 -
Cash and cash equivalents 312 - - 312 -
Financial assets 693 2 22 717 -
Mortgage debt, bank loans and financial loans 5 308 14 327 298 2.0-3.5
Trade payables 100 - - 100 -
Other financial liabilities 363 - - 363 -
Financig] liabilities 168 308 14 790 298
31 December 2012
Securities and receivables - 1 55 56 -
Trade receivables 248 - - 248 -
Other receivables 165 - - 165 -
Cash and cash equivalents 477 - - 477 -
Financial assets 890 1 55 946 -
Mortgage debt, bank loans and financial loans 5 311 16 332 323 3.1-4.0
Trade payables 136 - - 136 -
Other financial liabilities 346 - - 346 -
Financial liabilities 187 311 16 814 323
= Effective interest rate of fixed interest-bearing financial assets and financial Wabitities.
Future interest on financial assets and liabilities is not included.
Credit exposure
The ALK Group's primary credit exposure is related to trade receivables and cash and cash equivalents. The ALK Group has no major exposure relating
to any one customer or business partner. According to the ALK Group's policy for assuming credit exposure, all customers and business partners are
credit rated regularly.
Embedded derivative financial instruments
The ALK Group has made a systematic review of contracts that might contain terms that would make the contract or parts thereof a derivative financial
instrument. The review did not lead to recognition of derivative financial instruments relating fo the contracts.
1403174EogSN63125
da Consolidated financial statements
Notes to the consolidated financial stafements
28 Exchange rate, interest rate and credit expo-
sure and the use of derivative financial instru-
ments (continued)
Amounis in DKKm 2013 2012
Categories of financial instruments
Receivables from affiliates 57 61
Securities and receivables 6 7
Trade receivables 224 248
Other receivables 57 16
Loans and receivables 344 362
Securities and receivables 18 19
Financial assets available for sale 18 19
Currency option 1 -
Financial assets used as hedging 1 -
Mortgage debt 24 25
Bank loans and financial loans 303 307
Trade payables 100 136
Payables to affiliates - -
Other payables 335 329
Financial liabilities measured
at amortised cost 762 797
Financial assets available for sale are, according to the fair value
hierarchy, classified as measured by listed prices in an efficient market
(level 1).
29 Fees to the ALK-Abellé Group's auditors
Amounts in DKKM 2013 2012
Fees to the auditors, Deloitte, appointed
at the general meeting:
Audit
Audit related services
Tax advisory services
Other services
N
N
Æl=m — 1
Dim må |
Total
30 Related parties
Related parties exercising control
Parties exercising control are ALK's principal shareholder, the Lund-
beck Foundation.
Other related parties comprise ALK's Board of Management and Board
of Directors, companies in which the principal shareholders exercise
control, and such companies' affiliates, in this case H. Lundbeck A/S
and Falck Holding A/S and their affiliates.
Transactions and balances
Transactions and balances with the parent company's principal
shareholder:
ALK has paid dividends to the Lundbeck Foundation in 2013 constitut-
ing DKK 20 million (2012: DKK 20 million).
ALK received DKK 64 million (2012: DKK O million) concerning out-
standing company tax from the Lundbeck Foundation.
Receivables from affiliates in the ALK Group relates to outstanding
company tax of.DKK 57 million (2012:.DKK 61 million).
Remuneration etc. to Board of Directors and
Board of Management
For information on remuneration paid to the ALK Group's Board of
Directors and Board of Management, see note 4.
No other transactions have taken place during the year with the Board
of Directors, Board of Management, major shareholders or other
related parties.
Consolidated fnancialstatements
List of companies in the ALK Group
31 December 2013 (wholly owned untess otherwise stated). Nominal capital in 1,000.
Denmark Fm
ALK-Abeltå A/S DKK 101,284
CVRn0o.63717916
Hørsholm
ALK-Abellé Nordic A/S DKK 1,000
CVRn0o.31501296
Gentofte
Sweden ==
ALK-Abellé Nordic A/S (branch)
Kungsbacka
Norway FE
ALK-Abellé Nordic A/S (branch)
Oslo
Finland um
ALK-Abellå Nordic A/S (branch)
Helsinki
United kingdom SE
ALK-Abellå Ltd. GBP 1
Reading
France EN
ALK-Abellé S.A. EUR 160
Varennes-en-Årgonne
Germany FE
ALK-Abelld Arzneimittel GmbH EUR 1,790
Hamburg
Ausfria mann
ALK-Abelté Allergie-Service GmbH EUR 73
Linz
Switzerland EJ
ALK-Abellå AG CHF 100
Volketswil
ALKAG
Volketswil CHF 1,000
1403174EogSN63126
Netherlands mm
ALK-Abellé B.V. EUR 23
Nieuwegein
Artu Biologicals Europe B.V. EUR 182
Lelystad
Wholly owned by ALK-Abellå B.V.
Artu Biologicals Onroerend Goed BV. EUR 18
Lelystad
Wholly owned by ALK-Abellå B.V.
Spain em
ALK-Abellé S.A. EUR 4,671
Madrid
Italy UL!
ALK-Abellå S.p.A. EUR 3,680
Milan
Wholly owned by ALK-Abellå S.A.
Poland =
ALK-Abellé sp. z 0.0 PLN 325
Warsaw
USA E
ALK-Abellé, Inc. USD 50
Austin
ALK-Abelld, Source Materials, Inc. USD 5
Spring Mills
Canada fæl
ALK-Abellé Pharmaceuticals, Inc. CAD 3,000
Mississauga
China El
ALK-Abellé A/S (branch)
Hong Kong
Consolidated financial statements
Definitions
Invested capital
Gross-margin - %
EBITDA margin - %
Net asset value per share
ROAIC - %
Return on equity (ROE) - %
Pay-out ratio - %
Earnings per share (EPS)
Earnings per share (DEPS), diluted
Cash flow per share (CFPS)
Price earnings ratio (PE)
CAGR
Markets
Intangible assets, tangible assets, inventories and current receivables reduced by liabilities except for
mortgage debt, bank loans and financial loans
Gross profit x 100 / Revenue
Operating profit before depreciation and amortisationx 100 / Revenue
Equity end of period / Number of shares end of period
Operating profitx 100 / Average invested capital
Net profit/ (loss) for the period x 100 / Average equity
Proposed dividend x 100 / Net profit/ (loss) for the year
Net profit/ (loss) for the period / Average number of outstanding shares
Net profit/ (loss) for the period / Average number of outstanding shares
Cash flow from operating activities / Average number of outstanding shares
Share price / Earnings per share
Compound annual growth rate
Geographical markets (based on customer location):
» Europe comprises the EU, Norway and Switzerland
« North America comprises the USA and Canada
. international Markets comprise Japan, China and all other counfries
Key figures are calculated in accordance with "Recommendations and Ratios 2010” issued by the Danish Society of Financial Analysts.
Parent COMPANY
Hnancial statements
2013
1403174EogSN63127
Parent company financial statements
Content
Parent company financial statements
Income statement 61
Balance sheet - Assets 62
Balance sheet - Equity and liabilities 63
Equity 64
Notes to the parent company financial statemenis
1. Accounting policies 65
2 Staffcosts 66
3 Financialincome and expenses 66
4 Tax on profit for the year 66
5. Intangible assets 66
6 Property, plant and equipment 67
7 Deferred tax 67
8 Investmenis in subsidiaries 68
9 Inventories 68
10 Mortgage debt, bank loans and financial loans 68
11. Operating lease liabilities 68
12. Contingent liabilities and commitments 68
13 Other provisions 68
14 Related parties 68
15. Fees to the ALK-Abellé A/S auditors 68
Parent company financial statements
Income statement
Amounts in DKKM Note 2013 2012
Revenue 791 823
Cost of sales 2 308 302
Gross profit 483 521
Research and development expenses 2 432 478
Sales and marketing expenses 2 101 100
Administrative expenses 2,15 84 88
Other operating income 2 155
Other operating expenses - 54
Operating profit (EBIT) (132) (44)
Income from investments in subsidiaries 8 73 186
Financialincome 3 24 35
Financial expenses 3 27 15
Profit before tax (EBT) (62) 162
Tax on profit 4 (35) (40)
Net profit (27) 202
Proposed appropriation of net profit:
Dividends 51 51
Retained earnings (78) 151
(27) 202
1403174EogSN63128
oa Parent company financial statements
Balance sheet - Assets
31 Dec. 31 Dec.
Amounts in DKKm Note 2013 2012
Non-current assets
Intangible assets
Intangible assets 5 56 46
56 46
Tangible assets
Land and buildings 6 387 402
Plant and machinery 6 182 175
Other fixtures and equipment 6 10 11
Property, plant and equipment in progress 6 152 145
731 733
Other non-currents assets
Investment in subsidiaries 8 803 839
Receivables from affiliates 736 495
Securities and receivables 22 54
Deferred tax assets 7 - 1
1,561 1,389
Total non-current assets 2,348 2,168
Current assets
Invenfories 9 79 74
Receivables
Trade receivables 22 15
Receivables from affiliates 135 130
Other receivables 34 18
Prepayments 9 zu
200 187
Cash and cash equivalents 252 440
Total currents assets 531 701
Total assets 2,879 2,869
Parent company financial statements gg
:…… Balance sheet - Equity and liabilities
31 Dec. 31 Dec.
Amounts in DKKm . Note 2013 2012
Equity '
Share capital 101 101
Proposed dividends 51 51
Retained earnings 1,858 1,940
Total equity 2,010 2,092
Deferred tax liabilities 7 16 -
Other provisions 13 15 55
Provisions 31 55
Liabilities
Mortgage debt 10 22 24
Bank loans and financial loans 10 298 298
Non-current liabilities 320 322
Mortgage debt 10 2 1
Trade payables 34 45
Payables to affiliates 360 240
Other payables 122 114
Current liabilities 518 400
Total liabilities 838 722
Total equity and liabilities 2,879 2,869
1403174EogSN63129
DD Parent company financial statements
EqQulty
Share Retained Proposed Total
Amounts in DKKm capital earnings dividend equity
Equity at 1 January 2013 101 1,943 51 2,095
Effect of change in accounting policies - (3) - (3)
Adjusted equity at 1 January 2013 101 1,940 51 2,092
Appropriated from net profit - (78) 51 (27)
Share-based payments - 14 - 14
Share options settled - (14) - (14)
Purchase oftreasury shares - (6) - (6)
Dividend paid - - (51) (51)
Dividend on treasury shares - 2 - 2
Other transactions - (82) " (82)
Equity af 31 December 2013 101 1,858 51 2,010
Please refer to note 19 in the consolidated financial statements for information on treasury shares.
Parent company financial statements
Notes to the parent company financial statements
1 Accounting policies
General
The financial statements of the parent com-
pany ALK-Abellé A/S for the period 1 January
- 31 December 2013 has been prepared in ac-
cordance with the Danish Financial Statements
Act for large reporting class D enterprises.
The financial statements is presented in Danish
kroner (DKK), which also is the functional cur-
rency ofthe company.
Transition to the Danish Financial
Statements Act
The financialstatements for 2013 has been
transitioned from IFRS to the Danish Finan-
cial Statements Act, which has given rise to
achange in accounting policies for financial
assets, investment in subsidiaries and minor
changes and areduction in disclosure require-
ments compared with IFRS.
The policy changes in respect of financial
assets and investment in subsidiaries has
affected the parent company's figures for 2012
and 2013. The effect is presented in the tabte
below:
Amounts in DKKm 2013 2012
Net profit,
previous policy 2 190
Fair value adjustment
of financial assets 10 20
Write down of
investments in
subsidiaries (36) (3)
Tax on profit (3) (5)
Net profit,
new policy (27) 202
Equity, end of year,
previous policy 2,046 2,095
Write down of
investments in
subsidiaries (36) (3)
Equity, end of year,
new policy 2,010 2,092
1403174EogSN63130
Other than that, the accounting policies are
unchanged from previous year.
Differences relative to the Group's
accounting policies
The parent company's accounting policies for
recognition and measurement are in accord-
ance with the Group's accounting policies with
the following exceptions.
Income statement
Results of investments in subsidiaries
Dividends from investments in subsidiaries are
recognised in the parent company's financial
statements when the rightto fhe dividend final-
ly vests, typically atthe date ofthe company's
approvalin general meeting of the dividend of
the company in question less any writedowns
atthe investments.
Balance sheet
Investments in subsidiaries
Investments in subsidiaries are measured at
cost.
Where the recoverable amount of the invest-
ments is lower than cost, the investments are
written down to this lower value.
In addition cost is written down to the extent
that dividends distributed exceeds the ac-
cumulated earnings inthe company since the
acquisition date. In fhe event of indications of
impairment, an impairmenttest is performed
of investments in subsidiaries.
Other financial assets
On initial recognition, securities and invest-
ments are measured at cost, corresponding to
fair value plus directly attributable cost. They
are subsequently measured af fair value at the
balance sheet date, and changes to the fair
value are recognised under net financials in the
income statement.
Other accounting information
Cash flow statement
Ås allowed under section 86 (4) ofthe Danish
Financial Statements Act, no cash flow state-
mentis presented, as this is included inthe
consolidated cash flow statement.
Statement of changes in equity
Pursuant to the requirements ofthe Danish
Financial Statements Act, entries recognised
inthe statement of comprehensive income
inthe consolidated financial statements are
recognised directly in the statement of change
in equity in the parent company's financial
statements except for entries concerning other
financial assets.
Øg Parent company financial statements
Notes to the parent company financial statements
2 Staff costs 3 Financialincome and expenses
Amounts in DKKm 2013 2012 Amounts in DKKm 2013 2012
Wages and salaries 418 418 Interest on receivables from affiliates 14 6
Pensions 39 38 Other interestincome - 9
Other social security costs, etc. 13 17 Fair value adjustment of financial assets 10 20
Share-based payments 9 8 Total financialincome 24 35
Total 479 481
Interest on payabtes to affliates - 1
Staff costs are allocated as follows: Other interest expenses 12 11
Cost of sales 137 141 Currency loss, net 15 3
Research and development expenses 213 217 Total financial expenses 27 15
Sales and marketing expenses 40 38
Administrative expenses 73 75
Included in the cost of assets 16 10 4 Tax on profit for the year
Total 479 181
Amounts in DKKM 2013 2012
Employees
Average number 691 702 Current income tax (51) (67)
Number year end 672 706 Adjustment of deferred tax 17 23
Prior year adjustments (1) 4
Total (35) (40)
Remuneration to Board ofManagement
See note 4 Staff cost inthe consolidated financial statements Profit before tax (65) 165
Remuneration to Board of Directors Income tax, tax rate of 25% (16) 41
See note 4 Staff costinthe consolidated financial statements Non-taxable income (28) (87)
Non-deductible expenses 10 2
Prior year adjustments (1) 4
Tax on profit for the year (35) (40)
5 Intangible assets
Patents,
trademarks
Amounts in DKKm Software and rights Other 2013 2012
Cost beginning ofyear 170 27 3 200 183
Additions 17 - q 21 21
Disposals 3 - (3) - (4)
Cost year end 190 27 4 221 200
Amortisation and impairment beginning of year 128 26 - 154 149
Amortisation for the year 11 - - 11 9
Amortisation on disposials - - - - (4)
Amortisation and impairmentyear end 139 26 - 165 154
Carrying amount year end 51 1 4 56 46
Parent company financial statements (67)
Notes To the parent company financial statements
16 Property, plant and equipment
Property,
Other plant and
Land and Plantand fixtures and equipment
Amounts in DKKm buildings machinery equipment in progress 2013 2012
Cost beginning ofyear 568 314 34 145 1,061 1,014
Additions 1 H 1 43 49 64
Disposials - - - - - (17)
Transfer to/from other groups 4 29 3 (36) - -
Cost year end 573 347 38 152 1,110 1,061
Depreciation and impairment beginning ofyear 166 139 23 - 328 295
Depreciation for the year 20 26 5 - 51 50
Depreciation on disposials - - - — - (17)
Depreciation and impairment year end 186 165 28 - 379 328
Carrying amount year end 387 182 10 152 731 733
of which assets held under finance leases 105 105 109
Value ofland and buildings subject to mortgages 153 153 152
Land and buildings in Denmark include buildings on land leased from Scion DTU A/S, Hørsholm. The lease period for this land is unlimited.
7 Deferred tax
Tax losses
Intangible Tangible Current carried
Amounts in DKKm assets assets assets Liabilities forward Total
2013
Carrying amount beginning ofyear (7) (5) 1 10 2 1
Recognised in the income statement, net (4) (12) 2 (3) - (17)
Carrying amount year end (11) (17) 3 7 2 (16)
2012
Carrying amount beginning of year (2) 2 21 1 2 24
Recognised in the income statement, net (5) (7) (20) 9 - (23)
Carrying amount year end (7) (5) 1 10 2 1
Deferred tax in ALK-Abellé A/S is recognised as tax assets in the balance sheet, since itis assessed to be probable that sufficient future taxable income
willbe generated for the deferred tax asset to be utilised.
ALK-Abellé A/S is included in national jointly taxation with the Lundbeck Foundation and its Danish subsidiaries.
1403174EogSN63131
2 Parent company financial statements
Notes to the parent company financial statements
8 Investments in subsidiaries
Amounts in DKKM 2013 2012
Cost beginning ofyear 905 905
Costyear end 905 905
Write-down atthe beginning ofthe year 66 63
Write-down during the year 36 3
Write-down year end 102 66
Carrying amount year end 803 839
Income from investments in subsidiaries is dividends, which amounted
to DKK 109 million and write-down which amount io DKK 36 million
(2012: Dividens DKK 189 million and write-down DKK 3 million).
For an overview of all subsidiaries please refere to page 57 inthe
consolidated financial statements.
Q Inventories
Amounts in DKKM 2013 2012
Raw materials and consumables 22 20
Work in progress 34 25
Manufactured goods and goods for resale 23 29
Total 79 74
Amount of write-down of inventories
during the year 2 6
Amount of reversal of write-down of
inventories during the year 1 2
10 Mortgage debt, bank loans and financial loans
Amounts in DKKm 2013 2012
Debt to mortgage credit institutions
secured by real property
Morigage debt is due as follows:
Within 1 year 2 1
From 1-5 years 7 8
After 5 years 15 16
Total 24 25
Bank loans and financialloans
Bank loans and financial loans are due
as follows:
Within 1 year - -
From 1-5 years 298 298
After 5 years - -
Total 298 298
11 Operating lease liabilities
Amounts in DKKM 2013 2012
Minimum lease payments recognised
inthe income statement 15 14
The total future minimum lease payments
cf. interminable lease agreements:
Within 1 year 13 13
From 1-5 years 4 4
After 5 years -
Total 17 17
12 Contingent liabilifies and commitments
For information on contingent liabilities and commitments, please refer
to note 25 inthe consolidated financial statements.
13 Other provisions
Amounts in DKKM 2013 2012
Other provisions beginning ofyear 55 140
Provisions made during the year 3 55
Used during the year 42 -
Reversal during the year 1 140
Total 15 55
14 Related parties
For information on transactions with related parties, please refer to
note 30 inthe consolidated financial statements.
ALK-Abelté A/S is included inthe Lundbeck Foundation consolidated
financial statements.
15 Fees to the ALK-Abell6 A/S auditors
Amounts in DKKm 2013 2012
Fees to the auditors, Deloitte, appointed
atthe general meeting:
Audit 1
Audit related services -
Tax advisory services -
Other services -
Total 1 2
opf mm
Management's review ø
» Financial highlights and key ratios by fhe quarter
for the ALK Group” (unaudlifed)
Q4 Q3 Q2 Q1
Amountsin DKKm 2013 unaudited unaudited unaudited unaudited
Income statement
Revenue 2,244 593 509 532 610
Cost of sales 697 189 163 181 164
Research and development expenses . 463 96 95 136 136
Sales and marketing expenses "… 762 186 181 202 193
Administrative expenses 192 48 18 49 47
Operating profit/ (loss) (EBIT) before special items 131 77 22 (38) 70
Special items (22) (15) (5) (2) -
Operating profit/ (loss) (EBIT) 109 62 17 (40) 70
Net financial items (5) 5 (1) (12) 3
Profit/ (loss) before tax (EBT) 104 67 16 (52) 73
Net profit/ (loss), continuing operations 61 40 9 (30) 42
Net profit/ (loss) 61 40 9 (30) 42
Operating profit/ (loss) before depreciation and amortisation (EBITDA) before special items 258 110 54 (7) 101
Operating profit/ (loss) before depreciations (EBITDA) 236 95 19 (9) 101
Average number of employees 1,804 1,787 1,801 1,795 1,827
Revenue by market""
Europe 487 491
North America 87 101
International markets 19 18
Revenue by productline""
SCIT/SLIT-drops 1,719 481 USS
SLIT-tablets 2598 77 99
Other products and services 227 35 56
Total revenue 2,244 593 610
Growth in revenue in local currency by product line — gr
SCIT/SLIT-drops - 2 (1) 5 (5)
SLIT-tablets (31) (14) (66) (25) 14
Other products and services 19 (24) 40 42 15
Total revenue (4) (2) (16) 3 -
Balance sheet
Total assets 3,268 3,268 3,218 3,222 3,282
Invested capital 2,104 2,104 2,159 2,111 1,992
i 2,249 2,249 2,219 2,222 2,249
Ca: flow and investments
Cash flow from operating activities 146 144 7 (87) 82
Cash flow from investing activities (231) (75) (40) (60) (56)
- of which investment in tangible assets (186) (68) (30) (51) (37)
(33) (147) 26
Dividend 49 - - 49 -
Share capital 101 101 101 101 101
Shares in thousands of DKK 10 each 10,128 10,128 10,128 10,128 10,128
Share price, end quarter - DKK 614 614 525 438 421
Net asset value per share - DKK. 222 222 219 219 222
Key figures
Gross margin - % 69 68
EBITDA margin - % before special items 11 19
EBITDA margin - % 11 16
Earnings per share (EPS) - DKK 6.3 41
Earnings per share (EPS) - DKK, continuing operations 6.3 41
Diluted earnings per share (DEPS) - DKK 6.2 4.0
Diluted earnings per share (DEPS) - DKK, continuing operations 6.2 4.0
Cash flow per share (CFPS)- DKK 151 14.9
Cash flow per share (CFPS), continuing operations - DKK 15,1 14.9
Share price/Net asset value 2.8 2.8
Q4 Q3 Q2 Q1
Amounts in DKkm 2012 unaudited unaudited unaudited unaudited
Restatement of 2012 figures to new revenue segmentation:
Revenue by market”
Europe 406
North America 73
International markets 129
Revenue by productline””
SCIT/SLIT-drops 1,721 475 390 381 475
SLIT-tablets 128 88 168 86 86
Other products and services 196 52 50 48 46
Total revenue 2,345 615 608 515 607
= Management's review comprises pages 1-27 as well as Financial highlights and key ratlos for the ALK Group on page 69.
=xThe figures have been restated to reflect the change in revenue reporting.
Definitions: see page 58
1403174EogSN63132