ANNUAL REPORT 2021
LUNDBECK
ANNUAL REPORT 2021
= CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTES 10-11
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10 TRADE RECEIVABLES - CONTINUED
In April 2020, Lundbeck purchased a “key buyer" credit insurance covering around 100 of the largest
customers of the Group. The credit insurance was bought to protect against insolvency, protracted default
and political risk as a result of uncertainties created by the pandemic. The credit insurance was not renewed
in 2021 due to assessment that the pandemic did not materially increase the credit risk.
Changes to the Group's customer portfolio are limited. When collaboration is established with a new
customer, credit assessment is done either by Lundbeck or an external credit rating agency. At the time of
revenue recognition, Lundbeck assesses the full lifetime expected credit losses. In addition, undue and due
receivables are analyzed in an ongoing process. Based on the credit assessment, receivables analysis,
historical and industry experience, it is estimated whether the receivables are recoverable or writedowns are
needed. Historically, losses on debtors have been insignificant.
Fluctuations in foreign exchange rates, including the impact from currency devaluations, represent an
inherent risk as Lundbeck also operates in volatile economies. Lundbeck monitors and takes action to
mitigate risks associated with receivables.
Market risks
The pharmaceutical market is characterized by the aim of authorities to reduce or cap healthcare costs in
general. Market changes such as price reductions and ever-earlier launch of generics may have a
considerable impact on the earnings potential of pharmaceuticals.
11 CASH RESOURCES
Cash and bank balances
2021
2020
DKKm
DKKm
2,279
3,924
Liquidity risk and capital structure
The credit risk on cash and bank balances and derivatives (forward exchange contracts, currency options
and interest rate swaps) is limited as Lundbeck only deals with banks with a solid credit rating. The
counterparty risk towards banks with a short-term credit rating lower than A-1 (Standard & Poor's) is kept to
a minimum, only allowing balances necessary for operating needs within the immediate future. To further
limit the risk of loss, internal limits have been defined for the credit exposure accepted towards the banks
with whom Lundbeck collaborates. Credit lines are part of the Treasury Policy.
The Treasury Policy covers financial resources, foreign currency exposure, interest rate risk, securities, loan
and bond portfolios as well as capitalization of subsidiaries. The Treasury Policy is presented to the Audit
Committee annually for subsequent approval by the Board of Directors. In addition, the Board of Directors
approves the framework for selecting financial collaboration partners and the credit lines and types of
transactions allowed.
Pursuant to its Treasury Policy, Lundbeck must ensure that a minimum of DKK 1.0 billion is held in cash or
cash equivalents. If this amount is not available in cash, fixed-term deposits or bonds, Lundbeck will enter
into committed credit facilities with its banking partners.
In 2019, Lundbeck entered into two loan agreements with its strategic banks; a revolving credit facility (RCF)
of EUR 1.5 billion and a term loan of DKK 2 billion. The term loan was repaid in February 2021, following a
year of strong cash flow generation.
The RCF expires in 2025 and has an option, at the lenders' discretion, to extend the maturity for up to one
additional year. The flexible structure of the RCF enables Lundbeck to repay the debt in full at short notice,
normally not more than three months, and still maintain the facility until expiration of the credit commitment.
The RCF is subject to covenants, and no breaches were encountered during the year.
At 31 December 2021, Lundbeck had unutilized committed credit facilities of DKK 10.1 billion. In addition,
Lundbeck has a number of uncommitted credit facilities to cover its day-to-day operations.
At 31 December 2021 and 31 December 2020, these credit facilities were unutilized.View entire presentation