ANNUAL REPORT 2021

LUNDBECK ANNUAL REPORT 2021 = CONTENTS CONSOLIDATED FINANCIAL STATEMENTS NOTES 15-16 15 PROVISIONS 2021 Discounts and rebates Product returns DKKm DKKm Other provisions DKKm Total DKKm 76/111 Other provisions Of other provisions at 31 December 2021, DKK 253 million (DKK 161 million in 2020) relates to restructuring programs. This amount includes the restructuring costs announced during 2021 of around DKK 200 million, which was recognized in sales and distribution costs in October 2021. In addition, other provisions comprise liabilities relating to items such as legal disputes. Provisions at 1 January 1,002 179 630 1,811 Effect of foreign exchange differences 76 10 21 107 Provisions charged 1,790 101 407 2,298 Provisions used (1,945) (205) Unused provisions reversed (498) (71) (2,648) (71) Provisions at 31 December 923 85 489 1,497 Provisions break down as follows: Non-current provisions Current provisions Provisions at 31 December 38 54 923 47 435 1,405 923 85 489 1,497 92 22 Discounts and rebates The most significant sales deductions are in the U.S. and comprise discounts and rebates given in connection with sales under the U.S. Federal and State Government Healthcare programs, primarily Medicaid. Management's estimate of discounts and rebates is based on a calculation which includes a combination of historical product/population utilization mix, price increases, program/market growth and state-specific information. Further, the calculation of rebates involves legal interpretation of relevant regulations and is subject to changes in interpretive guidance from governmental authorities. The obligations for discounts and rebates are incurred at the time the sale is recorded; however, the actual rebate related to a specific sale may be invoiced by the authorities six to nine months later. In addition to this billing time lag, there is no statute of limitations for states to submit rebate claims; thus, rebate adjustments in any particular period may relate to sales from a prior period. Moreover, when a product loses exclusivity, shifts in payer mix may cause Medicaid claims/estimates to be more volatile. Product returns The Group has product return obligations normal for the industry. Management does not expect any major losses from these obligations apart from the amount already recognized. 16 CONTINGENT ASSETS AND CONTINGENT LIABILITIES Pending legal proceedings Lundbeck is involved in a number of legal proceedings, including patent disputes, the most significant of which are described below. The outcome of these proceedings is not expected to have a material impact on the financial position or cash flows beyond the amount already provided for in the financial statements, or it is too uncertain to make a reliable provision. Such proceedings will, however, develop over time, and new proceedings may occur which could have a material impact on the financial position and/or cash flows. In June 2013, Lundbeck received the European Commission's decision that agreements concluded with four generic competitors concerning citalopram violated competition law. The decision included fining Lundbeck EUR 93.8 million (approximately DKK 700 million). Lundbeck paid and expensed the fine in the third quarter of 2013. In March 2021, the European Court of Justice rejected Lundbeck's final appeal of the European Commission's decision. So-called "follow-on claims" for reimbursement of alleged losses, resulting from alleged violation of competition law, often arise when decisions and fines issued by the European Commission are upheld by the European Court of Justice. Health authorities in the UK and an umbrella organization of Dutch health insurance companies have taken formal protective steps against Lundbeck with the principal purpose of preventing potential claims from being time-barred under the applicable statutes of limitation. In September 2021, the UK proceedings were transferred from the High Court to the Competition Appeal Tribunal at the request of the parties. Lundbeck expects that the UK health authorities will now pursue their alleged claims. Further, in late October 2021, Lundbeck received a writ of summons from a German health care company claiming compensation for an alleged loss of profit plus interest payments, allegedly resulting from Lundbeck's conclusion of agreements with two of the four generic competitors, which were comprised by the EU Court of Justice ruling. Lundbeck is preparing its defence and it may take several years before a final conclusion is reached by the German courts. Lundbeck disagrees with the claims and will defend itself against the claims.

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