H. Lundbeck A/S (HLUNB) Earnings Call Transcript & Summary

Good morning, and welcome. On behalf of the Board of Directors, I would like to welcome you to Lundbeck's Extraordinary General Meeting today. Just like at the Annual General Meeting, we can let our shareholders follow the Extraordinary General Meeting via the webcast. We have some simultaneous interpreting into English so that our shareholders all over the world can follow the proceedings. We have appointed attorney-at-law, Jørgen Kjergaard Madsen, from Kromann Reumert as Chairman of the meeting today. The floor is yours.

Thank you very much. Thank you for appointing me. I hope we will have a good meeting today. Before I go through the practicalities, I have a few housekeeping points. As the Chairman mentioned, the general meeting today is webcast, and it's also interpreted into English. And that means that everyone who is present here today can take headset if you want to listen to the interpretation. Let me just ask if anybody in the audience wants a headset, please raise your hand. That is not the case. I assume everybody is happy with that. And let me also say that if any of our shareholders at this meeting today should wish to take the floor, I would like to ask you to come to the rostrum and bring their access cards with them. And that is because when people follow the webcast, they can only see the rostrum on the screen and not the room as such. And if any shareholder leaves the general meeting before it ends, please unregister at the desk outside. Now I would like to go through the usual formalities. I have to note whether the general meeting has been lawfully convened and whether we are quorate. It has to take place at the right time and place in the capital region, and that is the case. And with the right notice of at least 3 weeks and no more than 5 weeks. And on the 16th of May 2022, the convening notice was published on the company website and via Nasdaq Copenhagen. On the same day, we sent out the notice to the shareholders who has so wished. The convening notice contains the information and documents that are required according to the Articles of Association and applicable law, and they have been available on the website since the 16th of May 2022, which lives up to all the prerequisites for the EGM. On this basis, I take note that the EGM is correctly convened and that we are quorate. Are there any objections to this? That is not the case, then I can conclude that the EGM is lawfully convened and competent to transact the business on the agenda. I have recent figures here. And I can tell you that we have 78.65% of the share capital represented here at the general meeting and a corresponding number of votes. I can also inform you that proxies have been given to the Board of Directors and postal votes for a total of, let me see the most recent figures -- of -- let me see. I received the papers a bit late, and therefore, I just have to take a look -- of. Just a moment. Just a moment. Right, we have a total of -- well, it varies for the individual items, but I can tell you that we have a sufficient number of proxies and postal votes for all of the proposals on the agenda to be adopted. I can get back to the specific numbers once we go through the items on the agenda. Let me also tell you before we embark upon the agenda today that there is a disclaimer that the company normally uses of what we call forward-looking statements. That simply means that the figures that are used -- well, that will not be many today unless something comes up during the debate, but it's just to say that the statements from the company during the meeting today are all subject to this disclaimer. These are forward-looking statements. It's a document that looks very American and it is, indeed, but I have to tell you that this is what applies. And I will leave it on the screen for a moment if you are interested, and you can also find it on the company website. Otherwise, we will start our agenda today. We have 4 items on the agenda today, and you can see them here on the screen. First of all, we have a proposal from the Board of Directors to split the company's existing shares into A shares and B shares and amend the Articles of Association accordingly. Then we have a proposal from the Board of Directors to amend the authorization to the Board of Directors to increase the share capital of the company. Then we have a proposal to amend the remuneration policy for the Board of Directors and executive management. We will get back to that. These are minor adjustments. And then we have a technical proposal to authorize the Chairman of the meeting, that is me, and the attorneys at Bech-Bruun Advokatpartnerselskab to file the resolutions passed at the Extraordinary General Meeting today. And then, of course, the final item is any other business. We will now move on to the first item on the agenda. And I give the floor back to the Chairman of the Board, Lars Rasmussen.

Right, if you've followed us over the years, so you attended our AGM in March. You know that Lundbeck has been on a long growth journey. Over the last 20 years, Lundbeck has seen an annual increase in revenue of about 6.5%. As you can see from the diagram up here, Lundbeck has grown historically through internal and external innovation. It is Lundbeck's long-term ambition to continue this growth journey. As I also mentioned at the AGM in March, the changes of the share structure are not a change of strategy. However, we believe that this change that we are proposing today will contribute towards Lundbeck's financial capacity. It will expand the company's long-term opportunities to reach out to external growth opportunities. And long-term stability is insured through the majority ownership of the Lundbeck Foundation. So we will be well braced, well prepared in the long run. We do believe there will be interesting growth opportunities for Lundbeck [indiscernible] partnerships or acquisitions. Lundbeck and the Board have an ambition to selectively pursue these opportunities in the coming years. With the new split share structure, we'll be well braced to pursue strategic opportunities if and when they materialize. The suggested change of the share structure was introduced by the Lundbeck Foundation, and has been subsequently developed with Lundbeck [indiscernible] split the present loan picture into 1 A-share with 10 votes and 4 B-shares of 1 each with 1 vote. Both of these shares will be listed at the Danish Stock Exchange. All shares will maintain their financial rights. There will be no changes in voting rights or financial ownership for existing shareholders. If current shareholders wish only to retain their B shares and not the lesser liquid A shares, the Lundbeck Foundation has announced that via its subsidiary Lundbeckfond Invest A/S, it intends to offer warranted shareholders a one-to-one switch of their A shares with B shares. So there's more information about that on the website of the Lundbeck Foundation. Now let me try summarize the expected next steps. The listing document has been published on the website on the 20th of May. If the share split is adopted today, the last day of trading Lundbeck's current shares will be tomorrow on the 9th of June, and the new A shares and B shares will be traded at the stock exchange as from the 10th of June. Now if you look at it technically, the expectation is that if you have shares held on the 13th of June at 1759, 1 existing shares will be changed to 1 A-share and 4 B-shares on the 14th of June. The new A-shares and B-shares will be delivered on the 14th of June and they'll be ready. They'll be shown in your holdings. A shares are expected to be traded under a simple called HLUN A and B shares are expected to be traded under HLUN B, both of them with new ISIN codes. That was the practical points. So back to you, Jørgen.

Yes, there's a lot of technicalities and practicalities in this kind of exercise, but that's all happening parallel to this EGM. That was the motivation from the Board of Directors for this proposal to split the shares into A shares and B shares. And at this juncture, I would like to ask whether there are any questions or comments or if anyone wishes to take the floor. If that is not the case, I can conclude that the proposal has been adopted, as I mentioned, we already have a sufficient number of votes including postal votes and proxies for the adoption of this proposal. So the proposal under Item 1 has been adopted. Then we move on to item 2. This is a proposal from the Board of Directors to amend the authorization to the Board of Directors as described in the convening notice. This is also quite a technical point, I think that we do not need to go into more detail here. Of course, as anyone should so wish, we can. But as I said, this is simply an adjustment of the existing authorization in order to reflect the fact that the share capital in the future will be divided into A and B shares. Otherwise, there's not really any big changes here. Does anyone want to take the floor here? Or are there any questions? If not, I can conclude that the proposal has been adopted, because, again, we have a sufficient number of votes to adopt the proposal via the received proxies and postal votes. That leads me to item 1.3, which is a proposal to amend or might I call it just the remuneration policy for the Board of Directors and executive management. These are minor changes, primarily aimed at reflecting the changed share structure so that you can now give out LTI instruments in A or B shares. And it's simply a change of terminology from restricted share units to performance share units, and also the possibility for the Board to introduce sustainability targets as 1 element of the KPIs of the remuneration policy, 0.345. Any comments? Yes, please come up here to the rostrum. Please introduce yourself.

My name is [ Lars H. Nielsen ], and I have the following comment for Item 1.3, the proposal by the Board of Directors to amend the remuneration policy. It's my feeling that the Board of Directors and Lundbeck imagines that they can buy alchemist abilities for money. But management is not really something you can buy. You have a very incompetent CIO at a salary of $30 million in a year. You also hired the Executive Director, but who got the idea who led the way of giving $30 million a year to Deborah Dunsire. Was that the Board of Directors idea or [indiscernible] idea, the recruitment agency. Was he chosen as the best qualified? Because Dunsire has been a mismatch for Lundbeck. She's been the CEO since the 1st of September 2018. And in Nordnet, you can see harsh criticism of her. They have done really poorly for the past 3 or 4 years. The analysts of Nordnet say that Lundbeck are giving out exorbitant salaries and bonuses in spite of very poor results. Of course, I can't stand here and just criticize Lundbeck and say that they should do better. But that is what everyone says. And I have to say that Lundbeck has really performed poorly for the past 3 to 4 years. So my conclusion is that you have been purchasing incompetence to the tune of $30 million a year. You can only deduct DKK 7 million in taxes for your salaries for an executive director. That is what the Danish authorities find appropriate. So when you give out $30 million a year, it's simply a matter of greed. You should really consider a more appropriate remuneration level than $30 million. You need to stay within the tax limits of DKK 7 million a year. Thank you.

Thank you very much. Of course, to begin with, I can say that this is not a substantial change of the remuneration policy. But of course, this comment is related to this item on the agenda. Today, we're only talking about technical adjustments to the remuneration policy to reflect the already adopted proposals of the share split and also giving the possibility of introducing sustainability targets as KPIs. That is -- what is on the agenda here today. But let me ask if the Chairman of the Board would like to comment?

Thank you for the comment. And I'd like to repeat what you said, Jørgen. What we are voting about today is as a consequence of the fact that we are getting ambitious and that we want to be able to use sustainability as one of the criterions for paying out LTI's long-term money. So the DKK 7 million, I don't know where that comes from, but at least you can say it's a lot of money. So you can choose to set that as a limit. If you take the C25, the 25 biggest companies in Denmark and look where the salaries are, I don't think you can find a one that is at DKK 7 million or less. So there is a price is what it costs to have good management that is global for global companies. And shares have not had a good development. I understand that. So I understand the comment that you are giving. But the point of the matter is that it takes time to build up a pipeline in a company like this. We haven't had a sufficiently strong pipeline. And I want to give all the credit that I can to the current management to say that they have built up a pipeline now. But it takes 10 or 12 years to get a pipeline into the market. So at that time, I think we can assess whether it was good management or not good management. But that's the way it is. So we have to say supply and demand that decides the price of management. There's a price of management. There's a price of a car, there's a price of many things. The price of top management in a global pharma environment, that is the price that we pay. So that was my feedback. Thank you.

Thank you very much. Are there any other questions or comment regarding this item on the agenda? If not, I can conclude that the proposal is adopted. And that leads me to item 1.4 on today's agenda. This is simply the authorization to me and Bech-Bruun to file the resolutions passed at the Extraordinary General Meeting today. Are there any comments here? This is a completely standard authorization. That is not the case, and I conclude that the item has been adopted and the proposal has been adopted. And that leads me to the final item on today's agenda, any other business. We cannot adopt any proposals here. But if there are any concluding remarks or comments, you are very welcome. If that is not the case, we have exhausted our agenda today, and I'll give the floor back to the Chairman of the Board, Lars Rasmussen, for a final remark.

Thank you, and thank you for taking us through the general meeting. Thank you for attending here today. I look forward to seeing you for the next Annual General Meeting in 2023. See you then. Thank you.