NeuroSearch A/S - Financial statements 2006

Announcement 



NeuroSearch A/S - Financial statements 2006

The Board of Directors of NeuroSearch A/S today considered and adopted the
audited financial statements for the year ended 31 December 2006. 
A consolidated loss before tax of DKK 212.2 million was posted (2005: a profit
of DKK 0.6 million). Before recognition of results from associated companies
and other equity interests, the loss was DKK 191.5 million, which was in line
with the guidance of a loss of DKK 160-190 million before results from
associated companies and other equity interests announced on 13 December 2006.
The Group's capital resources totalled DKK 504 million at 31 December 2006
(2005: DKK 437 million). 
The year 2006 was a year of important events for NeuroSearch. We reached a
number of important milestones, both in our business activities and in our
portfolio of drug candidates under development. Overall, this resulted in
considerable value creation and a strengthening of our position. 
The favourable developments in our drug discovery and drug development
programmes have continued after the end of the financial year. On the business
side, on the other hand, we will not be able to sign a licence agreement for
the tesofensine programme during the first quarter of 2007 as projected
earlier. 
Business events  
•	In October, NeuroSearch acquired Swedish-based biopharmaceutical company
Carlsson Research AB, which develops new drugs for CNS diseases. This
acquisition added four new development programmes to our pipeline. 
In connection with our acquisition of Carlsson Research, we made a successful
rights issue to existing NeuroSearch shareholders. The shares were fully
subscribed, and the cash proceeds from the offering amounted to DKK 397
million. 
•	In November, NeuroSearch and GlaxoSmithKline (GSK) expanded the scope of
their strategic alliance (2004-2008) for research and development of new drugs.
This means that, in future, NeuroSearch will be responsible for a larger share
of drug development under the alliance, and we will thus retain more of the
value, with the prospect of greater earnings. Moreover, the alliance now covers
all disease areas within as well as outside the CNS area. 
•	At the annual general meeting in April 2006, Jørgen Buus Lassen, co-founder
and CEO, announced his decision to retire as CEO, and Flemming Pedersen, former
CFO, was appointed new President and CEO. 
R&D milestones 
•	With the drug candidate tesofensine, a Phase IIb development programme
(TIPO-1 and TIPO-2 studies) was initiated within the treatment of obesity and
type 2 diabetes. The background for this was very promising results in previous
clinical studies in which remarkable and dose-related weight loss had been seen
in 312 obese patients following treatment with tesofensine. Patient enrolment
for the TIPO-1 study was completed by the end of 2006. 
•	In late 2006, our alliance partner GSK initiated a comprehensive Phase IIb
programme with the drug candidate NS2359 for the treatment of depression. The
first Phase IIb study is to evaluate the effect and safety of treatment with
NS2359 compared to placebo and paroxetine, an SSRI (selective serotonin
re-uptake inhibitor) marketed by GSK for the treatment of depression under the
name of Paxil®. Another Phase IIb study is expected to commence in the spring
of 2007 to compare NS2359 with another antidepressant on the market. 
•	In November, Phase I clinical studies were initiated with the drug candidate
ACR325 with a view to developing the product for the treatment of psychoses,
including bipolar disorder. This milestone triggered a cash payment of SEK 75
million (DKK 61.7 million) to the vendors of Carlsson Research. 
•	Very favourable developments were seen in 2006 in the collaboration with
Abbott regarding neuronal nicotinic receptor (NNR) modulators. After successful
completion of Phase I studies with ABT-894, Abbott decided to initiate Phase II
clinical studies in several CNS diseases. The first Phase II study targets
ADHD, and it is expected that the study will commence in the first quarter of
2007. In addition, early in the year Abbott selected two new development
candidates: ABT-107 for the treatment of schizophrenia/dementia, and ABT-560
for the treatment of cognitive dysfunctions. In connection with the expiry of
the collaboration regarding NNR modulators at the end of 2006, Abbott selected
two new drug candidates. This brought the number of drug candidates from the
collaboration to a total of five. 
•	From NeuroSearch's own drug discovery programmes, NSD-644 was selected as a
new development candidate for the treatment of pain and other psychiatric
disorders. GSK holds an option for NSD-644 under the expanded licence
agreement. To this should be added ACR343 for Parkinson's disease, which was
selected as a new development candidate from the drug discovery programmes of
Carlsson Research. 

Events after the balance sheet date
•	NeuroSearch will not close a licence agreement on tesofensine before the end
of Q1 2007 
NeuroSearch has been in advanced negotiations in recent months with
international pharmaceutical companies about a potential licence agreement for
tesofensine, expecting to close the negotiations in Q1 2007. 

During the process, parallel negotiations were conducted with the three
companies, which were all primarily interested in an agreement to develop
tesofensine for psychiatric diseases in parallel with NeuroSearch's development
programme for the treatment of metabolic diseases (obesity and Type 2
diabetes). 

We now have concrete proposals for the tesofensine programme, but the Board of
Directors today concluded, based on an overall assessment, including new
favourable safety and tolerability data from the TIPO-1 study, that these
proposals are not satisfactory. NeuroSearch therefore no longer expect to sign
an agreement before the end Q1 2007. 

We have decided to continue discussions with potential licence partners, but if
we cannot reach a satisfactory outcome, we have decided to await the results
from the two ongoing clinical studies in obesity (TIPO-1 and TIPO-2) before
seeking to enter into a licence agreement. These studies are expected to be
completed during H2 2007. 

President and CEO Flemming Pedersen comments, “We will still work on reaching a
licence agreement in the current financial year, but we will increasingly take
into account that we will be getting closer to the end of the proof-of-concept
studies, TIPO-1 and TIPO-2, which naturally holds the potential of a further
significant increase of the value creation in the programme.” 
Other events after the balance sheet date 
•	In early 2007, an additional two new development candidates were selected
from NeuroSearch's drug discovery programmes: NSD-708 for the treatment of
anxiety and other psychiatric disorders and NSD-788 for the treatment of
anxiety. GSK holds options for both development programmes under the expanded
agreement. 
•	Preparations for the final clinical studies with ACR16 for Huntington's
disease are progressing as planned, and after the turn of the year discussions
have commenced with the US and European regulatory authorities (FDA and EMEA)
and the Huntington Study Group in the United States with a view to beginning
Phase III clinical studies in the second half of 2007. Under the licence
agreement with Astellas, the development of ACR16 for the treatment of
schizophrenia is also progressing in line with plans and in a very satisfactory
manner. 

For 2007, NeuroSearch forecasts a loss in the region of DKK 80 to DKK 100
million before recognition of losses from associated companies and other
investments. 


Asger Aamund
Chairman



Contact persons:
Flemming Pedersen, President & CEO 
Tel.: +45 4460 8214 or +45 2148 0118
Hanne Leth Hillman, Vice President, Director of IR & Corporate Communications 
Tel: +45 4460 8212 or +45 4017 5103
Telephone conference:
A teleconference will be held on 5 March 2007 at 3 pm Copenhagen time (2 pm
London time, 9 am New York time). Flemming Pedersen, CEO, Anita Milland, Vice
President, CFO and Hanne Leth Hillman, Vice President, Director of IR &
Corporate Communications, will present the annual report and answer questions.
The telephone conference will be conducted in English and the telephone number
is +44 (0)20 7162 0125. The corresponding PowerPoint presentation will be
available via www.neurosearch.com. 

NeuroSearch is a Scandinavian biopharmaceutical company listed on the
Copenhagen Stock Exchange (NEUR). Our core business covers the development of
novel drugs, based on a broad and well-established drug discovery platform
focusing on ion channel and transporters. A substantial part of the company's
activities are partner financed through a broad alliance with GlaxoSmithKline
(GSK) and collaborations with among others Abbott and Astellas. Eight drug
programmes are in clinical development: ACR16 for the treatment of Huntington's
disease (under preparation for Phase III), tesofensine for the treatment of
obesity/type 2 diabetes (Phase II), NS2359 for the treatment of depression
(Phase II) and ADHD (Phase II) in partnership with GSK, NS1209 for the
treatment of epilepsy and pain (Phase II), ABT-894 for the treatment of ADHD
and neuropathic pain (Phase I) in partnership with Abbott, ACR16 for the
treatment of schizophrenia (Phase I) in partnership with Astellas and ACR325
for the treatment of psychoses such as bipolar disorder (Phase I). In addition,
NeuroSearch has a broad portfolio of preclinical drug candidates and has equity
interests in several biotech companies. 

 
Broader perspectives and continued focus on growth 

2006 successful for NeuroSearch 
On many fronts, 2006 was one of the most eventful years in the history of
NeuroSearch. We took a number of important business steps, and we reached
several important milestones in our drug programmes. 
One of the most important events in 2006 was the acquisition of Swedish-based
biopharmaceutical company Carlsson Research AB, our first major acquisition.
With this acquisition we added four promising development programmes to our
drug pipeline and expanded our drug discovery platform with a unique
technology. The primary product from Carlsson Research's pipeline is ACR16,
which is under preparation for the final clinical Phase III studies for the
treatment of Huntington's disease. 
In connection with our acquisition of Carlsson Research, we made a rights issue
to the existing shareholders of NeuroSearch. The capital increase was very well
received by the equity market and gave us cash proceeds of DKK 397 million. 
Our existing business was also strengthened during the past year. On the basis
of our ion channel platform, we expanded our activities targeting major disease
areas outside CNS diseases. Moreover, we have significantly strengthened our
clinical development organisation so that we now have the necessary
competencies to handle a larger part of the drug development, thereby retaining
an ever larger proportion of the value added and earnings potential. 
NeuroSearch has one of the broadest portfolios of drug programmes under
development among all biopharmaceutical companies in Europe. To this should be
added a wide-ranging and very productive drug platform, which we continue to
expect will produce several new drug candidates. Furthermore, we have strong
partners from the international pharmaceutical industry and a strong financial
position. For all these reasons, we are well positioned for continuing growth
and progress in the years ahead. 

Five-year strategic goals focusing on growth
In connection with the annual general meeting held on 25 April 2006, we
announced a new, ambitious five-year plan with strategic goals for the period
from 2006 to 2010. The plan contains the following key elements: 

1.	To launch our first drug on the market
2.	To develop a broader and more mature pipeline of drugs under development 
	To increase the number of products in development
	To retain a larger share of the commercial rights 
	To develop specialist and hospital products all the way to filing of
registration applications and marketing 
3.	To be a part of a strategic alliance with an international pharmaceutical
company 
4.	To make acquisitions/engage in inlicensing
5.	To optimise our financial room to manoeuvre so that it supports our growth
targets. 

These goals will be the driving force for continuing development and expansion
of our activities towards creating a fully integrated pharmaceutical company
with products of our own on the market and with our own sales organisation. 


Acquisition of Carlsson Research AB 
In accordance with our strategic goals, we acquired Swedish-based
biopharmaceutical company Carlsson Research AB in October 2006. Founded in
2000, this company focuses on the development of new drugs for the treatment of
CNS diseases based on a platform in the dopaminergic stabiliser field. A
dopaminergic stabiliser is a compound which is capable of both inhibiting
overactivity and promoting underactivity of the neurotransmitter dopamine.
Since the acquisition, the name of Carlsson Research has been changed to
NeuroSearch Sweden AB, and all the company's activities are now fully
integrated in our organisation. NeuroSearch Sweden AB is located in Gothenburg
and has 32 employees. 

With the acquisition of Carlsson Research, we strengthened our drug pipeline by
the following four programmes under development: 
•	ACR16: under preparation for the final Phase III clinical studies for the
treatment of Huntington's disease. 
•	ACR16: in clinical Phase I for the treatment of schizophrenia under a
development and licence agreement with the international pharmaceutical group
Astellas Pharma Inc. (Astellas). 
•	ACR325: under preparation for clinical Phase I for the treatment of psychoses
and bipolar disorder. (Phase I studies were initiated in November 2006.) 
•	ACR343: new development candidate for Parkinson's disease.

On the acquisition, we paid SEK 250 million (DKK 202 million), whilst the
remaining part of the consideration up to a total of SEK 625 million (DKK 505
million) consists of success-related milestone payments. These payments become
due when a number of pre-determined development milestones are reached in the
development programmes acquired. We believe that reaching the milestones will
represent added value in excess of the related payments. 

We reached the first milestone as early as November 2006, when we started up
Phase I clinical studies with the drug candidate ACR325. On that occasion, we
made the first milestone payment of SEK 75 million (DKK 61.7 million) to the
vendors of Carlsson Research. 

The most valuable asset we acquired is currently ACR16 for which NeuroSearch
holds the commercial rights for the treatment of Huntington's disease. As this
is a so-called “orphan indication”, i.e. a small disease area, we intend to
complete the development of and market this product ourselves. The market for
Huntington's disease is a well-structured specialist market which we expect to
be able to serve with a relatively limited sales force. 

In connection with the acquisition of Carlsson Research, we made a one-for-two
rights issue in October 2006 with pre-emption rights to our existing
shareholders and proceeds of DKK 397 million. 


Expansion of strategic alliance with GSK
In November 2006, NeuroSearch and GlaxoSmithKline (GSK) agreed to expand the
scope of the current five-year strategic alliance (2004-2008) within drug
discovery and development. 

The highlights of the expansion are: 

1.	A change in the distribution of work, risk and reward between the two parties
In future, NeuroSearch will be responsible for bringing new drug candidates
from research to development and for the clinical development until completion
of Phase IIa effect studies (“Proof-of-Concept”). GSK will be responsible for
the late-stage development and for production and marketing. 
For drug candidates subject to the alliance, GSK will make milestone payments
to NeuroSearch as from start of clinical Phase I studies. For products where
NeuroSearch successfully completes the development through Phase IIa,
NeuroSearch will receive up to EUR 109 million (DKK 812 million) in development
milestones and attractive double digit royalties of GSK net sales. The expanded
alliance thus ensures early funding from GSK and greater potential earnings to
NeuroSearch. 
2.	The alliance now also comprises diseases outside the CNS that can be treated
by modulation of ion channels 
The alliance between NeuroSearch and GSK is now organised under GSK's business
unit for external research and development activities CEEDD (Center of
Excellence for External Drug Discovery). This organisation allows for
NeuroSearch drug discovery programmes being made available to all GSK
therapeutic areas, i.e. both inside and outside the CNS area. 
3.	A new share option agreement
As part of the expanded agreement, NeuroSearch can sell additional ordinary
NeuroSearch shares at market price to GSK for an amount of up to EUR 30 million
(approximately 223 million) linked to the filing of six INDs. 

The aim of the expansion of the agreement is: 
•	to secure an optimal and smooth transition of drug candidates from research
into development; 
•	to secure a full exploration of NeuroSearch's ion channel platform - both for
CNS and non-CNS indications; 
•	to change NeuroSearch's risk/reward profile part of their growth strategy;
•	to exploit NeuroSearch's development capabilities optimally.

In addition to ensuring substantial financial support for our activities, the
alliance with GSK gives us access to a number of new technologies and to
know-how within modern drug development. 


DEVELOPMENT PROGRAMMES

Our drug pipeline was expanded considerably in 2006. The acquisition of
Carlsson Research added four new development programmes, whilst NeuroSearch's
existing drug discovery platform provided a total of five new development
candidates. Four of these five candidates derive from the collaborative
agreement with Abbott on nicotinic receptors. In addition to ABT-107 and
ABT-560 selected in the spring, Abbott also selected two additional candidates
for clinical development in late 2006. 

In early 2007, we additionally selected two new compounds as development
candidates deriving from our own drug discovery programmes. NSD-708 is being
developed for the treatment of anxiety and other psychiatric disorders, whereas
NSD-788 is being developed for the treatment of anxiety. This brought the
number of new preclinical drug candidates added to NeuroSearch's pipeline since
the beginning of 2006 to a total of seven. 

Our development pipeline now comprises 18 development programmes. Of these
programmes, eight are in clinical development and ten are in preclinical
development. 
	

Drug candidates in clinical development (Phases I - III)

ACR16 - Huntington's disease: Under preparation for clinical Phase III 
ACR16 is a dopaminergic stabiliser which has shown promising results in a Phase
II clinical study for the treatment of Huntington's disease. Beneficial effects
of dopaminergic stabilisers in general have been demonstrated in clinical and
preclinical studies in psychiatric and neurological diseases. 
Huntington's disease is a fatal inherited disease characterised by symptoms
such as motor disturbances, attention and memory failure (cognitive
disturbances), psychoses, depression and anxiety. 

Preparations for the final clinical studies with ACR16 for Huntington's disease
are progressing as planned, and after the turn of the year discussions have
commenced with the US and European regulatory authorities (FDA and EMEA) and
the Huntington Study Group in the United States with a view to beginning Phase
III clinical studies in the second half of 2007. 

The planned studies will be randomised, double-blinded, placebo-controlled
studies conducted at approximately 60 centres in Europe and the US. The maximum
treatment time will be six months, and the primary goal will be to improve
motor function in patients with Huntington's disease. Secondary goals are to
assess the effect on behaviour, depressive symptoms, anxiety and the cognitive
functions, and to assess safety and tolerability. 

NeuroSearch holds the right to develop and commercialise ACR16 for the
treatment of Huntington's disease in North America and Europe. Astellas owns
the rights to ACR16 for the treatment of this disease in the rest of the world.
The health authorities in both Europe (EMEA) and the USA (FDA) have granted
ACR16 “orphan drug” status, which means that a closer dialogue than normal with
the authorities can be expected during clinical development and registration
procedures. 

Tesofensine - Obesity/Type 2 diabetes:  In clinical Phase II (TIPO-1 and
(TIPO-2) 
NeuroSearch holds all the rights to tesofensine, which is being studied in two
Phase II clinical studies in obesity and Type 2 diabetes. Tesofensine is a drug
candidate that affects the three neurotransmitters dopamine, serotonin and
noradrenaline (triple mode of action). The compound has potential in the
treatment of both obesity/Type 2 diabetes and depression, and this is also
expected to apply to other CNS indications. 

Tesofensine has previously been studied in Phase II clinical studies with a
total of 312 overweight Alzheimer and Parkinson patients. In these studies, 14
weeks' treatment with tesofensine resulted in significant and dosis-related
weight loss on a level with the effect of existing drugs for the treatment of
obesity. These results were later supported in a preclinical model for obesity
in which treatment with tesofensine resulted in weight loss and an additional
direct beneficial effect on the metabolic parameters such as blood glucose and
lipids, which is relevant for the treatment of Type 2 diabetes. 
 
Overall, tesofensine has been studied in more than 1,400 persons, and the
compound has an excellent and well-documented safety profile. 

Based on these data, we initiated a Phase IIb clinical, double-blinded,
placebo-controlled, multi-dose study (TIPO-1) to evaluate weight loss after
treatment with tesofensine. The study comprises more than 200 obese persons
(BMI ≥30) who are treated for six months with one of three different doses of
tesofensine or with placebo. All the participating persons follow the same
dietary and exercise programme before and during treatment and during a
follow-up period. An external expert Data Monitoring Committee (DMC) connected
to TIPO-1 has reviewed mid-term data from the study. Based on an evaluation of
160 obese persons, with half of them being exposed to tesofensine for at least
12 weeks, the DMC recommended that "the trial continues as planned". Patient
enrolment was completed in late 2006, and we expect to report results from the
study in the second half of 2007. 

At the end of 2006, we initiated a supplementary Phase I/II clinical study
(TIPO-2) to determine in greater detail the effect of tesofensine on the
metabolism. The study is a two-pronged, placebo-controlled, parallel-group
study which will include 32 overweight to obese persons (BMI 28-35). The
primary objective is to study the effect of tesofensine on energy conversion.
The study is also intended to deal with other parameters such as fat metabolism
and segregation and the effect of tesofensine on blood fat content (plasma
lipids) and parameters regulating appetite and metabolism. Results from the
study are expected to be available in the second half of 2007. 

We now have concrete proposals for the tesofensine programme, but the Board of
Directors today concluded, based on an overall assessment, including new
favourable safety and tolerability data from the TIPO-1 study, that these
proposals are not satisfactory. NeuroSearch therefore no longer expect to sign
an agreement before the end Q1 2007. 

We have decided to continue discussions with potential licence partners, but if
we cannot reach a satisfactory outcome, we have decided to await the results
from the two ongoing clinical studies in obesity (TIPO-1 and TIPO-2) before
seeking to enter into a licence agreement. 

NS2359 (GSK372475) - Depression (and ADHD): In clinical Phase II 
NS2359 also has a triple mode of action, affecting the three neurotransmitters
serotonin, noradrenaline and dopamine, all of which play an important role in
the development of depression. NS2359 also increases the amount of the
neurotransmitter acetylcholine that is released. This mode of action is
expected to produce a better and faster reduction of the symptoms associated
with depression. This rationale has been confirmed in independent studies in
which existing anti-depressants affecting serotonin have been combined with
drugs that affect noradrenaline/dopamine. Drugs with this triple mode of action
are expected to become the future standard in the treatment of depression. 
The worldwide right to develop and market NS2359 has been licensed to GSK, who
started up the first of two extensive Phase IIb clinical studies in the
treatment of major depressive disorder in late 2006. The two studies will
involve several hundred patients and a large number of centres in several
different countries. The first study is a randomised double-blinded parallel
study which, during a ten-week treatment period, will compare NS2359 with
placebo and paroxetine, an SSRI (selective serotonin re-uptake inhibitor)
marketed by GSK under the name of Paxil®. 
The other study of NS2359 as a treatment for depression is expected to begin in
the spring of 2007 to compare NS2359 with another drug on the market for the
treatment of depression. 
GSK also holds the rights to NS2359 for the treatment of other disease areas
including ADHD (attention deficit hyperactivity disorder), a psychiatric
disorder characterised by disturbances in attention, activity and
impulsiveness. In an earlier clinical trial conducted by NeuroSearch, NS2359
demonstrated an improvement in attention, concentration and memory, which are
affected in ADHD patients. 
 
ABT-894, ABT-107, ABT-560 and selection of two additional drug candiates (NNR
collaboration with Abbott) 
ABT-894 was selected as a development candidate under a research, development
and licence agreement with Abbott covering Neuronal Nicotinic Receptor (NNR)
modulators. Abbott has successfully completed Phase I single and multiple
dosing studies, including studies with surrogate markers for cognitive
improvement. In 2006, following positive Phase I studies with ABT-894, Abbott
decided to initiate Phase II studies in several CNS diseases, and the first
Phase II study targeting ADHD is expected to commence in Q1 2007. In the
beginning of 2006, an additional two development candidates, ABT-107 for the
treatment of schizophrenia/dementia and ABT-560 for the treatment of cognitive
dysfunctions, were selected. 
ABT-107 represents a different nicotinic subtype receptor profile compared to
ABT-894 and is developed for the treatment of schizophrenia and cognitive
dysfunctions. Preclinical development of ABT-107 has now been successfully
completed, and Phase I clinical studies are planned to be initiated in 2007. 
ABT-560 was selected as a new development candidate after having demonstrated
positive effects in preclinical models for dementia and cognitive dysfunctions.
It is expected that Phase I studies can be initiated in 2007 after completion
of preclinical development studies with a view to progressing ABT-560 for
potential treatment of cognitive dysfunctions in specific patient populations. 
By the end of 2006, a three-year tail period that followed the research phase
of the NNR-collaboration with Abbott expired. In connection with a final
evaluation of the pool of NNR modulators characterised under the agreement,
Abbott selected two additional development candidate compounds. 
The very productive collaboration with Abbott resulted in the identification of
a significant number (5) of drug candidates. Under the terms of the agreement,
Abbott is responsible for the clinical development and commercialisation of the
products and will pay NeuroSearch milestones, as well as royalties on sales. 

ACR16 - Schizophrenia: In clinical Phase I/II
ACR16 represents a new treatment principle for schizophrenia. NeuroSearch
Sweden AB has previously successfully evaluated ACR16 in a double-blinded,
placebo-controlled Phase I/II study in patients suffering from schizophrenia.
In addition, ACR16 has demonstrated efficacy in several preclinical models of
schizophrenia, whilst no effect was seen on normal behaviours. This means that
ACR16 has limited risk of inducing the side effects of existing
anti-psychotics. 

NeuroSearch's partner Astellas is developing ACR16 for schizophrenia and holds
the worldwide rights to ACR16 for all disease indications except for
Huntington's disease in the United States and Europe. NeuroSearch will receive
up to EUR 84 million in milestones as well as royalties on sales. The
partnership with Astellas is very productive. 

NS1209 - Status epilepticus and pain: In clinical Phase II
NS1209 is an AMPA antagonist, which means that it inhibits the binding of
glutamate to one of its subtype receptors, the AMPA receptors. It has been
shown that the neurotransmitter glutamate plays an important role in a number
of neurodegenerative diseases such as stroke, epilepsy and neuropathic pain. 
NS1209 has previously demonstrated beneficial effects in preclinical epilepsy
models and has been studied in two open-label Phase II clinical studies in a
severe type of epilepsy (status epilepticus). Moreover, the compound is being
studied in a Phase I/II clinical study in the treatment of pain. Patient
treatment has been completed, and it is expected that the results will be
reported in the first half of 2007. 

ACR325 - Psychoses, including bipolar disorder: In clinical Phase I 
In November 2006, NeuroSearch initiated Phase I studies of ACR325, a
dopaminergic stabiliser for the treatment of psychoses, including bipolar
disorder. The existing therapies for this disease have a limited effect and
considerable adverse side effects. 
ACR325 has demonstrated promising results in disease models for psychoses. The
compound significantly increases the level of dopamine and noradrenaline in the
brain whilst also enhancing the effect of glutamate, without inhibiting motor
activity. This indicates that, unlike marketed antipsychotics, ACR325 may have
a clinical profile with limited adverse side effects. 
The current Phase I study is a single-dose study involving 16 healthy
volunteers who receive three different doses of ACR325 and placebo. The purpose
of the study is to evaluate safety and pharmacokinetics. 

Drug candidates under preparation for clinical development
NSD-503 - Chronic Obstructive Pulmonary Disease, COPD (smoker's lungs)
In a drug discovery programme focusing on lung diseases we have characterised
by a number of compounds that modulate ion channels, which are expressed in
lung tissue. Compounds from this series have demonstrated good efficacy in
models for chronic obstructive pulmonary disease - also called COPD or smoker's
lungs. From this programme, NSD-503 has in preclinical studies shown a novel
and unique three sided activity profile in the treatment of COPD. 
From the same programme, we have identified a new drug candidate with the same
mode of action and an expected efficacy profile that is the same as NSD-503. A
distinguishing feature of this follow-up candidate is that it can potentially
be formulated for oral administration, which would optimise the commercial
potential of the product.  We are awaiting the completion of the preclinical
studies with the follow-up candidate before we decide whether to conduct
clinical studies based on oral administration or administration directly to the
lungs. Therefore, we do not expect to initiate the first clinical studies in
the COPD programme until around mid-2008.	 

ACR343 - Parkinson's disease and other neurological diseases
In early 2006, ACR343 was selected as a new drug candidate for the treatment of
Parkinson's disease and other neurological diseases. ACR343 is a dopaminergic
stabiliser which has shown efficacy in preclinical models for Parkinson's
disease and psychosis. We have now initiated the necessary preclinical
development activities with a view to starting up clinical trials with ACR343
in early 2008. 

NSD-551 - Brain tumours
In preclinical studies, NSD-551 has demonstrated an ability to activate an ion
channel involved in the transport of anti-cancer drugs across the blood-brain
barrier. NSD-551 therefore holds potential in the treatment of brain tumours. 
NSD-551 is in preclinical development in collaboration with TopoTarget, and
this company is studying the compound in a number of preclinical cancer models. 

NSD-644 - Neuropathic pain and psychiatric disorders 
For more than ten years, NeuroSearch has been a leading player in research and
development of new drugs with a “triple mode of action” which intensify the
effect of the three monoamine neurotransmitters: serotonin, noradrenaline and
dopamine. These signal compounds are key to the emotional condition of people
and to transmission in nociceptive pathways. 

In the summer of 2006, NSD-644 was selected as a new development candidate,
primarily for the treatment of pain, but also with a potential for the
treatment of psychiatric disorders. NSD-644 is under preparation for clinical
development, and we expect to be able to start up Phase I clinical studies in
late 2007. 

GSK holds an option for NSD-644 under the strategic alliance.


NSD-708 - Anxiety and other psychiatric disorders 
In early 2007, we selected a new development candidate, NSD-708, from our drug
discovery programme in the field of monoamine neurotransmitters. NSD-708 has a
unique relative effect on the monoamine re-uptake systems with primary effect
on serotonin and dopamine. This dual mode of action predicts advantages over
existing drugs in the treatment of anxiety. NSD-708 has shown very promising
efficacy in preclinical models for anxiety. 

GSK holds an option for NSD-708 under the strategic alliance. We expect to be
able to start up Phase I clinical studies in the beginning of 2008. 

NeuroSearch is also carrying out preclinical evaluation of a number of similar
compounds with other profiles and a different effect in relation to the
treatment of conditions such as chronic pain, anxiety, urinary incontinence,
obesity and substance abuse. 
 
NSD-788 - Anxiety
NeuroSearch is among the pioneers in GABA receptor research. In recent years,
we have focused on compounds which activate a specific subtype of GABA
receptors containing 2/3 proteins. It has been shown in preclinical models
that compounds with this efficacy profile have the same anxiety-reducing effect
as benzodiazepines - such as Valium®, - but without producing the adverse
effects characteristic of these drugs. 

In January 2007, we selected NSD-788 as the first drug candidate from the GABA
programme with the desired efficacy profile. We expect that Phase I studies can
be started up in the first half of 2008. GSK holds an option to this drug
candidate under the expanded strategic alliance. 

In parallel with the current high-priority 2/3 programme, we initiated new
drug discovery programmes in 2006 with a focus on other subtypes of GABA
receptors focusing on the treatment of epilepsy, pain and sleep disturbances. 
Drug discovery programmes
At NeuroSearch, we primarily work with ion channels as the target of new drugs.
We have built up a leading position within several aspects of the ion channel
field with strong knowledge and technical competencies, and we have acquired
comprehensive rights in the form of patents, etc. A large part of our drug
discovery programmes are targeted to finding new and better drugs for CNS
diseases, but out ion channel platform is also relevant for a number of other
major diseases areas. In this respect, we have advanced activities in the field
of respiratory diseases, heart disorders, inflammatory diseases, autoimmune
disorders and incontinence. 
In the course of 2006, we restructured our activities in drug discovery and
early development with a view to creating an even broader product focus. As an
important part of this, we strengthened our ion channel programmes targeting
diseases outside the CNS area. Moreover, we integrated the activities of
NeuroSearch Sweden AB. 

The productivity of our drug platform has been very high in recent years. In
2006, we selected as many as five drug candidates from our drug discovery
programmes for our pipeline. In 2007, we selected another two candidates. The
status in the current drug discovery programmes continues to be highly
satisfactory, and in 2007 we therefore expect to select more new candidates
than the two already selected. 


Affiliates and other equity interests 
Overall, developments were satisfactory in the companies in which NeuroSearch
holds investments. 
The value of NeuroSearch's shares in the listed company Bavarian Nordic A/S
increased by DKK 11.1 million. The unlisted companies made capital increases
more than DKK 77 million, of which NeuroSearch contributed DKK 16.7 million. 

FINANCIAL REVIEW

NeuroSearch's Annual Report 2006 comprises both the financial statements of the
parent company, NeuroSearch A/S, and the consolidated financial statements
comprising the parent company and the four wholly-owned subsidiaries
NeuroSearch Sweden AB, Poseidon Pharmaceuticals A/S, NeuroScreen ApS and
NsExplorer A/S. 

Liquidity and capital resources
The Group's capital resources stood at DKK 504 million at 31 December 2006, 

On 20 October 2006, NeuroSearch completed a rights issue of 3,970,715 new
shares with a nominal value of DKK 20 each at DKK 100 per share. The shares
were fully subscribed, and the cash proceeds from the offering amounted to DKK
397 million. 
 
Income statement
In December 2006, NeuroSearch reduced its guidance for the full year to a
consolidated loss in the region of DKK 170-190 million before recognition of
losses from associated companies and other equity interests. 

A consolidated operating loss of DKK 186.7 million was posted in 2006 and a
loss of DKK 191.5 million before recognition of results from associated
companies. A consolidated net loss of DKK 212.2 million was posted and a net
loss of DKK 163.8 million in the parent company. 

The consolidated loss includes combined losses of DKK 34.4 million from the
subsidiaries NeuroSearch Sweden, Poseidon Pharmaceuticals, NeuroScreen and
NsExplorer. NeuroSearch Sweden contributed negatively DKK 13 million to the
loss in the period of consolidation, 23 October to 31 December 2006. 

Revenue
Consolidated revenue for 2006 was DKK 66.3 million (parent company: DKK 72.2
million), which consisted of revenue from the research and development
partnership with GlaxoSmithKline (GSK). Consolidated revenue for 2005 was DKK
176.5 million (parent company: DKK 186.5 million). 

Costs
Consolidated costs totalled DKK 253.0 million (parent company: DKK 225.5
million). This represented a DKK 54.2 million increase in the Group and a DKK
27.2 million increase in the parent company year on year. Costs in the Group as
well as the parent company included a calculated value of DKK 5.1 million from
warrants granted in 2004, 2005 and 2006. The Board of Directors resolved on 13
December 2006 to issue up to 240,000 warrants. As the warrants were granted in
January 2007, the grant does not affect the financial statements for 2006. 

Development costs rose from DKK 17.6 million in 2005 to DKK 54.8 million in the
Group (parent company DKK 33.5 million). Consolidated development costs in 2006
mainly concerned activities relating to Tesofensine, ACR16 and NS1209. 

The average number of employees in 2006 was 199 (parent company: 193). 

Investments in subsidiaries
On 23 October 2006, NeuroSearch acquired all the shares of Carlsson Research AB
for a cash consideration of SEK 176.1 million (DKK 141.4 million) and SEK 84.0
million (DKK 68.0 million) by way of 407,371 new NeuroSearch shares. In
connection with the consideration, the Board of Directors on 23 October
exercised the authorisation given by the shareholders in general meeting to
issue 407,371 new shares of DKK 20 at a price of DKK 166.9 per share to the
vendors of Carlsson Research. The shares represented an aggregate value of SEK
84.0 million (DKK 68.0 million). The number of consideration shares issued to
the vendors was calculated on the basis of the average price (all trades) of
NeuroSearch's shares on the Copenhagen Stock Exchange for the last five days
preceding the closing of the acquisition on 23 October 2006 translated from
Danish kroner into Swedish kroner on the basis of the official exchange rate of
the Danish central bank on 20 October 2006. 

We reached the first success-related milestone as early as November 2006, when
we started up Phase I clinical studies with the drug candidate ACR325. On that
occasion, we made a payment to the vendors of Carlsson Research of SEK 75
million (DKK 61.7 million). 

In the financial statements of the parent company, management has written down
the investments in NsExplorer and NeuroScreen, which are measured at cost, by a
total amount of DKK 6.7 million, as there is no longer any activity in the
companies. 

Investments in associates
NeuroSearch's shares of the results of associates - NsGene A/S, Sophion
Bioscience A/S and Atonomics A/S - are recognised in the consolidated income
statement. The shares of results were a combined loss of DKK 20.7 million. The
companies are independently financed and had combined capital resources of DKK
39 million at 31 December 2006. 

Other financials
Other financials amounted to a net expense of DKK 4.8 million in 2006 (parent
company: DKK 3.7 million). This includes interest expense of DKK 7.9 million on
loans secured by mortgage on the company's property and amortisation of DKK 1.6
million. Other financials amounted to a net income of DKK 3.8 million in 2005
(parent company: DKK 4.4 million). This amount was DKK 8.6 million (parent
company: DKK 8.1 million) lower than in 2005 as a result of lower returns on
other financial assets and available-for-sale financial assets (primarily bonds
and securities) as a result of changes in the market. 

Securities comprise Danish government and mortgage bonds.

Income taxes
The NeuroSearch Group has tax assets of DKK 193 million (parent company: DKK
143 million), which are not recognised in the balance sheet. It is still deemed
that sufficient certainty has not been established as to whether the tax assets
can be used for offset against future taxable income. 

Allocation of loss
It is proposed that the year's consolidated loss of DKK 212.2 million be
transferred to retained earnings. 

Balance sheet
The balance sheet stood at DKK 1,267.5 million at 31 December 2006 (parent
company: DKK 1,289.3 million). At the end of 2005, the balance sheet stood at
DKK 633.0 million (parent company: DKK 746.4 million). 

Net cash investments in property, plant and equipment totalled DKK 12.9 million
in 2006 (parent company: DKK 12.8 million) against DKK 13.0 million in 2005
(parent company: DKK 13.0 million). 

Cash and cash equivalents including securities and investments totalled DKK
387.0 million at 31 December 2006 (parent company: DKK 386.1 million) against
DKK 403.4 million at 31 December 2005 (parent company: DKK 403.3 million). 

Statement of cash flows
Cash flows from operating activities was a cash outflow of DKK 166.4 million in
2006 (parent company: DKK 160.2 million) against a cash outflow of DKK 19.6
million in 2005 (parent company: DKK 19.7 million). 

The net cash flow for investing activities was an outflow of DKK 335.5 million
(parent company: DKK 343.7 million) compared to a cash outflow of DKK 45.1
million in 2005 (parent company: DKK 45.1 million). 

A cash outflow for financing activities of DKK 365.2 million (parent company:
DKK 366.3 million) was recorded, whereas a cash inflow of DKK 22.1 million
(parent company: DKK 22.7 million) was recorded in 2005. Cash and cash
equivalents amounted to DKK 9.5 million at 31 December 2006 (parent company:
DKK 8.7 million). 

Statement of movements in equity
Consolidated equity was reduced by the consolidated net loss of DKK 212.2
million and in the parent company by the net loss of DKK 163.8 million. Equity
rose by a net amount of DKK 440.6 million from the capital increase in
connection with employee exercise of warrants, the rights issue in October 2006
and new consideration shares. 

Financial risks
NeuroSearch is exposed to certain financial risks. The company is exposed to
foreign exchange risks relating to project revenue and costs and from the
subsidiary in Sweden, which reports in Swedish kroner (SEK), which it seeks to
eliminate by matching same-currency revenue and expenses. The payment flows
under the agreement with GSK have been agreed in euros, which are not currently
deemed to constitute a currency exposure in terms of translation into Danish
kroner. Evaluations are made regularly of whether the Group's cash flows should
be hedged. NeuroSearch had no derivatives at 31 December 2006. 

The company's securities portfolio is also subject to a financial risk by way
of price and exchange rate risks on the bond portfolios. The company seeks to
minimise these risks by pursuing a conservative investment strategy. 

Related-party transactions
The members of NeuroSearch's Executive Management, Board of Directors,
subsidiaries and the associates NsGene A/S, Sophion Bioscience A/S and
Atonomics A/S are considered to be related parties. The company also considers
Bavarian Nordic A/S and ZGene A/S to be related parties. 


SHAREHOLDER INFORMATION
Share capital
NeuroSearch made a rights issue on 20 October of 3,970,715 new shares of DKK 20
each, total nominal value DKK 79,414,300, at a subscription price of DKK 100
per share. On 23 October 2006, NeuroSearch issued 407,371 new shares of DKK 20
each at market price, DKK 166.9 per share, as consideration shares to the
vendors of Carlsson Research. 
NeuroSearch's share capital was increased by DKK 988,500 nominal value
equivalent to 49,425 shares of DKK 20 each when a number of employees exercised
their warrants in March and September 2006. The exercise price was DKK 53 per
share for 25,950 shares (warrant programme from 2002) and DKK 148 per share for
23,475 shares (warrant programme from 2003). At year-end 2006, NeuroSearch's
share capital comprised 12,319,516 shares of DKK 20, and the total nominal
value was DKK 246,390,320. All the shares are fully paid up and carry the same
rights. There are not restrictive provisions in the company's articles of
association on the size of individual shareholders' interests and voting
rights. 
Ownership structure
On 31 December 2006, NeuroSearch had 17,186 registered shareholders, who held a
total of 9,103,582 shares. The registered part of our shares represents 73.9%
of the share capital. In 2006, we got an additional 2,462 registered
shareholders, and the percentage of registered shareholders concurrently rose
by 5.9 percentage points. 

Since NeuroSearch shares are bearer securities, no exact registration exists of
the holders. However, NeuroSearch estimates that about 40% of the shares are
held by international investors. 

The following investors have notified NeuroSearch that they hold more than 5%
of the shares in the company: 

•	ATP, Kongens Vænge 2, DK-3400 Hillerød, Denmark
•	Glaxo Group Limited, Berkeley Ave., Greenford, Middlesex, UB6 0NN, United
Kingdom 
•	Asger Aamund/A.J. Aamund A/S, Amaliegade 14, DK-1256 Copenhagen K, Denmark
Share performance
On 29 December 2006, the closing price of NeuroSearch's shares was DKK 321.50
compared with a year-end price of DKK 171 in 2005, equivalent to a 121% price
increase in 2006. By comparison, the OMX Copenhagen Healthcare Index increased
by approximately 34%, whilst the OMX Copenhagen All Shares Index increased by
approximately 11%. 

Shareholdings
On 31 December 2006, the members of the Board of Directors, the Executive
Man¬agement and the employees held shares in the company as shown below: 
 

Shareholders
Number of shares at 31 December 2006
	

Asger Aamund, Chairman 	
955,171

Other Board members (6 persons)	
107,991

Executive Management (4 persons)	
61,604

Other employees	
184,576

Total 	
1)1,309,342
1)	Equivalent to 10.6% of the outstanding share capital of 12,319,516 shares at
31 December 2006. 

NeuroSearch does not hold any treasury shares.
Warrants in 2006
In March 2006, the Board of Directors granted 10,000 warrants entitling the
holders to subscribe for shares with a nominal value of up to DKK 200,000. The
exercise price on the date of grant was DKK 250, but after shares were issued
in the autumn of 2006, the number was adjusted to 11,709 warrants at DKK 213.51
each, (see below). The four exercise periods are in November 2008, May 2009,
November 2009 and March 2010. 

As NeuroSearch made a capital increase on 20 October 2006 with a nominal value
of DKK 79,414,300 at a price below the market value of the shares, the Board of
Directors decided, in accordance with NeuroSearch's articles of association and
the existing warrant programmes, to adjust the number of warrants previously
granted to NeuroSearch's employees and the exercise price of the warrants. 

The adjustment was made to ensure that the value to the employees of the
warrants is retained following the capital increase which was completed to a
price per share lower than market price. The adjustment implies that the
employees were granted a number of additional warrants and that the exercise
prices were reduced. 

The table below shows the most important information about the warrants granted
and outstanding: 
 

Warrants granted in 2003, 2004, 2005 and 2006 made up at 31 December 2006 



Year	

Exercise price DKK	

Exercise period	
Board of Directors	Executive Manage-ment	

Other employees	Total 
(DKK 20 each)	
Market value(1)
2003 	126.40	March 2007 	8,197	15,807	103.641	127,645	25.2
2004 	262.19	Nov. 2007 
March 2008 
Sept. 2008 
March 2009 	7,026 	2)24,003	4)115,882	4)146,911 	16.4
2005 	191.34	Nov. 2008 
May 2009 
Nov. 2009 
March 2010 	7,026 	27,165 	4)118,401	4)152,592	25.6
2006	213.51	Nov. 2008
May 2009
Nov. 2009
March 2010	0	0	11,709	11,709	1.8
Total			22,249	66,975	349,633	3)438,857	69.0

1)	The market value has been determined in DKK million at the end of the
exercise period. The calculation was made using the Black and Scholes model,
applying an average market price at 29 December 2006 of DKK 322.65 per share
and a volatility rate of 37.12%, equivalent to the annual rate of volatility of
the price of our shares over the past three years before the balance sheet date
(Source: Bloomberg and Danske Markets). 
2)	The Executive Management was increased from four to five persons in 2004. 
3)	The aggregate warrant programme corresponds to 3.6% of the share capital at
31 December 2006. 
4)	Warrants to other employees have been made up as a net figure less those
held by employees who are no longer with the company. 


Warrants in 2007

NeuroSearch's Board of Directors passed a resolution on 13 December 2006 to
grant up to 240,000 warrants composed of warrants entitling the members of the
Board of Directors to subscribe for an up to 39,000 shares and other employees
to subscribe for up to 201,000 shares. The exercise price of DKK 402 has been
determined as the average price of all trades during the period 18-22 December
2006, plus a premium of 10% p.a. during the vesting period. As the warrants
were granted in January 2007, the grant does not affect the financial
statements for 2006. 

Including warrants outstanding from earlier programmes: 127,645 from 2003,
146,911 from 2004, 152,592 from 2005 and 11,709 from 2006, a total of 438,857
warrants have been issued, equivalent to 3.6% of the current share capital.
Including the warrants granted in 2007, the total number of warrants granted is
678,857, equivalent to 5.5% of the current share capital. 


ORGANISATION

NeuroSearch had 231 employees at 31 December 2006, 32 of whom are employees of
our new subsidiary, NeuroSearch Sweden AB (formerly Carlsson Research AB),
which is located in Gothenburg. The affiliated companies had a total of 115
employees. 

Jørgen Buus Lassen, co-founder and President and CEO of NeuroSearch since its
inception in 1989, retired from this position at the annual general meeting
held on 25 April 2006. Jørgen Buus Lassen now works as Chief Scientific Officer
(CSO) in NeuroSearch. In addition, Jørgen Buus Lassen is a member of the Board
of Directors elected by the shareholders. 

The Board of Directors appointed former CFO, Flemming Pedersen new President
and CEO from 25 April 2006. Anita Milland concurrently took over responsibility
for treasury, human resources management, IT and other administrative functions
in addition to her existing responsibility for the finance function. 

In 2006, we significantly strengthened our capacity in clinical development. As
a central element of these efforts, we appointed Dr. Dieter Meier medical
director. Dieter Meier holds substantial international experience in drug
development from previous positions with companies such as Johnson & Johnson
and Boehringer Ingelheim, where he was responsible for the full development of
two marketed CNS drugs: pramipexol for the treatment of Parkinson's disease and
alteplase for the treatment of stroke. 

In NeuroSearch Sweden AB, former President and CEO of Carlsson Research AB,
Nicholas Waters, was appointed CEO. 


OUTLOOK FOR 2007

NeuroSearch aims to maintain the high activity level in 2007 in order to ensure
progress and value creation in our pipeline. As part of this we expect to sign
new partnership agreements and attain several important milestones in our drug
programmes. In particular, we expect to start up Phase III studies of ACR16 in
Huntington's disease in both the USA and Europe. 

For 2007, NeuroSearch forecasts a loss in the region of DKK 80 to DKK 100
million before recognition of losses from associated companies and other
investments. 

NeuroSearch expects to increase its cost and activity levels compared with 2006
- especially within clinical studies, where we expect to begin Phase III
studies in Huntington's disease. 

NeuroSearch continually assesses its options with respect to licensing or
buying products in clinical development. 


Board decisions and proposals for the annual general meeting
The annual general meeting, at which the 2006 Annual Report will be reviewed,
will be held at 4 p.m. on 25 April 2007 at the Radisson SAS Falconer. 

The Board of Directors proposes that the profit for the year be carried forward
to next year. 

The Board of Directors proposes the following amendments to the articles of
association: 

	that a new article 5 be inserted in replacement of the existing Article 5,
and that the shareholders at the annual general meeting therefore authorise the
Board of Directors to increase the company's share capital by one or more
issues of shares up to a total of DKK 60,000,000 nominal value (3,000,000
shares of DKK 20 nominal value each) in the period until 30 August 2011; and 

	that a new article 5a be inserted to replace article 5a, in which the Board
of Directors is authorised to issue warrants to some or all employees and
members of the Executive Management and Board of Directors at a total nominal
value of up to DKK 7,000,000 during the period until 31 December 2008. However,
a total maximum of DKK 500,000 nominal value would apply to the grant of
warrants to the Board of Directors. The Board of Directors will lay down the
specific terms in connection with the grant of the warrants; and 

	The board of directors seeks authorisation for the Company to purchase its
own shares of up to a total nominal value of 10% of the Company's share
capital; and 

	The board of directors proposes that Article 10 of the Articles of
Association be replaced by the following new article 10 regarding general
meetings: 

	"The general meeting has the supreme authority in all the Company's affairs,
subject to statute and these Articles. 

	General meetings shall be held at the Company's registered office or in the
Greater Copenhagen Area. 

	General meetings shall be convened by the board of directors giving no less
than eight days' and no more than four weeks' notice. 

	Notice shall be given in one leading daily newspaper and in the electronic
information system of the Danish Commerce and Companies Agency (Erhvervs- og
Selskabsstyrelsen). Written notice shall also be sent to all shareholders
registered in the register of shareholders upon request. 

	The notice shall include the agenda of the general meeting. If any proposed
resolution whose adoption is subject to a qualified majority of votes is to be
considered by the meeting, this shall be stated in the notice together with the
full text of the resolution. 

	Eight days before the date of any general meeting, the agenda and the full
text of any proposal to be submitted to the general meeting as well as, in the
case of the annual general meeting, the audited annual report shall be made
available for inspection by the shareholders at the Company's office. Such
documents shall also be sent to any registered shareholder upon request." 
 


FINANCIAL 
HIGHLIGHTS
(DKK million)		2002	2003	2004*	2005*	2006
		Group
	Parent
Company	Group
	Parent
Company	Group
	Parent
Company	Group
	Parent
Company	Group
	Parent
Company
			
Income statement:
Revenue
Research costs
Development costs
Operating profit/(loss)
Financials
Profit/(loss) before taxes
Net profit/(loss)		
198.7
123.0
86.4
(34.8)
(7.7)
(42.5)
(42.5)	
203.1
106.6
86.4
(12.8)
(29.6)
(42.5)
(42.5)	
163.4
120.0
35.0
(12.2)
22.7
10.5
10.5	
166.9
113.1
35.0
(0.3)
10.8
10.5
10.5	
122.3
140.7
21.3
(62.0)
58.6
(3.3)
(3.3)	
126.1
140.0
21.3
(56.8)
63.8
7.1
7.1	
176.5
159.6
17.6
(22.3)
22.9
0.6
0.6	
186.5
159.1
17.6
(11.8)
32.8
21.0
21.0	
66.3
172.3
54.8
(186.7)
(25.5)
(212.2)
(212.2)	
72.2
167.1
33.5
(153.4)
(10.5)
(163.8)
(163.8)
									
Balance sheet:
Total assets
Cash and cash equiva-
lents and equity interests
Equity
Investments in property,
plant and equipment		
455.7

206.8
260.3

14.3	
465.7

205.6
260.3

12.6	
723.4

519.3
402.6

2.8	
742.1

518.6
402.6

2.6	
656.1

436.9
416.5

14.8	
748.9

436.2
509.6

16.6	
633.0

403.4
408.0

13.0	
746.4

403.3
521.5

13.0	
1.267.5

**387.0
657.7

12.9	
1.289.3

386.1
819.5

12.8
									
Per share ratios (DKK)
Earnings per share
Diluted earnings per 
share 
Net asset value
Market price, year-end
Market price/net asset 
value
Average number of 
employees		
(6.0)

(6.0)
36.77
51
1.39


180	








161	
1.48

1.46
52.32
169
3.23


179	








161	
(0.43)

(0.43)
53.81
235
4.37


175	








172	
0.07

0.07
51.71
171.5
3.32


185	








185	
(24.17)

(24.17)
53.38
321.5
6.02


199	








193
*	In connection with accounting policy changes in 2005, the comparative figures
for 2004 have been restated. The comparative figures of other years have not
been restated. 
**	Capital resources, including unused credits, total approximately DKK 504
million, of which listed shares account for approximately DKK 59 million. 

The ratios are stated in accordance with the guidelines in “Recommendations and
Ratios” issued by the Danish Society of Financial Analysts. 

 

INCOME STATEMENT
for the year ended 31 December (DKK thousands)	Group		Parent company
	2006	2005		2006	2005
								
Revenue 		66,341	176,503		72,169	186,469
Total revenue		66,341	176,503		72,169	186,469
						
Research costs 		172,330	159,580		167,088	159,092
Development costs		54,849	17,568		33,529	17,568
General and administrative costs		25,868	21,691		24,909	21,645
Total costs 		253,047	198,839		225,526	198,305
						
Operating profit/(loss)	…		(186,706)	(22,336)		(153,357)	(11,836)
						
Writedown of subsidiaries		-	-		(6,732)	-
Share of profit/(loss) of associates		(20,673)	(9,298)		-	-
Fair value adjustments		-	28,399		-	28,399
Financial income 		7,508	13,911		8,548	14,531
Financial expenses 		12,295	10,095		12,295	10,095
Total financials		(25,460)	22,917		(10,479)	32,835
						
Profit/(loss) before taxes		(212,166)	581		(163,836)	20,999
						
Tax on profit/(loss) for the year		-	-		-	-
NET PROFIT/(LOSS)		(212,166)	581		(163,836)	20,999
						
Earnings per share, DKK		(24.17)	0.07			
Diluted earnings per share, DKK		(24.17)	0.07			
						
No dividend has been paid during this or earlier reporting periods.

 

BALANCE SHEET - ASSETS
as of 31 December (DKK thousands)	Group		Parent company
	2006	2005		2006	2005
			
Goodwill		38,506	-		-	-
Development projects		611,253	-		-	-
Licences and patents		8,066	10,065		8,066	10,065
Land and buildings		128,368	130,563		128,368	130,563
Plant and machinery		35,898	33,744		32,501	33,663
Other plant and equipment		3,719	2,801		3,719	2,801
Technical plant prepayments		1,730	154		1,730	154
Investments in subsidiaries		-	-		525,670	7,323
Investments in associates		7,023	22,613		95,555	92,858
Available-for-sale financial assets		22,645	20,595		22,645	20,595
Total non-current assets		857,208	220,535		818,254	298,022
		
7,023				
Receivables from subsidiaries		-	-		62,770	38,659
Receivables from associates		9,756	-		12,141	-
Other receivables		13,516	8,978		10,041	6,385
Available-for-sale financial assets		58,660	47,649		58,660	47,649
Other financial assets at fair value 
through profit or loss		
318,792	
218,301		
318,792	
218,301
Cash and cash equivalents		9,543	137,479		8,676	137,351
Total current assets		410,267	412,407		471,080	448,345
	
TOTAL ASSETS		1,267,475	632,942		1,289,334	746,367
 

BALANCE SHEET - 
EQUITY AND LIABILITIES
as of 31 December (DKK thousands)		
Group		
Parent company
		2006	2005		2006	2005
						
Share capital		246,390	157,790		246,390	157,790
Reserve for currency translation		5,145	-		5,145	-
Other reserves		54,261	43,250		54,261	43,250
Retained earnings		351,873	206,924		513,748	320,469
Total equity		657,669	407,964		819,544	521,509
						
Deferred tax		133,712	-		-	-
Contingent consideration		174,547	-		174,547	-
Mortgage debt 		111,006	115,956		111,006	115,956
Other long-term debt		16,408	15,726		16,408	15,726
Total non-current liabilities		435,673	131,682		301,961	131,682
						
Current portion of long-term debt		77,944	12,303		77,944	12,303
Borrowings 		16,754	8,014		16,754	8,014
Deferred income		26,841	40,287		26,841	40,287
Trade and other payables		33,293	17,536		31,136	17,416
Debt to associated companies		-	54		-	54
Other liabilities			19,301	15,102		15,154	15,102
Total current liabilities		174,133	93,296		167,829	93,176
						
Total liabilities		609,806	224,978		469,790	224,858
						
TOTAL EQUITY AND LIABILITIES			1,267,475	632,942		1,289,334	746,367

 

STATEMENT OF CASH FLOWS
(DKK thousands)	Group 		Parent company
	2006	2005		2006	2005
							
Net profit/(loss)			(212,166)	581		(163,836)	20,999
Reversal of items without cash flow effect		46,422	(1,405)		31,216	(11,568)
Change in working capital:						
Net change in receivables		(2,246)	37		(27,885)	(10,481)
Net change in short-term borrowings		1,591	(18,791)		272	(18,632)
Cash flows from operating activities		(166,399)	(19,578)		(160,233)	(19,682)
						
Payments to acquire property, plant and
equipment		(12,881)	(13,015)		(12,810)	(13,015) 
Proceeds from sale of property, plant and equipment		13	113		13	113
Payments to acquire subsidiary		(205,600)	-		(213,788)	-
Payments to invest in subsidiaries		-	-		(40)	-
Payments to invest in associates		(2,697)	(17,403)		(2,697)	(17,403)
Loan to associates		(11,814)	-		(11,814)	-
Payments to investment in available-for-sale financial 
Assets		
(2,050)	
(2,100)		
(2,050)	
(2,100)
Proceeds from sale of available-for-sale financial assets		-	29,319		-	29,319
Net change in marketable securities (more than three 
months)		
(100,491)	
(42,024)		
(100,491)	
(42,024)
Cash flows from investing activities		(335,520)	(45,110)		(343,677)	(45,110)
		
Net proceeds from equity issues		372,647	12,302		372,647	12,302
Proceeds from long-term borrowings		9,643	8,255		9,643	8,255
Repayment of long-term borrowings		(13,448)	(11,943)		(13,448)	(11,943)
Financial payments received/(paid)		(3,616)	5,556		(2,576)	6,176
Cash flows from financing activities		365,226	14,170		366,266	14,790
	
Net cash flows		(136,693)	(50,518)		(137,644)	(50,002)
Unrealised gain/(loss) on securities		229	(1,740)		229	(1,740)

Net increase/decrease in cash and cash
equivalents		(136,464)	(52,258)		(137,415)	(51,742) 
Cash at 1 January		129,465	181,723		129,337	181,079
Foreign exchange adjustments of cash 			(212)	-		-	-
Cash at 31 December		(7,211)	129,465		(8,078)	129,337
						
Cash and cash equivalents at 31 December		9,543	137,479		8,676	137,351
Borrowings at 31 December		(16,754)	(8,014)		(16,754)	(8,014)
Cash at 31 December		(7,211)	129,465		(8,078)	129,337
Securities at 31 December		318,792	218,301		318,792	218,301
Other available-for-sale financial assets at 31
December		58,660	47,649		58,660	47,649 
Other capital reserves at 31 December		133,332	41,386		133,332	41,386

Capital resources at 31 December		503,573	436,801		502,706	436,673
The cash and cash equivalents of associates is not recognised in the
consolidated financial statements. Total capital resources in associates
consisting of cash and cash equivalents amounted to DKK 39 million at 31
December 2006. 

STATEMENT OF MOVEMENTS IN EQUITY - GROUP
(DKK thousands)		Share
capital*	Share
premium**	Reserve for 
currency
translation	Other re-
serves***	Retained
earnings	
Total
							
Equity at 1 January 2005		154,816	0	0	69,093	192,610	416,519
Fair value adjustment of available-for-
sale financial assets 		
-	
-	
-	
(25,843)	
-	
(25,843)
Net profit		-	-	-	-	581	581
Total recognised income for the year		0	0	0	(25,843)	581	(25,262)
Employee warrant programme:							
- costs of share-based payment		-	-	-	-	4,405	4,405
- proceeds from shares issued		2,974	9,491	-	-	-	12,465
- costs of equity issues		-	(163)	-	-	-	(163)
Transfer		-	(9,328)	-	-	9,328	-
Equity at 31 December 2005		157,790	0	0	43,250	206,924	407,964
							
Equity at 1 January 2006		157,790	0	0	43,250	206,924	407,964
Fair value adjustment of available-for-
sale financial assets		
-	
-	
-	
11,011	
-	
11,011
Fair value adjustment of net investment
in foreign subsidiary		
-	
-	
(7,983)	
-	
-	
(7,983)
Currency translation		-	-	13,128	-	-	13,128
Net profit			-	-	-	(212,166)	(212,166)
Total recognised income for the year		0	0	5,145	11,011	(212,166)	(196,010)
Rights issue:							
- proceeds from shares issued		79,414	317,657	-	-	-	397,071
- costs of rights issue		-	(29,484)	-	-	-	(29,484)
Consideration shares in connection with 
acquisition of subsidiary		
8,147	
59,843	
-	
-	
-	
67,990
Employee warrant programme:						
- costs of share-based payment		-	-	-	-	5,078	5,078
- proceeds from shares issued		1,039	4,181	-	-	-	5,220
- costs of equity issues		-	(160)	-	-	-	(160)
Transfer		-	(352,037)	-	-	352,037	-
Equity at 31 December 2006		246,390	0	5,145	54,261	351,873	657,669
*	Under Danish corporate law, share capital may not be used for distribution of
dividends. 
**	In accordance with the Danish Public Companies Act, “Share premium” has been
transferred to “Retained earnings”. Accumulated “Share premium” was DKK 1,123
million at 31 December 2006 (2005: DKK 771 million). 

STATEMENT OF MOVEMENTS IN EQUITY - PARENT COMPANY
(DKK thousands)		Share
capital*	Share
premium**	Reserve
for cur-
rency 
trans-
lation	Other
reserves***	Retained
earnings	Total
							
Equity at 1 January 2005		154,816	0	0	69,093	285,735	509,644
Fair value adjustment of available-for-sale
financial assets 		
-	
-	
-	
(25,843)	
-	
(25,843)
Net profit		-	-	-	-	20,999	20,999
Total recognised income for the year		-	-	0	(25,843)	20,999	(4,844)
Employee warrant programme:							
- costs of share-based payment		-	-	-	-	4,405	4,405
- proceeds from shares issued		2,974	9,491	-	-	-	12,465
- costs of  equity issues		-	(161)	-	-	-	(161)
Transfer		-	(9,330)	-	-	9,330	-
Equity at 31 December 2005		157,790	0	0	43,250	320,469	521,509
							
Equity at 1 January 2006		157,790	0	0	43,250	320,469	521,509
Fair value adjustment of available-for-sale 
financial assets		
-	
-	
-	
11,011	
-	
11,011
Fair value adjustment of net investment in 
foreign subsidiary		
-	
-	
(7,983)	
-	
-	
(7,983)
Currency translation		-	-	13,128	-	-	13,128
Net profit		-	-	-	-	(163,836)	(163,836)
Total recognised income for the year		0	0	5,145	11,011	(163,836)	(147,680)
Rights issue:							
- proceeds from shares issued		79,414	317,657	-	-	-	397,071
- costs of rights issue		-	(29,484)	-	-	-	(29,484)
Consideration shares in connection with 
acquisition of subsidiary		
8,147	
59,843	
-	
-	
-	
67,990
Employee warrant programme:		
- costs of share-based payment		-	-	-	-	5,078	5,078
- proceeds from shares issued		1,039	4,181	-	-	-	5,220
- costs of equity issues		-	(160)	-	-	-	(160)
Transfer		-	(352,037)	-	-	352,037	-
Equity at 31 December 2006		246,390	0	5,145	54,261	513,748	819,544
*	Under Danish corporate law, share capital may not be used for distribution of
dividends. 
**	In accordance with the Danish Public Companies Act, “Share premium” has been
transferred to “Retained earnings”. Accumulated “Share premium” was DKK 1,123
million at 31 December 2006 (2005: DKK 771 million). 
 

SHARE CAPITAL
(DKK thousands)		2002	2003	2004	2005	2006
						
Share capital at 1 January		141,597	141,597	153,917	154,816	157,790
Equity issues		-	12,320	-	-	87,562
Warrants exercised		-	-	899	2,974	1,038
Share capital at 31 December		141,597	153,917	154,816	157,790	246,390
The total number of shares is 12,319,516 (2005: 7,889,505 shares) with a
nominal value of DKK 20 each (2005: DKK 20 each). All issued shares are fully
paid up. All shares carry the same rights.