UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
OR
For the fiscal year ended December 31, 20172023
OR
For the transition period from to
OR
Date of event requiring this shell company report
Commission file number 001-38097
ARGENX SE |
(Exact name of registrant as specified in its charter and translation of Registrant’s name into English) |
The Netherlands |
(Jurisdiction of incorporation or organization) |
|
|
(Address of principal executive offices) |
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Tim Van Hauwermeiren TVanHauwermeiren@argenx.com |
(Name, telephone, |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class: | Trading Symbol: | Name of each exchange on which registered: |
American Depositary Shares, each representing one ordinary share with a nominal value of €0.10 per share | ARGX |
|
Ordinary shares with a nominal value of €0.10 per | |
|
* Not for trading, but only in connection with the registration of the American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of December 31, 2017 32,180,641 2023
59,194,488ordinary shares were outstanding, including ordinary shares represented by American Depositary Shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes☐ X No X◻
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ ◻No X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:days.
Yes X No ☐◻
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):.
Yes X No ☐◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | Non-accelerated filer | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. X◻
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. X
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ◻ | ||
| International Financial Reporting Standards as issued | Other |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐◻ Item 18 ☐◻
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act).
Yes ☐ No X
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ◻
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 196 | |
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PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 199 | |
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DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 200 | |
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iiiii
Introduction
Unless otherwise indicated, “argenx,” “argenx SE,” “the Company,” “our company,” “we,” “us”, “our” our “Group” refer to argenx SE and its consolidated subsidiaries.
We own various trademark registrations and applications, and unregistered trademarks, including VYVGART®, VYVGART HYTRULO™, VYVDURA®, ARGENX™, ABDEG™, NHANCE™, SIMPLE ANTIBODY™, ARGENXMEDHUB™ and our corporate logo. Trade names, trademarks and service marks of other companies appearing in this annual report on Form 20-F (Annual Report) are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Annual Report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship, any other companies.
VYVGART® (efgartigimod alfa) (VYVGART) has been approved in the United States (U.S.), Japan, Europe, the United Kingdom (UK), Israel, mainland China (Mainland China) and Canada for the intravenous (IV) treatment of generalized myasthenia gravis (gMG). We have now commercialized VYVGART in the U.S., several countries in the European Union (EU), Japan, Mainland China (through our partner Zai Lab Ltd (Zai Lab)), Israel (through Medison Pharma Ltd., Medison) and Canada (all such countries together including Iceland, Norway and Liechtenstein, the VYVGART Approved Countries).
VYVGART subcutaneous (SC) (efgartigimod alfa + hyaluronidase qvfc) (VYVGART SC) has been approved in the U.S. as VYVGART HYTRULO™ (VYVGART HYTRULO) and in Japan as VYVDURA® (VYVDURA) for the treatment of gMG. VYVGART SC has also been approved in the EU and the UK for the treatment of gMG. We have now commercialized VYVGART SC in the U.S. (as VYVGART HYTRULO) and in Germany. Pricing and reimbursement discussions for VYVGART SC remain ongoing in multiple other countries, including in the EU and Japan (as VYVDURA).
For both VYVGART and VYVGART SC, we are aiming for further approvals and we are working to expand commercialization in other jurisdictions.
Where not specified, references in this Annual Report to VYVGART should be read as references to VYVGART and/or VYVGART SC, including VYVGART HYTRULO in relation to the U.S. and VYVDURA in relation to Japan, depending on the context.
Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Accordingly, our consolidated financial statements are presented in this Annual Report in U.S. dollars. All references in this Annual Report to “$,” “US$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” mean U.S. dollars and all references to “€,” “EUR,” and “euros” mean euros, unless otherwise noted. Throughout this Annual Report, references to ADSs mean American depositary shares (ADSs) or ordinary shares represented by ADSs, as the case may be.
Cautionary Statement with Respect to Forward-Looking Statements
This annual reportAnnual Report contains certain forward-looking statements within the meaning of Section 27Astatements. A forward-looking statement is any statement that does not relate to historical facts or events or to facts or events as of the Securities Actdate of 1933, as amended,this Annual Report or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based onderived from our management’s beliefs and assumptions andbased on information currently available to our management.All Forward-looking statements are generally identified by the use of forward-looking words, such as “anticipate”, “aspire”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “hope”, “intend”, “is designed to”, “look forward to”, “may”, “might”, “objective”, “plan”, “potential”, “project”, “predict”, “seek”, “should”, “target”, “will”, or other than present and historical facts and conditions contained in this annual report, includingvariations or the negative of such terms, or by discussion of strategy, although not all forward-looking statements regardingcontain these identifying words. These statements relate to our future results of operations and financial positions, prospects, developments, business strategy,strategies, plans and our objectives for future operations, results of clinical trials and regulatory approvals, and are based on analyses or forecasts of future developments and estimates of amounts not yet determinable.
iv
These forward-looking statements. When usedstatements represent the view of management only as of the date of this Annual Report, and we disclaim any obligation to update forward-looking statements, except as may be otherwise required by law. The forward-looking statements in this annual report, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designedAnnual Report involve known and unknown risks, uncertainties and other factors that could cause our actual future results, performance and achievements to” “may,” “might,” “will,” “plan,” “potential,” “predict,” “objective,” “should,” differ materially from those forecasted or the negative of these and similar expressions identify forward-looking statements. suggested herein.
Forward-looking statements include, but are not limited to, statements about:
● |
| the initiation, timing, progress, development and results of clinical trials of our product candidates, including new indications, alternative dosing regimens and treatment modalities, including statements regarding when results or interim analysis of the clinical trials will be available or made public; |
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● | the potential attributes and benefits of our products and product candidates, including new indications, alternative dosing regimens and treatment modalities, and their competitive position with respect to other alternative treatments; |
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| our ability to advance product candidates into, and successfully complete, clinical trials; |
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● | the anticipated pricing and reimbursement of our products and product candidates, if approved; |
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● | the timing or likelihood of regulatory filings and |
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| our ability to establish sales, marketing and distribution capabilities for any of our products and product candidates that achieve regulatory approval; |
● |
| our regulatory strategy and our ability to establish and maintain manufacturing arrangements for our products and product candidates; |
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| the scope and duration of protection, including any exclusivity period, we are able to establish and maintain for intellectual property rights covering our products and product candidates, platform and |
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| our estimates regarding expenses, future revenues, cash burn, capital requirements and our needs for additional financing; |
● | our financial performance, including potential volatility in the price of our ordinary shares and ADSs; |
v
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| the rate and degree of market acceptance of our products and product candidates, if approved; |
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● | our plans and ability to enter into collaborations for |
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● | the impact of government laws and regulations on our |
● | our expectations with respect to the timing and amount of any dividends; |
● | our plans regarding our supply chain, including our reliance on third parties, including contract manufacturing organizations (CMOs); and |
● | the implementation of our diversity, equity and inclusion policy, including our goal to further improve diversity on our board of directors (Board of Directors). |
These include changes in general economic and business conditions. You should refer to the sectionItem 3.D. “Risk Factors” of this annual report titled “Item 3.D.—Risk Factors”Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this annual reportAnnual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
iii
You should read this annual reportAnnual Report and the documents that we reference in this annual reportAnnual Report and have filed as exhibits to the annual reportAnnual Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Information regarding market and industry statistics contained in this annual reportAnnual Report is included based on information available to us that we believe is accurate. Forecasts and other forward lookingforward-looking information obtained from this available information is subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services.
In addition, statements that include “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
ivvi
Summary of Risk Factors
Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully below. These risks include, among others:
● | We have incurred significant losses since our inception and expect to incur losses for the foreseeable future. We may never achieve or sustain profitability. |
● | We may need to raise substantial additional funding which may not be available to us on acceptable terms or at all. |
● | Our assets, earnings and cash flows and the investment of our cash and cash equivalents may be subject to risks which may cause losses and affect the liquidity of these investments. |
● | We will face significant challenges in successfully commercializing our products and additional product candidates after they are launched. |
● | The commercial success of our products and product candidates, including in new indications or methods of administration, will depend on the degree of market acceptance. |
● | We face significant competition for our drug discovery and development efforts. |
● | Enacted and future legislation could impact demand for our products which could impact our business and future results of operations. |
● | We are subject to government pricing laws, regulation and enforcement. These laws affect the prices we may charge the government for our products and the reimbursement our customers may obtain from the government. Our failure to comply with these laws could harm our results, operations and/or financial conditions. |
● | We may not obtain or maintain adequate coverage or reimbursement status for our products and product candidates. |
● | If we fail to obtain orphan drug designation or we do not have valid and enforceable patents covering our products and product candidates and fail to obtain and/or maintain orphan drug exclusivity for our products or product candidates, our competitors may be able to sell products to treat the same conditions and our revenue may be reduced. |
● | We are subject to healthcare laws, regulation and enforcement. The failure to comply with these laws could harm our results, operations and/or financial conditions. |
● | All aspects of our business ranging from preclinical, clinical trials, marketing and commercialization are highly regulated and any delay by relevant regulatory authorities could jeopardize our development and approval process or result in other suspensions, refusals or withdrawal of approvals. |
● | We are subject to privacy laws, regulation and potential enforcement. Our failure to comply with these laws could harm our results, operations and/or financial conditions. |
● | Failure to successfully identify, select and develop VYVGART in other indications, or additional products or product candidates could impair our ability to grow. |
● | VYVGART has obtained regulatory approval in the VYVGART Approved Countries for the treatment of gMG. Our other products and product candidates – including additional indications or methods of use for efgartigimod, empasiprubart and ARGX-119 – are either in preclinical or clinical development or are pending marketing approval. |
vii
● | Our clinical trials have, and may in the future, fail, and even if they succeed, we may not obtain regulatory approval for our products and product candidates or regulatory approval may be delayed. |
● | Our products and product candidates may have serious adverse, undesirable or unacceptable side effects or even cause death, and we or others may identify undesirable or unacceptable side effects caused by VYVGART or any of our products or product candidates after they have received marketing approval. |
● | If our target patient population is smaller than expected, we are unable to successfully enroll and retain patients in our clinical trials, or experience significant delays in doing so, we may not realize the full commercial potential of any products or product candidates. |
● | We rely, and expect to continue to rely, on third parties to conduct some of our research activities and clinical trials and for parts of the development and commercialization of our existing and future research programs, products and product candidates. If our relationships with such third parties are not successful, our business may be adversely affected. |
● | Disruptions caused by our reliance on third parties for our manufacturing process may delay or disrupt our business, product development and commercialization efforts. |
● | Failure to adequately enforce or protect our intellectual property rights in products, product candidates and platform technologies could adversely affect our ability to maximize the value for patients in our marketed products and product candidates. |
● | If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest. |
● | We may encounter difficulties efficiently managing our growth and our increasing development, regulatory and sales and marketing capabilities, which could disrupt our operations. |
● | The price of our ADSs and ordinary shares may be volatile and may fluctuate due to factors beyond our control. An active public trading market may not be sustained. |
● | Holders of our ADSs are not treated as holders of our ordinary shares and may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares. |
● | We are a Dutch European public company with limited liability (Societas Europaea or SE). The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions. |
● | Claims of U.S. civil liabilities may not be enforceable against us or the members of our management and our Board of Directors. |
● | As a foreign private issuer, we are exempt from certain rules under U.S. securities laws and are permitted to file less information with the U.S. Securities and Exchange Commission (SEC) than a U.S. company. |
● | We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses. |
● | If we were to be classified as a passive foreign investment company for U.S. federal income tax purposes, this could result in adverse U.S. tax consequences to certain U.S. holders. |
viii
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA[RESERVED]
Our consolidated audited financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We derived the selected consolidated statements of profit and loss and other comprehensive income, selected condensed consolidated statements of financial position and selected condensed consolidated statements of cash flow as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2017, 2016 and 2015 from our consolidated audited financial statements, included herein. Our selected consolidated statements of profit and loss and other comprehensive income, selected condensed consolidated statements of financial position and selected condensed consolidated statements of cash flow as of December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013 have been extracted from our unaudited consolidated financial statements, which are not included herein. This data should be read together with, and is qualified in its entirety by reference to, “Item 5—Operating and Financial Review and Prospects” as well as our financial statements and notes thereto appearing elsewhere in this report. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.
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| Year ended | |||||||||||||
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| December 31, | |||||||||||||
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| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 | |||||
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| (In thousands, except share and per share data) | |||||||||||||
Consolidated statement of profit and loss and other comprehensive income: |
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Revenue |
| € | 36,415 |
| € | 14,713 |
| € | 6,854 |
| € | 3,756 |
| € | 2,677 |
Other operating income |
|
| 4,841 |
|
| 2,439 |
|
| 3,101 |
|
| 1,621 |
|
| 2,577 |
Research and development expenses |
|
| (51,740) |
|
| (31,557) |
|
| (20,635) |
|
| (12,641) |
|
| (9,352) |
Selling, general and administrative expenses |
|
| (12,448) |
|
| (7,011) |
|
| (4,925) |
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| (3,479) |
|
| (2,132) |
Operating loss |
|
| (22,932) |
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| (21,416) |
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| (15,605) |
|
| (10,743) |
|
| (6,230) |
Financial income |
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| 1,250 |
|
| 73 |
|
| 112 |
|
| 137 |
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| 186 |
Financial expenses |
|
| — |
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| — |
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| — |
|
| (3) |
|
| (4) |
Exchange gains (losses) |
|
| (5,797) |
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| (31) |
|
| 181 |
|
| 295 |
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| (83) |
Loss before taxes |
|
| (27,479) |
|
| (21,374) |
|
| (15,312) |
|
| (10,314) |
|
| (6,131) |
Income tax expense |
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| (597) |
|
| — |
|
| — |
|
| — |
|
| — |
Loss for the year and total comprehensive loss |
| € | (28,076) |
| € | (21,374) |
| € | (15,312) |
| € | (10,314) |
| € | (6,131) |
Weighted average number of shares outstanding |
|
| 24,609,536 |
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| 18,820,612 |
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| 15,734,007 |
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| 7,551,576 |
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| 18,000 |
Basic and diluted loss per share |
| € | (1.14) |
| € | (1.14) |
| € | (0.97) |
| € | (1.37) |
| € | (341.00) |
1
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| As of December 31, | |||||||||||||
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| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 | |||||
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Condensed consolidated statement of financial position: |
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Cash, cash equivalents and current financial assets |
| € | 359,775 |
| € | 96,728 |
| € | 42,327 |
| € | 55,973 |
| € | 23,220 |
Total assets |
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| 370,908 |
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| 105,772 |
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| 45,962 |
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| 58,510 |
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| 25,013 |
Deferred revenue |
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| 10,070 |
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| 30,206 |
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| 4,141 |
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| 3,451 |
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| 456 |
Total liabilities |
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| 25,977 |
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| 42,398 |
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| 8,684 |
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| 8,428 |
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| 3,309 |
Share capital |
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| 3,217 |
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| 2,012 |
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| 1,580 |
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| 1,571 |
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| 466 |
Share premium |
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| 430,518 |
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| 126,358 |
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| 82,169 |
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| 81,940 |
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| 45,304 |
Total equity |
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| 344,931 |
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| 63,374 |
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| 37,278 |
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| 50,082 |
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| 21,704 |
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| As of December 31, | |||||||||||||
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| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 | |||||
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| (In thousands) | ||||||||||||
Condensed consolidated statement of cash flows: |
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Cash and cash equivalents at beginning of the period |
| € | 89,897 |
| € | 35,514 |
| € | 32,180 |
| € | 22,720 |
| € | 15,430 |
Net cash flows (used in) / from operating activities |
|
| (36,546) |
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| 10,599 |
|
| (13,897) |
|
| (5,235) |
|
| (6,606) |
Net cash flows (used in) / from investing activities |
|
| (162,052) |
|
| (806) |
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| 16,812 |
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| (23,341) |
|
| 671 |
Net cash flows (used in) / from financing activities |
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| 305,365 |
|
| 44,621 |
|
| 238 |
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| 37,741 |
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| 13,308 |
Effect of exchange rate differences on cash and cash equivalents |
|
| (5,797) |
|
| (31) |
|
| 181 |
|
| 295 |
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| (83) |
Cash and cash equivalents at end of the period |
| € | 190,867 |
| € | 89,897 |
| € | 35,514 |
| € | 32,180 |
| € | 22,720 |
Exchange Rate Information
The euro is our functional currency and the currency in which we report our financial results. The following table sets forth, for each period indicated, the low and high exchange rates of U.S. dollars per euro, the exchange rate at the end of such period and the average of such exchange rates on the last day of each month during such period, based on the noon buying rate of the Federal Reserve Bank of New York for the euro. As used in this document, the term “noon buying rate” refers to the rate of exchange for the euro, expressed in U.S. dollars per euro, as certified by the Federal Reserve Bank of New York for customs purposes. The exchange rates set forth below demonstrate trends in exchange rates, but the actual exchange rates used throughout this annual report may vary.
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| Year ended | ||||||||
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| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
High |
| 1.2041 |
| 1.1516 |
| 1.2015 |
| 1.3927 |
| 1.3816 |
Low |
| 1.0416 |
| 1.0375 |
| 1.0524 |
| 1.2101 |
| 1.2774 |
Rate at end of period |
| 1.2022 |
| 1.0552 |
| 1.0859 |
| 1.2101 |
| 1.3779 |
Average rate per period |
| 1.1301 |
| 1.1072 |
| 1.1096 |
| 1.3297 |
| 1.3281 |
The following table sets forth, for each of the last six months, the low and high exchange rates for euros expressed in U.S. dollars and the exchange rate at the end of the month based on the noon buying rate as described above.
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| September |
| October |
| November |
| December |
| January |
| February |
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| 2017 |
| 2017 |
| 2017 |
| 2017 |
| 2018 |
| 2018 |
High |
| 1.2041 |
| 1.1847 |
| 1.1936 |
| 1.2022 |
| 1.2488 |
| 1.2482 |
Low |
| 1.1747 |
| 1.1580 |
| 1.1577 |
| 1.1725 |
| 1.1922 |
| 1.2211 |
Rate at end of period |
| 1.1813 |
| 1.1580 |
| 1.1898 |
| 1.2022 |
| 1.2428 |
| 1.2211 |
On December 31, 2017, the noon buying rate of the Federal Reserve Bank of New York for the euro was €1.00 = US$1.2022. Unless otherwise indicated, currency translations in this annual report reflect the December 31, 2017 exchange rate.
On March 16, 2018, the noon buying rate of the Federal Reserve Bank of New York for the euro was €1.00 = $1.2280.
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B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
Our business faces significant risks.risks, including those described below. You should carefully consider all of the information set forth in this annual reportAnnual Report and in our other filings with the U.S. Securities and Exchange Commission, or the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs. These are not the only risks argenx faces. Additional risks and uncertainties not presently known to argenx or that it currently considers immaterial or not specific may also impair its business, results of operation and financial condition. This report also contains forward‑lookingforward-looking statements that involve risks and uncertainties. Our actual results could differ materially and adversely from those anticipated in these forward‑lookingforward-looking statements as a result of certain factors including the risks described below and elsewhere in this annual reportAnnual Report and our other SEC filings. See “Cautionary“Cautionary Statement with Respect to Forward-Looking Statements” above.Statements.”
RisksRisk Factors Related to Ourargenx’s Financial Position and Need for Additional Capital
We are a clinical‑stage biopharmaceutical company and have incurred significant losses since our inception. Weinception and expect to incur losses for the foreseeable future andfuture. We may never achieve or maintainsustain profitability.
We are a clinical‑stage biopharmaceutical company with a limited operating history. Since our inception, we have incurred significant operating losses, totaling $2,405 million of cumulative losses. We incurred lossesTo date we have commercialized VYVGART for the year and total comprehensive lossestreatment of €21.4 million and €28.1 milliongMG. We do not currently have any marketing approvals for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2017, we had accumulated losses of €100.6 million.any other product candidates or VYVGART in other indications. Our losses resulted principally from costs incurred in research and development, preclinical testing and clinical development of our product candidates as well as costs incurred for research programs, and from general and administrative costs associated with our operations. In the future, wecommercial roll out and expansion. We intend to continue to conduct research and development, preclinical testing, clinical trials and regulatory compliance activities that,as well as the continued commercialization of VYVGART and other products candidates, for current and future indications, and we intend to continue our efforts to expand our sales, marketing and distribution infrastructure. These expenses, together with anticipated selling, general and administrative expenses, willmay result in incurring further significant losses for the next several years. Our losses, among other things, will continue to cause our working capital and shareholders’ equity to decrease.foreseeable future. We anticipate that our operating expenses will increase substantially if and as we:
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we execute our strategic objectives and as we experience delays or encounter issues relating thereto, including failed clinical trials, ambiguous clinical trial results, safety issues or other regulatory challenges.
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Since our inception in 2008,Although we have invested mostgenerated net product sales of our resources$1.2 billion from global product net sales in developing our product candidates, building our intellectual property portfolio, developing our supply chain, conducting business planning, raising capitalfiscal year 2023, we can provide no assurances that we will be able to achieve or sustain profitability based on sales in that indication alone or that we will be able to receive regulatory approval of and providing generalcommercialize VYVGART and administrative support for these operations. We do not currently have any approved products and have never generated any revenue from product sales. To date, we have funded our operations through public and private placements of equity securities, upfront, milestone and expense reimbursement payments received from our collaborators, funding from governmental bodies and interest income from the investment of our cash, cash equivalents and financial assets.
VYVGART SC in other indications or in other countries. To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our products and our product candidates, discovering and developing additional products and product candidates, including new indications, obtaining regulatory approval, for any product candidates that successfully complete clinical trials, establishing manufacturing and marketing capabilities, obtaining funding or reimbursement for our products, and ultimately selling any products for whichselling. Those activities are the drivers of our current path to profitability, however, we may obtain regulatory approval. We are onlynot succeed in the preliminary stagessome or even all of most of these activities. We may never succeed in these activities, and even if we do, we may nevernot generate revenue that is significant enough to achieve profitability.
Because of the numerous risks and uncertainties associated with pharmaceutical and biological product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or other comparable foreign authorities to perform studies in addition to those we currently anticipate, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase and revenue could be further delayed.
Even if we do generate product royalties or product sales, we may never achieve or sustain profitability on a quarterly or annual basis. Our failure to sustain profitability would depress the market price of the ADSs and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the market price of the ADSs also could cause you to lose all or a part of your investment.
We may need to raise substantial additional funding in orderwhich may not be available to complete the developmentus on acceptable terms or at all.
We have significant positions of cash and commercialization of our product candidates. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate certain of our product development or research operations.
To date, we have funded our operations through public and private placements of equity securities, upfront, milestone and expense reimbursement payments received from our collaborators, funding from governmental bodies and interest income from the investment of our cash, cash equivalents of $2,049 million and current financial assets. We expect to require additional funding in the future to sufficiently finance our operationsassets of $1,131 million as of December 31, 2023. Developing products and advance development of our product candidates.
We expect that our existing cash, cash equivalentscandidates, including new indications, and investments will enable us to fund our operating expensesconducting clinical trials is time-intensive, expensive and capital expenditure requirements through at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.risky. Our future capital requirements for ARGX‑113, ARGX‑110 or our preclinical programs will depend on many factors, including:
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Table of Contentsour development activities, preclinical testing and clinical trials for our product and product candidates, (ii) the time and costs involved in obtaining regulatory approvals and any delays we may encounter, including as we seek regulatory approval in additional jurisdictions or other indications, (iii) commercialization, manufacturing, sales and marketing of products and product candidates, (iv) securing adequate and uninterrupted supply chains, (v) the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our products or product candidates, (vi) the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties, (vii) the maintenance of our existing collaboration agreements and entry into new collaboration agreements, and (viii) the amount of revenue, if any, we may derive either directly or in the form of royalty payments from future sales of our products or product candidates, if approved.
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To finance our operations, we may need to raise additional capital through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. For example, we completed a global offering in July 2023 whereby we raised $1.3 billion in gross proceeds from the sale of 1,917,715 ADSs at a price of $490.00 per ADS and the sale of 663,918 ordinary shares at a price of €436.37 per ordinary share. Our ability to raise additional funds on acceptable terms or at all will depend on financial, economic and market conditions and other factors, over which we may have no or limited control. If adequate fundswe are unable to raise additional capital if and when needed, or if the terms are not available on commercially acceptable, terms when needed,our business strategy could be impacted, and we may be forced to delay, reduce or terminate the development or commercialization of all or part of our research programs or product candidates or we may be unable to take advantage of future business opportunities.
Raising additional capital may cause dilution to holders of our ordinary shares or purchasers of ADSs restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our operations with our existing cash, cash equivalents and current financial assets, the net proceeds from our initial U.S. and follow-on public offerings, revenue from our collaborations, funding from governmental bodies and interest income from the investment of our cash, cash equivalents and financial assets. In order to further advance development of our product candidates, discover additional product candidates and pursue our other business objectives, however, we will need to seek additional funds.
We cannot guarantee that future financing will be available in sufficient amounts or on commercially reasonable terms, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our ordinary shares or the ADSs and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of the ADSs to decline. The sale of additional equity or convertible securities would dilute all of our existing shareholders and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of ADSs. The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Further, any additional fundraising efforts may divert our management from its day‑to‑day activities, which may adversely affect our ability to develop and commercialize our product candidates.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any of our products or product
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candidates, including new indications, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired,all of which could materially affectmay have a material adverse impact on our business, financial condition and results of operations.
Our limitedassets, earnings and cash flows and the investment of our cash and cash equivalents may be subject to risks which may cause losses and affect the liquidity of these investments.
As of December 31, 2023, we had cash and cash equivalents and current financial assets of $3.2 billion compared to $2.2 billion as at December 31, 2022. All of our available cash and cash equivalents and current financial assets are invested in either current accounts, savings accounts, term accounts or highly liquid money market funds. Any future investments may include term deposits, corporate bonds, commercial paper, certificates of deposit, government securities and money market funds in accordance with our cash investment policy. These investments may be subject to general credit, liquidity, market, inflation, foreign currency and interest rate risks and we may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negative effect on our financial condition. The market risks associated with our cash flows and investment portfolio may adversely affect our results of operations, liquidity and financial condition.
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Due to the international scope of our operations, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly between the U.S. dollar, euro and Japanese Yen. Our revenue from outside of the U.S. will increase as our products, whether commercialized by us or our business partners or our collaborators gain marketing approval in such jurisdictions. If the U.S. dollar weakens against a specific foreign currency, our revenues will increase, having a positive impact on net income, but our overall expenses will increase, having a negative impact. Conversely, if the U.S. dollar strengthens against a specific foreign currency, our revenues will decrease, having a negative impact on net income, but our overall expenses will decrease, having a positive impact. Continued volatility in foreign exchange rates is likely to impact our operating historyresults and financial condition.
Risk Factors Related to Commercialization of argenx’s Products and Product Candidates, Including for New Indications
We will face significant challenges in successfully commercializing our products and additional product candidates after they are launched.
The commercialization of VYVGART in new indications or other approved product candidates, or entrance of any of our products or product candidates into new markets will require us to further expand our sales and marketing organization, enter into collaboration arrangements with third parties, outsource certain functions to third parties, or use some combination of each. We have built, and continue to expand, our sales forces in certain of the VYVGART Approved Countries and plan to further develop our sales and marketing capabilities to promote our products, and product candidates, including new indications, if and when marketing approval has been obtained in other relevant jurisdictions.
Even if we successfully expand our sales and marketing capabilities, either on our own or in collaboration with third parties, we may make it difficultfail to launch or market our products effectively. Recruiting and training a specialized sales force is expensive and the costs of expanding an independent sales, marketing and/or promotion organization could be greater than we anticipate. We could further encounter difficulties in our sales or marketing, due to regulatory actions, shut-downs, work stoppages or strikes, approval delays, withdrawals, recalls, penalties, supply disruptions, shortages or stock-outs at our facilities or third-party facilities that we rely on, reputational harm, the impact to our facilities due to pandemics or natural or man-made disasters, including as a result of climate change, product liability, and/or unanticipated costs. In addition, recruiting and training a sales force is time-consuming and could delay any product launch. In the event that any such launch is delayed or does not occur for youany reason, we would have prematurely or unnecessarily incurred these commercialization expenses, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
We have entered into distribution agreements with Medison, Zai Lab, Genpharm Services FZ-LLC (Genpharm) and Handok Inc. (Handok) to evaluateperform sales and marketing services in Israel, Central and Eastern Europe, Mainland China, the Gulf Cooperation Council (GCC) and South Korea, respectively. Under these agreements, our product revenues or the profitability of these product revenues could be lower than if we were to market and sell the products that we develop ourselves. Such distribution agreements may place the commercialization of our products outside of our control, including over the amount or timing of resources that our distribution partners devote to our products. Furthermore, our distributors’ willingness or ability to comply with and complete their obligations under our arrangements may be adversely affected by business combinations or significant changes in our distributors’ business strategies. In addition, we may not succeed in entering into arrangements with third parties to sell and market our products or may be unable to do so on terms that are favorable to us.
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The commercial success of our business to dateproducts and to assess our future viability.
Since our inception in 2008, we have invested most of our resources in developing our product candidates, building our intellectual property portfolio, developing our supply chain, conducting business planning, raising capitalincluding in new indications or methods of administration, will depend on the degree of market acceptance.
Our products and providing general and administrative support for these operations. Our most advanced candidate, ARGX‑113, completed a Phase 2 clinical trial for the treatment of MG and is in a Phase 2 clinical trial of ARGX‑113 for the treatment of ITP. In September 2017, we also initiated a third Phase 2 clinical trial of ARGX‑113 for the treatment of PV, and in October 2017, we initiated a Phase 1 clinical trial of a subcutaneous formulation of ARGX‑113 for the treatment of chronic autoimmune diseases. We have not yet demonstrated an ability to obtain regulatory approvals, manufacture a commercial‑scale product or conduct sales and marketing activities necessary for successful product commercialization. In addition, given our limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors in achieving our business objectives. If we are successful at completing the approval process for one of our product candidates, weincluding for new indications or methods of administration, if and when approved and available on the market, may consider transitioning from our current research and development focusnever achieve an adequate level of acceptance by physicians, patients, the medical community, or healthcare payors for us to focusingbe profitable. This will depend on commercializing our products. We may not be successful in such a transition or may incur greater costs than expected, which would materially adversely affect our business, prospects, financial condition and results of operation. Additionally, we expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a varietynumber of factors, many of which are beyond our control. Consequently, any predictions you make aboutcontrol, including, but not limited to:
● | the efficacy and safety as demonstrated by clinical trials and subsequent prevalence and severity of any side effects; |
● | approval may be for indications, dosage and methods of administration or patient populations that are not as broad as intended or desired; |
● | changes in the standard of care for the targeted indications for any product and product candidate; |
● | availability of alternative approved therapies; |
● | sales, marketing and distribution support; |
● | labeling may require significant use or distribution restrictions or safety warnings; |
● | potential product liability claims; |
● | acceptance by physicians, patients and healthcare payors of each product as safe, effective and cost-effective, and any subsequent changes thereof; |
● | relative convenience, ease of use, including administration, perceived dosing complexity and other perceived advantages over alternative and/or new products; |
● | patient continued commitment required to receive periodic in-center infusions; |
● | prevalence and severity of adverse events discovered before or after marketing approval has been received; |
● | consumer perceptions or publicity regarding our business or the safety and quality of our product and product candidates, clinical trials for new indications, or any similar products distributed by other companies; |
● | limitations, precautions or warnings listed in the summary of product characteristics, patient information leaflet, wording of package labeling or instructions for use, and any subsequent changes thereof; |
● | the cost of treatment with our products in relation to alternative and/or new treatments; |
● | the extent to which products are approved for inclusion and reimbursed on formularies of hospitals and managed care organizations, and any subsequent changes thereof; and |
● | whether our products are designated in the label, under physician treatment guidelines or under reimbursement guidelines as a first-line, second-line, third-line or last-line therapy, and any subsequent changes thereof. |
In addition, because we are developing our future successproducts and product candidates for the treatment of different indications, negative results in a clinical trial evaluating the efficacy and safety of a product or viabilityproduct candidate for one indication could negatively impact the perception of the efficacy and safety of such product or product candidate in a
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different indication, which could have an adverse effect on our reputation, commercialization efforts and financial condition.
Moreover, efforts to educate the medical community and third-party payors on the benefits of our products and product candidates may require significant resources and may never be successful. If our product candidates or methods of use of existing products or new indications fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues. Even if some products achieve market acceptance, they may not be able to retain market acceptance and/or the market may prove not to be large enough to allow us to generate significant revenues.
We face significant competition for our drug discovery and development efforts.
The market for pharmaceutical products is highly competitive and characterized by rapidly growing understanding of disease biology, quickly changing technologies, strong intellectual property barriers to entry, and a multitude of companies involved in the creation, development, and commercialization of novel therapeutics. Many of these companies are highly sophisticated and often strategically collaborate with each other.
Competition in the autoimmune field is intense and involves multiple monoclonal antibodies (mAbs), other biologics and small molecules either already marketed or in development by many different companies including large pharmaceutical companies such as accurateAbbVie, Inc. (AbbVie) (Humira/rheumatoid arthritis), Amgen, Inc. (Amgen) (Enbrel/rheumatoid arthritis), Biogen Inc, (Tysabr/multiple sclerosis), GlaxoSmithKline plc (GSK) (Benlysta/lupus), F. Hoffman-La Roche AG (Roche) (Rituxan/often used off label) and Janssen Pharmaceuticals, Inc. (Remicade/rheumatoid arthritis and Stelara/psoriasis). In addition, these and other pharmaceutical companies have mAbs or other biologics in clinical development for the treatment of autoimmune diseases.
Currently, our commercial revenue is generated by VYVGART, VYVGART HYTRULO and VYVGART SC in gMG. We face and expect to continue to face intense competition from other biopharmaceutical companies, who have launched or are developing products for the treatment of gMG and other autoimmune diseases, including products that are in the same class as theyVYVGART, as well as products that are similar to some of our product candidates. Competition for other (potential) future indications is also fierce, with significant development in almost all of the indications we are currently developing or planning to develop for our product or product candidates. For example, we are aware of several neonatal Fc receptor (FcRn) inhibitors that are in clinical development and one FcRn inhibitor, Rystiggo (rozanolixizumab-noli), which was approved in June 2023. We are also aware that AstraZeneca PLC is selling Soliris and Ultomiris for the treatment of adult patients with gMG who are AchR-AB+ and that UCB is selling Rystiggo for the treatment of adult patients with gMG who are AchR-AB+ or MuSK-AB+ and Zilbrysq for the treatment of adult patients with gMG who are AchR-AB+. Roche, Novartis AG, CSL Behring, Grifols, S.A., Curavac, Inc., Takeda Pharmaceutical Co Ltd, RemeGen Co, Immunovant, Inc., Cartesian Therapeutics, Inc., Horizon Therapeutics PLC, Regeneron Pharmaceuticals, Inc./Alnylam Pharmaceuticals, Inc. and Johnson & Johnson Innovation, Inc. (Johnson & Johnson), among others, are developing drugs that may have utility for the treatment of myasthenia gravis (MG).
Competitive product launches may erode future sales of our products, including our existing products and those currently under development, or result in unanticipated product obsolescence. Such launches continue to occur, and potentially competitive products are in various stages of development. We could also face competition for use of limited international infusion sites, particularly in new markets as competitors launch new products. We cannot predict with accuracy the timing or impact of the introduction of competitive products that treat diseases and conditions like those treated by our products or product candidates. In addition, our competitors and potential competitors compete with us in recruiting and retaining qualified scientific, clinical research and development and management personnel, establishing clinical trial sites, registering patients for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our products.
There can be if we had a longer operating historyno assurance that our competitors are not currently developing, or will not in the future develop, technologies and products that are equally or more experience developing antibody‑based drugs.effective, are more economically attractive, and can be administered more easily than any of our current or future technologies or products.
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Competing products or technology platforms may gain faster or greater market acceptance than our products or technology platforms and medical advances or rapid technological development by competitors may result in our products and product candidates or technology platforms becoming non-competitive or obsolete before we are able to recover our research and development and commercialization expenses. If we, our products and product candidates or our technology platforms do not compete effectively, it is likely to have a material adverse effect on our business, financial condition and results of operation.
Risks RelatedOur products and product candidates for which we have obtained or intend to seek approval as biological products, including for new indications, may face biosimilar competition.
In the U.S., the Biologics Price Competition and Innovation Act (BPCIA) created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with a U.S. Food and Drug Administration (FDA)-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the DevelopmentFDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full biologics license application (BLA) for the competing product containing the sponsor’s own preclinical data and Clinical Testingdata from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of Our Product Candidatestheir product.
AllWe believe that any of our product candidates areapproved as a biological product under a BLA should qualify for the 12-year period of exclusivity, as was the case with VYVGART and VYVGART HYTRULO. The regulatory exclusivity periods for VVVGART and VYVGART HYTRULO is expected to extend until December 2033 in preclinical or early‑stage clinical development. Clinical drug developmentthe U.S. Regulatory protection in the EU (both orphan and data/marketing exclusivity) is expected to expire in August 2032 in the European Economic Area (EEA) and March 2033 in the UK. Following those periods of regulatory exclusivity, we must enforce our patent rights against biosimilar products that infringe the patent claims of these products. However, there is a lengthyrisk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for competition by biosimilar products sooner than anticipated. Moreover, an interchangeable biosimilar product, once approved, may be substituted under existing state law for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products. Any non-interchangeable biosimilar products may also be substituted by a healthcare provider but, under existing law, will not be automatically substituted at the pharmacy. The extent of the impact of such substitution will depend on a number of marketplace and expensive processregulatory factors that are still developing.
In the EU, biosimilars are evaluated for marketing authorization pursuant to a set of general and product class-specific guidelines. In April 2023, the European Commission adopted a proposal to revise the EU’s pharmaceutical legislation. If adopted in the form proposed, a number of changes to the regulatory framework governing medicinal products in the EEA would occur, including a shortened period of data and market exclusivity. In addition, in an effort to spur biosimilar utilization and/or increase potential healthcare savings, some EU Member States have adopted, or are considering the adoption of, biosimilar uptake measures such as physician prescribing quotas or automatic pharmacy substitution of biosimilars for the corresponding reference products. Some EU Member States impose automatic price reductions upon market entry of one or more biosimilar competitors. In September 2022, the European Medicines Authority (EMA) and the EU Heads of Medicines’ Agencies issued a joint statement providing that biosimilar medicines approved in the EU are “interchangeable” with uncertain timelinestheir reference products and uncertain outcomes. If clinical trialsother biosimilars of the same reference product. This statement could further contribute to the prescribing of biosimilars and to greater competition in Europe. While the degree of competitive effects of biosimilar competition differs among EU Member States and among products, the overall use of biosimilars and the rate at which product sales of innovative products are being affected by biosimilar competition is increasing.
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Enacted and future legislation could impact demand for our products which could impact our business and future results of operations.
In the U.S., the UK, the EU and other jurisdictions, there have been a number of legislative and regulatory changes to the healthcare systems that could affect our future results of operations. Governmental regulations that mandate price controls or limitations on patient access to our products or establish prices paid by government entities or programs for our products could impact our business, and our future results of operations could be adversely affected by changes in such regulations or policies. For example, if the European Commission’s recent proposal to revise the EU’s pharmaceutical legislation is adopted in the form proposed, we may be affected by a decrease in data and market exclusivity for our products and product candidates in the EEA.
In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs in general and the cost of pharmaceuticals in particular. Healthcare reform initiatives in the U.S. culminated in the enactment of the Inflation Reduction Act (IRA) in August 2022, which allows, among other things, the U.S. Department of Health and Human Services (HHS) to directly negotiate the selling price of a statutorily specified number of drugs and biologics each year that the Centers for Medicare & Medicaid Services (CMS)reimburses under Medicare Part B and Part D. Only high-expenditure single-source biologics that have been approved for at least 11 years (7 years for single-source drugs) can qualify for negotiation, with the negotiated price taking effect two years after the selection year. In August 2023, the U.S. government announced the first 10 drugs to be subject to negotiation, although the Medicare drug price negotiation program is currently subject to legal challenges. Negotiations for Medicare Part D products begin in 2024 with the negotiated price taking effect in 2026, and negotiations for Medicare Part B products begin in 2024 with the negotiated price taking effect in 2028. HHS will announce the negotiated maximum fair price by September 1, 2024, and this price cap, which cannot exceed a statutory ceiling price, will come into effect on January 1, 2026.
The IRA also penalizes drug manufacturers that increase prices of Medicare Part D and Part B drugs at a rate greater than the rate of inflation. The IRA will also cap out-of-pocket spending for Medicare Part D enrollees and make other Part D benefit design changes beginning in 2024. Beginning in 2025, the IRA eliminates the coverage gap under Medicare Part D by significantly lowering the enrollee maximum out-of-pocket cost to $2,000 and by requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs below the out-of-pocket maximum, and 20% once the out-of-pocket maximum has been reached (plans will also be required to cover 20% in this case). Although these discounts represent a lower percentage of enrollees’ costs than the current discounts required below the out-of-pocket maximum (that is, in the coverage gap phase of Part D coverage), the new manufacturer contribution required above the out-of-pocket maximum could be considerable for very high-cost patients and the total contributions by manufacturers to a Part D enrollee’s drug expenses may exceed those currently provided. These Part D design changes may also incentivize Part D plans to exclude certain drugs from their formularies, which could affect the supply, demand, and pricing of our product and product candidates.
The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented. Manufacturers that fail to comply with the IRA may be subject to various penalties, some significant, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA (as defined below) marketplaces through plan year 2025. These provisions began taking effect progressively starting in 2023, although they may be subject to legal challenges. For example, the provisions related to the negotiation of selling prices of high-expenditure single-source drugs and biologics have been challenged in multiple lawsuits, Thus, while the full economic impact of IRA is unknown at this time, the law’s passage is likely to affect the pricing of our products and product candidates. In addition, in response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation, which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future. The adoption of restrictive price controls in new jurisdictions, more restrictive controls in existing jurisdictions, the adoption of these lower prices by commercial payors, or the failure to obtain or maintain timely or adequate pricing could also adversely impact revenue. We expect pricing pressures will continue globally.
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Further, at the U.S. state level, legislatures are increasingly enacting laws and implementing regulations designed to control pharmaceutical and biological product pricing, including price or reimbursement constraints, discount requirements, marketing cost disclosure and price transparency reporting, and programs designed to encourage importation from other countries and bulk purchasing. States are also enacting laws modeled on federal policies, such as the IRA and the 340B drug discount program. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, including pharmaceuticals, which could result in reduced demand for our products and product candidates particularly ARGX‑113or additional pricing pressures.
The EU, on the other hand, has reopened the entire legislative framework for medicinal products. On April 26, 2023, the European Commission has published its proposal for a new directive (COM/2023/192 final) and ARGX‑110,a new regulation (COM/2023/193 final), which would revise and replace the existing general pharmaceutical legislation, including e.g., Directive 2001/83/EC, as well as Regulations (EC) No. 726/2004, No. 141/2000, or No. 1901/2006 (EU Pharmaceutical Legislation). This proposal is currently undergoing the ordinary legislative procedure in the European Parliament and Council of the European Union and is therefore still subject to changes. If at all, the EU Pharmaceutical Legislation is expected to be implemented at the earliest in the next few years. Prevention and mitigation of medicine shortages, simplification of the market entry of generics and biosimilars, the reduction of the regulatory burden (e.g., by increased digitalization) and the implementation of a new regime for data and / or market exclusivity (e.g., by reducing the minimum period while introducing factors that, if met, prolong protections for marketing authorization holders) are prolonged among the major objectives pursued by the European Commission. Pending the outcome of the legislative procedure, the impact could be positive with respect to certain regulatory processes. There could, however, also be a negative impact on innovative pharma and biotech companies such as argenx due to shorter baseline regulatory and orphan exclusivities if the proposal is not amended.
We are subject to government pricing laws, regulation and enforcement. These laws affect the prices we may charge the government for our products and the reimbursement our customers may obtain from the government. Our failure to comply with these laws could harm our results, operations and/or financial conditions.
In the U.S., we are required to participate in various government programs for our products to be reimbursed or purchased by the federal government. We participate in programs such as the Medicaid Drug Rebate Program, the 340B drug discount program, Medicare Part B, Medicare Part D and the U.S. Department of Veterans Affairs Federal Supply Schedule pricing program. The requirements vary by program, but among these and any other programs in which we participate, we are, among other things, required to enter into agreements with and calculate and report prices and other information to certain government agencies, charge no more than statutorily mandated ceiling prices and calculate and pay rebates and refunds for certain products.
The calculations are complex and are often subject to interpretation by us, governmental agencies and the courts. If we determine that the prices we reported were in error, we may be required to restate those prices and pay additional rebates or refunds to the extent we understated the rebate or overcharged the government due to the error. Additionally, there are penalties associated with submission of incorrect pricing or other data. We may incur significant civil monetary penalties if we are found to have knowingly submitted false prices or other information to the government, or to have charged 340B covered entities more than the statutorily mandated ceiling price. Certain failures to timely submit required data also could result in a civil monetary penalty for each day the information is late. We could also become subject to allegations under the False Claims Act and other laws and regulations. In addition, misreporting and failure to timely report data to CMS also can be grounds for CMS to terminate our Medicaid rebate agreement, pursuant to which we participate in the Medicaid Drug Rebate Program. In the event that CMS terminates our rebate agreement, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs.
Recently enacted legislation in the U.S. has imposed additional rebates under government programs. For example, effective January 1, 2024, under the American Rescue Plan of 2021, rebates that manufacturers pay to state Medicaid programs was eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in Medicaid rebates than they receive on the sale of products for products that have undergone substantial price increases. In addition, the Infrastructure Investment and Jobs Act, effective January 1, 2023, added a requirement for manufacturers of certain single-source drugs (including biologics and biosimilars) separately paid for under Medicare
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Part B for at least 18 months and marketed in single-dose containers or packages (known as refundable single-dose containers or single-use package drugs) to provide annual refunds for any portions of the dispensed drug that are unused and discarded if those unused or discarded portions exceed an applicable percentage defined by statute or regulation. Manufacturers are subject to periodic audits and those that fail to pay refunds for their refundable single-dose containers or single-use package drugs shall be subject to civil monetary penalties. This requirement applies to VYVGART, and potentially other of our products in the future. As a result, we owe refunds to CMS starting this year. Although we will evaluate options to reduce the amount of refunds owed, pursuing any such actions will be time-consuming and costly. Even if we invest resources to reduce the amount of refunds owed to CMS, it is possible that we will be delayed or unsuccessful in achieving a reduction worthy of our investment.
Maintaining compliance with these government price reporting and discounting obligations is time-consuming and costly, and a failure to comply can result in substantial fines, penalties, all of which could adversely impact our financial results.
We may not obtain or maintain adequate coverage or reimbursement status for our products and product candidates.
Sales of VYVGART for gMG, VYVGART HYTRULO and our product candidates, if approved, will depend, in part, on the extent to which third-party payors, including government health programs in the U.S. (such as Medicare Parts B and D and Medicaid) and other countries, commercial health insurers, and managed care organizations, provide coverage and establish adequate reimbursement levels for such products and product candidates. In the U.S., no uniform policy of coverage and reimbursement for products exists among commercial third-party payors. Commercial third-party payors decide which products they will pay for and establish reimbursement levels. Commercial payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidate that we develop through approval will be made on a plan-by-plan basis. One commercial payor’s determination to provide coverage for a product does not assure that other commercial payors will also provide coverage and adequate reimbursement for the product. Additionally, a commercial third-party payor’s decision to provide coverage for a drug does not imply that an adequate reimbursement rate will be approved. Each plan determines whether or not it will provide coverage for a product, what amount it will pay the manufacturer for the product, on what tier of its formulary the product will be placed and whether to require step therapy. The position of a product on a formulary generally determines the co-payment that a patient will need to make to obtain the product and can strongly influence the adoption of a product by patients and physicians.
Even under U.S. government healthcare programs such as Medicare and Medicaid, coverage and reimbursement policies can vary significantly. Medicare Part D is administered by commercial insurance companies under contract with the CMS. The many Part D plans operated by these companies vary considerably in their coverage and reimbursement policies, much like the commercial plans that these same companies offer, as described above. Medicare Part B and Medicaid coverage and reimbursement rates are more uniform, but even Medicaid programs vary from state to state in their coverage policies and reimbursement rates.
Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Further, from time to time, typically on an annual basis, payment rates are updated and revised by third-party payors. Such updates could impact the demand for our products, to the extent that patients who are prescribed our products, if approved, are not separately reimbursed for the cost of the product.
The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Even if we do obtain adequate levels of reimbursement, third-party payors, such as government or private healthcare insurers, carefully review and increasingly question the coverage of, and challenge the prices charged for, products. Increasingly, third-party payors are requiring that biopharmaceutical companies provide them with predetermined discounts from list prices and are challenging the prices charged for products. We may also be required to conduct expensive pharmacoeconomic studies to justify the coverage and the amount of reimbursement for particular
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medications. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be.
Moreover, coverage policies and third-party payor reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained for one or more products for which we receive marketing approval in one or more indications, less favorable coverage policies and reimbursement rates may be implemented in the future. For instance, even though favorable coverage and reimbursement status has been attained for VYVGART for the treatment of gMG in the U.S., access to VYVGART or for any other indication may be reduced or restricted by limited payer coverage due to treatment criteria, which may prevent us from realizing its full commercial potential. In addition, the coverage and reimbursement levels for our products for the treatment in one indication may have an adverse impact on the coverage and reimbursement levels of such products or product candidates in other indications for which marketing approval has previously been or may subsequently be obtained. Inadequate coverage or reimbursement may diminish or prevent altogether any significant demand for our products and/or may prevent us entirely from entering certain markets or indications, which would prevent us from generating significant revenues or becoming profitable, which would adversely affect our business, financials and results of operations.
In many foreign countries, pricing, coverage, and level of reimbursement of prescription drugs are subject to governmental control, and we and our collaborators may be unable to obtain required regulatory approvals, and therefore will be unablecoverage, pricing, and/or reimbursement on terms that are favorable to us or necessary for us or our collaborators to successfully commercialize our marketed products in those countries. In some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing and reimbursement vary widely from country to country, and may take into account the clinical effectiveness, cost, and service impact of existing, new, and emerging drugs and treatments. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product candidatesor it may instead adopt a system of direct or indirect controls on a timely basis or at all, which will adversely affect our business.
To obtain the requisite regulatory approvals to market and sell anyprofitability of ourthe company placing the medicinal product candidates,on the market. Our results of operations may suffer if we or our collaboratorcollaborators are unable to market our products in foreign countries or if coverage and reimbursement for our marketed products in foreign countries is limited or delayed.
If we fail to obtain orphan drug designation or we do not have valid and enforceable patents covering our products and product candidates and fail to obtain and/or maintain orphan drug exclusivity for our products or product candidates, our competitors may be able to sell products to treat the same conditions and our revenue may be reduced.
Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the U.S., or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the U.S. In the EU, after a recommendation from the EMA’s Committee for Orphan Medicinal Products, the EU Commission grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition either affecting not more than five in 10,000 persons in the EU or when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product. In each case there must be no satisfactory method of diagnosis, prevention or treatment of such condition, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.
In the U.S., orphan drug designation entitles a party to financial incentives such as tax advantages and user fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application submitted by another applicant to market a same or similar biological product for the same indication for a period of seven years, except in limited circumstances. Whether a biological product is the same as another product is based on whether the two products have the same principal molecular structural features. Orphan designation does not, however, truncate the duration of the regulatory review and approval process.
In the EU, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity following drug or biological product approval. This period may be reduced to
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six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. If we fail to obtain or if we lose orphan drug status for one or more of our products and product candidates, the aforementioned incentives and market exclusivity may not or no longer be available to us, which is likely to increase the overall cost of development and to decrease the competitive position of such product and product candidate including from biosimilars. Similar considerations apply in the UK.
We may from time to time seek orphan drug designation in the U.S. or the EU for certain indications addressed by our products and product candidates. For example, in September 2017, the FDA granted orphan drug designation for the use of efgartigimod for gMG, and upon approval of VYVGART, the FDA granted seven years of orphan drug exclusivity for VYVGART for the treatment of gMG in adult patients who are anti-acetylcholine receptor (AChR) antibody positive (AChR-AB+). In July 2022, the FDA granted orphan drug designation for VYVGART HYTRULO, and upon approval of VYVGART HYTRULO, the FDA granted seven years of orphan drug exclusivity for this product for the treatment of gMG in adult patients who are AChR-AB+. In January 2019, the FDA granted orphan drug designation for the use of efgartigimod for the treatment of primary immune thrombocytopenia (ITP) and for the use of cusatuzumab for the treatment of acute myeloid leukemia (AML), and in August 2021, the FDA granted orphan drug designation for the use of efgartigimod co-formulated with recombinant human hyaluronidase PH20 (rHuPH20) for the treatment of chronic inflammatory demyelinating polyneuropathy (CIDP). In June 2020, Japan’s Ministry of Health, Labour and Welfare (MHLW) granted orphan drug designation for the use of efgartigimod for the treatment of gMG and in January 2022, the MHLW granted approval of VYVGART for treatment of gMG. Furthermore, in December 2022, the MHLW granted orphan drug designation for the use of VYVGART for the treatment of ITP. The application for approval of VYVGART for treatment of ITP was filed for the first time, pioneering worldwide, but such approval is expected in the first quarter of 2024. With regard to these designations or future designations we may obtain, we may not be the first to obtain marketing approval of these drugs for such candidatesindication due to the uncertainties associated with developing therapeutic products, and we may not obtain orphan designation upon approval. In addition, exclusive marketing rights in the U.S. may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties or different principal molecular structural features can be approved for the same condition. Even after an orphan drug is approved, the FDA, EMA or other foreign regulator can subsequently approve the same drug with the same principal molecular structural features for the same condition if the regulator concludes that the later drug is safer, more effective, or makes a major contribution to patient care.
Risk Factors Related to Other Government Regulations
We are subject to healthcare laws, regulation and enforcement. The failure to comply with these laws could harm our results, operations and/or financial conditions.
Our current and future operations may be or may become directly, or indirectly through our customers and third-party payors, subject to various U.S. federal and state, EU, Japanese, Chinese, UK, Canadian, Israel and other jurisdictions’ healthcare laws including anti-kickback statutes, anti-bribery, anti-corruption provisions, anti-fraud statutes, false claims acts, including the U.S. federal Anti-Kickback Statute (AKS), the U.S. Federal Food, Drug, and Cosmetic Act (FDCA), False Claims Act and more. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. These laws may impact, among other things, our proposed sales, marketing and education programs and constrain our business and financial arrangements with third-party payors, healthcare professionals who participate in our clinical research programs, healthcare professionals and others who recommend, purchase, or provide our approved products, and other parties through which we market, sell and distribute our products for which we obtain marketing approval.
In addition, our current and future operations are subject to other healthcare-related statutory and regulatory requirements and enforcement by regulatory authorities in jurisdictions in which we conduct our business. For example, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation,
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endorsement, purchase, supply, order or use of medical products is generally not permitted in countries that form part of the EU, or the UK. Some EU Member States have enacted laws explicitly prohibiting the provision of these types of benefits and advantages to induce or reward improper performance generally, and the UK has enacted similar restrictions through the Bribery Act 2010. Infringements of these laws can result in substantial fines and imprisonment, as well as associated reputational harm. We are also subject to EU Directive 2001/83/EC and the Human Medicines Regulations 2012. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
The shifting compliance environment and the need to maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that we or our collaborative partners may run afoul of one or more of the requirements. We continue to expand, enhance and refine our internal ethics and compliance function and program to ensure compliance with the different healthcare laws and regulations. The expansion and maintenance of an internal compliance program involves substantial costs and, notwithstanding our investment, mechanisms put in place to ensure compliance with applicable laws and regulations and our best efforts, the program may not be fully successful as there can be no assurance that our policies and procedures will be followed at all times or will effectively detect and/or prevent all compliance violations by our employees, consultants, subcontractors, agents and partners.
It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative investigations, penalties, damages, fines, disgorgement, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid in the U.S., additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm and the curtailment or restructuring of our operations. Managing such investigations and defending against or appealing any such actions or penalties can be costly and time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in managing any such governmental investigations and/or defending against or appealing any such actions or penalties that may be brought against or imposed upon us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations also involves substantial costs.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time and resource consuming and can divert a company’s attention from the business.
All aspects of our business ranging from preclinical, clinical trials, marketing and commercialization are highly regulated and any delay by relevant regulatory authorities could jeopardize our development and approval process or result in other suspensions, refusals or withdrawal of approvals.
Before we can commence clinical trials for a product candidate, we must demonstrate throughcomplete extensive preclinical studiestesting and clinical trials that support our products are safe, pure and potentinvestigational new drug (IND) or effectiveplanned IND applications in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the U.S. or Japan, or our clinical trial process andapplications (CTAs) in the UK or in the EU, or a comparable application in other jurisdictions. We cannot be sure that we will be able to submit INDs or CTAs or comparable applications for our future clinical trial results may not be successful.
We may experience delays in our ongoing clinical trials andpreclinical programs on the timelines we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule,expect, if at all. We also cannot guarantee that submission of INDs or CTAs or comparable applications will result in the UK Medicines and Healthcare products Regulatory Agency (MHRA), the EMA, the FDA, the MHLW (collectively, the Relevant Regulatory Authorities) or other regulatory authorities allowing clinical trials to even begin.
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Clinical trials canmust be delayed, suspended, or terminated for a varietyconducted in accordance with Relevant Regulatory Authorities and other applicable regulatory authorities’ legal requirements and regulations and are subject to oversight by these governmental agencies and institutional review boards (IRBs) and ethics committees at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted in compliance with good clinical practices (GCPs) and with supplies of reasons, including the following:
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our products and product candidates produced under current good manufacturing practices (cGMPs) and other regulations. We could encounter delays if a clinical trial is suspended or terminated, by us, by the IRBs or ethics committees of the institutions in which such clinical trials are being conducted, or ethics committees, by the Data Review Committee,data review committee or DRC, or Data Safety Monitoring Board, or DSMB,data safety monitoring board for such clinical trial or by the EMA, the FDARelevant Regulatory Authorities or other comparable regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or clinical trial site by the EMA, the FDARelevant Regulatory Authorities or other regulatoryapplicable authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, including those relating to the class to which our products and product candidates belong, failure to demonstrate a benefit from using a drug,the product or product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
If we experience delays in the completion of, or termination of, any clinical trial of our products or product candidates, the costs of our clinical trials may increase, the commercial prospects of our products and product candidates willmay be harmed, and our ability to generate product revenues from any of these products and product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Significant clinical trial delays could also allow our competitors to bring products to market before we do or shorten any periods during which we have the exclusive right to commercialize our products and product candidates.
Moreover, we must obtain separate regulatory approvals in each jurisdiction where we want to market and approval by one regulatory authority does not ensure approval by any other regulatory authority. As approval procedures can vary among countries and may change over time, this can require additional clinical testing and the time required to obtain approval may differ. We can provide no assurances that such approval will be obtained on the timeline that we expect or at all. In addition, we anticipate to submit applications for approval of VYVGART in new indications, but can provide no assurances that such applications will be accepted or that we will receive approval on our anticipated timeline, or at all.
If VYVGART or any new formulations of VYVGART are not approved in one or more jurisdictions including beyond the VYVGART Approved Countries, or if such approvals are significantly delayed, it could have a material adverse effect on our business. It is possible that none of our other existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval in any other jurisdiction or indication.
Further, the Relevant Regulatory Authoritiesmay impose extensive and ongoing unique regulatory requirements. For example, they:
● | may withdraw an approval or revoke a license; |
● | may refuse to grant approval, or may require additional data before granting approval, notwithstanding that approval may have been granted by another comparable foreign authority; |
● | may approve a product candidate for fewer or more limited indications or patient sub-segments than requested; or |
● | may grant approval contingent on the performance of costly post-marketing clinical trials, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate; or |
● | may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. |
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The costs of compliance with all Relevant Regulatory Authorities and applicable authorities regulations, requirements or guidelines could be substantial, and failure to comply could result in sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorization of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly increase our and/or our collaborative partners’ costs or delay the development and commercialization of our product candidates. At this time, we cannot guarantee or know the exact nature, precise timing and detailed costs of the efforts that will be necessary to complete the remainder of the development of our research programs and product candidates.
We are subject to privacy laws, regulation and potential enforcement. Our failure to comply with these laws could harm our results, operations and/or financial conditions.
Privacy laws, regulation and potential enforcement are particularly relevant to our business as we collect, store and process patient data, including sensitive health data as well as human biological samples such as blood or tissue, in the context of our clinical development activities, post-marketing approval monitoring obligations, and associated activities. We also collaborate on a regular basis with third parties where we may seek to use data collected by third parties on our or their behalf, or we may seek to share data collected by us with such third parties to further our research or commercial initiatives.
The EU General Data Protection Regulation (GDPR) imposes a broad range of strict requirements on companies, including with respect to cross-border transfers of personal data. The GDPR allows the imposition of substantial penalties in the event of non-compliance, including fines of up to €10 million or up to 2% of total worldwide annual turnover of the preceding fiscal year for certain comparatively minor offenses, or up to €20 million or up to 4% of total worldwide annual turnover if the preceding fiscal year for more serious offenses. We face uncertainty as to the exact interpretation of the requirements under the GDPR, and we may be unsuccessful in implementing all measures required by data protection authorities or courts in interpretation of the GDPR.
In addition, national laws of EU Member States may partially deviate from the GDPR and impose different obligations from country to country, so that we do not operate in a uniform legal landscape in the EU. Also, in the field of handling genetic data, the GDPR specifically allows EU Member States’ laws to impose additional and more specific requirements or restrictions, and European national laws have historically differed quite substantially in this field, leading to additional uncertainty.
Following its departure from the EU, the UK has maintained in force substantially equivalent provisions to the GDPR (UK GDPR). The UK Government has recently announced reforms to the regime. Similar concerns as those described above apply to our compliance with the UK GDPR and other UK data protection rules.
Privacy laws continue to evolve and expand in Europe. For example, Directive 2002/58/EC of the European Parliament and of the Council of July 12, 2002 (as amended, the e-Privacy Directive) required the EU Member States to implement laws to meet strict privacy requirements related to electronic communications, cookies and online monitoring, and other digital privacy. Violations of these requirements can result in administrative measures, including fines, or criminal sanctions. The EU is in the process of developing a new e-Privacy Regulation to replace the e-Privacy Directive, and the new e-Privacy Regulation may impose additional obligations and risk for our business.
Beyond the EU and UK, privacy and data protection laws and regulations continue to develop and expand around the world, including in other jurisdictions in which we operate, such as the U.S., Japan, and Canada. Such laws and regulations impose increasing restrictions and obligations on the processing of personal data, including sensitive personal data such as genetic data. For example, in the U.S., the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information and new state privacy laws, such as the California Consumer Privacy Act of 2018 (CCPA) and the Washington My Health My Data Act of 2023, impose obligations on covered businesses, including, but not limited to, providing specific disclosures in privacy notices and affording residents certain rights related to their personal data. Additionally, effective as of
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January 1, 2023, the California Privacy Rights Act of 2020 (CPRA) imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. Furthermore, in the U.S., similar laws were enacted in certain states and proposed in numerous others. The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation. If we are investigated by a data protection authority, we may face fines and other penalties. Any such investigation or charges by such data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance, or refusal by clients or pharmaceutical partners to continue to use our products and solutions due to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed on them by certain data protection authorities in interpretation of current law. Such clients or pharmaceutical partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could harm our business, prospects, financial condition and results of operations.
Failure to comply with anti-corruption laws and regulations, anti-money laundering laws and regulations, economic sanctions and/or export control regulations and other laws governing our operations such as in relation to sustainability could have an adverse impact on our business.
We are or may become subject to various laws and regulations regarding anti-corruption, anti-money laundering, economic sanctions, investment restrictions, anti-fraud and export control regulations issued by multiple jurisdictions. These include the UK Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, payments, offers, or promises made for the purpose of improperly influencing any act or decision of a foreign official. The nature of our business means that we engage in significant interactions with foreign officials. We are also subject to economic sanctions and export control rules and regulations imposed by, amongst others, the U.S. Department of the Treasury’s Office of Foreign Assets Control, other agencies of the U.S. government, HM Treasury and other agencies of the UK government, the EU, and the United Nations. Any change in export or import regulations, economic sanctions regulations or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could decrease our ability to manufacture, import, export or sell our products internationally. Any limitation on our ability to manufacture, import, export or sell our products could adversely affect our business.
We have mechanisms in place to ensure compliance with such rules and regulations. However, there can be no assurance that our policies and procedures will be followed at all times or will effectively detect and/or prevent violations of applicable compliance regimes by our employees, consultants, sub-contractors, agents and partners. As a result, in the event of non-compliance, we could be subject to substantial civil or criminal penalties, including economic sanctions against us, incarceration for responsible employees and managers, the possible loss of export or import privileges, reputational harm, and resulting loss of revenue and profits, which could have a material adverse impact on our business, financial conditions and operations.
Moreover, a growing number of investors, regulators, self-regulatory organizations and other stakeholders have expressed an interest in setting Environmental, Social and Governance (ESG) goals and requiring the provision of new and more robust disclosure of steps taken to implement such goals. The related legislative landscape in the EU has been evolving accordingly. For example, on January 5, 2023, Directive (EU) 2022/2464 of the European Parliament and of the Council of December 14, 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (CSRD) came into force. This new directive strengthens the rules on the social and environmental information that companies must report. It expands the scope of companies required to report ESG information and increases the depth of required disclosures. The CSRD also introduces a ‘double materiality’ analysis, which requires companies to report on how sustainability issues might create financial risks for the company and on the company’s own impacts on people and the environment. The CSRD applies to large EU companies, EU parent companies of a “large group” and listed EU small or medium-sized companies. It also applies to non-EU companies that meet certain criteria, including an EU turnover threshold and an EU branch or
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subsidiary. The specific information to be reported is set out in the European Sustainability Reporting Standards (ESRS). Companies subject to the CSRD will have to comply with the reporting requirements on a staggered basis depending on their category. For listed companies that qualify as large EU companies and which are already obliged to publish a non-financial statement, a mandatory sustainability report in accordance with the ESRS will be required for financial years starting on or after January 1, 2024. This means that in 2025, we will have to publish for the first time a sustainability report complying with requirements under the CSRD integrated in our annual report for the financial year 2024. The Dutch government is in the process of implementing the CSRD into Dutch legislation.
This means that in 2025, we will have to publish our first CSRD report covering the prescribed ESG information for the financial year 2024. The Dutch government is in the process of implementing the CSRD into Dutch legislation. In July 2023, a Dutch draft bill to implement certain elements of the CSRD (including the requirements for assurance of CSRD reports and applicability to listed companies) was published and submitted for public consultation, which consultation period ended in September 2023. Additionally, in November 2023, a Dutch draft decree implementing certain elements of the CSRD (including the CSRD disclosure obligations for in-scope companies, assurance rules and implementation timelines) was published and submitted for public consultation, which consultation period ended in December 2023. The Dutch government will need to progress the parliamentary debate and adoption of the aforementioned draft bill and decree in the near future given that the ultimate date for implementation of the CSRD within EU member states at a local level is July 6, 2024.
Similarly, the SEC adopted on March 6, 2024 final rules aimed at enhancing and standardizing climate-related disclosures relating to climate-related risks, Scope 1 and Scope 2 greenhouse gas emissions and climate-related financial metrics (SEC Climate Rules). As a foreign private issuer and large accelerated filer, we will need to begin complying with the disclosure requirements of the SEC Climate Rules in our Form 20-F for the fiscal year ending December 31, 2025, which will include quantitative and qualitative climate-related disclosures.
In response to new ESG initiatives and regulations we may voluntarily elect, or be required, to adopt strategies, policies, or procedures related to ESG matters. Reporting on ESG goals and objectives, including pursuant to the SEC Climate Rules, may cause us to expend significant capital and human resources, and could divert management’s attention from central operational matters. Reports could also lead to the disclosure of information that which may have a negative impact on our operations and reputation which may lead to additional exposure. Failure to accurately comply with any ESG reporting obligations may result in enforcement actions, sanctions, reputational harm or private litigation.
We may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.
Our operations, including our research, development, testing and third-party manufacturing activities, are subject to numerous environmental, health and safety laws and regulations and for which we may become liable.
If we or one of our CMOs or third-party distributors, manufacturers, licensees or co-marketers fail to comply with such laws and regulations, such failure could result in substantial fines, penalties or other sanctions which could also bring significant reputational loss to our business.
We face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of our exposure to hazardous or biological materials. Furthermore, environmental, health and safety laws and regulations are becoming more stringent. Both us and our CMOs may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed, and our financial condition and results of operations may be materially adversely affected
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Risk Factors Related to the Development and Clinical Testing of argenx’s Products and Product Candidates
Failure to successfully identify, select and develop VYVGART in other indications, or additional products or product candidates could impair our ability to grow.
Our long-term growth strategy entails developing and marketing additional products and product candidates, including VYVGART in new indications, which requires substantial resources, whether or not any product candidates or new indications are ultimately identified. The success of this strategy depends partly upon our ability to identify, select, develop, and ultimately, commercialize promising product candidates. We are heavily dependent on precise, accurate and reliable scientific data to identify, select and develop promising product candidates and products. Our business decisions may therefore be adversely influenced by inaccurate, improper or fraudulent scientific data, including data sourced from third parties. Any irregularities in the scientific data used by us to determine our focus in research and development of product and product candidates, could impair our ability to grow. Even with accurate scientific data, our technology platforms may fail to discover and to generate additional products and products candidates, that are suitable for further development.
Even if we identify additional product candidates, they may not be suitable for clinical development as a result of harmful side effects, limited efficacy or other characteristics that indicate that it is unlikely to be a product that will receive approval by the Relevant Regulatory Authorities and other comparable regulatory authorities or achieve market acceptance. For example, in November 2023, we announced that our ADVANCE-SC clinical trial evaluating VYVGART HYTRULO in adults with ITP did not meet the primary endpoint of a sustained platelet count response in chronic ITP patients. Secondary endpoints were also not met. In December 2023, we announced that topline data from the Phase 3 ADDRESS clinical trial evaluating SC efgartigimod in adults with pemphigus vulgaris (PV) and pemphigus foliaceus (PF) showed that the proportion of PV patients achieving the primary endpoint of complete remission on complete remission on minimal dose of steroids (CRmin) was not significantly different between SC efgartigimod and placebo. We consequently decided not to pursue additional development in pemphigus and plan to prioritize clinical development of efgartigimod in its ongoing severe autoimmune indications. If we do not successfully identify, develop and commercialize product candidates and VYVGART in new indications based upon our technological approach, we may not be able to obtain product or collaboration revenues in future periods.
VYVGART has obtained regulatory approval in the VYVGART Approved Countries for the treatment of gMG. Our other products and product candidates – including additional indications or methods of use for efgartigimod, empasiprubart and ARGX-119 – are either in preclinical or clinical development or are pending marketing approval.
To obtain the requisite regulatory approvals to market and sell any of our products and product candidates, we or our collaborators for such candidates must successfully demonstrate that our products are safe and effective in humans. Clinical trials are expensive and can take many years to complete, and their outcome is inherently uncertain. Further, success in early clinical trials or in one indication does not guarantee success in later clinical trials or in other indications.
The time required to obtain approval by the RelevantRegulatoryAuthorities is unpredictable but typically takes many years, if obtained at all, following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion or interpretation of the regulatory authorities. This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market any of our product candidates, including for new indications. We may experience delays in our ongoing or planned clinical trials, for a large variety of reasons outside our control in complying with regulatory approvals which can adversely affect the timing of trials, including as described in Item 3.D. “Risk Factors—Risk Factors Related to Other Government Regulations—All aspects of our business ranging from preclinical, clinical trials, marketing and commercialization are highly regulated and any delay by relevant regulatory authorities could jeopardize our development and approval process or result in other suspensions, refusals or withdrawal of approvals.”
If we are unable to obtain regulatory approval of our products and product candidates on a timely basis or at all, our business may be impacted.
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Our clinical trials have, and may harmin the future, fail, and even if they succeed, we may not obtain regulatory approval for our businessproducts and product candidates or regulatory approval may be delayed.
Even if clinical trials are initiated, our development efforts may not be successful. Many of our clinical trials are blinded, which may cause us to incur significant expenses without any visibility as to the likelihood of successful results. Even if we obtain positive results from preclinical trials or initial clinical trials, we may not achieve the same success in future clinical trials.
Regulatory approval of operations.our products or product candidates may be delayed or refused for many reasons, including:
● | the Relevant Regulatory Authorities may disagree with the design or implementation of our clinical trials; |
● | we may be unable to demonstrate, to the satisfaction of the FDA or comparable foreign regulatory authorities, that our product candidates are safe, pure, potent and effective for any of their proposed indications; |
● | we may be unable to demonstrate our product candidates’ clinical and other benefits outweigh their safety risks; |
● | the FDA may determine that clinical trial results are not generalizable to the U.S. population and/or U.S. medical practice based on the proportion and results of subjects outside of the U.S. where differences in patient management might affect the treatment response. Comparable foreign regulatory authorities may take a similar approach; |
● | the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; |
● | the chemistry, manufacturing and controls information submitted in a marketing application is insufficient; and |
● | the facilities of third-party manufacturers with which we contract for the manufacture of our product candidates are not adequate to support approval of our product candidates. |
Any of these occurrences may harm our business, results of operations and financial condition significantly.
We could also experience operational challenges as we undertake an increasing number of clinical trials, including those conducted in countries outside the EU, UK and the U.S. that may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-EU, non-UK and non-U.S. contract research organizations (CROs), as well as expose us to risks associated with clinical investigators who are unknown to the Relevant Regulatory Authorities, and apply different standards of diagnosis, screening and medical care.
If we experience delays in the completion of, or termination of, any clinical trial of our products or product candidates, our commercial prospects significantly. In addition, manymay be harmed. Any delays in completing our clinical trials may increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates or result in the development of our product candidates being stopped early.
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Clinical trials must be conducted in accordance with the FDA, the EMA and other applicable regulatory authorities’ legal requirements and regulations, and are subject to oversight by these governmental agencies and IRBs at the medical institutions where the clinical trials are conducted or ethics committees. In addition, clinical trials must be conducted with supplies of our product candidates produced under current good manufacturing practices, or cGMP, requirements and other regulations. Furthermore, we rely on CROs and Significant clinical trial sitesdelays could also allow our competitors to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance. We depend on our collaborators and on medical institutions and CROs to conduct our clinical trials in compliance with Good Clinical Practice, or GCP, requirements. To the extent our collaborators or the CROs or investigators fail to enroll participants for our clinical trials, fail to conduct the study to GCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business. In addition, clinical trials that are conducted in countries outside the European Union and the United States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non‑European Union and non‑U.S. CROs, as well as expose us to risks associated with clinical investigators who are unknown to the FDA or the EMA, and different standards of diagnosis, screening and medical care.
Preclinical drug development is uncertain. Some or all of our preclinical programs, such as ARGX‑115, ARGX‑112 and ARGX‑116, may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these product candidates on a timely basis or at all, which would have an adverse effect on our business.
In order to obtain FDA or EMA approvalbring products to market a new biological productbefore we must demonstrate proof of safety, purity and potencydo or efficacy in humans. To meet these requirements we will have to conduct adequate and well‑controlled clinical trials. Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned Investigational New Drug application, or IND, in the United States, or a Clinical Trial Authorization Application, or CTA, in Europe. While we have an IND in effect for ARGX‑113 for the treatment of MG with the FDA, we have not conductedshorten any of our clinical development to date in the United States. We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA or EMA will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of these product candidates. Thus, we cannot be sure that we will be able to submit INDs or CTAs for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or CTAs will result in the FDA or EMA allowing clinical trials to begin.
Conducting preclinical testing is a lengthy, time‑consuming and expensive process. The length of time may vary substantially according to the type, complexity, novelty and intended use of the product candidate, and often can be several years or more per product candidate. Delays associated with product candidates for which we are directly conducting preclinical testing and studies may cause us to incur additional operating expenses. Moreover, we may continue to be affected by delays associated with the preclinical testing and studies of certain product candidates conducted by our potential partners overperiods during which we have no control. The commencementthe exclusive right to commercialize our products and rateproduct candidates.
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Moreover, even if clinical trials do begin for these preclinical programs, our development efforts may not be successful, and clinical trials thatIf we conduct or that third parties conduct on our behalf may not demonstrate sufficient safety, purity and potency or efficacydecide to obtain the requisite regulatory approvalspursue accelerated approval for any of our product candidates, or product candidates employing our technology. Even if we obtain positive results from preclinical studies or initial clinical trials, weit may not achievelead to a faster development or regulatory review or approval process and does not increase the same success in future trials.
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The results of preclinical studies and early‑stage clinical trials oflikelihood that our product candidates will receive marketing approval. If we are unable to obtain approval under an accelerated pathway, we may not be predictive of the results of later‑stage clinical trials. Initial success in our ongoingrequired to conduct additional clinical trials beyond those that we contemplate, which could increase the expense of obtaining, reduce the likelihood of obtaining, and/or delay the timing of obtaining, necessary marketing approvals.
In the future, we may not be indicative of results obtained when these trials are completeddecide to pursue accelerated approval for one or in later stage trials.
Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Furthermore, there can be no assurance that any of our clinical trials will ultimately be successful or support further clinical development of anymore of our product candidates. ThereFor example, under the FDA’s accelerated approval program, the FDA may approve a drug or biological product for a serious or life-threatening disease or condition that provides a meaningful advantage over available therapies based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results inendpoint that can be measured earlier studies, and any such setbacks in our clinical development could have a material adversethan irreversible morbidity or mortality that is reasonably likely to predict an effect on our business and operating results.
Interim, topline and preliminary data from ourirreversible morbidity or mortality or other clinical benefit. For products granted accelerated approval, post-marketing confirmatory clinical trials are required to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. These confirmatory clinical trials must be completed with due diligence, and the FDA may require that the clinical trial be designed, initiated, and/or fully enrolled prior to approval. If we announcewere to pursue accelerated approval for a product candidate for a disease or publish fromcondition, we would do so on the basis that there is no available therapy for that disease or condition. If standard of care were to evolve or if any of our competitors were to receive full approval on the basis of a confirmatory clinical trial for a drug or biological product for a disease or condition for which we are seeking accelerated approval before we receive accelerated approval, the disease or condition may no longer qualify as one for which there is no available therapy, and accelerated approval of our product candidate may not occur.
Moreover, the FDA may withdraw approval of any product candidate approved under the accelerated approval pathway if, for example:
● | the clinical trial or clinical trials required to verify the predicted clinical benefit of our product candidate fail to verify such benefit or do not demonstrate sufficient clinical benefit to justify the risks associated with such product; |
● | other evidence demonstrates that our product candidate is not shown to be safe or effective under the conditions of use; |
● | we fail to conduct any required post-approval trial of our product candidate with due diligence; or |
● | we disseminate false or misleading promotional materials relating to the relevant product candidate. |
Recently, the accelerated approval pathway has come under scrutiny within the FDA and by Congress. The FDA has put increased focus on ensuring that confirmatory studies are conducted with diligence and, ultimately, that such studies confirm the benefit. The recently enacted Food and Drug Omnibus Reform Act (FDORA) includes provisions related to the accelerated approval pathway. Pursuant to FDORA, the FDA is authorized to require a post-approval clinical trial to be underway prior to approval or within a specified time period following approval. FDORA also requires the FDA to time may change as more patient data become availablespecify conditions of any required post-approval clinical trial and are subjectrequires sponsors to audit and verification procedures thatsubmit progress reports for required post-approval studies. In addition, FDORA enables the FDA to initiate enforcement action for the failure to conduct with due diligence a required post-approval clinical trial, including a failure to meet any required conditions specified by the FDA or to submit timely reports.
Failure to obtain accelerated approval for our product candidates could result in material changesa longer time period to commercialization of such product candidate, if any, and could increase the cost of development of such product candidate and harm our competitive position in the final data.marketplace.
From time to time, we may publish interim, topline or preliminary data from our clinical trials. Preliminary and interim data from our clinical trials may change as more patient data become available. Preliminary or interim data from our clinical trials are not necessarily predictive19
Our products and interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues, more patient data become available and we issue our final clinical trial report. Interim, topline and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary and interim data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to the interim data could significantly harm our business prospects.
Our product candidates may have serious adverse, undesirable or unacceptable side effects whichor even cause death, and we or others may delayidentify undesirable or prevent marketing approval. If suchunacceptable side effects are identified during the developmentcaused by VYVGART or any of our products or product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences followingafter they have received marketing approval, if any.approval.
Undesirable side effects that may be caused by our product candidates, or by the combination of our product candidates with other medical products, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive labellabeling or the delay or denial of regulatory approval by the FDA, the EMA or other comparable foreign authorities.Relevant Regulatory Authorities. While our preclinical trials and clinical studiestrials for our product candidates to date show that our product candidates have generally been well tolerated from a risk‑benefitrisk-benefit perspective, the results fromwe have observed adverse events and treatment emergent adverse events (TEAEs) in our clinical trials to date, and we may see additional adverse events and TEAEs in our ongoing and future clinical trials. Such side effects may be more serious than those observed to date, and as a result, our ongoing and future clinical trials may not support this conclusion.
In the single ascending dose part of the Phase 1 clinical trial of ARGX‑113, there were no drug‑ or infusion‑related serious adverse events associated with doses upbe negatively impacted. Moreover, as we seek to 50 mg/kg. The most frequently reported drug‑related adverse events included abnormal white blood cell count, increased C‑reactive protein levels, headache, dizziness and chills. All of these adverse events were mild or moderate and reported only in the two highest dose groups (25 mg/kg and 50 mg/kg). In the multiple ascending dose part of the Phase 1 clinical trial of ARGX‑113, one serious adverse event, hyperventilation, was observed in the multiple ascending dose part. This event, which occurred six days after drug administration, was considered by the clinical investigator as unlikely to be related to ARGX‑113. Some patients had changes to C‑reactive protein levels that were considered clinically significant. The most frequently reported drug‑related adverse events included headache, feeling cold, chills and fatigue, all of which were mild or moderate and reported only in the highest dose group of 25 mg/kg.
In the Phase 2 clinical trial of ARGX‑113 in MG, most adverse events were characterized as mild and not deemed to be drug‑related. Twenty (out of twenty-four) patients reported at least one treatment emergent adverse event, or TEAE, and nearly all were considered as mild (i.e., Grade 1), except for seven patients who experienced a moderate adverse event. No TEAEs Grade 3 or higher were reported. The most frequent TEAEs deemed to be drug‑related per investigator were headache in 25.0% of patients, monocyte count decrease in 16.7% of patients and rhinorrhea in 8.3%
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of patients receiving ARGX‑113, respectively. Herpes zoster (shingles) of moderate intensity was reported in one patient and deemed to be possibly drug‑related by the investigator. One patient in the ARGX‑113 group moved to rescue therapy. No clinically significant laboratory, vital signs and/or electrocardiogram findings were observed. No deaths, serious adverse events or TEAEs leading to discontinuation of treatment were reported during the trial.
In the dose‑escalation part of the Phase 1 part of our Phase 1/2 clinical trial for ARGX‑110 in patients with advanced malignancies expressing CD70, we observed serious adverse events in some patients, including seven patient deaths, of which five deaths were attributed to disease progression, one death was attributed to sepsis and one death was attributed to respiratory failure. None of these deaths were deemed to be drug‑related according to the investigator. In the first two completed safety‑expansion cohorts (one in patients with CD70‑positive solid tumors and one in patients with CD70‑positive hematological tumors), a similar tolerability profile as seen in the dose‑escalation part was observed. Fourteen patient deaths were reported in these cohorts (all at a dose of 5 mg/kg), of which 10 deaths were attributed to disease progression, one death was attributed to aspergillosis, one death was attributed to a fatal pleural hemorrhage, one death was attributed to pneumonia and one death, which was deemed drug‑related by the investigator, occurred in a heavily pre‑treated patient with Waldenstrom Macroglobulinemia and was attributed to sepsis and general condition deterioration. In this context, heavily pre‑treated means having failed multiple lines of prior treatment. In the dose‑escalation part, anti‑drug antibodies were observed in all doses except the 10 mg dose and appeared to be inversely related to the administered dose. In our two completed safety‑expansion cohorts, anti‑drug antibodies were detected.
In a preclinical mouse efficacy model of acute lymphocytic leukemia, or ALL, the administration of an ARGX‑110 variant at higher doses led to the acute death of some animals with high tumor load. The cause of death in this preclinical mouse study has not been determined, although a literature search conducted on our behalf revealed some similarities of this symptomatology with anecdotal reports in ALL patients treated with compounds having antibody‑dependent cell‑mediated cytotoxicity enhanced, or ADCC‑enhanced, Fc regions who experienced a cytokine storm, a potentially fatal immune reaction to immunotherapy. We are not currently evaluating ARGX‑110 for patients with ALL and have no intention of doing so. However, we cannot guarantee that we will not see evidence of cytokine storm or similar adverse events, which could potentially lead to serious life threatening side‑effects or even death, in patients with other forms of cancer, such as those being evaluated in our current Phase 1/2 clinical trial in patients with either AML or high‑risk MDS.
We are conducting one Phase 2 clinical trial in cutaneous T‑cell lymphoma, or CTCL; and one Phase 1/2 clinical trial in AML and high‑risk MDS; and one Phase 1 clinical trial in nasopharyngeal carcinoma. In the Phase 1 safety‑expansion cohorts in patients with CD70‑positive CTCL and in patients with CD70‑positive PTCL and Phase 2 clinical trial in CTCL, one Grade 3 event deemed to be drug‑related was observed in 1 mg/kg and 5 mg/kg doses. No grade 4 drug‑related toxicities were observed among this patient population. In the dose‑escalation part of the Phase 1/2 clinical trial of ARGX‑110 in combination with azacitidine in patients with AML or high‑risk MDS, in the first set of six evaluable patients receiving doses of 1 mg/kg and 3 mg/kg we observed 17 Grade 3 and 4 adverse events in patients receiving the 1 mg/kg dose (one with intermittent cases of thrombocytopenia) and 14 Grade 3 and 4 adverse events in patients receiving the 3 mg/kg dose (one with intermittent cases of anemia). Evaluation of the 10 mg/kg cohort is ongoing, and to date the observed tolerability profile in the 10 mg/kg dose cohort appears to be in line with the lower dose cohorts.
In the dose‑escalation part of the Phase 1 clinical trial for ARGX‑111 in treatment‑refractory patients whose tumors overexpress c‑Met, we observed 19 serious adverse events in 12 patients (four events in two patients at a dose of 0.3 mg/kg, two events in one patient at a dose of 1 mg/kg, seven events in six patients at a dose of 3 mg/kg and six events in three patients at a dose of 10 mg/kg). Except for six events of infusion‑related reactions and one event of bone pain, no drug‑related serious adverse events were observed. Seven patient deaths were reported (one at a dose of 0.3 mg/kg, one at a dose of 1 mg/kg, four at a dose of 3 mg/kg and one at a dose of 10 mg/kg), all of which were due to underlying disease and disease progression and were not deemed to be drug‑related according to the investigator. In the completed safety‑expansion cohort of ARGX‑111 in five treatment‑refractory MET‑amplified cancer patients using a 3 mg/kg dose of ARGX‑111 every two weeks, eight serious adverse events were seen in four of these patients. Except for one case of infusion‑related reaction, none of those were deemed drug‑related according to the investigator. One patient death attributed to disease progression and pneumonia was reported and was not deemed to be drug‑related according to the investigator.
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The results of future clinical studies may show that ourdevelop product candidates, cause undesirableincluding products in new indications, patients may experience new or unacceptable side effects or even death. In such an event, our trials could be suspended or terminated and the FDA, the EMA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug‑relatedmore serious effects. Drug-related side effects could affect patient recruitment, or the ability of enrolled patients to complete the clinical trial, or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly. Further, because allclaims, damage sales of our existing products, result in significant reputational damage for us and our product candidatesdevelopment, and preclinical programs, other than ARGX‑113, are based on our SIMPLE Antibody platform, any adverse safety or efficacy findings related to any product candidate or preclinical program may adversely impactissues including the viabilitydelay of our other product candidates or preclinical programs.
Additionally, if any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects caused by such products,VYVGART or any of our other product candidates after they receive marketing approval, a number of potentially significant negative consequences could result,arise, including:
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| regulatory authorities may withdraw approvals or revoke licenses of such products and require us to take |
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| regulatory authorities may require the addition of labeling statements, specific warnings, or a contraindication or request the issuance of field alerts to physicians and pharmacies; |
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| regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or |
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| we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; |
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| sales of the product may decrease significantly; |
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Any of these events could preventnegatively impact us, our collaborators or our potential future partners from achievingpartners. Further, the Relevant Regulatory Authorities could require a change of label or maintaining market acceptance ofeven revoke the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our products.
We face significant competition for our drug discovery and development efforts, and if we do not compete effectively, our commercial opportunities will be reduced or eliminated. We may not be successful in our efforts to use and expand our SIMPLE Antibody platform, our NHance and ABDEG technologies, or the licensed POTELLIGENT technology, to build a pipeline of product candidates and develop marketable products due to significant competition and technological change,license, which could limit or eliminate the market opportunity forharm our product candidatesreputation and technology platforms.
The market for pharmaceutical products is highly competitive. Our competitors include many established pharmaceutical companies, biotechnology companies, universities and other research or commercial institutions, many of which have substantially greater financial, research and development resources than we have. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and manufacturing pharmaceutical products. Smaller and early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites
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and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our products. The fields in which we operate are characterized by rapid technological change and innovation. There can be no assurance that our competitors are not currently developing, or will not in the future develop, technologies and products that are equally or more effective or are more economically attractive than any of our current or future technology or product. Competing products or technology platforms may gain faster or greater market acceptance than our products or technology platforms and medical advances or rapid technological development by competitors may result in our product candidates or technology platforms becoming non‑competitive or obsolete before we are able to recover our research and development and commercialization expenses. If we, our product candidates or our technology platforms do not compete effectively, it may have a material adverse effect on our business, prospects, financial condition and results of operation.ability to commercialize VYVGART.
Competition in the autoimmune spaceIf our target patient population is intense and involves multiple monoclonal antibodies, other biologics and small molecules either already marketed or in development by many different companies including large pharmaceutical companies such as AbbVie Inc. (Humira/rheumatoid arthritis); Amgen Inc. (Enbrel/rheumatoid arthritis); Biogen, Inc. (Tysabri/multiple sclerosis); GlaxoSmithKline plc (Benlysta/lupus); F. Hoffmann‑La Roche AG, or Roche (Rituxan/often used off label) and Janssen Pharmaceuticals Inc., or Janssen (Remicade/rheumatoid arthritis and Stelara/psoriasis). In some cases, these competitors are also our collaborators. In addition, these and other pharmaceutical companies have monoclonal antibodies or other biologics in clinical development for the treatment of autoimmune diseases. In addition to the current standard of care,smaller than expected, we are aware that Alexion Pharmaceuticals, Inc. has received FDA approval for Soliris for the treatment of adult patients with generalized MG who are anti‑acetylcholine receptor antibody positiveunable to successfully enroll and that GSK; Roche; Novartis AG; CSL Behring; Grifols, S.A.; BioMarin Pharmaceutical Inc.; Curavac and Millennium Pharmaceuticals, Inc., among others, are developing drugs that may have utility for the treatment of MG. We are aware that Rigel Pharmaceuticals, Inc.; Eisai Inc.; Bristol‑Myers Squibb; Shire Immunomedics; Protalex Inc. and others are developing drugs that may have utility for the treatment of ITP. We are aware that Roche and Syntimmune, Inc. and others are developing drugs that may have utility for the treatment of PV. Furthermore, we are aware of competing products specifically targeting FcRn and being developed by UCB S.A.; Momenta, Inc.; Syntimmune, Inc. and Hannal Biotech.
Competition in the leukemia and lymphoma space is intense, with many compounds in clinical trials by large multinational pharmaceutical companies and specialized biotech companies. Rituxan (Roche), Adcetris (Seattle Genetics Inc./Takeda Pharmaceutical Company Ltd), Darzalex (Janssen) and Poteligeo (Kyowa Hakko Kirin Co., Ltd.) are some examples of monoclonal antibodies approved for the treatment of Hodgkin’s lymphoma, non‑Hodgkin’s lymphoma, multiple myeloma or other blood cancers. We are aware of AML drugs recently approved by the FDA, such as Mylotarg (Pfizer), Rydapt (Amgen), Vyxos (Jazz Pharmaceuticals, Inc.) and IDHIFA (Agios, Inc. and Celgene). In addition, we are aware of a number of other companies with development stage programs that may compete with ARGX‑110 in the future. We anticipate that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available.
Similarly, other companies have monoclonal antibody drug discovery platforms that may compete with us in the search for novel therapeutic antibody targets, including Adimab LLC; Merus N.V.; Regeneron Pharmaceuticals Inc.; Xencor Inc.; and MorphoSys AG. We are aware that a product candidate in development by Scholar Rock, Inc. may compete with ARGX‑115 and a product candidate in development by Ionis Pharmaceuticals, Inc. may compete with ARGX‑116, if they are approved.
We depend on enrollment ofretain patients in our clinical trials, for ouror experience significant delays in doing so, we may not realize the full commercial potential of any products or product candidates.
Currently, we mainly develop products or product candidates for the treatment of rare diseases for which the target patient population can be small. If the actual number of patients with these disorders is smaller than we are unable to enrollexpected, we may encounter difficulties in enrolling sufficient patients in our clinical trials, thereby delaying or preventing
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development and approval of our researchproducts or product candidates. Physicians, who are an important source of referral of patients for clinical trials, may also be less familiar with these rare diseases and development effortsmay therefore fail to identify these conditions in their patients and business, financial condition and results of operations could be materially adversely affected.
Identifying and qualifying patientstherefore may not refer them to participate in our clinical trials is critical to our success. trials.
Patient enrollment, a significant factor in the timing of clinical trials, depends on many factors, including the size and nature of the patient population, eligibility criteria for the clinical trial, the proximity of patients to clinical sites, competition for patient recruitment from competing clinical trials, the design of the clinical protocol, the availability of competingeligibility criteria for the clinical trials, the availability of new drugsalternate approved therapies for the indication the clinical trial is investigating, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies. Since someWe compete with other companies to enroll target patient populations, as set forth in Item 3.D. “Risk Factors—Risk Factors Related to Commercialization of argenx’s Products and Product Candidates, Including for New Indications—We face significant competition for our drug discovery and development efforts.” Even if product candidates obtain significant market share for their approved indications, because certain potential target populations are focused on addressing rare diseases and conditions, there are limited patient
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pools from which to draw in order to complete our clinical trials in a timely and cost‑effective manner. For example, the number of patients suffering from each of MG; ITP; PV; T‑cell lymphoma, or TCL; and acute myeloid leukemia, or AML, is small, and has not been established with precision. If the actual number of patients with these disorders is smaller than we anticipate, we may encounter difficultiesnever recoup our investment in enrolling patients in our clinical trials, thereby delaying or preventing development andsuch product candidate without obtaining regulatory approval of our drugfor additional indications for such product candidates.
Even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials.
Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials. In addition, any negative results we may report in clinical trials of our drug candidatecandidates may make it difficult or impossible to recruit and retain patients in other clinical trials of that same drug candidate. Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage; and our product liability insurance may not cover all damages from such claims.
We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently, we have no products that have been approved for commercial sale; however, the current and future use of product candidates by us and our corporate collaborators in clinical trials, and the potential sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies, our corporate collaborators or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates or any prospects for commercialization of our product candidates. Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:
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Although we maintain adequate product liability insurance for our product candidates, it is possible that our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.
The regulatory approval processes of the FDA, the EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA, the EMA and comparable foreign authorities is unpredictable but typically takes many years, if obtained at all, following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amountcertain of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
Our product candidates could fail to receive regulatory approval for many reasons, including the following:
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This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations and prospects. The FDA, the EMA and other comparable foreign authorities have substantial discretion in the approval process, and determining when or whether regulatory approval will be obtained for any of our product candidates. Even if we believe the data collected from clinical trials of our product candidates are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post‑marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
If the FDA, the EMA or a comparable foreign regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post‑marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post‑approval, all of which may result in significant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post‑marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.
Our product candidates are classified as biologics in the United States and, therefore, can only be sold if we obtain a BLA from the FDA. The holder of a BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. The holder of a BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Failure to comply with a BLA or any other ongoing regulatory obligation may result in suspension of approval to manufacture or distribute the relevant product, as well as fines or imprisonment for violations.
If there are changes in the application of legislation, regulations or regulatory policies, or if problems are discovered with a product or our manufacture of a product, or if we or one of our distributors, licensees or co‑marketers fails to comply with regulatory requirements, the regulators could take various actions. These include imposing fines on us, imposing restrictions on the product or its manufacture and requiring us to recall or remove the product from the market. The regulators could also suspend or withdraw our marketing authorizations, requiring us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations.
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Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.
Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the biopharmaceutical industry, in particular for our lead product candidates, our business, financial condition and results of operations could be materially adversely affected.
Risks Related to Commercialization of Our Product Candidates
Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.
In the United States, the European Union and other foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
Among the provisions of the ACA of importance to our potential product candidates are the following:
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There have been legal and political challenges to certain aspects of the ACA. Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal legislation, the future of the ACA remains uncertain. We continue to evaluate how the ACA and recent efforts to repeal and replace or limit the implementation of the ACA will impact our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These new laws may result in additional reductions in Medicare and other healthcare funding. For example, on August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, including without limitation the Bipartisan Budget Act of 2015, will remain in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our customers and accordingly, our financial operations.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. The U.S. Department of Health and Human Services has set a goal of moving 30% of Medicare payments to alternative payment models by 2016 and 50% of Medicare payments into these alternative payment models by the end of 2018. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Further, legislative and regulatory proposals have been made to expand post‑approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition, increased scrutiny by the
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U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post‑marketing conditions and other requirements.
Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third‑party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our current or any future products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever‑increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post‑approval activities and affect our ability to commercialize any products for which we obtain marketing approval. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
We may be subject to healthcare laws, regulation and enforcement. Our failure to comply with these laws could harm our results of operations and financial conditions.
Although we do not currently have any products on the market, our current and future operations may be directly, or indirectly through our customers and third‑party payors, subject to various U.S. federal and state healthcare laws and regulations, including, without limitation, the U.S. federal Anti‑Kickback Statute. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. These laws impact, among other things, our proposed sales, marketing and education programs and constrain our business and financial arrangements and relationships with third‑party payors, healthcare professionals who participate in our clinical research program, healthcare professionals and others who recommend, purchase, or provide our approved products, and other parties through which we market, sell and distribute our products for which we obtain marketing approval. In addition, we may betrials are located in areas subject to patient data privacy and security regulation by both the U.S. federal government and the states in which we conduct our business. Finally, our current and future operations are subject to additional healthcare‑related statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. The laws that may affect our ability to operate include:
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It is possible that governmental authorities will conclude that our business practices may not comply with currentconflict, hostilities or future statutes, regulations or case law involving applicable fraud and abusewar, or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliance with these laws, reputational harm and the curtailment or restructuring of our operations.
The risk of us being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. For example, the definition of the “remuneration” under the federal Anti‑Kickback Statute has been interpreted to include anything of value. Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti‑Kickback Statute is violated.
Additionally, recent healthcare reform legislation has strengthened federal and state healthcare fraud and abuse laws. For example, the ACA amends the intent requirement of the federal Anti‑Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.
If we fail to obtain orphan drug designation or obtain or maintain orphan drug exclusivity for our products, our competitors may sell products to treat the same conditions and our revenue will be reduced.
Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, after a recommendation from the EMA’s Committee for Orphan Medicinal Products, or COMP, the European Commission grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life‑threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life‑threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user‑fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of
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market exclusivity following drug or biological product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
We may from time to time seek orphan drug designation in the United States or Europe for certain indications addressed by our product candidates. For example, in September 2017, the FDA granted orphan drug designation for the use of ARGX‑113 for the treatment of MG. Even if we are able to obtain orphan designation, we may not be the first to obtain marketing approval for such indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan‑designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, the FDA or the EMA can subsequently approve the same drug with the same active moiety for the same condition if the FDA or the EMA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate reimbursement levels and pricing policies. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third‑party payors are essential for most patients to be able to afford products such as our product candidates, assuming approval. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize, and attract additional collaboration partners to invest in the development of our product candidates. Assuming we obtain coverage for a given product by a third‑party payor, the resulting reimbursement payment rates may not be adequate or may require co‑payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
Third‑party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third‑party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third‑party payor may consider our product candidate and other therapies as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidate, pricing of existing drugs may limit the amount we will be able to charge for our product candidate. These payors may deny or revoke the reimbursement status of a given drug product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on products that we may develop.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third‑party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third‑party payors may require pre‑approval of coverage for new or innovative devices or drug therapies before they will reimburse health care providers who use such therapies. It is difficult to predict at this time what third‑party payors will decide with respect to the coverage and reimbursement for our product candidates.
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Obtaining and maintaining reimbursement status is time‑consuming and costly. No uniform policy for coverage and reimbursement for drug products exists among third‑party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time‑consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost‑containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever‑increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post‑approval activities and affect our ability to commercialize any products for which we obtain marketing approval.
Moreover, increasing efforts by governmental and third‑party payors in the European Union, the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
The future commercial success of our product candidates will depend on the degree of market acceptance of our potential products among physicians, patients, healthcare payers and the medical community.
Our product candidates are at varying stages of development and we may never have a product that is commercially successful. To date, we have no product authorized for marketing. Our lead product candidates are in early stages of clinical development. Our lead product candidates will require further clinical investigation, regulatory review, significant marketing efforts and substantial investment before they can provide us with any revenues. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many other companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain regulatory approval for the marketing of their product. Due to the inherent risk in the development of pharmaceutical products, it is probable that not all or none of the product candidates in our portfolio will successfully complete development and be commercialized. We do not expect to be able to commercialize any of our products for a number of years. Furthermore, when available on the market, our products may not achieve an adequate level of acceptance by physicians, patients and the medical community, and we may not become profitable. In addition, efforts to educate the medical community and third‑party payers on the benefits of our products may require significant resources and may never be successful which would prevent us from generating significant revenues or becoming profitable.
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Market acceptance of our future products by physicians, patients and healthcare payers will depend on a number of factors, many of which are beyond our control, including, but not limited to:
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If our product candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to provide a satisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove not to be large enough to allow us to generate significant revenues.
We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize our products on our own or together with suitable collaboration partners.
We do not have a sales or marketing infrastructure and have no experience in the sale or marketing of pharmaceutical products. To achieve commercial success for any approved product, we must develop or acquire a sales and marketing organization, outsource these functions to third parties or enter into collaboration arrangements with third parties.
We may decide to establish our own sales and marketing capabilities and promote our product candidates if and when regulatory approval has been obtained in the major European Union countries and the United States. There are risks involved should we decide to establish our own sales and marketing capabilities or enter into arrangements with third parties to perform these services. Even if we establish sales and marketing capabilities, we may fail to launch our products effectively or to market our products effectively since we have no experience in the sales and marketing of pharmaceutical products. In addition, recruiting and training a sales force is expensive and time consuming and could delay any product launch. In the event that any such launch is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses, and our investment would be lost if we cannot
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retain or reposition our sales and marketing personnel. Factors that may inhibit our efforts to commercialize our products on our own include:
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If we enter into arrangements with third parties to perform sales and marketing services, our product revenues or the profitability of these product revenues to us could be lower than if we were to market and sell any products that we develop ourselves. Such collaborative arrangements may place the commercialization of our products outside of our control and would make us subject to a number of risks including that we may not be able to control the amount or timing of resources that our collaborative partner devotes to our products or that our collaborator’s willingness or ability to complete its obligations, and our obligations under our arrangements may be adversely affected by business combinations or significant changes in our collaborator’s business strategy. In addition, we may not be successful in entering into arrangements with third parties to sell and market our products or may be unable to do so on terms that are favorable to us. Acceptable third parties may fail to devote the necessary resources and attention to sell and market our products effectively.
If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we may not be successful in commercializing our products, which in turn would have a material adverse effect on our business, prospects, financial condition and results of operations.
Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA‑licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12‑year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well‑controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12‑year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non‑biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
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control. See Table of ContentsItem 3.D. “Risk Factors
Risks—Risk Factors Related to Our Businessargenx’s Organization and Industry
Nearly all aspects of our activities are subject to substantial regulation. No assurance can be given that any of our product candidates will fulfill regulatory compliance. Failure to comply with such regulations could result in delays, suspension, refusalsOperations—‘Global geo- and withdrawal of approvals, as well as fines.
The international biopharmaceuticalsocio-political threats and medical technology industry is highly regulated by the FDA, the EMAmacro-economic uncertainty and other comparable foreign authorities and by other national or supra‑national regulatory authorities that impose substantial requirements covering nearly all aspects of our activities notably on research and development, manufacturing, preclinical tests, clinical trials, labeling, marketing, sales, storage, record keeping, promotion and pricing of our product candidates. Such regulation is further subject to regular review by the FDA, the EMA and other comparable foreign authorities which may result in changes in applicable regulation. If we do not comply with one or more of these requirements in a timely manner, or at all, our product development could experience significant delays as a result of the FDA, the EMA or other comparable regulatory authorities recommending non‑approval or restrictions on approval of a product candidate, leading to an inability to successfully commercialize any of our product candidates, which would materially harm our business. Any failure of any of our product candidates in clinical studies or to receive regulatory approval could have a material adverse effect on our business, results of operations and financial condition. If any of our product candidates fails to obtain approval on the basis of any applicable condensed regulatory approval process, this will prevent such product candidate from obtaining approval in a shortened time frame, or at all, resulting in increased expenses which would materially harm our business.
Compliance with requirements laid down by local regulatory authorities is necessary in each country where we, or any of our partners or licensees, conduct said activities in whole or in part. Local regulatory authorities notably include the EMA and the FDA. In order to market our future products in regions such as the European Economic Area, United States of America, Asia Pacific and many other foreign jurisdictions, we must obtain separate regulatory approvals. The approval procedures vary among countries and can require additional clinical testing, and the time required to obtain approval may differ from that required to obtain for example FDA or EMA approval. Moreover, clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA or EMA does not ensure approval by the comparable foreign authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA or EMA.
There can be no assurance that our product candidates will fulfil the criteria required to obtain necessary regulatory approval to access the market. Also, at this time, we cannot guarantee or know the exact nature, precise timing and detailed costs of the efforts that will be necessary to complete the remainder of the development of our research programs and products candidates. Each of the FDA, the EMA and other comparable foreign authorities may impose its own requirements, may discontinue an approval or revoke a license, may refuse to grant approval, or may require additional data before granting approval, notwithstanding that approval may have been granted by the FDA, the EMA or one or more other comparable foreign authority. The FDA, the EMA or other comparable foreign authorities may also approve a product candidate for fewer or more limited indications or patient sub‑segments than requested or may grant approval subject to the performance of post‑marketing studies. The EMA’s, the FDA’s or other regulatory authority’s approval may be delayed, limited or denied for a number of reasons, most of which are beyond our control. Such reasons could include, among others, the production process or site not meeting the applicable requirements for the manufacture of regulated products, or the products not meeting applicable requirements for safety, purity or potency, or efficacy, during the clinical development stage or after marketing. No assurance can be given that clinical trials will be approved the FDA, the EMA or other comparable foreign authorities or that products will be approved for marketing by such regulatory authorities in any pre‑determined indication or intended use. Any of the FDA, the EMA and other comparable foreign authorities may disagree with our interpretation of data submitted for their review.
We and our collaborative partners are, or may become subject to, numerous ongoing other regulatory obligations, such as data protection, environmental, health and safety laws and restrictions on the experimental use of animals. The costs of compliance with such applicable regulations, requirements or guidelines could be substantial, and failure to comply could result in sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorization of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or
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recalls of products, operating restrictions and criminal prosecutions, any of which could significantly increase our or our collaborative partners’ costs or delay the development and commercialization of our product candidates.
Because we are subject to environmental, health and safety laws and regulations, we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities which may adversely affect our business and financial condition.
Our operations, including our research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood‑borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.
As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed and our financial condition and results of operations may be materially adversely affected.
Our employees, independent contractors, principal investigators, CROs, consultants, vendors and collaboration partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants, vendors and collaboration partners may engage in fraudulent conduct or other illegal activities. Misconduct by these parties could include intentional, reckless and negligent conduct or unauthorized activities that violate: (i) the regulations of the FDA, the EMA and other comparable foreign authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad; or (iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self‑dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials or creating fraudulent data in our preclinical studies or clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs, individual imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliance with these laws, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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Our high dependency on public perception of our products may negatively influence the success of these products.
If any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of the safety and quality of our products. We could be adversely affected if we were subject to negative publicity or if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Because of our dependence upon consumer perception, any adverse publicity associated with illness or other adverse effects resulting from patients’ use or misuse of our products or any similar products distributed by other companies could have a material adverse impact on our business, prospects, financial condition and results of operations.
Future adverse events in research into the cancer, inflammation and severe autoimmune diseases that we focus our research efforts on, or the biopharmaceutical industry more generally, could also result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approvals of our products. Any increased scrutiny could delay or increase the costs of obtaining regulatory approval for our product candidates.
Failure to successfully identify, develop and commercialize additional products or product candidates could impair our ability to grow.
Although a substantial amount of our efforts will focus on the continued preclinical and clinical testing and potential approval of our product candidates in our current pipeline, a key element of our long‑term growth strategy is to develop and market additional products and product candidates. Because we have limited financial and managerial resources, research programs to identify product candidates will require substantial additional technical, financial and human resources, whether or not any product candidates are ultimately identified. The success of this strategy depends partly upon our ability to identify, select and develop promising product candidates and products. Our technology platforms may fail to discover and to generate additional product candidates that are suitable for further development. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate may not be suitable for clinical development as a result of its harmful side effects, limited efficacy or other characteristics that indicate that it is unlikely to be a product that will receive approval by the FDA, the EMA and other comparable foreign regulatory authorities and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our technological approach, we may not be able to obtain product or collaboration revenues in future periods, which would adversely affect our business, prospects, financial condition and results of operations.
Our long‑term growth strategy to develop and market additional products and product candidates is heavily dependent on precise, accurate and reliable scientific data to identify, select and develop promising pharmaceutical product candidates and products. Our business decisions may therefore be adversely influenced by improper or fraudulent scientific data sourced from third parties. Any irregularities in the scientific data used by us to determine our focus in research and development of product candidates and products could have a material adverse effect on our business, prospects, financial condition and results of operations.
Service or supply failures, or other failures, business interruptions or other disasters affecting the manufacturing facilities of any party participating in the supply chain would adversely affect our ability to supply our products.
Our product candidates are biologics and require processing steps that are more difficult than those required for most chemical pharmaceuticals. Accordingly, multiple steps are needed to control the manufacturing processes. Problems with these manufacturing processes, even minor deviations from the normal process or from the materials used in the manufacturing process, which may not be detectable by us in a timely manner, could lead to product defects or manufacturing failures, resulting in lot failures, product recalls, product liability claims and insufficient inventory.
Also, certain raw materials or other products necessary for the manufacture and formulation of our product candidates, some of which are difficult to source, are provided by single‑source unaffiliated third‑party suppliers. In addition, we rely on certain third parties to perform filling, finishing, distribution, laboratory testing and other services related to the manufacture of our product candidates, and to supply various raw materials and other products. We would be unable to obtain these raw materials, other products, or services for an indeterminate period of time if any of these
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third parties were to cease or interrupt production or otherwise fail to supply these materials, products, or services to us for any reason, including due to regulatory requirements or actions (including recalls), adverse financial developments at or affecting the supplier, failure by the supplier to comply with cGMPs, contamination, business interruptions, or labor shortages or disputes. In any such circumstances, we may not be able to engage a backup or alternative supplier or service provider in a timely manner or at all. This, in turn, could materially and adversely affect our ability to supply product candidates, whichunforeseen political crises could materially and adversely affect our business and future prospects.
Certain of the raw materials required in the manufacturefinancial performance.’ and the formulation of our product candidates may be derived from biological sources, including mammalian tissues, bovine serum and human serum albumin. There are certain European regulatory restrictions on using these biological source materials. If we are required‘We face risks related to substitute for these sources to comply with European regulatory requirements, our clinical development or commercial activities may be delayed or interrupted.
Our business may be adversely affected as a result of computer system failures.
Any of the internal computer systems belonging to us or our third‑party service providers are vulnerable to damage from computer viruses, unauthorized access, natural disasters terrorism, war and telecommunicationpublic health issues, that could negatively affect our business and electrical failure. Any system failure, accident or security breach that causes interruptions in our own or in third‑party service vendors’ operations could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our or our partners’ regulatory approval efforts and significantly increase our costs in order to recover or reproduce the lost data. To the extent that any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability, our product development programs and competitive position may be adversely affected and the further development of our product candidates may be delayed. Furthermore, we may incur additional costs to remedy the damage caused by these disruptions or security breaches.financial condition.”
RisksRisk Factors Related to Ourargenx’s Dependence on Third Parties
We rely, and expect to continue to rely, on third parties including independent clinical investigators and CROs, to conduct some of our preclinical studiesresearch activities and clinical trials.trials and for parts of the development and commercialization of our existing and future research programs, products and product candidates. If theseour relationships with such third parties doare not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates andsuccessful, our business couldmay be substantially harmed.adversely affected.
We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators, CROs, CMOs and third‑party CROs,other third-party service providers, to assist us in the conduct of certain of our preclinical studiesresearch activities and clinical trials and to monitor and manage data for our ongoing preclinical trials and clinical programs.trials. We relyalso depend on these parties for execution of our preclinical studiescollaborators and on medical institutions and CROs to conduct our research activities and clinical trials in compliance with regulatory and control only certain aspects of their activities.legal requirements, including GCPs or GMPs, our standard operating procedures and our applicable protocols. Nevertheless, we are responsible for ensuring that each of our studiespreclinical trials and clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. We andTo the extent our third party contractors andcollaborators or the CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principalor investigators and trial sites. If we, our investigators or any of our CROs fail to comply with applicable GCPs, the clinical data generated inenroll participants for our clinical trials, may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
Further, these investigators and CROs are not our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any
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product candidates that we develop. In addition, the use of third‑party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated.
Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated.
There is a limited number of third‑party service providers that specialize or have the expertise required to achieve our business objectives. If any of our relationships with these third‑party CROs or clinical investigators terminate, we may not be able to enter into arrangements with alternative CROs or investigators or to do so on commercially reasonable terms. If CROs or clinical investigators do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy ofconduct the clinical data they obtain is compromised duetrial to the failure to adhere to our clinical protocols,GCP standards or in full compliance with legal and regulatory requirements or are delayed for other reasons, oura significant time in the execution of clinical trials, including achieving full enrollment, we may be extended, delayedaffected by increased costs, program delays or terminated and weboth, which may not be able to obtain regulatory approval for or successfully commercializeharm our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.business.
Switching or adding additional CROs (or investigators) involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
We rely and will continue to rely on collaborative partners regarding the development of our research programs and product candidates. If we fail to enter into new strategic relationships our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.
We are, and expect to continue to be, dependent on partnerships with partners and licensees relating to the development and commercialization of our existing and future research programs, products and product candidates. We currently have collaborative research relationships with various pharmaceutical companies such as
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AbbVie, and ShireZai Lab, Genmab A/S (Genmab) and with various academic and research institutions worldwide for the development of product candidates resulting from such collaborations. We also have distribution agreements with Medison, Genpharm and Handok for the distribution of VYVGART. We had, have and will continue to have discussions on potential partnering opportunities with various pharmaceutical companies. If we fail to enter into or maintain collaborations on reasonable terms or at all, our ability to develop our existing or future research programs and product candidates and to commercialize our existing or future products could be delayed, the commercial potential of our products could change and our costs of development and commercialization could increase.
While we have agreements governing our relationships with these third parties, we have limited influence over their actual performance and control only certain aspects of their activities. If independent investigators, third-party service providers or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop. In addition, regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we, our investigators or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the Relevant Regulatory Authoritiesor comparable regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Upon inspection by a given regulatory authority, such regulatory authority may determine that our clinical trials do not fully comply with GCP regulations, which may require us to repeat clinical trials and delay the regulatory approval process. Our dependence on collaborative partners subjectsmay not adhere or terminate collaboration agreements with all associated consequences or disagree on the interpretation of contractual terms. We may not be able to control our collaborative partners’ compliance with all applicable requirements for the commercialization of our products, which could adversely affect such commercialization and the profitability of such products. Failures by our collaborative partners to meet their contractual, regulatory, or other obligations to us toor any disruption in the relationships between us and our collaborative partners, could have a number of risks, including, but not limited to, the following:material adverse effect on our product pipeline and business.
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We face significant competition in seekingestablishing successful relationships with third-party service providers and appropriate collaborative partners. These third-party service providers may have contractual relationships with other entities, some of which may be our competitors, which may draw their time and resources away from our programs. In addition, some of our third-party service providers or CROs have the ability to terminate their respective agreements with us, and if such agreements terminate, we may not be able to enter into arrangements with alternative CROs or investigators or to do so on commercially reasonable terms. In addition, we may not be able to find appropriate collaboration partners. Our ability to reach a definitive agreement for a partnership will depend, among other things, upon an assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed partnership and the proposed collaborator’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of regulatory approval, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership regardless of the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a partnership could be more attractive than the one with us.
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We relyDisruptions caused by our reliance on third parties for our manufacturing process may delay or disrupt our business, product development and commercialization efforts.
We do not have the ability to supply and manufactureinternally source the raw materials necessary to produce our products or product candidates, and we expect to continue to rely on third parties to manufacture our products, if approved. The development of such product candidates and the commercialization of any products, if approved, could be stopped, delayed or made less profitable if any such third party fails to provide us with sufficient quantities of product candidates or products or fails to do so at acceptable quality levels or prices or fails to maintain or achieve satisfactory regulatory compliance
We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our products or product candidates and depend on a worldwide supply chain and third parties for use in the conductboth. Disruptions caused by our reliance on such third-party suppliers, service providers and manufacturers may delay or disrupt our business, product development and commercialization efforts.
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Reliance on Third-Party Suppliers and Service Providers
For some of our clinical studies or for commercial supply, if our products are approved. Instead,raw materials, we rely on a single source of supply and expect to continue to rely on contract manufacturing organizations, or CMOs. We currently rely mainly on Lonza Sales AG, or Lonza, based in Slough, UK and Singapore for the manufacturingthere are limited supplies of the drug substance of all our products and the production cell line POTELLIGENT CHOK1SV jointly owned by Lonza and BioWa, Inc. for clinical and commercial scale production of ADCC enhanced antibody products. Reliance on third‑party providers may expose us to more risk than if we were to manufacture our product candidates ourselves. We do not control the manufacturing processes of the CMOs we contract with and are dependent on those third parties for the production of our product candidates in accordance with relevant regulations (such as cGMP), which includes, among other things, quality control, quality assurance and the maintenance of records and documentation.
raw materials. If we were to experience an unexpected loss of supply of or if any supplier werewas unable to meet our demand for any of our products and product candidates, including for example if VYVGART is approved for additional indications, we could experience delays in our research or planned clinical studiestrials or commercialization. Werisk shortages in commercial supply which could materially impact our revenue potential. These issues could be unablemade worse during a pandemic or due to find alternative suppliersgeopolitical events, including trade disputes or economic sanctions enacted as a result of acceptable quality,international conflict.
Additionally, certain of the raw materials required in the appropriate volumesmanufacture and at an acceptable cost. Moreover,the formulation of our suppliersproducts and product candidates may be derived from biological sources, including mammalian tissues, bovine serum and human serum albumin. There are often subject to strict manufacturing requirements andcertain European regulatory restrictions on using these biological source materials including rigorous testing requirements, which could limit or delay production. The long transition periods necessaryIf there are changes in the regulation requirements that our suppliers are unable to switch manufacturers and suppliers, if necessary, would significantly delaymeet, our clinical studiesdevelopment or commercial activities may be delayed or interrupted.
We may not be able to engage a back-up or alternative supplier or service provider in a timely manner or at all if any of these third parties were to cease or interrupt production or otherwise fail to supply these materials, products, or services to us for any reasons, including due to regulatory requirements or actions (including recalls), adverse financial developments at or affecting the supplier, failure by the supplier to comply with cGMPs, contamination, business interruptions, or labor shortages or disputes. Interruptions in the supply of these materials, products or services may also result from international conflict, trade disputes or economic sanctions enacted by, or imposed on, the U.S., the UK, the EU or any other country or region.
Reliance on Third-Party Manufacturing
We rely on and expect to continue to rely on CMOs.We also rely on certain third parties to perform filling, finishing, distribution, laboratory testing and other services related to the commercializationmanufacture of our products if approved, which would materially adversely affect our business, prospects, financial condition and results of operation.product candidates.
In complying withAlthough we do not control the manufacturing process at our CMOs and are completely dependent on them for the production of our products and product candidates in accordance with relevant regulations (such as cGMPs), we are responsible for ensuring that our products comply with regulatory requirements. If our CMOs cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, the EMA and other comparable foreign authorities, we and our third‑party suppliers must spend significant time, money and effort in the areas of design and development, testing, production, record‑keeping and quality control to assure that the products meet applicable specifications and other regulatory requirements. The failure to comply with these requirements could result in an enforcement action against us, including the seizure of products and shutting down of production. We and any of these third‑party suppliers may also be subject to audits by the FDA, the EMA Relevant Regulatory Authoritiesor other comparable foreign authorities. If anyregulatory authorities, our business could be adversely affected in a number of ways, including an inability to initiate or continue clinical trials of product candidates under development, delay in submitting regulatory applications, or receiving regulatory approvals for product candidates, including new indications, subjecting third-party manufacturing facilities to additional inspections by regulatory authorities, requirements to cease distribution or to recall batches of our third‑party suppliers failsproducts or product candidates and an inability to complymeet commercial demands for our marketed products.
We contract with cGMPLonza Sales AG (Lonza) based in Slough, UK, Portsmouth, U.S, Singapore and Visp, Switzerland and FUJIFILM Diosynth Biotechnologies Denmark ApS (Fujifilm) based in Denmark for activities relating to the development of cell banks, development of our manufacturing processes and the manufacturing of drug substance, and use additional contract manufacturers to fill, test, label, package, store and distribute our (investigational) drug products. Our products and product candidates are biologics and require multiple processing steps that are more difficult than those required for most small molecule chemical pharmaceuticals. Problems with these manufacturing processes, such as capacity issues, or other applicableeven minor deviations from the normal process or from the materials used in the manufacturing regulations, our abilityprocess, which may not be detectable by us in a timely manner, could lead to developmanufacturing failures or product defects, resulting in lot failures, product recalls, product liability claims and commercialize the products could suffer significant interruptions. insufficient inventory.
We face risks inherent in relying on a single CMO,limited CMOs, as any failure in their ability to successfully manufacture our products or product candidates as described above or any disruption, such as a fire, pandemic, natural hazards or vandalism at the CMO could significantly interrupt our manufacturing capability. We currently do not have alternativeAlternative production plans in place or disaster‑recoverydisaster-recovery facilities available.available to us may not be sufficient. In case of a disruption, we willmay have to establish
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additional alternative manufacturing sources. This would require substantial capitalinvestment on our part, which we may not be able to obtain on commercially acceptable terms or at all. Additionally, we would likelymay experience months ofsignificant manufacturing delays as we build or locate replacement facilities and seek and obtain necessary regulatory approvals. If this occurs, we will be unable to satisfy manufacturing needs on a timely basis, if at all. Also, operating any new facilities may be more expensive than operating at our current facility.facilities. Further, business interruption insurance may not adequately compensate us for any losses that may occur, and we would have to bear the additional cost of any disruption. For these reasons, a significant disruptive event of the manufacturing facility could have drastic consequences, including placing our financial stability at risk.
Accuracy and timing of our financial reporting is partially dependent on information received from third-party partners, which we do not control.
We have collaborated, and plan to continue to collaborate, with third parties, including distributor and licensing partners, on certain product candidates. As part of some of these collaborations, our collaboration partners are responsible for providing us with financial information regarding specific projects, including funds spent, liabilities incurred and expected future costs, on which we rely for our own financial reporting. If our collaboration partners fail to provide us with the necessary financial information within the agreed upon timeframes, or if such financial information proves inaccurate, it would adversely impact the timing and accuracy of our own financial reporting. Any inaccuracy in our financial reporting could cause investors to lose confidence in our financial reporting. This in turn may lead to reputational damage or affect our ability to obtain, and the terms of, any future financing, which may harm our business.
We and our third-party manufacturers and suppliers may become exposed to liability, fines, penalties or other sanctions and substantial expenses in connection with environmental compliance or remediation activities.
Our third-party manufacturers and suppliers operations, including research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, laboratory procedures and exposure to pathogens. We do not have control over our manufacturers’ or suppliers’ compliance with environmental, health and safety laws and regulations. If we, or they fail to comply with such laws and regulations, we could be subject to liability, fines, penalties or other sanctions and incur substantial expenses to comply or remediate the activities.
We face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed, and our financial condition and results of operations may be materially adversely affected.
Risk Factors Related to argenx’s Business and Industry
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, or insider trading violations, which could significantly harm our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with governmental regulations, comply with healthcare fraud and abuse and anti-kickback laws and regulations in the U.S. and other markets, or failure to report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of material information, including improper trading based upon, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We maintain a global compliance program and remain focused on its evolution and enhancement. Our program includes efforts such as risk assessment and monitoring, fostering a culture encouraging employees and third parties to raise good
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faith questions or concerns, and defined processes and systems for reviewing and remediating allegations and identified potential concerns. It is not always possible, however, to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
We may become exposed to costly and damaging liability claims.
We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products and marketing of human therapeutic products. The manufacturingcurrent and future use of allproducts and product candidates by us and our collaborators in clinical trials and the sale of any approved products may further expose us to liability claims. If any of our products or product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies, physicians, payors, caregivers, investors, employees, government agencies, or our collaborators or others selling such products. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our products and product candidates or any prospects for commercialization of our products and product candidates. Any such claims, regardless of their merit, could also adversely affect our reputation and the trust that physician and patients place in our products. Product liability risk in the EU is likely to increase in the future if plaintiff-friendly reforms to the current EU legislation, which are currently at an advanced stage of the EU legislative process, are formally adopted.
Regardless of the merits or eventual outcome litigation or liability claims may result in:
● | decreased demand for our products due to negative public perception; |
● | damage to our reputation; |
● | withdrawal of clinical trial participants or difficulties in recruiting new clinical trial participants; |
● | initiation of investigations by regulators; |
● | costs to defend or settle the related litigation; |
● | a diversion of management’s time and our resources; |
● | substantial monetary awards to clinical trial participants or patients; |
● | product recalls, withdrawals or labeling, marketing or promotional restrictions; |
● | loss of revenues from product sales; and |
● | the inability to successfully commercialize VYVGART and any of our other product candidates, if approved. |
Although we maintain product liability insurance, we may not be able to maintain insurance coverage at a reasonable cost or to obtain adequate insurance coverage to satisfy any liability that may arise. Product liability claims could delay or prevent completion of our clinical development programs. In addition, claims made by patients, healthcare professionals or others might not be fully covered by product liability insurance and could result in investigations of the safety of our products or product candidates or may result in recalls. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may
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not be sufficient to cover such claims and our business, financial condition and results of operations would be adversely affected.
We may engage in strategic transactions, including acquisitions, collaborations, licenses or investments in other companies or technologies, and we may not realize the benefits of such transactions.
We may enter into strategic transactions, including acquisitions, collaborations, licenses or investments for or in other companies or technologies that complement or augment our existing business and facilitate our access to new products, research projects or geographical areas. However, we may not be able to identify appropriate targets or enter into such transactions under satisfactory conditions. In addition, we may need additional funding to finance these transactions including through issuances of public or private equity or convertible debt securities, which could be dilutive to our shareholders and ADS holders.
Integrating any newly acquired companies, business, technologies or products could be expensive, time-consuming, and may never be successful. Integration efforts often take a significant amount of time, place a significant strain on managerial, operational and financial resources, result in loss of key personnel and could prove to be more difficult or expensive than we predict. The diversion of our management’s attention and any delay or difficulties encountered in connection with any future transactions we may consummate could result in the disruption of our ongoing business or inconsistencies in standards and controls that could negatively affect our ability to maintain third-party relationships. We cannot assure that we will achieve the expected synergies to justify any such transaction, which could have a material adverse effect on our business, financial condition, results of operations and future growth prospects and our investors’ ability to realize on their investment.
Our business and operations could suffer in the event of system failures or unauthorized or inappropriate use of or access to our systems.
We are increasingly dependent on our information technology systems and infrastructure for our business. We collect, store and transmit sensitive information including intellectual property, proprietary business information, including highly sensitive clinical trial data, and personal data in connection with business operations. The secure maintenance of this information is critical to our operations and business strategy. Some of this information could be an attractive target of criminal attack or unauthorized access and use by third parties with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” patient groups, disgruntled current or former employees and others. Cyber-attacks are of ever-increasing levels of sophistication, and despite our security measures, our information technology and infrastructure may be vulnerable to such attacks or may be breached, including due to employee error or malfeasance.
The pervasiveness of cybersecurity incidents in general and the risks of cyber-crime are complex and continue to evolve. Although we are making significant efforts to maintain the security and integrity of our information systems and are exploring various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage or interruption from computer viruses, unauthorized or inappropriate access or use, natural disasters, pandemics, terrorism, war (including the ongoing conflict in Ukraine and the ongoing conflict in Israel and the Gaza Strip), and telecommunication and electrical failures. Such events could cause interruption of our operations. For example, the loss of pre-clinical trial data or data from completed or ongoing clinical trials for our product candidates could result in delays in our regulatory filings and development efforts, as well as delays in the commercialization of our products, and significantly increase our costs. To the extent that any disruption, security breach or unauthorized or inappropriate use or access to our systems were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, including but not limited to patient, employee or vendor information, we could incur notification obligations to affected individuals and government agencies, liability, including potential lawsuits from patients, collaborators, employees, stockholders or other third parties and liability under foreign, federal and state laws that protect the privacy and security of personal data, and the development and potential commercialization of our product candidates requires using cells whichcould be delayed.
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We are stored in a cell bank. highly dependent on public perception of our products.
We have one master cell bank for each product manufactured in accordance with cGMP. Working cell banks have not yet been manufactured. Half of each master cell bank is stored at a separate site so that in case of a catastrophic event at one site we believe sufficient vialsare highly dependent upon consumer perceptions of the master cell banks are left at the alternative storage site to continue manufacturing.safety and quality of our products. We believe sufficient working cell banks could be producedadversely affected if we, or any of our collaborators, are subject to negative publicity or if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to patients, or for example, be deemed cruel to animals. Because of our dependence upon consumer perception, any adverse publicity associated with illness or other adverse effects resulting from the vialspatients’ use or misuse of the master cell bank stored atour products or any similar products distributed by other companies could have a given site to assure product supply for the future. However, it is possible that we could lose multiple cell banks and have our manufacturing significantly impacted by the need to replace these cell banks, which could materially adversely affectmaterial adverse impact on our business, prospects, financial condition and results of operations.
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RisksRisk Factors Related to argenx’s Intellectual Property
We rely on patents and otherFailure to adequately enforce or protect our intellectual property rights to protect ourin products, product candidates and the SIMPLE Antibody, NHance and ABDEG platform technologies the enforcement, defense and maintenance of which may be challenging and costly. Failure to enforce or protect these rights adequately could harmadversely affect our ability to competemaximize the value for patients in our marketed products and impair our business.product candidates.
Our commercial success depends in part on obtaining and maintaining patents and other forms of intellectual property rights for our products, product candidates methods used to manufacture those products and the methods for treating patients using those products, or on licensing in such rights.platform technologies. Failure to protect or to obtain, maintain or extend adequate patent and other intellectual property rights, which may be challenging and costly, could materially adversely affect our ability to develop and market our products and product candidates.candidates and erode or negate any competitive advantage we may have.
We cannot be certain that patents will be issued or granted with respect to applications that are currently pending, or that issued or granted patents will not later be found to be invalid or enforceable. The patent position of biopharmaceutical companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the European Patent Office, the United States Patent and Trademark Office, or USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biopharmaceutical patents. Consequently, patents may not issue from our pending patent applications. As such, we do not know the degree of future protection that we will have on our proprietary products and technology.pending. The scope of patent protection that the European Patent Office and the U.S. Patent and the U.S. Patent and Trademark Office (USPTO) will grant with respect to the antibodies in our antibodies product pipeline is uncertain.uncertain and may vary by jurisdiction. It is possible that the European Patent Office and the USPTO will not allow broad antibody claims that cover antibodies closely related to our products and product candidates as well as the specific antibody. As a result, upon receipt of EMA or FDA approval, competitors may be free to market antibodiesmolecules almost identical to ours including biosimilar antibodies, therebyif those competitors elected to engage and invest in a full clinical development program to establish the safety and efficacy of their molecule and secure that approval. If that would happen, then there is a risk of decreasing our market share. However, a competitor cannot submit to the FDA an application for a biosimilar product based on one of our products until four years following the date of approval of our “reference product,” and the FDA may not approve such a biosimilar product until 12 years from the date on which the reference product was approved. See the section of this annual report titled “Item 4.—Business—Government Regulation—Licensure and Regulation of Biologics in the United States—Biosimilars and Exclusivity” for more details regarding biosimilar regulatory exclusivities.potential.
The patent prosecution process is expensive and time‑consuming, and weWe and our current or future licensors, licensees or collaboration partners may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors, licensees or collaboration partners will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Further, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’, licensees’ or collaboration partners’ patent rights are highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued that protect our technology or products, in whole or in part, or that effectively prevent others from commercializing competitive technologies and products. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, or we may need to enter into new license or royalty agreements, covering technology that we license from or license to third parties or have developed in collaboration with our collaboration partners and are reliantrely on patent procurement activities of our licensors, licensees or collaboration partners. Therefore, these patents and applicationspartners or obtain additional costly licenses. Such parties may not be prosecuted and enforced in a manner consistentfully comply with the best interests of our business. If our current or future licensors, licensees or collaboration partners fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors, licensees or collaboration partners are not fully cooperativeapplicable patent rules or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. The patent examination process may require us or our licensors, licensees or collaboration partners to narrow the scope of the claims of our or our licensors’, licensees’ or collaboration partners’ pending and future patent applications, which may limit the scope of patent protection that may be obtained. We cannot assure you that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application.rights. Even if patents do successfully issue and even if such
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patents cover our products and product candidates, third parties may initiate an opposition, interference, re‑examination, post‑grant review, inter partes review, nullification or derivation action in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated. Our and our licensors’, licensees’ or collaboration partners’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology.
BecauseFurthermore, because patent applications are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to a product and product candidate. Furthermore, as to the United States, if third parties have filed such patent applications on or before March 15, 2013, an interference proceeding can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such applications after March 15, 2013, a derivation proceeding can be initiated by such third parties to determine whether our invention was derived from theirs. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing our invention where the other party can show that they used the invention in commerce before our filing date, or if the other party is able to obtain a compulsory license. In addition, after expiry of our regulatory exclusivities, we may not have a patent position to enforce if a biosimilar presents a ‘skinny label’ and introduces a product into commerce for unpatented uses, doses, and other important patient innovations described in our product labels. Any of the aforementioned situations could cause harm to our ability to protect our intellectual property, which in turn would allow competitors to market comparable products which could materially adversely affect our competitive position and as such our business, financial condition and results of operation.
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We enjoy only limited geographical protection with respect to certain patents and may face difficulties in certain jurisdictions. We often file our first patent application (i.e., priority filing) at the UK Intellectual Property Office, the European Patent Office or the USPTO. International applications under the Patent Cooperation Treaty are usually filed within 12 months after the priority filing. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. If we fail to timely file a patent application in any such country or major market, we may be precluded from doing so at a later date. In addition, the grant proceeding of each national/regional patent may lead to situations in which applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. Furthermore, competitors may use our and our licensors’ or collaboration partners’ technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors or collaboration partners have patent protection, but enforcement is not as strong as that in the U.S., UK and the EU. Finally, some countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties, and other countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
Issued patents covering one or more of our products or the SIMPLE Antibody, NHance and ABDEG platform technologies could be found invalid or unenforceable if challenged in the applicable patent office or court.
Once granted, patents may remain open to invalidity challenges after allowance or grant, where third parties can raise objections against such granted patent. In the course of such proceedings, the patent owner may be compelled to limit the scope of the allowed or granted claims thus challenged or may lose the allowed or granted claims altogether.
To protect our competitive position, we may from time to time need to resort to litigationadversarial proceedings in order to enforce or defend any patents or other intellectual property rights owned by or licensed to us, or to determine or challenge the scope or validity of patents or other intellectual property rights of third parties. Enforcement of intellectual property rights is difficult, unpredictable and expensive, and many of our or our licensors’ or collaboration partners’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaboration partners can. Accordingly, despite our or our licensors’ or collaboration partners’ efforts, we or our licensors or collaboration partners may not prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect those rights as fully as in the European Union and the United States. We may fail in enforcing our rights—in which case our competitors may be permitted to use our technology without being required to pay us any license fees. In addition, however, litigationadversarial proceedings involving our patents carries the risk that one or more of our patents will be held invalid (in whole or in part, on a claim‑by‑claim basis) or held unenforceable. Such an adverse court ruling could allow third parties to commercialize our products immediately after the expiration of our regulatory protection or use our SIMPLE Antibody, NHance and ABDEG platform technologies, and then compete directly with us, without payment to us.
If we wereWe may be subject to initiate legal proceedings against a third party to enforce a patent covering oneclaims challenging the inventorship or ownership of our products, the defendant could counterclaimintellectual property or be required to make additional payments to secure intellectual property from collaborators.
Many of our consultants and employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these consultants and employees executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our patentconsultants and employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these consultants and employees have used or disclosed confidential information or intellectual property of any such consultant’s or employee’s former employer or have breached their non-competition agreement. Additionally, many of our collaborators do not commit to assigning all intellectual property arising out of the collaboration to us and, instead, grant us options to acquire intellectual property or commit to making such intellectual property available to us at a fair price. As such, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our products and product candidates.
In addition, while it is invalid or unenforceable. In patent litigationour policy to require our employees and contractors who may be involved in the United States or in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. A claim for a validity challengedevelopment of intellectual property to execute agreements assigning such intellectual property to us, we may be based on failureunsuccessful in executing such an agreement with such party. Our and their assignment agreements may not be self-executing or may be breached and we may be forced to meet anybring claims against third parties or defend claims they may bring against us to determine the ownership of several statutory requirements, for example, lack of novelty, obviousness or non‑enablement. A claim for unenforceability could involve an allegation that someone connected with prosecution of the patent withheld relevant information from the European Patent Office or the USPTO or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example,what we cannot be certain that thereregard as our intellectual property.
There is no invalidating prior art, ofguarantee we will be successful in defending such claims, which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our SIMPLE Antibody, NHance and ABDEG platform technologies. Such a loss of patent protection could have a material adverse impact on our business. Further, litigation could result in substantial costs and diversion of management resources, regardless of the outcome, and this could harm our business and financial results. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patentsus paying monetary damages, or otherlose valuable personnel or intellectual property rights.
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IntellectualThird-party intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, such that we could be required to litigate or obtain licenses from third parties in order to develop or market ourproducts and product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.
Our competitive position may suffer if patents issued to third parties or other third‑partythird-party intellectual property rights cover our products or elements thereof,product candidates or our manufacture or uses relevant to our development plans, the targets of our product candidates, or other attributes of our product candidates or our technology.plans. In such cases, we may not be in a position to develop or commercialize products or product candidates unless we secure a license, design around, or successfully pursue litigationcostly and time-consuming proceedings to nullify or invalidate the third‑partythird-party intellectual property right concerned or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. We are aware of certain U.S. issued patents held by third parties that some may argue cover certain aspects of our product candidates, including ARGX‑110 and ARGX‑111. The patent relating to ARGX‑110 is scheduled to expire in 2026, and the patents relating to ARGX‑111 are scheduled to expire between 2024 and 2032. In the event that a patent has not expired at the time of approval of such product candidate and the patent owner were to bring an infringement action against us, we may have to argue that our product, its manufacture or use does not infringe a valid claim of the patent in question. Alternatively, ifholder. If we were to challenge the validity of any issued U.S. patent in court, we would need to overcome a statutory presumption of validity that attaches to every U.S. patent. This means that in order to prevail, we would need to present clear and convincing evidence as to the invalidity of the patent’s claims. There is no assurance that a court would find in our favor on questions of infringement or validity. In the event that a patent is successfully asserted against us such that the patent is found to be valid and enforceable and infringed by our product, unless we obtain a license to such a patent, which may not be available on commercially reasonable terms or at all, we could be prevented from continuing to develop or commercialize our product. Similarly, the targets for certain of our product candidates have also been the subject of research by other companies which have filed patent applications or have patents on aspectsthe targets for certain of the targetsour products or their uses. There can be no assurance any such patents will not be asserted against us or that we will not need to seek licenses from such third parties. We may not be able to secure such licenses on acceptable terms, if at all, and any such litigation would be costly and time‑consuming.
It is also possible that we failed to identifyare unaware of relevant patents or applications. For example, certain U.S. applications filed after November 29, 2000 that will not be filed outside the United States may remain confidential until patents issue.or of relevant scientific discoveries. In general, patent applications in the United StatesU.S. and elsewhere are published approximately 18 months after the earliest filing from which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Additionally, publications of discoveries in scientific literature often lag behind the actual discoveries. Therefore, patent applications covering our products, product candidates or platform technology could have been filed by others and relevant discoveries may have been made without our knowledge. Furthermore, we operate in a highly competitive field, and given our limited resources, it is unreasonable to monitor all patent applications purporting to gain broad coverage in the areas in which we are active. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our products or the use of our products.platform technologies.
Third‑partyThird-party intellectual property right holders, including our competitors, may actively bring infringement claims against us. The granting of orphan drug status in respect of any of our product candidates does not guarantee our freedom to operate and is separate from our risk of possible infringement of third parties’ intellectual property rights. Weus that we may not be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage or continue costly, unpredictable and time‑consuming litigation and may be prevented from or experience substantial delays in marketing our products.resolve.
If we fail in any such dispute, in addition to being forced to pay damages, we or our licensees may be temporarily or permanently prohibited from commercializing any of our products and product candidates that are held to be infringing.infringing for the remaining term of any valid and enforceable patents. We might, if possible, also be forced to redesign products and product candidates so that we no longer infringe the third‑partythird-party intellectual property rights. Or, weWe may be required to seek a license to any such technology that we are found to infringe, which license may not be available on commercially reasonable terms, or at all. Even if we or our licensors or collaboration partners obtain a license, it may be non‑exclusive (for example, the POTELLIGENT platform),non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaboration partners. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. Any of these events, even if we were to ultimately prevail, could
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require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
In addition, if the breadth or strength of protection provided by our or our licensors’ or collaboration partners’ patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or futureproducts and product candidates. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Our ability to compete may be adversely affected if we are unsuccessful in defending against any claims by competitors or others that we are infringing upon their intellectual property rights.
The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, companies producing therapeutics to treat and potentially cure cancer have employed intellectual property litigation as a means to gain an advantage over their competitors. As a result, we may be required to defend against claims of intellectual property infringement that may be asserted by our competitors against us and, if the outcome of any such litigation is adverse to us, it may affect our ability to compete effectively.
Our involvement in litigation, and in, e.g., any interference, derivation, reexamination, inter partes review, opposition or post‑grant proceedings or other intellectual property proceedings inside and outside of the European Union or the United States may divert management time from focusing on business operations, could cause us to spend significant amounts of money and may have no guarantee of success. Any current and potential intellectual property litigation also could force us to do one or more of the following:
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Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, this could have a substantial adverse effect on the price of the ADSs. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
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We may not be successful in obtaining or maintaining necessary rights to our products and product candidates through acquisitions and in‑licenses.in-licenses.
Because our programs may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in‑license, maintain or use these proprietary rights. We may be unable to acquire or in‑license any compositions, methods of use, processes, or other third‑partyin-license third-party intellectual property rights from third parties that we identify as an appropriate strategic fit for our Company and necessary for our product candidates. The licensingcandidates and acquisition of third‑party intellectual property rights is a competitive area, and atechnology. A number of more established companies with greater resources may pursue strategies to license or acquire third‑partythird-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
For example, weWe sometimes collaborate with U.S. and non‑U.S.non-U.S. academic institutions to accelerate our preclinical research or development under written agreements with these institutions.development. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so,us, in which case the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our applicable product candidate or program.
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In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third‑partythird-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain a license to third‑party intellectual property rights necessary for the development of a product candidate or program,investment, in which case we may have to abandon development of that product candidate or programprogram.
Existing license agreements impose various development, payment and other obligations. If we fail to comply with our obligations under these agreements, the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture, market and sell products that are covered by the licensed technology. Moreover, we could incur significant costs and/or disruption to our business and financial condition could suffer.distraction of our management defending against any breach alleged by the licensor. Several of our existing license agreements are sub-licenses from third parties who are not the original licensors of the intellectual property at issue. If the licensors fail to comply with their obligations under these upstream license agreements, the original third-party licensor may have the right to terminate the original license, which may terminate the sublicense, causing us to lose our rights to the applicable intellectual property if we are unable to secure our own direct license with the owner of the relevant rights on reasonable terms.
Further, if disputes over intellectual property that we have licensed or our associated obligations prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected products and product candidates.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.interest.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. WeThird parties may oppose or attempt to cancel our trademark applications or trademarks or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we may not be able to protectuse these trademarks to market our products in those countries and could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. If we attempt to enforce our trademarks and assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable or that the party against whom we have asserted trademark infringement has superior rights to these trademarks and trade names, which we need to build name recognition by potential partners or customersthe marks in our markets of interest.question. Over the long term, if we are unable to establish name recognition, based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.effectively. If other entities use trademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout the world.
Although we have trademark registrations for arGEN-X, this trademark may be considered as confusing with other registered trademarks and weWe may not be in a positionable to keep exclusive rights over the use of it. We do not expect the potential loss of this trademark registration to have an adverse impact on our business as we are not planning to use arGEN-X as a product name.
If we do not obtain protection under the Hatch‑Waxman AmendmentsU.S. Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act) and similar non‑U.S.non-U.S. legislation for extending the term of patents covering each of our products and product candidates, our business may be materially harmed.
Patents have a limited duration. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non‑provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates, their manufacture, or use are obtained, once the patent life has expired, we may be open to competition from competitive medications, including biosimilar medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
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candidates.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch‑WaxmanHatch-Waxman Act and similar legislation in the European Union.EU and the Asia Pacific region. The Hatch‑WaxmanHatch-Waxman Act permits a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. The patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent applicable to an approved drug may be extended. However, we may not receive an extension if we fail to apply within applicable deadlines fail to applyor prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner than we expect. As a result, our revenue from applicable products could be reduced, possibly materially.
We enjoy only limited geographical protection with respect to certain patents and may face difficulties in certain jurisdictions, which may diminish the value of intellectual property rights in those jurisdictions.
We often file our first patent application (i.e., priority filing) at the UK Intellectual Property Office, the European Patent Office or the USPTO. International applications under the Patent Cooperation Treaty, or PCT, are usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in additional jurisdictions where we believe our product candidates may be marketed. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national/regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.
Competitors may use our and our licensors’ or collaboration partners’ technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors or collaboration partners have patent protection, but enforcement is not as strong as that in the United States and the European Union. These products may compete with our product candidates, and our and our licensors’ or collaboration partners’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States and the European Union, and companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions.
Some countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired and our business and results of operations may be adversely affected.
Proceedings to enforce our and our licensors’ or collaboration partners’ patent rights in foreign jurisdictions could result in substantial costs and divert our and our licensors’ or collaboration partners’ efforts and attention from other aspects of our business, could put our and our licensors’ or collaboration partners’ patents at risk of being invalidated or interpreted narrowly and our and our licensors’ or collaboration partners’ patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors or collaboration partners. We or our licensors or collaboration partners may not prevail in any lawsuits that we or our licensors or collaboration partners initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.
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If we fail to comply with our obligations under the agreements pursuant to which we license intellectual property rights from third parties, or otherwise experience disruptions to our business relationships with our licensors, we could lose the rights to intellectual property that are important to our business.
We are a party to license agreements under which we are granted rights to intellectual property that are important to our business and we expect that we may need to enter into additional license agreements in the future. Existing license agreements impose, and we expect that future license agreements will impose, various development obligations, payment of royalties and fees based on achieving certain milestones, as well as other obligations. If we fail to comply with our obligations under these agreements, the licensor may have the right to terminate the license. The termination of any license agreements or failure to adequately protect such license agreements could prevent us from commercializing product candidates covered by the licensed intellectual property. Several of our existing license agreements are sublicenses from third parties which are not the original licensor of the intellectual property at issue. Under these agreements, we must rely on our licensor to comply with its obligations under the primary license agreements under which such third party obtained rights in the applicable intellectual property, where we may have no relationship with the original licensor of such rights. If the licensors fail to comply with their obligations under these upstream license agreements, the original third‑party licensor may have the right to terminate the original license, which may terminate the sublicense. If this were to occur, we would no longer have rights to the applicable intellectual property and, in the case of a sublicense, if we were not able to secure our own direct license with the owner of the relevant rights, which it may not be able to do at a reasonable cost or on reasonable terms, it may adversely affect our ability to continue to develop and commercialize the product candidates incorporating the relevant intellectual property.
Disputes may arise regarding intellectual property subject to a licensing agreement, including:
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If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:
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Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. ObtainingChanges in patent law and enforcing patentsregulations in the biopharmaceutical industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time‑consuming and inherently uncertain. In addition, the America Invents Act,various countries or the AIA, has been enactedjurisdictions or changes in the United States, resultinggovernmental bodies that enforce them or changes in significanthow the relevant governmental authority enforces them may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future. We cannot predict future changes in the interpretation of patent laws or changes to thepatent laws that might be enacted into law by U.S. patent system.
An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first‑to‑file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The AIA and its
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implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Additionally,foreign legislative bodies. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard toRelatedly, U.S. congressional representatives have introduced multiple draft bills this year that, if passed, may have a significant impact on U.S. patent laws. Such changes by the U.S. Congress, U.S. courts, USPTO, and the relevant law-making bodies in other countries may materially affect our patents or patent applications and our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtainadditional patent protection in the future.
Confidentiality agreements with employeesWe may be unable to protect the confidentiality of our trade secrets and others may not adequately prevent disclosureknow-how.
In addition to patent protection, we rely on trade secret protection for our proprietary information, including, for example, certain aspects of our llama immunization and antibody affinity maturation approaches. However, trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our numerous licensors, collaborators and protect other proprietary information.suppliers.
We consider proprietary trade secrets, confidential know‑how and unpatented know‑how to be important to our business. We may rely on trade secrets or confidential know‑how to protect our technology, especially where patent protection is believed to be of limited value. However, trade secrets and confidential know‑how are difficult to maintain as confidential.
To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractorsadvisors and advisorspotential collaborators to enter into confidentiality agreements with us.agreements. Moreover, we put in place appropriate procedures to identify confidential material and restrict access to documentation. However, current or former employees, consultants, contractorsadvisors and adviserspotential collaborators may unintentionally or willfully disclose our confidential information to competitors despite these procedures or in violation of our confidentiality agreements. In addition, the need to share trade secrets and confidentiality agreements may not provide an adequate remedy inother confidential information increases the eventrisk that such trade secrets become known to our competitors or inadvertently incorporated into the technology of unauthorizedothers. Any disclosure, either intentional or unintentional, or misappropriation by third parties (such as through a cybersecurity breach) of confidential information. our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements.
Enforcing a claim that a third party illegally obtained illegally and is using trade secrets or confidential know‑how is expensive, time consumingtime-consuming and unpredictable. Thethe outcome is unpredictable, and the enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction. Furthermore,Moreover, if a competitorany of our trade secrets were to be lawfully obtained or independently developed any of our trade secrets,by a competitor or other third party, we would have no right to prevent such competitorthem from using that technology or information to compete with us, which could harm our competitive position. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.us.
Failure to obtain or maintain trade secrets or confidential know‑how trade protection could adversely affect our competitive position. Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful in obtaining such patent protection, our competitors could limit our use of our trade secrets or confidential know‑how.
Under certain circumstances, we may also decide to publish some know‑how to attempt to prevent others from obtaining patent rights covering such know‑how.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our consultants and employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these consultants and employees executed proprietary rights, non‑disclosure and non‑competition agreements in connection with such previous employment. Although we try to ensure that our consultants and employees do not use the proprietary information or know‑how of others in their work for us, we may be subject to claims that we or these consultants and employees have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such consultant’s or employee’s former employer, or have breached their non‑competition agreement. Litigation may be necessary to defend against these claims.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or
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products. Such a license may not be available on commercially reasonable terms or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non‑compliance with these requirements.
Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO, the European Patent Office and foreign patent agencies in several stages over the lifetime of the patent. The USPTO, the European Patent Office and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non‑compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non‑payment of fees and failure to properly legalize and submit formal documents. If we or our licensors or collaboration partners fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have an adverse effect on our business.
RisksRisk Factors Related to Ourargenx’s Organization and Operations
Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.
OurAs a global organization in a highly competitive and specialized industry, our success depends upon the continued contributions of our key management, scientific, medical and technical personnel, many of whom have been instrumental for us and have substantial experience with our therapiesproduct and related technologies. These key management individuals include the members of our boardBoard of directorsDirectors and executivesenior management including Tim Van Hauwermeiren, our co‑founder and Chief Executive Officer; Eric Castaldi, our Chief Financial Officer; Prof. Hans de Haard, our co‑founder and Chief Scientific Officer; Dr. Nicolas Leupin, our Chief Medical Officer; Torsten Dreier, our co‑founder and Chief Development Officer; Debbie Allen, our Senior Vice President of Business Development; and Dirk Beeusaert, our General Counsel.
Theteam. Difficulties in recruiting or the loss of key managers, and senior scientistsscientific, medical or technical personnel could delay our research and development activities. In addition, our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our abilityit may be difficult to attract and retain highly qualified management, scientific and medical personnel. personnel, particularly if we expand into fields that will require additional skills.
As a Dutch company listed on Euronext Brussels in addition to the Nasdaq Global Select Market (Nasdaq), our remuneration practices and policies may be limited by local governance rules or shareholder guidance for EU companies. Such limitations may make it more difficult to successfully compete for key talent in a number of markets that have differing remuneration practices and policies as we are bound by more restrictive remuneration practices than
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our competitors. For example, the Dutch Corporate Governance Code 2022 (DCGC) places certain limitations on the ability to grant equity incentives to non-executive directors, while Belgian law requires non-executive directors to receive part of their remuneration in the forms of shares, but not stock options. The DCGC also places limitations on amount of severance payment permitted in the event of dismissal. In addition, the U.S. has proposed legislation that imposes restrictions on our ability to prevent departing employees from competing with us following their departure. If finalized, such legislation could also adversely affect our ability to retain employees who may go to competitors with more resources than us and who are not bound by similar remuneration policies.
Many other biotechnology and pharmaceutical companies and academic institutions that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Additionally, an inflationary environment, combined with the tight labor market for the recruitment and retention of skilled workers, could make it more costly for us to attract or retain employees. In order to meet the compensation expectations of our prospective and current employees due to inflationary factors, we may be required to increase our operating costs. Therefore, we might not be able to attract or retain these key persons on conditions that are economically acceptable. Furthermore,
Global geo- and socio-political threats and macro-economic uncertainty and other unforeseen political crises could materially and adversely affect our business and financial performance.
Many geo- and socio-political threats and macro-economic uncertainties are outside of our control, including general economic and market conditions, consumer and commercial credit availability, inflation, interest rates, unemployment, consumer debt levels, political crises, such as terrorist attacks, war and other political instability, economic sanctions, outbound investment restrictions and other challenges affecting the global economy, including the Russia-Ukraine and the Israel-Hamas conflicts, disruptions in supply chains, and changes in trade agreements which could adversely affect consumer confidence and disposable income levels, increase difficulty in forecasting our financial results and have other impacts on our business and financial performance. Such geo- and socio-political threats could also result in volatility in stock markets in general, causing our stock to have extreme price and volume fluctuations unrelated to our business and financial performance. For example, in 2023, we received approval for VYVGART in Israel through our partner Medison. It is not yet possible to predict or determine the ultimate consequence of the ongoing Israel-Hamas conflict on our business and financial performance.
Due to our international operations and the fact that we run clinical trials in a large number of jurisdictions, the eruption of global conflicts, such as the continuing conflict between Russia and Ukraine and the ongoing Israel-Hamas conflict, may negatively impact our ability to conduct or complete clinical trials in the affected regions, which could adversely affect our business and financial performance. On January 17, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control issued General License 6C to replace General License 6B. General License 6C authorizes “clinical trials and other medical research activities” that would otherwise be prohibited by U.S. sanctions targeting Russia, and General License 6C does not have an expiration date. Following a risk assessment relating to the conflict between Russia and Ukraine, we increased target enrollment, which delayed expected topline data of SC efgartigimod for PV and PF to the second half of 2023. Additionally, the conflict between Russia and Ukraine and the sanctions imposed upon Russia by the U.S., the UK, and the EU, among others could disrupt:
● | the recruitment and enrollment of eligible patients who may not be able to travel safely to clinical trial sites or may be forced to withdraw for a number of reasons; |
● | the closure or destruction of clinical sites or treatment facilities; |
● | the ability to compensate patients or staff living in sanctioned countries; |
● | the manufacturing process for our products or supply chain, which could increase the costs of raw material and production costs; |
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● | the ability to transport, deliver, supply and collect necessary materials, products or services to clinical trial sites or deliver them to third-party central laboratories’ for analysis; |
● | the ability to collect data from clinical trial sites and ensure the integrity of any data collected; |
● | the destruction or disruption of our data centers or our critical business or information technology systems; or |
● | the ability to submit data collected at Russian or Ukrainian sites due to the incompleteness or the fact that auditing by regulatory authorities was not fully possible. |
To date, other than as described above and elsewhere in this Annual Report, we have no indication that the conflict between Russia and Ukraine and the corresponding sanctions imposed on Russia will significantly hinder our clinical development activities performed in the affected regions or regulatory activities relevant for our pending or expected approval requests. Moreover, we do not generate revenues in Russia, and we gather more regular feedback from and to stakeholders and team members in Russia and Ukraine. However, we also perform development activities in a number of countries neighboring Russia and Ukraine and if the conflict were to escalate further and impact neighboring countries, it could impact our development activities in those countries.
Changes in U.S.-Mainland China relations, including tariffs, export controls, sanctions, and other regulations may adversely impact our collaboration with Zai Lab in Mainland China, Hong Kong, Taiwan and Macau (together, Greater China). The U.S. government has taken steps and continues to take steps with regard to U.S.- Mainland China relations that will impact companies with connections to the U.S. or Mainland China, including by imposing tariffs affecting certain products manufactured in mainland China, imposing certain sanctions on individuals and entities in the Mainland China, and issuing statements indicating enhanced review of companies with significant Mainland China-based operations. The scope of the impact of any such actions on the pharmaceutical industry or argenx remains unknown. Through argenx’s collaboration with Zai Lab, we have an interest in business operations in Greater China. Any unfavorable government policies on international trade, including tariffs, export controls, and/or increased scrutiny on companies with significant Mainland China-based operations, may impact the development and commercialization of products that contain argenx-licensed material.
Any new legislation, executive orders, tariffs, export controls, and/or other regulations that may be implemented, the renegotiation of existing trade agreements, and any retaliatory actions taken by the U.S. or Chinese governments due to the U.S.- Mainland China tensions could have an adverse effect on our business, including the development and commercialization of products containing argenx-licensed material.
We face risks related to natural disasters and public health issues, that could negatively affect our business and financial condition.
Our business could be adversely impacted by the effects of catastrophic global events including natural disasters such as an earthquake, fire, hurricane, tornado, flood or significant power outage and pandemics, such as the COVID-19 pandemic.
For example, the manufacturing of all of our products and product candidates requires using cells which are stored in a cell bank. We have one master cell bank for each product manufactured in accordance with cGMPs. However, it is possible that we could lose multiple cell banks and have our manufacturing significantly impacted by the need to recruit new managers and qualified scientific personnel to developreplace these cell banks, which could materially adversely affect our business, ifprospects, financial condition and results of operations.
Public health issues could also negatively affect our business and financial condition. We operate and conduct our clinical trials globally. We cannot presently predict the scope and severity of any potential future business shutdowns or disruptions as a result of public health issues. If we expand into fields that will require additional skills. Our inabilityor any of the third parties with whom we engage, including the suppliers, contract manufacturers, clinical trial sites, regulators and other third parties, were to attractexperience shutdowns, quarantines, or other business disruptions due to natural disasters or global public health issues, it may impair our or our third-party partners’ ability to initiate clinical trials and recruit and retain these key personspatients, particularly if quarantine or travel
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restrictions impede healthcare provider or patient movement, impact the usability of the data due to treatment interruptions and require protocol amendments. In addition, regulatory authorities may restrict their operations or be delayed in their operations during a pandemic, the outbreak of new variants or other public health issues, including further to travel restrictions which could prevent us from achievingadversely affect our objectivesability to obtain regulatory approval for and implementingto commercialize our business strategy, which couldproducts and product candidates and have a material adverse effect on our business and prospects.financial results.
We expect to expandmay encounter difficulties efficiently managing our growth and our increasing development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We have grown significantly in the number of employees and scope of operations over recent years and expect to experience significant growth in the number of our employees and the scope of our operations also in the near future, particularly in the areas of drug research, drug development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. In particular, we must efficiently leverage our own sales and marketing capabilities in order to launch or market our products candidates effectively.
Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansionOur limited financial, manufacturing and management resources, could cause us to forgo or delay the pursuit of our operations may leadopportunities with potential product candidates that later prove to significant costshave greater market potential, fail to capitalize on viable commercial products or profitable market opportunities or relinquish rights to such product candidates through collaborations, licensing or royalty arrangements in circumstances where it would have been more advantageous for us to retain sole development and may divert our management and business development resources.commercialization rights. Any inability to manage growth could delay the execution of our business plansstrategic objectives or disrupt our operations.
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We may not be able to integrate efficiently or achieve the expected benefits of any acquisitions of complementary businesses, product candidates or technologies.
Since our inceptionoperations, which in 2008, we have grown organically without any acquisitions. Should we in the future contemplate to acquire any complementary business, product candidates or technologies, our ability to integrate and manage acquired businesses, product candidates or technologies effectively will depend upon a number of factors including the size of the acquired business, the complexity of any product candidate or technology and the resulting difficulty of integrating the acquired business’s operations, if any. Our relationship with current employees or employees of any acquired business may become impaired. We may also be subject to unexpected claims and liabilities arising from such acquisitions. These claims and liabilities could be costly to defend, could be material to our financial position and might exceed either the limitations of any applicable indemnification provisions or the financial resources of the indemnifying parties. There can also be no assurance that we will be able to assess ongoing profitability and identify all actual or potential liabilities of a business, product candidate or technology prior to its acquisition. If we acquire businesses, product candidates or technologies that result in assuming unforeseen liabilities in respect of which it has not obtained contractual protections or for which protection is not available, thisturn could materially adversely affectharm our business prospects, financial condition and results of operations.prospects.
Our business is subject to economic, political, regulatory and other risks associated with international operations.
Our business is subject to risks associated with conducting business internationally. Accordingly, our future results could be harmed by a variety of factors, including:
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We have obtained significant fundingbenefitted from agenciescertain research and development incentives. These could be impacted by changes in law (or interpretation), changes of the government of the Flemish region of Belgiumfact (such as a change in ownership), or challenge by tax authorities.
As a company active in research and development, we have benefited from certain research and development incentives.tax incentives including tax credits and a payroll withholding tax exemption. We also expect to benefit from the Belgian innovation income deduction. The relevant tax authorities may challenge our eligibility for, or our calculation of, such incentives.
We have contracted over the past year numerous funding agreements with agencies of the Flemish government to partially finance our research and development programs. These funding agreements are subject to various criteria linked to employment and investment in the Flemish region of Belgium. We have committed to establish our operational site in the Flemish region, which must remain our major effective operational site, and to maintain our site and all our existing activities, including research and development in the Flemish region. Similarly, our funding agreement with one such agency of the Flemish government requires us to maintain substantial research and development activities in the Flemish region. Such undertakings restrict our ability to choose the most convenient or cost‑effective location of our premises.
If we were to breach these contractual obligations, we may be held liable by the agencies of the Flemish government with which we have funding agreements for any damage incurred by the such agencies resulting from the breach of contract and we could be required to reimburse in full the subsidies granted by such agencies.
Further, pursuant to the general terms of each grant, certain Flemish agencies are entitled to re‑evaluate the subsidies granted to us in case of a fundamental change in our shareholding base, which is not defined in the general terms, but we believe would involve a change of control of us. Any such reevaluation could negatively impact the funding that we receive or have received from the Flemish agencies.
The research and developmenttax incentives from which we have benefited as a company active in research and development in Belgium can be offset against Belgian corporate income tax due. The excess portion may be refunded at the end of a five‑year fiscal period for the Belgian research and development incentive. The research and development incentives are both calculated based on the amount of eligible research and development expenditure. The Belgian tax authorities may audit each research and development program in respect of which a tax credit has been claimed and assess whether it qualifies for the tax credit regime. The tax authorities may challenge our eligibility for, or our calculation of, certain tax reductions or deductions in respect of our research and development activities and, should such a claim of the Belgian tax administrationchallenge be successful, we may be liable for additional corporate income tax,taxes, and penalties and interest related thereto, which could have a significantan impact on our results of operations and future cash flows. In case of a change of control, we could be exposed to the risk of losing any unused tax credit and innovation income deduction. Furthermore, if the Belgian government decideany legislator decides to eliminate, or change the conditions for claiming such tax incentives, or reduce the scope or the rate of the research and development incentive benefit, eithersuch incentives, any of which it could decide to do at any time, our results of operations could be adversely affected.
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Exchange rate fluctuations or abandonment of the euro currency may materially affect our results of operations and financial condition.
Due to the international scope of our operations, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the U.S. dollar, British pound and Swiss francs. Our functional currency is the euro and the majority of our operating expenses are paid in euros, but we also receive payments from our main business partners AbbVie and Shire in U.S. dollars and we regularly acquire services, consumables and materials in U.S. dollars, Swiss francs and British pounds. Further, potential future revenue may be derived from abroad, particularly from the United States. As a result, our business and share price may be affected by fluctuations in foreign exchange rates between the euro and these other currencies, which may also have a significant impact on our reported results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.
In addition, the possible abandonment of the euro by one or more members of the European Union could materially affect our business in the future. Despite measures taken by the European Union to provide funding to certain European Union member states in financial difficulties and by a number of European countries to stabilize their economies and reduce their debt burdens, it is possible that the euro could be abandoned in the future as a currency by countries that have adopted its use. This could lead to the re‑introduction of individual currencies in one or more European Union member states, or in more extreme circumstances, the abandonment of the euro or the dissolution of the European Union. The effects on our business of a potential dissolution of the European Union, the exit of one or more European Union member states from the European Union or the abandonment of the euro as a currency, are impossible to predict with certainty, and any such events could have a material adverse effect on our business, financial condition and results of operations
Recent developments relating to the United Kingdom’s referendum vote in favor of withdrawal from the European Union could adversely affect us.
The United Kingdom held a referendum on June 23, 2016 in which a majority voted for the United Kingdom’s withdrawal from the European Union, or Brexit. As a result of this vote, on March 29, 2017 the United Kingdom officially started the separation process and negotiations are expected to commence to determine the terms of the United Kingdom’s withdrawal from the European Union as well as its relationship with the European Union going forward, including the terms of trade between the United Kingdom and the European Union. The effects of Brexit have been and are expected to continue to be far‑reaching. Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally and could continue to contribute to instability in global financial and foreign exchange markets. Brexit could also have the effect of disrupting the free movement of goods, services and people between the United Kingdom and the European Union; however, the full effects of Brexit are uncertain and will depend on any agreements the United Kingdom may make to retain access to European Union markets.
In addition, we expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace. If the United Kingdom were to significantly alter its regulations affecting the pharmaceutical industry, we could face significant new costs. It may also be time‑consuming and expensive for us to alter our internal operations in order to comply with new regulations. Altered regulations could also add time and expense to the process by which our product candidates receive regulatory approval in the United Kingdom and European Union. Similarly, it is unclear at this time what Brexit’s impact will have on our intellectual property rights and the process for obtaining, maintaining and defending such rights. It is possible that certain intellectual property rights, such as trademarks, granted by the European Union will cease being enforceable in the United Kingdom absent special arrangements to the contrary, and we may be required to refile our trademarks and other intellectual property applications domestically in the United Kingdom. As a result of the Brexit, other European countries may seek to conduct referenda with respect to their continuing membership in the European Union. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, we cannot be certain of the full extent to which Brexit could adversely affect our business, results of operations and financial condition.
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We are exposed globally to unanticipated changes in tax laws and regulations, adjustments to our tax provisions, exposure to additional tax liabilities, or forfeiture of our tax assets.
The determination of our provision for income taxes and other tax liabilities requires significant judgment, including the adoption of certain accounting policies and our determination of whether our deferred tax assets are, and will remain, tax effective.fully available in future periods. We cannot guarantee that our interpretation of applicable tax laws or our structure will not be questioned by the relevant tax authorities, or that the relevant tax laws and regulations, or the interpretation thereof, including through tax rulings, by the relevant tax authorities, will not be subject to change. Any adverse outcome of such a review or change in law may lead to adjustments in the amounts recorded in our financial statements and could have a materially adverse effect on our operating results and financial condition.
We are subject to laws and regulations on tax levies and other charges or contributions in different countries, including transfer pricing and tax regulations for the compensation of personnel and third parties. Dealings between current and former group companies as well as additional companies that may form part of our group in the future, are subject to transfer pricing regulations, which may be subject to change and could adversely affect us.have a material impact. Compliance with these laws and regulations will be more challenging as we expand
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our international operations, including in connection with potential approvals of our products and product candidates in Europe, Japan, the U.S. and elsewhere.
Our effective tax rates could be adversely affected, now or in the future, by changes in tax laws, treaties and regulations both internationally and domestically, or the interpretation thereof by the relevant tax authorities in countries where we have material operations, including changes to the patentBelgian innovation income deduction, possible changes to the corporate income tax base, wage withholding tax incentive for qualified research and development personnel in Belgium andor to other tax incentives and the implementation of new tax incentives. A successful challenge to our qualifications for and application of these tax incentives such asby the innovation deduction.tax authorities in Belgium or other country where we have material operations would have a significant impact on our effective tax rate and on our tax assets. An increase of the effective tax rates could have an adverse effect on our business, financial position, results of operations and cash flows.
In recent years, the Organisation of Economic Co-operation and Development (OECD) has worked on a project aimed at reforming the international tax system by, among other matters ensuring large multinational enterprises pay a minimum level of tax in each of the jurisdictions in which they operate (Pillar Two). In December 2021, the OECD released model rules in respect of Pillar Two (GloBE Rules). On December 14, 2022, the Council of the EU adopted Directive (EU) 2022/2523 implementing the GloBE Rules for multinational enterprise groups and large-scale domestic groups in the Union (Pillar Two Directive). The Pillar Two Directive was required to be implemented in the EU Member States’ national law by December 31, 2023. In addition, certain other jurisdictions in which the Group operates have either already enacted the GloBE Rules in their domestic law (such as Japan) or announced an intention to implement the GloBE Rules in their domestic law.
Based on current information, management expects that the Group could become subject to the Pillar Two Directive and domestic laws as early as 2025. Management does not expect the Pillar Two Directive and implementing domestic laws to have an impact on the Group in 2024. The Group is currently in the process of determining the impact, if any, for 2025 and onwards.
In addition, we may not be able to use, or changes in tax regulations may affect the use of, certain unrecognized tax assets or credits that we have built over the years. For instance, as of December 31, 2017, we had €113.6 million of consolidatedhave considerable material tax loss carry forwards. In general,assets in Belgium and some of these tax loss carry forwardsassets may be forfeited in whole, or in part, as a result of various transactions, including corporate reorganizations or transactions relating to our shareholding structure, or their utilization may be restricted by statutory law or interpretation in the relevant jurisdiction. Any corporate reorganization by us or any transaction relating to our shareholding structure may result in partial or complete forfeiture of tax loss carry forwards. For instance, under Belgian law, argenx BVBA may lose its tax loss carry forwards in case of a change of control, through an acquisition or otherwise, not meeting legitimate financial or economic needs as well as in case of a tax neutral reorganization, such as a merger or a demerger, involving argenx BVBA. The tax burden would increase if profits, if any, could not be offset against tax loss carry forwards. As such, our redomiciliation as described in “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation—Transfer of Our Registered Office from the Netherlands to Belgium,” will have no impact on the tax loss carry forwards of argenx BVBA. For a description of the tax impact of our restructuring, see the risk factor below and “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation.”
Furthermore, the Belgian government recently announced its intention to limit the use of tax loss carry forwards as of January 1, 2018. If adopted, this rule would result in the tax loss carry forwards (and certain other tax deductions) being no longer tax deductible against 30% of our profits exceeding the first €1.0 million.
The restructuring and its contemplated tax treatment is subject to approval by the Belgian tax authorities.
We have engaged with the Dutch and Belgian tax authorities in order to reach an agreement on the tax effects of our proposed restructuring. The Dutch tax authorities have confirmed in a ruling dated April 20, 2017 that they agree (i) that, for Dutch corporate income tax purposes, the economic ownership of our intellectual property rights was transferred to argenx BVBA on August 28, 2009 and (ii) that the indemnification payment to be paid by argenx BVBA to argenx SE entails an arm’s length consideration for (a) the value of economic ownership of our intellectual property rights at that time, (b) accrued interest thereon and (c) related transfer pricing adjustments. See “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation.”
The Belgian tax authorities have not yet issued a binding ruling confirming these points and may take a different position. The Belgian tax authorities may consider that the economic ownership of the intellectual property rights will not be transferred to argenx BVBA until the completion of our restructuring. The Belgian tax authorities may
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not accept the amount of the indemnification payment to be paid by argenx BVBA to argenx SE as agreed upon with the Dutch tax authorities and may disagree with its arm’s length character and its qualification as a deductible cost for argenx BVBA. If the Belgian tax authorities do not accept the qualification of the indemnification payment as a deductible cost for argenx BVBA, we will not be allowed to treat the amount of €80 million as a deductible cost and would thus not be able to offset this amount against potential taxable profits in the future. See “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation.” In addition, as long as our redomiciliation is not successfully completed, we will not qualify for a recently introduced Belgian tax scheme under which argenx SE may transfer losses to argenx BVBA (subject to certain conditions and limitations), which scheme could result in a reduction of argenx BVBA’s corporate tax due.
If our redomiciliation is not successfully completed, we will not be able to reduce our compliance burden and costs.
We face a compliance burden from an organizational and regulatory perspective as a European public company with limited liability under Dutch law with our shares listed on Euronext Brussels and with the majority of our operations in Belgium. Accordingly, depending on the entry into force of major changes to Belgian corporate law, we may seek shareholder approval for our redomiciliation from the Netherlands to Belgium. The redomiciliation is expected to be implemented through a series of complex cross‑border steps, including obtaining shareholder and governmental approvals, all of which are beyond our control. See “Item 4.A.— Overview of Our Restructuring and Anticipated Redomiciliation.” We cannot assure you that we will receive these approvals, and we may be unable to implement our redomiciliation.
If our redomiciliation is not successfully completed, we will remain a European public company with limited liability under Dutch law. In such event, we will not be able to reduce our compliance burden. Our legal and financial compliance costs will remain higher and some activities will continue to be more time‑consuming and costly than if we would be a company incorporated under Belgian law. For example, if our redomiciliation is not successfully completed, we would continue to need the services provided by our independent auditors as required under both Dutch law in respect of argenx SE and Belgian law in respect of argenx BVBA and would continue to owe increased fees in respect thereof. In addition, if our redomiciliation is not successfully completed, we would need to continue leasing our office in Breda, the Netherlands.
Risks Related to the ADSs
The price of theour ADSs and ordinary shares may be volatile and may fluctuate due to factors beyond our control. An active public trading market may not be sustained. And you may not be able to resell the ADSs at or above the public offering price.
The tradingstock markets in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. During 2023, the closing sales price of theour ADSs and therepresenting our ordinary shares hason Nasdaq fluctuated and is likelygreatly, ranging from $334.23 to continue to fluctuate, substantially.$548.43. The trading price of those securities depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. In addition, although the ADSs are listed on the Nasdaq Global Select Market and our ordinary shares are listed on Euronext Brussels, we cannot assure you that a trading market for those securities will be maintained.
Since the ADSs were sold at our initial U.S. public offering in May 2017 at a price of $17.00 per ADS, the price per ADS has ranged as low as $17.33 and as high as $87.00 through March 20, 2018. During this same period, ordinary share prices have ranged from as low as €15.15 to as high as €70.50. The market price of the ADSs may fluctuate significantly due to a variety of factors, many of which are beyond our control, including:
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These and other market and industry factors may cause the market price and demand for the ADSs and ordinary shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs or ordinary shares and may otherwise negatively affect the liquidity of theour ADSs and ordinary shares. Sales of a substantial number of ADSs or ordinary shares in the public market, or the perception that these sales might occur, could depress the market price of ADSs and ordinary shares and could impair the market price of our securities or our ability to raise capital through the sale of additional equity securities.
In addition, an active public trading market for our ADSs or our ordinary shares may not be sustained. Further, fluctuations in exchange rates may also impact the stock marketprice of our ADSs and ordinary shares which may result in general,heavy trading by investors seeking to exploit such differences, or impact the proceeds holders receive.
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If we fail to maintain an effective system of disclosure controls and biopharmaceutical companies in particular, have experienced extremeinternal control over financial reporting, our ability to comply with applicable regulations could be impaired, and the trading price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.our ADSs may be negatively impacted.
We will continue to incur, increased costs as a result of operating as a U.S.‑listed public company, and our board of directors will beare required to devote substantial time to new compliance initiatives andcomply with various corporate governance practices.
As a public company, and particularly after we no longer qualify as an emerging growth company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a public company listed on Euronext Brussels. We are a Dutch European public company with limited liability (Societas Europaea or SE). If our redomiciliation is completed, we will be a Belgian European public company with limited liability (Societas Europaea or SE). The Sarbanes‑Oxleyfinancial requirements under the Sarbanes-Oxley Act of 2002, the Dodd‑FrankDodd-Frank Wall Street Reform and Consumer Protection Act, the Nasdaq listing rules and requirements of the (Nasdaq Stock Market, or Nasdaq,Listing Rules), and other applicable securities rules and regulations impose various requirements on non‑U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our board of directors and other personnel will be required to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time‑consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.
However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
regulations. Pursuant to Section 404 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our boardmanagement on, among other things, the effectiveness of directors on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to includereporting and an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 withinUndetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the prescribed period, we are engaged in a processexpense of remediation. Moreover, any failure to document and evaluate ourmaintain internal control over financial reporting which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over
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financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or moreany material weaknesses itor significant deficiency thereover, could result in an adverse reaction in the financial markets due to a loss of confidenceinvestors’ in the accuracy, completeness and reliability of our financial statements.
Certain significant shareholders own a substantial number of our securities and as a result, may be ablestatements, subject us to exercise control over us, including the outcome of shareholder votes. These shareholders may have different interests from ussanctions or your interests.
We have a number of significant shareholders. For an overview of our current significant shareholders, please see “Item 7.A.—Major Shareholders.”
Currently, we are not aware that any of our existing shareholders have enteredinvestigations, or will enter into a shareholders’ agreement with respect to the exercise of their voting rights. Nevertheless, depending on the level of attendance at our general meetings of shareholders, or the General Meeting, these significant shareholders could, alone or together, have the ability to determine the outcome of decisions taken at any such General Meeting. Any such voting by these shareholders may not be in accordance with our interests or those of our shareholders. Among other consequences, this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of the ADSs.
Future sales, or the possibility of future sales, of a substantial number of our securities could adversely affect the price of the shares and dilute shareholders.
If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our securities in the public market,impact the trading price of the ADSs could decline significantly. In addition, ordinary shares subject to outstanding options under our equity incentive plans and the ordinary shares reserved for future issuance under our equity incentive plan will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. In addition, we intend to register all ordinary shares that we may issue under our equity compensation plans. Once we register these ordinary shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and lock‑up agreements.
Provisions of our Articles of Association or Dutch corporate law, or, following our redomiciliation, our Belgian Articles of Association or Belgian corporate law, might deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the then board of directors.
Provisions of our Articles of Association may make it more difficult for a third party to acquire control of us or effect a change in our board of directors. We have adopted several provisions that may have the effect of making a takeover of our company more difficult or less attractive. These provisions include a requirement that certain matters, including an amendment of our Articles of Association, may only be brought to our shareholders for a vote upon a proposal by our board of directors. If we complete our redomiciliation, Belgian corporate law will allow for various protective measures. In addition, several provisions of Belgian corporate law and certain other provisions of Belgian law, such as obligations to disclose significant shareholdings and merger control regulations, may apply to us following completion of our redomiciliation and may make an unsolicited tender offer, merger, change in management or other change in control of our company more difficult. These provisions could discourage potential takeover attempts that other shareholders may consider to be in their best interest and could adversely affect the market price of our securities. These provisions may also have the effect of depriving ADS holders of the opportunity to sell their ADSs at a premium. In addition, the board of directors of Belgian companies may in certain instances, and subject to prior authorization by the shareholders, deter or frustrate public takeover bids through dilutive issuances of equity securities (pursuant to the authorized capital) or through share buy‑backs. Although the authorization of the board of directors to increase a company’s share capital through contributions in kind or in cash with restriction or limitation of the preferential subscription right of the existing shareholders is suspended upon the notification to the company by the FSMA of a public takeover bid on the securities of the company, the company’s shareholders at the General Meeting can, under certain conditions, expressly authorize the board of directors to increase the capital of the company by issuing shares in an amount of not more than 10% of the existing shares of the company at the time of such a public takeover bid. If
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Belgian corporate law is amended, these and/or other provisions may have a similar effect. See “Management Upon Redomiciliation.”
Fluctuations in exchange rates may increase the risk of holding ADSs and ordinary shares.
Due to the international scope of our operations, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the euro, U.S. dollar, British pound and Swiss franc. Our functional currency is the euro, and the majority of our operating expenses are paid in euros, but we also receive payments from our main business partners AbbVie and Shire in U.S. dollars, and we regularly acquire services, consumables and materials in U.S. dollars, Swiss francs and British pounds. Further, potential future revenue may be derived from abroad, particularly from the United States. As a result, our business and the price of the ADSs and ordinary shares may be affected by fluctuations in foreign exchange rates between the euro and these other currencies, which may also have a significant impact on our reported results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.
Moreover, because our ordinary shares currently trade on Euronext Brussels in euros, and the ADSs will trade on the Nasdaq Global Select Market in U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and the euro may result in temporary differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences.
In order to finance the growth of our activities in the United States, notably with the opening of our U.S. office in October 2017, we have invested in U.S. dollar denominated cash deposit accounts and in current financial assets with a significant portion of the proceeds from our initial U.S. public offering completed in May 2017. Depending on the exchange rate fluctuations of the U.S. dollar, this may result in unrealized exchange rate losses which may impact negatively the reporting of our cash, cash equivalents and current financial assets at reporting dates when translating to euros these U.S. denominated cash deposits accounts and current financial assets. In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the euro, the U.S. dollar equivalent of the proceeds that a holder of the ADSs would receive upon the sale on Euronext Brussels of any ordinary shares withdrawn from the depositary and the U.S. dollar equivalent of any cash dividends paid in euros on our ordinary shares represented by the ADSs could also decline.ADSs.
Holders of our ADSs are not treated as holders of our ordinary shares and may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.
HoldersADSs are transferable on the books of the depositary. However, holders of ADSs are not treated as holders of our ordinary shares, unless they withdraw the ordinary shares underlying their ADSs in accordance with the deposit agreement and applicable laws and regulations. The depositary is the holder of the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as holders of our ordinary shares, other than the rights that they have pursuant to the deposit agreement. See “Item 12.D.—American Depositary Shares.”
Holders of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.
ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to the right of ADS holders to cancel their ADSs and withdraw the underlying ordinary shares.reason. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our ordinary shares. In addition, ADS holders may not be able to cancel their ADSs and withdraw the underlying ordinary shares when they owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.
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You willour ADSs do not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise yourtheir right to vote.
Except as described in this annual report and theAnnual Report or any deposit agreement, holders of the ADSs will not be able to exercise voting rights attaching to the ordinary shares represented by the ADSs. Under the terms of the deposit agreement, holders of the ADSs may instruct the depositary to vote the ordinary shares underlying their ADSs. Otherwise,agreements, holders of ADSs willare not be able to exercise their right to votetreated as our shareholders unless they withdraw the ordinary shares underlying their ADSs toADSs. The depositary, or its nominee, is the holder of the ordinary shares underlying the ADSs. Holders may vote them in person or by proxy in accordance with applicable laws and regulations and our Articles of Association. Even so, ADS holders may not know about a meeting far enough in advance to withdraw those ordinary shares. If we ask for the instructions of holders of the ADSs, the depositary, upon timely notice from us, will notify ADS holders of the upcoming vote and arrange to deliver our voting materials to them. Upon our request, the depositary will mail to holders a shareholder meeting notice that contains, among other things, a statement as to the manner in which voting instructions may be given. We cannot guarantee that ADS holders of ADSs will receive the voting materials in time to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. A shareholder isOur shareholders are only entitled to participate in, and vote at, thea general meeting of our shareholders (General Meeting), provided that itstheir shares are recorded in its nametheir names at midnight (Central(central European Time)time) at the end of the twenty‑eighth28th day preceding the date of the meeting of shareholders.such General Meeting. In addition, the depositary’s liability to ADS holders of ADSs for failing to execute voting instructions or for the manner of executing voting instructions is limited by the deposit agreement.agreements. As a result, holders of our ADSs may not be able to exercise their right to give voting instructions or to vote in person or by proxy and they may not have any recourse against the depositary or us if their ordinary shares are not voted as they have requested or if their shares cannot be voted.
We do not expectIf securities or industry analysts cease coverage of us, or publish inaccurate or unfavorable research about our business, the price of our ADSs or ordinary shares and our trading volume could decline.
The trading market for the ADSs and ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If no or too few securities or industry analysts cover us, the trading price of our ADSs and ordinary shares would likely be negatively affected. If one or more of the analysts who cover us
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downgrade our ADSs or ordinary shares or publish inaccurate or unfavorable research about our business, the price of our ADSs or ordinary shares would likely decline.
Risks Related to pay cash dividendsbeing a Foreign Private Issuer or a Dutch Company
The risks in the foreseeable future.this subsection that relate to our status as a foreign private issuer will change if we lose our status as a foreign private issuer under U.S. law.
We have not paid any cash dividends sinceare a Dutch European public company with limited liability (Societas Europaea or SE). The rights of our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings will be reinvested in our business and that cash dividends will not be paid until we have an established revenue stream to support continuing cash dividends. In addition, payment of any future dividends to shareholders would be subject to shareholder approval at our General Meeting, upon proposal of the board of directors, which proposal would be subject to the approval of the majority of the non‑executive directors after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. In addition, payment of future cash dividends may be made only if our shareholders’ equity exceedsdifferent from the sumrights of shareholders in companies governed by the laws of U.S. jurisdictions.
We are a Dutch European public company with limited liability. The rights of shareholders and the responsibilities of members of our paid‑Board of Directors may be different from the rights and obligations of shareholders in and called‑up share capital pluscompanies governed by the reserves required to be maintained bylaws of U.S. jurisdictions.
As a result of these differences between Dutch corporate law or byand our Articles of Association. If we completeAssociation, on the one hand, and the U.S. federal and state laws, on the other hand, in certain instances, our redomiciliation, under Belgian corporate law, we may pay dividends only up to an amount equal to the excessshareholders and holders of our shareholders’ equity over the sumADSs could receive less protection than they would as shareholders or ADS holders of (i) paid‑up or called‑up share capital, and (ii) reserves not available for distribution pursuant to law ora listed U.S. company.
Provisions of our Belgian Articles of Association based onmight deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the most recent statutory audited financial statements, prepared in accordance with the generally accepted accounting principles in Belgium, or Belgian GAAP. In addition, under Belgian law, prior to distributing dividends, we must allocate an amountthen Board of 5%Directors.
Provisions of our annual net profit on an unconsolidated basisArticles of Association may make it more difficult for a third party to acquire control of us or effect a legal reservechange in our unconsolidated financial statements until such reserve equals 10%Board of Directors. We have adopted several provisions that may have the effect of making a takeover of our share capital. If Belgian corporate law is amended, these and/Company more difficult or less attractive. These provisions could discourage potential takeover attempts that other provisionsshareholders may contain similar restrictions. See “Description of Share Capitalconsider to be in their best interest and Group Structure Upon Completion of Our Redomiciliation.” Accordingly, investors cannot rely on cash dividend income from ADSs and any returns on an investment incould adversely affect the ADSs will likely depend entirely upon any future appreciation in themarket price of the ADSs.our securities.
Holders of our ordinary shares outside the Netherlands, or, if we complete our redomiciliation, Belgium, and ADS holders of ADSs may not be able to exercise preemptive rights.pre-emptive rights or preferential subscription rights, respectively.
In the event of an increase in our share capital, holders of our ordinary shares are generally entitled under Dutch law to full preemptivepre-emptive rights, unless these rights are excluded either by a resolution of the shareholders at thea General Meeting, or by a resolution of the boardBoard of directorsDirectors (if the boardBoard of directorsDirectors has been designated by the shareholders at thea General Meeting for this purpose). If we complete our redomiciliation, in the event of a share capital increase for cash by way of the issue of new shares, or in the event of an issue of shares, convertible bonds or warrants, or equity interests, all our shareholders will generally have a preferential subscription right unless these rights are restricted or canceled either by a resolution of the shareholders at the General Meeting or by a resolution of our board of directors in Belgium, or our Belgian Board, (if the Belgian Board has been authorized by the shareholders at the General Meeting for
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this purpose). See “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation—Preferential Subscription Rights.” If Belgian corporate law is amended, these and/or similar provisions may contain similar rights. See “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation.” However, making preemptivepre-emptive rights available to holders of ordinary shares or ADSs representing ordinary shares also requires compliance with applicable securities laws in the jurisdictions where holders of those securities are located, which we may be unable or unwilling to do. In particular, holders of ordinary shares or ADSs located in the United States and holders of the ADSsU.S. would not be able to participate in a preemptivepre-emptive rights offering unless we registered the securities to which the rights relate under the U.S. Securities Act of 1933, as amended (Securities Act) or an exemption from the registration requirements of that Act is available.requirements. In addition, ADS holders would not be able to participate in a preemptivepre-emptive rights offering unless we made arrangements with the depositary to extend that offering to ADS holders of ADSs, which we are not required to do.
We are a Dutch European public company with limited liability (Societas Europaea or SE). If we complete our redomiciliation, we will be a Belgian European public company with limited liability (Societas Europaea or SE). The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.
We are a Dutch European public company with limited liability (Societas Europaea or SE). If we complete our redomiciliation, we will be a Belgian European public company with limited liability (Societas Europaea or SE). Our corporate affairs are, or will be, governed by our Articles of Association and by the laws governing companies incorporated in the Netherlands, and if we complete our redomiciliation, by our Belgian Articles of Association and by the laws governing companies incorporated in Belgium, respectively. The rights of shareholders and the responsibilities of members of our board of directors or if our redomiciliation is completed our Belgian Board may be different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Dutch law to, and the Belgian Board may under Belgian law, consider the interests of our company, our shareholders, our employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder. See “Item 16G.—Corporate Governance” and “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation—Comparison of Belgian Corporate Law and U.S. Corporate Law—Corporate Governance.”
We are not obligated to, and do not comply with, all the best practice provisions of the Dutch Corporate Governance Code, and we do not expect to comply with all principles and provisions of the Belgian Corporate Governance Code if we complete our redomiciliation,DCGC, which may affect your rights as a shareholder.shareholders’ rights.
As a Dutch European public company with limited liability, (Societas Europaea or SE), we are subject to the Dutch Corporate Governance Code dated December 8, 2016, which is in force as of the financial year starting on or after January 1, 2017, or the DCGC. The DCGC contains both principles and best practice provisions for board of directors, management boards, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC applies to all Dutch companies listed on a regulated market, including Euronext Brussels. The principles and best practice provisions apply to our board of directors (in relation to role and composition, conflicts of interest and independency requirements, board committees and remuneration), shareholders and the General Meeting (for example, regarding anti‑takeover protection and our obligations to provide information to our shareholders) and financial reporting (such as external auditor and internal audit requirements). We do not comply with all the best practice provisions of the DCGC. As a Dutch company, we are required to disclose in our annual report, filed in the Netherlands, whether we comply with the provisions of the DCGC. If we do not comply with the provisions of the DCGC (for example, because of a conflicting Nasdaq requirementListing Rule or otherwise), we must list the reasons for any deviation from the DCGC in our annual report. See “Item 16G.—Corporate Governance.”
If we complete our redomiciliation, as a Belgian European public company with limited liability (Societas Europaea or SE), we will be subject toreport filed in the Belgian Corporate Governance Code of March 12, 2009, or the Belgian Corporate Governance Code. The Belgian Corporate Governance Code contains principles, provisions and guidelines for the management and control of companies. The Belgian Corporate Governance Code applies to all Belgian companies listed on a regulated market, including Euronext Brussels. If we complete our redomiciliation, the principles, provisionsNetherlands.
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and guidelines will apply to the Belgian Board (in relation to role and composition, conflicts of interest and independency requirements, board committees and remuneration), our executive management (in relation to role and composition, conflicts of interest and remuneration) and shareholders and the General Meeting (for example, regarding their role and our obligations to provide information to our shareholders). We do not expect to comply with all the provisions and guidelines of the Belgian Corporate Governance Code. If we complete our redomiciliation, under the Belgian Corporate Governance Code, as a Belgian company, we will be required to include a corporate governance statement in our annual report describing whether we comply with all provisions of the Belgian Corporate Governance Code. If we do not comply with the provisions of the Belgian Corporate Governance Code (for example, because of a conflicting Nasdaq requirement or otherwise), we must explain our reasons for any deviation from the Belgian Corporate Governance Code in this corporate governance statement. See “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation—Comparison of Belgian Corporate Law and U.S. Corporate Law—Belgian Corporate Governance Code.” If the Belgian Corporate Governance Code is replaced, these and/or other provisions will apply. See “Management Upon Redomiciliation.”
This may affect your rights as a shareholder and you may not have the same level of protection as a shareholder in another Dutch or Belgian European public company with limited liability (Societas Europaea or SE) listed on a regulated market that fully complies with the DCGC or, respectively, the Belgian Corporate Governance Code, as applicable.
Claims of U.S. civil liabilities may not be enforceable against us.us or the members of our management and our Board of Directors.
We are incorporated under the laws of the Netherlands. If we complete our redomiciliation, we will be incorporated under the laws of Belgium. Substantially all of our assets are located outside the United States.U.S. The majority of the members of our board ofsenior management team and our directors reside outsideare not U.S. residents and we do not have significant assets in the United States.U.S. As a result, it may not be possible, or may be very difficult, for investors to effect service of process within the United StatesU.S. upon such persons or to enforce against them or us in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws.
The United States currently does not have a treaty There are no treaties between the U.S. with either the Netherlands or Belgium providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States,U.S. based on civil liability, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in the Netherlands or Belgium. In order to obtainin Belgium unless the underlying claim was re-litigated before a judgment which is enforceable in the Netherlands, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim with aDutch or Belgian court of competent jurisdiction in the Netherlands. Such party may submit to the Dutch court the final judgment rendered by the U.S. court. If and to the extent that the Dutch court finds that the jurisdiction of the U.S. court has been based on grounds which are internationally acceptable and that proper legal procedures have been observed, the court of the Netherlandsjurisdiction. This will in principle, give binding effect to the judgment of the U.S. court, unless such judgment contravenes principles of public policy of the Netherlands. Dutch courts may deny the recognition and enforcement of punitive damages or other awards. Moreover, a Dutch court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages. Enforcement and recognition of judgments of U.S. courts in the Netherlands are solely governed by the provisions of the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering).
In order to obtain a judgment for the payment of money based on civil liability which is enforceable in Belgium, the judgment must be recognized and be declared enforceable by a Belgian court pursuant to the relevant provisions of the 2004 Belgian Code of Private International Law, or the PIL Code. Recognition or enforcement does not imply a review of the merits of the case and is irrespective of any reciprocity requirement. A U.S. judgment will, however, not be recognized or declared enforceable in Belgium if it infringes upon one or more of the grounds for refusal which are listed in article 25 of the PIL Code. In addition to recognition or enforcement, a judgment by a federal or state court in the United States against us may also serve as evidence in a similar action in a Belgian court if it meets the conditions required for the authenticity of judgments according to the law of the state where it was rendered. In addition, with regard to enforcements by legal proceedings in Belgium (including the recognition of foreign court decisions in Belgium), a registration tax at the rate of 3% of the amount of the judgment is payable by the debtor, if the sum of money which the debtor is ordered to pay by a Belgian court, or by a foreign court judgment that is either
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(i) automatically enforceable and registered in Belgium, or (ii) rendered enforceable by a Belgian court, exceeds €12,500. The registration tax is payable by the debtor. The creditor is jointly liable up to a maximum of one‑half of the amount the creditor recovers from the debtor. A stamp duty is payable for each original copy of an enforcement judgment rendered by a Belgian court, with a maximum of €1,450.
Baseddepend on the lackapplicable Dutch or Belgian national rules. In light of a treaty as describedthe above, U.S. investors may not be able to enforce against us or members of our board of directors or certain experts named herein who are residents of the Netherlands or Belgium or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.laws, against us, members of our management or our Board of Directors or certain experts named herein who are residents of the Netherlands, Belgium or countries other than the U.S. In addition, there is doubt as to whether a Dutch or Belgian court would impose civil liability on us or the members of our management or of our Board of Directors in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction against us, our management or directors.
We areAs a foreign private issuer, and, as a result, we are not subjectexempt from certain rules under U.S. securities laws and are permitted to file less information with the SEC than a U.S. proxycompany.
As a “foreign private issuer” defined in the SEC’s rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non‑U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act,regulations, we are exempt from certain provisions of the U.S. Securities Exchange Act of 1934, as amended (Exchange Act) that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10‑Q containing unaudited financial and other specified information, or current reports on Form 8‑K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20‑F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10‑K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers. However, wecompanies.
We are subject to Dutch laws and regulations and if we complete our redomiciliation, Belgian laws and regulations, with regard to such matters and intend tomatters. While we furnish quarterly unaudited financial information to the SEC on Form 6‑K.6-K, the information we furnish to the SEC is less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers.
As a foreign private issuer, and aswe are permitted by the listing requirements of Nasdaq, we rely onto adopt certain home country governance practices rather than the corporate governance requirements of Nasdaq. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.
We qualify asAs a foreign private issuer. As a result, in accordance with theissuer listed on Nasdaq, we are subject to corporate governance listing requirements of Nasdaq,standards. However, we are permitted to rely on home country governance requirements and certain exemptions thereunder rather than relying on the corporate governance requirements of Nasdaq. In accordance with Dutch law and generally accepted business practices, our Articles of Association do not provide quorum requirements generally applicable to General Meetings. To this extent, our practice varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one‑third of the outstanding voting stock. Although we must provide shareholders with an agenda and other relevant documents for the General Meeting, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands, thus our practice will vary from the requirement of Nasdaq Listing Rule 5620(b). In addition, we have opted out of certain Dutch shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity‑based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events. For an overviewthereunder. Certain of our corporate governance principles, see “Item 16G.—Corporate Governance.” In addition, if we complete our redomiciliation, these andpractices may differ significantly from other variations from the corporate governance requirements of Nasdaq may exist. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to these Nasdaq requirements.
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listing standards.
We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.
We are a foreign private issuer, and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We may no longer be a foreign private issuer as of June 30, 2018 (the end of our second fiscal quarter in the fiscal year after our initial U.S. public offering), which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers as of January 1, 2018. In order to maintain our current status as a foreign private issuer, either (a) a majority of our ordinary shares must be either directly or indirectly owned of record by non‑residentsnon-residents of the United StatesU.S. or (b)(i) a majority of our executive officers or directors may not be U.S. citizens or residents, (ii) more than 50% of our assets cannot be located in the United StatesU.S. and (iii) our business must be administered principally outside the United States.U.S. As of March 16, 2018,February 1, 2024, we believe at least 50% of our outstanding ordinary shares were held by U.S. residents (assuming that all our ordinary shares represented by ADSs were held by residents of the United States)U.S.). If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules.
The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable toas a U.S. domestic issuer may be significantly higher than the costthose we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain
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coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our boardBoard of directors.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make the ADSs less attractive to investors.
We are an “emerging growth company,” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an “emerging growth company,” we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an “emerging growth company,” we are required to report only two years of financial results and selected financial data compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to the last day of the fiscal year ending after the fifth anniversary of our initial U.S. public offering, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our ordinary shares held by non‑affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our fiscal year‑end). We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the price of the ADSs may be more volatile.Directors.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of the ADSs.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemedwere to be material weaknesses or that may require prospective or retroactive changes to our
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financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of the ADSs.
Our management is required to assess the effectiveness of our internal controls and procedures annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” for up to five years from the closing of our initial U.S. public offering. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
If securities or industry analysts cease coverage of us, or publish inaccurate or unfavorable research about our business, the price of the ADSs and our trading volume could decline.
The trading market for the ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If no or too few securities or industry analysts cover us, the trading price for the ADSs would likely be negatively affected. If one or more of the analysts who cover us downgrade the ADSs or publish inaccurate or unfavorable research about our business, the price of the ADSs would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for the ADSs could decrease, which might cause the price of the ADSs and trading volume to decline.
We do not anticipate being treatedclassified as a passive foreign investment company or PFIC, for U.S. federal income tax purposes, for the current taxable year, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to qualify as a PFIC, this could result in adverse U.S. tax consequences to certain U.S. holders.
Generally, if, If our Company is classified as a passive foreign investment company (PFIC)for any taxable year, U.S. investors may be subject to adverse U.S. federal income tax consequences described below under “Taxation –U.S. Federal Income Tax Considerations – Passive Foreign Investment Company Rules.” Our Company will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in which, taking into account a pro rata portion of the income and assets of 25% or more owned subsidiaries, either (i) at least 75% of ourits gross income is passive income,consists of “passive income” or (ii) at least 50% of the average quarterly value of ourits assets is attributable to assets that produce, passive income or are held for the production of, passive income, including cash, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest,income.
Based on our historic and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. Our status as a PFIC depends onanticipated operations, the composition of our income and the projected composition and valueestimated fair market values of our assets (for which purpose the total value of our assets may be determined in part by the market value of our ordinary shares and the ADSs, which are subject to change) from time to time. If we are characterized as a PFIC, U.S. holders of ADSs may suffer adverse tax consequences, including having gains realized on the sale of ADSs treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of sales of ADSs. See “Item 10.E.—Taxation—Certain Material U.S. Federal Income Tax Considerations to U.S. Holders—Passive Foreign Investment Company Considerations.”
Based upon the expected value of our assets, including any goodwill, and the expected composition of our income and assets, we do not anticipate being treatedbelieve that we were a PFIC for our most recent taxable year and do not expect to be classified as a PFIC with respect tofor the current taxable year and should not be treated as suchor for subsequent taxable years.the foreseeable future. However, our status as a PFIC is a fact‑intensivefactual determination made on an annual basis, and we cannot provide any assurances regarding our PFIC status for the current prior or future taxable years.
ITEM 4. INFORMATION ON THE COMPANY
Our legal and commercial name is argenx SE. We were incorporated under the laws of the Netherlands on April 25, 2008, as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid). From incorporation until August 28, 2009, our research and development activities were initially performed in the Netherlands, then Belgium, by argenx N.V. and its legal predecessors. Since August 28, 2009, all our research and development activities have been performed by our wholly-owned subsidiary, argenx BV, under a license provided by argenx N.V. Throughout this time, argenx BV assigned all resulting intellectual property to argenx N.V. On May 28, 2014, we converted to a Dutch public company with limited liability (naamloze vennootschap). On April 26,
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2017, we converted to a Dutch European public company with limited liability (Societas(Societas Europaea or SE)SE). On May 5, 2017, we transferred the legal ownership of all intellectual property rights of argenx SE to argenx BV, effective retroactively as of January 1, 2017. As a result, since January 1, 2017, (i) argenx BV holds all legal and economic ownership of our intellectual property rights, and (ii) the research and development agreement between argenx SE and argenx BV has been terminated.
Our official seat is in Rotterdam, the Netherlands, and our registered office is at Willemstraat 5, 4811 AH, Breda,Laarderhoogtweg 25, 1101 EB Amsterdam, the Netherlands. We are registered with the trade register of the Dutch Chamber of Commerce under number 24435214. Our European legal entity identifier number is 7245009C5FZE6G9ODQ71. Our telephone number is +32 9 310 34 00.+31 (0) 10 70 38 441. Our website address is http://www.argenx.com. The information contained on, or that can be accessed through, ourThis website is not a part of, and shall not be incorporated by reference into,in this annual report. We have included our website address asAnnual Report. The SEC maintains an inactive textual reference only.Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The registered agent for service of process in the United StatesU.S. is C TCT Corporation System, with an address at 111 8th8th Avenue, New York, NY 10011.
Our actualFor information on our capital expendituresexpenditure for the years ended December 31, 2015, 20162023, 2022 and 2017 amounted2021, please see “Note 4—Property, plant and equipment” and “Note 5—Intangible assets” in our consolidated financial statements which are appended to €0.3 million, €0.9 million, and €0.4 million respectively. These capital expenditures primarily consisted of office and laboratory equipment and IT equipment. We expect our capital expenditures to increase in absolute terms inannual report on Form 20-F for the near term as we continue to advance our research and development programs and grow our operations.period ended December 31, 2023. We anticipate our capital expenditure in 20182024 to be financed from the cash flows from operating activities and cash reserves. For more information on our capital expenditures and requirements, see the section of this annual report titled “ItemItem 5.B.— “Liquidity and Capital Resources—Resources—Cash Flows—Flows—Operating and Capital Expenditure Requirements.”
Overview of Our Restructuring and Anticipated Redomiciliation
Background
From our incorporation in 2008 until August 28, 2009, our research and development activities were performed in the Netherlands by argenx N.V. On August 28, 2009, we moved our research and development activities to Belgium for various business reasons. Accordingly, as of August 28, 2009, our wholly owned subsidiary, argenx BVBA, or the Belgian BVBA,No takeover bid has been performing all research and development activities under a license providedinstigated by argenx N.V. (since April 26, 2017, argenx SE) and has been assigning all resulting intellectual property rights to argenx N.V. As a consequence, argenx N.V. remained the legal owner of the intellectual property rights relating to our platform technologies.
The diagram below sets out our group structure and legal ownershipthird parties in respect of our intellectual property,equity during the current or IP, rights as of December 31, 2016:
previous fiscal years.
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Since all our research and development activities have been performed by the Belgian BVBA since August 28, 2009, we believe that value creation is not adequately aligned with our intellectual property ownership structures as required under the Base Erosion and Profit Shifting project of the Organization for Economic Co-operation and Development. Additionally, we face a compliance burden from an organizational and regulatory perspective, as a company incorporated and existing under Dutch law, while our shares are listed on Euronext Brussels. Accordingly, we have implemented a business restructuring, as described below, and we intend to seek shareholder approval to reorganize under the laws of Belgium.
Restructuring
In view of the above considerations, a business restructuring has been implemented, which we refer to as the restructuring, which involves two principal steps as described below.
Step 1: Conversion of argenx N.V. to argenx SE
In order to allow for the transfer of our registered office from the Netherlands to Belgium, we have converted to a Dutch European public company with limited liability (Societas Europaea or SE), since there is currently no clear legal framework under Dutch law for such transfer of registered office by a Dutch public company with limited liability (naamloze vennootschap). However, it is possible for a European public company with limited liability (Societas Europaea or SE) to cross- border transfer its registered office pursuant to the relevant provisions of the European Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (Societas Europaea or SE), or the SE regulation. At our General Meeting held on April 26, 2017, our shareholders approved our conversion into a Dutch European public company with limited liability (Societas Europaea or SE) pursuant to a notarial deed of conversion and amendment, which notarial deed was executed on the same date.
The diagram below sets out our group structure and legal ownership of intellectual property rights effective as of April 26, 2017:
Step 2: Transfer of ownership of intellectual property rights to the Belgian BVBA
On May 5, 2017, we transferred the legal ownership of all intellectual property rights of argenx SE to the Belgian BVBA, effective as of January 1, 2017, resulting in the Belgian BVBA holding all legal and economic ownership of our intellectual property rights. As a consequence, the research and development agreement between argenx SE and the Belgian BVBA has been terminated effective as of January 1, 2017.
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The diagram below sets out our group structure and legal ownership of intellectual property rights following completion of the transfer of ownership of intellectual property rights to the Belgian BVBA, as of the date of this annual report:
Transfer of Our Registered Office from the Netherlands to Belgium
Following our restructuring, and also in view of the above considerations, we intend to transfer our corporate seat located in Rotterdam, the Netherlands and our registered office located at Willemstraat 5, 4811 AH, Breda, the Netherlands, to Industriepark Zwijnaarde 7, Building C, 9052 Zwijnaarde (Ghent), Belgium, or our redomiciliation. If we complete our redomiciliation, we will no longer have any presence in the Netherlands. We may seek shareholder approval to reorganize under the laws of Belgium, and in light of the contemplated legislative changes in Belgium, we may postpone our redomiciliation until these changes have entered into force. On July 20, 2017, the Belgian council of ministers approved a draft new Belgian companies code, which will replace the current Belgian Companies Code and will contain major changes in Belgian corporate law. Following the approval by the Belgian council of ministers, the draft new Belgian companies code has been submitted for review by the Belgian Council of State and will subsequently go through the parliamentary approval process, resulting in the publication of the new Belgian companies code in the Belgian Official Gazette (Belgisch Staatsblad), the timing of which is unclear as of the date of this annual report. It is contemplated that the new Belgian companies code will enter into force on January 1 of the year following publication of the new Belgian companies code in the Belgian Official Gazette (Belgisch Staatsblad). In addition, a new Belgian corporate governance code replacing the Belgian Corporate Governance Code and incorporating the draft new Belgian companies code is being prepared. Given these contemplated major changes to Belgian corporate law, we may postpone seeking shareholder approval for our redomiciliation until the entry into force of the new companies code, which decision may depend on the actual timing of the entry into force of the new Belgian companies code. If we seek to implement our redomiciliation, this will be subject to a procedure governed by the SE regulation, which can be summarized as follows:
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The diagram below sets out our group structure and legal ownership of intellectual property rights effective upon the completion of our redomiciliation:
We may not be able to successfully complete our redomiciliation, in which case we will remain a European public company with limited liability (Societas Europaea or SE) under Dutch law.
Tax Considerations
In view of the above considerations, on April 20, 2017, we reached an agreement with the Dutch tax authorities on the following aspects of the restructuring:
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In view of the above considerations, on April 4, 2017, we requested a tax ruling from the Belgian ruling commission with respect to the following aspects of the restructuring:
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In summary, the restructuring will result in a taxable amount for argenx SE of €2.4 million subject to Dutch corporate income tax at a tax rate set out above and an elimination of its tax loss carry forwards for Dutch corporate income tax purposes an amount of €77.5 million. On the other hand, the restructuring is expected to bring additional deductible costs to the Belgian BVBA for an amount of up to €80 million.
As set out in “Item 3.D.—Risk Factors—Risks Related to Our Organization and Operations—The restructuring and its contemplated tax treatment is subject to approval by the Belgian tax authorities,” we may not obtain the tax ruling from the Belgian ruling commission, and we may not be allowed to treat the amount of €80 million as a deductible cost for the Belgian BVBA.
We are a clinical‑stage biotechnologycommercial-stage, global, fully-integrated biopharma company developing a deep pipeline of differentiated antibody‑based therapies for the treatment of severe autoimmune diseases and cancer. Utilizingdiseases. By combining our suite of antibody engineering technologies we are focused on developing product candidates with the potential to be either first‑in‑class against novel targets or best‑in‑class against known, but complex, targets in order to treat diseases with a significant unmet medical need. Our SIMPLE Antibody Platform, based on the powerful llama immune system, allows us to exploit novel and complex targets, and our three antibody Fc engineering technologies are designed to enable us to expand the therapeutic indexdisease biology expertise of our product candidates. Together with our antibody discovery and development expertise, this suite of technologies has enabled ourresearch collaborators, we aim to translate immunology breakthroughs into a pipeline of seven product candidates. Two ofnovel antibody-based medicines through our product candidatesdiscovery engine, the IIP. We developed and are commercializing the first approved FcRn blocker in clinical proof‑of‑concept trials for three indications, one of which has achieved clinical proof‑of‑conceptthe U.S., Japan, Israel, the EU, Mainland China and is being prepared for Phase 3 clinical development.
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We recently completed a Phase 2 clinical trial for ARGX‑113, our most advanced product candidate, for the treatment of the rare autoimmune disease myasthenia gravis, or MG, and we reported topline data from this trial in December 2017. ARGX‑113 demonstrated strong clinical improvement and statistically significant benefit over placebo. ARGX‑113 treatment resulted in a strong clinical improvement over placebo during the entire duration of the study as measured by all four predefined clinical efficacy scales. In addition, ARGX‑113 was observed to have a favorable tolerability profile consistent with that observed in our Phase 1 clinical trial. In March 2017, we initiated a Phase 2 clinical trial of ARGX‑113 for the treatment of another rare autoimmune disease, primary immune thrombocytopenia, or ITP. In September 2017, we initiated a Phase 2 clinical trial of ARGX‑113 for the treatment of a third rare autoimmune disease, pemphigus vulgaris, or PV.Canada. We are currently developingevaluating efgartigimod in multiple serious autoimmune diseases and advancing several earlier stage experimental medicines.
For additional information regarding our second lead product candidate, ARGX‑110, for rareCompany’s principal markets and aggressive hematological cancers, initially for T‑cell lymphoma, or TCL,revenue breakdown, see Item 5.A. “Operating Results” and acute myeloid leukemia, or AML, as well as high‑risk myelodysplastic syndrome, or MDS. In December 2016, we commenced a Phase 1/2 clinical trial of ARGX‑110 in combination with azacitidine for the treatment of newly diagnosed AML or high‑risk MDS patients, and in April 2017, we initiated the Phase 2 part of a Phase 1/2 clinical trial of ARGX‑110 for the treatment of cutaneous TCL, or CTCL. We reported interim data for both clinical trials in December 2017.
We have a disciplined strategy to maximize the value of our pipeline whereby we plan to retain development and commercialization rights to those product candidates that we believe we can ultimately commercialize successfully on our own if they are approved. We plan to collaborate on product candidates that we believe have promising utility in disease areas or patient populations that are better served by the resources of larger biopharmaceutical companies. We have entered into collaborations with a number of biopharmaceutical companies, including our collaboration with AbbVie S.À.R.L, or AbbVie, for ARGX‑115, a cancer immunotherapy‑focused product candidate against the novel target glycoprotein A repetitions predominant, or GARP. We received a $40.0 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) upfront payment and a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) preclinical milestone payment in connection with this collaboration.
Our product candidates are focused on indications for which there is a solid biological rationale and for which we believe there is an advantage to utilizing our suite of technologies outlined below:
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Our product candidate pipeline includes both wholly‑owned and partnered programs. We refer to programs for which we retain the exclusive right to develop and commercialize the product candidate on a worldwide basis as our wholly‑owned programs. We refer to programs for which we have entered into collaboration agreements with third parties for the development and commercialization of the product candidate as our partnered programs. While we have an investigational new drug application, or IND, in effect for ARGX‑113 for the treatment of MG with the U.S. Food and Drug Administration, or FDA, we have only conducted part of our Phase 2 clinical development in MG in the United States.
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Our product candidate pipeline enabled by our suite of technologies is set forth below:
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We believe that our clinical expertise and execution capabilities position us well to advance our product pipeline and enter into collaborations designed to maximize the value of our portfolio. We have assembled a team of over 90 employees and consultants with experience across the spectrum of antibody drug discovery and development and business development. Members of our board of directors and management team have extensive experience in the life sciences industry and have previously served at companies including Cambridge Antibody Technology Group Plc; Celgene Corporation; Galapagos NV; GlaxoSmithKline plc; Janssen Pharmaceuticals, Inc.; Micromet, Inc.; Nicox S.A.; The Procter & Gamble Company; Quintiles IMS Holdings, Inc. and Unilever NV.
Our Competitive Strengths
We believe that the combination of our technologies, expertise and disciplined focus will enable us to overcome many of the challenges associated with antibody drug development and positions us to be a leader in delivering therapies
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to patients suffering from severe autoimmune disease and cancers for which the current treatment paradigm is inadequate. Our competitive strengths include:
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For a breakdown of our total revenues by activity and geographic market, please see “Note 5.3—Segment reporting” in our consolidated financial statements which are appended to this annual report.our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
2023 In Brief
Operational Highlights
At the start of 2023, we shared our key drivers for the year to continue our trajectory of value creation. First, we aimed to reach more patients globally with VYVGART, our first-in-class FcRn blocker. VYVGART and VYVGART SCare now approved in more than 30 countries or regions and by the end of 2023, we had treated over 6,000 gMG patients globally with our innovations.
gMG is just the beginning of our mission to transform autoimmunity. Our Strategy
Our goalsecond key driver was to pioneer the FcRn class of medicines, including broadening the scope of indications we are evaluating with efgartigimod. As of the end of 2023, efgartigimod is to deliver therapies that are either first‑in‑classapproved or best‑in‑class to patients suffering from severeunder regulatory review in three indications, including gMG, CIDPand ITP, and is being evaluated in more than 10 additional serious autoimmune diseases and various cancers for which there exists a significant unmet medical need.indications. We are also focusedwell on attaining this goalour way to achieve our ‘argenx 2025’ vision of efgartigimod being commercially available or in clinical development in 15 indications by 2025.
Third, we worked to advance our pipeline of differentiated immunology assets. Beyond efgartigimod, our wholly-owned clinical pipeline consists of empasiprubart (ARGX-117) targeting complement component 2 (C2) and ARGX-119 targeting muscle-specific kinase (MuSK). We believe both have potential as a manner that is disciplined fornovel treatment modality in multiple serious indications.
The fourth key driver was to build out our innovation ecosystem, serving our core mission to sustainably deliver immunology innovations to the patients who need them. We continue to invest in our IIPfrom which we drive pipeline expansion by collaborating with leading disease biologists who are researching first-in-class disease targets or pathways. Our IIP has a companytrack record of success and nine programs have been tested in humans since our size. We plan to:inception.
Reach More Patients Globally with VYVGART
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● | Pricing and reimbursement discussions for VYVGART and VYVGART SC remain ongoing in multiple jurisdictions, including in several countries in the EU |
● | We filed for approval of VYVGART for ITP in Japan and a decision is expected in the first quarter of 2024 |
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● | A supplemental Biologics License Application (sBLA) for SC efgartigimod for CIDP has been accepted for priority review by the FDA, with |
● | We have filed for approval of VYVGART SC in |
● | We entered into a VYVGART commercial and distribution agreement with Handok in South Korea (the Handok Agreement) |
● | We filed for approval of VYVGART for gMG in several jurisdictions and we are expecting multiple decisions by the end of 2024 |
Advance Extensive Pipeline
We continue to demonstrate breadth and depth within our immunology pipeline and have advanced multiple pipeline-in-a-product candidates. With efgartigimod, we are furthering our leadership in FcRn and we expect to be approved or in development in 15 autoimmune indications by 2025. Beyond efgartigimod, we are advancing earlier stage pipeline programs, including empasiprubart (C2 inhibitor) with Phase 2 proof-of-concept (POC) clinical trials ongoing in multifocal motor neuropathy (MMN), delayed graft function (DGF) and dermatomyositis (DM). In addition, we expect to initiate Phase 1b/2a clinical trials of ARGX-119, a MuSK agonist, in congenital myasthenic syndrome (CMS) and amyotrophic lateral sclerosis (ALS) in 2024.
Pioneer the FcRn Pathway with Efgartigimod
● | Neurology indications: |
● | ADHERE: following the positive topline results from the ADHERE clinical trial in CIDP, an |
o | Clinical trial met primary endpoint (p=0.000039); SC efgartigimod demonstrated 61% reduction (HR: 0.39 95% CI: 0.25; 0.61) in risk of relapse versus placebo |
● | ALKIVIA: operationally seamless Phase 2/3 clinical trial is ongoing with SC efgartigimod for three subtypes of idiopathic inflammatory myopathies (Myositis), including immune-mediated necrotizing myopathy (IMNM), anti-synthetase syndrome (ASyS) and DM; analysis planned for first 30 patients of each subtype |
● | Registrational clinical trial in thyroid eye disease (TED) expected to |
● | Hematology/rheumatology indications: |
● | ADVANCE-IV: positive clinical trial results formed basis of filing in Japan for |
● | ADVANCE-SC: topline data from |
o | Primary endpoint was not met (p=0.5081); 13.7% (17/124) of treated patients demonstrated sustained platelet count response compared to 16.2% (11/68) of placebo patients. Secondary endpoints were also not met |
● | RHO: Phase 2 POC clinical trial in primary Sjögren’s disease (SjD) is ongoing through our partnership with IQVIA Ltd (IQVIA) |
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● | ALPHA: Phase 2 POC clinical trial in postural orthostatic tachycardia syndrome post-COVID-19 (PC-POTS) ongoing through our partnership with IQVIA |
● | Dermatology indications: |
● | ADDRESS: announced topline data of SC efgartigimod in PV and |
o | Primary endpoint was not met; proportion of PV patients achieving primary endpoint of CRmin was not significantly different between SC efgartigimod and placebo |
o | Treatment with SC efgartigimod led to CRmin in 35.5% of patients compared to 30.3% with placebo (p=0.5956). Secondary endpoints were also not met |
● | BALLAD: in light of ADDRESS results and the comparable biology between PV and bullous pemphigoid (BP), we decided to stop enrollment of BALLAD. We will integrate key learnings from ADDRESS and data from already enrolled patients in BALLAD and we plan to communicate on a revised development plan before end of 2024 |
● | Nephrology indications: |
● | MembranousNephrology (MN): Phase 2 POC clinical trial ongoing through our partnership with Zai Lab |
● | Lupus Nephritis (LN): Phase 2 POC clinical trial ongoing through our partnership with Zai Lab |
● | Antibody-mediatedrejection (AMR): IND submission planned for the second quarter of 2024 |
Broaden Immunology Pipeline with Empasiprubart and ARGX-119
● | Empasiprubart (C2 inhibitor): |
● | ARDA: Phase 2 POC clinical trial ongoing of empasiprubart in MMN |
o | In January 2024, we reported positive clinical data from the |
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Build out Innovation Ecosystem
● | In January 2024, we announced the nomination of four new pipeline candidates, including: ARGX-213 targeting FcRn and furthering argenx’s leadership in this new class of medicine; ARGX-121 and ARGX-220, which are first-in-class targets broadening argenx’s focus across the immune system; and ARGX-109, targeting IL-6, which plays an important role in inflammation. Preclinical work is ongoing in each candidate. |
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● | We entered into a collaboration with Genmab to jointly discover, develop and commercialize novel therapeutic antibodies with applications in immunology, as well as in oncology therapeutic areas. |
Corporate Achievements
● | Mr. Steve Krognes joined our Board of Directors in February 2023 as a non-executive director and chairperson of the audit and compliance committee |
● | Mr. J. Donald deBethizy, who has served as a director since May 2015, was appointed to serve as vice-chairman of the Board of Directors as of February 2023 |
● | Karen Massey joined argenx as chief operating officer (COO) in March 2023 succeeding Keith Woods. Mr. Woods transitioned to serve as strategic advisor to the commercialization committee of the Board of Directors |
● | Expansion to 1,148 full-time employees (as of December 31, 2023) to support further growth of our business, including fully staffed commercial teams in the U.S., Europe, Japan and Canada |
2023 Financial Highlights
● | Product net sales of $1.2 billion |
● | Cash and cash equivalents and current financial assets of $3.2 billion enabling execution of our ambitious strategy objective |
● | Operating loss $425 million |
● | Loss $295 million |
● | $1.3 billion raised in gross proceeds in global offering of 2,581,633 ordinary shares (including ordinary shares represented by ADSs, which included the full exercise of the underwriters’ option to purchase 336,734 additional ADSs |
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2024 Outlook
The table above is subject to risks and uncertainties that may materially impact the achievement of our 2024 outlook. For more information, please refer to Item 3.D. “Risk Factors” of this Annual Report for a discussion of such risks and uncertainties.
Our Medicines
VYVGART is a first-in-class antibody fragment targeting FcRn and is now approved for gMG in more than 30 countries globally for the treatment of gMG.
VYVGART SC is now approved in the U.S., the EU, the UK, and in Japan for the treatment of gMG. This makes VYVGART the only gMG treatment available as both an IV and simple SC injection.
Our Pipeline
● | Efgartigimod is a human IgG1 antibody region interacting with cell surface Fc receptors (Fc) fragment that is designed to target the FcRn and reduce immunoglobulin G (IgG). It is approved or under regulatory review in 3 indications, |
● | Empasiprubart (C2 inhibitor): empasiprubart is a novel complement inhibitor targeting C2, blocking the function of both the classical and lectin pathways while leaving the alternative pathway intact. We believe |
● | ARGX-119 (MusK agonist): ARGX-119 is an agonist SIMPLE ANTIBODY™ to the MuSK receptor with |
● | Preclinical Candidates: Preclinical work is ongoing for each of the |
o | ARGX-213, targets FcRn, furthering argenx’s leadership in this new class of medicine |
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o | ARGX-109, targets IL-6, which plays an important role in inflammation |
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IIP
Our IIP is central to our core business strategy of co-creation and innovation. The IIP also serves as our discovery engine to identify novel targets and together, in collaboration with our scientific and academic partners, to build potential new pipeline candidates. Every current pipeline candidate from both our wholly-owned and partnered pipeline emerged from an IIP collaboration. The IIP enables us to build our broad pipeline of products and product candidates and advance our long-term strategy to be a sustainable, integrated immunology company.
Examples of our IIP programs include:
● | Efgartigimod emerged from a collaboration with Professor Sally Ward at the University of Texas Southwestern Medical Center (UT Southwestern) and later became one of the blueprints for our IIP collaborations. Professor Ward’s research identified the crucial role that FcRn plays in maintaining and distributing IgGs throughout the body. Efgartigimod is a human IgG1 Fc fragment that is equipped with ABDEG™ mutations, which we in-licensed from UT Southwestern. These proprietary mutations modified efgartigimod to |
● | Empasiprubart was built in collaboration with Broteio Pharma B.V. (Broteio). Broteio was launched in 2017 with support from Professor Erik Hack and |
● | ARGX-119 was built in collaboration with the Leiden University Medical Center (LUMC) and New York University (NYU) with support from teams led by Professor Verschuuren and Professor Steve Burden, respectively. Both groups have world-class expertise in unraveling the biological mechanism of neuromuscular disease and translating these insights from the lab to the patient. |
Our Suite of Technologies
Harnessing the Therapeutic Potential of Antibodies
Antibodies are Y‑shaped proteins used by the immune system to target and clear foreign bodies, including pathogens, such as bacteria and viruses, and tumor cells. Antibodies are composed of two structurally independent parts, the variable region, or V‑region, and the constant, or Fc, region. The V‑region is responsible for targeting a specific antibody to an antigen and is different for every type of antibody. The Fc region does not interact with antigens, but rather interacts with components of the immune system through a variety of receptors on immune and other cells. These interactions allow antibodies to regulate the immune response and levels of cell‑killing ability, or cytotoxicity, as well as their persistence in circulation and tissues. Fc regions are the same and interchangeable from antibody to antibody.
● | Through our IIP, we collaborate with scientific and academic partners to identify immunology breakthroughs and build potential pipeline candidates. This is done through co-creation. We bring to the collaboration our unique suite of antibody engineering technologies and experience in clinical development to complement our partners’ expertise in disease and target biology. |
● | SIMPLE ANTIBODY™ platform technology: Our proprietary SIMPLE ANTIBODY™ platform technology, based on the powerful llama immune system, allows us to exploit novel and complex disease biology targets. The platform sources antibody variable regions (V-regions) from the immune system of outbred llamas, each of which has a different genetic background. The llama produces highly diverse panels of antibodies with a high |
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human homology, or similarity, in their V-regions when immunized with targets of human disease. Our SIMPLE ANTIBODY™ platform technology allows us to access and explore a broad target universe while potentially minimizing the long timelines associated with generating antibody candidates using traditional methods. |
● | NHANCE™, ABDEG™, POTELLIGENT®, and dehydrated hereditary stomatocytosis(DHS) mutations focus on engineering the Fc region of antibodies in order to augment their intrinsic therapeutic properties. In addition, we obtained a non-exclusive research license and option from Chugai Pharmaceutical Co., Ltd. (Chugai) for the SMART-Ig® (‘Recycling Antibody’ and part of ‘Sweeping Antibody’) and ACT-Ig® (Antibody half-life extending) technologies. These technologies are designed to enable us to expand the therapeutic index of our product candidates, which is the ratio between toxic and therapeutic dose, by potentially modifying their half-life, tissue penetration, rate of disease target clearance and potency. In 2020, we also entered into a non-exclusive research agreement with the Clayton Foundation under which we may access the Clayton Foundation’s proprietary DHS mutations to extend the serum half-life of therapeutic antibodies. |
● | Halozyme’sENHANZE®SC drug delivery technology: we have exclusive access to ENHANZE® for FcRn, C2 and four additional target nominations. The global collaboration and license agreement with Halozyme Therapeutics, Inc. (Halozyme)was announced in February 2019 and expanded in October 2020. The ENHANZE®technology has the potential to shorten drug administration time, reduce healthcare practitioner time and offer additional flexibility and convenience for patients. |
● | In April 2021, we entered into a collaboration and license agreement with Elektrofi, Inc. (Elektrofi) to explore Elektrofi’s high concentration technology for efgartigimod, and up to one additional target (Elektrofi Agreement). |
As shown in Figure 1, we apply a unique suite of technologies to create antibodies with optimized V‑regionsOur Products and an enhanced Fc region. Used alone or in combination, we believe that our suite of technologies enable us to create product candidates with potential first‑in‑class and best‑in‑class therapeutic activity against a wide range of targets.
Figure 1: Overview of our suite of technologies
Our Proprietary SIMPLE Antibody Platform
Our proprietary SIMPLE Antibody Platform sources V‑regions from conventional antibodies existing in the immune system of outbred llamas. Outbred llamas are those that have been bred from genetically diverse parents, and each has a different genetic background. The llama produces highly diverse panels of antibodies with a high human homology in their V‑regions when immunized with human disease targets. We then combine these llama V‑regions with Fc regions of fully human antibodies, resulting in antibodies that we then produce in industry‑validated production cell lines. The resulting antibodies are diverse and, due to their similarity to human antibodies, we believe they are well suited to human therapeutic use. With this breadth of antibodies, we are able to test many different epitopes. Being able to test many different epitopes with our antibodies enables us to search for an optimized combination of safety, potency and species cross‑reactivity with the potential for maximum therapeutic effect on disease. These antibodies are often cross‑reactive with the rodent version of chosen disease targets. This rodent cross‑reactivity enables more efficient preclinical development of our product candidates because most animal efficacy models are rodent‑based. By contrast, most other antibody discovery platforms start with antibodies generated in inbred mice or synthetic antibody libraries, approaches that we believe are limited by insufficient antibody repertoires and limited diversity, respectively. Our SIMPLE Antibody Platform allows us to access and explore a broad target universe, including novel and complex targets, while minimizing the long timelines associated with generating antibody candidates using traditional methods.
Our Fc Engineering Technologies
Our antibody engineering technologies—NHance, ABDEG and POTELLIGENT—focus on engineering the Fc region of antibodies in order to augment their interactions with components of the immune system, thereby potentially expanding the therapeutic index of our product candidates by modifying their half‑life, tissue penetration, rate of disease target clearance and potency. For example, our NHance and ABDEG engineering technologies enable us to modulate the interaction of the Fc region with FcRn, which is responsible for regulating half‑life, tissue distribution and pharmacodynamic properties of IgG antibodies. Similarly, our POTELLIGENT engineering technology modulates the
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interaction of the antibody Fc region with receptors located on specialized immune cells known as natural killer, or NK, cells. These NK cells can destroy the target cell, resulting in enhanced antibody‑dependent cell‑mediated cytotoxicity, or ADCC.
NHance and ABDEG: Modulation of Fc Interaction with FcRn
An illustration of the FcRn‑mediated antibody recycling mechanism is shown in Figure 2. (1) Serum proteins, including IgG antibodies, are routinely removed from the circulation by cell uptake. (2) Antibodies can bind to FcRn, which serves as a dedicated recycling receptor in the endosomes, which have an acidic environment, and then (3A) return to the circulation by binding with their Fc region to FcRn. (3B) Unbound antibodies end up in the lysosomes and are degraded by enzymes. Because this Fc/FcRn interaction is highly pH‑dependent, antibodies tightly bind to FcRn at acidic pH (pH 6.0) in the endosomes, but release again at neutral pH (pH 7.4) in the circulation.
Figure 2: The FcRn‑mediated recycling mechanism
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NHance
NHance refers to two mutations that we introduce into the Fc region of an IgG antibody. NHance is designed to extend antibody serum half‑life and increase tissue penetration. In certain cases, it is advantageous to engineer antibodies that remain in the circulation longer, allowing them to potentially exert a greater therapeutic effect or be dosed less frequently. As shown in Figure 3, (1) NHance antibodies bind to FcRn with higher affinity, specifically under acidic pH conditions. (2) Due to these tighter bonds, NHance FcRn‑mediated antibody recycling is strongly favored over lysosomal degradation, although some degradation does occur. (3) NHance allows a greater proportion of antibodies to return to the circulation potentially resulting in increased bioavailability and reduced dosing frequency. ARGX‑111, ARGX‑109 and a number of our discovery‑stage programs utilize NHance.
Figure 3: NHance mutations favor theFcRn‑mediated recycling of IgG antibodies
ABDEG
ABDEG refers to five mutations that we introduce in the Fc region that increase its affinity for FcRn at both neutral and acidic pH. In contrast to NHance, ABDEG‑modified Fc regions remain bound to FcRn if the pH changes, occupying FcRn with such high affinity that they deprive endogenous IgG antibodies of their recycling mechanism, leading to enhanced clearance of such antibodies by the lysosomes. Some diseases mediated by IgG antibodies are directed against self‑antigens. These self‑directed antibodies are referred to as auto‑antibodies. We use our ABDEG technology to reduce the level of these pathogenic auto‑antibodies in the circulation by increasing the rate at which they are cleared by the lysosomes. ABDEG is a component in a number of our product candidates, including ARGX‑113.
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As shown in Figure 4, our ABDEG technology can also be used with our pH‑dependent SIMPLE Antibodies in a mechanism referred to as sweeping. Certain SIMPLE Antibodies bind to their target in a pH‑dependent manner. These antibodies (1) bind tightly to a target at neutral pH while in circulation, and (2) release the target at acidic pH in the endosome. (3) The unbound target is degraded in the lysosome. (4) However, when equipped with our ABDEG technology, the therapeutic antibodies remain tightly bound to FcRn at all pH levels and are not degraded themselves. Instead, they are returned to the circulation where they can bind new targets. We believe this is especially useful in situations where high levels of the target are circulating or where the target needs to be cleared very quickly from the system.
Figure 4: SIMPLE Antibody and ABDEG
technologies work in concert to sweep
disease targets
POTELLIGENT: Modulation of Fc Interaction with NK Cells
POTELLIGENT modulates the interaction of the Fc region with the Fc gamma receptor IIIa located on specialized immune cells, known as NK cells. These NK cells can destroy the target cell, resulting in enhanced ADCC. POTELLIGENT changes the Fc structure by excluding a particular sugar unit such that it enables a tighter fit with the Fc gamma receptor IIIa. The strength of this interaction is a key factor in determining the killing potential of NK cells. An independent publication reported that the exclusion of this sugar unit of the Fc region increases the ADCC‑mediated cell‑killing potential of antibodies by 10‑ to 1000‑fold. ARGX‑110 and ARGX‑111 utilize POTELLIGENT.
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Our Wholly‑Owned ProgramsProduct Candidates
The following is the pipelinetable summarizes key information on our portfolio of our wholly‑ownedlead product and product candidates as of the date of this Annual Report.
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Our Programs
VYVGART
Approval in gMG
Our two approved medicines for gMG are VYVGART and discovery programs:
ARGX‑113
We are currently developing our lead product candidate, ARGX‑113,VYVGART SC. VYVGART is a FcRn blocker approved for the treatment of adults with gMG who are AChR-AB+ in the U.S., the EU, Israel, the UK, Mainland China and Canada and for the treatment of adults with gMG who do not have sufficient response to steroids or non-steroidal immunosuppressive therapies (ISTs), including seronegative patients, in Japan. Our second product, VYVGART SC, is a subcutaneous combination of efgartigimod alfa and rHuPH20, Halozyme’s ENHANZE® SC drug delivery technology. It has been approved for the treatment of adults with gMG who are AChR-AB+ as VYVGART HYTRULO in the U.S. and VYVGART SC in the EU and the UK. It has also been approved as VYVDURA in Japan for the treatment of adults with gMG who do not have sufficient response to steroids or non-steroidal ISTs, including seronegative patients.
gMG is a rare and chronic autoimmune disease, often causing debilitating and potentially life-threatening muscle weakness. A key driver of gMG is the action of AChR autoantibodies at the neuromuscular junction. VYVGART, a human IgG1 antibody fragment that binds to FcRn, acts by reducing circulating IgG antibodies.
The approval of VYVGART is based on results from the global Phase 3 ADAPT clinical trial, which were published in the July 2021 issue of The Lancet Neurology (source: Howard JF Jr et al., Safety, efficacy, and tolerability of efgartigimod in patients with MG, ITPgeneralised myasthenia gravis (ADAPT): a multicentre, randomised, placebo-controlled, Phase 3 trial. Lancet Neurology. 2021; 20: 526-36).
The ADAPT clinical trial demonstrated significantly more AChR-AB+ gMG patients were responders on the Myasthenia Gravis Activities of Daily Living (MG-ADL) score following treatment with efgartigimod compared with placebo (67.7% vs. 29.7%; p<0.0001). Responders were defined as having at least a two-point improvement sustained for four or more consecutive weeks on the MG-ADL score. Additionally, 40% of patients treated with efgartigimod achieved minimal symptom expression defined as MG-ADL scores of zero (symptom free) or one, compared to 11.1% of patients who received placebo. Among AChR-AB+ responders, 84.1% showed clinically meaningful improvement on the MG-ADL score within the first two weeks of treatment. The safety profile of efgartigimod was comparable to placebo.
The approvals of VYVGART SC are based on positive results from the global Phase 3 ADAPT-SC bridging clinical trial.
The ADAPT-SC clinical trial established the efficacy of VYVGART SC by demonstrating a reduction in anti-AChR antibody levels comparable to VYVGART IV in adult gMG patients. The primary endpoint of noninferiority was met (p< 0.0001) and PV, allVYVGART SC demonstrated mean total IgG reduction of 66.4% from baseline at day 29, compared to 62.2% with VYVGART. Additional key secondary endpoints were met, which were consistent with efficacy measures from the ADAPT clinical trial identifying the correlation between total IgG reduction and clinical benefit in gMG. VYVGART SC has a demonstrated safety profile, consistent with the ADAPT IV clinical trial. As commonly observed with biologics administered subcutaneously, VYVGART SC showed injection site reactions. Such injection site reactions (ISRs) were mild to moderate and did not lead to treatment discontinuation.
Commercialization and Regulatory Plans
VYVGART has been approved in the U.S., Japan, Europe, Mainland China, Canada, the UK and Israel for the treatment of gMG. VYVGART launched in the U.S., Japan, Mainland China, Canada and some countries in Europe.
In Mainland China, VYVGART was added to the National Reimbursement Drug List (NRDL) in January 2024.
VYVGART SC has been approved in the U.S., in Europe, the UK and in Japan. VYVGART SC launched in the U.S. and in Germany.
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Launches of both VYVGART and VYVGART SC in multiple jurisdictions and countries are planned following pricing and reimbursement negotiations.
We have established our own sales force in the U.S., Japan, Europe, Canada and the UK for VYVGART for the treatment of gMG. We plan to expand our own sales and marketing capabilities and promote our products and product candidates in other regions if we decide there is a business case to do so after regulatory approval has been obtained.
Development and commercialization may also be done through collaborations with third parties. In January 2021, we entered into an exclusive out-license agreement with Zai Lab (Zai Lab Agreement), a commercial-stage biopharmaceutical company, for the development and commercialization of efgartigimod in Greater China. Zai Lab announced approval of VYVGART in Mainland China in June 2023 for the treatment of adult gMG patients. Under the Zai Lab Agreement, we received and continue to be eligible for certain milestone payments and royalties based on annual net sales of efgartigimod in Greater China.
In October 2021, we announced an exclusive distribution agreement with Medison to commercialize efgartigimod for gMG in Israel (Medison Agreement). Medison filed for and obtained approval for VYVGART in Israel in April 2023. On June 6, 2022 we announced an exclusive multi-regional agreement with Medison to commercialize efgartigimod in 14 countries, including Poland, Hungary, Slovenia, Czech Republic, Romania, Bulgaria, Lithuania, Croatia, Slovakia, Estonia, Latvia, Greece, and Cyprus, for the treatment of adult patients with gMG (Medison Multi-Regional Agreement).
In January 2022, we entered into a partnership agreement with Genpharm, under which Genpharm shall purchase VYVGART from us for the resale in the GCC on an exclusive basis for Genpharm’s own account and own name (Genpharm Agreement).
In 2023, we entered into the Handok Agreement with Handok for the distribution of VYVGART in South Korea.
We intend to sign additional distribution partnerships for other territories.
For a discussion of total revenues by geographic market, please see “Note 18—Segment reporting” in our consolidated financial statements which are appended to this Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
Pre-Approval Access Program
We are committed to improving the lives of people suffering from rare diseases. We are driven to discover new treatment approaches in autoimmunity and severe autoimmune diseases associatedfueled by the resilience of patients to urgently deliver them. We aim to do this in partnership; we listen to patients, supporters and advocacy communities, and we hear their stories. Their insights guide us as we develop our investigational therapies and motivate us to advance the understanding of rare diseases.
We implemented a pre-approval access program (PAA) on February 21, 2021 through which investigational therapies are made available in certain circumstances to treat gMG patients who are unable to participate in an ongoing clinical trial. In 2023, we approved access to the PAA for over 330 gMG patients in 14 countries. The PAA program remains open in countries where VYVGART is not yet launched or reimbursed.
Efgartigimod (formerly ARGX-113) Development
Mechanism of Action
As shown in Figure 1, efgartigimod is a human IgG1 Fc fragment equipped with high levels of circulating pathogenic IgG antibodies for which there are few innovative biologic treatments and a severe unmet medical need exists. ARGX‑113 utilizes our ABDEG engineering technology andABDEG™ mutations that is designed to blocktarget the FcRn and reduce IgG. FcRn is foundational to the immune system and functions to recycle IgG,
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extending its serum half-life over other Igs that are not recycled by FcRn. IgGs that bind to FcRn are rescued from lysosomal degradation. By binding to FcRn, efgartigimod can reduce IgG recycling and increase IgG degradation.
Compared to alternative immunosuppressive approaches, such as B-lymphocyte (B-cell) depleting agents, efgartigimod acts in a highly selective manner. For efgartigimod, we now have an estimated 4,000 patients years of safety follow-up between clinical trials and real world experience. Efgartigimod has been observed to significantly reduce concentrations of all IgG subtypes without decreasing levels of other Igs or human serum albumin, which is also recycled by FcRn, discussed in more detail in Item 4.B. “Business Overview—Formulations” below.
Figure 1: Efgartigimod’s mechanism of action blocks the recycling of IgG antibodies which resultsand removes them from circulation.
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Based on its mechanism of action in their removal from circulation. We believe that our approach presentstargeting FcRn to selectively reducing IgGs, efgartigimod has the potential benefits relative to address a multitude of severe autoimmune diseases where pathogenic IgGs are believed to be mediators of disease.
As of the current standardend of care for MG, ITP and PV: corticosteroids and immunosuppressants2023, we are evaluating efgartigimod in the early stages, followed by intravenous IgG, or IVIg, and plasma exchange, or plasmapheresis, as the disease progresses. We believe these potential benefits include improved time of onset, increased magnitude and duration of therapeutic benefit, a more favorable safety and tolerability profile and a reduced cost burden to the healthcare system.
We have completed the single and multiple ascending dose parts of a double‑blind, placebo‑controlled Phase 1 clinical trial of ARGX‑113 in 62 healthy volunteers. This clinical trial was conducted at one site in Belgium.
We announced topline data from a double‑blind, placebo‑controlled Phase 2 clinical trial of ARGX‑113 in 24 patients with generalized MG in December 2017. This clinical trial has been performed at multiple sites in Europe, Canada and the United States.than 10 serious autoimmune indications. We plan to advance ARGX‑113expand efgartigimod into Phase 3 clinical development beforenew indications and plan to be in 15 indications by 2025.
Indication Selection Strategy
We utilize the endfollowing strategy to select indications for efgartigimod:
● | We first start with a strong, unifying biological rationale. The indications in our pipeline are unified in that there exists a wide range of supportive evidence that demonstrates that each is IgG-mediated. This ranges from published literature, clinical trials with currently used therapies such as IVIg, PLEX, or Rituximab, and other experiments, such as passive transfer models. |
● | We also look at indications where a significant clinical or commercial opportunity exists. These are disease areas where there is a significant unmet need for innovation as patients are often not well-managed by current therapies and their respective side effects. |
● | Furthermore, for each indication, there is a defined path forward with established precedent for how to run POC and registrational clinical trials with generally accepted clinical and regulatory endpoints. |
● | Finally, as we work towards achieving our ‘argenx 2025’ vision, we select indications where there is a reasonable fit within our growing commercial activities. |
Formulations
Overview
We are developing two formulations of 2018, subjectefgartigimod to discussions at an end‑of‑Phase 2 meeting withaddress the FDA, which we intend to schedule in 2018, aiming for a first approval in this indication. needs of patients, physicians, and payors across indications and geographies, including IV efgartigimod (VYVGART) and SC efgartigimod (VYVGART SC).
IV (VYVGART)
We announced in September 2017 that the FDA granted orphan drug designation for the use of ARGX‑113 for the treatment of MG.
In parallel, we are performing a second Phase 2 clinical trial of ARGX‑113 in patients with ITP in Europe and expect to report topline data in the second half of 2018. In addition, we launched a third Phase 2 clinical trial of ARGX‑113 in patients with PV in September 2017 at multiple sites in Europe, Ukraine and Israel. Depending on the outcome of the ITP and PV clinical trials and subject to discussions with regulatory agencies, we intend to enter into Phase 3 clinical development of ARGX‑113 in one or both of these indications. In addition to the intravenous formulation of ARGX‑113 that we are using in our current clinical trials, we are also developing a subcutaneous formulation designed to make ARGX‑113 accessible to larger patient populations, including patients requiring chronic therapy, potentially outside of the hospital setting. We initiatedconducted a Phase 1 clinical trial in healthy volunteers to evaluate the safety, tolerability, pharmacokinetic (PK), pharmacodynamic (PD), and immunogenicity of single and multiple doses of efgartigimod. In the first part of the clinical trial, 30 subjects were randomized to receive a single dose of efgartigimod or placebo ranging from 0.2 mg/kg to 50 mg/kg. In the second part of the clinical trial, 32 subjects were randomized to receive multiple ascending doses (MADs) of efgartigimod or placebo up to a maximum of 25 mg/kg.
In the MAD part of the Phase 1 clinical trial, repeat administration of both 10 mg/kg and 25 mg/kg of efgartigimod every seven days, four doses in total, and 10 mg/kg every four days, six doses in total, was associated with a gradual reduction in levels of all four classes of IgG antibodies by 60% to 85%, with 10 mg/kg dose results shown in Figure 2. For all doses in the MAD part of the Phase 1 clinical trial, we observed the reduction in circulating IgG antibody levels to persist for more than four weeks after the last dose with levels below 50% at approximately three weeks and did not return to baseline levels for more than one month. PK analysis of serum baseline levels of efgartigimod indicates that it has a subcutaneoushalf-life of approximately three to four days with no drug accumulation following subsequent weekly dosing. The prolonged activity on the levels of IgG antibodies is consistent with the mechanism of action of efgartigimod and the effect of our proprietary ABDEG™ technology (detailed in Item 4.B. “Business Overview—Intellectual Property—Platform Technologies”) on increasing the intracellular recycling of efgartigimod. In
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both the single and MAD portions, no significant reductions in immunoglobulin M (IgM), immunoglobulin A (IgA) or serum albumin were observed.
Figure 2: Reduction in the levels of four IgG antibody classes and total IgG levels in the MAD part of our Phase 1 clinical trial of efgartigimod in healthy volunteers at a dose of 10 mg/kg every seven days.
SC (VYVGART SC) - Partnership with Halozyme
In July 2019, we evaluated a first generation of SC efgartigimod that incorporates Halozyme’s ENHANZE® SC drug delivery technology in a Phase 1 clinical trial in healthy volunteers, which demonstrated retained PD profile of IV efgartigimod.
ENHANZE® has demonstrated across multiple FDA-approved products the ability to remove traditional limitations on the volume of biologics that can be delivered subcutaneously, potentially shortening drug administration time, reducing healthcare practitioner time, and offering additional flexibility and convenience for patients.
In 2020, we expanded the existing global collaboration and license agreement with Halozyme. Under the expansion, we gained the ability to access Halozyme’s ENHANZE® SC drug delivery technology for three additional exclusive targets upon nomination bringing the total to six potential targets under the collaboration. To date, two targets have been nominated including FcRn and C2.
In March 2022, we announced our Phase 3 ADAPT-SC clinical trial evaluating SC efgartigimod achieved the primary endpoint of total IgG reduction from baseline at day 29, demonstrating statistical non-inferiority to VYVGART IV formulation in gMG patients. Based on these results, we received approval of ARGX‑113 in October 2017VYVGART SC for the treatment of chronic autoimmune diseases.adult patients with gMG in the U.S., the EU, the UK and Japan.
Currently, we are developing a pre-filled syringe presentation for the same SC formulation using the Halozyme technology, to allow for a convenient delivery and the potential for self-administration, reducing the healthcare practitioner time and further increasing flexibility and convenience for patients. As a next step in patient convenience, we have also started the development of a high-volume auto-injector.
SC – Partnership with Elektrofi
In April 2021, we entered into a collaboration and license agreement with Elektrofi to explore a high concentration technology for efgartigimod and up to one additional target. Please refer to Item 4.B. “Business Overview—License Agreements—Our Exclusive License with Elektrofi for efgartigimod” for more information.
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Efgartigimod Indications
gMG
Overview of Myasthenia Gravis
gMG is a rare and chronic autoimmune disease where IgG autoantibodies disrupt communication between nerves and muscles, causing debilitating and potentially life-threatening muscle weakness.
In MG, is an autoimmune disorder associated with muscle weakness that is triggered by IgG auto‑antibodies. These antibodies attack critical signaling proteins at the junction between nerve and muscle cells, thereby impairing their communication signals. As shown in Figure 5, in MG these auto‑antibodiesautoantibodies either bind and occupy or cross‑linkcross-link and internalize the receptor on the muscle cells, thereby preventing the binding of acetylcholine, the signal sent by the nerve cell. In addition, these auto‑antibodiesautoantibodies can cause destruction of the neuromuscular junction by recruiting complement, a potent cell‑destroyingcell-destroying mechanism of the human immune system.
Figure 5: MG is caused by auto‑antibodies attacking the transmission of nerve impulses to muscles
The muscle weakness associated with MG usually presents initially in ocular muscles and can then spread into a generalized form affecting multiple muscles.muscles, known as gMG. Approximately 85% of people with MG progress to gMG within 24 months (source: Behin et al. New Pathways and Therapeutics Targets in Autoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277). MG in the ocular form initially causes droopy eyelids and blurred or double vision due to partial paralysis of eye movements. As MG becomes generalized it affects muscles in the neck and jaw, causing problems in speaking, chewing and swallowing. MG can also cause weakness in skeletal muscles leading to problems in limb function. In the most severe cases, respiratory function can be weakened to the point where it becomes life‑threatening.life-threatening. These respiratory crises occur at least once in the lives of approximately 15% to 20% of MG patients.
The U.S. prevalence of MG is estimated at approximately 20 cases per 100,000. Currently, there are an estimated 64,000 MG patients100,000 (source: Philips et al, Ann NY Acad Sci. 2003).
Patients with confirmed AchR antibodies account for approximately 85% of the total gMG population (Behin et al. New Pathways and Therapeutics Targets in the United States, of which an estimated 55,000 patients are suffering from generalized MG. We believe that the prevalence in Europe is at a similar level. Our initial focus is on generalized MG patients whose disease is not well‑controlled with corticosteroids and immunosuppressants, whichAutoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277).
In May 2020, we believe represents a majority of generalized MG patients.
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Limitations of Current MG Treatments
Early in their disease, patients are treated with cholinesterase inhibitors, such as pyridostigmine, followed by corticosteroids and immunosuppressants. The majority of patients with MG require some form of immunotherapy at some point during their illness. Corticosteroids are associated with a number of significant side effects, including bone thinning, weight gain, diabetes, hypertension, osteoporosis and depression. The side effects of immunosuppressants, depending on the particular immunosuppressant, include weakness, sweating, transaminase elevations, neutropenia, including severe neutropenia with infection, acute deep venous thrombosis, nausea, vomiting and the incidence of cancer. As MG becomes more advanced, patients can be treated with IVIg and plasmapheresis. Both of these approaches are associated with significant side effects.
Treatment with IVIg is based on the principle of altering the balance between synthesis and degradation of antibodies in the body. IVIg treatmentannounced positive topline results in a large increase in the quantity of IgG antibodies in circulation. This excess of exogenously added IgG antibodies competes with the endogenous autoimmune antibodies for various pathways including the FcRn antibody recycling pathway. Saturation of this pathway with exogenous IgG antibodies promotes antibody destruction, which in turn leads to a decrease in the level of autoimmune antibodies. IVIg treatment is associated with a number of adverse events including fever, myalgia, headache, nausea and impaired kidney function or kidney disease, and IVIg can lead to life‑threatening complications such as pulmonary edema, acute kidney dysfunction or stroke in elderly patients.
Plasmapheresis involves collecting blood from a patient and physically removing the IgG antibodies and other serum proteins from the plasma before returning it to the patient. Plasmapheresis is also associated with known limitations and drawbacks. Potential complications include thrombotic events, bleeding, catheter occlusion, infection, nausea, hypotension and arrhythmias. In most cases, these symptoms are mild and transient, but in some cases they can be severe and life‑threatening.
Bothpivotal ADAPT clinical trial of these approaches place a heavy cost burden on the healthcare system. In addition to the costs of the IVIg or plasmapheresis treatment itself, hospitalization of patients receiving these treatments further adds to this cost burden. According to a 2011 study, the average short‑term cost for utilizing IVIg or plasmapheresis for MG crisis was $78,814 and $101,140 per patient, respectively. In addition to patients experiencing an MG crisis, we believe a substantial number of MG patients receive chronic IVIg or plasmapheresis for which they require frequent hospitalization
Recently, the FDA and European Medicines Agency approved the use of Soliris®efgartigimod for the treatment of generalizedgMG. The topline results from the ADAPT clinical trial showed that efgartigimod was well-tolerated, demonstrated clinically meaningful improvements in strength and quality of life measures, and provided the option of an individualized dosing schedule for gMG patients. The full Phase 3 ADAPT results were published in The Lancet Neurology in July 2021. The data from the ADAPT clinical trial and the subsequent open-label extension (OLE) (ADAPT+) formed the basis for the regulatory approvals of VYVGART in the U.S., Japan, the EU, Mainland China, Israel, the UK and Canada.
On March 22, 2022, we announced positive topline results from the Phase 3 ADAPT-SC s clinical trial, a registrational non-inferiority bridging clinical trial of SC efgartigimod for the treatment of gMG. SC efgartigimod achieved the primary endpoint of total IgG reduction from baseline at day 29, demonstrating statistical noninferiority to VYVGART IV formulation in gMG patients. Based on these results, we received regulatory approval in the U.S. in June 2023, in the EU in September 2023, in Japan in January 2024 and in the UK in February 2024.
Other clinical trials
We are currently evaluating alternative dosing regimens of IV efgartigimod in adult gMG patients in the ADAPT NXT clinical trial. In addition, a clinical trial of IV efgartigimod in pediatric gMG patients is ongoing. In 2022, a Phase 1 clinical trial evaluating the effect of efgartigimod or placebo on immune response to the polyvalent pneumococcal vaccine (PNEUMOVAX 23) was completed. In 2024, we plan to initiate registrational clinical trials to expand VYVGART label into broader MG populations, including in seronegative patients.
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CIDP
Overview
CIDP is a chronic autoimmune disorder of peripheral nerves and nerve roots caused by an autoimmune-mediated destruction of the myelin sheath, or myelin producing cells, insulating the axon of the nerves and enabling speed of signal transduction. The cause of CIDP is unknown, but abnormalities in both cellular and humoral immunity have been shown. CIDP is a chronic and progressive disease: onset and progression occur over at least eight weeks in contrast with the more acute Guillain-Barré-syndrome. Demyelination and axonal damage in CIDP lead to loss of sensory and/or motor neuron function, which can lead to weakness, sensory loss, imbalance and/or pain. CIDP affects approximately 24,000 patients who havein the U.S.
Most CIDP patients require treatment, the majority currently with IVIg. Glucocorticoids and plasma exchange are used to a lesser extent as they are either limited by side effects upon chronic use, in the case of glucocorticoids, or invasiveness of the procedure and access, which is restricted to specialized centers in case of plasma exchange. Alternative immunosuppressant agents are typically reserved for patients ineligible for or refractory to IVIg, glucocorticoids or plasma exchange.
In July 2023, we announced positive topline results from the ADHERE clinical trial evaluating VYVGART SC (efgartigimod alfa and hyaluronidase-qvfc) in adults with CIDP. The clinical trial met its primary endpoint (p=0.000039), demonstrating a significantly lower risk of relapse with VYVGART SC compared to placebo (HR: 0.39 95% CI: 0.25; 0.61). 67% of patients in open-label Stage A demonstrated evidence of clinical improvement (ECI), indicating that IgG autoantibodies play a significant role in the underlying biology of CIDP.
VYVGART SC was well-tolerated with a safety profile that is consistent with prior clinical trials and the known profile of VYVGART. The most frequent treatment-related adverse event was ISRs, which occurred in a lower percentage of patients than previous VYVGART SC trials (20% in Stage A; 10% in Stage B). All ISRs were mild to moderate and resolved over time. 99% (226/249) of eligible patients continued to the ADHERE-Plus OLE clinical trial. Detailed data from ADHERE is expected to be presented at an upcoming medical meeting.
In December 2023, we submitted an sBLA to the FDA for SC efgartigimod for CIDP with a priority review voucher. The FDA accepted the sBLA for priority review, with a PDUFA target date of June 21, 2024.
Primary ITP
Overview
Primary ITP is an acquired autoimmune bleeding disorder, characterized by a low platelet count (<100×109/L) in the absence of other causes associated with thrombocytopenia. In most patients, IgG autoantibodies directed against the acetylcholine receptor. Soliris is an anti‑C5 antibody blocking the activityplatelet receptors can be detected. They accelerate platelet clearance and destruction, inhibit platelet production, and impair platelet function, resulting in increased risk of complement recruited by the pathogenic IgGs directed against the acetylcholine receptor at the neuromuscular junction. However, Soliris does not address the blockingbleeding and impaired quality of the acetylcholine receptor by pathogenic IgGs, nor the receptor cross‑linking and internalization by these IgGs. In addition, a sub‑set of MG patients is known to have anti‑MuSK antibodies, which are known not to activate the complement cascade. The price of Soliris in MG amounts to approximately $700,000 per patient per year, placing, we believe, a substantial cost burden on the health care system.
Finally, a minority of MG patients undergo thymectomy, the surgical removal of the thymus, an immune organ which is believed to play a role in the pathogenesis of the disease.
For MG patients who have advanced to the point where they are not well‑controlled with corticosteroids and immunosuppressants, we believe ARGX‑113 may offer advantages over IVIg and plasmapheresis, including the potential to deliver a faster onset of action, a larger and longer lasting therapeutic effect and an improved safety and tolerability profile. In addition, a subcutaneous formulation of ARGX‑113 could further expand its use to patients requiring chronic therapy, potentially outside of the hospital setting.
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Overview oflife. Primary Immune Thrombocytopenia
ITP is a bleeding disease caused by an autoimmune reaction in which a patient develops antibodies that attack and destroy their own platelets, which are blood cells that help blood to clot, or their own platelet‑forming cells. ITP, which develops for no known reason, is differentiated from secondary immune thrombocytopenia,ITP, which is associated with other illnesses, such as infections or autoimmune diseases, or which occurs after transfusion or taking other drugs, such as cancer drugs. Platelet deficiency, or thrombocytopenia, can cause bleeding in tissues, bruising and slow blood clotting after injury. Patients may suffer from depression and fatigue as well as side effects of existing therapies, impairing their quality of life. Current therapeutic approaches include non-specific immunosuppression (e.g., steroids and rituximab), inhibition of platelet clearance (e.g., splenectomy, IVIg, anti-D globulin, and spleen tyrosine kinase inhibitor fostamatinib13) or stimulation of platelet production (e.g., thrombopoietin receptor agonist TPO-RA). Splenectomy remains the only treatment that provides sustained remission off therapy for one year or longer for a high proportion of patients. ITP affects approximately 72,000 patients in the United States.U.S. (sources: Current Medical Research and Opinion, 25:12, 2961-2969; Am J Hematol. 2012 Sep; 87(9): 848–852; Pediatr Blood Cancer. 2012 Feb; 58(2): 216–220).
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Phase 3 ADVANCE Clinical Trials
LimitationsIn 2019, the first of Currenttwo registrational clinical trials, the ADVANCE clinical trial, was initiated to evaluate IV efgartigimod (VYVGART) for the treatment of primary ITP. The second registrational ADVANCE-SC clinical trial of SC efgartigimod for the treatment of primary ITP Treatmentswas initiated in 2020.
TreatmentIn May 2022, we announced positive Phase 3 data from the ADVANCE clinical trial. Primary endpoint was met, demonstrating that a significantly higher proportion of patients with chronic ITP receiving VYVGART (17/78; 21.8%) compared to placebo (2/40; 5%) achieved a sustained platelet response (p=0.0316), defined as having platelet counts greater than or equal to 50x109/L on at least four of the last six scheduled visits between weeks 19 and 24 of treatment. There was also a statistically significant separation from placebo in key platelet-derived secondary endpoints. Additional secondary endpoint data from the ADVANCE clinical trial are consistent with primary and secondary platelet-derived endpoints and provide additional context on metrics that often drive treatment decisions, including on International Working Group (IWG) responder status.
VYVGART was well-tolerated in this 24-week clinical trial and the observed safety and tolerability profile was consistent with previous clinical trials. Results from ADVANCE-IV clinical trial were published in The Lancet in September 2023. We filed for approval of VYVGART for ITP in Japan and an approval decision is focused on either reducingexpected in the autoimmune activity that is causing accelerated platelet destructionfirst quarter of 2024.
In November 2023, results of the second registrational clinical trial as part of the ongoing ITP development program for VYVGART in adult patients with chronic and allowingpersistent ITP were announced. Patients were heavily pre-treated and 75% of patients had received three or more prior ITP therapies. The clinical trial did not meet the platelets to recover on their own, or directly stimulating platelet production with specific growth factors. Patients with less severe ITP are treated with corticosteroids and immunosuppressants, which are associated with significant side effects also seen with such treatmentprimary endpoint of other autoimmune diseases, such as MG. For more severe ITP, splenectomy is sometimes used as treatment, although its use is rapidly declining. The use of thrombopoietin receptor agonists, which stimulate the production and differentiation of platelets and are approved for last‑line therapy, is increasing. Patients diagnosed with severe ITP are primarily offered IVIg or, to a lesser extent, plasmapheresis.
IVIg can raise thesustained platelet count within daysresponse in most patients, butchronic ITP patients. Secondary endpoints were also not met, including additional endpoints on IWG responder status and mean platelet count change from baseline.
VYVGART SC was well-tolerated in ADVANCE-SC; the effect is usually transient. IVIg introduces high levelsobserved safety and tolerability profile was consistent with ADVANCE-IV and the confirmed safety profile of exogenously added IgG antibodies to the blood stream that compete with the patient’s auto‑antibodies for various pathways including the FcRn‑dependent antibody recycling pathway, thereby lowering the impact of the auto‑antibodies. IVIg treatment for ITP requires intravenous dosing of up to 2 g/kg per day of IVIgVYVGART and is associated with many of the adverse events seen with IVIg treatment of other autoimmune diseases, such as MG as described above. Both IVIg and plasmapheresis when used to treat ITP carry a high cost burden on the healthcare system as they do when used to treat MG.VYVGART SC.
The production of platelets in patients refractory to other treatments can be stimulated by drugs such as romiplostim (Nplate) or eltrombopag (Promacta) that mimic thrombopoietin. While these therapies lead to increases in blood platelet counts, they do not address the underlying cause of the disease, which is the destruction of platelets by the immune system. Romiplostim (Nplate) and Eltrombopag (Promacta) are approved as last‑line therapy for ITP and have generated global revenues of $584 million and $635 million in 2016, respectively.Pemphigus
Overview of Pemphigus Vulgaris
PV is an autoimmune disorder associated with mucosal and skin blisters that lead to pain, difficulty swallowing and skin infection. This chronic, potentially life‑threateninglife-threatening disease is triggered by IgG auto‑antibodiesautoantibodies targeting desmoglein‑1desmoglein-1 and −3,-3, which are present on the surface of keratinocytes and important for cell‑to‑cellcell-to-cell adhesion in the epithelium. Auto‑antibodiesAutoantibodies targeting desmogleins result in loss of cell adhesion, the primary cause of blister formation in PV. Similar to MG and ITP, disease severity of PVpemphigus correlates to the amount of pathogenic IgGs targeting desmogleins.
Currently, there are an estimated 17,40019,000 pemphigus patients in the United States,U.S., of which an estimated 13,100 patients are suffering from PV. We believe that the prevalence in Europe is at a similar level. Our initial focus is on mild‑to‑moderate PV patients who are either newly diagnosed or not well‑controlled with corticosteroids and immunosuppressants.
Several disease activity measurements exist for the clinical evaluation of PV patients, including the pemphigus disease area index or PDAI;(PDAI), autoimmune bullous skin disorder intensity score, or ABSIS; and the PV activity score or PVAS.(PVAS). The PDAI is reported to have the highest validity and is recommended for use in clinical trials of PV.
Phase 3 ADDRESS Clinical Trial
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Limitations of Current PV Treatments
The goalsSC efgartigimod for the treatment of PV are twofold: (1) decrease blister formation and promote healingPF. This was a randomized, double-blinded, placebo-controlled clinical trial, where the objective was to assess efficacy, safety and tolerability in newly diagnosed or relapsing patients with moderate to severe pemphigus (total of blisters222 enrolled). Patients were randomized to receive either SC efgartigimod or placebo for 30 weeks. Patients started on concomitant steroids based on what we determined to be the optimized dosing regimen from the Phase 2 POC clinical trial. The primary endpoint assessed the proportion of patients who achieve sustained complete remission on a minimal steroid dose within 30 weeks. The ADDRESS clinical trial evaluated efficacy and erosions, and (2) determine the minimal dose of medication necessary to control the disease process. The current treatment regime for PV patients is limited. Typically, corticosteroids are used as first‑line therapy, possibly in combination with immunosuppressants. Patients not well‑controlled by these therapies may then receive IVIg or Rituxan. The latter is becoming more common in the treatment regime due to the significant side effects associated with corticosteroids and immunosuppressants. Rituxan carries infusion reaction risks,safety, including anaphylaxis, and the risk of opportunistic infections, including progressive multifocal leukoencephalopathy, a rare and usually fatal viral disease.
Even with aggressive PV therapy, it takes two to three weeks for blisters to stop forming and about six to eight weeks for blisters to heal. Even with IVIg and Rituxan, complete remissions may take several months, and some patients do not respond to these treatments. The serious complications that can arise from use of these drug classes leave a large unmet medical need for effective therapy with a faster onset of action and better safety profile.
Our Solution: ARGX‑113
Our lead product candidate, ARGX‑113, is an antibody Fc fragment that we believe has the potential to overcome manydrive fast onset of disease control and complete remission and the ability to taper corticosteroids.
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Topline data from the Phase 3 ADDRESS clinical trial were announced in December 2023, in which the results show the proportion of PV patients achieving the primary endpoint of complete remission on CRmin was not significantly different between SC efgartigimod and placebo. We will not pursue additional development in pemphigus and we will prioritize clinical development of efgartigimod in its ongoing severe autoimmune indications.
BP
Overview
BP is the most common autoimmune blistering disease and is driven by autoantibodies affecting the skin. The disease typically affects elderly people and early key symptoms are itch and rash and patients develop fluid-filled blisters during disease progression. The prevalence of BP is 12 per 100,000 adults and the incidence increases with age. BP is associated with a high disease burden and can have a significant impact on the quality of life of patients. The mortality of BP in the U.S. is 2.4% or higher than the mortality in the general population of the limitationssame age. There are currently no approved therapies available for BP. First line treatment consists of topical or systemic corticosteroids, which result in substantial morbidity and increased mortality, conventional immunosuppressants as corticosteroid-sparing agents, rituximab and IVIg.
BP is a well characterized autoimmune disease in which the binding of autoantibodies to hemidesmosomal proteins, BP180 and BP230, initiates a cascade of inflammatory events resulting in blister formation. BP180 and BP230 are involved in the stable attachment of keratinocyte to the underlying matrix. The autoantibody actions include mechanical disruption of keratinocyte adhesion and cytokine release. Immune complex formation initiates complement activation leading to the recruitment mast cells, neutrophils, eosinophils and other immune cells and to the release of proteases and inflammatory mediators. All these effects, which start with the binding of the autoantibodies, induce the blistering observed in BP.
BALLAD Clinical Trial
We initiated the Phase 2/3 BALLAD registrational clinical trial evaluating SC efgartigimod in BP in 2022.
The clinical trial population are newly diagnosed and relapsing patients within one year from diagnosis. Patients are randomized 1-to-1 to receive efgartigimod or placebo for a total duration of 36 weeks. The primary endpoint is the proportion of participants in complete remission while off oral corticosteroids for at least eight weeks at week 36. Secondary endpoints relate to cumulative steroid doses, IGA BP score, time to achieving control of disease activity, change from baseline in average itch, and quality of life measures.
In light of ADDRESS results and the comparable biology between PV and BP, we decided to stop enrollment of BALLAD. We will integrate key learnings from ADDRESS and data from already enrolled patients in BALLAD and we plan to communicate on a revised development plan before end 2024.
Myositis
Overview
Myositis are a rare group of autoimmune diseases that can be muscle specific or affect multiple organs including the skin, joints, lung, gastrointestinal tract and heart. Myositis can be very severe and disabling and have a material impact on quality of life. Initially these Myositis were classified as either DM or polymyositis, but as the underlying pathophysiology of Myositis has become better understood, including through the identification of characteristic autoantibodies, new polymyositis subgroups have emerged. Two of these subtypes are IMNM and ASyS. Proximal muscle weakness is a unifying feature of each Myositis subset.
● | IMNM is characterized by skeletal muscle weakness due to muscle cell necrosis. The muscle weakness is typically symmetrical – on both sides of the body – and affects proximal muscles including hips, thighs, upper arms, shoulder and neck. The muscle weakness can be severe and lead to difficulty in completing daily tasks. |
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Characteristic autoantibodies of IMNM, include anti-signal recognition particle and anti-3-hydroxy-3-methylglutaryl-coenzyme A reductase autoantibodies. |
● | ASyS is characterized by muscle inflammation, inflammatory arthritis, interstitial lung disease, thickening and cracking of the hands (“mechanic’s hands”) and Raynaud phenomenon. Autoantibodies associated with ASyS attack tRNA synthetase enzymes and include anti-Jo-1 and anti-PL1 and PL-12 most commonly. |
● | DM is characterized by muscle inflammation and degeneration and skin abnormalities, including heliotrope rash, Gottron papules, erythematous, calcinosis and edema. DM is associated with Myositis-specific autoantibodies, including anti-Mi-2, anti-MDA-5, anti-TIF-1γ and others. |
There are no current standardFDA-approved therapies for IMNM or ASyS. IVIg (Octagam 10%) was approved by the FDA for the treatment of careDM in July 2021. Myositis patients are most often treated with high-dose steroids.
ALKIVIA Clinical Trial
We initiated the registrational ALKIVIA clinical trial of SC efgartigimod for MG, ITPthe treatment of Myositis in 2022. The clinical trial plans to enroll approximately 240 patients in three Myositis subtypes, IMNM, ASyS and PV,DM. The clinical trial will be conducted in two Phases, with an analysis of the Phase 2 portion of the clinical trial, including with respect30 patients of each subtype, followed by conduct of the Phase 3 portion of the clinical trial only if a signal is observed in the Phase 2 portion of the clinical trial.
The primary endpoint is the total improvement score (TIS) at the end of the treatment period. Key secondary endpoints include response rates at the end of treatment, time to time of onset, magnituderesponse, and duration of therapeutic benefit and safety profile. We developed ARGX‑113 using our ABDEG Fc engineering technology.
ARGX‑113 targets FcRn with high affinity, thereby reducing levels of all four classes of IgG antibodies, which are referred to as IgG1, IgG2, IgG3 and IgG4. In the case of MG, the large majority of patients have auto‑antibodies of the IgG1 and IgG3 classes, whileresponse in the case of ITP these auto‑antibodies consist mainly of the IgG1 class. In the case of PV, the pathogenic auto‑antibodies consist mainly of the IgG1 and IgG4 class. As shown in Figure 6, ARGX‑113’s mechanism of action is to block the recycling of IgG antibodies and remove them from circulation. Antibodies are routinely removed from circulation by being internalized into cells, where they can either become destined for degradation in the lysosomes or recycled back into circulation. IgG antibodies not bound to FcRn are degraded, while those bound to FcRn are recycled back into circulation. [(1)] As a result of our ABDEG technology and the modifications we made to the Fc region, ARGX‑113 binds to FcRn with high affinity making this receptor unavailable to circulating IgG antibodies. [(2)] The IgG antibodies can then no longer effectively be rescued and end up in the lysosomes where they are degraded. Compared to alternative immunosuppressive approaches, such as B‑lymphocyte, or B‑cell, depleting agents, ARGX‑113 acts in a highly selective manner by reducing IgG antibody levels, while leaving
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levels of antibodies of the immunoglobulin A, or IgA, immunoglobulin M, or IgM, and immunoglobulin D, or IgD, typesTIS, as well as all componentschange from baseline in individual TIS components. Other secondary endpoints include quality of life and other functional scores.
An interim analysis of the innate immune system intact.
Figure 6: ARGX‑113’s mechanism of action blocks the recycling of IgG antibodies and removes them from circulation
Based on our preclinical studies and early clinical trial results, we believe that ARGX‑113 has the potential to reduce levels of pathogenic IgG antibodies. Our clinical data suggest that ARGX‑113 reduces circulating IgG antibodies more rapidly than current therapies, which we believe could translate into faster therapeutic benefit if replicated with
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respect to pathogenic IgG antibodies. Our clinical data also suggest that the quantity of ARGX‑113 required to achieve and maintain suppression of circulating antibodiesfirst 30 patients in each subset is lower than the levels of IVIg required for therapeutic benefit, which could translate into fewer infusions, shorter infusion time and a more favorable safety and tolerability profile.
In addition to MG, ITP and PV, we believe there are other autoimmune diseases that may benefit from the mechanism of action of ARGX‑113 therapy. We intend to pursue initial approval for MG and then plan to expand to ITP and, potentially, PV because these diseases have significant unmet medical needs. We then intend to expand our clinical development efforts for ARGX‑113 into additional indications also mediated by pathogenic IgG antibodies. Pathogenic auto‑antibodies have been shown to be associated with other neuromuscular diseases such as Guillain‑Barré, Lambert Eaton, chronic inflammatory demyelinating polyradiculoneuropathy; with other hematological diseases such as hemolytic anemia; and with other autoimmune blistering diseases such as bullous pemphigoid and epidermyolysis bullosa; as well as with systemic lupus erythematosus and multiple sclerosis, which affect larger numbers of patients.
Clinical Development Plan
We recently completed a Phase 2 clinical trial of ARGX‑113 in patients with MG, and we are currently evaluating ARGX‑113 in two Phase 2 clinical trials, one in patients with ITP and one in patients with PV. We reported topline data from the MG clinical trial in December 2017, and we expect to report topline data from the ITP clinical trial and interim data from the PV clinical trialexpected in the second half of 2018. 2024.
TED
TED is an autoimmune orbital disease associated with Graves’ disease and other autoimmune thyroid pathologies such as Hashimoto’s thyroiditis. TED is characterized by extraocular muscle enlargement, orbital adipose tissue expansion, and orbital inflammation, which can lead to proptosis, diplopia, or vision loss in severe cases. Persistent orbital symptoms often impair patient QoL long-term.
Substantial nonclinical and clinical evidence supports thyrotropin receptor (TSHR) autoantibodies as causative in the pathology of TED. Clinical evidence supports the removal of autoantibodies as a mechanism for the treatment of TED. By reducing immunoglobulin γ (IgGs), including TED-associated pathogenic IgG autoantibodies, efgartigimod is expected to ease disease manifestations. Additionally, IgG reduction could address the underlying hyperthyroidism. Side effects and tolerability issues with current therapies, including steroids and teprotumumab (only FDA-approved biologic), are treatment limiting for many patients based on comorbidities and a significant unmet need remains for safe and convenient therapies.
A registrational clinical trial evaluating efgartigimod in TED is expected to start in 2024.
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SjD
Overview
SjD is a chronic, progressive autoimmune disease, characterized by lymphocytic infiltration and progressive destruction of exocrine glands. B-cells play a pivotal role in the development of the disease and this results amongst others in production of IgG autoantibodies, especially those which target SSA/Ro, SSB/La ribonuclear complexes. In addition to symptoms of dry eyes, dry mouth, chronic pain and fatigue, a substantial subset of patients suffer from extraglandular systemic disease. There are no FDA-approved treatments currently registered for the treatment of SjD.
Phase 2 RHO Clinical Trial (in partnership with IQVIA)
In 2023, we initiated a Phase 2 POC clinical trial evaluating IV efgartigimod for the treatment of SjD. The RHO clinical trial is a randomized, placebo-controlled, double-blind clinical trial evaluating IV efgartigimod. The clinical trial enrolled approximately 30 patients with at least moderate systemic disease (ESSDAI ≥5). Patients have to be on stable background treatment and positive for anti-SSA/Ro. At the end of the 24-week treatment period, participants who complete the clinical trial may roll over into an OLE. The primary endpoint is the proportion of responders to the Composite of Relevant Endpoints for SjD (CRESS; response on ≥3 out of 5 items) at week 24. Key secondary endpoints include change from baseline in the clinESSDAI (Clinical ESSDAI), ESSDAI (Eular Sjögrens Syndrome Disease Activity Index), and ESSPRI (Eular Sjögrens Patient Reported Index) scores.
RHO clinical trial results are expected in first half of 2024.
PC-POTS
Overview
PC-POTS has been emerging following SARS-Cov-2 infection in previously healthy patients. PC-POTS is a disorder of the autonomic nervous system that is characterized by a rise in heart rate when moving to a standing position and additional symptoms of shortness of breath, headache, fatigue, poor concentration, weakness and anxiety. The large majority of patients are women between 15 and 50 years of age. There is a strong association of PC-POTS to activating autoantibodies to autonomic G-protein coupled receptors, including the β1 and β2-adrenergic receptors and M2 and M3 muscarinic receptors. There are no current FDA-approved therapies and symptomatic treatments focus on blood volume, kidney sodium levels, heart rate reduction and vessel constriction.
Phase 2 POC ALPHA Clinical Trial (in partnership with IQVIA)
In 2022, we initiated the placebo-controlled Phase 2 POC ALPHA clinical trial of weekly IV efgartigimod for the treatment of de novo POTS triggered by COVID-19. The co-primary endpoints are COMPASS-31 and the Malmö POTS Symptom score at the end of the 24-week treatment period. Key secondary endpoints include change from baseline in PROMIS fatigue & cognitive function, as well as the Patient Global Impression of change and severity. Other secondary endpoints include quantitative autonomic testing and other functional scores.
Phase 2 POC ALPHA clinical trial results are expected in the first half of 2024.
LN
Overview
LN is an inflammatory autoimmune disease of the kidney and one of the most severe and common organ manifestations of the autoimmune disease systemic lupus erythematosus (SLE). In patients with SLE, approximately 25% to 50% have signs or symptoms of kidney disease at SLE onset. Approximately 40% to 60% of patients with SLE will develop renal involvement during the course of disease, with substantial morbidity or mortality. Pathogenic autoantibodies and complement deposits are critically involved in SLE pathogenesis and particularly LN, where renal
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deposition of immune complexes is a hallmark of the disease. Autoantibodies associated with LN include anti-dsDNA, anti-C1q, anti-cardiolipin, anti-Smith and anti-nuclear antibodies. 10-30% of LN patients progress to end-stage renal disease. Oral corticosteroids and broad immunosuppressants are current standards of care but are not uniformly effective. Belimumab (Benlysta) and voclosporin (Lupkynis) are approved by the FDA for the treatment of LN.
Phase 2 POC Clinical Trial (in partnership with Zai Lab)
In 2023, we initiated a POC clinical trial to evaluate the efficacy and safety of IV efgartigimod in Chinese patients with active LN. The clinical trial plans to enroll approximately 60 patients with LN class III or IV (with or without class V).
The primary endpoint is the change in urine protein creatinine ratio (UPCR) from baseline to end of the treatment period. Key secondary endpoints include proportion of patients achieving complete and partial renal response (CRR and PRR, respectively) at the end of treatment period and time to CRR and PRR. Other secondary endpoints include additional efficacy measurements, PK, PD, immunogenicity, biomarkers, safety, and quality of life assessments.
MN
Overview
MN is an autoimmune, glomerular disease and one of the most common causes of nephrotic syndrome in adults. MN is characterized by thickening of the glomerular basement membrane caused by immune complex deposition. As many as 75% of MN patients have IgG autoantibodies against PLA2R. Data are highly suggestive of a causal relationship between anti-PLA2R Ab and MN pathogenesis. Other target antigens identified to date include thrombospondin type 1 domain-containing 7A (THSd7A), neural epidermal growth factor-like-1 (NELL-1), and semaphorin-3B (Sema3B). 20-30% of MN patients progress to end-stage renal disease. All MN patients receive optimal supportive care and patients at high risk for disease progression are additionally treated with broad immunosuppressants. There are no current approved therapies for MN.
Phase 2 POC Clinical Trial (in partnership with Zai Lab)
In 2023, we initiated a POC clinical trial to evaluate the efficacy and safety of IV efgartigimod in Chinese patients with primary MN (pMN). The clinical trial plans to enroll a maximum of 72 patients with pMN. The clinical trial will include two phases: a double-blinded period (DB) for the main clinical trial followed by an optional OLE period. The primary endpoint is the change in UPCR from baseline to end of the treatment period in the anti-PLA2R Ab seropositive population. Key secondary endpoints include change in UPCR from baseline to end of the treatment period in the overall population, proportion of participants achieving complete remission and partial remission at the end of the treatment period in the overall population and in the anti-PLA2R Ab seropositive population and time to complete remission and partial remission in the overall population and in the anti-PLA2R Ab seropositive population. Other secondary endpoints include additional efficacy measurements, PK, PD, immunogenicity, biomarkers, safety, and quality of life assessments.
Other Efgartigimod Indications
AMR
AMR is an autoimmune disease that affects transplanted organs and can contribute to allograft loss. AMR in kidney allografts is driven by donor specific antibodies (DSA), which often target human leukocyte antigens expressed by endothelial allograft cells. Through different mechanisms DSA can induce microvascular inflammation, a histopathological hallmark of AMR. Microvascular inflammation leads to loss in organ function which, if continued, can result in allograft loss. The unmet need for an efficacious treatment is very high, as evidenced by AMR being the leading cause of kidney transplant failure. There are currently no approved therapies for treating AMR.
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AAV – in partnership with IQVIA
ANCA-associated vasculitis (AAV) is an autoimmune disease that is characterized by the inflammation and damaging of small blood vessels in the body. There a three different AAV subtypes; granulomatosis with polyangiitis, microscopic polyangiitis and eosinophilic granulomatosis with polyangiitis (EGPA). Polyangiitis or microscopic polyangiitis are often associated with the presence of PR3- or MPO-autoantibodies, respectively. These autoantibodies play a pivotal role in the disease, in which their binding to neutrophils initiates a series of inflammatory processes. Symptoms like fatigue, muscle pain, fever, abdominal pain, and blood in the urine are often observed, but many patients develop organ- or life-threatening disease where kidneys, lungs or the cardiovascular system are severely damaged. Multiple treatments are FDA-approved, with rituximab, on top of glucocorticoids, considered as main treatment for both induction and maintenance in AAV.
Partnerships for efgartigimod indications
Zai Lab Limited
Pursuant to the Zai Lab Agreement, Zai Lab obtained the exclusive right to develop and commercialize efgartigimod in Greater China. Zai Lab will also contribute patients to our global Phase 3 clinical trials of efgartigimod. Our Zai Lab strategic collaboration allows us to accelerate development of efgartigimod into new autoimmune indications with Zai Lab taking operational leadership of the Phase 2 POC clinical trials.
In 2022 Zai Lab initiated the Phase 2 POC clinical trials in MN and LN, which both fall within the emerging nephrology indications. This was done after having completed a Phase 1 PK/PD clinical trial to support the approval of efgartigimod for gMG in Mainland China, as well as obtaining regulatory approvals to enroll Chinese patient into our global Phase 3 clinical trials. In our collaboration with Zai Lab, we continue to evaluate additional POC clinical trials to initiate in the Greater China under the Zai Lab Agreement to accelerate the development of efgartigimod globally.
IQVIA
On December 2, 2021 we entered into a strategic asset development agreement (Asset Development Agreement) with IQVIA. Pursuant to the Asset Development Agreement, IQVIA shall perform asset and indication development services for efgartigimod through an advanced outsourcing model. Such services include, but are not limited to, overall product indication development strategy, design of clinical trial protocol, set-up, execution and oversight of clinical development plans for an indication for efgartigimod selected by us.
To enable and encourage fast and innovative delivery of the services by IQVIA, the Asset Development Agreement contains an innovative earn-back and bonus plan based upon the performance of IQVIA.
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SjD, PC-POTS and AAV are the indications we identified to be further developed under the Asset Development Agreement.
Clinical Trial | Stage | Indication | Patients | Primary Endpoint | Status | |||||
ADAPT | | Registrational | | gMG | | | | The proportion of responders based on the Myasthenia Gravis Activities of Daily Living (MG-ADL) score | | Marketed |
ADAPT-SC | | Registrational | | gMG | | | | The proportion of responders based on the Myasthenia Gravis Activities of Daily Living (MG-ADL) score | | Marketed |
ADHERE | | Registrational | | CIDP | | 322 | | The hazard ratio for the time to first adjusted INCAT deterioration | | sBLA accepted by FDA |
ADVANCE-IV | | Registrational | | ITP | | | | The proportion of patients that achieved sustained platelet response | | positive Topline Data |
ADVANCE-SC | | Registrational | | ITP | | 131 | | The proportion of patients that achieved sustained platelet response | | Did not meet primary endpoint, analysis ongoing |
ADDRESS | | Registrational | | PV and PF | | 222 | | The proportion of patients who achieve complete remission on a minimal steroid dose at 30 weeks | | Did not meet primary enpoint, evaluation of efgart in PV and PF stopped. |
BALLAD | | Registrational | | BP | | | | The proportion of participants in complete remission while off oral corticosteroids for at least eight weks at week 36 | | Analysis ongoing for path forward |
ALKIVIA | | Registrational | | Myositis | | Appr.240 | | The TIS at the end of the treatment period | | Ongoing Interium analysis expected second half 2024 |
RHO | | PoC | | Primary | | Appr.30 | | The proportion of responders to the Composite of Relevant Endpoints for Sjogren’s Syndrome (CRESS; response on 23 out of 5 items) at week 24. | | Ongoing study results expected first half 2024 |
ALPHA | | PoC | | PC-POST | | 53 | | The co-primary endpoints are 1) COMPASS-31 and 2) the Malmo POTS Symptom score at the end of the 24-week treatment period | | Ongoing study results expected first half 2024 |
In partnership with Zai Lab | | PoC | | LN | | Appr.60 | | The change in UPCR from baseline to end of the treatment period | | Ongoing study results expected first half 2025 |
In partnership with Zai Lab | | PoC | | MN | | Appr.70 | | The change in UPCR from baseline to end of the treatment period in the anti-PLAZR Ab seropositive population | | Ongoing study results expected first half 2025 |
Clinical trial to start in 2024 | | Registrational | | TED | | | | | | |
Other Clinical Trails | | PoC | | AMR | | | | | | IND submission planned for 2Q 2024 |
* | AAV program under review; phase 2 study paused at the time of publication of this Annual Report |
Empasiprubart (ARGX-117) Development
Mechanism of Action
Empasiprubart is a highly differentiated therapeutic mAb targeting C2 equipped with our proprietary NHANCE™ mutations. By addressing a novel target at the intersection of the complement and lectin pathways of the complement cascade, we believe empasiprubart represents a broad pipeline opportunity across several severe autoimmune indications. Activation of the classical and lectin pathway of complement may contribute to tissue damage and organ dysfunction in a number of autoimmune inflammatory diseases and ischemia-reperfusion conditions. Targeting C2 also leaves the alternative pathway of the complement system intact, which is an important component of the innate defense system.
Empasiprubart exhibits both pH- and calcium dependent binding. These unique characteristics enable empasiprubart to capture free C2 in circulation and release it in the endosome to be sorted for degradation in the lysosome. Empasiprubart is equipped with NHANCE™ mutations increasing its affinity for FcRn and allowing it to recycle back into circulation to capture more C2.
We obtained the rights to empasiprubart as part of our IIP. argenx and Broteio launched a collaboration in 2017 to conduct research, with support from the University of Utrecht, to demonstrate preclinical POC of the mechanism of
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empasiprubart. Based on promising preclinical data generated under this collaboration agreement, we exercised the exclusive option to license the program and assumed responsibility for further development and commercialization.
In addition to an IV formulation, we have exclusive access to Halozyme’s ENHANZE® SC drug delivery technology for the C2 target.
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Figure 3: LEFT: Empasiprubart exhibits both pH- and calcium dependent target binding. RIGHT: Empasiprubart is equipped with NHANCE™ mutations increasing its affinity for FcRn at acidic pH and allowing it to recycle back into circulation.
Empasiprubart Indications
MMN
Overview
MMN is a debilitating neuromuscular autoimmune disorder that is characterized by slowly progressive muscle weakness due to motor neuron degeneration. It mainly affects hands and forearms, mainly in males, and the median age of diagnosis is around 40 years. Diagnosis takes about a year and a half and is often misdiagnosed as ALS. There are estimated to be around 13,000 patients with MMN in the U.S. and this number is increasing.
Specific pathophysiologic characteristics of MMN include the presence of IgMautoantibodies against the ganglioside GM1 and conduction block, i.e., impaired propagation of action potentials along the axon. GM1 is widely expressed in the nervous system by neurons, particularly around the nodes of Ranvier, and Schwann cells.
IVIg is the only approved treatment for MMN and needs to be dosed frequently to address the disease’s progressive nature.
Phase 1 Data
We conducted a Phase 1 healthy volunteer clinical trial of IV and SC empasiprubart. This first-in-human clinical trial was a double-blind placebo-controlled clinical trial designed to assess the safety, tolerability, PK and PD of a broad dose range of empasiprubart in 102 healthy subjects. In the single ascending dose part, we evaluated 70 subjects and tested up to 80 mg/kg administered IV and up to 60mg/kg administered SC. In the MAD part of the clinical trial, we evaluated 32 subjects to understand the safety and tolerability of repeated administrations and in particular to generate a data-set to optimally inform a PK/PD model.
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Both single and multiple administrations of empasiprubart or placebo had a favorable safety and tolerability profile supporting the investigation of clinical trial drug in patient clinical trials.
We observed a dose-dependent reduction of free C2 levels. After one dose of 30mg/kg empasiprubart, free C2 levels were reduced by 95% for more than 100 days. In the MAD part of the clinical trial, we could reach full complement blockade with more than 99% reduction of free C2 levels.
Following analysis of Phase 1 data, and the observed favorable safety and tolerability profile and consistent PK/PD profile, we launched a Phase 2 POC clinical trial in MMN in 2021.
Interim Results Phase 2 POC ARDA clinical trial
In June 2023, argenx announced its plan to advance ARGX‑113 into Phase 3 clinical development beforeto a second cohort with the end of 2018, subject to discussions at an end‑of‑Phase 2 meeting with the FDA, which we intend to scheduleARDA clinical trial of empasiprubart in 2018, aiming forMMN. This decision followed a first approval in MG. Depending on the outcomeplanned interim analysis of the ITP and PV clinical trials and subject to discussions with regulatory agencies, we intend to enter into Phase 3 clinical development of ARGX‑113first dose cohort by an Independent Data Monitoring Committee (IDMC) meeting.
The IDMC reviewed interim safety data from all patients (n=22) enrolled in one or both of these indications. In addition to the current intravenous formulation of ARGX‑113, we are also developing a subcutaneous formulation designed to make ARGX‑113 accessible to larger patient populations including patients requiring chronic therapy, potentially outsidefirst cohort of the hospital setting. We initiatedARDA clinical trial, including nine patients who completed the full 16-week treatment period. The IDMC confirmed a favorable safety and tolerability profile of empasiprubart consistent with results from the Phase 1 clinical trial and recommended advancing to the second cohort. Combined with the early efficacy signals observed, supporting POC of empasiprubart in healthy volunteersMMN, argenx started the second cohort of the ARDA clinical trial.
In January 2024, argenx announced positive data from the first cohort (n=22) of the Phase 2 POC ARDA clinical trial establishing POC in MMN. Empasiprubart demonstrated a 91% reduction in the need for IVIg rescue compared to placebo [HR: 0.09 95% CI (0.02; 0.044)].
In total, the ARDA clinical trial is expected to enroll 48 patients across two cohorts. The clinical trial’s objective, in addition to assessing safety and efficacy of empasiprubart, is to populate a subcutaneous formulation of ARGX‑113 in October 2017 forPK/PD model to inform the treatment of chronic autoimmune diseases.Phase 3 clinical trial dose selection.
Phase 2 ARDA Clinical Trial in MGDesign
We conductedThe Phase 2 POC ARDA clinical trial is a randomized, double‑blind, placebo‑controlled Phase 2double-blinded, placebo-controlled multicenter clinical trial to evaluate the safety and tolerability, efficacy, pharmacodynamicsPK, PD, and pharmacokineticsimmunogenicity of ARGX‑113. Thistwo dose regimens of empasiprubart in adults with MMN. The clinical trial consists of an IVIg dependency and monitoring period and two 16-week treatment cohorts of 24 MMN patients receiving empasiprubart or placebo in a 2x1 randomization. The dosing for Cohort 2 was established after a planned interim analysis of the first nine patients to complete the 16-week treatment period from Cohort 1. The primary endpoint is safety and tolerability. Additional endpoints include time to IVIg retreatment, biomarker analyses of C2 levels, and changes in measurements on key functional scores (modified medical research council (mMRC)-10 sum score, grip strength, MMN-RODS) as well as several patient-reported quality of life outcome measures (fatigue severity score (FSS), chronic acquired polyneuropathy patient-reported index (CAP-PRI), and values of the patient global impression change (PGIC) scale).
DGF
Overview
DGF, a complication after kidney transplantation, is defined as the need for dialysis in the first week after transplant. DGF occurs in up to 40% of patients receiving a deceased donor graft, and is associated with worse long-term transplant outcomes. DGF is often the clinical representation of ischemia reperfusion injury, in which the classical and lectin complement pathways play an important role, as shown by compelling evidence from both (in-house) in vitro and in vivo preclinical, and clinical trials. There are currently no approved therapies to reduce DGF risk. Furthermore, there is a well-established process to measure kidney function and DGF, and to establish POC and achieve registration. On
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this basis, combined with the significant unmet medical need, we have chosen DGF after kidney transplantation as second indication for empasiprubart.
Phase 2 POC VARVARA Clinical Trial
The Phase 2 POC VARVARA clinical trial was conductedinitiated in 24 generalized MG patients with an MG‑Activity‑of‑Daily‑Living, or MG‑ADL, score of 5 points or higher, with more than 50% of the score consisting of non‑ocular items,2023 and who are onis a stable dose of cholinesterase inhibitors, steroids and/or immunosuppressants which make up the typical first‑ and second‑line standard‑of‑care therapies. We conducted therandomized, placebo-controlled, double-blinded clinical trial at 19 sites across Europe, Canada and the United States. Patients were randomly assigned to two arms of 12 patients each. Patients in one treatment arm received 10 mg/kg of ARGX‑113, and the other treatment arm received placebo. All patients continued to receive the standard of care. Dosing took place during a three‑week period which included four weekly doses of ARGX‑113 or placebo. Patients received follow‑up for eight weeks after treatment.
The primary objectives of this Phase 2 clinical trial were to evaluate the efficacy, safety and tolerability of ARGX‑113empasiprubart in improving allograft function in recipients at risk for DGF. The clinical trial will include approximately 102 recipients of an at-risk deceased donor kidney. After a short screening period of < 24 hours, patients are randomly assigned in a 1:1 ratio to receive two doses of empasiprubart IV or placebo, of which one dose is administered during transplantation and one a week later. Participants receive standardized background induction and maintenance immunosuppression. They are evaluated for 52 weeks, with one additional safety follow-up visit in week 64. The primary endpoint is the estimated glomerular filtration rate (eGFR) at six months. Key secondary endpoints evaluatinginclude DGF risk, safety, and PK, PD and immunogenicity.
DM
Overview
DM is an idiopathic inflammatory myopathy characterized by muscle inflammation that causes progressive muscle weakness and is associated with various characteristic skin manifestations. Histopathological findings suggest that DM is a complement-mediated disease. The most common therapy for DM is the incidence and severityadministration of adverse events and serious adverse events, and evaluating vital signs, electrocardiogram and laboratory assessments. Secondary endpoints ofsteroids. IVIg is the trial included efficacy as measured by the change from baseline of the MG‑ADL; Quantitative MG; and MG Composite disease severity scores and the impact on quality of life as measured by the MG Quality of Life score. In addition, an assessment of pharmacokinetics, pharmacodynamics and immunogenicity was performed. All 24 enrolled patients were evaluable.only approved treatment for DM.
Phase 2 Topline ResultsPOC EMPACIFIC Clinical Trial
We announced topline data from thisThe EMPACIFIC clinical trial is a Phase 2 clinical trial in December 2017.
Primary endpoint analysis demonstrated ARGX‑113 to be well‑tolerated in all patients, with most adverse events observed characterized as mild and not deemed to be drug‑related. The majority of treatment emergent adverse events, or TEAEs, observed were considered as mild (i.e., Grade 1). No TEAEs Grade 3 or higher were reported. No
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clinically significant laboratory, vital signs and/or electrocardiogram findings were observed. No deaths, serious adverse events or TEAEs leading to discontinuation of treatment were reported during the trial. The observed tolerability profile was consistent with the Phase 1 healthy volunteer trial.
In total, 20 out of 24 (83.3%) patients reported at least one TEAE, and nearly all TEAEs were considered mild by the investigator, except for seven patients who experienced a moderate adverse event. No patients reported experiencing vomiting during the clinical trial. We did not observe any clinically significant increase in C‑reactive protein in the clinical trial.
The most frequent TEAEs deemed to be drug‑related per investigator were headache in 25.0% of patients, monocyte count decrease in 16.7% of patients and rhinorrhea in 8.3% of patients receiving ARGX‑113, respectively. Herpes zoster (shingles) of moderate intensity was reported in one patient and deemed to be possibly drug‑related by the investigator. One patient in the ARGX‑113 group moved to rescue therapy.
All TEAEs reported, as well as TEAEs deemed to be drug‑related by the investigator in at least two patients, are summarized in Table 1.
Table 1. Overview of TEAEs and drug‑related TEAEs reported in at least two patients in ARGX‑113 Phase 2 Clinical Trial in MG
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The secondary endpoint measures relating to efficacy showed ARGX‑113 treatment resulted in a strong clinical improvement over placebo as measured by all four predefined clinical efficacy scales during the entire duration of the trial. Patients in the treatment arm showed rapid onset of disease improvement, with clear separation from placebo one week after the first infusion.
83% of patients treated with ARGX‑113 achieved a clinically meaningful response (MG‑ADL≥2). 75% of patients treated with ARGX‑113 had a clinically meaningful and statistically significant improvement in MG‑ADL scores (at least a two‑point reduction from baseline) for a period of at least six consecutive weeks versus 25% of patients on placebo (p = 0.0391).
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Clinical benefit in the ARGX‑113 treatment group maximized as of one week after the administration of the last dose, achieving statistical significance over the placebo group (p = 0.0356) on the MG‑ADL score. Increasing differentiation was observed between the ARGX‑113 treatment group versus placebo with increasing MG‑ADL and QMG thresholds as shown in Figure 7.
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Figure 7: Increasing differentiation in patient MG‑ADL and QMG thresholds
(treatment group vs. placebo)
Analysis of the pharmacokinetic and pharmacodynamic endpoints was generally consistent with the findings from the Phase 1 clinical trial. We observed disease improvement to be correlated with reduction in pathogenic IgG levels. Moreover, we observed a reduction of acetylcholine receptor autoantibodies following a similar kinetic as the total IgG level reduction.
In line with findings in the Phase 1 healthy volunteer trial, positive anti‑drug antibody, or ADA, titers were detected in a limited number of patients. In the Phase 2 clinical trial, positive post‑dosing ADA titers were detected in four out of 12 patients receiving ARGX‑113 and in three out of 12 patients receiving placebo. Positive ADA titers were detected in one active‑treated patient as of two weeks after the last infusion, and these titers may have the tendency to slightly increase over the course of the trial. In line with the results obtained in the Phase 1 healthy volunteer trial, the majority of ADA signals in active‑treated patients were just above the detection limit of the assay and were typically only found once or twice during the course of the trial. Positive post‑dose ADA titers had no apparent effect on ARGX‑113 pharmacokinetics or pharmacodynamics.
Phase 2 Clinical Trial in ITP
We are conducting aPOC, randomized, double‑blind, placebo‑controlled Phase 2double-blinded, placebo-controlled, multicenter clinical trial to evaluate the safety, tolerability, and efficacy of multiple dose regimens of IV empasiprubart in adults with dermatomyositis. A total of 56 adult participants with a clinical diagnosis of DM and pharmacokinetics of ARGX‑113 in 36 ITP patients, who have platelet counts lower than 30 × 109/L and who are stable on standard‑of‑care treatment, consisting of corticosteroids, permitted immunosuppressants and/or thrombopoietin receptor agonists. We intend to conduct the clinical trial at approximately 35 sites across Europe. Patientsactive muscle disease will be randomly assignedrandomized (1:1:1:1) to threeone of four treatment arms of 12 patients each. All patients in this clinical trial will continue to receive standard‑of‑care treatment. One treatment arm(three empasiprubart dose regimens and one placebo arm). Participants will receive 5 mg/kg ARGX‑113,loading doses on Days 1 and 8, followed by maintenance doses every four weeks until the second arm will receive 10 mg/kg ARGX‑113 andend of the third arm will receive placebo. Dosing will take place in a three‑week period with four weekly doses of ARGX‑113 or placebo. The ITP trial protocol was amended by extending the follow-up period from 8 weeks to 21 weeks. In addition, a one-year open label extension study was added as a second amendment to allow (re)52-week treatment of ITP patients from the first study (dosed at 10mg/kg).
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phase. The primary objectives of this Phase 2 clinical trial areobjective is to evaluate safety and tolerability of ARGX‑113 with primary endpoints evaluating the incidence and severity of adverse events and serious adverse events and evaluating vital signs, electrocardiogram and laboratory assessments. Secondary objectives include evaluation of efficacy, based on platelet count, use of rescue treatment and bleeding events; pharmacokinetics; pharmacodynamics; and immunogenicity.
In September 2017, we announced that the clinical trial had achieved 50% enrollment.
Phase 2 Clinical Trial in PV
We are conducting an open‑label, non‑controlled Phase 2 clinical trialtolerability. The secondary objective is to evaluate clinical efficacy, using the safety, efficacy, pharmacodynamicsmean TIS at weeks 13, 25, and pharmacokinetics52 as endpoint.
ARGX-119 Development
ARGX-119 is a humanized agonist mAb that specifically targets and activates MuSK to promote maturation and stabilization of ARGX‑113the neuromuscular junction (NMJ). We plan to develop ARGX-119 in 12a range of neuromuscular diseases including CMS, a rare hereditary subtype of MG, and ALS, both severe neuromuscular indications.
NMJs are specialized synapses formed between motor neurons and muscle cells, which are essential for the ability to move and breathe. At the NMJ, motor neurons release acetylcholine, which binds to AChRs on the muscle to initiate muscle contraction. Deficits in the NMJ can cause neuromuscular disorders, which can range in severity from mild to life-threatening skeletal muscle weakness. MuSK is an essential component for the formation and function of NMJs.
ARGX-119 is the first and highly specific agonist mAb targeting human MuSK being developed for patients with mild to moderate PV who are either newly diagnosed or relapsing.neuromuscular disease, such as CMS and ALS. This mAb is derived from llamas and discovered using the argenx SIMPLE ANTIBODY™ platform technology. We intend to conductdeveloped ARGX-119 through our IIP program in collaboration with the world leading key opinion leaders on MuSK and the neuromuscular junction, including Professor Steve Burden from NYU and Professor Verschuuren from LUMC. In collaboration with Professor Burden, it was shown that ARGX-119 holds promising preclinical POC data in Dok7 congenital myasthenic syndrome, observed in a mouse model bearing the most common patient mutation and in ALS using ALS patient derived NMJ on-a-chip models. Based on these data, clinical trial at 12 sites across Europe, Ukrainedevelopment for ARGX-119 was initiated as activation of MuSK by ARGX-119 may stabilize, mature, and Israel. The trial design comprises three cohorts
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improve the function of the maintenance period, followed by an eight‑week follow‑up periodNMJ in patients with no dosingCMS or ALS, significantly reducing weakness and fatigability and improving quality of ARGX‑113. In newly diagnosed patients and relapsing patients off‑therapy, ARGX‑113 will be dosed as monotherapy, in absence of standard of care therapy. In relapsing patients on prednisone, ARGX‑113 will be dosed on top of a stable dose of prednisone during the induction phase. The prednisone dose may be changed (decreased or increased) from the beginning of the maintenance phase up to study end according to standard of care (i.e., corticosteroids, immunosuppressants, IVIg, plasma exchange and rituximab). An independent data monitoring committee may recommend adapting the dose during both the induction and the maintenance period, or the dosing frequency at maintenance, or the duration of dosing during the maintenance period with a maximum of two extra doses per cohort for a following cohort based on the outcome of the previous cohort. In case of a dose increase, the maximum dose would be 25 mg/kg.life.
The primary objectives of this Phase 2 clinical trial are to evaluate safety and tolerability of ARGX‑113, with primary endpoints evaluating the incidence and severity of adverse events and serious adverse events and evaluating vital signs, electrocardiogram, physical examination abnormalities and laboratory assessments. Secondary objectives include evaluation of pharmacodynamics including assessment of total IgG and pathogenic IgG levels, efficacy based on the PDAI score, pharmacokinetics, and immunogenicity.
A Phase 1 Clinical Trial for Subcutaneous Formulation of ARGX‑113
In addition to the intravenous product formulation of ARGX‑113 that we are currently using in our clinical trials, we are also developing a subcutaneous product formulation designed to enable administration of ARGX‑113 to larger patient populations, including patients requiring chronic therapy, potentially outside the hospital setting.
We evaluated the intravenous and subcutaneous formulations of ARGX‑113 head‑to‑head in a preclinical cynomolgus monkey model. The results suggest that both formulations result in comparable half‑life in circulation of ARGX‑113, a favorable bioavailability of 75% of the subcutaneous formulation and a comparable pharmacodynamic effect shown by reduction of total IgG antibodies. We believe these results suggest subcutaneous dosing of ARGX‑113 in humans may be feasible. We initiated a Phase 1dose-escalation clinical trial in healthy volunteers for a subcutaneous formulationstarted in October 2017 for the treatment of chronic autoimmune diseases.
We are evaluating a subcutaneous formulation of ARGX‑113 in a randomized, open‑label, parallel group, single‑center study in approximately 32 healthy male subjects to compare the pharmacokinetics, pharmacodynamics, safety2023 and tolerability of this formulation with the current intravenous formulation being administered in our ongoingis ongoing. A Phase 2 clinical trials. Single1b and repeat dosing regimens are being studied, and doses are aligned with doses used in the continuing Phase 2 clinical trials of ARGX‑113 using the intravenous formulation. This clinical trial is taking place in a single clinical center in the Netherlands.
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Phase 1 Clinical Data
We have completed enrollment in a double‑blind, placebo‑controlled Phase 12a clinical trial in healthy volunteersCMS and ALS respectively are planned to evaluatestart in 2024 to assess early signal detection in patients.
ARGX-109, ARGX-220, ARGX-121 and ARGX-213 Development
We continue to invest in our discovery engine, the IIP, to drive long-term sustainable pipeline growth. Through the IIP, four new pipeline candidates were nominated in 2023, including: ARGX-213 targeting FcRn and furthering argenx’ leadership in this new class of medicine; ARGX-121 and ARGX-220, which are first-in-class targets broadening argenx’ focus across the immune system; and ARGX-109, targeting IL-6, which plays an important role in inflammation. Preclinical work is ongoing for each candidate and we expect to file four IND applications by the end of 2025.
Antibody Engineering and Other Technology Capabilities
Our Proprietary SIMPLE ANTIBODY™ Platform
Our proprietary SIMPLE ANTIBODY™ platform technology sources V-regions from conventional antibodies existing in the immune system of outbred llamas. Outbred llamas are those that have been bred from genetically diverse parents, and each has a different genetic background. The llama produces highly diverse panels of antibodies with a high human homology in their V-regions when immunized with human disease targets. We then combine these llama V-regions with Fc regions of fully human antibodies, resulting in antibodies that we then produce in industry-validated production cell lines. The resulting antibodies are diverse and, due to their similarity to human antibodies, we believe they are well suited to human therapeutic use. With this breadth of antibodies, we are able to test many different epitopes. Being able to test many different epitopes with our antibodies enables us to search for an optimized combination of safety, tolerability, pharmacokinetics, pharmacodynamicspotency and immunogenicityspecies cross-reactivity with the potential for maximum therapeutic effect on disease. These antibodies are often cross-reactive with the rodent version of singlechosen disease targets. This rodent cross-reactivity enables more efficient preclinical development of our product candidates because most animal efficacy models are rodent-based. By contrast, most other antibody discovery platforms start with antibodies generated in inbred mice or synthetic antibody libraries, approaches that we believe are limited by insufficient antibody repertoires and multiple doses of ARGX‑113. Inlimited diversity, respectively. Our SIMPLE ANTIBODY™ platform technology allows us to access and explore a broad target universe, including novel and complex targets, while minimizing the first part of the clinical trial, 30 subjects were randomized to receive a single dose of ARGX‑113 or placebo ranging from 0.2 mg/kg to 50 mg/kg. In the second part of the clinical trial, 32 subjects were randomized to receive multiple ascending doses of ARGX‑113 or placebo uplong timelines associated with generating antibody candidates using traditional methods.
Our Antibody Engineering Technologies
Through licensing we have obtained access to a maximumbroad range of 25 mg/kg.
We announced interim data from this Phase 1 clinical trial in June 2016 and at a workshop we sponsored in conjunction with the American Society of Hematology annual meeting in December 2016. We expect that the full results from this clinical trial will be published in a peer‑reviewed journal during the first half of 2017.
Single Ascending Dose
We observed that a single two‑hour infusion of 10 mg/kg ARGX‑113 was associated with an approximate 50% reduction of circulating IgG antibody levels. We observed that a reduction of circulating IgG antibody levels persisted for more than four weeks after the last dose, as shown in Figure 8. We believe this sustained reduction would be clinically meaningful if replicated with respect to pathogenic IgG antibodies because IVIg and plasmapheresis typically result in a 30% to 60% reduction in pathogenic IgG antibody levels.
Figure 8. Selective reduction of IgG by administration of ARGX‑113 to healthy volunteers in the single ascending dose part of our Phase 1 clinical trial
Administration of ARGX‑113 at single doses up to 25 mg/kg was reported to be well‑tolerated and administration of a single dose of 50 mg/kg was reported to be moderately tolerated. There were no drug‑ or infusion‑related serious adverse events associated with doses up to 50 mg/kg. The most frequently reported drug‑related adverse events included abnormal white blood cell count, increased C‑reactive protein levels, headache, dizziness and chills. All of these adverse events were mild or moderate and reported only in the two highest dose groups (25 mg/kg and 50 mg/kg). While ARGX‑113 was associated with a decrease in the levels of IgG antibodies, there were no observed changes in IgM or IgA levels or serum albumin observed in the clinical trial, suggesting that ARGX‑113 has the potential to be a highly selective immunosuppressant.
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Multiple Ascending Dose
In the multiple ascending dose part of the Phase 1 clinical trial, repeat administration of both 10 mg/kg and 25 mg/kg of ARGX‑113 every seven days, four doses in total, and 10 mg/kg every four days, six doses in total, was associated with a gradual reduction in levels of all four classes of IgG antibodies by 60% to 85%engineering technologies. NHANCE™, with 10 mg/kg dose results shown in Figure 9. For all doses, we observed the reduction in circulating IgG antibody levels to persist for more than four weeks after the last dose with levels below 50% at approximately three weeks, and did not return to baseline levels for more than one month. Pharmacokinetic analysis of serum baseline levels of ARGX‑113 indicates that it has a half‑life of approximately three to four days with no drug accumulation following subsequent weekly dosing. The prolonged activity on the levels of IgG antibodies is consistent with the mechanism of action of ARGX‑113ABDEG™, POTELLIGENT® and the effect ofDHS mutations focus on engineering the ABDEG technology on increasing the intracellular recycling of ARGX‑113. Similar to the single ascending dose part, no significant reductions in IgM, IgA or serum albumin were observed.
Figure 9. Reduction in the levels of four IgG antibody classes and total IgG levels in the multiple ascending dose part of our Phase 1 clinical trial of ARGX‑113 in healthy volunteers at a dose of 10 mg/kg every seven days
Administration of multiple ARGX‑113 doses of 10 mg/kg and 25 mg/kg were reported to be well‑tolerated. One serious adverse event, hyperventilation, was observed in the multiple ascending dose part. This event, which occurred six days after drug administration, was considered by the clinical investigator as unlikely to be related to ARGX‑113. Some patients had changes to C‑reactive protein levels that were considered clinically significant. The most frequently reported drug‑related adverse events included headache, feeling cold, chills and fatigue, all of which were mild or moderate and reported only in the highest dose group of 25 mg/kg.
In a limited number of pre‑ and post‑dose samples originating from both active‑ and placebo‑treated individuals, positive ADA titers were detected. During the single ascending dose part of the clinical trial, three out of 20 subjects on drug and one out of 10 subjects on placebo showed positive post‑dose ADA titers. During the multiple ascending dose part of the clinical trial, one out of 23 subjects on drug and two out of eight subjects on placebo showed positive post‑dose ADA titers. Signals typically were just above the detection limit of the assay and were only found once during the clinical trial for the majority of subjects. No increase of ADA titers over time for individual subjects was
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observed, nor had any of the subjects with at least one positive ADA sample an apparent different pharmacokinetic/pharmacodynamic profile.
Preclinical Data
We conducted several preclinical studies of ARGX‑113. The role of FcRn in maintaining IgG homeostasis was observed in knockout mice lacking functional FcRn. In preclinical in vitro studies, ARGX‑113 bound to human FcRn with an affinity that was 30 to 500 times higher than the naturally occurring Fc region of human IgG1. In preclinical testingantibodies, while SMART-Ig® and ACT-Ig® technologies allow to make sweeping antibodies.
Fc engineering can augment antibodies interactions with components of the immune system, thereby potentially expanding the therapeutic index of our product candidates by modifying their half-life, tissue penetration, rate of disease target clearance and potency. For example, our NHANCE™ and ABDEG™ engineering technologies enable us to modulate the interaction of the Fc region with FcRn, which is responsible for regulating half-life, tissue distribution and PD properties of IgG antibodies. Similarly, the POTELLIGENT engineering technology modulates the interaction of the antibody Fc region with receptors located on specialized immune cells known as natural killer (NK) cells. These NK cells can destroy the target cell, resulting in cynomolgus monkeys, ARGX‑113 specifically blocked IgGenhanced antibody-dependent cell-mediated cytotoxicity (ADCC).
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NHANCE™and ABDEG™: Modulation of Fc Interaction with FcRn.
An illustration of the FcRn-mediated antibody recycling mechanism is shown in Figure 4. [1] Serum proteins, including IgG antibodies, are routinely removed from the circulation by cell uptake. [2] Antibodies can bind to FcRn, which serves as a dedicated recycling receptor in the endosomes, which have an acidic environment, and did not leadthen [3A] return to reductionsthe circulation by binding with their Fc region to FcRn. [3B] Unbound antibodies end up in IgA, IgMthe lysosomes and are degraded by enzymes. Because this Fc/FcRn interaction is highly pH-dependent, antibodies tightly bind to FcRn at acidic pH (pH 6.0) in the endosomes but release again at neutral pH (pH 7. 4) in the circulation.
Figure 4: The FcRn-mediated recycling mechanism
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NHANCE™
NHANCE™refers to two mutations that we introduce into the Fc region of an IgG antibody. NHANCE™ is designed to extend antibody serum half-life and increase tissue penetration. In certain cases, it is advantageous to engineer antibodies that remain in the circulation longer, allowing them to potentially exert a greater therapeutic effect or serum albumin levels.be dosed less frequently. As shown in Figure 5, [1] NHANCE™ antibodies bind to FcRn with higher affinity, specifically under acidic pH conditions. [2] Due to these tighter bonds, NHANCE™ FcRn-mediated antibody recycling is strongly favored over lysosomal degradation, although some degradation does occur. [3] NHANCE™ allows a greater proportion of antibodies to return to the circulation potentially resulting in increased bioavailability and reduced dosing frequency. ARGX-109, empasiprubart and a number of our discovery-stage programs utilize NHANCE™.
Figure 5: NHANCE™ mutations favor the FcRn-mediated recycling of IgG antibodies.
ABDEG™
ABDEG™ refers to five mutations that we introduce in the Fc region that increase its affinity for FcRn at both neutral and acidic pH. In preclinical animal efficacy modelscontrast to NHANCE™, ABDEG™-modified Fc regions remain bound to FcRn if the pH changes, occupying FcRn with such high affinity that they deprive endogenous IgG antibodies of MG, ITP, rheumatoid arthritis and MS, different prototypestheir recycling mechanism, leading to enhanced clearance of ARGX‑113 showedsuch antibodies by the potentiallysosomes. Some diseases mediated by IgG antibodies are directed against self-antigens. These self-directed antibodies are referred to as autoantibodies. We use our ABDEG™ technology to reduce the level of these pathogenic IgG antibodies, thereby reducing disease symptoms.
ARGX‑110
Weautoantibodies in the circulation by increasing the rate at which they are developing ARGX-110 in cancer indications, initially for TCL and AML, as well as high-risk MDS. TCL and AML are rare and aggressive hematological cancers for which significant unmet medical needs exist. MDS, a rare bone marrow disorder, is often a precursor to AML. ARGX-110cleared by the lysosomes. ABDEG™ is a SIMPLE Antibody designed to potently block the CD70/CD27 interactioncomponent in a number of our products and kill CD70-positive cells via its potent antibody effector functions through the useproduct candidates, including efgartigimod.
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ARGX-110 is currently being evaluatedAs shown in an open-label Phase 1/2 clinical trial, in combination with azacitidine, in newly diagnosed AML patients who are unfit for intensive chemotherapy or in patients with high-risk MDS and an open-label Phase 1/2 clinical trial in 27 patients (13 patients in the Phase 1 part and 14 patients in the Phase 2 part) relapsed or refractory CD70-positive CTCL patients.
We reported interim results for the first six patients from the dose-escalation part of the Phase 1/2 clinical trial in combination with azacitidine in AML or high-risk MDS in December 2017, which demonstrated a favorable tolerability profile of the combination therapy and suggested evidence of biological activity across the evaluated doses. We expect to report topline data for this trial in the second half of 2018.
We reported interim data from the Phase 2 part of the Phase 1/2 clinical trial in CTCL in December 2017, which demonstrated a favorable tolerability profile and disease control in six out of nine evaluable patients. We expect to report topline data from the Phase 2 part of this clinical trial in the second half of 2018.
In addition, ARGX-110 is being evaluated in an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma. To date, 11 patients have been enrolled in this clinical trial.
Overview of Acute Myeloid Leukemia and Myelodysplastic Syndrome
AML is a hematologic cancer characterized by excessive proliferation of myeloid stem cells and their failure to properly differentiate into mature white blood cells. AML is the second most common subtype of leukemia in adults. In the United States, AML has an incidence of approximately 22,000 new cases annually. AML is generally a disease of elderly people, with more than 60% of diagnosed patients being older than 60 years, and AML is uncommon before the age of 45. The average five-year survival rate for patients with AML is 27%, but there are significant differences in prognosis depending on several factors, including the age of the patient at diagnosis. For patients under the age of 45, the five-year survival rate is approximately 57%, while for those over the age of 65 it is only 6%. There are likely multiple reasons for this discrepancy, including the ability of younger patients to tolerate more aggressive therapy.
Current first-line treatments in AML typically involve aggressive chemotherapy, including alkylating agents and cytarabine potentially followed by stem cell transplantation, for younger patients with the aim to induce remission. This therapy is not recommended for older patients or patients with comorbidities, who are often treated with hypomethylating agents. We believe there is a significant need for safer, more effective AML treatments thatFigure 6, our ABDEG™ technology can also be used with our pH-dependent SIMPLE ANTIBODY™ generated antibodies in elderly patients. Because relapsea mechanism referred to as sweeping. Certain antibodies generated through the SIMPLE ANTIBODY™ platform bind to their target in a pH-dependent manner. These antibodies [1] bind tightly to a target at neutral pH while in circulation, and [2] release the target at acidic pH in the endosome. [3] The unbound target is often duedegraded in the lysosome. [4] However, when equipped with our ABDEG™ technology, the therapeutic antibodies remain tightly bound to leukemic stem cells present nextFcRn at all pH levels and are not degraded themselves. Instead, they are returned to the malignant AML cells,
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or blasts, therapies targeting both blasts and leukemic stem cells may be more efficacious than chemotherapy only and could increase survival rates.
MDS also affects bone marrow cells, reducing their ability to produce red and white blood cells or platelets. In the United States, MDS has an incidence of approximately 13,000circulation where they can bind new cases annually. There are currently an estimated 60,000 MDS patientstargets. We believe this is especially useful in the United States. Approximately 75% of MDS patients are older than 60 years of age when diagnosed, and, like with AML, as the population ages the disease prevalence is expected to rise. Some MDS patients are atsituations where high risk to develop AML and are treated in a similar way as AML patients.
Overview of T-Cell Lymphoma
Lymphoma is the most common type of blood cancer and occurs when lymphocytes, a type of white blood cell such as B-cells and/or T-cells, grow and multiply uncontrollably. Cancerous lymphocytes can travel to many partslevels of the body, includingtarget are circulating or where the bloodtarget needs to be cleared very quickly from the system.
Figure 6: SIMPLE ANTIBODY™ and bone marrow, giving riseABDEG™ platform technologies work in concert to leukemias, and to lymph nodes, spleen, skin or other organs, forming a masssweep diseases targets.
POTELLIGENT®
POTELLIGENT® modulates the interaction of the Fc region with the Fc gamma receptor IIIa located on specialized immune cells, known as NK cells. These NK cells can destroy the target cell, resulting in enhanced ADCC. POTELLIGENT® changes the Fc structure by excluding a tumor.
TCL accounts for 6%particular sugar unit such that it enables a tighter fit with the Fc gamma receptor IIIa. The strength of all casesthis interaction is a key factor in determining the killing potential of lymphoma and can be divided into various subtypes. These subtypes differ by location, distribution and aggressivenessNK cells. An independent publication reported that the exclusion of this sugar unit of the primary tumor as well asFc region increases the ADCC-mediated cell-killing potential of antibodies by specific changes10- to the affected lymphocytes. CTCL is1000-fold. Cusatuzumab and ARGX-111 utilize POTELLIGENT® (source: Expert Opin Biol Ther 2006; 6:1161-1173; http://www.tandfonline.com/doi/full/10.1517/14712598.6.11.1161%20).
SMART-Ig®, ACT-Ig®and DHS
In 2020, we entered into a subtype of TCLresearch license and overall, there are approximately 7,900 new cases of TCL in the United States each year. According to the Cutaneous Lymphoma Foundation, the incidence of CTCL in the United States is approximately 3,000 new cases per year.
The two most common types of CTCL are mycosis fungoides, representing approximately 50% of CTCL patients, and a more advanced form known as Sézary syndrome, representing approximately 15% of CTCL patients. In both mycosis fungoides and Sézary syndrome, visible skin lesions offer an ongoing meansoption agreement with Chugai under which to monitor both the progression of disease and the impact of treatment. Sézary syndrome is distinguished by the presence of malignant lymphocytes in the blood, an extensive rash covering over 80% of the body and tumors visible on the skin.
Advanced TCL is generally very aggressive and is typically treated with standard anticancer chemotherapy agents used in combination with or without the addition of biologics. The five-year survival for TCL patients is 65%, with poor prognosis for subtypes such as Sézary syndrome underscoring the unmet need for effective, long-lasting TCL treatments.
Our Solution: ARGX‑110
Our product candidate ARGX-110 is an antibody that we believe has the potential to add to the treatment paradigm for lymphomas and leukemias by both increasing the response rates and extending the duration of response for patients with CD70-positive advanced-stage cancers.
We developed ARGX-110 using our SIMPLE Antibody Platform and the POTELLIGENT Fc engineering technology. ARGX-110 binds to the cell surface protein CD70 with high affinity, blocking the interaction between CD70 and its receptor CD27 and targeting CD70 expressing cells for destruction by multiple immune pathways. CD70 is a cell surface protein that is highly expressed in cancer, including in T-cell and B-cell lymphomas, leukemias and certain solid tumors. In normal tissues, CD70 expression is either low or absent. Binding of CD70 to its receptor, CD27, initiates a cascade of intracellular events leading to cell proliferation and survival. As a byproduct of CD70 binding to CD27, the extracellular portion of CD27 is cleaved, creating a soluble form of CD27 known as sCD27, which can easily be measured. sCD27 may serve as a biomarker for CD70 activity, potentially allowing us to identify target patients based on the likelihood of response to treatment, monitor disease progression and measure the impact of anti-CD70 therapy. ARGX-110 exhibits potent ADCC and antibody dependent cellular phagocytosis potential through the use of POTELLIGENT technology as well as complement-dependent cytotoxicity leading to the killing of cells expressing CD70.
Based on the broad overexpression of CD70 in hematological cancers, we may decideaccess Chugai’s SMART-Ig® and ACT-Ig® . In 2020, we also entered into a non-exclusive research agreement with the Clayton Foundation under which we may access the Clayton Foundation’s proprietary DHS mutations to study ARGX-110 in additional hematological cancer indications beyond TCL, AML and MDS. In addition to ARGX-110’s potential as a
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monotherapy, we believe that it may be suitable for combination therapy given its reported tolerability to date; the fact that certain cancer treatments, such as histone deacetylase inhibitors, hypomethylating agents and irradiation, may upregulate CD70; and resistance to certain treatment with tyrosine kinase inhibitors may be effected through CD70 overexpression.therapeutic antibodies.
Clinical Development PlanGenmab collaboration
In December 2016,2023, we initiated an open-label Phase 1/2 clinical trial of ARGX-110 at three sites in Switzerland for the treatment of newly diagnosed AML or high-risk MDS patients. We expect the majority of patient enrollment in this clinical trial to be AML patients. We reported interim results from the dose-escalation part of this clinical trial in December 2017. Patient recruitment is currently ongoing, and we have recruited nine AML patients to date.
We are also currently evaluating ARGX-110 in an open-label, multi-site Phase 1/2 clinical trial in Europe in patients with relapsed or refractory CD70-positive CTCL, with interim data from the Phase 1 and Phase 2 parts of this clinical trial reported in December 2017. We expect to report topline results from the Phase 2 part of this clinical trial in the second half of 2018.
Prior to this, ARGX-110 was evaluated in an extensive Phase 1 clinical trial in patients with advanced malignancies expressing CD70, following a step-wise adaptive clinical trial design enrolling a total of 86 patients (of whom 85 patients have been treated): a dose-escalation part (60 patients) and four safety-expansion cohorts in solid tumors (20 patients), hematological cancers (19 patients), CTCL patients (14 patients, of whom 13 have been treated) and PTCL (seven patients). This clinical trial design was adaptive in that it allowed us to make data driven decisions and open-up new cohorts in indications where we have seen the most promising early signals of biological activity. While the primary goal of the Phase 1 part of this clinical trial is to investigate safety and pharmacokinetics, we have also observed evidence of biological activity in several of the patients treated. These results led us to pursue the further evaluation of ARGX-110 in AML and CTCL.
In addition, ARGX-110 is being evaluated in an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma. To date, 11 patients have been enrolled in this clinical trial.
Phase 1/2 Clinical Trial in Combination with Azacitidine in Patients with AML or High-Risk MDS (ongoing)
We are evaluating ARGX-110 in an open-label, dose-escalating Phase 1/2 clinical trial to evaluate its safety, tolerability and efficacy in combination with azacitidine in newly diagnosed AML patients unfit for chemotherapy or high-risk MDS patients. The clinical trial was initiated in December 2016. All patients in this clinical trial are receiving ARGX-110 in combination with 75 mg/m2 azacitidine (standard of care for AML). During the dose-escalation part of the clinical trial, three doses of ARGX-110, 1 mg/kg, 3 mg/kg and 10 mg/kg administered bi-weekly are being evaluated. This trial design was amended in February 2018 by adding a 20 mg/kg dose cohort to the dose–escalation part to best inform the recommended dose for a Phase 2 trial.
Patients will be dosed every two weeks until disease progression for a maximum duration of 12 months. The primary objective of the Phase 1 part of the clinical trial is to determine the maximum tolerated dose of ARGX-110 and/or the recommended Phase 2 dose in combination with azacitidine. Once the dose for the combination therapy is selected, efficacy will be evaluated in a dedicated Phase 2 clinical trial. This is a multi-center clinical trial conducted in Europe, with three sites currently open in Switzerland. To date, we have enrolled a total of nine patients in the Phase 1 part of this clinical trial. We reported interim results for a first set of six evaluable patients from the dose-escalation part of this clinical trial in December 2017 representing the data as of November 15, 2017. These six patients constituted the 1 mg/kg and 3 mg/kg dose cohorts. Three patients have also been enrolled in the 10 mg/kg dose cohort, but were non-evaluable at the time of the interim data. Six out of nine patients were still on treatment at the time of the interim data. These interim results showed for the first six patients that no dose-limiting toxicity was observed for ARGX-110 and that ARGX-110 was overall reported to be well-tolerated with signs of clinical activity. To date, the tolerability profile of ARGX-110 in this Phase 1/2 clinical study in combination with azacitidine appears to be similar to what we observed in the other ARGX-110 clinical trials. We believe that the observed Grade 3 and 4 hematological toxicity for ARGX-110
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in combination with azacitidine corresponds to the reported safety profile of azacitidine monotherapy and can be seen in Table 2.
Table 2. Grade 3 and 4 adverse events of ARGX-110 in combination with azacitidine open-label, Phase 1 dose‑escalation part (first set of six evaluable patients, ongoing, uncleaned data as of November 15, 2017*)
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* The collection of safety data for the three patients enrolled in the 10 mg/kg dose cohort is ongoing. Through November 15, 2017, the observed tolerability profile in the 10 mg/kg dose cohort appeared to be in line with the lower dose cohorts.
** Intermittent toxicities for the same patient.
More specifically, at the time of the interim data, six out of six AML patients showed signs of clinical activity, including complete remission in three out of six patients, complete remission with incomplete blood count recovery in one out of six patients and partial response in two out of six patients. One of the patients who achieved a complete remission successfully bridged to allogeneic stem cell transplant after five cycles. One patient discontinued from the study following an adverse event. The preliminary responses as of November 15, 2017, observed in the first six evaluable AML patients can be seen in Table 3.
Leukemic stem cells are demonstrated to give rise to a large population of more mature leukemic blasts which lack self-renewal capacity in AML. Leukemic stem cells reside in the bone marrow and are considered difficult to target specifically. Preliminary data from the first set of patients suggest ARGX-110 could be active both at the circulating and bone marrow blast level and at the leukemic stem cell level.
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Table 3. Overview of six AML patients treated with ARGX-110 in the Phase 1 dose-escalation
part of the Phase 1/2 clinical trial in combination with azacitidine in patients with AML or
high-risk MDS (uncleaned data as of November 15, 2017)
Phase 2 Part of Clinical Trial in Patients with Relapsed or Refractory CD70-positive CTCL and Phase 1 Safety‑Expansion Cohorts in Patients with CD70-positive CTCL (ongoing, completed enrollment)
A Phase 1 safety-expansion cohort completed enrollment, consisting of heavily pre-treated patients with CD70-positive CTCL. In total, we have recruited 14 CTCL patients (13 of whom have been treated). We transitioned into the open-label Phase 2 part of our Phase 1/2 clinical trial of ARGX-110 in 14 adult, relapsed or refractory CD70-positive CTCL patients in April 2017. We announced interim results from the 13 patients in the CTCL safety-expansion cohort of the Phase 1 part and nine patients in the Phase 2 part of the clinical trial in December 2017 for a total of 22 CTCL patients, who demonstrated signs of clinical activity and a favorable tolerability profile in line with what was observed earlier in the dose-escalation part of the Phase 1 trial and previous safety-expansion cohorts of the Phase 1/2 clinical trial in patients with advanced malignancies expressing CD70.
Based on the ongoing biomarker and pharmacokinetic analysis from those CTCL patients treated in the Phase 1 part of the Phase 1/2 clinical trial, we decided to increase the dose of ARGX-110 from 1 mg/kg to 5 mg/kg every three weeks for the Phase 1 safety-expansion CTCL cohort. All patients in the Phase 2 part of the clinical trial will receive a 5 mg/kg dose of ARGX-110 monotherapy. We are conducting this Phase 2 part of the clinical trial at multiple centers in Europe. Patients will cease treatment if necessary for either safety reasons or disease progression. The primary endpoint of this part of the clinical trial is efficacy, and secondary endpoints include safety and characterization of pharmacokinetics and immunogenicity. We expect to report topline results from this clinical trial in the second half of 2018.
As of December 2017, of the 22 patients under analysis, we observed one complete response, two partial responses and 10 patients with stable disease, and five patients were still on the study at a 5 mg/kg dose. As of December 2017, ARGX-110 has continued to show a favorable tolerability profile in these patients. Grade 3 and 4 drug-related adverse events from the CTCL safety expansion cohort of the Phase 1 and the Phase 2 parts of the clinical trial are
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summarized in Table 4. No Grade 4 drug-related toxicities were observed among this patient population. The preliminary responses as of November 7, 2017, observed in the first 22 evaluable CTCL patients can be seen in Table 5.
Table 4. Grade 3 and 4 adverse events in 1 mg/kg and 5 mg/kg doses of ARGX 110 in open-label, Phase 1 safety‑expansion CTCL cohort and Phase 2 CTCL part (ongoing, uncleaned data as of November 7, 2017)
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Table 5. Overview of 13 CTCL patients treated with ARGX-110 in the CTCL safety expansion cohort of the Phase 1 part and nine CTCL patients treated with ARGX-110 in the CTCL Phase 2 part of the Phase 1/2 clinical trial (uncleaned data as of November 7, 2017)
Note: Best responses are based on the modified Severity Weighted Assessment Tool, or mSWAT, a widely used method for scoring of skin lesions in CTCL. The mSWAT score takes into account the number and severity of skin lesions as well as the total body surface area affected. A stable disease score is given if the mSWAT score does not increase by more than 25%. A partial response is deemed to have occurred with a 50% reduction in the mSWAT score. A complete response requires a 100% reduction in mSWAT score.
Phase 1 Part of Phase 1/2 Clinical Trial in Patients with Advanced Malignancies Expressing CD70 (ongoing, completed enrollment)
ARGX-110 was evaluated in an extensive Phase 1 part of a Phase 1/2 clinical trial in patients with advanced malignancies expressing CD70, following a step-wise adaptive clinical trial design enrolling a total of 86 patients (of whom 85 patients have been treated to date): a dose-escalation part (26 patients) and four safety-expansion cohorts in solid tumors (20 patients), hematological cancers (19 patients), PTCL (seven patients) and the previously mentioned cohort in CTCL patients (14 patients, of whom 13 have been treated) . This clinical trial design was adaptive in that it allowed us to make data driven decisions and open-up new cohorts in indications where we have seen the most promising early signals of biological activity. While the primary goal of the Phase 1 part of this clinical trial was to
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investigate safety and pharmacokinetics, we also observed evidence of biological activity in several of the patients treated.
No dose-limiting toxicities were observed. The most frequent drug-related adverse events were fatigue in 48.2% of patients and mild (Grade 1–2) infusion-related reactions in 34.1% of patients. Other monoclonal antibodies engineered using POTELLIGENT or similar third-party products that augment ADCC such as mogamulizumab, obinutuzumab and imgatuzumab also have infusion-related reaction rates of 24% to 77%. Premedication with acetaminophen, antihistamines and/or corticosteroids are used to reduce the impact of infusion-related reactions.
There were 83 serious adverse events seen in 42 of these pre-treated patients. Many patients who enrolled in this study have failed more than one prior therapy. All drug-related adverse events referenced in this paragraph were evaluated by the investigators according to the Common Terminology Criteria for Adverse Events guidelines (CTCAE v4.03). One Grade 1 (pyrexia), seven Grade 2 (infusion-related reactions), four Grade 3 (febrile neutropenia, anaemia, thrombocytopenia and fatigue—included in Table 6) and no Grade 4 serious adverse events were reported by the investigator as being drug-related. 23 patient deaths were reported in the phase 1 clinical trial, of which 17 deaths were attributed to disease progression. One patient death (Grade 5), which was deemed drug-related by the investigator, occurred in a heavily pre-treated patient with Waldenstrom Macroglobulinemia and was attributed to sepsis and general condition deterioration.
Table 6. Grade 3 and 4 drug-related adverse events (including serious adverse events), in ARGX-110 in open‑label, Phase 1 clinical trial
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Dose-escalation Part and Cohorts 1-4 |
| 0.1 mg/kg |
| 1 mg/kg |
| 2 mg/kg |
| 5 mg/kg |
| 10 mg/kg |
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Number of patients |
| 6 |
| 15 |
| 7 |
| 42 |
| 5 |
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Fatigue |
| 1 |
| — |
| — |
| 3 |
| — |
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Anaemia |
| — |
| — |
| — |
| 1 |
| — |
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Decreased appetite |
| 1 |
| — |
| — |
| — |
| — |
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Electrocardiogram qt prolonged |
| — |
| 1 |
| — |
| — |
| — |
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Febrile neutropenia |
| — |
| — |
| — |
| 1 |
| — |
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Hypoxia |
| 1 |
| — |
| — |
| — |
| — |
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Infusion related reactions |
| — |
| — |
| — |
| 1 |
| — |
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Thrombocytopenia |
| — |
| — |
| — |
| ��1 |
| — |
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Note: All Grade 3 drug-related adverse events. No Grade 4 drug-related adverse events reported.
All other serious adverse events were considered non-drug-related by the treating investigator.
In the dose-escalation part of this clinical trial, the half-life of ARGX-110 was observed to be approximately 13 days. Anti-drug antibodies were detected in 50% of all patients, the majority of which were seen at the 0.1 mg/kg and 1 mg/kg doses.
Phase 1 Clinical Trial in Nasopharyngeal Carcinoma (ongoing, completed enrollment)
In addition, ARGX-110 is being evaluated in an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma at various stages of its natural history (adjuvant vs. metastatic). To date, 11 patients have been enrolled in this clinical trial. Patients receive a 5 mg/kg dose of ARGX-110, which can be administered as monotherapy or in combination with chemotherapy agents, including cisplatin, carboplatin, 5-fluorouracil, gemcitabine and paclitaxel. The clinical trial is currently ongoing, and no Grade 3 or 4 drug-related adverse events have been reported to date.
Preclinical Data
We conducted preclinical studies of ARGX-110 in support of our clinical program. In preclinical testing in cynomolgus monkeys, ARGX-110 was well-tolerated. In preclinical mouse efficacy models, ARGX-110 variants
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showed the potential to prolong survival in Burkitt’s lymphoma, overcome tyrosine kinase inhibitor resistance thereby prolonging survival in chronic myeloid leukemia, or reduce blast and leukemic stem cell burden thereby prolonging survival in AML. In a preclinical mouse efficacy model of acute lymphocytic leukemia, the administration of an ARGX-110 variant led to the acute death of some animals with high tumor load.
ARGX‑111
We are developing ARGX‑111 for the treatment of patients with certain solid tumors that overexpress c‑Met, a receptor associated with tumor growth and metastasis, or tumors that are mesenchymal‑epithelial transition factor, or MET, amplified. MET‑amplified tumors possess multiple copies of the MET gene, resulting in elevated c‑Met levels. While c‑Met overexpression and MET amplification both result in elevated c‑Met levels, clinical and preclinical evidence suggests c‑Met from MET‑amplified tumors is a disease driver in some cancers. ARGX‑111 employs our SIMPLE Antibody, NHance and POTELLIGENT technologies to drive tissue penetration in the body and to increase its ability to enhance ADCC. ARGX‑111 binds to c‑Met with high affinity and does not cause dimerization of the c‑Met receptor, which differentiates it from other, earlier attempts to direct antibodies against c‑Met. Dimerization is a process which can result in receptor activation, undermining the intended therapeutic effect of antibodies blocking hepatocyte growth factor, or HGF, binding to c‑Met. By blocking both HGF‑dependent and independent c‑Met activation, ARGX‑111 is able to block c‑Met receptor activation which could trigger survival, proliferation and metastasis of tumor cells. Thus, we believe ARGX‑111 may have a differentiated clinical profile.
Clinical Development Plan
Phase 1b Clinical Trial in Patients with Advanced Cancer Overexpressing the c‑Met Protein
We conducted a Phase 1 clinical trial in Europe consisting of a dose‑escalation part in 19 treatment‑refractory patients whose tumors overexpress c‑Met and a safety‑expansion part in five treatment‑refractory patients whose tumors were MET‑amplified. We chose to focus the safety‑expansion part on MET‑amplified tumors, rather than c‑Met overexpressing tumors, because of the accumulating preclinical and clinical evidence suggesting MET amplification is an oncogenic driver. The primary objective of this Phase 1 clinical trial was to determine the recommended Phase 2 dose of ARGX‑111, with the primary endpoint evaluating the incidence of dose‑limiting toxicity. As a secondary objective, safety, immunogenicity, pharmacokinetics and pharmacodynamics were characterized, with secondary endpoints being the pharmacokinetics and pharmacodynamics profile of ARGX‑111, as well as tumor response.
Dose‑Escalation Part
In the dose‑escalation part of the Phase 1 clinical trial, ARGX‑111 was dosed every three weeks at 0.3 mg/kg, 1 mg/kg, 3 mg/kg and 10 mg/kg in treatment‑refractory patients whose tumors overexpress c‑Met. Dose‑limiting infusion‑related reactions were observed at 10 mg/kg, and it was determined to continue further clinical testing at a dose of 3 mg/kg. Nineteen serious adverse events were seen in 12 patients (four events in two patients at a dose of 0.3 mg/kg, two events in one patient at a dose of 1 mg/kg, seven events in six patients at a dose of 3 mg/kg and six events in three patients at a dose of 10 mg/kg). Except for six events of infusion‑related reactions and one event of bone pain, no drug‑related serious adverse events were observed. Seven patient deaths were reported (one at a dose of 0.3 mg/kg, one at a dose of 1 mg/kg, four at a dose of 3 mg/kg and one at a dose of 10 mg/kg), all of which were due to underlying disease and disease progression and were not deemed to be drug‑related according to the investigator.
Safety‑Expansion Part
One safety‑expansion cohort has been completed in five treatment‑refractory MET‑amplified cancer patients using a 3 mg/kg dose of ARGX‑111 every two weeks. Eight serious adverse events were seen in four of these patients. Except for one case of infusion‑related reaction, none of those were deemed drug‑related according to the investigator. One patient death attributed to disease progression and pneumonia was reported and was not deemed to be drug‑related according to the investigator.
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Although neither the dose‑escalation part nor the safety‑expansion part were designed to evaluate the efficacy of ARGX‑111, we anecdotally observed reduced tumor burden at various sites and stable disease in a gastric cancer patient with bone metastases who was refractory to multiple rounds of prior treatment and in a MET‑amplified renal cancer patient with metastases and progressive disease. Overall, we observed signs of biological activity for ARGX‑111 in seven out of 19 patients in the dose‑escalation part, including one partial response, and in three out of five patients in the safety‑expansion cohort.
Preclinical Data
In preclinical orthotopic breast cancer models in mice, ARGX‑111 was observed to reduce circulating tumor cells and cancer metastasis both in the adjuvant and the neo‑adjuvant setting.
Intent to Partner
Given the size of the potential patient populations and the costs of clinical development for ARGX‑111, we intend to begin Phase 2 development only if and when we have entered into a collaboration with Genmab to jointly discover, develop and commercialize novel therapeutic antibodies with applications in immunology, as well as in oncology therapeutic areas. The multiyear collaboration is expected to leverage the antibody engineering expertise and knowledge of disease biology of both companies to accelerate the identification and development of novel antibody therapeutic candidates with a goal to address unmet patient needs in immunology and cancer. Under the terms of the collaboration, argenx and Genmab each
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have access to the suites of proprietary antibody technologies of both companies to advance the identification of lead antibody candidates against differentiated disease targets.
SC drug delivery technologies
We have exclusive access to Halozyme’s ENHANZE® SC drug delivery technology for the FcRn and C2 targets and four additional targets. ENHANZE® has the potential to shorten drug administration time, reduce healthcare practitioner time, and offer additional flexibility and convenience for patients.
In addition, in April 2021, we entered into the Elektrofi Agreement with Elektrofi to explore new SC formulations utilizing Elektrofi’s high concentration technology for efgartigimod, and up to one additional target.
For more information on our collaborations, please refer to Item 4.B. “Business Overview—Collaboration Agreements” and to Item 4.B. “Business Overview—License Agreements.”
Partnered Programs
For a description of collaboration and license agreements that we have entered into to further leverage our IIP, please refer to Item 4.B. “Business Overview—Collaboration Agreements” and to Item 4.B. “Business Overview—License Agreements.”
Strategy and objectives
● | Our goal is to deliver immunology innovations that are both first-in-class and best-in-class to transform the lives of people with serious autoimmune diseases. We do this by combining our leading antibody engineering capabilities with disease biology insights from our collaborators. Within this business model we plan to: |
● | Continue to execute our global launch in gMG. One of our goals of 2023 was to expand our global launch of VYVGART as the first approved neonatal FcRn blocker for the treatment of gMG beyond initial commercial regions of the U.S., Japan and EU. In 2023, we received approval for VYVGART in Israel (through our partner Medison), the UK, Mainland China (through our partner Zai Lab) and Canada and we aim for further approvals in additional jurisdictions. We have built our commercial infrastructure to support the commercialization of VYVGART in the U.S., Europe, Japan and Canada and will be prepared to expand this infrastructure to support the launch of VYVGART into new indications in some of these territories if and when we receive approval. |
● | Expand applications for our lead product efgartigimod beyond gMG. Our goal is to maximize the commercial potential of our existing products and product candidates by exploring additional indications, as well as formulations that may expand the target patient populations within existing indications. We are further developing our lead product, efgartigimod, for the treatment of more than 10 serious autoimmune indications. We expand the use of our products and product candidates in existing indications by developing new formulations and product generations, that may reach more patient groups by capturing different patient preferences and providing additional optionality with regards to dosing. |
● | Advance our pipeline of assets. In addition to new indications for efgartigimod, we plan to advance additional product candidates. In particular, we are advancing the clinical development of empasiprubart in MMN, DGF in the context of kidney transplants and DM. We are also advancing ARGX-119 into Phase 1b/2a clinical trials in CMS and ALS and beyond and plan to advance early-stage pipeline candidates towards IND filing by the end of 2025, as well as expand our pipeline of future product candidates through the IIP. |
● | Leverage our suite of technologies to seek strategic collaborations and maximize the value of our pipeline.Our suite of technologies and productive discovery capabilities have yielded several potential product candidates for which we seek to capture value, while maintaining our focus and discipline. We plan to collaborate on product candidates that we believe have promising utility in disease areas or patient populations but fall outside our |
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commercial franchises or are better served with the focus of a dedicated team in a spin-off company. In addition to collaborating on our products and product candidates, we may also elect to enter into collaborations for access to partner technology platforms or capabilities from which we can develop differentiated potential pipeline assets. |
● | Continue to build innovation into every step of our development, highlighted by our collaborative IIP translating immunology breakthroughs into medicines.Our IIP is our core business strategy connecting the specialized insight into disease- and target biology of our external scientific and academic collaborators with our unparalleled experience as antibody engineers. Co-creation has led to a deep pipeline of highly differentiated product candidates. Through our IIP, we hope to together transcend breakthrough research and publications to our ultimate and unifying mission of creating new potential treatment options for patients. |
Competitive position
We participate in a highly innovative industry characterized by a rapidly growing understanding of disease biology, quickly changing technologies, strong intellectual property barriers to entry, and a multitude of companies involved in the creation, development and commercialization of novel therapeutics. Many of these companies are highly sophisticated and often strategically collaborate with each other.
Competition in the autoimmune field is intense and involves multiple mAbs, other biologics and small molecules either already marketed or in development by many different companies, including large pharmaceutical companies. We compete with a wide range of biopharmaceutical companies, who are developing products for the treatment of gMG and other autoimmune diseases, including products that are in the same class as VYVGART, as well as products that are similar to some of our product candidates. We are aware of several FcRn inhibitors that are in clinical development or marketed. Competitive product launches may erode future sales of our products, including our existing products and those currently under development, or result in unanticipated product obsolescence. Such launches continue to occur, and potentially competitive products are in various stages of development. We could also face competition for use of limited international infusion sites, particularly in new markets as competitors launch new products. We cannot predict with accuracy the timing or impact of the introduction of competitive products that treat diseases and conditions like those treated by our products or product candidates. In addition, our competitors compete with us to recruit and retain qualified scientific and management personnel, establish clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our products. Please refer to Item 3.D. “Risk Factors—Risk Factors Related to Commercialization of argenx’s Products and Product Candidates, Including for New Indications—We face significant competition for our drug discovery and development efforts.” for further details on the competition we face.
Manufacturing and Supply
We utilize third-party contract manufacturers who act in accordance with the FDA’s cGMPs for the manufacture of drug substance and drug product. We continue to build our global network of contract manufacturers to support the development and commercialization of our products. We work with Lonza teams based in Slough, UK, Portsmouth, U.S., Singapore and Visp, Switzerland for activities relating to the development of cell banks, development of our manufacturing processes and the manufacturing of drug substance, thereby using validated and scalable systems broadly accepted in our industry. In 2022, we started our collaboration with Fujifilm based in Hillerød, Denmark, for activities relating to the large-scale manufacturing of efgartigimod drug substance. We use additional contract manufacturers to fill, label, package, store and distribute (investigational) drug products.
Intellectual Property
Introduction
We strive to protect and maintain exclusivity for the proprietary technologies that we believe are important to our business, patients and shareholders. We are focused on pursuing and maintaining patent protection intended to cover core platform technologies incorporated into, or used to produce, our product candidates and commercial products. We
69
will seek protection for our innovations in key global jurisdictions. We continue to focus our exclusivity strategies on all aspects of our assets, including our compositions of matter, methods of use for our approved products, and other inventions that are important to our business (e.g., the patient innovations described in our product labels/product inserts and our core manufacturing technologies).
Our intellectual property portfolio continues to grow and keep pace with the innovations arising from our discovery, development, and commercial efforts. We expect the total volume of patent positions under our management to increase with each year as our pipeline evolves. We currently oversee more than 500 pending applications and granted patents. More importantly, as we continue to innovate for patients, we will work to protect our patient innovations with new intellectual property filings to enable future reinvestment for patients.
In addition to patent protection, we rely on trademarks and trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of our llama immunization and antibody affinity maturation approaches.
Our commercial success depends in part upon our ability to obtain and maintain exclusivity, including regulatory exclusivities, patent, and other proprietary protection for commercially important technologies, inventions and know-how related to our business. We will defend and enforce our intellectual property rights, particularly our patent rights, and preserve the confidentiality of our trade secrets while operating without infringing valid and enforceable intellectual property rights of others. Specifically, we are materially dependent on regulatory, patent and other proprietary protection related to our core platform technologies, described in Item 4.B. “Business Overview—Intellectual Property—Platform Technologies”, our product candidates, as described in Item 4.B. “Business Overview—Intellectual Property—Our Internal Programs”, and Item 4.B. “Business Overview—Intellectual Property—Our Partnered Programs”.
The patent positions for biotechnology companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our platform technologies and product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.
In the U.S., the term of a patent covering an appropriate partner.FDA-approved drug may be eligible for a limited patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process as described in Item 4.B. “Business Overview—Regulation—Licensure and Regulation of Biologics in the U.S.” Similar provisions are available in the EU and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering each of our product candidates may be entitled to patent term extensions. If our product candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.
Platform Technologies
With regard to our platform technologies, we own or have intellectual property rights directed to our SIMPLE ANTIBODY™ discovery platform, the ABDEG™ and NHANCE™ technologies.
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With regard to our SIMPLE ANTIBODY™ discovery platform, we have a broad patent portfolio providing exclusivity on the SIMPLE ANTIBODY™ platform. We expect to enjoy exclusivity under this patent portfolio until between 2029 and 2033.
With regard to the ABDEG™ platform, we co-own the technology with UT Southwestern and enjoy certain exclusive license rights. We have a broad patent portfolio covering the composition of matter and uses of certain FcRn antagonists to achieve certain biological effects. The composition of matter and other relevant patents in the U.S. expire in 2036 whereas in many other countries the base expiry date is 2034.
With regard to the NHANCE™ platform, we exclusively licensed two U.S. patents from UT Southwestern with composition of matter claims directed to an IgG molecule comprising a variant human Fc domain, and method of use claims directed to a method of blocking FcRn function in a subject by providing to the subject such an IgG molecule. The U.S. patents are expected to expire earliest in 2027 to 2028. The patent family also includes a granted European patent.
Our Internal Programs
Efgartigimod
Efgartigimod incorporates the ABDEG™ platform technology. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-109 Product Candidate
With regard to our wholly-owned ARGX-109 product candidate, we have one patent family with composition of matter claims directed to ARGX-109. The patent family has a basic expiry date in 2033. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Furthermore, ARGX-109 incorporates or employs the SIMPLE ANTIBODY™ platform technology and the NHANCE™ platform technology.
Empasiprubart Product Candidate
With regard to the empasiprubart product candidate, we own or have rights to multiple patent families (including one in-licensed patent family from Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia, directed to composition of matter claims and method of treatment claims. The in-licensed patent family from Broteio has granted patents in several countries/regions and has a basic expiry date in 2034. Additional patent families have granted patents with basic expiry dates in 2039 and 2040. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Empasiprubart product candidate incorporates or employs the NHANCE™ platform technology.
Our ARGX-119 Product Candidate
With regard to the ARGX-119 product candidate, we in-licensed patent families from/with NYU Langone Health, a U.S. medical center based in New York, and additional patent families from/with the LUMC, with a U.S. granted patent and several pending applications in multiple jurisdictions. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-118 Product Candidate
With regard to the ARGX-118 product candidate, we co-own a patent portfolio with VIB vzw (VIB), an inflammation research center in Ghent, Brussels, and Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia. The patent family has a basic expiry date in 2039.
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Our Partnered ProgramsManufacturing and Supply
The following isWe utilize third-party contract manufacturers who act in accordance with the pipelineFDA’s cGMPs for the manufacture of drug substance and drug product. We continue to build our partneredglobal network of contract manufacturers to support the development and commercialization of our products. We work with Lonza teams based in Slough, UK, Portsmouth, U.S., Singapore and Visp, Switzerland for activities relating to the development of cell banks, development of our manufacturing processes and the manufacturing of drug substance, thereby using validated and scalable systems broadly accepted in our industry. In 2022, we started our collaboration with Fujifilm based in Hillerød, Denmark, for activities relating to the large-scale manufacturing of efgartigimod drug substance. We use additional contract manufacturers to fill, label, package, store and distribute (investigational) drug products.
Intellectual Property
Introduction
We strive to protect and maintain exclusivity for the proprietary technologies that we believe are important to our business, patients and shareholders. We are focused on pursuing and maintaining patent protection intended to cover core platform technologies incorporated into, or used to produce, our product candidates and commercial products. We
69
will seek protection for our innovations in key global jurisdictions. We continue to focus our exclusivity strategies on all aspects of our assets, including our compositions of matter, methods of use for our approved products, and other inventions that are important to our business (e.g., the patient innovations described in our product labels/product inserts and our core manufacturing technologies).
Our intellectual property portfolio continues to grow and keep pace with the innovations arising from our discovery, programs. Fordevelopment, and commercial efforts. We expect the total volume of patent positions under our management to increase with each year as our pipeline evolves. We currently oversee more informationthan 500 pending applications and granted patents. More importantly, as we continue to innovate for patients, we will work to protect our patient innovations with new intellectual property filings to enable future reinvestment for patients.
In addition to patent protection, we rely on trademarks and trade secrets to protect aspects of our collaborations, see “—Collaborations.”business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of our llama immunization and antibody affinity maturation approaches.
Our commercial success depends in part upon our ability to obtain and maintain exclusivity, including regulatory exclusivities, patent, and other proprietary protection for commercially important technologies, inventions and know-how related to our business. We will defend and enforce our intellectual property rights, particularly our patent rights, and preserve the confidentiality of our trade secrets while operating without infringing valid and enforceable intellectual property rights of others. Specifically, we are materially dependent on regulatory, patent and other proprietary protection related to our core platform technologies, described in Item 4.B. “Business Overview—Intellectual Property—Platform Technologies”, our product candidates, as described in Item 4.B. “Business Overview—Intellectual Property—Our Internal Programs”, and Item 4.B. “Business Overview—Intellectual Property—Our Partnered Programs”.
ARGX‑115 (partnered with AbbVie)The patent positions for biotechnology companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our platform technologies and product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
We are developing ARGX‑115 as a cancer immunotherapy againstThe term of individual patents depends upon the novel target GARP, a protein present on the surface of activated regulatory T‑cells, or Tregs. We are developing ARGX‑115 with our collaboration partner AbbVie. See “—Collaborations.”
ARGX‑115 employs our SIMPLE Antibody technology and works by stimulating a patient’s immune system after a tumor has suppressed the immune system by co‑opting immunosuppressive cells such as Tregs. While the normal function of Tregs is to suppress portionslegal term of the immune system to prevent a self‑directed immune response through the release of active transforming growth factor beta, or TGF‑β, Tregs can also prevent the immune system from recognizing and suppressing pathogenic cells including cancer cells. By binding to GARP, which plays a key rolepatents in the regulation of production and release of active TGF‑β, ARGX‑115 works to limit the immunosuppressive activity of Tregs and thereby stimulate the immune system to attack cancer cells. We believe this specific inhibition of TGF‑β release by Tregs is
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potentially superior as a therapy to systemic inhibition of TGF‑β activity or the depletion of Tregs, the presumed mode of action of ipilimumab (Yervoy), and that its specificity has the potential to provide an improved safety profile.
ARGX‑115 was observed to be activecountries in a mouse model of graft‑versus‑host disease, or GVHD, where it was able to completely block the activity of Tregs, suggesting its potential to re‑activate the immune system against cancer cells. In this model, human peripheral blood lymphocytes, or PBMCs, are introduced into mice leading to a rapid onset of disease, caused by these PBMCs attacking the mouse host. When human Tregs are added to the human PBMCs, they can significantly delay disease onset and reduce disease severity. However, the addition of ARGX‑115 completely neutralized the effect of human Tregs, resulting in a rapid onset of the disease again. The purpose of the experiment was to show that when ARGX‑115 binds to GARP on Tregs, the normal immune suppressive function of Tregs is itself suppressed so that the immune system is free to act. In this experiment, the PBMCs represent the human immune system. The Tregs suppress the PBMCs whenwhich they are added (illustrated by lower PBMC activity—obtained. In most countries in this case represented by less activity againstwhich we file, the mouse host). ARGX‑115 suppressespatent term is 20 years from the Tregs, allowingearliest date of filing a non-provisional patent application.
In the immune system to act (as represented byU.S., the PBMCs once again attackingterm of a patent covering an FDA-approved drug may be eligible for a limited patent term extension under the mouse host). A prototype of ARGX‑115 devoid of cell‑killing ability wasHatch-Waxman Act as effective as ARGX‑115 with cell‑killing ability as shown in Figure 10, leading us to believe the effect of ARGX‑115 is mainly due to blocking Treg activity.
Figure 10. Preclinical data of ARGX‑115 in a graft‑versus‑host disease model
We are currently advancing ARGX‑115 through preclinical studies up to completion of IND‑enabling studies, at which point AbbVie has the right to exercise an option to obtain a worldwide, exclusive license to ARGX‑115.
ARGX‑109 (partnered with Bird Rock Bio)
ARGX‑109 (gerilimzumab) is being developedcompensation for the treatmentloss of rheumatoid arthritis, or RA, by our collaboration partner Bird Rock Bio. See “—Collaborations.”
ARGX‑109 employs our SIMPLE Antibodypatent term during the FDA regulatory review process as described in Item 4.B. “Business Overview—Regulation—Licensure and NHance technologies and blocks interleukin 6, or IL‑6, a cell‑signaling protein that is an important driverRegulation of inflammatory response implicatedBiologics in the transition from acuteU.S.” Similar provisions are available in the EU and in certain other jurisdictions to chronic inflammation. Chronic inflammation is a notable feature of several diseases, including RA, psoriatic arthritis and chronic kidney disease. In particular, IL‑6 has been shown to stimulateextend the immune system to increase tissue destruction and joint damage in RA patients. By targeting a unique epitope, ARGX‑109 potentially enables blocking of IL‑6 with high potency, with the goal of mitigating inflammatory responses at lower and less frequent doses than current therapies directed at IL‑6.
Bird Rock Bio has completed two Phase 1 clinical trials of ARGX‑109 in 50 healthy volunteers to assess the safety and tolerability of the compound in single and multiple ascending doses compared to placebo. The clinical trials
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also explored the pharmacokinetics of ARGX‑109. In these clinical trials, ARGX‑109 was reported to be well‑tolerated with no serious adverse events. Further, ARGX‑109 was observed to have a prolonged half‑life in circulation. In January 2017, Bird Rock Bio announced that it had received approval for the initiationterm of a Phase 2 clinical trial in Brazil in approximately 200 patients with RA.
Bird Rock Bio and argenx have mutually agreed to terminate Bird Rock Bio’s license agreement to develop and commercialize ARGX-109. Genor, a sublicenseepatent that covers an approved drug. It is possible that issued U.S. patents covering each of Bird Rock Bio, will continue to develop ARGX-109 for the Chinese market. Hence, we will notour product candidates may be entitled to patent term extensions. If our product candidates receive some or allFDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the milestone or other payments under this exclusive license agreement with Bird Rock Bio.
ARGX‑112 (partnered with LEO Pharma)
approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are developing ARGX‑112 foravailable, however, there is no guarantee that the treatment of dermatologic indications involving inflammation, togetherapplicable authorities, including the FDA, will agree with our collaboration partner LEO Pharma. See “—Collaborations.”assessment of whether such extensions should be granted, and if granted, the length of such extensions.
Platform Technologies
ARGX‑112 employsWith regard to our SIMPLE Antibody technology and blocks the interleukin‑22 receptor,platform technologies, we own or IL‑22R, in order to neutralize the signaling of interleukin‑22, or IL‑22, and interleukin‑20, or IL‑20, both of which are cytokines involved in the proliferation and differentiation of skin cells. When overexpressed, IL‑22 and IL‑20 are implicated in autoimmune diseases of the skin, including atopic dermatitis, psoriasis and pustular psoriasis. In preclinical studies, ARGX‑112 was observed to have high neutralization potency for IL‑22R and favorable in vivo pharmacokinetics and distribution to the skin.
Under the collaboration, LEO Pharma will fund more than half of all product development costs up to approval of a clinical trial application, or CTA, in Europe for a first product in a Phase 1 clinical trial. After CTA approval of a first product in a Phase 1 clinical trial, LEO Pharma will be solely responsible to fund the clinical development of the program.
ARGX‑116 (partnered with Staten Biotechnology)
We are developing ARGX‑116 for the treatment of dyslipidemia, together with our collaboration partner Staten Biotechnology. See “—Collaborations.”
ARGX‑116 employs our SIMPLE Antibody technology and blocks APOC3, a metabolic target involved in triglyceride metabolism. APOC3 is supported as a therapeutic target by human genetic evidence suggesting that deactivating mutations in the APOC3 gene results in a favorable lipoprotein profile, lower insulin sensitivity, longevity and protection from cardiovascular disease.
ARGX‑116 is the first of up to three research programs under the collaboration. Under the terms of the collaboration, the parties are jointly responsible for conducting research under a mutually agreed research program, with Staten reimbursing us for all costs of carrying out our research responsibilities under each research program.
Innovative Access Program
We have developed a program designed to secure access to early, cutting edge targets, which we call our Innovative Access Program. Through our Innovative Access Program, we are able to serially collaborate with leading academic labs by providing them accessintellectual property rights directed to our SIMPLE Antibody PlatformANTIBODY™ discovery platform, the ABDEG™ and NHANCE™ technologies.
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With regard to our SIMPLE ANTIBODY™ discovery platform, we have a broad patent portfolio providing exclusivity on the SIMPLE ANTIBODY™ platform. We expect to enjoy exclusivity under this patent portfolio until between 2029 and 2033.
With regard to the ABDEG™ platform, we co-own the technology with UT Southwestern and enjoy certain exclusive license rights. We have a broad patent portfolio covering the goalcomposition of expeditingmatter and uses of certain FcRn antagonists to achieve certain biological effects. The composition of matter and other relevant patents in the validationU.S. expire in 2036 whereas in many other countries the base expiry date is 2034.
With regard to the NHANCE™ platform, we exclusively licensed two U.S. patents from UT Southwestern with composition of new targetsmatter claims directed to an IgG molecule comprising a variant human Fc domain, and acceleratingmethod of use claims directed to a method of blocking FcRn function in a subject by providing to the addition of new product candidatessubject such an IgG molecule. The U.S. patents are expected to expire earliest in 2027 to 2028. The patent family also includes a granted European patent.
Our Internal Programs
Efgartigimod
Efgartigimod incorporates the ABDEG™ platform technology. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-109 Product Candidate
With regard to our pipeline. In return,wholly-owned ARGX-109 product candidate, we receive early accesshave one patent family with composition of matter claims directed to these targets and provide academic groups or biotechnology companiesARGX-109. The patent family has a simple pathbasic expiry date in 2033. We anticipate several more patient innovations to clinical validation and future commercialization of promising ideas inevolve during development for which we will seek additional patent protection. Furthermore, ARGX-109 incorporates or employs the SIMPLE ANTIBODY™ platform technology and the academic labNHANCE™ platform technology.
Empasiprubart Product Candidate
With regard to the empasiprubart product candidate, we own or biotechnology company both sharehave rights to multiple patent families (including one in-licensed patent family from Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, the upside potential.EU and Asia, directed to composition of matter claims and method of treatment claims. The in-licensed patent family from Broteio has granted patents in several countries/regions and has a basic expiry date in 2034. Additional patent families have granted patents with basic expiry dates in 2039 and 2040. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Empasiprubart product candidate incorporates or employs the NHANCE™ platform technology.
One example ofOur ARGX-119 Product Candidate
With regard to the value of the Innovative Access Program is ARGX‑115, which was developedARGX-119 product candidate, we in-licensed patent families from/with NYU Langone Health, a U.S. medical center based in collaboration New York, and additional patent families from/with the de Duve Institute / Université Catholique de Louvain.LUMC, with a U.S. granted patent and several pending applications in multiple jurisdictions. We provided antibodiesanticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-118 Product Candidate
With regard to the academic groups to help validateARGX-118 product candidate, we co-own a patent portfolio with VIB vzw (VIB), an inflammation research center in Ghent, Brussels, and Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, the target. ThisEU and Asia. The patent family has a basic expiry date in turn, allowed the groups to advance their work successfully, including the2039.
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facilitation of supportive publications. Subsequently, this program formed the basis of our collaboration with AbbVie. ARGX‑115 exemplifies how our Innovative Access Program enables us to generate product candidates against novel targets that may be of high interest for collaboration with biopharmaceutical partners. Another example is ARGX‑116, which was discovered in close collaboration with disease biology experts from Staten Biotechnology, an emerging biotechnology company specialized in the field of dyslipidemia.
In March 2017, we entered into a collaboration under our Innovative Access Program with Broteio Pharma B.V. to develop an antibody against a novel target in the complement cascade with therapeutic potential in autoantibody‑ and complement‑mediated indications including autoimmune haemolytic anemia and antibody mediated rejection following organ transplantation. Under the terms of the agreement, we and Broteio will jointly develop the complement‑targeted antibody to seek to establish preclinical proof‑of‑concept using our proprietary suite of technologies. Upon successful completion of these studies, we may exercise an exclusive option to license the program and assume responsibility for further development and commercialization.
Manufacturing and Supply
We utilize third‑partythird-party contract manufacturers who act in accordance with the FDA’s good laboratory practices, or GLP, and current good manufacturing practices, cGMP,cGMPs for the manufacture of drug substance and drug product. Currently, weWe continue to build our global network of contract manufacturers to support the development and commercialization of our products. We work with Lonza Sales AG, or Lonza,teams based in Slough, UK, Portsmouth, U.S., Singapore and Singapore,Visp, Switzerland for all activities relating to the development of our cell banks, development of our manufacturing processes and the productionmanufacturing of all drug substance, thereby using validated and scalable systems broadly accepted in our industry. In 2022, we started our collaboration with Fujifilm based in Hillerød, Denmark, for activities relating to the large-scale manufacturing of efgartigimod drug substance. We use additional contract manufacturers to fill, label, package, store and distribute investigational(investigational) drug products.
ARGX‑113, ARGX‑110, ARGX‑111Intellectual Property
Introduction
We strive to protect and ARGX‑112maintain exclusivity for the proprietary technologies that we believe are each manufactured using an industry‑standard mammalian cell cultureimportant to our business, patients and shareholders. We are focused on pursuing and maintaining patent protection intended to cover core platform technologies incorporated into, or used to produce, our product candidates and commercial products. We
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will seek protection for our innovations in producing monoclonal antibodies.
Allkey global jurisdictions. We continue to focus our exclusivity strategies on all aspects of our antibodiesassets, including our compositions of matter, methods of use for our approved products, and other inventions that are manufactured by starting with cells, which are storedimportant to our business (e.g., the patient innovations described in a cell bank. We have one master cell bank for eachour product manufactured in accordance with cGMP. Half of each master cell bank is stored at a separate sitelabels/product inserts and our core manufacturing technologies).
Our intellectual property portfolio continues to grow and keep pace with the goal that, in caseinnovations arising from our discovery, development, and commercial efforts. We expect the total volume of a catastrophic event at one site, sufficient vials of the master cell bank would remain at the alternative storage sitepatent positions under our management to increase with each year as our pipeline evolves. We currently oversee more than 500 pending applications and granted patents. More importantly, as we continue manufacturing.
For a description of the sources and availability of raw materials, see section of this annual report titled “Item 3.D. —Risk Factors—Risks Related to Our Business and Industry.”
Competition
We participate in a highly innovative industry characterized by a rapidly growing understanding of disease biology, quickly changing technologies, stronginnovate for patients, we will work to protect our patient innovations with new intellectual property barriersfilings to entry, a multitudeenable future reinvestment for patients.
In addition to patent protection, we rely on trademarks and trade secrets to protect aspects of companies involvedour business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of our llama immunization and antibody affinity maturation approaches.
Our commercial success depends in the creation, developmentpart upon our ability to obtain and commercialization of novel therapeutics. These companies are highly sophisticated and often strategically collaborate with each other.
We compete with a wide range of pharmaceutical companies, biotechnology companies, academic institutionsmaintain exclusivity, including regulatory exclusivities, patent, and other research organizationsproprietary protection for novel therapeutic antibody targets, newcommercially important technologies, for optimizing antibodies, talent, financial resources,inventions and know-how related to our business. We will defend and enforce our intellectual property rights, particularly our patent rights, and collaboration opportunities. Manypreserve the confidentiality of our competitorstrade secrets while operating without infringing valid and potential competitors have substantially greaterenforceable intellectual property rights of others. Specifically, we are materially dependent on regulatory, patent and other proprietary protection related to our core platform technologies, described in Item 4.B. “Business Overview—Intellectual Property—Platform Technologies”, our product candidates, as described in Item 4.B. “Business Overview—Intellectual Property—Our Internal Programs”, and Item 4.B. “Business Overview—Intellectual Property—Our Partnered Programs”.
The patent positions for biotechnology companies like us are generally uncertain and can involve complex legal, scientific researchand factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our platform technologies and product development capabilitiescandidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as well as greater financial, manufacturing, marketing and sales and human resources thanpatents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we do. In addition, there is intense competition for establishing clinical trial sites and registering patients for clinical trials. Many specialized biotechnology firms have formed collaborations with large, established companies to support the research, development and commercialization of products thathold may be competitive with ours. Accordingly, our competitorschallenged, circumvented or invalidated by third parties.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.
In the U.S., the term of a patent covering an FDA-approved drug may be more successful than we may beeligible for a limited patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process as described in developing, commercializingItem 4.B. “Business Overview—Regulation—Licensure and achieving widespread market acceptance.
CompetitionRegulation of Biologics in the autoimmune field is intense and involves multiple monoclonal antibodies, other biologics and small molecules either already marketed or in development by many different companies including large
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pharmaceutical companies such as AbbVie Inc. (Humira/rheumatoid arthritis); Amgen Inc. (Enbrel/rheumatoid arthritis); Biogen, Inc. (Tysabri/multiple sclerosis); GlaxoSmithKline plc, or GSK, (Benlysta/lupus); F. Hoffman‑La Roche AG, or Roche, (Rituxan/often used off label); and Janssen Pharmaceuticals, Inc., or Janssen (Remicade/rheumatoid arthritis and Stelara/psoriasis). In some cases, these competitors Similar provisions are also our collaborators. In addition, these and other pharmaceutical companies have monoclonal antibodies or other biologics in clinical development for the treatment of autoimmune diseases. In addition to the current standard of care, we are aware that Alexion Pharmaceuticals, Inc. has received FDA approval for Soliris for the treatment of adult patients with generalized MG who are anti‑acetylcholine receptor antibody positive and that GSK; Roche; Novartis AG; CSL Behring; Grifols, S.A.; BioMarin Pharmaceutical Inc.; CuraVac, Inc.; and Millennium Pharmaceuticals, Inc., among others, are developing drugs that may have utility for the treatment of MG. We are aware that Rigel Pharmaceuticals, Inc.; Eisai Inc.; Bristol‑Myers Squibb; Shire Immunomedics; Protalex Inc. and others are developing drugs that may have utility for the treatment of ITP. We are aware that Roche and Syntimmune, Inc. and others are developing drugs that may have utility for the treatment of PV. Furthermore, we are aware of competing products specifically targeting FcRn and being developed by UCB S.A.; Momenta, Inc.; Syntimmune, Inc. and Hannal Biotech.
Competitionavailable in the leukemiaEU and lymphoma space is intense, with many compounds in clinical trials by large multinational pharmaceutical companies and specialized biotech companies. Rituxan (Roche), Adcetris (Seattle Genetics, Inc./Takeda Pharmaceutical Company Ltd), Darzalex (Janssen), Poteligeo (Kyowa Hakko Kirin Co., Ltd.) are some examples of monoclonal antibodies approved forcertain other jurisdictions to extend the treatment of Hodgkin’s lymphoma, non‑Hodgkin’s lymphoma, multiple myeloma or other blood cancers. We are aware of AML drugs recently approved by the FDA, such as Mylotarg (Pfizer), Rydapt (Amgen), Vyxos (Jazz Pharmaceuticals, Inc.) and IDHIFA (Agios, Inc. and Celgene). In addition, we are awareterm of a number of other companies with development stage programspatent that may compete with ARGX‑110 in the future if itcovers an approved drug. It is approved. We anticipatepossible that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available.
There are several monoclonal antibody drug discovery companies that may compete with us in the search for novel therapeutic antibody targets, including Adimab LLC; Merus N.V.; Regeneron Pharmaceuticals, Inc.; Xencor Inc. and MorphoSys AG. We are aware that a product candidate in development by Scholar Rock, Inc. may compete with ARGX‑115 and a product candidate in development by Ionis Pharmaceuticals, Inc. may compete with ARGX‑116, if they are approved.
Our commercial opportunity could be reduced or eliminated if our competitors’ products prove to be safer and more tolerable, more effective, more convenient to dose, less expensive, faster to approve, or more effectively marketed and reimbursed than anyissued U.S. patents covering each of our product candidates may be entitled to patent term extensions. If our product candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that may gain regulatory approval. In addition,cover the levelapproved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of generic competitionwhether such extensions should be granted, and if granted, the length of such extensions.
Platform Technologies
With regard to our platform technologies, we own or have intellectual property rights directed to our SIMPLE ANTIBODY™ discovery platform, the ABDEG™ and NHANCE™ technologies.
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With regard to our SIMPLE ANTIBODY™ discovery platform, we have a broad patent portfolio providing exclusivity on the SIMPLE ANTIBODY™ platform. We expect to enjoy exclusivity under this patent portfolio until between 2029 and 2033.
With regard to the ABDEG™ platform, we co-own the technology with UT Southwestern and enjoy certain exclusive license rights. We have a broad patent portfolio covering the composition of matter and uses of certain FcRn antagonists to achieve certain biological effects. The composition of matter and other relevant patents in the U.S. expire in 2036 whereas in many other countries the base expiry date is 2034.
With regard to the NHANCE™ platform, we exclusively licensed two U.S. patents from UT Southwestern with composition of matter claims directed to an IgG molecule comprising a variant human Fc domain, and method of use claims directed to a method of blocking FcRn function in a subject by providing to the subject such an IgG molecule. The U.S. patents are expected to expire earliest in 2027 to 2028. The patent family also includes a granted European patent.
Our Internal Programs
Efgartigimod
Efgartigimod incorporates the ABDEG™ platform technology. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-109 Product Candidate
With regard to our wholly-owned ARGX-109 product candidate, we have one patent family with composition of matter claims directed to ARGX-109. The patent family has a basic expiry date in 2033. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Furthermore, ARGX-109 incorporates or employs the SIMPLE ANTIBODY™ platform technology and the availabilityNHANCE™ platform technology.
Empasiprubart Product Candidate
With regard to the empasiprubart product candidate, we own or have rights to multiple patent families (including one in-licensed patent family from Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia, directed to composition of reimbursementmatter claims and method of treatment claims. The in-licensed patent family from governmentBroteio has granted patents in several countries/regions and has a basic expiry date in 2034. Additional patent families have granted patents with basic expiry dates in 2039 and 2040. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Empasiprubart product candidate incorporates or employs the NHANCE™ platform technology.
Our ARGX-119 Product Candidate
With regard to the ARGX-119 product candidate, we in-licensed patent families from/with NYU Langone Health, a U.S. medical center based in New York, and additional patent families from/with the LUMC, with a U.S. granted patent and several pending applications in multiple jurisdictions. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-118 Product Candidate
With regard to the ARGX-118 product candidate, we co-own a patent portfolio with VIB vzw (VIB), an inflammation research center in Ghent, Brussels, and Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia. The patent family has a basic expiry date in 2039.
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Our Partnered Programs
Our Cusatuzumab (ARGX-110) Product Candidate
With regard to the cusatuzumab product candidate, we have a broad patent portfolio that include claims to the composition of matter, uses of the molecule, and other third‑party payors will impactimportant inventions. The issued U.S. patents expire in 2032 and 2033, without taking a potential patent term extension into account. Cusatuzumab incorporates or employs the commercial viabilitySIMPLE ANTIBODY™ and POTELLIGENT® platform technologies.
Our ARGX-115 (ABBV-151) Product Candidate
With regard to the ARGX-115 (ABBV-151) product candidate that we co-own with, and exclusively license from, the Ludwig Institute for Cancer Research and UCL, we have a patent portfolio that includes a U.S. patent with a basic expiry date in 2034, without taking a potential patent term extension into account. There is a second family with meaningful patent coverage to the composition of matter and epitope claims that are expected to expire in 2036 and 2038. Furthermore, ARGX-115 (ABBV-151) incorporates or employs the SIMPLE ANTIBODY™ platform technology.
Our ARGX-112 (LP-0145) Product Candidate
With regard to the ARGX-112 (LP-0145) product candidate, we have one patent family with composition of matter claims directed to an antibody that binds human IL-22R. The patent family has a basic expiry date in 2037. Furthermore, ARGX-112 (LP-0145) incorporates the SIMPLE ANTIBODYTM platform technology.
Collaboration and Licenses
We follow a disciplined strategy to maximize the value of our programs.
Collaborationspipeline. We plan to retain all development and commercialization rights to those products and product candidates that we believe we can commercialize successfully, if approved.
We have entered into multiple collaboration agreements with pharmaceutical partners.partnered, and plan to continue to partner, to develop products and product candidates that we believe have promising utility in disease areas or have patient populations that may benefit from resources of other biopharmaceutical companies. We expect to continue to collaborate selectively with pharmaceutical and biotechnology companies to leverage our discovery platform technology and accelerate product candidate development.
Our Strategic Partnership with AbbVie (for ARGX‑115)
In April 2016,We are also party to several license agreements under which we license patents, patent applications and other intellectual property to third parties. We have also entered into a collaboration agreement with AbbVie S.À.R.L., or AbbVie,several license agreements under which we license patents, patent applications and other intellectual property from third parties. License agreements can relate to develop and commercialize ARGX‑115. Under the terms of the collaboration agreement, we will be responsible for conducting and funding all ARGX‑115 research and development activities upand/or commercialization of the relevant product candidates (and technologies) or products. The licensed intellectual property covers some of our product candidates and some of the antibody engineering technologies that we use. Some of these licenses impose various diligence and financial payment obligations on us. We expect to completioncontinue to enter into these types of IND‑enabling studies.license agreements in the future.
We have granted AbbVie an exclusive option, for a specified period following completion of IND‑enabling studies, to obtain a worldwide, exclusive license to the ARGX‑115 program to develop and commercialize products. Following the exercise of the option, AbbVie will assume certain development obligations, and will be solely responsible for all research, development and regulatory costs relating to the products. We received an upfront, non‑refundable, non‑creditable payment of $40.0 million (€35.1 million based on the exchange rate in effect as of the
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date the payment was received) from AbbVie for the exclusive option to license ARGX‑115, and we achieved the first of two preclinical milestones, triggering a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) payment, and are eligible to receive a second preclinical milestone of $10.0 million. We are also eligible, if AbbVie exercises its option and develops a product, to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to $110.0 million, $190.0 million and $325.0 million, respectively, as well as tiered royalties on sales at percentages ranging from the mid‑single digits to the lower teens, subject to customary reductions.
We have the right, on a product‑by‑product basis to co‑promote ARGX‑115‑based products in the European Economic Area and Switzerland and combine the productentered into multiple collaboration agreements with our own future immuno‑oncology programs. The co‑promotion effort would be governed by a co‑promotion agreement negotiated in good faith by the parties. In addition to the ARGX‑115 program, and upon reaching a predetermined preclinical stage milestone, AbbVie will fund further GARP‑related research by us for an initial period of two years. AbbVie will have the right to license additional therapeutic programs emerging from this research, for which we could receive associated milestone and royalty payments.
If AbbVie does not exercise its option to license ARGX‑115, we have the right to pursue development and commercialization of ARGX‑115 by ourselves or with another partner.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the term of the optionpharmaceutical partners and license agreement ends, with respect to the ARGX‑115 program, upon the earliest of (i) a technical failure of the IND‑enabling studies which is outside of our control, (ii) AbbVie’s election to not exercise its option, or (iii) following AbbVie’s exercise of the option, fulfilment of all payment obligations under the agreement. AbbVie may terminate the agreement for any reason upon prior written notice to us. AbbVie’s royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) such timeagreements, as there are no valid claims covering such product, (ii) expiration of regulatory or market exclusivity in respect of such product or (iii) 10 years after the first commercial sale of such product sold in that country under the agreement.described below.
Our Collaboration with Bird Rock Bio (for ARGX‑109)
In October 2012, we entered into an exclusive license agreement with Bird Rock Bio, Inc. (formerly known as RuiYi, Inc. and Anaphore, Inc.), or Bird Rock Bio, to develop and commercialize ARGX‑109. Under the terms of the collaboration, Bird Rock Bio is solely responsible for and bears all costs incurred in the research, development and commercialization of ARGX‑109.
We have granted Bird Rock Bio an exclusive, worldwide, royalty‑bearing license to develop and commercialize ARGX‑109. Bird Rock Bio has certain diligence obligations with regard to development and commercialization of ARGX‑109 and must report their progress in achieving these milestones on an annual basis. We received a non‑refundable, non‑creditable upfront payment from Bird Rock Bio of €0.5 million in cash plus shares of Bird Rock Bio stock, and we are eligible to receive additional development milestone payments of up to approximately €10.0 million in cash and additional shares of Bird Rock Bio stock, regulatory milestone payments of up to €10.0 million in cash and commercial milestone payments of up to €12.0 million in cash. We are eligible to receive tiered royalties on Bird Rock Bio’s commercial sales of ARGX‑109 at percentages ranging from the low to high single digits and a tiered percentage of Bird Rock Bio’s sublicensing income ranging from the mid-teens to high twenties, subject to customary reductions. In connection with the collaboration, we also granted Bird Rock Bio a sublicense under our license agreement with the University of Texas with respect to our NHance Fc engineering technology, which is incorporated into ARGX‑109.
In the event that Bird Rock Bio fails to achieve a certain performance milestone within a designated period after entering the agreement, we have the right to terminate the agreement, unless Bird Rock Bio pays us an amount equal to the milestone payment that would have been payable had the milestone event occurred. In addition, in the event that Bird Rock Bio does not meet certain sublicensing objectives with respect to a product, we have the option to enter a profit sharing arrangement with Bird Rock Bio, under which we have the option to fund 50% of remaining program costs for a
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product and waive future milestone and royalty payments in return for a 50% share of all profits with respect to that product.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends with the expiry of the last royalty term under the agreement. Each royalty term expires, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) 10 years after the first commercial sale of such product sold in that country under the agreement or (ii) such time as there are no valid claims covering such product. Bird Rock Bio may terminate the agreement upon prior written notice to us in the event of a technical failure in product development.
Bird Rock Bio and argenx have mutually agreed to terminate Bird Rock Bio’s license agreement to develop and commercialize ARGX-109. Genor, a sublicensee of Bird Rock Bio, will continue to develop ARGX-109 for the Chinese market. Hence, we will not be entitled to receive some or all of the milestone or other payments under this exclusive license agreement with Bird Rock Bio.
Our Strategic Partnership with LEO Pharma (for ARGX‑112)
In May 2015, we entered into a collaboration agreement with LEO Pharma A/S, or LEO Pharma, to develop and commercialize ARGX‑112. Under the terms of the collaboration, LEO Pharma will fund more than half of all product development costs up to CTA approval of a first product in a Phase 1 clinical trial, with our share of such costs capped. After CTA approval of a first product in a Phase 1 clinical trial, LEO Pharma will be solely responsible to fund the clinical development of the program.
Up through specified periods following the latest to occur of (i) submission of an application to commence a Phase 2b dose finding trial (or Phase 3 clinical trial if a Phase 2b is not conducted) or (ii) the availability of an International Preliminary Examination report for ARGX‑112 patent rights after completion of a Phase 2a clinical trial, LEO Pharma may exercise an option to obtain an exclusive, worldwide license to further develop and commercialize products. Following the exercise of the option, LEO Pharma would assume full responsibility for the continued development, manufacture and commercialization of such product, subject to certain diligence obligations. If LEO Pharma elects to exercise this option, it must pay us an option fee. We received a non‑refundable, non‑creditable upfront payment from LEO Pharma of €3.0 million in cash. In February 2016 and in June 2017, we achieved preclinical milestones under this collaboration for which we received milestone payments. We are also eligible to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to €11.5 million, € 6.0 million and €102.5 million, respectively, as well as tiered royalties on product sales at percentages ranging from the low single digits to the low teens, subject to customary reductions.
If LEO Pharma does not exercise its option prior to expiration of the applicable option period, if it does not meet certain development diligence obligations within a specified time, or if the agreement is terminated other than for reasons of our breach or insolvency, then we have the right to develop and commercialize ARGX‑112 alone, subject to our obligation to pay LEO Pharma low‑single digit percentage royalties on net sales of any product covered by any LEO Pharma patents, know‑how or rights in research results generated under the collaboration. If the agreement is terminated for reasons of our breach or insolvency, rights to product candidates in development at the time of such termination will be allocated to the parties through a mechanism specified in the agreement.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the term of the agreement ends upon the later of (i) the expiration of the option period, (ii) the expiration of the last license which has been granted under the agreement, and (iii) the fulfilment of all payment obligations which may arise under the agreement. LEO Pharma may terminate the agreement for any reason upon prior written notice to us. LEO Pharma’s royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) such time as there are no valid claims covering such product, (ii) in major market countries in which no composition of matter patent has been issued covering such product, the expiration of the data exclusivity period or (iii) in countries that are not major market countries, a double‑digit number of years after the first commercial sale of such product sold in that country under the agreement.
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Our Research Collaboration with Staten (for ARGX‑116)
In January 2015, we entered into a collaboration agreement with Staten Biotechnology B.V., or Staten, to develop and commercialize products in the area of dyslipidemia therapy. Under the collaboration agreement, the parties will seek to discover and characterize antibodies against at least one and up to three different human gene targets that have therapeutic relevance in the field of dyslipidemia and/or cardiovascular disease. Each research program will last no more than 24 months from commencement unless the parties agree otherwise. The first research program under this agreement has commenced and been extended to December 2017. ARGX‑116 will be the initial product candidate under the collaboration, and Staten exercised its exclusive option to license ARGX‑116 in March 2017. Under the terms of the collaboration, the parties are jointly responsible for conducting research under a mutually agreed research program, with Staten reimbursing us for all costs of carrying out our research responsibilities under each research program. Staten is also responsible for additional clinical development.
On a research program‑by‑research program basis, up through a specified period within such research program, we have granted Staten an option to obtain an exclusive, worldwide, permanent license to research, develop and commercialize products identified in that program. If Staten elects to exercise this option for a product, it would be obligated to pay us a percentage of any payments payable to or on behalf of Staten’s shareholders in the event of (i) a change of control of Staten, (ii) any licensing, sale, disposition or similar transaction relating to any such product, or (iii) otherwise from the research, development or commercialization of that product. This percentage varies by stage of development for an applicable product and ranges up to the low‑twenties, subject to downward proportional adjustment in the event a portion of the proceeds from the applicable transaction does not include payment for the product candidate we developed with Staten. Staten has certain diligence obligations to develop and commercialize at least one product during the term of the agreement and must report on their progress in doing so on an annual basis.
If Staten does not exercise its option with respect to a research program prior to expiration of the applicable option period, then we have the right to research, develop and commercialize product candidates in relation to the relevant target at our sole cost and expense.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends on the later of (i) January 2020, (ii) expiration of the last license granted by us under the agreement, (iii) expiration of last option period for Staten and (iv) fulfilment of all payment obligations which have arisen or may arise pursuant to the agreement. In addition, we may terminate the agreement in whole or with respect to a research program if no targets have been selected within 24 months of the effective date of the agreement, other than the target selected for the ARGX‑116 research program.
Intellectual Property
Introduction
We strive to protect and maintain exclusivity for the proprietary technologies that we believe are important to our business, patients and shareholders. We are focused on pursuing and maintaining patent protection intended to cover core platform technologies incorporated into, or used to produce, our product candidates and commercial products. We
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will seek protection for our innovations in key global jurisdictions. We continue to focus our exclusivity strategies on all aspects of our assets, including our compositions of matter, methods of use for our approved products, and other inventions that are important to our business (e.g., the patient innovations described in our product labels/product inserts and our core manufacturing technologies).
Our Strategic Collaborationintellectual property portfolio continues to grow and keep pace with Shire
In February 2012, we entered into a collaboration agreement with Shire AG (now known as Shire International GmbH), or Shire, to discover, developthe innovations arising from our discovery, development, and commercialize novel human therapeutic antibodies against up to three targets to address diverse, rare and unmet diseases. Undercommercial efforts. We expect the termstotal volume of the collaboration, for any target selected for study under the collaboration, the parties worked together to conduct research and development through discovery of antibodies with certain specificity for and functional activity against those targets.
Up through a specified period following completion of each study for a target, we have granted Shire an exclusive option to obtain all right, title and interest in any antibodies discovered under a study and to obtain an exclusive, worldwide licensepatent positions under our management to increase with each year as our pipeline evolves. We currently oversee more than 500 pending applications and granted patents. More importantly, as we continue to innovate for patients, we will work to protect our patient innovations with new intellectual property which is necessaryfilings to further develop and commercialize products incorporating such antibodies. Following exercise of its exclusive option, Shire has certain diligence obligations to develop and commercialize at least one product. To exercise this option with respect to antibodies discovered against any of the three initial targets named in the agreement, Shire paid us a one‑time option fee.
In May 2014, we expanded the collaboration agreement to accommodate research and development of additional novel targets implicated in multiple disease areas to provide Shire with a sublicense under our license agreement with the University of Texas with respect to our NHance and ABDEG engineering technologies and to provide an option to a sublicense to the POTELLIGENT technology of BioWa, Inc. The initial three year term of this
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expanded agreement expires on May 30, 2017, and Shire has opted to extend the collaboration termenable future reinvestment for a further year until May 30, 2018.
Shire may exercise options to develop and commercialize programs arising under our expanded agreement, in which case an option fee is due on a per program basis.patients.
In addition to option fees, Shire would also be obligatedpatent protection, we rely on trademarks and trade secrets to pay us on a per‑product basisprotect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of our llama immunization and antibody affinity maturation approaches.
Our commercial success depends in part upon achievementour ability to obtain and maintain exclusivity, including regulatory exclusivities, patent, and other proprietary protection for commercially important technologies, inventions and know-how related to our business. We will defend and enforce our intellectual property rights, particularly our patent rights, and preserve the confidentiality of specified development, regulatoryour trade secrets while operating without infringing valid and commercial milestones and a percentageenforceable intellectual property rights of net sales as a royalty. Milestones are paid on a first product per indication per study target basis, andothers. Specifically, we are eligiblematerially dependent on regulatory, patent and other proprietary protection related to receive paymentsour core platform technologies, described in aggregate amountsItem 4.B. “Business Overview—Intellectual Property—Platform Technologies”, our product candidates, as described in Item 4.B. “Business Overview—Intellectual Property—Our Internal Programs”, and Item 4.B. “Business Overview—Intellectual Property—Our Partnered Programs”.
The patent positions for biotechnology companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of up to $3.8 million, $4.5 millionour platform technologies and $22.5 million,product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
The term of individual patents depends upon achievementthe legal term of development, regulatory and commercial milestones, respectively,the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.
In the U.S., the term of a patent covering an FDA-approved drug may be eligible for a limited patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process as described in Item 4.B. “Business Overview—Regulation—Licensure and Regulation of Biologics in the U.S.” Similar provisions are available in the EU and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering each of our product generated againstcandidates may be entitled to patent term extensions. If our product candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.
Platform Technologies
With regard to our platform technologies, we own or have intellectual property rights directed to our SIMPLE ANTIBODY™ discovery platform, the ABDEG™ and NHANCE™ technologies.
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With regard to our SIMPLE ANTIBODY™ discovery platform, we have a broad patent portfolio providing exclusivity on the SIMPLE ANTIBODY™ platform. We expect to enjoy exclusivity under this patent portfolio until between 2029 and 2033.
With regard to the ABDEG™ platform, we co-own the technology with UT Southwestern and enjoy certain exclusive license rights. We have a broad patent portfolio covering the composition of matter and uses of certain FcRn antagonists to achieve certain biological effects. The composition of matter and other relevant patents in the U.S. expire in 2036 whereas in many other countries the base expiry date is 2034.
With regard to the NHANCE™ platform, we exclusively licensed two U.S. patents from UT Southwestern with composition of matter claims directed to an IgG molecule comprising a variant human Fc domain, and method of use claims directed to a method of blocking FcRn function in a subject by providing to the subject such an IgG molecule. The U.S. patents are expected to expire earliest in 2027 to 2028. The patent family also includes a granted European patent.
Our Internal Programs
Efgartigimod
Efgartigimod incorporates the ABDEG™ platform technology. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-109 Product Candidate
With regard to our wholly-owned ARGX-109 product candidate, we have one patent family with composition of matter claims directed to ARGX-109. The patent family has a basic expiry date in 2033. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Furthermore, ARGX-109 incorporates or employs the SIMPLE ANTIBODY™ platform technology and the NHANCE™ platform technology.
Empasiprubart Product Candidate
With regard to the empasiprubart product candidate, we own or have rights to multiple patent families (including one in-licensed patent family from Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia, directed to composition of matter claims and method of treatment claims. The in-licensed patent family from Broteio has granted patents in several countries/regions and has a basic expiry date in 2034. Additional patent families have granted patents with basic expiry dates in 2039 and 2040. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Empasiprubart product candidate incorporates or employs the NHANCE™ platform technology.
Our ARGX-119 Product Candidate
With regard to the ARGX-119 product candidate, we in-licensed patent families from/with NYU Langone Health, a U.S. medical center based in New York, and additional patent families from/with the LUMC, with a U.S. granted patent and several pending applications in multiple jurisdictions. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-118 Product Candidate
With regard to the ARGX-118 product candidate, we co-own a patent portfolio with VIB vzw (VIB), an inflammation research center in Ghent, Brussels, and Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia. The patent family has a basic expiry date in 2039.
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Our Partnered Programs
Our Cusatuzumab (ARGX-110) Product Candidate
With regard to the cusatuzumab product candidate, we have a broad patent portfolio that include claims to the composition of matter, uses of the three initial targets namedmolecule, and other important inventions. The issued U.S. patents expire in 2032 and 2033, without taking a potential patent term extension into account. Cusatuzumab incorporates or employs the 2012 agreement. For products generated against additional targets nominated underSIMPLE ANTIBODY™ and POTELLIGENT® platform technologies.
Our ARGX-115 (ABBV-151) Product Candidate
With regard to the 2014 agreement,ARGX-115 (ABBV-151) product candidate that we co-own with, and exclusively license from, the Ludwig Institute for Cancer Research and UCL, we have a patent portfolio that includes a U.S. patent with a basic expiry date in 2034, without taking a potential patent term extension into account. There is a second family with meaningful patent coverage to the composition of matter and epitope claims that are expected to expire in 2036 and 2038. Furthermore, ARGX-115 (ABBV-151) incorporates or employs the SIMPLE ANTIBODY™ platform technology.
Our ARGX-112 (LP-0145) Product Candidate
With regard to the ARGX-112 (LP-0145) product candidate, we have one patent family with composition of matter claims directed to an antibody that binds human IL-22R. The patent family has a basic expiry date in 2037. Furthermore, ARGX-112 (LP-0145) incorporates the SIMPLE ANTIBODYTM platform technology.
Collaboration and Licenses
We follow a disciplined strategy to maximize the value of our pipeline. We plan to retain all development and regulatory milestone payments remain the same,commercialization rights to those products and product candidates that we are eligible to receive payments in aggregate amounts of up to $60.0 million for achievement of commercial milestones. The royalties payable to us are tiered, single digitbelieve we can commercialize successfully, if approved.
We have partnered, and are subject to customary reductions. Through December 31, 2017, pursuant to the agreement Shire has paid us an aggregate total of (i) €3.4 million in upfront payments, (ii) €0.3 million in milestone payments and (iii) $12.0 million in research and development fees. In addition, Shire purchased €12.0 million of our ordinary shares in July 2014 by participating in our initial public offering on Euronext Brussels.
If Shire does not exercise its option with respect to any discovered antibody within the specified period, then we are free to research, develop and commercialize antibodies in relation to the applicable study target, subject to negotiation of a license from Shire for the use of any antibodies that were discovered during the applicable study, or any Shire confidential information, Shire intellectual property or Shire’s interest in any joint intellectual property. If (a) Shire (i) does not exercise its option with respect to any discovered antibody, or (ii) exercises its option but later abandons development of such antibody or (iii) the agreement is terminated other than for our breach or insolvency, and (b) Shire is no longer pursuing a development program with respect to the applicable study target, then we may electplan to continue the developmentto partner, to develop products and product candidates that we believe have promising utility in disease areas or have patient populations that may benefit from resources of such antibody atother biopharmaceutical companies. We expect to continue to collaborate selectively with pharmaceutical and biotechnology companies to leverage our sole costplatform technology and expense, subject to negotiation of a license from Shire under which Shire will receive either specified royalties, if we commercialize the program ourselves, or a percentage of sublicensing revenues, if the program is subsequently sublicensed to a third party.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends with the expiry of the last royalty term under the agreement. Each royalty term expires, on a product‑by‑accelerate product and country‑by‑country basis, on the date that is the later of (i) such time as there are no valid claims covering such product or (ii) 10 years after the first commercial sale of such product sold in that country under the agreement. Shire may terminate the agreement for any reason upon prior written notice to us.
License Agreementscandidate development.
We are aalso party to a number ofseveral license agreements under which we license patents, patent applications and other intellectual property to third parties. We have also entered into several license agreements under which we license patents, patent applications and other intellectual property from third parties. We enter into theseLicense agreements can relate to augment our proprietary intellectual property portfolio.research and development and/or commercialization of the relevant product candidates (and technologies) or products. The licensed intellectual property covers some of our product candidates and some of the Fcantibody engineering technologies that we use. TheseSome of these licenses impose various diligence and financial payment obligations on us. We expect to continue to enter into these types of license agreements in the future.
Our Exclusive License with the University of Texas (NHance and ABDEG)
In February 2012, weWe have entered into an exclusive licensemultiple collaboration agreements with The Board of Regents of The University of Texas System, or UoT, for use of certain patents rights relating to the NHance platform, for any use worldwide. The agreement was amended on December 23, 2014 to also include certain patent rights relating to the ABDEG platform.
Upon commercialization of any of our products that use the in‑licensed patent rights, we will be obligated to pay UoT a percentage of net sales as a royalty until the expiration of any patents covering the product. This royalty varies with net sales volumepharmaceutical partners and is subject to an adjustment for royalties we receive from a sublicensee of our rights under this agreement, but in any event does not exceed 1%. In addition, we must make annual license maintenance
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payments to UoT until termination of the agreement. We have assumed certain development, regulatory and commercial milestone payment obligations and must report on our progress in achieving these milestones on a quarterly basis. The maximum amount of milestone payments we would be required to make is approximately $0.5 million. Through December 31, 2017, we have paid UoT an aggregate of $0.5 million, which includes reimbursement for UoT’s patent prosecution and maintenance costs. We also have certain diligence requirements with respect to development and commercialization of products which use the in‑licensed patent rights.
Under the terms of the license, we have the right to grant sublicenses to third parties, subject to certain restrictions. If we receive any non‑royalty income in connection with such sublicenses we must pay UoT a percentage of such income varying from low‑middle single digits to middle‑upper single digits depending on the nature of the sublicense. Such fees are waived if a sublicensee agrees to pay the milestone payments as set forth in our agreement with UoT.
We may unilaterally terminate the license agreement for convenience upon prior written notice. Absent early termination, the agreement will automatically expire upon the expiration of all issued patents and filed patent applications within the patent rights covered by the agreement. Our royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, at such time as there are no valid claims covering such product.
Our Non‑Exclusive License with BioWa (POTELLIGENT)
In October 2010, we entered into a non‑exclusive license agreement with BioWa, Inc., or BioWa, for use of certain patents and know‑how owned by BioWa and relating to its POTELLIGENT® Technology, for use in the field of prevention and treatment of human diseases. POTELLIGENT® Technology is referred to herein as POTELLIGENT. Under the terms of the license, we are granted a non‑exclusive right to use POTELLIGENT to research, develop and commercialize antibodies and products containing such antibodies. BioWa retains a right of first negotiation for the exclusive right to develop and commercialize, in certain countries only, any product we develop using POTELLIGENT. We successfully applied POTELLIGENT to ARGX‑110, an anti‑CD70 mAb, and ARGX‑111, an anti‑c‑Met mAb, under this license.
Upon commercialization of our products developed using POTELLIGENT, we will be obligated to pay BioWa a percentage of net sales of a licensed product as a royalty. This royalty varies with net sales volume, ranging in the low single digits, and it is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed patent(s) that covers the product expires or ends. In addition, we must make annual license maintenance payments which cease with commencement of our royalty payments to BioWa. We have certain diligence requirements with respect to development and commercialization of products. We have also assumed certain development, regulatory and commercial milestone payment obligations and must report on our progress toward achieving these milestones on an annual basis. Milestones are to be paid on a commercial target‑by‑commercial target basis, and we are obligated to make milestone payments in aggregate amounts of up to $36.0 million per commercial target should we achieve annual global sales of over $1.0 billion.
Under the terms of the license, we have the right to grant sublicenses to third parties, subject to certain restrictions.
We may terminate the license agreement at any time by sending BioWa prior written notice. Absent early termination, the agreement will automatically expire upon the expiry of our royalty obligations under the agreement. In the event the agreement is terminated for any reason, the license grant to us would cease but BioWa would grant our sublicensees a direct license following such termination. In the event the agreement is terminated other than for our breach or insolvency, we would retain the right to sell licensed products then on hand for a certain period of time post‑termination.
Our Non‑Exclusive Licenses with BioWa and Lonza (POTELLIGENT CHOK1SV)
To scale up production of our product candidates ARGX‑110 and ARGX‑111 for clinical trial supply, we required a license to a GMP cell line in which POTELLIGENT antibodies could be expressed. This cell line,
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POTELLIGENT CHOK1SV, was jointly developed by BioWa and Lonza. In December 2013 and August 2014, respectively, we entered non‑exclusive commercial license agreements, for ARGX‑110 and ARGX‑111 with BioWa and Lonza Sales AG, or Lonza, for use of certain patents and know‑how relating to the POTELLIGENT® CHOK1SV Technology, which is a combination of Lonza’s GS System and BioWa’s POTELLIGENT® Technology, for use in the field of prevention and treatment of human diseases. Under the terms of each commercial license, we received a non‑exclusive right to research, develop and commercialize products containing an antibody generated specifically against a specific target using POTELLIGENT® CHOK1SV, namely the target CD70 in the case of ARGX‑110 and c‑Met in the case of ARGX‑111. Both targets are designated as reserved targets under our 2010 license agreement with BioWa, which continues to govern our research, development and commercialization of products utilizing BioWa’s POTELLIGENT® Technology. Under the terms of each commercial license, BioWa retains a right of first negotiation for the exclusive right to develop and commercialize, in certain countries only, any product we develop using POTELLIGENT® CHOK1SV.described below.
Upon commercialization of our products developed using POTELLIGENT® CHOK1SV, we will be obligated to pay both BioWa and Lonza a percentage of net sales as a royalty. We are required to pay a royalty to BioWa on net sales for any specific licensed product under only one license—either the POTELLIGENT® agreement or the POTELLIGENT® CHOK1SV agreement, but not both. The BioWa royalty is tiered, ranging in the low single digits and is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed BioWa patent(s) that covers the product expires or ends. The Lonza royalty varies based on whether the product is manufactured by Lonza, us or a third party, but in any event is in the low single digits and is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed Lonza patent(s) that covers the product expires or ends. In addition, we must make annual license maintenance payments to BioWa which cease with commencement of payment of the BioWa royalty, and annual payments to Lonza in the event that any product is manufactured by a party other than Lonza, us or one of our affiliates or strategic partners named in the agreement.
We have assumed certain development, regulatory and commercial milestone payment obligations to both BioWa and Lonza and must report on our progress toward achieving these milestones on an annual basis. We are required to pay such milestones and royalties to BioWa under only one license—either the POTELLIGENT® agreement or the POTELLIGENT® CHOK1SV agreement, but not both. Payments related to the development and commercialization of ARGX‑110 and ARGX‑111 are foreseen under their respective POTELLIGENT® CHOK1SV agreements. Milestones are to be paid on a product‑by‑product basis, and we are obligated to make development, regulatory and commercial milestone payments to BioWa in aggregate amounts of up to $36.0 million per product should we achieve global annual sales of $1.0 billion. We are obligated to make development, regulatory and commercial milestone payments to Lonza in aggregate amounts of up to approximately £1.1 million per product, if such product is manufactured by Lonza, us or one of our affiliates or strategic partners, or £3.1 million per product, otherwise. Through December 31, 2017, we have paid BioWa an aggregate amount of $1.4 million, which includes target reservation fees and annual research license fees under our POTELLIGENT® agreement and commercial license fees and milestone payments under our POTELLIGENT® CHOK1SV agreement. Through December 31, 2017, we have paid Lonza an aggregate amount of £0.2 million, which includes milestone payments under our POTELLIGENT® agreement.
Under the terms of both commercial licenses, we have the right to grant sublicenses to certain pre‑approved third parties, but otherwise must obtain BioWa and Lonza’s prior written consent.
We may terminate the agreement at any time by sending BioWa and Lonza prior written notice. Absent early termination, the agreement will automatically expire upon the expiry of our royalty obligations under the agreement. In the event the agreement is terminated for any reason, the license grant to us would cease but BioWa and Lonza would grant our sublicensees a direct license following such termination. In the event the agreement is terminated other than for our failure to make milestone or royalty payments, we would retain the right to sell products then on hand for a certain period of time post‑termination. Our royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) 10 years after the first commercial sale of such product sold in that country under the agreement or (ii) such time as there are no valid claims covering such product.
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Our Collaboration with UCL (GARP)
In January 2013, we entered into a collaboration and exclusive product license agreement with Université Catholique de Louvain, or UCL, and Sopartec S.A., or Sopartec, to discover and develop novel human therapeutic antibodies against GARP. Under the terms of the collaboration, each party was responsible for all of its own costs and in connection with the activities assigned to it under a mutually agreed research plan.
In January 2015, we exercised the option we had been granted to enter into an exclusive, worldwide commercial license for use of certain GARP‑related intellectual property rights owned by UCL and the Ludwig Institute for Cancer Research to further develop and commercialize licensed products. Upon the expiration of the agreement, this license became a fully paid up, perpetual worldwide exclusive license under the GARP intellectual property for any purpose, subject to UCL’s retention of non‑commercial research rights.
Under the terms of the license, we have the right to grant sublicenses to third parties, subject to certain restrictions. If we receive any income in connection with such sublicenses, we must pay Sopartec a percentage of that income varying from mid‑single digit to lower teen digit depending on the stage of development of the licensed products at the time the sublicense was entered into. In the event that we have not granted a sublicense, we are required to pay a percentage of net sales as a royalty. This royalty varies with net sales volume, but does not exceed 1% in all tiers, and the royalty is subject to customary reductions. This royalty obligation expires on a product‑by‑product and country‑by‑country basis when there are no valid claims covering such product. In the event that we have not granted a sublicense, we have certain development and commercial milestone payment obligations of up to approximately €0.9 million in the aggregate. In the event we have granted a sublicense, we are obligated to pay Sopartec a percentage of sublicense revenue received. We also have certain diligence obligations with respect to development and commercialization of products. Through December 31, 2017, we have an aggregate amount of €3.2 million payable to Sopartec, of which €2.7 million has been paid and the remainder is kept in escrow, which includes option fees and payments related to sublicense revenue we received.
Intellectual Property
Introduction
We strive to protect and maintain exclusivity for the proprietary technologies that we believe are important to our business, includingpatients and shareholders. We are focused on pursuing and maintaining patent protection intended to cover thecore platform technologies incorporated into, or used to produce, our product candidates theand commercial products. We
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will seek protection for our innovations in key global jurisdictions. We continue to focus our exclusivity strategies on all aspects of our assets, including our compositions of matter, of our product candidates and their methods of use as well asfor our approved products, and other inventions that are important to our business. business (e.g., the patient innovations described in our product labels/product inserts and our core manufacturing technologies).
Our intellectual property portfolio continues to grow and keep pace with the innovations arising from our discovery, development, and commercial efforts. We expect the total volume of patent positions under our management to increase with each year as our pipeline evolves. We currently oversee more than 500 pending applications and granted patents. More importantly, as we continue to innovate for patients, we will work to protect our patient innovations with new intellectual property filings to enable future reinvestment for patients.
In addition to patent protection, we also rely on trademarks and trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of our llama immunization and antibody affinity maturation approaches.
Our commercial success depends in part upon our ability to obtain and maintain exclusivity, including regulatory exclusivities, patent, and other proprietary protection for commercially important technologies, inventions and know‑howknow-how related to our business,business. We will defend and enforce our intellectual property rights, particularly our patent rights, and preserve the confidentiality of our trade secrets and operatewhile operating without infringing valid and enforceable intellectual property rights of others. Specifically, we are materially dependent on regulatory, patent and other proprietary protection related to our core platform technologies, described in Item 4.B. “Business Overview—Intellectual Property—Platform Technologies”, our product candidates, as described in Item 4.B. “Business Overview—Intellectual Property—Our Internal Programs”, and Item 4.B. “Business Overview—Intellectual Property—Our Partnered Programs”.
The patent positions for biotechnology companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our platform technologies and product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
As of March 16, 2018, our patent estate (which includes both owned and in‑licensed patent rights) included 17 issued U.S. patents, 15 pending U.S. patent applications, 60 issued foreign patents (including five granted European patents that have been validated into 42 national patents) and 85 pending foreign patent applications (including 10 pending European patent applications).
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Platform Technologies
With regard to our platform technologies, we own or have rights in patents and patent applications directed to our SIMPLE Antibody discovery platform, the ABDEG and NHance platforms and the POTELLIGENT platform.
With regard to our SIMPLE Antibody discovery platform, we own a patent family containing six issued U.S. patents with composition of matter claims directed to chimeric antibodies containing variable domains comprising CDRs obtained from conventional heterotetrameric llama antibodies fused to one or more domains of a human antibody, polynucleotides encoding such chimeric antibodies, libraries of expression vectors comprising cDNA sequences encoding camelid antibodies, method claims directed to the preparation of such chimeric antibodies, and methods of modulating the binding of a human target antigen to its ligand or receptor by administering such a chimeric antibody. The U.S. patents are expected to expire in 2029 to 2033. In addition, the patent family contains patents that have been granted in Australia, Europe and Israel, and at least five patent applications pending in various other countries and regions in North America, Europe and Asia. In addition, we have a second patent family containing patents granted in the United States and Australia, and eight patent applications pending in the United States and other countries in North America, Europe and Asia, with composition of matter claims directed to a chimeric antibody containing variable regions with CDRs derived from a llama antibody and certain amino acid substitutions corresponding to amino acids present in a human germline variable region. The granted U.S. patent and the pending U.S. patent application, if issued as a patent, are expected to expire in 2029.
With regard to the ABDEG platform, we co‑own with, and exclusively license from, the University of Texas, a patent family containing a pending U.S. patent application with composition of matter claims directed to an isolated FcRn‑antagonist comprising an variant immunoglobulin Fc region having an increased affinity for an Fc gamma receptor relative to a wild‑type IgG1 Fc region, and method of use claims directed to a method of using such an FcRn‑antagonist to treat certain antibody mediated disorders. The U.S. patent application, if issued as a U.S. patent, is expected to expire in 2034. In addition, we have at least 10 patent applications pending in various other countries and regions in North America, South America, Europe and Asia. In addition, we own a second patent family containing pending patent applications in the United States and 14 other jurisdictions with claims directed to methods of reducing the serum levels of an Fc‑containing agent in a subject by administering to the subject an FcRn‑antagonist containing a variant immunoglobulin Fc region containing certain amino acid substitutions. A U.S. patent, if issued from the U.S. patent application, is expected to expire in 2036.
With regard to the NHance platform, we have exclusively licensed from the University of Texas two U.S. patents with composition of matter claims directed to an IgG molecule comprising a variant human Fc domain, and method of use claims directed to a method of blocking FcRn function in a subject by providing to the subject such an IgG molecule. The U.S. patents are expected to expire in 2027 to 2028. The patent family also includes a granted European patent.
With regard to the POTELLIGENT platform, which is currently used in the production of our ARGX‑110 and ARGX‑111 product candidates, we have non‑exclusively licensed from BioWa certain patent rights that relate to different aspects of the POTELLIGENT platform.
Product Candidates: Wholly‑Owned Programs
With regard to the ARGX‑113 product candidate, ARGX‑113 incorporates the ABDEG technology platform, the coverage of which is discussed above under “Platform Technologies.” It is expected that U.S. patents, if they were to issue from the two patent families directed to the ABDEG technology platform are expected to expire in 2034 or 2036, without taking a potential patent term extension into account.
With regard to the ARGX‑110 product candidate, we have three issued U.S. patents, one with composition of matter claims directed to the ARGX‑110 antibody, one with claims directed to the epitope ARGX‑110 binds to, and one with claims directed to a polynucleotide that encodes antibodies that bind to the epitope ARGX‑110 binds to and one U.S. patent application with method of use claims directed to the treatment of cancer with the ARGX‑110 antibody. The issued U.S. patents expire in 2032 and 2033, and the U.S. patent application, if issued as a U.S. patent, is expected to
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expire in 2032, without taking a potential patent term extension into account. In addition, we have patents that have been granted in Japan and Russia and at least nine patent applications pending in various other countries and regions in North America, South America, Europe and Asia. Furthermore, ARGX‑110 incorporates or employs the SIMPLE Antibody and POTELLIGENT technology platforms, which are covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”
With regard to the ARGX‑111 product candidate, we have three issued U.S. patents, one with composition of matter claims directed to the ARGX‑111 antibody, one with method of use claims directed to the use of the ARGX‑111 antibody in the treatment of cancer, and one with claims directed to polynucleotides that encode the ARGX‑111 antibody and one U.S. patent application with composition of matter claims directed to ARGX‑111. The issued U.S. patents and the U.S. patent application, if issued as a U.S. patent, are expected to expire in 2031, without taking a potential patent term extension into account. In addition, we have patents that have been granted in Australia, Europe, Japan and Russia, and at least eight patent applications pending in various other countries and regions in North America, South America, Europe and Asia. Furthermore, ARGX‑111 also incorporates or employs the SIMPLE Antibody, POTELLIGENT and NHance technology platforms, which are covered by one or more of the patents and patent applications discussed above under “Platform Technologies.” In addition, we have one U.S. patent, patents granted in Australia and Europe, and eight patent applications pending in various other countries and regions in North America, South America and Asia with composition of matter claims directed to a combination of antibodies or a multi‑specific antibody, where one of the antigen binding regions in the combination of antibodies or the multi‑specific antibody binds the epitope bound by the ARGX‑111 antibody. The U.S. patent is expected to expire in 2033.
Product Candidates: Partnered Programs
With regard to the ARGX‑115 product candidate, we co‑own with, and exclusively license from, the Ludwig Institute for Cancer Research and Université Catholique de Louvain, a pending U.S. patent application with composition of matter claims directed to an antibody that binds GARP the presence of TGF‑β and method of use claims directed to the use of such an antibody in the treatment of cancer. A U.S. patent, if issued from the U.S. patent application, is expected to expire in 2034, without taking a potential patent term extension into account. In addition, the patent family contains at least 10 patent applications pending in various other countries and regions in North America, South America, Europe and Asia. In addition, we co‑own with, and exclusively license from, the Université Catholique de Louvain patent applications pending in the United States and Europe with composition of matter claims directed to an antibody that binds an epitope of a complex formed by human GARP and TGF‑β and method of use claims directed to the use of such an antibody in the treatment of cancer. A U.S. patent, if issued from the U.S. patent application, is expected to expire in 2034. Furthermore, ARGX‑115 incorporates or employs the SIMPLE Antibody technology platform, which is covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”
With regard to the ARGX‑109 product candidate, we have a pending U.S. patent application with composition of matter claims directed to ARGX‑109. A U.S. patent, if it were to issue, would be expected to expire in 2033, without taking a potential patent term extension into account. We also have counterpart patents and pending patent applications in various jurisdictions, including North America, Europe and Asia. Furthermore, ARGX‑109 incorporates or employs the SIMPLE Antibody technology and the NHance technology, which is covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”
With regard to the ARGX‑112 product candidate, we have a pending international application with composition of matter claims directed to an antibody that binds human IL‑22R. A U.S. patent, if it were to issue, that claims priority to the international application would be expected to expire in 2037, without taking a potential patent term extension into account. Furthermore, ARGX‑112 incorporates the SIMPLE Antibody technology, which is covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non‑provisionalnon-provisional patent application.
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In the United States,U.S., the term of a patent covering an FDA‑approvedFDA-approved drug may be eligible for a limited patent term extension under the Hatch‑WaxmanHatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process. The periodprocess as described in Item 4.B. “Business Overview—Regulation—Licensure and Regulation of extension may be up to five years beyondBiologics in the expiration of the patent, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent among those eligible for an extension may be extended.U.S.” Similar provisions are available in Europethe EU and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering each of our product candidates may be entitled to patent term extensions. If our product candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.
Platform Technologies
With regard to our platform technologies, we own or have intellectual property rights directed to our SIMPLE ANTIBODY™ discovery platform, the ABDEG™ and NHANCE™ technologies.
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With regard to our SIMPLE ANTIBODY™ discovery platform, we have a broad patent portfolio providing exclusivity on the SIMPLE ANTIBODY™ platform. We expect to enjoy exclusivity under this patent portfolio until between 2029 and 2033.
With regard to the ABDEG™ platform, we co-own the technology with UT Southwestern and enjoy certain exclusive license rights. We have a broad patent portfolio covering the composition of matter and uses of certain FcRn antagonists to achieve certain biological effects. The composition of matter and other relevant patents in the U.S. expire in 2036 whereas in many other countries the base expiry date is 2034.
With regard to the NHANCE™ platform, we exclusively licensed two U.S. patents from UT Southwestern with composition of matter claims directed to an IgG molecule comprising a variant human Fc domain, and method of use claims directed to a method of blocking FcRn function in a subject by providing to the subject such an IgG molecule. The U.S. patents are expected to expire earliest in 2027 to 2028. The patent family also includes a granted European patent.
Our Internal Programs
Efgartigimod
Efgartigimod incorporates the ABDEG™ platform technology. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-109 Product Candidate
With regard to our wholly-owned ARGX-109 product candidate, we have one patent family with composition of matter claims directed to ARGX-109. The patent family has a basic expiry date in 2033. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Furthermore, ARGX-109 incorporates or employs the SIMPLE ANTIBODY™ platform technology and the NHANCE™ platform technology.
Empasiprubart Product Candidate
With regard to the empasiprubart product candidate, we own or have rights to multiple patent families (including one in-licensed patent family from Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia, directed to composition of matter claims and method of treatment claims. The in-licensed patent family from Broteio has granted patents in several countries/regions and has a basic expiry date in 2034. Additional patent families have granted patents with basic expiry dates in 2039 and 2040. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection. Empasiprubart product candidate incorporates or employs the NHANCE™ platform technology.
Our ARGX-119 Product Candidate
With regard to the ARGX-119 product candidate, we in-licensed patent families from/with NYU Langone Health, a U.S. medical center based in New York, and additional patent families from/with the LUMC, with a U.S. granted patent and several pending applications in multiple jurisdictions. We anticipate several more patient innovations to evolve during development for which we will seek additional patent protection.
Our ARGX-118 Product Candidate
With regard to the ARGX-118 product candidate, we co-own a patent portfolio with VIB vzw (VIB), an inflammation research center in Ghent, Brussels, and Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, the EU and Asia. The patent family has a basic expiry date in 2039.
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Our Partnered Programs
Our Cusatuzumab (ARGX-110) Product Candidate
With regard to the cusatuzumab product candidate, we have a broad patent portfolio that include claims to the composition of matter, uses of the molecule, and other important inventions. The issued U.S. patents expire in 2032 and 2033, without taking a potential patent term extension into account. Cusatuzumab incorporates or employs the SIMPLE ANTIBODY™ and POTELLIGENT® platform technologies.
Our ARGX-115 (ABBV-151) Product Candidate
With regard to the ARGX-115 (ABBV-151) product candidate that we co-own with, and exclusively license from, the Ludwig Institute for Cancer Research and UCL, we have a patent portfolio that includes a U.S. patent with a basic expiry date in 2034, without taking a potential patent term extension into account. There is a second family with meaningful patent coverage to the composition of matter and epitope claims that are expected to expire in 2036 and 2038. Furthermore, ARGX-115 (ABBV-151) incorporates or employs the SIMPLE ANTIBODY™ platform technology.
Our ARGX-112 (LP-0145) Product Candidate
With regard to the ARGX-112 (LP-0145) product candidate, we have one patent family with composition of matter claims directed to an antibody that binds human IL-22R. The patent family has a basic expiry date in 2037. Furthermore, ARGX-112 (LP-0145) incorporates the SIMPLE ANTIBODYTM platform technology.
Collaboration and Licenses
We follow a disciplined strategy to maximize the value of our pipeline. We plan to retain all development and commercialization rights to those products and product candidates that we believe we can commercialize successfully, if approved.
We have partnered, and plan to continue to partner, to develop products and product candidates that we believe have promising utility in disease areas or have patient populations that may benefit from resources of other biopharmaceutical companies. We expect to continue to collaborate selectively with pharmaceutical and biotechnology companies to leverage our platform technology and accelerate product candidate development.
We are also party to several license agreements under which we license patents, patent applications and other intellectual property to third parties. We have also entered into several license agreements under which we license patents, patent applications and other intellectual property from third parties. License agreements can relate to research and development and/or commercialization of the relevant product candidates (and technologies) or products. The licensed intellectual property covers some of our product candidates and some of the antibody engineering technologies that we use. Some of these licenses impose various diligence and financial payment obligations on us. We expect to continue to enter into these types of license agreements in the future.
We have entered into multiple collaboration agreements with pharmaceutical partners and license agreements, as described below.
Our Strategic Collaboration with Shire
In February 2012, we entered into a collaboration agreement with Shire AG (Shire, now known as Shire International GmbH) to discover, develop and commercialize novel human therapeutic antibodies against up to three targets to address diverse, rare and unmet diseases (Shire Collaboration Agreement). Pursuant to the Shire Collaboration Agreement, up through a specified period, we have granted Shire an exclusive option, against payment of a one-time option fee, to obtain all right, title and interest in any antibodies discovered under the collaboration. If Shire does not exercise its option with respect to any discovered antibody within a specified period, we are free to research,
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develop and commercialize antibodies in relation to the applicable clinical trial target, subject to negotiation of a license from Shire.
OncoVerity for cusatuzumab
In 2022, we, the University of Colorado Anschutz Medical Campus and the University of Colorado Health (UCHealth) created an asset-centric spin-off, OncoVerity, Inc (OncoVerity), focused on optimizing and advancing the development of cusatuzumab, a novel anti-CD70 antibody, in AML. OncoVerity is an entity of co-creation, combining the extensive translational biology insights from Dr. Clayton Smith, M.D. from the University of Colorado with our experience on the CD70/CD27 pathway.
In 2023, we granted an exclusive license for cusatuzumab to OncoVerity and provided, together with a joint venture of UCHealth and University License Equity Holdings, Inc. on the University of Colorado Anschutz Medical Campus, $26.0 million in funding for ongoing clinical development of cusatuzumab.
Our Strategic Partnership with LEO Pharma for ARGX-112 (LP0145)
In May 2015, we entered into a collaboration agreement with LEO Pharma A/S (LEO Pharma) to develop and commercialize ARGX-112 (LP0145) for the treatment of dermatologic indications involving inflammation (LEO Pharma Collaboration Agreement). ARGX-112 (LP0145) employs our SIMPLE ANTIBODY™ technology and blocks the IL-22R in order to neutralize the signaling of cytokines implicated in autoimmune diseases of the skin. LEO Pharma funded more than half of all product development costs up to CTA approval of a first product in a Phase 1 clinical trial, with our share of such costs capped, which was achieved in April 2018. Since then, LEO Pharma has been solely responsible for funding the clinical development of the program. In May 2021, CTA approval of a Phase 2a clinical trial for LP0145 was received.
In September 2022, LEO Pharma, exercised its option to obtain, and was granted an exclusive, worldwide license to further develop and commercialize ARGX-112 against payment of a €5.0 million option fee to us. LEO Pharma assumed full responsibility for the continued development, manufacture and commercialization of such product and is subject to diligence obligations in respect of continuation of development and commercialization of such product. We are eligible to receive additional development, regulatory and commercial milestone payments in aggregate amount of up to €120.0 million, as well as tiered royalties on product sales at percentages ranging from the low single digits to the low teens, subject to customary reductions.
Unless earlier terminated, the term of the LEO Pharma Collaboration Agreement ends upon the later of (i) the expiration of the last license granted under the agreement, and (ii) the fulfilment of all payment obligations under the agreement. LEO Pharma may terminate the LEO Pharma Collaboration Agreement for any reason upon prior written notice to us. LEO Pharma’s royalty payment obligations expire, on a product-by-product and country-by-country basis, upon the later of (i) a time when no valid claims covering such product, and (ii) (a) in major market countries with no composition of matter patent covering such product, the expiration of the data exclusivity period or (b) in countries that are not major market countries, a double-digit number of years after the first commercial sale of such product sold in that country.
Our Strategic Partnership with Zai Lab for efgartigimod
Pursuant to the Zai Lab Agreement, Zai Lab obtained the exclusive right to develop and commercialize efgartigimod in Greater China. Zai Lab will also contribute patients to our global Phase 3 clinical trials of efgartigimod. Additionally, the collaboration with Zai Lab is expected to accelerate efgartigimod global development by initiating multiple Phase 2 POC clinical trials in new autoimmune indications under our supervision; first indications for such POC clinical trials are kidney conditions LN and MN.
Pursuant to the Zai Lab Agreement, we have received value worth $175.0 million from the Zai Lab Payments. We are also eligible to receive tiered royalties (mid-teen to low-twenties on a percentage basis) based on annual net sales of efgartigimod in Greater China.
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Our Strategic Partnership with AbbVie for ARGX-115 (ABBV-151)
In April 2016, we entered into a collaboration agreement with AbbVie to develop and commercialize ARGX-115 (ABBV-151) as a cancer immunotherapy against the novel target glycoprotein A repetitions predominant (GARP) (the AbbVie Collaboration Agreement). ARGX-115 (ABBV-151) employs our SIMPLE ANTIBODY™ technology and works by stimulating a patient’s immune system after a tumor has suppressed the immune system by co-opting immunosuppressive cells such as regulatory T cells. Under the terms of the AbbVie Collaboration Agreement, we were responsible for conducting and funding all ARGX-115 (ABBV-151) research and development activities up to completion of IND enabling clinical trials.
AbbVie has exercised its option and obtained a worldwide, exclusive license to the ARGX-115 (ABBV-151) program to develop and commercialize products and has assumed development obligations, including the sole responsibility for all research, development and regulatory costs relating to ARGX-115 (ABBV-151)-based products. Subject to the continuing progress of ARGX-115 (ABBV-151) by AbbVie, we are eligible to receive development, regulatory and commercial milestone payments in aggregate amounts of up to $110 million, $190 million and $325 million, respectively, as well as tiered royalties on product sales at percentages ranging from the mid-single digits to the lower teens, subject to customary reductions.
Pursuant to the AbbVie Collaboration Agreement, we have the right, on a product-by-product basis, to co-promote ARGX-115 (ABBV-151) based products in the EEA and Switzerland and to combine the product with our own future oncology programs (if any). The co-promotion effort would be governed by a co-promotion agreement negotiated in good faith by the parties.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the AbbVie Collaboration Agreement, the term of the license agreement ends, with respect to the ARGX-115 (ABBV-151) program, upon fulfilment of all payment obligations under the agreement.
AbbVie may terminate the AbbVie Collaboration Agreement for any reason upon prior written notice to us. AbbVie’s royalty payment obligations expire, on a product-by-product and country-by-country basis, on the date that is the later of (i) such time as there are no valid claims covering such product, (ii) expiration of regulatory or market exclusivity in respect of such product or (iii) 10 years after the first commercial sale of such product sold in that country under the AbbVie Collaboration Agreement.
Our Exclusive License with Elektrofi for efgartigimod
In April 2021, we entered into the Elektrofi Agreementwith Elektrofi to explore new SC formulations utilizing Elektrofi’s high concentration technology for efgartigimod, and up to one additional target. The Elektrofi-enabled formulations are aimed to promote additional optionality for patients through at-home and self-administration capabilities.
Under the terms of the Elektrofi Agreement, we made an upfront payment and future milestones payments across both targets pending achievement of pre-defined development, regulatory, and commercial milestones. Elektrofi will also receive a mid-single digit royalty on sales of commercialized products.
Our collaboration with Genmab
In 2023, we entered into a collaboration with Genmab to jointly discover, develop and commercialize novel therapeutic antibodies with applications in immunology, as well as in oncology therapeutic areas. The multiyear collaboration is expected to leverage the antibody engineering expertise and knowledge of disease biology of both companies to accelerate the identification and development of novel antibody therapeutic candidates with a goal to address unmet patient needs in immunology and cancer. Under the terms of the collaboration, we and Genmab each have access to the suites of proprietary antibody technologies of both companies to advance the identification of lead antibody candidates against differentiated disease targets.
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Our Non-Exclusive Research License and Option Agreement with Chugai for SMART-Ig® and ACT-Ig®
In September 2020, we entered into a non-exclusive research license and option agreement with Chugai, allowing us to access Chugai’s SMART-Ig® and ACT-Ig® engineering technologies for conducting feasibility clinical trials. These technologies are designed to enable us to make sweeping antibodies and expand the therapeutic index of our product candidates, which is the ratio between toxic and therapeutic dose, by potentially modifying their half-life, tissue penetration, rate of disease target clearance and potency.
Our Non-exclusive License with the Clayton Foundation for DHS mutations
In October 2020, we entered into a non-exclusive research agreement with the Clayton Foundation relating to the non-exclusive in-license for Clayton Foundation’s proprietary DHS mutations to extend the serum half-life of therapeutic candidates.
Our Exclusive License with Halozyme for ENHANZE®
In February 2019, we entered into an in-license agreement with Halozyme for the use of certain patents, materials and know-how owned by Halozyme and relating to its ENHANZE®, for application in the field of prevention and treatment of human diseases (the ENHANZE® License Agreement). Pursuant to the ENHANZE® License Agreement, we were granted exclusive rights to apply ENHANZE® to biologic products against pre-specified targets, in order to research, develop and commercialize SC formulations of our therapeutic antibody-based product candidates.
Our first therapeutic target for which we received an exclusive license from Halozyme was FcRn, which allows us to apply ENHANZE® to efgartigimod and any other product candidates selective and specific for FcRn. Moreover, the breadth of our exclusive license to FcRn precludes either Halozyme itself or any of its current or future partners from utilizing ENHANZE® in the context of an FcRn-targeted product. Our second therapeutic target for which we received an exclusive license from Halozyme was human C2 associated with the product candidate empasiprubart, which is being developed to treat severe autoimmune diseases. Pursuant to the ENHANZE® License Agreement, we also have the right to nominate future targets for an exclusive ENHANZE® license if the target in question has not already been licensed by Halozyme or is not already being pursued by Halozyme.
In October 2020, we expanded our collaboration with Halozyme for ENHANZE® drug delivery technology to include three additional exclusive targets upon nomination bringing the total to six potential targets. From the effective date of the ENHANZE® License Agreement, we have a seven-year period in which to conduct research and preclinical trials on other target-specific molecules in combination with ENHANZE® and may nominate up to four additional targets we have not yet nominated for an exclusive commercial license.
Pursuant to the ENHANZE® License Agreement, we have the right to grant sublicenses to our subsidiaries and to third parties both for research/preclinical work (for example, to subcontractors) and for development and commercialization. Halozyme provides dedicated specialist support to us which it has accrued over 10 years of licensing ENHANZE® to its collaborators.
Upon nomination of any future target for an exclusive commercialization license and confirmation by Halozyme that such a license is available, we will pay $12.5 million to Halozyme per target. We will be obligated to pay clinical development, regulatory and commercial milestones totaling $160.0 million for the first product that uses ENHANZE® and is specific for a given target. We are also obligated to pay Halozyme a percentage of net sales as a royalty of any licensed product that uses ENHANZE®. This royalty varies with net sales volume, ranging from the low to mid-single digits. The royalty obligations may be reduced by up to 50% under different circumstances including the requirement of a compulsory license from a government, the need to secure third-party licenses to enable sales of our products using the ENHANZE® technology, and/or the lack of patent coverage in a particular country. We have diligence obligations with respect to the continuation of development and commercialization of product candidates, but we are not obligated to utilize ENHANZE® for every product candidate directed to a given exclusive target(s).
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We may terminate the ENHANZE® License Agreement at any time, either in its entirety or on a target-by-target basis, by sending Halozyme prior written notice. Absent early termination, the ENHANZE® License Agreement will automatically expire upon the expiry of our royalty payment obligations under the agreement. In the event the ENHANZE® License Agreement is terminated for any reason, the license granted to us would terminate but Halozyme would grant our sublicensees a direct license following such termination. In the event the ENHANZE® License Agreement is terminated other than for our breach, we would retain the right to sell licensed products then on hand for a certain period of time post-termination.
Our Exclusive License with Agomab Therapeutics NV (Agomab) for ARGX-114 (AGMB-101)
In March 2019, we entered into an exclusive out-license with Agomab for the use of certain patent rights relating to our proprietary suite of technologies for the development and commercialization of a series of agonistic anti-mesenchymal-epithelial transition factor (MET) SIMPLE ANTIBODYTM generated antibodies, including ARGX-114 (AGMB-101), a halofuginone-mimetic antibody directed against the MET receptor. Agomab is required to use commercially reasonable efforts to develop and commercialize at least one licensed product. In connection with our entry into this agreement, we received a profit-sharing certificate which entitles us to 20% of all distributions to Agomab’s shareholders (which shall be reduced to 10% following the filing of an IND and is subject to further adjustment upon the occurrence of certain financings). Upon the occurrence of a qualified initial public offering of Agomab, the profit-sharing certificate will automatically be converted into the equivalent number of ordinary shares in Agomab. This agreement is subject to mutual termination for material breach or insolvency and automatically expires upon the expiration of the last to expire of our licensed patent rights.
Our Exclusive License with Broteio for empasiprubart
In March 2017, we entered into a collaboration with Broteio in connection with our IIP, to develop an antibody against a novel target in the complement cascade, empasiprubart (Broteio Agreement). Under the Broteio Agreement, we are jointly developing the complement-targeted antibody to seek to establish preclinical POC using our proprietary suite of technologies. Upon successful completion of these clinical trials, we exercised an exclusive option to in-license the program in March 2018 and assumed responsibility for further development and commercialization. Pursuant to the Broteio Agreement, we are obligated to make milestone payments upon the occurrence of certain development milestones (up to an aggregate of €4.0 million), commercialization milestones (up to an aggregate of €10.0 million) and pay tiered royalties on net sales in the low single digits. We may terminate the Broteio Agreement for convenience upon 90 days prior written notice. The Broteio Agreement is also subject to mutual termination for material breach or insolvency and automatically expires upon the expiration of our financial obligations thereunder.
Our Exclusive License with VIB for ARGX-118
In November 2016, we entered into a collaboration under our IIP with VIB vzw (VIB) to develop antibodies against Galectin-10, the protein of Charcot-Ley-den Crystals, which play a major role in severe asthma and the persistence of mucus plugs, including ARGX-118 (VIB Agreement). Pursuant to the VIB Agreement, we are jointly developing antibodies against Galectin-10 using our proprietary suite of technologies. Upon successful completion of this initial research, we exercised an exclusive option to in-license the program and assumed responsibility for further development and commercialization. Under the VIB Agreement, including as amended in November 2018, we are obligated to make milestone payments upon the occurrence of certain development milestones (up to an aggregate of €4.0 million), commercialization milestones (up to an aggregate of €11.0 million) and pay tiered royalties on net sales in the low single digits. We may terminate the VIB Agreement for convenience upon 90 days prior written notice. The VIB Agreement is also subject to mutual termination for material breach, insolvency or certain patent challenges and automatically expires upon the expiration of VIB’s licensed patent rights.
Our Exclusive License with the University of Texas for NHANCE™ and ABDEG™
In February 2012, we entered into an exclusive in-license with the Board of Regents of the University of Texas System (UT BoR) for the use of certain patent rights relating to the NHANCE™ platform for any use worldwide (the
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UT Agreement). The UT Agreement was amended on December 23, 2014 to also include certain additional patent rights relating to the ABDEG™ platform. Upon commercialization of any of our products that use the in-licensed patent rights, we will be obligated to pay UT BoRa percentage of net sales as a royalty until the expiration of any patents covering the product. This royalty varies with net sales volume and is subject to an adjustment for royalties we receive from a sublicensee of our rights under the UT Agreement, but in any event does not exceed 1%. In addition, we must make annual license maintenance payments to UT BoR until termination of the UT Agreement and we have assumed certain development and commercial milestone payment and reimbursement obligations. We also have diligence requirements with respect to development and commercialization of products which use the in-licensed patent rights.
Pursuant to the UT Agreement, we may grant sublicenses to third parties. If we receive any non-royalty income in connection with such sublicenses, we must pay UT BoR a percentage of such income varying from low-middle single digits to middle-upper single digits depending on the nature of the sublicense. Such fees are waived if a sublicensee agrees to pay the milestone payments as set forth in the UT Agreement.
We may unilaterally terminate the UT Agreement for convenience upon prior written notice. Absent early termination, the UT Agreement will automatically expire upon the expiration of all issued patents and filed patent applications within the patent rights covered by the UT Agreement. Our royalty payment obligations expire, on a product-by-product and country-by-country basis, at such time as there are no valid claims covering such product.
Our Non-Exclusive License with BioWa and Non-Exclusive Commercial Licenses with BioWa and Lonza for POTELLIGENT®
In October 2010, we entered into a non-exclusive license agreement with BioWa, Inc. (BioWa) for the use of certain patents and know-how owned by BioWa and relating to its POTELLIGENT® platform technology, for use in the field of prevention and treatment of human diseases (the BioWa Agreement). Pursuant to the BioWa Agreement, we are granted a non-exclusive right to use POTELLIGENT® to research and develop antibodies and products containing such antibodies using POTELLIGENT®.
In 2013 and 2014, we entered into non-exclusive license agreements for POTELLIGENT® CHOK1SV with BioWa and Lonza for the further development, manufacturing and commercialization of ARGX-110 and ARGX-111, respectively (the POTELLIGENT® License Agreements).
Upon commercialization of our products developed using POTELLIGENT®, we will be obligated to pay BioWa and Lonza a percentage of net sales of a licensed product as a royalty. This royalty varies with net sales volume, ranging in the low single digits, and it is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed patent(s) that covers the product expires or ends. In addition, we must make annual research license maintenance payments which cease with commencement of our royalty payments to BioWa. We have diligence requirements with respect to the continuation of development and commercialization of products. We have also assumed certain development, regulatory and commercial milestone payment obligations and must report on our progress toward achieving these milestones on an annual basis. Milestones to BioWa are to be paid on a commercial target-by-commercial target basis, and we are obligated to make milestone payments in aggregate amounts of up to $36.0 million per commercial target should we achieve annual global sales of over $1.0 billion.
Pursuant to the POTELLIGENT® License Agreements, we have the right to grant sublicenses to third parties. BioWa retains a right of first negotiation for the exclusive right to develop and commercialize, in certain countries only, any product we develop using POTELLIGENT®.
We may terminate the POTELLIGENT® License Agreementsat any time by sending BioWa and Lonza prior written notice. Absent early termination, the POTELLIGENT® License Agreements will automatically expire upon the expiry of our royalty obligations under the POTELLIGENT® License Agreements. In the event a POTELLIGENT® License Agreement is terminated for any reason, the license granted to us would terminate but BioWa would grant our
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sublicensees a direct license following such termination. In the event the POTELLIGENT® License Agreement is terminated other than for our breach or insolvency, we would retain the right to sell licensed products then on hand for a certain period of time post-termination.
Our non-exclusive license with Lonza for Multi-product GS Xceed-License
On February 4, 2015, we entered into a non-exclusive multi-product in-license agreement with Lonza (the Multi-Product License) for use of Lonza’s proprietary glutamine synthetase gene expression system known as GS Xceed™ consisting of Chinese hamster ovary cell line and the vectors for the manufacturing of drug substance (the System). The System is used for the manufacturing of, amongst others, efgartigimod, empasiprubart and ARGX-119.
Pursuant to the Multi-Product License, we have the right to grant sublicenses to certain pre-approved third parties without prior written consent of Lonza, but otherwise we must obtain Lonza’s prior written consent.
We have assumed certain development, regulatory and commercial milestone payment obligations to Lonza. We are required to pay such milestones using the System. We are obligated to make development, regulatory and commercial milestone payments to Lonza.
We may terminate the Multi-Product License on a product-by-product basis by giving Lonza prior written notice. Lonza may terminate the Multi-Product License solely in case of breach or insolvency events. Absent early termination, the Multi-Product License will automatically expire upon the expiry of the last valid claim for such product. We or our strategic partners would retain the right to sell the respective products then on hand post-termination.
Our Collaboration with Université Catholique de Louvain (UCL) and Sopartec S.A. (Sopartec) for GARP
In January 2013, we entered into a collaboration and exclusive product license agreement with UCL and its technology transfer company Sopartec to discover and develop novel human therapeutic antibodies against GARP (GARP Agreement). Pursuant to the GARP Agreement, each party is responsible for all of its own costs in connection with the activities assigned to it under a mutually agreed research plan.
In January 2015, we exercised the option we were granted under the GARP Agreement to enter into an exclusive, worldwide commercial in-license for use of certain GARP-related intellectual property rights owned by UCL and the Ludwig Institute for Cancer Research to further develop and commercialize licensed products, including the GARP-neutralizing antibody ARGX-115 which was discovered under the original collaboration (GARP License). Upon the expiration of the GARP Agreement, the GARP License will become a fully paid-up, perpetual worldwide exclusive license under the GARP intellectual property for any purpose, subject to UCL’s retention of non-commercial research rights.
Pursuant to the GARP License, we may grant sublicenses to third parties and affiliates of such third parties. In 2016, we entered into an exclusive collaboration and license agreement with AbbVie regarding ARGX-115. From any income we receive in connection with these sublicenses, such as in connection with AbbVie Collaboration Agreement, we must pay Sopartec a percentage of that income in the lower teen digit range. Royalty payment obligations expire on a product-by-product and country-by-country basis when there are no valid claims covering the ARGX-115 product. We also have diligence obligations with respect to the continued development and commercialization of ARGX-115 products.
Our Exclusive License with NYU Langone Health and LUMC for ARGX-119
In 2019 and 2020, we entered into collaboration and exclusive license agreements with NYU Langone Health and LUMC under our IIP to develop antibodies targeting the MuSK, for the treatment neuromuscular diseases, which play a major role at the neuromuscular junction (NYU and LUMC Agreements). Pursuant to the NYU and LUMC Agreements, we, NYU and LUMC jointly developed antibodies against MuSK using our proprietary suite of technologies. Under the NYU and LUMC Agreements, as amended, we are obligated to make milestone payments upon
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the occurrence of certain development milestones, commercialization milestones and pay tiered royalties on net sales in the low single digits.
Distribution Agreements
We are parties to the Medison Agreement, the Medison Multi-Regional Agreement, Genpharm Agreement, and the Handok Agreement.
Trade Secret Protection
In addition to patent protection, we also rely on trade secret protection to ensure exclusivity for our proprietary information that is not amenable to, or that we do not consider appropriate for, patent protection, including, for example, certain aspects of our llama immunization and antibody affinity maturation approaches. However, trade secrets can be difficult to protect. Although we take steps to protect our proprietary information, including restricting access to our premises and our confidential information, as well as entering into agreements with our employees, consultants, advisors and potential collaborators, third parties may independently develop the same or similar proprietary information or may otherwise gain access to our proprietary information. As a result, we may be unable to meaningfully protect our trade secrets and proprietary information.
Government Regulation
Government authorities in the United States,U.S., at the federal, state and local level, and in the European UnionEU and other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post‑approvalpost-approval monitoring and reporting, and import and export of pharmaceutical products, including biological products. In addition, some jurisdictions regulate the pricing of pharmaceutical products. The processes for obtaining marketing approvals in the United StatesU.S. and in foreignother countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Licensure and Regulation of Biologics in the United StatesU.S.
In the United States, our product candidates are regulated asU.S., biological products used for the prevention, treatment, or biologics,cure of a disease or condition in a human being are subject to regulation under the FDCA and its implementing regulations, with the exception that the section of the FDCA that governs the approval of drugs via new drug applications (NDAs) does not apply to the approval of biologics. Biologics are approved for marketing under provisions of the Public Health Service Act or (PHSA) via biologics license applications (BLAs). However, the application process and the Federal Food, Drug, and Cosmetic Act, or FDCA, and their implementing regulations.requirements for approval of BLAs are very similar to those for NDAs. The failure to comply with the applicable U.S. requirements at any time during the product development process, including nonclinicalpreclinical testing and clinical testing, the approval process or post‑approvalpost-approval process may subject an applicant to delays in the conduct of a study,clinical trial, regulatory review and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not limited to, the FDA’s refusal to allow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning or untitled letters, adverse publicity, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines and civil or criminal investigations and penalties brought by the FDA or the Department of Justice or other governmental entities.
An applicant seeking approval to market and distribute a new biologic in the United StatesU.S. generally must satisfactorily complete each of the following steps:
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Nonclinical Studies and Investigational New Drug Application
Before testing any biologicbiological product candidate in humans, the product candidate must undergo nonclinicalpreclinical testing. NonclinicalPreclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as animal studies to evaluate the potential for activity and toxicity. The conduct of the nonclinicalpreclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the nonclinicalpreclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an Investigational New Drug, or IND application. The IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the product candidate or conduct of the proposed clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks.risks, and places the proposed clinical trial on clinical hold. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns before the clinical trial can begin.
As a result, submission of the IND may result in the FDA not allowing the clinical trial to commence or on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either during this initial 30‑day period, or at any time during the IND process, it may choose to imposeimposes a partial or complete clinical hold. This order issued by the FDAhold, this action would delay either a proposed clinical studytrial or cause suspension of an ongoing study,clinical trial, or in the case of a partial clinical hold place limitations on the conduct of the clinical trial such as duration of treatment, until all outstanding concerns have been adequately addressed and the FDA has notified the company that investigation may proceed.proceed and then only under terms authorized by the FDA. This could cause significant delays or difficulties in completing planned clinical trials in a timely manner. The FDA may impose clinical holds on a biologicbiological product candidate at any time before or during clinical trials due to safety concerns or non‑compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA.non-compliance.
Human Clinical Trials in Support of a BLA
Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator in accordance with GCP
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requirements.GCPs. Clinical trials are conducted under studyclinical trial protocols detailing, among other things, the objectives of the study,clinical trial, inclusion and exclusion criteria, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
A sponsor who wishes to conduct a clinical trial outside the United StatesU.S. may, but needis not required to, obtain FDA authorizationclearance to conduct the clinical trial under an effective IND. If a foreign clinical trial is not conducted under an IND,
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the sponsor may submit data from the clinical trial to the FDA in support of the BLA so long as the clinical trial is well‑designedwell-designed and well‑conductedwell-conducted in accordance with GCP,GCPs, including review and approval by an independent ethics committee, and the FDA is able to validate the studyclinical trial data through an onsite inspection, if necessary.
Further, each clinical trial must be reviewed and approved by an institutional review board,the IRB or, IRB,if applicable, the Ethics Committee, either centrally or individually at each institution at which the clinical trial will be conducted. The IRB or the Ethics Committee will consider, among other things, clinical trial design, patient informed consent, ethical factors and the safety of human subjects. An IRB must operate in compliance with FDA regulations. The FDA, IRB, the Ethics Committee or the clinical trial sponsor may suspend or discontinue a clinical trial at any time for various reasons, including a finding that the clinical trial is not being conducted in accordance with FDA requirements or the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive GCP rulesGCPs and the requirements for informed consent. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group may recommend continuation of the studyclinical trial as planned, changes in studyclinical trial conduct, or cessation of the studyclinical trial at designated check points based on access to certain data from the study.clinical trial.
Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Additional studiesclinical trials may be required after approval.
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In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post‑approvalpost-approval clinical trials are typically referred to as Phase 4 clinical trials. These studiesclinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of biologics approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement or to request a change in the product labeling. Failure to exhibit due diligence with regard to conducting required Phase 4 clinical trials could result in withdrawal of approval for products.
Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators 15 days after the clinical trial sponsor determines the information qualifies for reporting for serious and unexpected suspected adverse events, findings from other clinical trials or animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must also notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but in no case later than seven calendar days after the sponsor’s initial receipt of the information.
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A drug being studied in clinical trials may be made available to individual patients in certain circumstances. Pursuant to the 21st Century Cures Act, as amended, the manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 POC or Phase 3 clinical trial of the investigational drug, or as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.
Compliance with cGMP Requirements
Before approving a BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency, and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in the manufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with the FDCA, cGMPs and other laws.requirements. Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection by
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including biological products, are required to register and disclose certain clinical trial information on the FDAwebsite www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, clinical trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial. Competitors may leaduse this publicly available information to a product being deemed to be adulterated.gain knowledge regarding the progress of clinical development programs as well as clinical trial design.
Review and Approval of a BLA
The results of product candidate development, nonclinicalpreclinical testing and clinical trials, including negative or ambiguous results as well as positive findings, are submitted to the FDA as part of a BLA requesting a license to market the product. The BLA must contain extensive manufacturing information and detailed information on the composition of the product and proposed labeling as well as payment of a user fee.
The FDA has 60 days after submission of the application to conduct an initial review to determine whether the BLA is sufficient to accept for filingfile based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. If the FDA determines the BLA is not sufficiently complete, it will refuse to file the BLA. Once the submission has been accepted for filing,filed, the FDA begins an in‑depthin-depth review of the application. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or the PDUFA, the FDA has ten10 months from the filing date in which to complete its initial review of a standard application and respond to the applicant, and six months from the filing date for a priority review of an application.application, if the BLA is not filed under the program. If the BLA is submitted under the program, additional two months are added to the review clock, whether standard or priority review for a total review time of 12 or 8 months, respectively. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs. The review process may often be significantly extended by FDA requests for additional information or clarification.reviews. The review process and the PDUFA goal date may also be extended by three months if the FDA so requests or if the applicant otherwise provides additional
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information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.which may be deemed as substantial information.
On the basis ofAfter the FDA’s evaluation of the application and accompanying information, including the results of the inspectionany potential inspections of the manufacturing facilities and any FDA audits of clinical trial sites to assure compliance with GCPs, the FDA maywill issue an approval letter, denial letter, or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. Under the PHSA, the FDA may approve a BLA if it determines that the product is safe, pure and potent and the facility where the product will be manufactured meets standards designed to ensure that it continues to be safe, pure and potent. If the application is not approved, the FDA maywill issue a complete response letter, which will containidentify the deficiencies in the application and the conditions that must be met in order to secure final approval of the application, and when possible, will outline recommended actions the sponsor might take to obtain approval of the application. Sponsors that receive a complete response letter may submit to the FDA information that represents a complete response to the issues identified by the FDA.FDA, withdraw the application or request a hearing. The FDA will not approve an application until issues identified in the complete response letter have been addressed. The FDA issues a denial letter if it determines that the establishment or product does not meet the agency’s requirements.
The FDA may also refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. In particular, the FDA may refer applications for novel biologicbiological products or biologicbiological products that present difficult questions of safety or efficacy to an advisory committee. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions.
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The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
If the FDA approves a new product, it may limit the approved indications for use of the product. It may also require that contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may call for post‑approvalpost-approval studies, including Phase 4 clinical trials, to further assess the product’s safety after approval. The agency may also require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals and elements to assure safe use or ETASU.(ETASU). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patent registries. The FDA may prevent or limit further marketing of a product based on the results of post‑marketpost-market studies or surveillance programs.
After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Such regulatory reviews can result in denial or modification of the planned changes, or requirements to conduct additional tests or evaluations that can substantially delay or increase the cost of the planned changes.
Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life‑threateninglife-threatening disease or condition. These programs are referred to as fast track designation, breakthrough therapy designation and priority review designation.
The FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life‑threateninglife-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must
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pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track applicationrolling review does not begin until the last section of the application is submitted. Fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life‑threateninglife-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross‑disciplinarycross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.
The FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case‑by‑casecase-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment‑limitingtreatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from 10 months to six6 months.
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Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life‑threateninglife-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for suchbenefit or on a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality or (IMM) and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographicradio-graphic image, physical sign, or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post‑approvala post-approval confirmatory clinical trial or studies to verify and describe the product’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post‑marketingpost-marketing compliance requirements, including the completion of Phase 4 or post‑approvalpost-approval clinical trials to confirm the effect on the clinical endpoint. These confirmatory clinical trials must be completed with due diligence, and the FDA may require that the confirmatory
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clinical trial be designed, initiated, and/or fully enrolled prior to approval. Failure to conduct required post‑approvalpost-approval studies, or confirm a clinical benefit during post‑marketingpost-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. AllUnless otherwise informed by the FDA, all promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.agency. FDORA, enacted in December 2022, included provisions related to the accelerated approval pathway. Pursuant to FDORA, the FDA is authorized to require a post-approval clinical trial to be underway prior to approval or within a specified time period following approval. FDORA also requires the FDA to specify the conditions of any required post-approval clinical trial not later than 180 days following approval and not less frequently than every 180 days thereafter until completion or termination of such clinical trial. Such conditions may include imposing milestones such as a target date of clinical trial completion or requiring sponsors to submit progress reports. FDORA also enables the FDA to initiate enforcement actions or criminal prosecutions for the failure to conduct with due diligence a required post-approval clinical trial, including a failure to meet any required conditions specified by the FDA or to submit timely reports.
Post‑ApprovalOrphan Drug Designation
Orphan drug designation in the U.S. is designed to encourage sponsors to develop products intended for rare diseases or conditions. In the U.S., a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the U.S. or that affects more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available the product for the disease or condition will be recovered from sales of the product in the U.S.
Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the date of the product’s marketing approval if granted by the FDA and if it is the first FDA approval for that product for the disease for which it has such designation. An application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. If the FDA grants orphan drug designation, the generic identity of the product and its potential orphan use are disclosed publicly by the FDA. The product must then go through the review and approval process like any other product in order to be marketed.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to the first drug. Whether a large molecule product (i.e., a biological product) is the same as another product is based on whether the two products have the same principal molecular structural features. More than one sponsor may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a complete request for designation.
If orphan drug exclusivity is granted by the FDA, the period of exclusivity begins on the date that the marketing application is approved by the FDA and applies only to the indication for which the product has been designated. The FDA may approve a second application for the same product for a different use or a second application for a clinically superior version of the product for the same use. The FDA cannot, however, approve the same product made by another sponsor for the same indication during the market exclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities of the product.
Post-Approval Regulation
If regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor will be required to comply with all regular post‑approvalpost-approval regulatory requirements as well as any post‑approvalpost-approval requirements that the FDA has imposed as part of the approval process. The sponsor will be required to report certain adverse reactions and production problems to the FDA, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional labeling. Manufacturers and other parties involved in the drug supply chain for prescription drug and biological products must also comply with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated products or products that are otherwise unfit for distribution in the U.S. Manufacturers and certain of their subcontractors are required to
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register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMP regulations,cGMPs, which impose certain procedural and documentation requirements upon manufacturers. Accordingly, the sponsor and its third‑partythird-party manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP regulationscGMPs and other regulatory requirements.
A biologicbiological product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in addition perform certain confirmatory tests on lots of some products before releasing the lots for
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distribution. Finally, the FDA will conduct laboratory research related to the safety, purity, potency and effectiveness of pharmaceutical products. Any distribution of prescription biological products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act and the PHSA.
Once an approval is granted, the FDA may withdrawrevoke or suspend the approval of the BLA if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post‑marketpost-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. FDA also has authority to require post-market studies, in certain circumstances, on reduced effectiveness of a product and may require labeling changes related to new reduced effectiveness information. Other potential consequences for a failure to maintain regulatory compliance include, among other things:
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| refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; |
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| injunctions or the imposition of civil or criminal penalties. |
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of the approved label.labeling. Although physicians may prescribe legally available products for unapproved uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), companies with approved products may not market or promote such off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑labeloff-label uses, and a company that is found to have improperly promoted off‑labeloff-label uses may be subject to significant liability.
Orphan Drug Designation
Orphan drug designation in the United States is designed to encourage sponsors to develop products intended for rare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United Statesliability, including investigation by federal and for which there is no reasonable expectation that the cost of developing and making available thestate authorities. Prescription biological product for the disease or condition willpromotional materials must be recovered from sales of the product in the United States.
Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the date of the product’s marketing approval if granted by the FDA. An application for designation as an orphan product can be made any time priorsubmitted to the filing of an application for approval to market the product. A product becomes an orphan when it receives orphan drug designation from the Office of Orphan Products Development, or OOPD, at the FDA based on acceptable confidential requests made under the regulatory provisions. The product must then go through the review and approval process like any other product.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to thein conjunction with their first drug. More than one sponsor may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a complete request for designation.
The period of exclusivity begins on the date that the marketing application is approved by the FDA and applies only to the indication for which the product has been designated. The FDA may approve a second application for the
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same product for a different use or a second application for a clinically superior version of the product for the same use. The FDA cannot, however, approve the same product made by another manufacturer for the same indication during the market exclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities.first publication.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act of 2003 (as amended, PREA), a BLA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations,sub-populations, and to support dosing and administration for each pediatric subpopulation for which
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the product is safe and effective. Sponsors must also submit pediatric studyclinical trial plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric studyclinical trial or studies the applicant plans to conduct, including studyclinical trial objectives and design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements doPREA does not apply to products witha biologic for an indication for which orphan designation.designation has been granted, except that PREA will apply to an original BLA for a new active ingredient that is orphan-designated if the biologic is a molecularly targeted cancer product intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer.
Pediatric exclusivity is another type of non‑patentnon-patent marketing exclusivity in the United StatesU.S. and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non‑patent and orphan exclusivity. This six‑monthsix-month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application.
Biosimilars and Exclusivity
The Biologics Price Competition and Innovation Act or (BPCIA) established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. To date, while biosimilar products have been approved by the FDA for use in the United States, no interchangeable biosimilars have been approved.
Under the BPCIA, a manufactureran applicant may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biological product or “reference product.” In order forFor the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity and potency. For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own nonclinicalpreclinical data and data from adequate and well‑controlledwell-controlled clinical trials to demonstrate the safety, purity and potency of their product. However, to rely on such exclusivities for establishing or protecting our market position is not without risk, as such laws are subject to changes by the legislature.
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The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether productsProducts deemed “interchangeable”interchangeable by the FDA will, in fact,may be readily substituted by pharmacies as dictated by individual state law.
U.S. Patent Term Restoration
Depending upon the timing, duration and specifics of FDA approval of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act that permits restoration of the patent term of up to five years as compensation for patent term lost during the FDA regulatory review process. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date and only those claims covering such approved product, a method for using it or a method for
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manufacturing it may be extended. The patent-term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application, except that the review period is reduced by any time during which are governed by state pharmacy law.the applicant failed to exercise due diligence. Only one patent applicable to an approved biologic is eligible for the extension and the application for the extension must be submitted within sixty (60) days of approval from FDA and prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.
Regulation and Procedures Governing Approval of Medicinal Products in the European UnionEU and the UK
In order to market any medicinal product outside of the United States,U.S., a company also must comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can initiate clinical trials or marketing of the product in those countries or jurisdictions. Specifically, with respect to the EU, no medicinal product may be placed on the market of an EU Member State unless a marketing authorization has been issued by the competent authorities of that member state in accordance with Directive 2001/83/EC or a centralized marketing authorization has been granted in accordance with Regulation (EC) No 726/2004, read in conjunction with Regulation (EC) No 1901/2006 and Regulation (EC) No 1394/2007. Similar requirements apply in Great Britain. The process governing approval of medicinal products in the European UnionEU and Great Britain generally follows the same lines as in the United States.U.S. It entails satisfactory completion of pharmaceutical development, nonclinical studiespre-clinical trials and adequate and well‑controlledwell-controlled clinical trials to establish the safety and efficacy of the medicinal product for each proposed indication. ItThe EU also requires the submission to relevant competent authorities for clinical trials authorization and to the European Medicines Authority,EMA or EMA, forto competent authorities in EU Member States of a marketing authorization application or (MAA) and granting of a marketing authorizationsuch MAA by these authorities before the product can be marketed and sold in the European Union.EU. Following the UK’s departure from the EU, a separate MAA is required in order to place medicinal products on the market in the Great Britain (England, Wales and Scotland) (under the Northern Ireland Protocol, the EU regulatory framework will continue to apply in Northern Ireland in this regard). Centralized EU marketing authorizations continue to be recognized, with new International Recognition Procedures anticipated.
Clinical Trial Approval
Pursuant toOn January 31, 2022, the currently applicablenew Clinical Trials Regulation (EU) No 536/2014 (CTR) entered into application, and replaced the Clinical Trials Directive 2001/20/ECEC. The transitional provisions of the new CTR offered sponsors the possibility to choose between the requirements of the previous Directive and the new CTR if the request for authorization of a clinical trial was submitted by January 30, 2023. If the sponsor chose to submit under the previous Directive, 2005/28/EC on GCP,the clinical trial continues to be governed by the Directive until three years after the new CTR became applicable (i.e., January 30, 2025). If a systemclinical trial continues for more than three years after the Regulation became applicable, the new CTR will at that time begin to apply to the clinical trial (i.e., from January 31, 2025). The new Regulation, which is directly applicable in all EU Member States, aims to simplify and streamline the approval of clinical trials in the European Union has been implemented through national legislationEU. The main characteristics of the member states. Under this system, an applicant must obtain approval from the competent national authority of an European Union member state in which the clinical trial is to be conducted or in multiple member states if the clinical trial is to be conducted in a number of member states. Furthermore, the applicant may only start a clinical trial at a specific study site after the independent ethics committee has issued a favorable opinion. The clinical trial application, or CTA, must be accompanied by an investigational medicinal product dossier with supporting information prescribed by Directive 2001/20/EC and Directive 2005/28/EC and corresponding national laws of the member states and further detailed in applicable guidance documents.
In April 2014, the European Union adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC. It is expected that the new Clinical Trials Regulation will apply by 2019 with a three‑year transition period. It will overhaul the current system of approvals for clinical trials in the European Union. Specifically, the new regulation, which will be directly applicable in all member states, aims at simplifying and streamlining the approval of clinical trials in the European Union. For instance, the new Clinical Trials Regulation provides forCTR include: a streamlined application procedure via a single-entry point through the Clinical Trials Information System; a single entry pointset of documents to be prepared and strictly defined deadlinessubmitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts (Part I contains scientific and medicinal product documentation and Part II contains the national and patient-level documentation). Part I is assessed by a coordinated review by the competent authorities of all EU Member States in which an application for authorization of a clinical trial applications.has been submitted (Concerned Member States) of a draft report prepared by a reference member state. Part II is assessed separately by each Concerned Member State. Strict deadlines have also been established for the assessment of CTAs.
Prior to its exit from the EU, the UK implemented Directive 2001/20/EC into national law through the Medicines for Human Use (Clinical Trials) Regulations 2004 (as amended). However, implementation of the new EU
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CTR took place after the UK’s departure from the EU, and so the new CTR described in the preceding paragraph does not apply to Great Britain. The MHRA, the UK medicines regulator, ran a consultation on reforms to the UK clinical trials legislation, which closed in March 2022. The outcome of that consultation was published in March 2023 and includes proposals to reform the clinical trials legislative framework, although content and timeline for reform are not yet determined. The future regulatory framework for clinical trials in the UK therefore remains uncertain.
Orphan Designation and Exclusivity
Regulation (EC) No. 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an orphan drug by the EU Commission if its sponsor can establish: (1) that the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition, (2) either (i) the prevalence of the condition is not more than five in ten thousand persons in the EU when the application is made, or (ii) without incentives it is unlikely that the marketing of the product in the EU would generate sufficient return to justify the necessary investment in its development and (3) there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been authorized in the EU or, if such method exists, the product has to be of a significant benefit compared to products available for the condition.
An orphan designation provides a number of benefits, including fee reductions and, regulatory assistance. If a marketing authorization is granted for an orphan medicinal product, this results in a ten-year period of market exclusivity. During this market exclusivity period, neither the EMA, the European Commission nor the EU Member States can accept an application or grant a marketing authorization for a “similar medicinal product.” A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The market exclusivity period for the authorized therapeutic indication may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation because, for example, the product is sufficiently profitable not to justify market exclusivity. Market exclusivity may also be revoked in very select cases, such as if (i) it is established that a similar medicinal product is safer, more effective or otherwise clinically superior; (ii) the marketing authorization holder for the authorized orphan product consents to the second orphan application; or (iii) the marketing authorization holder for the authorized orphan product cannot supply enough orphan medicinal products. Orphan designation must be requested before submitting an application for marketing approval. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Since January 1, 2021, a separate process for orphan designation has applied in Great Britain. There is now no pre-marketing authorization orphan designation (as there is in the EU) and the application for orphan designation will be reviewed by the MHRA, at the time of an MAA for a UK or Great Britain marketing authorization. The criteria are the same as in the EU, save that they apply to Great Britain only (e.g., there must be no satisfactory method of diagnosis, prevention or treatment of the condition concerned in Great Britain, as opposed to the EU, and the prevalence of the condition must be no more than five in 10,000 persons in Great Britain).
Marketing Authorization
To obtain a marketing authorization for a product under the European UnionEU regulatory system, an applicant must submit an MAA, either under ato the EMA using the centralized procedure administered by the EMA or one of the procedures administered byto competent authorities in European Union Member Statesthe EU using the other procedures (decentralized procedure, national procedure, or mutual recognition procedure). A marketing authorization may be granted only to an applicant established in the European Union.EU. Regulation (EC) No. 1901/2006 provides that prior to obtaining a marketing authorization in the European Union,EU, an applicant must demonstrate compliance with all measures included in an EMA‑approved Pediatric Investigation Plan, or EMA-approved pediatric investigation plan (PIP), covering all subsets of the pediatric population, unless the EMA has granted a product‑specificproduct-specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.
The centralized procedure provides for the grant of a single marketing authorization by the EuropeanEU Commission that is valid for all European Union member states.EEA Member States. Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy medicinal products (gene therapy, somatic cell therapy or
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tissue engineered products) and products with a new active
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substance indicated for the treatment of certain diseases, including products for the treatment of cancer. Forcancer and auto-immune diseases and other immune dysfunctions and neurodegenerative disorders. The centralized procedure is optional for products withthat contain a new active substance indicated for the treatment ofany other diseasesindications, which are a significant therapeutic, scientific or technical innovation and products that are highly innovative or for which a centralized process iswhose authorization would be in the interest of patients,public health in the centralized procedure may be optional.EU.
Under the centralized procedure, the EMA’s Committee for Medicinal Products for Human Use or the (CHMP established at the EMA) is responsible for conducting the assessment of a product to define its risk/benefit profile. The CHMP recommendation is then sent to the EU Commission, which adopts a decision binding in all EEA Member States. Under the centralized procedure, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions ofasked by the CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 210 days. Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the time limit of 210 days will be reduced to 150 days (excluding clock stops), but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that it is no longer appropriate to conduct an accelerated assessment.
Following the departure of the UK from the EU, Great Britain is no longer covered by centralized marketing authorizations (under the Northern Ireland Protocol, centralized EU authorizations will continue to be recognized in Northern Ireland). All medicinal products with a current centralized authorization were automatically converted to UK marketing authorizations on January 1, 2021, and there is a further period to December 31, 2023, during which the MHRA may rely on a decision taken by the EU Commission on the approval of a new marketing authorization in the centralized procedure, in order to more quickly grant a new Great Britain marketing authorization European Commission Decision Reliance Procedure (ECDRP). A separate application is, however, still required. The December 31, 2023 date by which the ECDRP was due to draw to a close is currently subject to a public consultation. From January 1, 2024, a new International Recognition Procedure will become available, which is a new licensing route for medicines allowing the UK to recognize approvals from specified Reference Regulators, including the FDA and the EMA and EU member state competent authorities.
European Data and Market Exclusivity
In the EU, innovative medicinal products, approved on the basis of a complete independent data package, qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. The data exclusivity, if granted, prevents generic or biosimilar applicants from referencing the innovator’s preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU, for a period of eight years from the date on which the reference product was first authorized in the EU. During the additional two-year period of market exclusivity, a generic or biosimilar MAA can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed in the EU until the expiration of the market exclusivity period. The overall ten-year period will be extended to a maximum of 11 years if, during the first 8 years of those 10 years, the marketing authorization holder obtains a marketing authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies. There is no guarantee that a product will be considered by the EMA to be an innovative medicinal product, and products may not qualify for data exclusivity. Even if a product is considered to be an innovative medicinal product so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained a marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials. Similar arrangements apply in the UK.
Periods of Authorization and Renewals
A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of a reevaluation of the risk benefit balance by the EMA for a centrally authorized product, or by the competent
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authority of the authorizing member state. To that end, the marketing authorization holder must provide the EMA or the competent authority withstate for a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid.nationally authorized product. Once renewed, the marketing authorization is valid for an unlimited period, unless the EuropeanEU Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five‑yearfive-year renewal period. Any marketing authorization that is not followed by the placement of the drug on the European UnionEU market (in the case of the centralized procedure) or on the market of the authorizing member state (for a nationally authorized product) within three years after authorization, or if the drug is removed from the market for three consecutive years, ceases to be valid. In Great Britain, centrally authorized products converted from EU to UK marketing authorizations will have the same renewal date.
Regulatory Requirements after Marketing Authorization
Following approval, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of the medicinal product. These include compliance with the European Union’sEU’s stringent pharmacovigilance or safety reporting rules, pursuant to which post‑authorizationpost-authorization studies and additional monitoring obligations can be imposed. In addition, the manufacturing of authorized products, for which a separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the EMA’s GMP requirements and comparable requirements of other regulatory bodies in the European Union,EU, which mandate the methods, facilities and controls used in manufacturing, processing and packing of drugsproducts to assure their safety and identity. Finally, the marketing and promotion of authorized products, including industry‑sponsoredindustry-sponsored continuing medical education and advertising directed toward the prescribers of drugsproducts and/or the general public, are strictly regulated in the European UnionEU under Directive 2001/83EC,83/EC, as amended.
Orphan Drug DesignationThe aforementioned EU rules are generally applicable in the EEA, and Exclusivitysimilar arrangements apply in the UK.
Regulation (EC) No. 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an orphan drug byProposal for new EU Pharmaceutical Legislation
On April 26, 2023, the European Commission if its sponsor can establish: thathas published a proposal for a new directive (COM/2023/192 final) and a new regulation (COM/2023/193 final), which would revise and replace the productexisting general pharmaceutical legislation, including e.g., Directive 2001/83/EC, as well as Regulations (EC) No. 726/2004, No. 141/2000, or No. 1901/2006 (EU Pharmaceutical Legislation). This proposal is intended forcurrently undergoing the diagnosis, prevention or treatment of (1) a life‑threatening or chronically debilitating condition affecting not more than five in ten thousand personsordinary legislative procedure in the European Union when the application is made, or (2) a life‑threatening, seriously debilitating or seriousParliament and chronic condition inCouncil of the European Union and is therefore still subject to changes. If at all, the EU Pharmaceutical Legislation is expected to be implemented at the earliest in the next few years. Prevention and mitigation of medicine shortages, simplification of the market entry of generics and biosimilars, the reduction of the regulatory burden (e.g. by increased digitalization) and the implementation of a new regime for data and / or market exclusivity (e.g. by reducing the minimum period while introducing factors that, without incentivesif met, prolong protections for marketing authorization holders) are among the major objectives pursued by the European Commission.
Brexit and the Regulatory Framework in the UK
On January 31, 2020, the UK officially withdrew from the EU (Brexit). Provisionally since January 1, 2021 and formally since May 1, 2021, the EU and UK’s trade and cooperation agreement (TCA) includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued, but does not foresee wholesale mutual recognition of UK and EU pharmaceutical regulations. The UK has implemented EU legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012 (as amended) and has not yet enacted significant legislative change in this area following its exit from the EU. The regulatory regime in Great Britain therefore largely aligns with current EU regulations. However, these regimes may diverge increasingly as time passes, now that Great Britain’s regulatory system is independent from the EU, and the TCA does not provide for mutual recognition of UK and EU pharmaceutical legislation. For example, as already explained, the new Clinical Trials Regulation which became effective in the EU on January 31, 2022 has not been implemented into UK law, and a separate application will need to be submitted for clinical trial authorization in the UK. Furthermore, the position in Northern Ireland differs in certain respects from that of the rest of the UK (England, Wales and Scotland) as some EU rules continue to be applicable to Northern Ireland following the UK’s departure from the EU.
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Regulation and Procedures Governing Approval of Medicinal Products in Japan
In order to market any medical products in Japan, a company must comply with numerous and varying regulatory requirements in Japan regarding quality, safety and efficacy in the context, among other things, of clinical trials, marketing approval, commercial sales and distribution of products. A person who manufactures or markets medical products in Japan is subject to the supervision of the MHLW, primarily under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals and Medical Devices (Pharmaceutical and Medical Devices Act). This entails the satisfactory completion of pharmaceutical development, preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the medical product for each proposed indication. It also requires the filing of a notification of clinical trials with the Pharmaceuticals and Medical Devices Agency (Japan) (PMDA) and the obtaining of marketing approval from the relevant authorities before the product can be marketed and sold in the Japanese market.
Business License
Under the Pharmaceutical and Medical Devices Act, a person is required to obtain from the MHLW a marketing license in order to conduct the business of marketing, leasing or providing medical products that are manufactured (or outsourced to a third party for manufacturing) or imported by such person.
Also, in order to conduct the business of manufacturing medical products which will be marketed in Japan, a person is required to obtain from the MHLW a manufacturing license for each manufacturing site.
Marketing Approval
Under the Pharmaceutical and Medical Devices Act, it is unlikely thatgenerally required to obtain marketing approval from the MHLW for the marketing of each medical product. An application for marketing approval must be made through the drugPMDA, which implements a marketing approval review.
Clinical Trial
Under the Pharmaceutical and Medical Devices Act, it is required to file notification of clinical trials with the PMDA. Also, the data of clinical trials and other pertinent data, which must be attached for an application for marketing approval, must be obtained in compliance with the standards established by the MHLW, such as GLPs and GCPs stipulated by the ministerial ordinances of the MHLW.
Regulatory Requirements after Marketing Approval
A marketing license-holder that has obtained marketing approval for a new pharmaceutical must have that pharmaceutical re-examined by the PMDA for a specified period after receiving marketing approval. Such re-examination period for VYVGART is stated to be 10 years after the marketing approval in January 2022. The purpose of this re-examination process is to ensure the safety and efficacy of a newly approved pharmaceutical by imposing on the marketing license-holder the obligation to gather clinical data for a certain period after the marketing approval was granted so that the PMDA has the opportunity to re-examine the product. Results of usage and other pertinent data must be attached for an application for a re-examination. A marketing license holder that has obtained a marketing approval is also required to investigate, among other things, the results of usage and to periodically report to the PMDA pursuant to the Pharmaceutical and Medical Devices Act.
Price Regulation
In Japan, public medical insurance systems cover virtually the entire Japanese population. The public medical insurance system, however, does not cover any medical product which is not listed on the National Health Insurance (NHI) price list published by the Minister of the MHLW. Accordingly, a marketing license-holder of medical products
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must first have a new medical product listed on the NHI price list in order to obtain its coverage under the public medical insurance system. The NHI price list listed VYVGART in April 2022.
The NHI price of a medical product is determined either by price comparison of comparable medical products with necessary adjustments for innovativeness, usefulness or size of the market; or, in the European Union would generate sufficient return to justifyabsence of comparable medical products, by the necessary investment. For either of these conditions, the applicant must demonstrate that there exists no satisfactorycost calculation method, of diagnosis, prevention, or treatmentdetermined after considering of the condition in question that has been authorized in the European Union or, if such method exists, the drug has to be of significant benefit compared to products available for the condition.
An orphan drug designation provides a number of benefits, including fee reductions, regulatory assistance and the possibility to apply for a centralized European Union marketing authorization. Marketing authorization for an orphan
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drug leads to a ten‑year period of market exclusivity. During this market exclusivity period, neither the EMA nor the European Commission or the member states can accept an application or grant a marketing authorization for a “similar medicinal product.” A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The market exclusivity period for the authorized therapeutic indication may, however, be reduced to six years if, at the endopinion of the fifthmanufacturer. Prices on the NHI price list will be subject to revision, generally once every year, it is established thaton the product no longer meetsbasis of the criteria for orphan drug designation because, for example,actual prices at which the product is sufficiently profitable not to justify market exclusivity.medical products are purchased by medical institutions.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval. Even if our product candidates are approved for marketing, sales of such product candidates will depend, in part, on the extent to which third‑partythird-party payors, including government health programs in the United StatesU.S. (such as Medicare and Medicaid), commercial health insurers, and managed care organizations, provide coverage and establish adequate reimbursement levels for such product candidates. Moreover, increasing efforts by governmental and third-party payors in the EU, the U.S. and other markets to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
In the United StatesU.S. and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third‑partythird-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare costs.programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Patients are unlikely to use any product candidates we may develop unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of such product candidates.
Factors payors consider in determining reimbursement are based on whether the product is (i) a covered benefit under its health plan; (ii) safe, effective and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational.
The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates. No uniform policy for coverage and reimbursement for drug products exists among third-party payors in the U.S. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for determiningthe use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Each plan determines whether a payoror not it will provide coverage for a product, may be separate fromwhat amount it will pay the process for setting the price or reimbursement rate that the payor will paymanufacturer for the product, once coverage is approved. Third‑party payors are increasingly challengingon what tier of its formulary the priceproduct will be placed and examiningwhether to require step therapy. The position of a product on a formulary generally determines the medical necessityco-payment that a patient will need to make to obtain the product and cost‑effectivenesscan strongly influence the adoption of medical productsa product by patients and services and imposing controls to manage costs. Third‑partyphysicians. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of the product, and the cost of these studies would be in addition to the costs required to obtain FDA or other comparable marketing approvals. Even after pharmacogenomic studies are conducted, product candidates may not be considered medically necessary or cost effective. A decision by a third‑party payor not to cover any product candidates we may develop could reduce physician utilization of such product candidates once approved and have a material adverse effect on our sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. For example, the payor may require co‑paymentsco-payments that patients find unacceptably high. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. Third‑party
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Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services and imposing controls to manage costs, especially drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidate and other therapies as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidate, pricing of existing drugs may limit the amount we will be able to charge for our product candidate. These payors may deny or revoke the reimbursement status of a given drug product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates and may not be able to obtain a satisfactory financial return on products that we may develop. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In Mainland China, the newly created National Healthcare Security Administration (NHSA) an agency responsible for administering Mainland China’s social security system, organized a price negotiation with drug companies for certain new drugs that had not been included in the NRDL at the time of the negotiation in November 2019, which resulted in an average price reduction by over 60% for 70 of the 119 drugs that passed the negotiation. NHSA, together with other government authorities, review the inclusion or removal of drugs from Mainland China’s National Drug Catalog for Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance, or provincial or local medical insurance catalogues for the national medical insurance program regularly, and the tier under which a drug or device will be classified, both of which affect the amounts reimbursable to program participants for their purchases of those drugs. These determinations are made based on a number of factors, including price and efficacy. We may also be invited to attend the price negotiation with NHSA upon receiving regulatory approval in Mainland China, but we will likely need to significantly reduce our prices, and to negotiate with each of the provincial healthcare security administrations on reimbursement ratios. On the other hand, if the NHSA or any of its local counterpart includes our drugs and devices in the national RDL or provincial RDL, which may increase the demand for our drug candidates and devices, our potential revenue from the sales of our drug candidates and devices may still decrease as a result of lower prices. Moreover, eligibility for reimbursement in Mainland China does not imply that any drug or device will be paid for in all cases or at a rate that covers our costs, including licensing fees, research, development, manufacture, sale and distribution.
Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely. Outside the U.S., we will face challenges in ensuring obtaining adequate coverage and payment for any product candidates we may develop. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. In order to secure coverage and reimbursement for any product that might be approved for sale, we have needed and may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, and the cost of these studies would be in addition to the costs required to obtain FDA or other comparable marketing approvals. Conducting such studies could be expensive, involve additional risk and result in delays in our commercialization efforts. Even after pharmacogenomic studies are conducted, product candidates may not be considered medically necessary or cost-effective. A decision by a third-party payor not to cover any product candidates we may develop could reduce physician utilization of such product candidates once approved and have a material adverse effect on our sales, results of operations and financial condition. Third-party reimbursement and coverage may not be adequate to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. The insurance coverage and reimbursement status of newly‑newly approved products for orphan diseases is particularly uncertain, and failure to obtain or maintain adequate coverage and reimbursement for any such product candidates could limit a company’sour ability to generate revenue. Further, due to the COVID-19 pandemic, millions of individuals have lost/will lose employer-based insurance coverage, which may adversely affect our ability to commercialize our products. As noted above, in the U.S., we plan to have various programs to help patients afford our products, including patient assistance programs and co-pay coupon programs for eligible patients. More specifically, patients can enroll into MY VYVGART PATH™, a patient support program that provides personalized support from a nurse case manager and committed support team. In addition to providing support on questions on the treatment and on navigating the insurance process, the program provides a VYVGART Co-pay Program to eligible patients, aids in referring patients to charitable foundations that may be able to help with out-of-pocket costs and informs patients of financial assistance programs that may be available.
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The containment of healthcare costs also has become a priority of U.S. federal, state and foreigninternational governments and the prices of pharmaceuticals have been a focus in this effort. Governments have shown significant interest in implementing cost‑containmentcost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any future product candidate that we commercialize and, if reimbursement is available, the level of reimbursement. In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. Further, these prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs. Adoption of price controls and cost‑containmentcost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’sour potential revenue from the sale of any approved products.products for which we may obtain approval. Coverage policies and third‑partythird-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more of our products for which a companywe or itsour collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Outside the United States, we will face challenges in ensuring obtaining adequate coverage Obtaining and payment for any product candidates we may develop. Pricing of prescription pharmaceuticalsmaintaining reimbursement status is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory
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marketing approval for a producttime-consuming and may require us to conduct a clinical trial that compares the cost effectiveness of any product candidates we may develop to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts.costly.
In the European Union,EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost effectivenesscost-effectiveness of a particular product candidate to currently available therapies (so called health technology assessments, or HTAs)assessments) in order to obtain reimbursement or pricing approval. For example, the European UnionEU provides options for its member statesMember States to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member statesEU Member States may approve a specific price for a product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member statesMember States allow companies to fix their own prices for products but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the European UnionEU have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union.EU. The downward pressure on health carehealthcare costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member statesEU Member States and parallel trade (arbitrage between low‑pricedlow-priced and high‑priced member states)high-priced Member States) can further reduce prices. Special pricing and reimbursement rules may apply to orphan drugs. Inclusion of orphan drugs in reimbursement systems tend to focus on the medical usefulness, need, quality and economic benefits to patients and the healthcare system as for any drug. Acceptance of any medicinal product for reimbursement may come with cost, use and often volume restrictions, which again can vary by country. In addition, results basedresults-based rules of reimbursement may apply. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. Historically, products launched in the EU do not follow price structures of the U.S. and generally prices tend to be significantly lower.
Outside the U.S., international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the U.S., the reimbursement for our products may be reduced compared with the U.S. and may be insufficient to generate commercially reasonable revenue and profits.
The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy.
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National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which we obtain marketing approval.
Government Pricing and Reimbursement Programs for Marketed Drugs in the U.S.
Medicaid, the 340B Drug Pricing Program, and Medicare
Federal law requires that a pharmaceutical manufacturer, as a condition of having its drug and biological products receive federal reimbursement under Medicaid and Medicare Part B, must pay rebates to state Medicaid programs for all units of its covered outpatient drugs dispensed to Medicaid beneficiaries and paid for by a state Medicaid program under either a fee-for-service arrangement or through a managed care organization. This federal requirement is effectuated through a Medicaid drug rebate agreement between the manufacturer and the Secretary of HHS. CMS administers the Medicaid drug rebate agreements, which provide, among other things, that the drug manufacturer will pay rebates to each state Medicaid agency on a quarterly basis and report certain price information on a monthly and quarterly basis. The rebates are based on prices reported to CMS by manufacturers for their covered outpatient drugs. For non-innovator products, generally generic drugs marketed under abbreviated NDAs, the rebate amount is 13% of the average manufacturer price (AMP) for the quarter. The AMP is the weighted average of prices paid to the manufacturer (1) directly by retail community pharmacies and (2) by wholesalers for drugs distributed to retail community pharmacies. For innovator products (i.e., drugs that are marketed under NDAs or BLAs), the rebate amount is the greater of 23.1% of the AMP for the quarter or the difference between such AMP and the best price for that same quarter. The best price is essentially the lowest price available to non-governmental entities after accounting for discounts and rebates. Innovator products may also be subject to an additional rebate that is based on the amount, if any, by which the product’s AMP for a given quarter exceeds the inflation-adjusted baseline AMP, which for most drugs is the AMP for the first full quarter after launch. Since 2017, non-innovator products are also subject to an additional rebate. To date, the rebate amount for a drug has been capped at 100% of the AMP; however, effective January 1, 2024, this cap will be eliminated, which means that a manufacturer could pay a total rebate amount on a unit of the drug that is greater than the average price the manufacturer receives for the drug.
The terms of participation in the Medicaid drug rebate program impose an obligation to correct the prices reported in previous quarters, as may be necessary. Any such corrections could result in additional or lesser rebate liability, depending on the direction of the correction. In addition to retroactive rebates, if a manufacturer were found to have knowingly submitted false information to the government, federal law provides for civil monetary penalties for failing to provide required information, late submission of required information, and false information.
A manufacturer must also participate in a federal program known as the 340B drug pricing program in order for federal funds to be available to pay for the manufacturer’s drug and biological products under Medicaid and Medicare Part B. Under this program, the participating manufacturer agrees to charge certain safety net healthcare providers no more than an established discounted price for its covered outpatient drugs. The formula for determining the discounted price is defined by statute and is based on the AMP and the unit rebate amount as calculated under the Medicaid drug rebate program, discussed above. Manufacturers are required to report pricing information to the Health Resources and Services Administration (HRSA) on a quarterly basis. HRSA has also issued regulations relating to the calculation of the ceiling price as well as imposition of civil monetary penalties for each instance of knowingly and intentionally overcharging a 340B covered entity.
Federal law also requires that manufacturers report data on a quarterly basis to CMS regarding the pricing of drugs that are separately reimbursable under Medicare Part B. These are generally drugs and biologics, such as injectable products, that are administered incident to a physician service and are not generally self-administered. The pricing information submitted by manufacturers is the basis for reimbursement to physicians and suppliers for drugs covered under Medicare Part B. Under the IRA, manufacturers are also required to provide quarterly rebates for certain single-source drugs and biologics (including biosimilars) covered under Medicare Part B with prices that increase faster than
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the rate of inflation. This requirement started on January 1, 2023 for drugs approved on or before December 1, 2020 and begins six quarters after a drug is first marketed for all other drugs. As with the Medicaid drug rebate program, federal law provides for civil monetary penalties for failing to provide required information, late submission of required information, and false information.
Recently, the Infrastructure Investment and Jobs Act added a requirement, effective January 1, 2023, for manufacturers of certain single-source drugs (including biologics and biosimilars) separately paid for under Medicare Part B for at least 18 months and marketed in single-dose containers or packages (known as refundable single-dose containers or single-use package drugs) to provide annual refunds for any portions of the dispensed drug that are unused and discarded if those unused or discarded portions exceed an applicable percentage defined by statute or regulation. Manufacturers will be subject to periodic audits and those that fail to pay refunds for their refundable single-dose containers or single-use package drugs shall be subject to civil monetary penalties.
Medicare Part D provides prescription drug benefits for seniors and people with disabilities. Medicare Part D enrollees once had a gap in their coverage (between the initial coverage limit and the point at which catastrophic coverage begins) where Medicare did not cover their prescription drug costs, known as the coverage gap. However, beginning in 2019, Medicare Part D enrollees paid 25% of brand drug costs after they reached the initial coverage limit - the same percentage they were responsible for before they reached that limit - thereby closing the coverage gap from the enrollee’s point of view. Most of the cost of closing the coverage gap is being borne by innovator companies and the government through subsidies. Each manufacturer of drugs approved under NDAs or BLAs is required to enter into a Medicare Part D coverage gap discount agreement and provide a 70% discount on those drugs dispensed to Medicare Part D enrollees in the coverage gap, in order for its drugs to be reimbursed by Medicare Part D. Beginning in 2025, the IRA eliminates the coverage gap under Medicare Part D by significantly lowering the enrollee maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs above a deductible and below the out-of-pocket maximum, and 20% once the out-of-pocket maximum has been reached. Although these discounts represent a lower percentage of enrollees’ costs than the current discounts required below the out-of-pocket maximum (that is, in the coverage gap phase of Part D coverage), the new manufacturer contribution required above the out-of-pocket maximum could be considerable for very high-cost patients and the total contributions by manufacturers to a Part D enrollee’s drug expenses may exceed those currently provided. The IRA also requires manufacturers to provide annual Medicare Part D rebates for single-source drugs and biological products with prices that increase faster than the rate of inflation.
The IRA also allows HHS to directly negotiate the selling price of a statutorily specified number of drugs and biologics each year that CMS reimburses under Medicare Part B and Part D. Only high-expenditure single-source biologics that have been approved for at least 11 years (7 years for single-source drugs) can qualify for negotiation, with the negotiated price taking effect two years after the selection year. Negotiations for Medicare Part D products begin in 2024 with the negotiated price taking effect in 2026, and negotiations for Medicare Part B products begin in 2026 with the negotiated price taking effect in 2028. In August 2023, HHS announced the 10 Medicare Part D drugs and biologics that it selected for negotiations, and by October 1, 2023, each manufacturer of the selected drugs signed a manufacturer agreement to participate in the negotiations. HHS will announce the negotiated maximum fair price by September 1, 2024, and this price cap, which cannot exceed a statutory ceiling price will come into effect on January 1, 2026.
U.S. Federal Contracting and Pricing Requirements
Manufacturers are also required to make their covered drugs, which are generally drugs approved under NDAs or BLAs, available to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration. The law also requires manufacturers to offer deeply discounted FSS contract pricing for purchases of their covered drugs by the Department of Veterans Affairs, the Department of Defense, the Coast Guard, and the Public Health Service (including the Indian Health Service) in order for federal funding to be available for reimbursement or purchase of the manufacturer’s drugs under certain federal programs. FSS pricing to those four federal agencies for covered drugs must be no more than the Federal Ceiling Price (FCP), which is at least 24% below the Non-Federal Average Manufacturer Price (Non-FAMP) for the prior year. The Non-FAMP is the average price for covered drugs sold to wholesalers or other middlemen, net of any price reductions.
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The accuracy of a manufacturer’s reported Non-FAMPs, FCPs, or FSS contract prices may be audited by the government. Among the remedies available to the government for inaccuracies is recoupment of any overcharges to the four specified federal agencies based on those inaccuracies. If a manufacturer were found to have knowingly reported false prices, in addition to other penalties available to the government, the law provides for significant civil monetary penalties per incorrect item. Finally, manufacturers are required to disclose in FSS contract proposals all commercial pricing that is equal to or less than the proposed FSS pricing, and subsequent to award of an FSS contract, manufacturers are required to monitor certain commercial price reductions and extend commensurate price reductions to the government, under the terms of the FSS contract Price Reductions Clause. Among the remedies available to the government for any failure to properly disclose commercial pricing and/or to extend FSS contract price reductions is recoupment of any FSS overcharges that may result from such omissions.
Healthcare Law and Regulation
Healthcare providers and third‑partythird-party payors play a primary role in the recommendation and prescription of pharmaceutical products that are granted marketing approval. Our current and future arrangements with providers, researchers, consultants, third‑partythird-party payors and customers are subject to broadly applicable federal and state fraud and abuse, anti‑kickback,anti-kickback, false claims, transparency and patient privacy laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations include, without limitation, the following:
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| Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. A person or entity can be found guilty of violating the AKS without actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute. Violations of the AKS carry potentially significant civil and criminal penalties, including imprisonment, fines, administrative civil monetary penalties, and exclusion from participation in federal healthcare programs. On December 2, 2020, the Office of Inspector General (OIG) published further modifications to the AKS. Under the final rules, OIG added safe harbor protections under the AKS for certain coordinated care and value-based arrangements among clinicians, providers, and others. This rule became effective January 19, 2021. We continue to evaluate what effect, if any, the rule will have on our business; |
● | the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act and federal civil monetary |
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| the U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) which |
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| HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and |
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| the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 |
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● | federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; |
● | analogous state |
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● | EU, UK and other foreign law equivalents, including reporting requirements detailing interactions with and payments to healthcare providers and data privacy and security laws and regulations that may be more stringent than those in the U.S. |
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelinesApril 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and the relevant compliance guidance promulgated by the federal governmentManufacturers of America’s Code on Interactions with Healthcare Professionals, in addition to requiring pharmaceutical manufacturers to report information related to payments to physicians and other health carehealthcare providers or marketing expenditures. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state and require the registration of pharmaceutical sales representatives. State and foreign laws, including for example the GDPR, also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement, we could be subject to penalties.
We have and will be requiredcontinue to spend substantial time and money to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations. Recent healthcare reform legislation has strengthened these federal and state healthcare laws. For example, the ACA amends the intent requirement of the federal Anti‑Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Other laws that may affect our ability to operate include:
● | the anti-inducement law prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person know or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program; and |
● | European and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers. |
In the U.S., to help patients afford our approved product, we may utilize programs to assist them, including patient assistance programs and co-pay coupon programs for eligible patients. Government enforcement agencies have shown increased interest in pharmaceutical companies’ product and patient assistance programs, including reimbursement support services, and a number of investigations into these programs have resulted in significant civil and criminal settlements. In addition, at least one insurer has directed its network pharmacies to no longer accept co-pay coupons for certain specialty drugs the insurer identified. Our co-pay coupon programs could become the target of similar insurer actions. In addition, in November 2013, the CMS issued guidance to the issuers of qualified health plans sold through the ACA’s marketplaces encouraging such plans to reject patient cost-sharing support from third parties and indicating that the CMS intends to monitor the provision of such support and may take regulatory action to limit it in the future. The CMS subsequently issued a rule requiring individual market qualified health plans to accept third-party premium and cost-sharing payments from certain government-related entities. In September 2014, the OIG of the HHS issued a Special Advisory Bulletin warning manufacturers that they may be subject to sanctions under the AKS and/or civil monetary penalty laws if they do not take appropriate steps to exclude Part D beneficiaries from using co-pay coupons. Accordingly, companies exclude these Part D beneficiaries from using co-pay coupons. It is possible that changes in insurer policies regarding co-pay coupons and/or the introduction and enactment of new legislation or regulatory action could restrict or otherwise negatively affect these patient support programs, which could result in fewer patients using affected products, and therefore could have a material adverse effect on our sales, business, and financial condition.
Third-party patient assistance programs that receive financial support from companies have become the subject of enhanced government and regulatory scrutiny. The OIG has established guidelines that suggest that it is lawful for pharmaceutical manufacturers to make donations to charitable organizations who provide co-pay assistance to Medicare
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patients, provided that such organizations, among other things, are bona fide charities, are entirely independent of and not controlled by the manufacturer, provide aid to applicants on a first-come basis according to consistent financial criteria and do not link aid to use of a donor’s product. However, donations to patient assistance programs have received some negative publicity and have been the subject of multiple government enforcement actions, related to allegations regarding their use to promote branded pharmaceutical products over other less costly alternatives. Specifically, in recent years, there have been multiple settlements resulting out of government claims challenging the legality of their patient assistance programs under a variety of federal and state laws. It is possible that we may make grants to independent charitable foundations that help financially needy patients with their premium, co-pay, and co-insurance obligations. If we choose to do so, and if we or our vendors or donation recipients are deemed to fail to comply with relevant laws, regulations or evolving government guidance in the operation of these programs, we could be subject to damages, fines, penalties, or other criminal, civil, or administrative sanctions or enforcement actions. We cannot ensure that our compliance controls, policies, and procedures will be sufficient to protect against acts of our employees, business partners, or vendors that may violate the laws or regulations of the jurisdictions in which we operate. Regardless of whether we have complied with the law, a government investigation could impact our business practices, harm our reputation, divert the attention of management, increase our expenses, and reduce the availability of foundation support for our patients who need assistance.
On November 30, 2020, the HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers (PBMs), unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between PBMs and manufacturers. The IRA delayed implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and PBM service fees until January 1, 2032. Further, on December 31, 2020, CMS published a new rule, effective January 1, 2023, requiring manufacturers to ensure the full value of co-pay assistance is passed on to the patient or these dollars will count toward the AMP and Best Price calculation of the drug. On May 21, 2021, PhRMA sued the HHS in the U.S. District Court for the District of Columbia, to stop the implementation of the rule claiming that the rule contradicts federal law surrounding Medicaid rebates, and on May 17, 2022, the court vacated the rule.
Violations of these laws or any future enacted laws can subject us to criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment and exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliancenon-compliance with these laws, reputational harm, and we may be required to curtail or restructure our operations. Moreover, we expect that there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our future operations and business.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, the exclusion from participation in federal and state healthcare programs, individual imprisonment, reputational harm, and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, defending against any such actions can be costly and time-consuming, and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment. If any of the above occur, our ability to operate our business and our results of operations could be adversely affected.
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Healthcare Reform
A primary trend inIn the U.S. healthcare industry, the EU and elsewhere is cost containment. Thereother foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare systems that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state proposals during the last few yearslevels that seek to reduce healthcare costs and improve the costquality of care through changeshealthcare. For example, the ACA, effective since March 2010, is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
Healthcare reforms that have been adopted, and that may be adopted in the healthcare system, including limits on the pricing,future, could result in further reductions in coverage and levels of reimbursement offor pharmaceutical and biopharmaceutical products, especiallyincreases in rebates payable under government‑funded health careU.S. government rebate programs and increased governmental controladditional downward pressure on pharmaceutical product prices. On September 9, 2021, the Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug pricing.
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By way of example,the IRA in March 2010, the United States Congress enacted the ACA,August 2022, which allows, among other things, includes changesHHS to directly negotiate the selling price of statutorily specified number of drugs and biologics each year that CMS reimburses under Medicare Part B and Part D. Only high-expenditure single-source biologics that have been approved for at least 11 years (7 years for single-source drugs) can qualify for negotiation, with the negotiated price taking effect two years after the selection year. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price. Negotiations for Medicare Part D products begin in 2024 with the negotiated price taking effect in 2026, and negotiations for Medicare Part B products begin in 2026 with the negotiated price taking effect in 2028. In August 2023, HHS announced the 10 Medicare Part D drugs and biologics that it selected for negotiations, and by October 1, 2023, each manufacturer of the selected drugs signed a manufacturer agreement to participate in the negotiations. HHS will announce the negotiated maximum fair price by September 1, 2024, and this price cap, which cannot exceed a statutory ceiling price will come into effect on January 1, 2026. The IRA also penalizes drug manufacturers that increase prices of Medicare Part B and Part D drugs at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. These provisions will take began taking progressively starting in 2023, although they may be subject to legal challenges. For example, the provisions related to the coveragenegotiation of selling prices of high-expenditure single-source drugs and payment for products under governmental and private insurance plans. Among the provisions of the ACA of importance to our potential product candidates are:
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Therebiologics have been legal and political challenges to certain aspects of the ACA. Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal legislation, the future of the ACA remains uncertain. We continue to evaluatechallenged in multiple lawsuits. Thus, while it is unclear how the ACA and recent efforts to repeal and replace or limitIRA will be implemented, it will likely have a significant impact on the implementation of the ACApharmaceutical industry.
We expect that additional U.S. federal healthcare reform measures will impact our business.
Other legislative changes have been proposed andbe adopted in the United States sincefuture, any of which could limit the ACA was enacted. For example,amounts that the U.S. federal government will pay for healthcare products and services, which could result in August 2011, the Budget Control Act of 2011, among other things, created measuresreduced demand for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through
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2024 unlessour product candidates or additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.pricing pressures.
There have been, and likely will continue to be,Further, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing conditions and other requirements.
Individual states in the U.S. have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations,
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financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our current or any future products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the foreign, federal andEU (such as the EU Pharmaceutical Legislation) or member state levels directed at broadening the availabilitylevel may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment and containingoperation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or lowering the costdelay marketing approval of healthcare. Such reforms could have an adverse effect on anticipated revenues fromour product candidates, that we may successfully developrestrict or regulate post-approval activities and affect our ability to commercialize any products for which we may obtain marketing approval. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our overall financial conditionbusiness.
Environmental issues which may influence the use of our material fixed assets
Our primary research and ability to develop product candidates.development activities take place in our facilities in Zwijnaarde, Belgium. For these activities we require, and have obtained, the necessary environmental and biohazard permits from the responsible governments, required by us for the manner in which we use said facilities.
Additionally, thereNew shares created during 2023
As a result of the exercise of stock options and vesting of restricted stock units (RSUs) under our Equity Incentive Plan (as defined herein), 1,216,999 new shares were created in 2023. Equity Incentive Plan means the equity incentive plan as adopted by our Board of Directors on December 18, 2014, which was approved by a General Meeting on May 13, 2015, and subsequently amended at General Meetings on April 28, 2016 and November 25, 2019, respectively, and by the Board of Directors on December 18, 2019, November 5, 2020, December 15, 2021 and February 27, 2023.
On July 24, 2023, we closed an offering of 2,581,633 of our ordinary shares through a global offering. The global offering was comprised of an offering of ordinary shares represented by ADSs in the U.S. and certain other countries outside of the EEA and a simultaneous private placement of ordinary shares in the EEA and the UK. As a result, we received $1.3 billion of gross proceeds from this offering, decreased by $65.9 million of underwriter discounts and commissions, and offering expenses, of which $0.8 million has been increasing legislativededucted from equity. The total net cash proceeds from the offering amounted to $1.2 billion.
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The following table shows the developments in our share capital for the fiscal year ending December 31, 2023 and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.on February 20, 2024:
Number of shares outstanding on December 31, 2021 | 51,668,315 | |
Number of shares outstanding on December 31, 2022 | | 55,395,856 |
Exercise of stock options in 2023 | | 1,137,439 |
Vesting of RSUs | | 79,560 |
Global public offering in Euronext and Nasdaq on July 17, 2023 | | 2,244,899 |
Over-allotment option exercised by underwriters on July 19, 2023 | | 336,734 |
Number of shares outstanding on December 31, 2023 | | 59,194,488 |
Exercise of stock options in January 2024 | | 106,617 |
Exercise of stock options in February 2024 | | 2,277 |
Number of shares outstanding on February 20, 2024 | | 59,302,232 |
C. ORGANIZATIONAL STRUCTURE
C. | ORGANIZATIONAL STRUCTURE |
As of December 31, 2017, we had2023, argenx SE, has two subsidiaries, argenx BV and argenx Benelux BV, based in Belgium and argenx BV has ten subsidiaries. The following table sets out for each of our principal subsidiaries, the country of incorporation, and percentage ownership and voting interest held by us (directly or indirectly through subsidiaries).
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argenx | | The Netherlands | | 100.00 | % | |||
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argenx US, Inc. |
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argenx Japan KK | Japan | 100.00 | % | |||||
argenx France SAS | | France | | 100.00 | % | |||
argenx Germany GmbH | | Germany | | 100.00 | % | |||
argenx Canada Inc. | | Canada | | 100.00 | % | |||
argenx UK Ltd. | | United Kingdom | | 100.00 | % | |||
argenx Netherlands Services B.V. | | The Netherlands | | 100.00 | % | |||
argenx Italy S.r.l. | | Italy | | 100.00 | % | |||
argenx Spain S.L. | | Spain | | 100.00 | % |
The following chart provides an overview of the Group as of the date of this Annual Report. Percentages refer to both the share of capital and voting rights.
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D.PROPERTY, PLANTS AND EQUIPMENT
In January 2021, we entered into a binding lease agreement related to the envisioned relocation of our Zwijnaarde facility to a newly built office in Zwijnaarde, with an annual base rent of $1.8 million, which will be operational in the third quarter of 2028, and with an initial term of 10.5 years. The total future cash flows related to this lease are represented below in “Note 22—Leases” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
We also lease office space in Amsterdam (the Netherlands), Boston (U.S.), Tokyo (Japan), Geneva (Switzerland), Munich (Germany), Issy Les Moulineaux (France), Vaughan Ontario (Canada), Gerrards Cross (UK) and Milan (Italy). In addition, our lease liabilities include a lease plan for company cars with maturity dates up to four years.
For a discussion of contractual obligations, please see “Note 29—Commitments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
We have our principal executive, operational offices and laboratory space which consists of approximately 1,500 square meters, located in Zwijnaarde, Belgium. The lease for this facility expires in 2026. We believefollowing table sets forth our current facility is sufficient to meet our needs for the foreseeable future. We also lease an office in Breda, the Netherlands.
We lease additional office space in Boston, Massachusetts. The lease runs on a yearly basis, and we believe this Boston facility is sufficient for us to initiate U.S. activities in line with our business plan.
We have a total of threematerial leased facilities worldwide owned or leased as of December 31, 2017, as set forth in the following table:2023:
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Environment, Health and Safety
Our primary research and development activities take place in our facilities in Zwijnaarde, Belgium. For these activities we require, and have obtained, the necessary environmental and biohazard permits from the responsible governments.governments, required by us for the manner in which we use said facilities. See “ItemItem 3.D.— “Risk Factors—Risks Related to Our Business and Industry.Factors”.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following “Operating and Financial Review and Prospects” should be read together with the information in our financial statements and related notes included elsewhere in this Annual Report. The following discussion is based on our financial information prepared in accordance with the IFRS, as issued by the IASB, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including U.S. GAAP. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described in Item 3.D. “Risk Factors”and elsewhere in this Annual Report. Please also see“Cautionary Statement Regarding Forward-Looking Statements” in this Annual Report.
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A. OPERATING RESULTS
The review of the financial condition and results of operations of certain items from fiscal year ended December 31, 2021, and year-to-year comparisons between fiscal year ended December 31, 2022, and December 31, 2021, that are not included in this Annual Report can be found in Item 5 “Operating and Financial Review and Prospects” of our annual report on Form 20-F for the fiscal year ended December 31, 2022.
Overview
We are a clinical‑stage biotechnology company developing a deep pipeline of differentiated antibody‑based therapies for the treatment of severe autoimmune diseases and cancer. Utilizing our suite of technologies, we are focused on developing product candidates with the potential to be either first‑in‑class against novel targets or best‑in‑class against known, but complex, targets in order to treat diseases with a significant unmet medical need. Our SIMPLE Antibody Platform, based on the powerful llama immune system, allows us to exploit novel and complex targets, and our three antibody Fc engineering technologies are designed to enable us to expand the therapeutic index of our product candidates. Together with our antibody discovery and development expertise, this suite of technologies has enabled our pipeline of seven product candidates. Two of our product candidates are in clinical proof‑of‑concept trials for three indications, one of which has achieved clinical proof‑of‑concept and is being prepared for Phase 3 clinical development.
We recently completed a Phase 2 clinical trial for ARGX‑113, our most advanced product candidate, for the treatment of the rare autoimmune disease myasthenia gravis, or MG, and we reported topline data from this trial in December 2017. ARGX‑113 demonstrated strong clinical improvement and statistically significant benefit over placebo. ARGX‑113 treatment resulted in a strong clinical improvement over placebo during the entire duration of the study as measured by all four predefined clinical efficacy scales. In addition, ARGX‑113 was observed to have a favorable tolerability profile consistent with that observed in our Phase 1 clinical trial. In March 2017, we initiated a Phase 2 clinical trial of ARGX‑113 for the treatment of another rare autoimmune disease, primary immune thrombocytopenia, or ITP. In September 2017, we initiated a Phase 2 clinical trial of ARGX‑113 for the treatment of a third rare autoimmune disease, pemphigus vulgaris, or PV. We are currently developing our second lead product candidate, ARGX‑110, for rare and aggressive hematological cancers, initially for T‑cell lymphoma, or TCL, and acute myeloid leukemia, or AML, as well as high‑risk myelodysplastic syndrome, or MDS. In December 2016, we commenced a Phase 1/2 clinical trial of ARGX‑110 in combination with azacitidine for the treatment of newly diagnosed AML or high‑risk MDS patients, and in April 2017, we initiated the Phase 2 part of a Phase 1/2 clinical trial of ARGX‑110 for the treatment of cutaneous TCL, or CTCL. We reported interim data for both clinical trials in December 2017.
We have a disciplined strategy to maximize the value of our pipeline whereby we plan to retain development and commercialization rights to those product candidates that we believe we can ultimately commercialize successfully on our own if they are approved. We plan to collaborate on product candidates that we believe have promising utility in disease areas or patient populations that are better served by the resources of larger biopharmaceutical companies. We have entered into collaborations with a number of biopharmaceutical companies, including our collaboration with AbbVie S.Á.R.L., or AbbVie, for ARGX‑115, a cancer immunotherapy‑focused product candidate, against the novel target glycoprotein A repetitions predominant. We received a $40.0 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) upfront payment and a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) preclinical milestone payment in connection with this collaboration.
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Since our inception in 2008, we have focused most of our financial resources and efforts towards developing our SIMPLE AntibodyTM Platform and antibody engineering technologies, identifying potential product candidates, establishing process, development and manufacturing capabilities for our product candidates and advancing multiple discovery programs into the clinic. WeIn 2022, we executed on our global launch of VYVGART our first-in-class neonatal FcRn blocker for IV use, which is now approved in the U.S, Japan, Europe, Israel, Canada and China for gMG. In 2023, we executed on our global launch of VYVGART SC, the first-and-only neonatal FcRn blocker administered by subcutaneous injection, which is now approved in the U.S. and Europe. In 2023, the successful commercialization of VYVGART and VYVGART SC generated a global product net sales of $1.2 billion.
On our research and development, we continue towards advancing a deep pipeline of both clinical- and preclinical-stage product candidates for the treatment of severe autoimmune diseases. Leveraging our technology suite and clinical expertise, we have advanced four internally developed productseveral candidates into late-stage clinical development—ARGX‑113, ARGX‑110, ARGX‑111development and ARGX‑109—three into the preclinical stage—ARGX‑115, ARGX‑112 and ARGX‑116—andwe currently have multiple programs in the discovery stages. Through December 31, 2017, we have raised an aggregate gross proceeds of €474.7 million, including (i) an aggregate of €46.0 million from the private placement of equity securities in 2008, 2009 and 2011, (ii) €41.8 million from our initial public offering on the Euronext Brussels in 2014, (iii) €46.0 million from the private placement of equity securities, primarily to U.S.‑based institutional investors, in 2016, (iv) $114.7 million from our initial U.S. public offering on the Nasdaq Global Select Market in May 2017 and (v) $265.5 million from our second U.S public offering on the Nasdaq Global Select Market in December 2017. In addition, as of December 31, 2017, we have received upfront payments, milestone payments and research and development service fees from our collaborators totaling €77.3 million and have received €13.2 million in grants and incentives from governmental bodies. stage.
As of December 31, 2017,2023 and December 31, 2022, we had cash, cash equivalents and current financial assets of €359.8 million.$3,180 million and $2,193 million, respectively.
Our statement of financial position shows our total assets of $4,542 million for the year ended December 31, 2023, compared to $3,134 million for the year ended December 31, 2022. The main reason for the material change in balance sheet total are the various equity financing rounds, completed over the periods covered by the financial statements.
Since our inception, we have incurred significant operating losses. We do not currently have any approved products and have never generated any revenue from product sales. Our ability to generate revenue sufficient to achieve profitability will depend significantly upon the successful development and eventual commercialization of one or more of our product candidates, which may never occur. For the years ended December 31, 20162023 and 2017,2022, we incurred total comprehensive losses of €21.4$295 million and €28.1$730 million, respectively. As of December 31, 2017,2023, we had accumulated losses of €100.6$2,405 million.
Although we have generated revenue of $1.2 billion from global product net sales of VYVGART and VYVGART SC for gMG in the fiscal year ended December 31, 2023, we can provide no assurances that we will be able to achieve or sustain profitability based on product net sales in that indication alone or that we will be able to receive regulatory approval of and commercialize VYVGART or VYVGART SC in other indications or in other countries.
On December 17, 2021, the FDA approved efgartigimod, which is marketed as VYVGART, for the intravenous treatment of gMG in adult patients who are AChR-AB+, followed by Japanese PMDA approval (including seronegative patients) and approval the EU Commission in 2022 and China’s NMPA approval on July 30, 2023. On June 20, 2023, the FDA approved VYVGART SC for the subcutaneous treatment of gMG in adult patients who are AChR-AB+, followed by approval of the EU Commission on November 16, 2023. These are the only approved products we currently have.
We expect our expenses to continue to increase substantiallyas we expand our global commercial infrastructure and drug product inventory for VYVGART and VYVGART SC for the treatment of gMG, the commercial launch of VYVGART SC for the treatment of CIDP if and when approval obtained, the advancement of our clinical-stage pipeline, including
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ongoing registrational clinical trials across five indications of efgartigimod, and continued investment in connection with our ongoing development activities related to our preclinical and clinical programs. In addition, we expect to incur additional costs associated with operating as a public company in the United States.IIP. We anticipate that our expenses will increase substantially if and as we:
Research and development activities:
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As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
Collaboration Agreements
We have a disciplined strategy to maximizeexpect that the valuecosts of our pipeline whereby we plan to retain all development and commercialization rightsmight also increase due to those product candidates that we believe we can ultimately commercialize successfully, if approved. We have partnered,current and plan to continue to partner, product candidates that we believe have promising utility in disease areas or patient populations that are better served by resources of larger biopharmaceutical companies. Below are summaries of our key collaborations. See “Item 4.B.—Business Overview—Collaborations” for a more detailed description of these agreements.
AbbVie. In April 2016, we entered into a collaboration agreementfuture collaborations with AbbVie to develop and commercialize ARGX‑115. Under the terms of the collaboration agreement, we will be responsible for conducting and funding all ARGX‑115 research and development activities up to completion of investigational new drug, or IND, -enabling studies.
We have granted AbbVie an exclusive option, for a specified period following completion of IND‑enabling studies, to obtain a worldwide, exclusive license to the ARGX‑115 program to develop and commercialize products. Following the exercise of the option, AbbVie will assume certain development obligations, and will be solely responsible for all research, development and regulatory costs relating to the products. We received an upfront, non‑refundable, non‑creditable payment of $40.0 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) from AbbVie for the exclusive option to license ARGX‑115, and we achieved the first of two preclinical milestones, triggering a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) payment, and are eligible to receive a second near‑term preclinical milestone of $10.0 million. We are also eligible, if AbbVie exercises its option, to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to $110.0 million, $190.0 million and $325.0 million, respectively,partners as well as tiered royalties on sales at percentages ranging from the mid‑single digitscommercial partners.
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Information pertaining to the lower teens, subject to customary reductions. In addition to the ARGX‑115 program,years ended December 31, 2022 and upon reaching a predetermined preclinical stage milestone, AbbVie will fund further GARP‑related research by us for an initial period of two years. AbbVie will have the right to license additional therapeutic programs emerging from this research, for which we could receive associated milestone and royalty payments.
If AbbVie does not exercise its option to license ARGX‑115, we have the right to pursue development and commercialization of ARGX‑115 by ourselves or with another partner.
Bird Rock Bio. In October 2012, we entered into an exclusive license agreement with Bird Rock Bio, Inc. (formerly known as RuiYi, Inc. and Anaphore, Inc.), or Bird Rock Bio, under which we granted Bird Rock Bio an exclusive, worldwide, royalty‑bearing license to develop and commercialize ARGX‑109. We received a non‑refundable, non‑creditable upfront payment from Bird Rock Bio of €0.5 millionDecember 31, 2021 was included in cash plus shares of Bird Rock Bio stock, and we are eligible to receive additional development milestone payments of up to approximately € 10.0 million in cash and additional shares of Bird Rock Bio stock, regulatory milestone payments of up to €10.0 million in cash and commercial milestone payments of up to €12.0 million in cash. We are eligible to receive tiered royaltiesour annual reports on Bird Rock Bio’s commercial sales of ARGX‑109 at percentages ranging from the low to high single digits and a tiered percentage of Bird Rock Bio’s sublicensing income ranging from the mid teens to high twenties, subject to customary reductions. Bird Rock Bio and argenx have mutually agreed to terminate Bird Rock Bio’s license agreement to develop and commercialize ARGX-109. Genor, a sublicensee of Bird Rock Bio, will continue to develop ARGX-109Form 20-F for the Chinese market. Hence, we will not be entitled to receive some or all of the milestone or other payments under this exclusive license agreement with Bird Rock Bio.
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LEO Pharma. In May 2015, we entered into a collaboration agreement with LEO Pharma A/S, or LEO Pharma, to develop and commercialize ARGX‑112. We received a non‑refundable, non‑creditable upfront payment from LEO Pharma of €3.0 million in cash. In February 2016 and June 2017, we achieved preclinical milestones under this collaboration for which we received milestone payments. We are also eligible to receive development, regulatory and commercial milestone payments in aggregate amounts of up to €11.5 million, €6.0 million and €102.5 million, respectively, as well as tiered royalties on product sales at percentages ranging from the low single digits to the low teens, subject to customary reductions. Under the terms of the collaboration, LEO Pharma will fund more than half of all product development costs up to approval of a Clinical Trial Authorization Application, or CTA, in Europe for a first product in a Phase 1 clinical trial, with our share of such costs capped. After CTA approval of a first product in a Phase 1 clinical trial, LEO Pharma will be solely responsible to fund the clinical development of the program.
Shire. In February 2012, we entered into a collaboration agreement with Shire AG (now known as Shire International GmbH), or Shire, to discover, develop and commercialize novel human therapeutic antibodies against up to three targets to address diverse rare and unmet diseases. In May 2014, we expanded the collaboration agreement to accommodate research and development on several novel targets implicated in multiple disease areas. In February 2017, Shire extended the collaboration term for a further year until May 30, 2018.
Throughyears ended December 31, 2017, Shire has paid us an aggregate total of (i) €3.4 million in upfront payments, (ii) €0.3 million in milestone payments2022 and (iii) $12.0 million in researchDecember 31, 2021, respecively, under Item 5 “Operating and development fees. In addition, Shire purchased €12.0 million of our ordinary shares in July 2014 by participating in our initial public offeringFinancial Review and Prospects,” which were filed with the SEC on Euronext Brussels.
Shire has the option to license antibodies discovered under the agreement for further developmentMarch 16, 2023 and commercialization worldwide, in return for milestone payments and single‑digit percentage royalties on product sales.March 21, 2022, respectively.
Bayer. In May 2014, we entered into a research collaboration and exclusive product license option agreement with Bayer AG, focused on the creation of novel human therapeutic antibodies against complex targets in various therapeutic indications using our SIMPLE Antibody technology. We received technology access fees and research funding totaling €3.3 million. We concluded all research under this collaboration in 2016 and we have no further commitment pursuant to this agreement.
Basis of Presentation
RevenueForeign Currency Transactions
1. | Functional and presentation currency |
Items included in the consolidated financial statements of each of our entities are valued using the currency of their economic environment in which the entity operates. The consolidated financial statements are presented in USD ($), which is the Company’s presentation currency.
ToRevenue from sale of product
Revenue from the sale of goods is recognized at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods to a customer, at the time when the customer obtains control of the goods rendered, i.e., when the customer has the ability to direct the use of the asset. The consideration that is committed in a contract with a customer can include fixed amounts, variable amounts, or both. The amount of the consideration may vary due to discounts, rebates, returns, chargebacks or other similar items. Contingent consideration is included in the transaction price when it is highly probable that the amount of revenue recognized is not subject to future significant reversals.
Our product net sales mainly consist of sales of VYVGART in the U.S., Japan, Europe and China and VYVGART SC in the U.S. and Europe. Product net sales are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria in accordance with IFRS 15 “Revenue from contracts with customers”.
Revenue arising from the commercial sale of VYVGART and VYVGART SC is presented in the consolidated financial statements under “Note 15—Product net sales” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference. In accordance with IFRS 15 “Revenue from contracts with customers”, such revenue is recognized when the product is physically transferred, in accordance with the delivery and acceptance terms agreed with the customer. Payment of the transaction price is payable at the point the customer obtains the legal title to the goods.
Revenue from Collaborations and License Agreements
Revenues to date our revenue hashave consisted principally of collaboration revenue consisting of (i)milestones, license fees, non-refundable upfront payments, including upfront licensing fees (ii) milestone payments based on achievement of research and development goals and (iii) research and development service fees in connection with collaboration and license agreements.
We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods and services. In order to determine revenue recognition for agreements that we determine to be in the scope of IFRS 15, we followed the IFRS 15 5-step model. The Company has currently two active collaboration and license agreements in scope of IFRS 15:
Zai Lab
For the collaboration agreement with Zai Lab the Company has assessed that there is more than one distinct performance obligation, being the transfer of a license and supply of clinical and commercial product. The Company concluded that these performance obligations are distinct in the context of the contract.
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Therefore, the Company allocates the transaction price to all performance obligations identified. The transaction price of the agreement is composed of (i) a fixed part, that being an upfront payment in the form of newly issued Zai Lab shares, and a guaranteed, non-creditable, non-refundable payment and (ii) a milestone payment for approval of efgartigimod in the U.S. and the consideration received in return for the supply of clinical and commercial product.
The fixed part of the transaction price, as well as the milestone for approval of efgartigimod in the U.S. has been allocated to the transfer of a license performance obligation. The Company concluded that the license as of the effective date of the contract, being January 2021, has standalone value. As such, the Company concluded that the promise in granting the license to Zai Lab is to provide a right to use the entity’s intellectual property as it exists at the point in time at which the license is granted and therefore, revenue was recognized at a point in time.
Under the collaboration agreement, the Company provides clinical and commercial supply to Zai Lab. Company concludes to recognize such sales as revenue given that the Company acts as principal in the transaction as the risk related to charges for full time equivalents,inventory is born by the Company until the inventory is transferred to Zai Lab. The revenue related to clinical supply is recorded under line item “Collaboration revenue”. The revenue related to commercial supply is recorded under line item “product net sales” in the consolidated statements of profit or FTEs, at contracted ratesloss and reimbursementthe consolidated statements of other comprehensive income (loss). The income related to royalties is recorded under line item item “Collaboration revenue”.
AbbVie
For the collaboration agreement with AbbVie the Company has determined that the transfer of license combined with the performance of research and development expenses. We currently have no products approved for sale. Other thanactivities represent one single performance obligation. The Company concluded that the sourceslicense is not distinct in the context of revenue described above, we do not expect to receive any revenue from any product candidatesthe contract.
The transaction price is composed of a fixed part, that we develop, including ARGX‑113, ARGX‑110being an upfront license fee, and our preclinical product candidates, until we obtain regulatory approval and commercialize such products, or until we potentially enter into collaborative agreements with third parties for the development and commercialization of such candidates and when we have obtained regulatory approval.
Collaborations typically contain license fees, non‑refundable upfront fees, research and development service fees anda variable part, being milestone payments and may involve multiple elements. We evaluate whether the elements under these arrangements have value to our collaboration partner on a standalone basis. If we determine that multiple deliverables exist, the consideration is allocated to one or more unitscost reimbursements of accounting based upon the best estimate of the selling price of each deliverable. Deliverables that do not meet these criteria are not evaluated separately for the purpose of revenue recognition.
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Other Operating Income
As a company that carries extensive research and development activities we benefit from various grants, research and development incentives and payroll tax rebates from certain governmental agencies. These grants and research and development incentives generally aim to partly reimburse approved expenditures incurreddelivered. Milestone payments are only included in our research and development efforts. The primary grants, research and development incentives and payroll tax rebates are as follows:
Government Grants
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Research and Development Incentives
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Payroll Tax Rebates
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The government grants and research and development incentives generally aim to partly reimburse approved expenditures incurred in our research and development efforts and are creditedthe transaction price to the income statement, under other operating income,extent it is highly probable that a significant reversal in the amount of cumulative revenue recognition will not occur when the relevant expenditureuncertainty associate with the variable consideration is subsequently resolved. Management estimates the amount to be included in the transaction price upon achievement of the milestone event. Sales-based milestones and sales-based royalties are a part of the Company’s arrangements but are not yet included in its revenues.
The transaction price has been incurredallocated to the single performance obligation and there is reasonable assurancerevenues has been recognized over the estimated service period based on an input model, being the percentage of completion method. The upfront license fee has been fully recognized since 2021 as the performance obligation has been fulfilled at that time. Milestone payments that become highly probable after the grant or research and development incentive is receivable.performance obligation has been fulfilled are therefore recognized at that point in time.
Research and Development Expenses
Research and development expenses consist principally of:
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● | materials and consumables expenses; |
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| depreciation and amortization of tangible and intangible fixed assets used to develop our product candidates; and |
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● | other expenses |
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The table below shows our research and development expenses for the past three fiscal years:
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| Year ended December 31, | ||||||
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| 2017 |
| 2016 |
| 2015 | |||
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| (in thousands) | ||||||
Total research and development expenses |
| € | 51,740 |
| € | 31,557 |
| € | 20,635 |
We incur various external expenses under our collaboration and license agreements for material and services consumed in the discovery and development of our partnered product candidates. Under our agreements with Shire, LEO Pharma and Bayer, our collaboration partner reimburses us for part or all of these external expenses and compensates us for time spent on the project by our employees. Under our agreement with AbbVie, our own research and development expenses are not reimbursed. Research and development expenses are recognized in the period in which they are incurred.
We typically utilize our employee, consultant and infrastructure resources across all of our development programs. We separately track external development costs with respect to ARGX‑113 and ARGX‑110, our most advanced product candidates.
Our researchResearch and development expenses may vary substantially from period to period based on the timing of our research and development activities, including the timing of the initiation of clinical trials, production of product batches and enrolment of patients in clinical trials. Research and development expenses are expected to increase as we advance the clinical development of ARGX‑113efgartigimod and ARGX‑110 and the preclinical development of ARGX‑115empasiprubart and further advance the research and development of our other preclinical and discovery stage programs.early-stage pipeline candidates. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, as fully described in Item 3.D. “Risk Factors,” and including the uncertainty of:
● |
| the scope, rate of progress and expense of our research and development activities; |
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| the successful enrollment in, and completion of clinical trials; |
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● | establishing and maintaining a continued acceptable safety profile for our product candidates; |
● | the terms, timing and receipt of regulatory approvals from applicable regulatory authorities; |
● | the successful completion of preclinical studies necessary to support IND applications in the |
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| the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property |
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Any of these variables with respect to the development of ARGX‑113, ARGX‑110, ARGX-115 or any other product candidate that we may develop could result in a significant change in the costs and timing associated with, and the viability of, the development of such product candidates. For example, if the FDA, the EMA or other regulatory authority were to require us to conduct preclinical studies or clinical trials beyond those we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrolment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs and the viability of the product candidate in question could be adversely affected.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of:
● | personnel expenses relating to salaries and related costs for personnel, including share-based compensation, of our employees in executive, finance, business development, marketing, commercial and support functions; |
● | professional fees for business development, marketing, IT, audit, commercial, legal services and investor relations costs; |
● | Board of Directors expenses consisting of directors’ fees, travel expenses and share-based compensation for non-executive board members; |
● | costs associated with commercial launch of VYVGART and VYVGART SC for the treatment of gMG and marketing and promotional activities, pre-launch activities of VYVGART and VYVGART SC in other |
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indications and continued investment in supply chain and costs associated with pre-launch activities in other indications; |
● | allocated facilities costs; and |
● | other Selling, general and administrative expenses, including leasing costs, office expenses, travel costs. |
We expect our selling, general and administrative expenses to increase as we continue to support our growth and operate as a public company in the United States.growth. Such costs include increases in our finance and legal personnel, additional external legal and audit fees,IT-related expenses, and expenses and costs associated with compliance with the regulations governing public companies. We expect our sellingSelling and marketing expenses to increase significantly, notably with the opening of our U.S. office and with preparatorydue to marketing and pricingpromotional activities with respect to the potential future commercializationongoing commercial launch of one or moreVYVGART, VYVGART SC and preparation of commercial launch of our other product candidates, if approved. We also expect to incur increased costs for directors’ and officers’ liability insurance and an enhanced investor relations function.candidates.
Financial Income (Expense)
Financial income mainly reflects interest earned on the financial investments of our cash and cash equivalents and current financial assets.assets and net gains on our cash and cash equivalents and current financial assets held at fair value through profit or loss. Financial expense corresponds mainly to interest expenses.net losses on cash and cash equivalents and current financial assets held at fair value through profit or loss.
Exchange Gains (Losses)
Our exchange gains (losses) relate to (i) our transactions denominated in foreign currencies, mainly in U.S. dollarseuro, and British pounds, which generate exchange gains or losses and (ii) the translation at the reporting date of assets and liabilities denominated in foreign currencies into euros,USD, which is our functional and presentation currency. For more information on currency exchange fluctuations on our business, please see “Note 26—Financial risk management—Foreign exchange risk” in our consolidated financial statements which are appended to our Annual Report for the section of this annual report titled “Item 11—Quantitativeperiod ended December 31, 2023 and Qualitative Disclosures about Market Risk—Foreign Exchange Risk.”which are incorporated herein by reference. We have no derivative financial instruments to hedge interest rate and foreign currency risk.
Income Tax Expense
We have a history of losses.losses in certain jurisdictions, including Belgium and the Netherlands. We expectmay continue to continue incurringincur losses as we continue to invest in our clinical and pre‑clinicalpre-clinical development programs and our discovery platform, and as we prepareincur costs for the potential futurevarious commercial launch of one or more of our product candidates, if approved.launches and regulatory approvals. Consequently, we do not haverecognize any deferred tax asset regarding certain tax attributes on our statementconsolidated statements of financial position.
We incur current income tax expense and recognize deferred tax assets in various subsidiaries in view of the transfer pricing policy set up between argenx BV and these subsidiaries.
For more information on income tax and deferred tax, please see “Note 24—Income taxes” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
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Capitalization and Indebtedness
The table below sets forth our capitalization as of December 31, 2023 on an actual basis:
|
| As of December 31, | |
(in thousands of $) |
| 2023 (audited) | |
Total current debt (including current portion of non-current debt) |
| $ | — |
Guaranteed |
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| — |
Secured |
|
| — |
Unguaranteed/unsecured |
|
| — |
Total non-current debt (excluding current portion of non-current debt) |
|
| — |
Guaranteed |
|
| — |
Secured |
|
| — |
Unguaranteed/unsecured |
|
| — |
Shareholder equity |
|
| 4,097,507 |
Share capital |
|
| 7,058 |
Share premium |
|
| 5,651,497 |
Legal reserve(s) (1) |
|
| 131,543 |
Retained earnings |
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| (2,404,844) |
Other reserves |
|
| 712,253 |
Total |
| $ | 4,097,507 |
(1) | Legal reserves are the amount of translation differences |
The table below sets forth our indebtedness as of December 31, 2023 on an actual basis:
(in thousands of $) |
| As of December 31, | |
A. Cash | | $ | 20,744 |
B. Cash equivalents (1) | | | 2,028,100 |
C. Other current financial assets (2) | | | 1,131,000 |
D. Liquidity (A + B + C) | | | 3,179,844 |
E. Current financial debt (including debt instruments, but excluding current portion of non-current financial debt) | | | — |
F. Current portion of non-current financial debt (3) | | | 4,646 |
G. Current financial indebtedness (E + F) | | | 4,646 |
H. Net current financial indebtedness (G - D) | | | (3,175,198) |
I. Non-current financial debt (excluding current portion and debt instruments) (3) | | | 15,354 |
J. Debt instruments | | | — |
K. Non-current trade and other payables | | | — |
L. Non-current financial indebtedness (I + J + K) | | | 15,354 |
M. Total financial indebtedness (H + L) | | | (3,159,844) |
(1) | See “Note 11—Cash and cash equivalents” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference. |
(2) | See “Note 10—Financial assets – current” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference. |
(3) | Please note that financial debt balances as presented in the table above do not include any indirect or contingent indebtedness. For more information on the Company’s indirect and contingent indebtedness, please see “Note 29—Commitments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference. |
As of December 31, 2023, current financial debt (as disclosed in item F in the table above) included current liabilities related to short-term leases in the amount of $4.6 million and non-current financial debt (as disclosed in item I in the table above) including non-current liabilities related to long-term leaes in the amount of $15.4 million.
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More information is included in our consolidated financial statements and related notes included in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
Critical Accounting PoliciesEstimates and Significant Judgments and Estimates
In the application of ourthe Company’s accounting policies, wewhich are described above, the Company is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Critical estimates in applying accounting policies
Gross to net adjustments
The following elementsproduct gross sales are areas where key assumptions concerning the future,subject to various deductions, which are primarily composed of rebates to government agencies, distributors, health insurance companies and other key sources of estimation uncertainty at the endmanaged healthcare organizations. These deductions represent estimates of the related obligations, requiring the use of judgment when estimating the effect of these sales deductions on product gross sales for a reporting period, have aperiod. These adjustments are deducted from product gross sales to arrive at product net sales. The significant riskcomponents of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
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Revenue Recognition
Evaluating the criteria forvariable consideration under revenue recognition with respect to our collaboration agreements requires management’s judgment to ensure that all criteria have been fulfilled prior to recognizing any amount of revenue in accordance to International Accounting Standard 18. In particular, such judgments are made with respect to determination ofpolicy summarizes the nature of transactions, whether simultaneous transactions shall be considered as one or more revenue‑generating transactions, allocation ofthese deductions and how the contractual price (upfront and milestone paymentsdeduction is estimated, see “Note 2.17 —Product net sales” in connection with a collaboration agreement) to several elements included in an agreement. All of our revenue‑generating transactions have been subject to such evaluation by management.
We generate revenue under our collaboration agreements and recognize this revenue as follows:
Upfront Payments
Upfront payments for which there are subsequent deliverables are initially reported as deferred income and are recognized as revenue when earned over the period of the development collaboration or the manufacturing obligation. Upfront payments also include license fees received upfront.
Deferred revenue reflects the part of upfront payments that has not been recognized as revenue immediately on receipt of payment and which relates to agreements with multiple components that cannot be separated. Deferred revenue is measured at nominal value.
Milestone Payments
Revenue associated with performance milestones is recognized based upon the achievement of the milestone event if the event is substantive, objectively determinable and represents an important point in the development life cycle of the product candidate.
Research and Development Services Fees
Research and development service fees are recognized as revenue over the life of the research agreement as the required services are provided and costs are incurred. These services are usually in the form of a defined number of FTEs at a specified rate per FTE.
Commercial collaborations resulting in a reimbursement of research and development costs are recognized as revenue as the related costs are incurred. The corresponding research and development expenses are included in research and development expenses in the consolidated financial statements.
With respectstatements which are appended to the allocation of value to the separate elements, we use the stand alone selling prices or management’s best estimates of selling prices to estimate the fair value of the elements and accountour Annual Report for them separately allocated to each deliverable based on the fair value of each individual element and is recognized when the revenue recognition criteria described above are met. Upfront fees under collaboration or licensing agreements are recognized over the expected duration of the performance obligations, unless there is no continuous involvement required. Management estimates this period at the start of the collaboration and validates the remaining estimated collaboration term at each closing date. The recognition of revenue is linked (i) to the period during which we are continuously involved in the development of the product candidates subject to the collaboration and (ii) in relation to the expenses incurred over the period, which defines a percentage of achievement compared to the original budget.
Measurement of Share‑Based Payments
We determine the costs of the share‑based payment plan (i.e., our stock option plan) on the basis of the fair value of the equity instrument at grant date in accordance with IFRS 2. For the determination of the fair value we are using the Black Scholes pricing model. This requires the input into the valuation model of amounts that require judgment, like the estimated useful life of the stock options and the volatility of our stock. Once calculated, the fair value
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of the stock options granted is recognized as an expense in our statement of comprehensive income and not re‑measured subsequently.
In accordance with the terms of our stock option plan, as approved by our shareholders, our employees, certain of our consultants and our directors may be granted options to purchase ordinary shares at an exercise price per ordinary share equal to the average of the closing share prices of the last 30 calendar days preceding the date of the grant by the board of directors. Each stock option converts into one ordinary share upon exercise. No amounts are paid or payable by the beneficiary upon receipt of the option. The stock options carry neither rights to dividends nor voting rights. Stock options may be exercised at any time from the date of vesting to the date of their expiry.
The stock options generally vest as follows:
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No other conditions are attached to the stock options.
On December 31, 2017, the total number of stock options outstanding was 2,862,216, compared to 2,293,636 on December 31, 2016. For the year ended December 31, 2017, no stock options had expired, a total of 203,412 stock options had been exercised2023 and 2,369 stock options had been forfeited.
The expected volatility used inwhich are incorporated herein by reference. After recording these, product net sales represent the Black Scholes model is based, for the periods before 2016, on the historical volatility of peer companies. The peer companies are publicly traded entities active in the business of developing antibody‑based therapeutics, treatments and drugs and are selected taking into consideration the availability of meaningful trading data history and market capitalization.
For grants beginning in 2016, we only considered the historical volatility of our stock price calculated since our initial public offering on Euronext Brussels. The selection of a relevant peer group requires significant judgments and refers to multiple factors which may vary over the time. For instance, we realized that oneCompany’s best estimate of the companies includedcash that we expect to ultimately collect. If in future periods the initial peer group had experienced a clinical failure in 2016, which had a significant impact on its volatility over the considered period. In 2016, we looked at our own historical volatility and compared it to (i) the 2016 volatility of the initial peer group, (ii) the volatility of a selection of Belgian biotechnology companies and (iii) a new peer group combining some of the initial peer group companies and a selection of Belgian biotechnology companies. The conclusions were that some of the entitiesactuals vary from prior period best estimates, this would affect revenue in the initial peer group were no longer deemed representative to estimate our expected volatility. Such entities were replaced in the peer group by selected Belgian biotechnology companies that were deemed more representative of our profile. The inclusion of such Belgian biotechnology companies in the new peer group decreased the average of the volatility of the peer group. We then calculated the impact of the various alternatives on the total fair value of the options granted in 2016 and concluded that the impact of using our own historical volatility would not be significantly different than using the other alternatives over the total vesting period of the stock options and in 2016. Therefore, we believe that excluding peer data as from 2016 is appropriate. We will continue to evaluate the need to use peer data in future years.
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| Stock options granted in |
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| June 2017 |
| December 2017 |
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Number of options granted |
| 120,536 |
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| 653,825 |
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Average fair value of options | € | 7.90 |
| € | 37.10 |
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Share price | € | 17.76 |
| € | 53.50 |
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Exercise price | € | 18.41 |
| € | 21.17 |
|
Expected volatility |
| 36.60 | % |
| 36.14 | % |
Average expected option life (in years) |
| 10 |
|
| 10 |
|
Risk-free interest rate |
| 0.61 | % |
| 0.53 | % |
Expected dividends |
| — | % |
| — | % |
adjustment.
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| Stock options granted in |
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| May 2016 |
| June 2016 |
| December 2016 |
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Number of options granted |
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| 288,950 |
|
| 60,000 |
|
| 363,226 |
|
Average fair value of options |
| € | 5.32 |
| € | 5.46 |
| € | 7.25 |
|
Share price |
| € | 11.10 |
| € | 11.36 |
| € | 14.96 |
|
Exercise price |
| € | 11.47 |
| € | 11.38 |
| € | 14.13 |
|
Expected volatility |
|
| 40.2 | % |
| 39.6 | % |
| 38.0 | % |
Average expected option life (in years) |
|
| 10 |
|
| 10 |
|
| 10 |
|
Risk‑free interest rate |
|
| 0.52 | % |
| 0.46 | % |
| 0.67 | % |
Expected dividends |
|
| — | % |
| — | % |
| — | % |
The grant date fair value of the options in the above table is estimated using the following assumptions:
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The total share‑based payment expense recognized in the consolidated statement of profit and loss and other comprehensive income was €4.3 million for the year ended December 31, 2017 and €2.8 million for the year ended December 31, 2016.
Recognition of Deferred Tax Assets and Liabilities
We are subject to income taxes in the Netherlands and in Belgium and expect to be subject to income taxes in the United States with the formation of our U.S. subsidiary and expansion of U.S. activities. Significant judgment is required in determining the use of net operating loss carry‑forwards and taxation of upfront and milestone payments for income tax purposes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
No tax charge or income was recognized during the reporting periods since we are in a loss‑making position and have a history of losses. We had consolidated tax loss carry forwards of €113.6 million as of December 31, 2017.
In the year ended December 31, 2017, a business restructuring was implemented, resulting in a taxable amount for our Dutch entity, argenx SE, of €2.4 million subject to a Dutch corporate income tax rate of 25%, or a tax amount of €0.6 million.
Deferred income tax assets are recognized for tax losses and other temporary differences to the extent that the realization of the related tax benefit through future taxable profits is probable. We recognize deferred tax assets arising from unused tax losses or tax credits only to the extent the relevant fiscal unity has sufficient taxable temporary differences or if there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilized by the fiscal unity. Our judgment is that sufficient convincing other evidence is not available and therefore, a deferred tax asset is not recognized.
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Results of Operation
Comparison of Years Ended December 31, 20172023 and 20162022
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| 2023 |
| 2022 |
| % Change | ||||||||||||
|
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|
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| |||||||||
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| Year ended | ||||||||||||||||
|
| December 31, | ||||||||||||||||
|
| 2017 |
| 2016 |
| % Change | ||||||||||||
|
|
| (In thousands) |
|
|
| ||||||||||||
Revenue |
| € | 36,415 |
| € | 14,713 |
| 148 | % | |||||||||
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| | | (In thousands) | | | | ||||||||||||
Product net sales |
| $ | 1,190,783 | | $ | 400,720 | | 197 | % | |||||||||
Collaboration revenue |
|
| 35,533 | |
| 10,026 | | 254 | % | |||||||||
Other operating income |
|
| 4,841 |
|
| 2,439 |
| 98 | % | | | 42,278 | | | 34,520 | | 22 | % |
Total operating income |
|
| 41,256 |
|
| 17,152 |
| 141 | % |
|
| 1,268,594 | |
| 445,267 | | 185 | % |
Cost of sales | | | (117,835) | | | (29,431) | | 300 | % | |||||||||
Research and development expenses |
|
| (51,740) |
|
| (31,557) |
| 64 | % | | | (859,492) | | | (663,366) | | 30 | % |
Selling, general and administrative expenses |
|
| (12,448) |
|
| (7,011) |
| 78 | % |
|
| (711,905) | |
| (472,132) | | 51 | % |
Loss from investment in joint venture |
|
| (4,411) | |
| (677) | | 552 | % | |||||||||
Total operating expenses | | | (1,693,643) | | | (1,165,607) | | 45 | % | |||||||||
Operating loss |
|
| (22,932) |
|
| (21,416) |
| 7 | % |
|
| (425,049) | |
| (720,340) | | (41) | % |
Financial income |
|
| 1,250 |
|
| 73 |
| 1,612 | % |
|
| 107,386 | |
| 27,665 | | 288 | % |
Financial expenses |
|
| — |
|
| — |
|
| % | |||||||||
Exchange gains (losses) |
|
| (5,797) |
|
| (31) |
| 18,600 | % | |||||||||
Loss before taxes |
| € | (27,479) |
| € | (21,374) |
| 29 | % | |||||||||
Income tax expense |
|
| (597) |
|
| — |
|
| % | |||||||||
Loss for the period and total comprehensive loss |
| € | (28,076) |
| € | (21,374) |
| 31 | % | |||||||||
Financial expense |
|
| (906) | |
| (3,906) | | (77) | % | |||||||||
Exchange gains/(loss) | | | 14,073 | |
| (32,732) | | (143) | % | |||||||||
Loss for the year before taxes |
| $ | (304,496) | | $ | (729,314) | | (58) | % | |||||||||
Income tax benefit | | | 9,443 | | | 19,720 | | (52) | % | |||||||||
Loss for the year | | $ | (295,053) | | $ | (709,593) | | (58) | % | |||||||||
Weighted average number of shares outstanding |
|
| 24,609,536 |
|
| 18,820,612 |
|
|
| | | 57,169,253 | | | 54,381,371 | | | |
Basic and diluted loss per share (in €) |
|
| (1.14) |
|
| (1.14) |
|
|
| |||||||||
Basic and diluted (loss) per share (in $) | | | (5.16) | | | (13.05) | | | |
RevenueProduct net sales
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) |
|
|
| |||
Upfront payments |
| € | 20,137 |
| € | 9,103 |
| 121 | % |
Milestone payments |
|
| 9,677 |
|
| 500 |
| 1,835 | % |
Research and development service fees |
|
| 6,601 |
|
| 5,110 |
| 29 | % |
Total |
| € | 36,415 |
| € | 14,713 |
| 148 | % |
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
(in thousands of $) |
| 2023 |
| 2022 | ||
United States | | $ | 1,046,592 | | $ | 377,659 |
Japan | | | 56,432 | | | 15,764 |
EMEA | | | 72,852 | | | 7,297 |
China | | | 14,907 | | | — |
Total product net sales |
| $ | 1,190,783 |
| $ | 400,720 |
For the twelve months ended December 31, 2023, the product net sales were mainly related to sales of VYVGART in the U.S., Japan, EU and China and VYVGART SC in the U.S and Europe.
| | | | | | | | | |
| | Year Ended | |||||||
(in thousands of $) | | December 31, | |||||||
| | 2023 | | 2022 |
| 2021 | |||
Product gross sales | | $ | 1,342,148 | | | 446,923 | | | - |
Gross to net adjustment | | | (151,365) | | | (46,203) | | | - |
Product net sales | | | 1,190,783 | | | 400,720 | | | - |
114
Collaboration revenue
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2023 |
| 2022 |
| % Change | |||
| | | (In thousands) | | | | |||
AbbVie | | | 30,000 | | | — | | n.a. | % |
Other | | | — | | | 5,365 | | (100) | % |
Milestone payments | | | 30,000 | | | 5,365 | | 459 | % |
Other | | | — | | | 424 | | (100) | % |
Research and development service fees | | | — | | | 424 | | (100) | % |
Zai Lab | | | 5,533 | | | 4,238 | | 31 | % |
Other collaboration revenues | | | 5,533 | | | 4,238 | | 31 | % |
Total collaboration revenue | | $ | 35,533 | | $ | 10,026 | | 254 | % |
Our collaboration revenue increased by €21.7$26 million to $36 million for the year ended December 31, 2017 to reach €36.4 million,2023, compared to €14.7$10 million for the year ended December 31, 2016, primarily related to a €11.0 million increase2022. The collaboration revenue recognized in upfront payments and a €9.2 million increase in milestone payments.
The increase of €11.0 million in upfront payments for the year ended December 31, 2017 compared2023 was mainly the result of the recognition of a $30 million development milestone related to the AbbVie collaboration agreement. The revenue recognized during the year ended December 31, 2016 corresponded principally2022, from milestone payments primarily relates to €5 million triggered by the payments received in connection with entering into the collaboration agreements withoption exercised by LEO Pharma in May 2015 and with AbbVie in April 2016. These upfront payments were recognized in revenue based on the progress of the research and development programs that are the subject of both collaborations.
The milestone payment recognized for the year ended December 31, 2017 related to payments received under the AbbVie and LEO Pharma collaborations. The milestone payments recognized for the year ended December 31, 2016 related to a payment received underenter into the LEO Pharma collaboration. In 2016, no milestone payment was received from AbbVie.
Collaboration Agreement for ARGX-112. The increase in revenue recognition from “Other collaboration revenues” of €1.5$1 million was primarily driven by the royalties on net sales of VYVGART in research and development service fees for the year ended December 31, 2017 compared to the year ended December 31, 2016 related to payments under the collaboration agreements with LEO Pharma and Shire.
129
Greater China through Zai Lab.
Other Operating Incomeoperating income
| | | | | | | | | | |||||||||
| | Year ended | ||||||||||||||||
| | December 31, | ||||||||||||||||
|
| 2023 |
| 2022 |
| % Change | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Year ended | ||||||||||||||||
|
| December 31, | ||||||||||||||||
|
| 2017 |
| 2016 |
| % Change | ||||||||||||
|
|
| (In thousands) | |||||||||||||||
Government grants |
| € | 422 |
| € | 779 |
| (46) | % | |||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| | | (In thousands) | |||||||||||||||
Grants |
| $ | 2,538 | | $ | 2,186 | | 16 | % | |||||||||
Research and development incentives |
|
| 983 |
|
| 641 |
| 53 | % |
|
| 27,815 | |
| 19,502 | | 43 | % |
Payroll tax rebates |
|
| 3,436 |
|
| 1,019 |
| 237 | % |
|
| 11,925 | |
| 8,576 | | 39 | % |
Change in fair value on non-current financial assets | | | — | | | 4,256 | | (100) | % | |||||||||
Total |
| € | 4,841 |
| € | 2,439 |
| 99 | % |
| $ | 42,278 | | $ | 34,520 | | 22 | % |
Other operating income increased by €2.4$8 million to $42 million for the year ended December 31, 2017 to €4.8 million,2023, compared to €2.4$35 million for the year ended December 31, 2016. For the year ended December 31, 2017, we accrued research and development incentives income of €1.02022. The $8 million compared to €0.6 million for the year ended December 31, 2016, corresponding to Belgian research and development incentives with regard to incurred research and development expenses which will be paid to us in cash after a five‑year period, if not offset against the taxable basis over the respective period. We accounted for €3.4 million of payroll tax rebates in the year ended December 31, 2017, compared to €1.0 million in the year ended December 31, 2016, for employing certain research and development personnel.increase was primarily driven by:
● | the increase in research and development incentives due to a Belgian research and development tax incentive scheme, as a result of the overall increased research and development costs incurred. |
● | the increase in payroll tax rebates for the year ended December 31, 2023, as a result of higher research and development personnel expenses eligible for rebates for the year ended December 31, 2023; and |
● | a decrease of $4 million due to the fact that there was no change in fair value on our profit share in AgomAb for the year ended December 31, 2023; |
For more information regarding governmental policies that could affect our operations, see “ItemItem 4.B.— “Business Overview—Government Regulation.Overview—Healthcare Law and Regulation.”
115
Research and Development Expensesdevelopment expenses
| | | | | | | | | | |||||||||
| | Year ended | ||||||||||||||||
| | December 31, | ||||||||||||||||
|
| 2023 |
| 2022 |
| % Change | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Year ended | ||||||||||||||||
|
| December 31, | ||||||||||||||||
|
| 2017 |
| 2016 |
| % Change | ||||||||||||
|
|
| (In thousands) | |||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
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| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| | | (In thousands) | |||||||||||||||
Personnel expense |
| € | 16,473 |
| € | 9,844 |
| 67 | % |
| $ | 226,344 | | $ | 162,010 | | 40 | % |
External research and development expenses |
|
| 27,893 |
|
| 17,562 |
| 59 | % |
|
| 483,192 | |
| 366,955 | | 32 | % |
Materials and consumables |
|
| 1,562 |
|
| 1,180 |
| 32 | % |
|
| 4,057 | |
| 2,396 | | 69 | % |
Depreciation and amortization |
|
| 446 |
|
| 335 |
| 33 | % |
|
| 105,546 | |
| 102,132 | | 3 | % |
IT expenses | | | 19,935 | | | 12,678 | | 57 | % | |||||||||
Other expenses |
|
| 5,366 |
|
| 2,636 |
| 104 | % |
|
| 20,418 | |
| 17,194 | | 19 | % |
Total |
| € | 51,740 |
| € | 31,557 |
| 64 | % |
| $ | 859,492 | | $ | 663,366 | | 30 | % |
Our researchResearch and development expenses totaled €51.7$859 million and €31.6$663 million for the years ended December 31, 20172023 and 2016, respectively,2022, respectively. The increase of $196 million in fiscal year 2023 as compared to fiscal 2022 is primarily as a result of higher externaldriven by Personnel expense and External research and development expenses.
Personnel expense primarily relates to internal and external personnel. The increase of €6.6 million in personnel expense for the year ended December 31, 2017 corresponded principally to (i) costs associated with additional research and development personnel and (ii) increased share‑basedalso includes share-based compensation expenseexpenses related to the grant of stock options and RSUs to our research and development employees (including an increase of €3.2 million of social security costs on stock options granted to certain Belgian and non-Belgian resident employees).employees. We employed 58 employeeson average 607 full-time equivalents in our research and development function onfunctions in the year ended December 31, 2017,2023, compared to 48 employees on475 in the year ended December 31, 2016.2022.
Our externalExternal research and development expenses for the year ended December 31, 20172023 totaled €27.9to $483 million, compared to €17.6$367 million for the year ended December 31, 2016, reflecting higher2022. The expense reflects clinical trial costs and manufacturing expenses related to the development of our product candidate portfolio. The increase of €2.7 million in other expenses for the year ended December 31, 2017 corresponded to (i) €0.1 million for patent expenses related to the growth of our product candidate portfolio, (ii) €2.3 million for license fees we paid to one of our licensors as a result of the signing of the AbbVie agreement, and (iii) €0.3 million for expenses corresponding principally to travel expenses, clinical trial
130
insurance premiums and recruitment fees for research and development employees. The table below provides additional detail on our externalExternal research and development expenses by program:
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2023 |
| 2022 |
| % Change | |||
| | | (In thousands) | ||||||
efgartigimod |
| $ | 361,676 | | $ | 280,572 | | 29 | % |
cusatuzumab |
|
| 14,298 | |
| 13,554 | | 5 | % |
empasiprubart | | | 47,636 | | | 32,384 | | 47 | % |
Other programs (*) |
|
| 59,582 | |
| 40,445 | | 47 | % |
Total |
| $ | 483,192 | | $ | 366,955 | | 32 | % |
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) | ||||||
ARGX‑113 |
| € | 12,382 |
| € | 8,988 |
| 38 | % |
ARGX‑110 |
|
| 3,144 |
|
| 2,914 |
| 8 | % |
Other programs |
|
| 12,367 |
|
| 5,660 |
| 118 | % |
Total |
| € | 27,893 |
| € | 17,562 |
| 59 | % |
(*) Other programs include general expenses not allocated to specific program of $27 million in 2023 and $23 million in 2022.
External research and development expenses for our lead product candidate ARGX‑113efgartigimod totaled €12.4$362 million for the year ended December 31, 2017,2023, compared to €9.0$281 million for the year ended December 31, 2016. The2022. This increase of €3.4 million of external research and development expenses for the year ended December 31, 2017 for ARGX‑113 correspondedcorresponds primarily to increased manufacturing and clinical development activities in relation with (i) the advancementto:
● | the execution of two Phase 3 clinical trials in MG Ph3b and Pediatric |
● | the execution of two Phase 3 clinical trials in CIDP; |
● | the execution of two Phase 3 clinical trial in PV and PF; |
● | the execution of Phase 2 and 3 clinical trials in BP, Myositis, LN, MN, AMR, PC-POTS SjD, TED and AAV; |
● | the execution of multiple Phase 2 clinical trials in empasiprubart in MMN, DGF and DM |
● | the execution of one HV clinical trial in ARGX-119 |
116
● | the execution of pre-clinical activities |
External research and development expenses for ARGX‑110empasiprubart totaled €3.1 million for the year ended on December 31, 2017 compared to €2.9$48 million for the year ended December 31, 2016.2023 compared to $32 million for the year ended December 31, 2022. This increase of €0.2$15 million related principallywas due to the progressionramp up of the Phase 1/2Ph2 clinical trialtrials in patients with AML or high-risk MDS.MMN, DGF and DM and futher investments in Discovery activities.
External research and development expenses on other programs increased by €6.7$19 million to €12.4$60 million for the year ended December 31, 2017,2023, compared to €5.7$40 million for the year ended December 31, 2016. This increase was primarily due to external2022. Of the total External research and development expenses incurred under our collaboration agreements with LEO Pharma and AbbVie.expense, $27 million relates to general allocation of expenses.
Selling, Generalgeneral and Administrative Expensesadministrative expenses \
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 6,745 |
| € | 3,256 |
| 107 | % |
Consulting fees |
|
| 3,289 |
|
| 2,563 |
| 28 | % |
Supervisory board |
|
| 621 |
|
| 446 |
| 39 | % |
Office costs |
|
| 1,793 |
|
| 746 |
| 140 | % |
Total |
| € | 12,448 |
| € | 7,011 |
| 78 | % |
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2023 |
| 2022 |
| % Change | |||
| | | (In thousands) | ||||||
Personnel expenses |
| $ | 303,033 | | $ | 234,740 | | 29 | % |
Marketing services |
|
| 202,146 | |
| 115,950 | | 74 | % |
Professional fees | | | 108,820 | | | 62,620 | | 74 | % |
Supervisory board |
|
| 8,362 | |
| 6,912 | | 21 | % |
Depreciation and amortization |
|
| 2,366 | |
| 2,211 | | 7 | % |
IT expenses | | | 20,408 | | | 17,431 | | 17 | % |
Other expenses | | | 66,770 | | | 32,268 | | 107 | % |
Total Selling, general and administrative expenses |
| $ | 711,905 | | $ | 472,132 | | 51 | % |
Our selling,Selling, general and administrative expenses totaled €12.4$712 million and €7.0$472 million for the years ended December 31, 20172023 and 2016,2022, respectively. The increase of €5.4 million in our selling,Selling, general and administrative expenses for the year ended December 31, 20172023 was principally due to:resulting from:
● |
|
● |
|
● | increased costs |
● | continued investment in our |
|
|
131
|
|
|
|
On December 31, 2017, weWe employed 15 employeeson average 681 full-time equivalents in our selling, general and administration function,administrative functions in the year ended December 31, 2023, compared to 10 employees on442 in the year ended December 31, 2016.2022.
Financial Income (Expense)income and (expense)
For the year ended December 31, 2023, financial income amounted to $107 million compared to $28 million for the year ended December 31, 2022. The increase of $80 million in 2023 related primarily to higher interest.
For the year ended December 31, 2017,2023, financial incomeexpense amounted to €1.3$1 million compared to €0.1$4 million for the year ended December 31, 2016. The increase2022.
117
Exchange Gains (Losses)gains (losses)
Exchange lossesgains totaled €5.8$14 million for the year ended December 31, 2017. The increase is mainly attributable2023, compared to unrealized exchange rate losses on our cash and current financial assets position in U.S. dollars due to the unfavorable fluctuation of the EUR/USD exchange rate.
Comparison of Years Ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) |
|
|
| |||
Revenue |
| € | 14,713 |
| € | 6,854 |
| 115 | % |
Other operating income |
|
| 2,439 |
|
| 3,101 |
| (21) | % |
Total operating income |
|
| 17,152 |
|
| 9,955 |
| 72 | % |
Research and development expenses |
|
| (31,557) |
|
| (20,635) |
| 53 | % |
General and administrative expenses |
|
| (7,011) |
|
| (4,925) |
| 42 | % |
Operating loss |
|
| (21,416) |
|
| (15,605) |
| 37 | % |
Financial income |
|
| 73 |
|
| 112 |
| (35) | % |
Financial expenses |
|
| — |
|
| — |
|
| % |
Exchange gains (losses) |
|
| (31) |
|
| 181 |
| (117) | % |
Loss before taxes |
| € | (21,374) |
| € | (15,312) |
| 40 | % |
Income tax income/(expense) |
|
| — |
|
| — |
|
| % |
Loss for the period and total comprehensive loss |
| € | (21,374) |
| € | (15,312) |
| 40 | % |
Weighted average number of shares outstanding |
|
| 18,820,612 |
|
| 15,734,007 |
|
|
|
Basic and diluted loss per share (in €) |
|
| (1.14) |
|
| (0.97) |
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) |
|
|
| |||
Upfront payments |
| € | 9,103 |
| € | 2,194 |
| 315 | % |
Milestone payments |
|
| 500 |
|
| 343 |
| 46 | % |
Research and development service fees |
|
| 5,110 |
|
| 4,317 |
| 18 | % |
Total |
| € | 14,713 |
| € | 6,854 |
| 115 | % |
132
Our revenue increased by €7.8$33 million for the year ended December 31, 20162022. The decrease was mainly attributable to €14.7 million, compared to €6.9 million forunrealized exchange rate gains on the cash, cash equivalents and current financial assets position in euro during the year ended December 31, 2015.
The increase of €6.9 million in upfront payments for2023 as compared to unrealized exchange rate losses on the cash, cash equivalents and current financial assets position during the year ended December 31, 2016 compared to the year ended December 31, 2015 corresponds principally to the payments received in connection with entering into the collaboration agreements with LEO Pharma in May 2015 and with AbbVie in April 2016. These upfront payments were recognized in revenue based on the progress of the research and development programs that are the subject of both collaborations.2022.
The milestone payment recognized for the year ended December 31, 2016 related to a payment received under the LEO Pharma collaboration. The milestone payments recognized for the year ended December 31, 2015 related to a €0.2 million payment received from the Leukemia and Lymphoma Society under a partnership agreement relating to ARGX‑110 and a €0.1 million milestone payment received from Bird Rock Bio following the announcement in September 2015 of the first human dosing of ARGX‑109 for the treatment of autoimmune disorders including rheumatoid arthritis.
The increase of €0.8 million in research and development service fees for the year ended December 31, 2016 compared to the year ended December 31, 2015 related to payments under the collaboration agreements with LEO Pharma and Shire.
Other Operating Income
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
Government grants |
| € | 779 |
| € | 1,598 |
| (51) | % |
Research and development incentives |
|
| 641 |
|
| 608 |
| 5 | % |
Payroll tax rebates |
|
| 1,019 |
|
| 895 |
| 14 | % |
Total |
| € | 2,439 |
| € | 3,101 |
| (21) | % |
Other operating income decreased by €0.7 million for the year ended December 31, 2016 to €2.4 million, compared to €3.1 million for the year ended December 31, 2015, as a result of a decrease in grants received from the Flemish government. For the years ended December 31, 2016 and 2015, we accrued research and development incentives income of €0.6 million, corresponding to Belgian research and development incentives with regard to incurred research and development expenses which will be paid to us in cash after a five‑year period, if not offset against the taxable basis over the respective period. We received €1 million of payroll tax rebates for the year ended December 31, 2016, compared to €0.9 million for the year ended December 31, 2015, for employing certain research and development personnel.
Research and Development Expenses
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 9,844 |
| € | 6,665 |
| 48 | % |
External research and development expenses |
|
| 17,562 |
|
| 11,653 |
| 51 | % |
Materials and consumables |
|
| 1,180 |
|
| 1,050 |
| 12 | % |
Depreciation and amortization |
|
| 335 |
|
| 196 |
| 71 | % |
Other expenses |
|
| 2,636 |
|
| 1,071 |
| 146 | % |
Total |
| € | 31,557 |
| € | 20,635 |
| 53 | % |
Our research and development expenses totaled €31.6 million and €20.6 million for the years ended December 31, 2016 and 2015, respectively. The decrease of €1.8 million in personnel expense for the year ended December 31, 2016 corresponded principally to (i) costs associated with additional research and development personnel
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and (ii) increased share‑based compensation expense related to the grant of stock options to our research and development employees. We employed 48 employees in our research and development function on December 31, 2016, compared to 35 employees on December 31, 2015.
Our external research and development expenses for the year ended December 31, 2016 totaled €17.6 million, compared to €11.7 million for the year ended December 31, 2015, reflecting higher clinical trial costs related to the development of our product candidate portfolio but lower manufacturing expenses compared to the same period in 2015. The increase of €1.6 million in other expenses for the year ended December 31, 2016 corresponded to (i) patent expenses of €0.3 million related to the growth of our product portfolio, (ii) license fees of €0.7 million we paid to one of our licensors as a result of the signing of the AbbVie agreement, and (iii) €0.6 million of expenses corresponding principally to travel expenses, clinical trial insurance premiums and recruitment for research and development employees. The table below provides additional detail on our external research and development expenses by program:
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| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
ARGX‑113 |
| € | 8,988 |
| € | 4,148 |
| 117 | % |
ARGX‑110 |
|
| 2,914 |
|
| 3,816 |
| (24) | % |
Other programs |
|
| 5,660 |
|
| 3,689 |
| 53 | % |
Total |
| € | 17,562 |
| € | 11,653 |
| 51 | % |
External research and development expenses for our lead product candidate ARGX‑113 totaled €9.0 million for the year ended December 31, 2016, compared to €4.1 million for the year ended December 31, 2015. The increase of €4.8 million of external research and development expenses for the year ended December 31, 2016 for ARGX‑113 corresponded to increased manufacturing and clinical development activities linked with the preparation of the Phase 2 clinical trials for MG and ITP. External research and development expenses for ARGX‑110 decreased by €0.9 million to €2.9 million during the year ended on December 31, 2016 compared to €3.8 million for the year ended December 31, 2015. For the year ended December 31, 2016, we increased clinical development expenses in connection with the preparation of the TCL and AML clinical trials, offset by a reduction in expenses on drug material compared to the year ended December 31, 2015. External research and development expenses on other programs increased by €2.0 million to €5.7 million for the year ended December 31, 2016, compared to €3.7 million for the year ended December 31, 2015. This increase was primarily due to external research and development expenses incurred under our collaboration agreements with LEO Pharma and AbbVie.
General and Administrative Expenses
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|
|
|
|
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|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 3,256 |
| € | 1,607 |
| 103 | % |
Consulting fees |
|
| 2,563 |
|
| 2,395 |
| 7 | % |
Supervisory board |
|
| 446 |
|
| 165 |
| 170 | % |
Office costs |
|
| 746 |
|
| 758 |
| (2) | % |
Total |
| € | 7,011 |
| € | 4,925 |
| 42 | % |
Our general and administrative expenses totaled €7.0 million and €4.9 million for the years ended December 31, 2016 and 2015, respectively. The increase in our general and administrative expenses for the year ended December 31, 2016 was principally due to (i) an increase of €1.6 million of personnel expenses related to employees recruited to strengthen our general and administrative activities, including the share based compensation expenses related to the grant of stock options to our general and administrative employees, (ii) an increase of €0.2 million of consulting fees related to investor relations, business development, IT, legal and audit activities and (iii) an increase of €0.3 million of supervisory board expenses due to the reclassification of share based compensation expenses related to the grant of stock options to board members from personnel expenses to supervisory board expenses and to increases in
134
the remuneration and travel expenses of the non‑executive members of our board of directors. On December 31, 2016, we employed 10 employees in our general and administration function, compared to six employees on December 31, 2015.
Financial Income (Expense)
For the year ended December 31, 2016, financial income amounted to €0.07 million compared to €0.1 million for the year ended December 31, 2015.
Exchange Gains (Losses)
The exchange losses of €0.03 million for the year ended December 31, 2016 and the exchange gains of €0.2 million recorded for the year ended December 31, 2015 were both realized by converting foreign currencies into euros.
B. LIQUIDITY AND CAPITAL RESOURCES
Sources of Funds
Since our inception in 2008, we have invested most of our resources toin developing our product candidates, building our intellectual property portfolio, developing our supply chain, conducting business planning, raising capital and providing general and administrative support for these operations. We do not currently have any2 products approved productsby the FDA and have never generated any revenue fromas of the year ended December 31, 2022, net product sales.sales also started to contribute to the funding of our operations. To date, we have funded our operations through public and private placements of equity securities, upfront, milestone and expense reimbursement payments received from our collaborators, funding from governmental bodies and interest income from the investment of our cash, cash equivalents and financial assets. Through December 31, 2017,2023, we have raised gross proceeds of €474.7 million$5.6 billion from private and public offerings of equity securities, received aggregate gross proceedssecurities. We have made product net sales of €77.3 million from our collaborators, and received €13.2 million in grants and incentives from governmental bodies.$1.2 billion during the twelve months ended December 31, 2023.
Our cash flows may fluctuate, and are difficult to forecast and will depend on many factors. On December 31, 2017,2023, we had cash, cash equivalents and current financial assets of €359.8 million.$3,180 million, compared to $2,193 million on December 31, 2022.
We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than operating leases.a line of credit totalling to $7.2 million, leases and our commitments to Halozyme, Lonza and Fujifilm which are detailed in “Note 29—Commitments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
For more information as to the risks associated with our future funding needs, see the section of this annual report titled “ItemItem 3.D.— “Risk Factors—RisksFactors—Risk Factors Related to Ourargenx’s Financial Position and Need for Additional Capital.Capital.”
For more information as to our financial instruments, please see “Note 6—“Note 26—Financial instruments and financial risk management—Overview of financial instruments”management” in our consolidated financial statements which are appended to this annual report.
our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
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Cash Flows
Comparison for the Years Ended December 31, 20172023 and 20162022
The table below summarizes our cash flows for the years ended December 31, 20172023 and 2016.2022.
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| | Year ended | ||||||||||||||||
| | December 31, | ||||||||||||||||
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| 2023 |
| 2022 |
| Variance | ||||||||||||
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| |||||||||
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| Year ended | ||||||||||||||||
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| December 31, | ||||||||||||||||
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| 2017 |
| 2016 |
| Variance | ||||||||||||
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| (In thousands) | ||||||||||||||||
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| | (In thousands) | ||||||||||||||||
Cash and cash equivalents at beginning of the period |
| € | 89,897 |
| € | 35,514 |
| € | 54,383 | | $ | 800,740 | | $ | 1,334,676 | | $ | (533,936) |
Net cash flows (used in) / from operating activities |
|
| (36,546) |
|
| 10,599 |
|
| (47,145) |
|
| (420,327) | |
| (862,807) | |
| 442,480 |
Net cash flows (used in) / from investing activities |
|
| (162,052) |
|
| (806) |
|
| (161,246) | |||||||||
Net cash flows (used in) / from financing activities |
|
| 305,365 |
|
| 44,621 |
|
| 260,744 | |||||||||
Effect of exchange rate differences on cash and cash equivalents |
|
| (5,797) |
|
| (31) |
|
| (5,766) | |||||||||
Net cash flows from / (used in) investing activities |
|
| 308,210 | |
| (461,184) | |
| 769,394 | |||||||||
Net cash flows from / (used in) financing activities |
|
| 1,336,727 | |
| 843,757 | |
| 492,970 | |||||||||
Exchange gains/(losses) on cash and cash equivalents |
|
| 23,494 | |
| (53,702) | |
| 77,196 | |||||||||
Cash and cash equivalents at end of the period |
| € | 190,867 |
| € | 89,897 |
| € | 100,970 | | $ | 2,048,844 | | $ | 800,740 | | $ | 1,248,104 |
Net Cash (Used in) Provided by Operating Activitiescash used in operating activities
Net cash outflow fromused in our operating activities increaseddecreased by €48.1$442 million to a net outflow of €36.5$420 million for the year ended December 31, 2017,2023, compared to a net inflowoutflow of €10.6$863 million for the year ended December 31, 2016. 2022.
The increaseddecrease in net cash outflow used in operating activities results primarily from an increase in net product sales related to VYVGART and VYVGART SC, partly offset by:
(i) | the increase in Research and development expenses incurred in relation to the manufacturing and clinical development activities of efgartigimod and the advancement of other clinical, preclinical and discovery-stage product candidate; |
(ii) | the increase in personnel expenses, marketing expenses and consulting expenses incurred for the commercial expansion of VYVGART and VYVGART SC; and |
(iii) | the further increase in working capital as a result of our inventory levels, including prepaid inventory. |
Net cash used in operating/ from investing activities
Investing activities for the year ended December 31, 2017 resulted2023, consist primarily from increased researchof the net desinvestment of $272 million in current financial assets, and development expensesinterests received, partly offset by payments related to regulatory and sales based milestones to Halozyme and investement in relation to the manufacturing and clinical development activities of ARGX-113 and ARGX-110 and the advancement of other preclinical and discovery-stage product candidate (including external research and development expenses incurred under the LEO Pharma and AbbVie collaborations). The netOncoVerity, resulting in a cash inflow of $308 million.
Investing activities for the year ended December 31, 2016 is related to the upfront payment of $40 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) received from AbbVie in April 2016.
Net Cash Provided by (Used in) Investing Activities
Investing activities consist2022, consists primarily of the acquisitionnet investment of $369 million in current financial assets, and purchase of laboratory equipment and interesta priority review voucher for $102 million, partly offset by interests received, from the placements of ourresulting in a cash and cash equivalents and current financial assets. Cash flow from investing activities represented a net outflow of €162.1 million for the year ended December 31, 2017, compared to a net outflow of €0.8 million for the year ended December 31, 2016. The net outflow for the year ended December 31, 2017 related to (i) the acquisition of €162.1 million of current financial assets, including money market funds and a U.S. dollar term deposit account, (ii) the purchase of € 0.3 million of office, information technology and laboratory equipment, and less (iii) € 0.4 million interest received from the placements of our cash, cash equivalents and current financial assets. The net outflow for the year ended December 31, 2016 related to €0.7 million to purchase office and laboratory equipment and €0.1 million to purchase information technology equipment.$461 million.
Net Cash Providedcash provided by Financing Activitiesfinancing activities
Financing activities primarily consist of net proceeds from our private placements and public offerings of our securities and exercise of stock options. The net cash inflow from financing activities was €305.4$1,337 million for the year ended December 31, 2017,2023, compared to a net cash inflow of €44.6$844 million for the year ended December 31, 2016.2022. The net cash inflow for the year ended December 31, 2017 wasinflows were attributed to (i) €93.2 million$1.2 billion net cash proceeds from our initial U.S. publicglobal offering of ADSs on the Nasdaq Global Select Market in May 2017 (based on the exchange rate in effect of the date the proceeds were received), (ii) €211.5 millionJuly 2023, compared to $0.8 billion net cash proceeds offrom our follow onglobal offering of ADSs on the Nasdaq Global Select Market in December 2017 (based on the exchange rate in effect of the date the proceeds were received)February 2022 and (iii) €0.7(ii) $158 million proceeds received from the exercise of stock options. The net cash inflow for the year ended December 31, 2016 was attributedoptions in 2023, compared to two private placements of our ordinary shares issued to institutional investors in January and June 2016 for total gross proceeds of €46.0 million.
136
Comparison for the Years Ended December 31, 2016 and 2015
The table below summarizes our cash flows for the years ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| Variance | |||
|
| (In thousands) | |||||||
Cash and cash equivalents at beginning of the period |
| € | 35,514 |
| € | 32,180 |
| € | 3,334 |
Net cash flows (used in) / from operating activities |
|
| 10,599 |
|
| (13,897) |
|
| 24,496 |
Net cash flows (used in) / from investing activities |
|
| (806) |
|
| 16,812 |
|
| (17,618) |
Net cash flows (used in) / from financing activities |
|
| 44,621 |
|
| 238 |
|
| 44,383 |
Effect of exchange rate differences on cash and cash equivalents |
|
| (31) |
|
| 181 |
|
| (212) |
Cash and cash equivalents at end of the period |
| € | 89,897 |
| € | 35,514 |
| € | 54,383 |
Net Cash (Used in) Provided by Operating Activities
Cash provided by operating activities for the year ended December 31, 2016 was a net inflow of €10.6 million. Cash used by operating activities for the year ended December 31, 2015 was a net outflow of €13.9 million. The net cash inflow for the year ended December 31, 2016 related to the upfront payment of $40 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) received from AbbVie in April 2016. The net cash outflow for the year ended December 31, 2015 related to increased operating losses due to increased clinical trial and product candidate manufacturing activities in 2015.
Net Cash Provided by (Used in) Investing Activities
Investing activities consist primarily of purchase of laboratory equipment and interest received from the placements of our cash and cash equivalents and current financial assets. Cash flow from investing activities represented a net outflow of €0.8$93 million for the year ended December 31, 2016, compared to a net inflow2022.
119
Net Cash Provided by Financing Activities
Financing activities consist of net proceeds from our private placements and public offerings of our securities and exercise of stock options. The net cash inflow from financing activities was €44.6 million for the year ended December 31, 2016, compared to €0.2 million for the year ended December 31, 2015. The net cash inflow for the year ended December 31, 2016 was attributed to two private placements of our ordinary shares issued to institutional investors in January and June 2016 for total gross proceeds of €46.0 million.
Operating and Capital Expenditure Requirements
We have never achieved profitability and, as of December 31, 2017,2023, we had accumulated losses of €100.6$2,405 million. Our losses resulted principally from costs incurred in research and development, preclinical testing and clinical development of our research programs, and from general and administrative costs associated with commercial roll out and expansion. We expectanticipate that our operating expenses will increase as we intend to continue to incur significant operating losses for the foreseeable future as we continue ourconduct research and development and continue our efforts to expand our sales, marketing and seekdistribution infrastructure. Although we have generated net product sales of $1.2 billion from global product net sales of VYVGART and VYVGART SC for the treatment of gMG in fiscal year 2023, which supports our current path to obtainprofitability, we can provide no assurances that we will be able to achieve or sustain profitability based on this indication alone or that we will be able to receive regulatory approval of and commercializationcommercialize VYVGART and VYVGART SC in other indications or in other countries.
On the basis of our product candidates.
Wecurrent assumptions, we expect that our existing cash and cash equivalents and current financial assets will enable us to fund our operating expenses and capital expenditure requirements through at least the next 12twelve months. We have based this estimateOur future equity capital will depend on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.multiple factors. Because of the numerous risks and uncertainties associated with the development and commercialization of ARGX‑113, ARGX‑110efgartigimod and our other product candidates and discovery stage programs and because the extent to which we may enter into collaborations with third parties for the development of these product candidates is unknown, we are unable to
137
estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements for ARGX‑113, ARGX‑110efgartigimod and our other product candidates and discovery stage programs will depend on many factors, including:
● |
| the progress, timing and completion of preclinical testing and clinical trials for our current or any future product candidates; |
● |
| the number of potential new product candidates we identify and decide to develop; |
● |
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|
|
|
|
|
| the time and costs involved in obtaining regulatory approval for our product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of our product candidates; |
● |
| selling and marketing activities undertaken in connection with the commercialization of VYVGART, VYVGART SC or potential commercialization of any of our current or any future product candidates, if approved, and costs involved in the creation of an effective sales and marketing organization; |
● |
|
|
● | the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our current or any future product candidates; |
● | the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties; |
● | the maintenance of our existing collaboration agreements and entry into new collaboration agreements; |
● | developments related to the global economic uncertainties and political instability. |
For more information as to the risks associated with our future funding needs, see the section of this annual report titled “ItemItem 3.D.— “Risk Factors—RisksFactors— Risk Factors Related to Ourargenx’s Financial Position and Need for Additional Capital.Capital.”
120
Treasury and Liquidity Policy
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSESThe Company has adopted a policy whereby cash and cash equivalents and current financial assets are invested with several highly reputable banks and financial institutions. The Company holds its cash and cash equivalents mainly with different banks which are independently rated with a minimum rating of ‘A-’. The Company also holds short-term investment funds in the form of money market funds with a recommended investment horizon of six months or shorter but with a low historical volatility. These money market funds are highly liquid investments, can be readily convertible into a known amount of cash. The Company has adopted a policy whereby money market funds must have an average rating of “BBB” or higher.
For a discussion ofmore information as to our researchtreasury policy and development activities,liquidity, please see the sections of“Note 26—Financial risk management” in our consolidated financial statements which are appended to this annual report titled “Item 4.B.—Business Overview” and “Item 5.A.—Operating Results.”
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or eventsAnnual Report for the period from January 1, 2017 toended December 31, 2017 that2023 and which are reasonably likely to haveincorporated herein by reference.
Working capital statement
In accordance with item 3.1 of Annex 11 of the Commission Delegated Regulation (EU) 2019/980 we make the following statement:
In our opinion, the working capital of the Company is sufficient for the Company’s present requirements, at least for a material effect on our net revenues, income, profitability, liquidity or capital resources, or that causedperiod of 12 months from the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. For a discussion of trends, see the sectionsdate of this annual report titled “Item 4.B.—Business Overview,” “Item 5.A.—Operating Results”, and “Item 5.B.—Liquidity and Capital Resources.”Annual Report.
E. OFF-BALANCE SHEET ARRANGEMENTSOff-Balance Sheet Arangements
We did not have during the periods presented, and we do not currently have, any off‑balanceoff-balance sheet arrangements, as defined in the applicable rules and regulations, of the SEC, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
For a discussion of our research and development policies, see Item 4 “Information on the Company” and Item 5 “Operating and Financial Review and Prospects”.
D. TREND INFORMATION
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the current financial period that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity, capital resources or prospects, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
Following the approval of VYVGART and VYVGART SC for the treatment of gMG in the U.S. by the FDA in 2021 and 2023 respectively, we transitioned from a clinical-stage to a commercial-stage biotechnology company. We have now commercialized VYVGART in U.S., the EU, Japan, China (through our partner Zai Lab), Israel (through our partner Medison) and Canada, and VYVGART SC in U.S and Germany. We are working to expand commercialization in other jurisdictions, and to launch new products and product candidates, including into new indications.
There has been no significant change in the financial performance or the financial position of the Group since the balance sheet date of December 31, 2023.
For more information, please refer to Item 4.B. “Business Overview”, Item 5.A. “Operating Results”, Item 5.B. “Liquidity and Capital Resources” and to “Note 29—Commitments” in our consolidated financial statements which are appended to this Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
138121
E. CRITICAL ACCOUNTING ESTIMATES
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONSSee Item 5.A. “Operating Results—Critical Accounting Estimates”.
The table below summarizes our contractual obligations at December 31, 2017.
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| Total |
| 1 year |
| 1–3 years |
| 3–5 years |
| 5 years | |||||
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| (In thousands) | |||||||||||||
Operating lease commitments |
| € | 1,526 |
| € | 1,028 |
| € | 465 |
| € | 33 |
| € | — |
Purchase obligation |
| € | 13,277 |
| € | 8,363 |
| € | 4,915 |
| € | — |
| € | — |
We signed a lease agreement effective April 2016 for new laboratory and office space in Zwijnaarde, Belgium. This lease agreement is for a period of nine years starting from April 1, 2016, with the possibility to terminate the lease by giving a notice of at least 12 months in advance at the occasion of the third and sixth anniversary of the agreement. Our operating lease commitments include a lease plan for company cars with maturity dates up to four years.
For our office in the Netherlands, we have a lease agreement renewable on an annual basis. For our office in Boston, Massachusetts, we have a lease agreement renewable on an annual basis.
The purchase obligation described above relates to contractual obligations with our manufacturing contractor, Lonza Sales AG.
The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty.
We have received various governmental grants that may need to be repaid if certain conditions related to these grants are not met. We believe that it is uncertain whether we will be required to repay these grants and, accordingly, have not included them in the table above.
In July 2017, we signed a letter of intent with our drug substance manufacturing contractor, Lonza Sales AG, or Lonza, related to the biologics license application for ARGX‑113. The total commitment under this letter of intent amounts to a minimum spend of £5.0 million before the end of calendar year 2018, of which we paid £1.0 million upon signature. In December 2017, we amended one of our manufacturing agreements with Lonza. This amendment expands the scope of Lonza’s services with additional services for ARGX‑113 to be performed at the Lonza facility in Tuas, Singapore. These services relate to the start‑up of Lonza Singapore as a potential future commercial manufacturing site. Pursuant to this amendment, we have additional contractual obligations in the aggregate amounts of approximately $9.3 million, with payments beginning in January 2018. In addition to the obligations for ARGX‑113, we have contractual obligations for ARGX‑110 for approximately £0.9 million, with payments beginning by the third quarter of 2018.
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Cautionary Statement with Respect to Forward Looking Statements” at the beginning of this annual report.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
Our Board of Directors
WeAs at December 31, 2023, we have a one‑tierone-tier board structure consisting of executive directors who are responsible for our day‑to‑day management and non‑executive directors who are responsible for the supervision of the executive directors. Our executive directors and our non‑executive directors are collectively responsible for our general affairs. We may be represented by our board of directors or by two executive directors acting jointly. Our board of directors is currently comprised of one executive director and six non‑executiveeight non-executive directors, who weand a senior management team (consisting of our CEO and senior personnel reporting directly to the CEO) responsible for the day-to-day operations. We have opted for this structure to allow for a division of responsibilities between our Board of Directors and our senior management team, keeping our Board of Directors at a manageable size whilst being able to involve some or all members of our senior management team in discussions with the Board of Directors if and when necessary.
In practice, all members of our senior management team are regularly involved in the discussions of our Board of Directors and its committees, in order to provide information and context to the various issues the Board of Directors needs to decide on. In addition to being present at meetings from time to time, our senior management and other senior leaders in the organization keep regular contact (face to face or via electronic means) with members of the Board of Directors and its committees.
Our Board of Directors had five formal meetings in the course of 2023. The meetings were held in the months February, May, July, October and December. The committees of the Board of Directors also convened regularly and at least once per quarter (please refer to individuallyItem 6.C. “Board Practices—Report Audit and Compliance Committee”, Item 6.C. “Board Practices—Report Audit and Compliance Committee”, Item 6.C. “Board Practices—Report Audit and Compliance Committee”, andItem 6.C. “Board Practices—Report Audit and Compliance Committee”).
All Board of Director meetings and all formal committee meetings were also attended by Mr. Van Hauwermeiren, as executive director. In addition, several members of the senior management team were invited to discuss specific items included on the Board of Directors and committee meetings’ agendas (please refer to Item 6.A “Directors and Senior Management—Attendance Record Board of Director Meetings”).
Set out below is a summary of certain provisions of Dutch corporate law as of the date of this Annual Report, as well as a director. Less than a majoritysummary of the directorsrelevant information concerning our Board of Directors and certain provisions of our boardarticles of directorsassociation (Articles of Association) and the Board By-Laws.
This summary does not purport to give a complete overview and should be read in conjunction with and is qualified in its entirety by reference to the relevant provisions of Dutch law as in force on the date of this Annual Report, the Articles of Association and Board By-Laws. The Articles of Association are citizens or residentsavailable in the governing Dutch language and an unofficial English translation thereof, and the Board By-laws are available in English, on our website.
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The following table sets forth certain information with respect to the current members of our boardBoard of directors,Directors, including their ages as of December 31, 2017:2023:
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Name |
| Age |
| Position |
| Nationality |
| Date of |
| Term | |
Tim Van Hauwermeiren |
| 45 |
| Executive Director (Chief Executive Officer) |
| BE |
| July 9, 2014 |
| 2018 | |
Peter K.M. Verhaeghe |
| 59 |
| Non‑Executive Director (chairperson) |
| BE |
| July 9, 2014 |
| 2018 | |
David L. Lacey |
| 65 |
| Non‑Executive Director |
| U.S. |
| July 9, 2014 |
| 2018 | |
Werner Lanthaler |
| 49 |
| Non‑Executive Director (vice chairperson) |
| AT |
| July 9, 2014 |
| 2018 | |
J. Donald deBethizy |
| 67 |
| Non‑Executive Director |
| U.S. |
| May 13, 2015 |
| 2019 | |
Pamela Klein |
| 56 |
| Non‑Executive Director |
| U.S. |
| April 28, 2016 |
| 2020 | |
A.A. Rosenberg |
| 64 |
| Non‑Executive Director |
| U.K. |
| April 26, 2017 |
| 2021 |
The address for our directors is our registered office, Willemstraat 5, 4811 AH, Breda, the Netherlands.
Our board of directors has determined that all of the non‑executive members of the board of directors are independent under the Nasdaq’s listing requirements and that all of the non‑executive members of the board of directors are independent under the Dutch Corporate Governance Code, or DCGC.
The following is the biographical information of the members of our board of directors:
Tim Van Hauwermeiren co‑founded our company in 2008 and has served as our Chief Executive Officer since July 2008. He has served as a member of our board of directors since July 2014. Mr. Van Hauwermeiren has more than 20 years of general management and business development experience across the life sciences and consumer goods sectors. Mr. Van Hauwermeiren holds a B.Sc. and M.Sc. in bioengineering from Ghent University (Belgium) and an Executive MBA from The Vlerick School of Management.
Peter K.M. Verhaeghe has served as a member and chairperson of our board of directors since July 2014. Mr. Verhaeghe is the managing partner of VVGB Advocaten—Avocats, a corporate finance law and tax law firm, a position he has held since July 1999. He is currently lead counsel to a number of Belgian, Dutch and Swiss biotechnology and diagnostics companies. Mr. Verhaeghe served as the president of the board of directors of Merisant France SAS, as a member of the management board of Merisant Company 2 sàrl and serves as a member of the board of directors of CzechPak Manufacturing s.r.o. He previously served as the chairman of the board of directors of PharmaNeuroBoost NV from December 2006 to January 2013 and as liquidator in charge of KBC Private Equity Fund Biotech NV from April 2009 to December 2012. Mr. Verhaeghe holds a degree in law from the University of Leuven and an LLM degree from Harvard Law School.
Dr. David L. Lacey has served as a member of our board of directors since July 2014. Dr. Lacey is a biopharmaceutical consultant at David L. Lacey LLC, where he advises academic institutions, biotechnology companies
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and venture capital firms, a position he has held since July 2011. He currently serves as a director of Inbiomotion SL, Atreca, Inc. and Nurix, Inc. From 1994 until his retirement in 2011, he held various positions, including head of discovery research, at Amgen Inc., where he played a fundamental scientific role in the discovery of the OPG/RANKL/RANK pathway, which led to the development of the anti‑RANKL human mAb denosumab, for both osteoporosis (Prolia) and cancer‑related bone diseases (XGEVA). He holds a Bachelor’s degree in biology and an M.D. from the University of Colorado, and has his board certification in anatomic pathology.
Dr. Werner Lanthaler has served as a member of our board of directors since July 2014. Dr. Lanthaler is the chief executive officer of Evotec AG, a global drug discovery research organization, a position he has held since March 2009. Dr. Lanthaler previously served on the supervisory boards of Bioxell SpA and Pantec Biosolutions AG. Dr. Lanthaler holds a degree in psychology, a Ph.D. in business administration from Vienna University of Economics and Business and a Master’s degree in public administration from Harvard University.
Dr. J. Donald deBethizy has served as a member of our board of directors since May 2015. Dr. deBethizy has 30 years of experience in research and development and financial, business and operating management in the biotechnology and consumer products industry. He is the president of White City Consulting ApS. Previously, Dr. deBethizy served as president and chief executive officer of Santaris Pharma A/S until October 2014, when the company was sold to Roche. From August 2000 to June 2012, Dr. deBethizy was co‑founder and chief executive officer of Targacept, Inc., a U.S. biotechnology company listed on Nasdaq. He currently serves on the supervisory boards of Albumedix A/S, Newron Pharmaceuticals SpA, Noxxon Pharma NV and AG, Rigontec GmbH and Proterris, Inc. From May 2013 to November 2014, he served as executive chairman of Contera Pharma ApS. He previously served on the boards of Asceneuron SA, Serendex Pharmaceuticals A/S, Enbiotix Inc., Targacept Inc. and Biosource Inc. Mr. deBethizy has held adjunct appointments at Wake Forest University Babcock School of Management, Wake Forest University School of Medicine and Duke University. Dr. deBethizy holds a B.Sc. in biology from the University of Maryland, and an M.Sc. and a Ph.D. in toxicology from Utah State University.
Dr. Pamela Klein has served as a member of our board of directors since April 2016. Dr. Klein is a principal and founder of PMK BioResearch, which offers strategic consulting in oncology drug development to corporate boards, management teams and the investment community, a position she has held since 2008. She currently serves as a member of various scientific advisor boards. Previously, Dr. Klein spent seven years at the National Cancer Institute as Research Director of the NCI‑Navy Breast Center, after which she joined Genentech and was VP, Development until 2001. She served as Chief Medical Officer for Intellikine which was acquired by Takeda. She was previously Vice President, Development for Genentech. Dr. Klein holds a Bachelor’s degree in biology from California State University and an M.D. from Stritch School of Medicine, Loyola University Chicago and is trained in internal medicine and medical oncology.
Msc. A.A. Rosenberg has served as a member of our board of directors since April 2017. He currently serves as CEO of TR Advisory Services GmbH, a consultancy firm advising on business development, licensing and mergers and acquisitions. Mr. Rosenberg has also been a Managing Director of MPM Capital, a venture capital firm, since April 2015. From January 2013 until February 2015, he served as Corporate Head of M&A and Licensing at Novartis Pharma. He served as Global Head of Business Development and Licensing at Novartis Pharma from March 2005 to December 2012. Msc. A.A. Rosenberg holds non‑executive board memberships in Idenix Pharmaceuticals, Radius Health Inc., TriNetX, Inc., Clinical Ink, Inc. and iOmx Therapeutics AG and Cullinan Oncology Inc. Msc. A.A. Rosenberg has a B.Sc. (Hons) from the University of Leicester and a M.Sc. Physiology from the University of London.
James Daly is up for nomination to be appointed as a member of our board of directors at our annual General Meeting in May 2018. Mr. Daly served as Executive Vice President and Chief Commercial Officer at Incyte Corporation from 2012 to 2015. Prior to joining Incyte, Mr. Daly worked for Amgen, Inc. for ten years, holding multiple leadership positions. In his last role, Mr. Daly served as Senior Vice President, North America Commercial Operations, Global Marketing and Commercial Development. Previously, he served as Vice President and General Manager of Amgen’s Oncology Business Unit. His teams at Amgen were responsible for the successful launch of many products, including Aranesp®, Neulasta®, Vectibix®, Nplate®, Xgeva® and Prolia®. Previously, Mr. Daly spent over 16 years with Glaxo Wellcome/GlaxoSmithKline where he held roles of increasing responsibility, including Senior Vice President, General Manager, Respiratory and Anti-Infective Business Unit, and led the U.S. launch of Advair®. He currently serves on the
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Board of Directors of Chimerix Inc. Mr. Daly earned his B.S. in Pharmacy and M.B.A. from the University at Buffalo, The State University of New York.
Our Executive Management
The following table sets forth certain information with respect to the current members of our executive management, including their ages as of December 31, 2017:
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The address for our executive management is Industriepark Zwijnaarde 7, Building C, 9052 Zwijnaarde (Ghent), Belgium.
The following is a brief summary of the biographical information of those members of our executive management who do not also serve on our board of directors:
Eric Castaldi has served as our Chief Financial Officer since April 2014 and served as a member of our board of directors from July 2014 to April 26, 2017. Mr. Castaldi has 28 years of international financial executive management experience, including 19 years in the biopharmaceutical industry. From 1998 to 2014, Mr. Castaldi served as chief financial officer and a member of the executive committee of Nicox SA, a Euronext‑listed biotechnology company. From 2008 to 2012, he served as a member of the board of directors and as chairman of the audit committee of Hybrigenics Services SAS, a Euronext‑listed French biopharmaceutical company specializing in oncology. Mr. Castaldi graduated with a degree in finance, accountancy and administration from the University of Nice.
Dr. Nicolas Leupin has served as our Chief Medical Officer since February 2016. Dr. Leupin has clinical and industry expertise in medical oncology as well as experience in drug development. He currently lectures at the University of Bern. From 2008 to 2015, Dr. Leupin served in different positions in clinical development at Celgene, including Director of Clinical Development of EMEA Celgene, where he contributed to building the clinical development department in Europe and then led the European lymphoma and myeloma teams, served as clinical lead for several compounds up to phase III clinical trials, and was responsible for running and managing hematology and oncology clinical trials, including both industry‑sponsored trials and academic cooperative groups, several of them through to registration. Among other activities, he was responsible for specific clinical documents of registration dossiers that lead to European and American registrations. Dr. Leupin holds an MBA from Jones International University and an M.D. from the University of Bern and was board certified in medical oncology (Switzerland).
Prof. Hans de Haard has served as our Chief Scientific Officer since July 2008. Prof. de Haard has been active in the antibody engineering field since 1989. He also serves as a Professor of Immunology at University of Franche Comté (France). Prof. de Haard holds an M.Sc. in biochemistry from the Higher Professional Education for Laboratory Technicians (Oss, the Netherlands) and a M.Sc. in chemistry from the Institute of Technology (Rotterdam, the Netherlands) and a Ph.D. in molecular immunology from Maastricht University.
Dr. Torsten Dreier has served as our Chief Development Officer since May 2008. Dr. Dreier has been developing antibodies for more than 20 years and led teams that progressed six antibody products from preclinical research into clinical trials. Dr. Dreier holds an M.Sc. and a Ph.D. in biochemistry from the University of Tübingen (Germany).
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Dr. Debbie Allen has served as our Senior Vice President of Business Development since November 1, 2010. Dr. Allen has been active in the antibody engineering field since the 1980s. She has more than 30 years of corporate and business development experience with small and large biotech companies focused on biopharmaceuticals. Dr. Allen is an inventor of HUMIRA (adalimumab). Prior to joining us, Dr. Allen acted as an independent consultant to emerging biotech companies, providing strategic management and business development support. Dr. Allen holds an B.Sc. in cellular pathology from the University of Bristol and a Ph.D. in viral oncology from the University of London.
Dirk Beeusaert has served as our General Counsel since April 1, 2017. Mr. Beeusaert has extensive general experience in corporate governance and as general counsel of a listed company. Mr. Beeusaert worked in various roles from February 1996 to July 2016 for Gimv NV, a European private equity company listed on Euronext Brussels, including chief legal officer from January 2001 to 2006, and general counsel from 2006 to July 2016, where he was co‑responsible for operations and corporate governance. Mr. Beeusaert currently serves as a member of the boards of directors of Pragma Capital SAS and Cubigo NV. Mr. Beeusaert holds a Bachelor in Law and a Master Law degree from Ghent University and an MBA in Fiscal Studies and Accounting Research, Tax and Accounting from Vlerick School of Management.
General Information About Our Directors and Executive Management
As of the date of this Annual Report, none of the members of our board of directors and executive management has a family relationship with any other member of our board of directors or executive management.
As of the date of this Annual Report and except as set out below, none of the members of our board of directors and executive management for at least the previous five years:
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Peter K.M. Verhaeghe—PharmaNeuroBoost NV
Mr. Verhaeghe was chairman of the board of directors of PharmaNeuroBoost NV, which voluntarily filed for bankruptcy in 2013 after its Phase 3 trial failed and no additional funding was found to continue its operations.
Peter K.M. Verhaeghe—KBC Private Equity Fund Biotech NV
Mr. Verhaeghe was a member of the board of directors of KBC Private Equity Fund Biotech NV, a Euronext‑listed fund, when it voluntarily liquidated pursuant to a decision of its shareholders. Mr. Verhaeghe was appointed as liquidator in charge and closed the liquidation by the end of 2012 with net proceeds for the shareholders of over €6 per share.
Compensation of Our Executive Management and Board of Directors
Our shareholders have adopted a policy governing the remuneration of our board of directors, which is aimed to attract, reward and retain highly qualified executive and non‑executive directors and to provide and motivate the members of our board of directors with a balanced and competitive remuneration that is focused on sustainable results and is aligned with the long‑term strategy of the company as set out in its business plan.
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At the General Meeting on April 28, 2016, the shareholders approved an amended remuneration policy, or the Remuneration Policy, which allows for the granting of compensation packages to our directors in line with a benchmarking analysis performed by an independent consulting firm engaged by our remuneration and nomination committee and an assessment of the duties of the directors, and includes competitive severance arrangements intended to attract and retain highly qualified personnel. At the extraordinary shareholders’ meeting of our shareholders held on November 7, 2017, the shareholders approved an amendment to the Remuneration Policy, discussed in more detail below. For a discussion of our employment arrangements with our executive management, see the section of this annual report titled “Item 7.B.—Related Party Transactions—Agreements with Our Executive Management.”
Except the arrangements described in the section of this annual report titled “Related‑Party Transactions—Agreements with Our Executive Management” there are no arrangements or understanding between us and any of the executive directors providing for benefits upon termination of their employment, other than as required by applicable law.
Compensation of Our Executive Management
The remuneration of our executive management (including our executive directors) consists of the following fixed and variable components:
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Fixed base salary. The base salary of our executive management was determined on the basis of a benchmarking analysis completed by an independent consulting firm. In accordance with this benchmarking analysis, our board of directors has resolved to aim for a compensation of our executive management in the 50th percentile of the compensation offered by the European peer group identified by the independent consulting firm used in this analysis. In line with the amended remuneration policy discussed above, our board of directors has amended the current contracts between us and our executive directors to be brought in line with the new remuneration policy.
Variable annual cash bonus. The objective of this short‑term annual cash incentive is to ensure that our executive management is incentivized to achieve performance targets in the shorter term. Our executive management is eligible for an annual cash incentive up to a maximum percentage of his/her annual base salary. On September 3, 2015, the maximum percentage for this purpose was set at 40% of base salary of the chief executive officer, and at 35% of base salary of the other executive management. Performance conditions are established by our board of directors before or at the beginning of the relevant calendar year and shall include criteria concerning our financial performance, qualitative criteria representing our performance and/or individual qualitative performance.
Long‑term incentive awards. Our board of directors intends to incentivize our executive management by issuing Options from time to time to be able to attract and retain well‑qualified executive management in connection with the argenx Employee Stock Option Plan, as set out below.
Severance arrangements. We have entered into management contracts and employment agreements with our executive management, each of which provides for certain minimum notice periods if their service or employment with us is terminated in certain circumstances as described below in “Related Party Transactions—Agreements with our Executive Management.”
Pension and fringe benefits. Our executive management participates in a defined contribution pension scheme operated by a third party pension insurance organization. Our executive management is entitled to customary fringe benefits, such as a company car and a hospitalization plan.
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The following table sets forth information regarding compensation paid by us for Tim Van Hauwermeiren during the year ended December 31, 2017:
(1) | Keith Woods retired as COO effective March 13, 2023 and was succeeded by Karen Massey effective March 13, 2023. |
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Tim Van Hauwermeiren
Tim Van Hauwermeiren co-founded our Company in 2008 and has served as our CEO since July 2008. He has served as a member of our Board of Directors since July 2014.
Mr. Van Hauwermeiren has more than 20 years of general management and business development experience across the life sciences and consumer goods sectors. He also serves on the boards of directors of iTeos Therapeutics, Inc. and RayzeBio, Inc.
Mr. Van Hauwermeiren holds a Bachelor’s of Science and Master’s of Science in bioengineering from Ghent University and an executive MBA from the Vlerick School of Management.
Keith Woods
Keith Woods served as our COO from April 2018 to March 2023, at which time he was succeeded by Karen Massey.
Mr. Woods transitioned to serve as an advisor to our Board of Directors. He has over 30 years of experience in the biopharmaceutical industry. Mr. Woods most recently served as senior vice president of North American operations for Alexion Pharmaceuticals, Inc. (Alexion). Within Alexion, he previously served as vice president and managing director of Alexion UK, overseeing all aspects of Alexion’s UK business, and as vice president of U.S. operations and executive director of sales. Prior to joining Alexion, Mr. Woods held various positions of increasing responsibility within Roche, Amgen, and Eisai Co., Ltd. over a span of 20 years. He holds a Bachelor’s of Science in marketing from Florida State University.
Karen Massey (effective March 13, 2023)
Karen Massey has served as our COO since March 2023.
Ms. Massey has over 20 years of experience in the pharmaceutical and biotechnology industry, including in commercial, product development, corporate strategy, and innovation roles. Prior to joining argenx, Ms. Massey was with Genentech (Roche Group) for over nine years, where she most recently served as senior vice president of product development and global clinical operations and previously held various commercial leadership roles across marketing and business operations, including as the vice president of the multiple sclerosis and neuromyelitis optica business. Ms. Massey started her biopharmaceutical career in marketing at Pfizer Inc., and returned there, after two years as a management consultant at Bain & Company, to take on leadership positions in corporate strategy and sales and as a commercial lead in Latin America.
Ms. Massey holds a Bachelor’s of Economics from the University of Sydney and an MBA from the NYU Stern School of Business.
Karl Gubitz
Karl Gubitz has served as our CFO since June 2021.
Mr. Gubitz previously worked at Pfizer Inc. for nearly 20 years, most recently as vice president of finance within the global oncology business. Within Pfizer Inc., Mr. Gubitz held country, regional, and global positions, and consistently delivered top-line growth. He managed teams of over 250 colleagues in financial leadership roles within the global internal medicine and global innovative products businesses. Prior to joining Pfizer Inc. in 2003, Mr. Gubitz held various management roles at PricewaterhouseCoopers LLP.
Mr. Gubitz holds an MBA from Henley Management College, a Bachelor’s degree in computing from the University of South Africa, and Bachelor’s of Commerce from the University of Pretoria.
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Dr. Peter Ulrichts
Peter Ulrichts has served as our chief scientific officer since January 2023. In this role, he oversees the development of all clinical and pre-clinical compounds within our pipeline.
Dr. Ulrichts previously served in various roles at the Company since he joined us in 2010, including, most recently, as our head of clinical science. As a research scientist, Dr. Ulrichts was involved in the development of various therapeutic antibodies for the treatment of cancer and autoimmune diseases. In 2013, he headed the development of our FcRn antagonist efgartigimod until the first-in-human clinical trial. He subsequently transitioned to become the lead scientist of our efgartigimod program.
Dr. Ulrichts holds a Bachelor’s of Science in chemistry from Katholieke Universiteit Leuven, as well as a Master’s degree in Biotechnology and a Ph.D. in Biomedical Sciences, both from Ghent University.
Malini Moorthy
Malini Moorthy has served as our general counsel since February 2022.
She has over 25 years of extensive global legal and compliance experience in the biopharmaceutical and medical device industries. She was most recently senior vice president and chief deputy general counsel of legal, compliance, and government affairs at Medtronic plc, where she played a pivotal role in shaping and driving enterprise and functional strategies. Before joining Medtronic plc, Ms. Moorthy spent four years at Bayer Corporation as the head of global litigation and investigations and 10 years at Pfizer Inc., where she progressed to lead civil litigation globally. Ms. Moorthy began her career as a law firm associate, first with McCarthy Tétrault LLP and Genest Murray Desbrisay Lamek LLP in Toronto, Canada and then Salans LLP (now Dentons US LLP) in New York City.
She holds a Bachelor of Arts in political science and economics from the University of North Carolina at Chapel Hill and a Bachelor of Laws from the Faculty of Law at Queen’s University in Canada.
Luc Truyen
Luc Truyen has served as our chief medical officer since April 2022 and previously served as our head of research and development operations management from September 2021 to April 2022.
Prior to this, Dr. Truyen was with Johnson & Johnson (and its subsidiary companies) for over 20 years holding various leadership positions, primarily within neuroscience. In his most recent position prior to joining argenx, Dr. Truyen was global head of development and external affairs for neuroscience, managing the strategy and delivery of the early and late portfolio of assets for mood disorders, schizophrenia, and neurodegenerative and neuroinflammatory disorders. Besides Dr. Truyen’s strong track record in clinical development resulting in several globally innovative drug approvals, his broad-based experience also includes leading global clinical development operations for the whole Johnson & Johnson pharmaceutical group as well as serving as the head of research and development and chief medical officer of Janssen Alzheimer Immunotherapy Research & Development LLC, an internal spin-out from Johnson & Johnson.
Dr. Truyen holds an M.D. and Ph.D. in Neurology from the University of Antwerp.
Arjen Lemmen
Arjen Lemmen joined argenx in 2016 and has served as our vice president of corporate development & strategy since 2019. He has successfully executed several transactions including a number of programs within the IIP.
Prior to joining the Company, Mr. Lemmen served as a corporate finance specialist at Kempen & Co NV focusing on mergers and acquisitions, equity capital markets and strategic advisory transactions in the European life
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sciences industry. He holds a Bachelor of Science in life science & technology from the University of Groningen and a Master of engineering management from Duke University.
Andria Wilk
Andria Wilk joined argenx as global head of quality in 2020. Ms. Wilk has more than 20 years of experience in QA within the pharmaceutical industry. Most recently, Ms. Wilk served as senior director, head of medical, regulatory & clinical QA (MRC QA) at H Lundbeck A/S (Lundbeck), where she managed the global MRC QA group based in the EU, US, and Asia. In this role, she was responsible for the global audit programs and QA support for all clinical trial and post-marketing activities and related computerized systems.
Prior to Lundbeck, she held various QA positions of increasing responsibility within AstraZeneca PLC, Takeda Global Research, Development Centre Europe, and Astellas Pharma Inc.
Ms. Wilk holds a joint Bachelor’s of Science in pharmacology and biochemistry, is a member of the Research Quality Association and observing board member of The European Forum for Good Clinical Practices.
General Information About Our Directors and Senior Management
As of the date of this Annual Report (or in any period before), none of the members of our Board of Directors and senior management has or has had a family relationship with any other member of our Board of Directors or senior management and there are no arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management. For further information regarding any arrangements by which our Board of Directors or senior management were appointed, see Item 7.B. “Related Party Transactions—Agreements with Our Senior Management”.
B. COMPENSATION
Remuneration Report and Compensation Statement
SAY-ON-PAY AND PROPOSED AMENDMENTS TO THE REMUNERATION POLICY
Introduction
In response to dissent expressed by shareholders on the 'say-on-pay’vote at the Company’s 2022 and 2023 annual General Meetings, we have engaged extensively with stakeholders, shareholders and proxy advisors. This group of stakeholders represented over 60% of the Company’s issued share capital. This has led to a proposal for a revised remuneration policy, which is expected to be published in draft form on or around March 21, 2024 (Draft 2024 Remuneration Policy), which requires approval at the Company’s annual General Meeting that will take place on May 7, 2024 (2024 General Meeting). Readers of this report are encouraged to read the Draft 2024 Remuneration Policy and corresponding explanatory notes, both of which will be made available on the Company’s website at https://www.argenx.com/investors/shareholder-meetings.
Although the following is not an exhaustive summary of the proposed changes to the Company’s current 2021 remuneration policy (the 2021 Remuneration Policy), which you are encouraged to read in full including the accompanying explanatory notes, the Company deems it relevant to bring to your attention the following key changes that will be proposed in the Draft 2024 Remuneration Policy.
3.4.1.1Non-executive pay
● | Stock options will no longer be granted to non-executive directors |
● | Non-executive pay will take the form of cash remuneration and equity remuneration in the form of RSUs |
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● | Non-executive RSU grants will have a vesting period of one year and a holding period of three years after vest and as such underlying shares cannot be sold until after four years from the grant date |
● | Non-executive RSUs will be awarded based on a benchmarked target cash value, awarded in shares subject to the aforementioned holding requirements |
● | Minimum holding requirements extending at least two years beyond term of service will continue to apply |
Executive equity incentives
● | Performance share units (PSUs) will be introduced in the executive compensation plan, attaching financial and non-financial performance conditions to the vesting of the PSUs |
● | At least 50% of target executive equity pay-out will be performance based |
● | PSU performance conditions will link for at least 50% of their target value to financial targets |
● | Non-financial targets will relate to measurable sustainable long term value creating outcomes linked to the Company’s key value drivers: ‘innovation and pipeline development’ and ‘people and culture’ |
● | PSUs will not vest prior to the third anniversary of the grant date and only to the extent applicable performance conditions are met |
● | The target equity pay opportunities for the CEO, chief financial officer (CFO) and COO (together, NEOs)will continue to be set between the 50th percentile and 75th percentile of the reference group and will in any case not exceed 15x base cash compensation |
● | All equity grants will be subject to multi-year (at least three years) vesting periods and/or holding requirements |
● | Minimum holding requirements extending at least two years beyond term of service will continue to apply |
Executive short-term cash incentive
● | Short-term cash incentives will be linked to multiple strategically relevant targets, which, in turn, will be linked to clearly measurable outcomes |
● | At least 50% of short-term variable pay will be linked to financial targets |
● | The target cash pay opportunity (target and maximum), measurement and evaluation and pay-out will be disclosed |
● | Considering the rapid growth and development of the Company and the environment in which it operates, discretionary adjustment of the total variable pay within the set limits by the Board of Directors will be possible, but in the event this happens, a clear and detailed explanation of the use of such discretion will be included in the Company’s remuneration report |
The principles above will be applicable for remuneration granted and targets set after the approval of the Draft 2024 Remuneration Policy, which requires a majority vote of more than 75% at the 2024 General Meeting. If such majority is not achieved, the Company will, in accordance with Dutch law, be obliged to continue to apply the 2021 Remuneration Policy until a new policy gets approved at the 2024 General Meeting. You are encouraged to read this 2023 remuneration report in conjunction with the Draft 2024 Remuneration Policy and the accompanying explanatory notes.
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It is noted that this 2023 remuneration report describes the application of the Company’s 2021 Remuneration Policy for the fiscal year 2023.
2023 Remuneration
The 2021 Remuneration Policy rewards contributions to achieving Company objectives and generating stakeholder value. The aim is to provide competitive remuneration packages that align with market practices in the key markets where the Company competes for talent. The Company conducts regular reviews (at least once every three years) of director and senior management members’ total remuneration (both in quantum and in program design) and makes comparisons against the Company’s reference companies. The 2021 Remuneration Policy and total compensation aligns or slightly exceeds the market median for fixed compensation, benefits, and short-term variable compensation. The long-term incentive component consists of equity grants, the size of which is positioned between the 50th and the 75th percentile of the global reference group. The 2021 Remuneration Policy was adopted at the 2021 General Meeting with a 76% majority vote and is available on the Company’s website at https://www.argenx.com/investors/governance/remuneration-policy.
Reference group - general
For the 2023 remuneration which was set following a benchmark exercise conducted in the August – September 2022 timeframe, the Company worked with an independent third party compensation advisor, AON Radford. The Company continued to benchmark against both US and European peer groups to account for being a global company competing for talent against European based and US based companies. The aim is to deliver globally competitive compensation supporting the execution of Company’s business strategy and aligning with long-term sustainable value creation for its stakeholders.
The following criteria were used to select the reference group for the 2023 remuneration as part of the Company’s benchmark performed in the third quarter of 2022, ahead of setting the long term incentive schemes for 2023 in December 2023 and the annual cash compensation for 2023 in first quarter of 2023:
● | Sector: Biotech and Pharmaceuticals |
● | Stage of development: Market |
● | Market Capitalization: primary ~1/3x – 3x argenx’s 30‐day average market value as of 5/20/22, secondary $5‐50 billion |
● | Headcount: primary ~1/3x – 3x the midpoint of argenx’s projected financial years ended 31 December, 2022 and 2023 headcounts, secondary 300‐2500 employees |
● | Revenue: less than $1 billion revenues |
● | Years public: less than 10 years since IPO |
With the goal of arriving at a sufficiently sized U.S. and EU peer group of companies disclosing detailed compensation information, a number of companies were added to the European peer group following a qualitative review by AON Radford to identify companies with relevant similarities in business model and therapeutic focus. This leads to the following selection of peer groups used by us in the 2022 benchmark for the 2023 compensation plans:
Note: for completeness’ sake, this is not the peer group the Company used in 2023 for its 2024 remuneration. The 2023 benchmark takes into account ongoing discussions and insight on the development of the 2021 Remuneration Policy and plans, as well as stakeholder feedback received. On or around the date of this report, the peer group for the
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2024 remuneration will be reported on the Company’s website at https://www.argenx.com/investors/governance/remuneration-policy.
Company Name | Company Ticker | Country of Trade | ||
Abcam Plc | | ABC | | GBR |
Acadia Healthcare Company, Inc. | | ACHC | | USA |
ALK‐Abelló A/S | | ALK.B | | DNK |
Alnylam Pharmaceuticals, Inc. | | ALNY | | USA |
Amicus Therapeutics, Inc. | | FOLD | | USA |
Ascendis Pharma A/S | | ASND | | USA |
BeiGene, Ltd. | | 6160 | | USA |
Biohaven Pharmaceutical Holding Company Ltd. | | BHVN | | USA |
BioMarin Pharmaceutical Inc. | | BMRN | | USA |
BioNTech SE | | BNTX | | USA |
Blueprint Medicines Corp | | BPMC | | USA |
CRISPR Therapeutics AG | | CRSP | | USA |
Denali Therapeutics Inc | | DNLI | | USA |
Evotec SE | | EVT | | DEU |
Galapagos NV | | GLPG | | NLD |
Genmab A/S | | GMAB | | DNK |
Hikma Pharmaceuticals Plc | | HIK | | GBR |
Horizon Therapeutics Public Limited Company | | HZNP | | USA |
Idorsia Ltd | | IDIA | | CHE |
Incyte Corporation | | INCY | | USA |
Intellia Therapeutics, Inc. | | NTLA | | USA |
Intra‐Cellular Therapies, Inc. | | ITCI | | USA |
Ionis Pharmaceuticals, Inc. | | IONS | | USA |
Mirati Therapeutics, Inc. | | MRTX | | USA |
Neurocrine Biosciences, Inc. | | NBIX | | USA |
Recordati SpA | | REC | | ITA |
Sarepta Therapeutics, Inc. | | SRPT | | USA |
Seagen Inc. | | SGEN | | USA |
Swedish Orphan Biovitrum AB | | SOBI | | SWE |
UCB SA | | UCB | | BEL |
uniQure N.V. | | QURE | | USA |
Vifor Pharma AG | | VIFN | | CHE |
Award levels
Our Board of Directors sets award levels based on the outcome of our benchmarking exercise. Our remuneration policy, contains the following framework in this respect:
| | | ||
| Non-executive directors | Senior management team | ||
Cash-based compensation | | 50th percentile of the companies in the global reference group | | 50th percentile of U.S. companies in the reference group for U.S.-based executives, and at or around the 75th percentile of EU companies in the reference group for EU-based executives |
Equity-based compensation | | 50th percentile of the U.S. companies in the reference group | | 50th to 75th percentile of the U.S. companies in the reference group |
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NEO remuneration
This chapter contains a detailed overview of the remuneration paid for the year 2023 to the following NEOs: the CEO, the CFO and the COO. Of these NEOs, only the CEO is a statutory director of argenx. The remuneration of the NEOs in 2023 consisted of base salary, variable cash remuneration, company equity and benefits.
Executive Remuneration Policy
The majority of executive compensation is provided in the form of variable remuneration, which is a combination of performance dependent (short-term cash incentives, stock options) and service dependent (RSUs) compensation. Variable (short-term) compensation allows the Board of Directors to set challenging annual objectives aligning the priorities of the NEOs with the short-term strategic objectives of the Company. Company equity in the form of stock options provides an incentive to the NEOs to contribute to Company (stock price) value increase over the long-term (three years) vesting period of the stock options. Company equity in the form of RSUs also provides an incentive for value creation over the long-term (four years) vesting period of the RSUs. The combination of variable pay, stock options and RSUs ensures a balanced incentive for short term focus on and performance of near term strategic targets, while contributing to sustainable long-term value creation and ensuring long-term commitment (retention) of the executive. In addition, the Company provides market standard severance arrangements and pension and fringe benefits, including a corporate bonus of maximally €3,948 ($4,266) in accordance with Belgian practice. Moreover, in accordance with the DCGC, when determining the remuneration package of the executives, scenario analyses are performed annually and taken into account in setting the total remuneration levels and target and maximum awards under the short- and long-term incentive plans.
Total executive remuneration
The following table sets forth the total value of the remuneration paid to the NEOs for the last three years:
| | | | | | | | | | | | | | | | | | | | | | |
(in USD) | | Base salary (1) | | Base salary in % change vs the prior year (1) | | Sign on bonus | | Corporate bonus | | Variable short-term incentive | | Variable cash | | Compensation in the form of stock options (2) | | Compensation in the form of RSUs | | Other benefits (3) | | % fixed (of total) (4) | | Total |
CEO - Tim Van Hauwermeiren | ||||||||||||||||||||||
2023 | | 655,787 | | 0% | | — | | — | | 590,215 | | 60% | | 8,084,605 | (5) | 2,575,174 | | 39,054 | | 6% | | 11,944,835 |
2022 | | 638,901 | | 10% | | — | | — | | 766,682 | | 60% | | 4,174,684 | | 2,159,689 | | 38,342 | | 9% | | 7,778,298 |
2021 | | 651,986 | | 5% | | — | | 1,186 | | 586,787 | | 60% | | 3,895,370 | | 2,084,509 | | 45,177 | | 10% | | 7,265,014 |
CFO - Karl Gubitz | ||||||||||||||||||||||
2023 | | 516,043 | | 6% | | — | | 3,556 | | 260,866 | | 40% | | 2,626,062 | | 1,287,587 | | 62,798 | | 12% | | 4,756,913 |
2022 | | 487,600 | | 79% | | — | | 3,745 | | 243,800 | | 40% | | 2,623,633 | | 1,356,048 | | 91,203 | | 12% | | 4,806,030 |
2021 | | 271,646 | | n.a. | (6) | — | | 2,235 | | 108,659 | | 40% | | 3,181,721 | | 1,629,272 | | 31,809 | | 6% | | 5,225,342 |
COO - Karen Massey (7) | ||||||||||||||||||||||
2023 | | 481,471 | | n.a. | | 338,000 | (8) | 2,921 | | 467,662 | | 50% | | 3,939,093 | | 2,296,517 | | 127,393 | | 8% | | 7,653,057 |
COO - Keith Woods (9) | ||||||||||||||||||||||
2023 | | 305,022 | | (48)% | | — | | — | | — | | — | | — | | — | | 46,034 | | 100% | | 351,056 |
2022 | | 583,774 | | 5% | | — | | 3,745 | | 583,774 | | 50% | | 2,601,982 | | 1,364,014 | | 205,032 | | 15% | | 5,342,321 |
2021 | | 555,975 | | 5% | | — | | 4,095 | | 347,484 | | 50% | | 2,430,402 | | 1,316,532 | | 116,041 | | 14% | | 4,770,529 |
(1) | The base salary of the CEO is paid in EUR (for 2023 base salary the exchange rate 1.0815 EUR/$ used in this table), the base salary of the COO is paid in CHF (for 2023 base salary exchange rate of 1.1135 EUR/CHF used in this table). The percentage presenting the change in salary is calculated using the currency of payment. |
(2) | Amounts shown represent the expenses with respect to stock options measured using the Black Scholes formula. For a description of the assumptions used in valuing these awards, see “Note 13—Share-based payments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by |
(3) | Other benefits consists of the lease of a company car, employer-paid medical insurance premiums, pension contributions, social security costs and other allowances. |
(4) | Fixed compensation is considered as Base salary and Other benefits. |
(5) | Target pay level set in number of options and RSUs as part of benchmark performed in September of the prior year (target value $6,986,986, grant occurred on the first business day of July 2023. Share price increase between setting the grant using argenx’s 30-day average stock price of |
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$366.58 as of July 22, 2022 and the share price of $389.73 at the date of grant) explains variation between target compensation level and the final calculation displayed in the table above. These amounts do not reflect the actual economic value realized by the beneficiary. Amounts shown represent the expenses with respect to the Stock Options awards granted in 2023 measured using the Black Scholes formula with unobservable assumptions. The assumptions used in the fair valuation differ between Belgian beneficiary versus non-Belgian beneficiary. The fair value of equity granted to Belgian beneficiaries was higher than that of non-Belgian beneficiaries resulting in Mr. Van Hauwermeiren’s stock based compensation expense to be higher than other beneficiaries. For a description of the assumptions used in valuing these awards, see “Note 13—Share-based payments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2023 and which are incorporated herein by reference.
(5) | Karl Gubitz joined as CFO in June 2021, and consequently no comparison for |
(6) | Karen Massey joined as COO in March 2023, and consequently no comparisons to 2022 and before were possible, and Ms. Massey’s remuneration shows the remuneration paid for the period March 13, 2023 through December 31, 2023. Her variable pay pay-out has been pro-rated to reflect this as well. |
(7) | In 2023, the Company paid a sign-on bonus to Karen Massey to allow the Company to make an overall competitive offer of employment and in recognition of lost corporate benefits as a result of early departure at Ms. Massey’s previous employer. Ensuring a competitive offer in this way and securing Ms. Massey as the Company’s new COO was deemed by the Board of Directors to be in the best interest of the Company and its stakeholders. |
(8) | Keith Woods resigned as COO March 2023 and his employment relationship ended on June 30, 2023 and consequently the remuneration numbers show his remuneration for the period January 1, 2023 through June 30, 2023. No equity award or variable pay was paid to Mr. Woods in the year ended December 31,
Base salary In 2023, compared to 2022, the base salary of the NEOs was increased in line with the total argenx employee population merit increase guidelines (CEO +0%, CFO +6%, COO joined in 2023). These increases followed a review of the individual’s performance over the preceding year(s), in light of comprehensive analysis of benchmark data showing the relative positioning of base salaries compared to the relevant external and internal peers. This process ensures that the Company’s compensation packages are a fair reflection of individual performance while also remaining competitive and aligned with the market. The merit principles and base pay increase framework applied are identical to those applicable to all employees in the organization and are based on the individuals’ performance and contributions over the preceding period. From 2022 to 2023, our CEO declined to receive a base pay increase. With respect to the CFO, the Board of Directors recognized outstanding performance in 2022, including the achievement and overachievement of short-term targets, and established that the CFO’s pay was below the midpoint of peer reviewed base pay for CFOs in the reference group. Consequently, and in line with pay practice applied consistently across all employees, the CFO’s base pay was increased with a merit increase and an additional increase to move the CFO closed to the benchmarked midpoint, totalling a 6% base pay increase in 2023 versus 2022. Variable cash The NEOs were eligible for a variable cash payment for the performance of pre-defined short term performance targets in 2023, with the target variable cash compensation set as a percentage of their base salary (60% for CEO, 50% for COO, 40% for CFO). The Board of Directors has set a cap of 200% pay-out per target, and a 200% overall pay-out cap. The Board of Directors evaluated the pay-out of each target, with ‘at target’, ‘maximum per target’ and ‘actual pay-out’ explained in detail in the table below. In addition, the Board of Directors has discretion to adjust the pay-out if the total outcome would not fairly represent pay-for-performance. If such discretion is used, it will be explained in detail in the remuneration report. CEO When considering the variable pay pay-out of the CEO, the Board of Directors primarily reviewed whether the key objectives of the Company’s business plan for 2023 were achieved. These key objectives were: |
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The trade and other receivables are composed of receivables which are detailed below:
The carrying amounts of trade and other receivables approximate their respective fair values. On December 31, 2023, 2022 and 2021, we did not have any provision for expected credit losses. Please also refer to Note 26 for more information on the financial risk management.
These current financial assets relate to term accounts with an initial maturity longer than 3 months but less than 12 months and money market funds that do not qualify as cash equivalents.
On December 31, 2023, the current financial assets included $221.0 million (€200.0 million) held in EUR, which could generate a foreign currency exchange gain or loss in the financial results in accordance with the fluctuations of the USD/EUR exchange rate as the Company’s functional currency is USD. Please also refer to Note 26 for more information on the financial risk management.
Cash and cash equivalents may comprise of cash and bank balances, saving accounts, term accounts with an original maturity not exceeding 3 months and money market funds that are readily convertible to cash and are subject to an insignificant risk of changes in value. Cash positions are invested with preferred financial partners, which are mostly considered to be high quality financial institutions with sound credit ratings to reduce credit risk. F-24 On December 31, 2023, the cash and cash equivalents included $702.8 million (€636.0 million) held in EUR, and $8.2 million (¥1,164.6 million) held in JPY which could generate a foreign currency exchange gain or loss in the financial results in accordance with the fluctuations of the USD/EUR and USD/JPY exchange rates as the Company’s functional currency is USD. Please also refer to Note 26 for more information on the financial risk management.
On December 31, 2023, the Company’s share capital was represented by 59,194,488 shares. All shares were issued, fully paid up and of the same class. The table below summarizes the share issuances as a result of offerings, exercise of stock options and the vesting of restricted stock units under the Company’s Employee Stock Option Plan. Roll forward of number of shares outstanding:
On May 2, 2023, at the annual general meeting, the shareholders of the Company approved the authorization to the Board to issue up to a maximum of 10% of the then-outstanding share capital, for a period of 18 months. On July 18, 2023, argenx SE offered 2,244,899 of its ordinary shares through a global offering which consisted of 1,580,981 ADSs in the U.S. at a price of $490.0 per ADS, before underwriting discounts and commissions and offering expenses; and 663,918 ordinary shares in the European Economic Area at a price of €436.37 per share, before underwriting discounts and commissions and offering expenses. On July 19, 2023, the underwriters of the offering exercised their overallotment option to purchase 336,734 additional ADSs in full. As a result, argenx SE received $1.26 billion in gross proceeds from this offering, decreased by $65.9 million of underwriter discounts and commissions, and offering expenses, of which $0.8 million has been deducted from equity. The total net cash proceeds from the offering amounted to $1.2 billion. On December 31, 2023, an amount of €202,408.2, represented by 2,024,082 shares, still remained available under the authorization to issue shares as granted to the Board by the shareholders of the Company. F-25
The Company has an equity incentive plan for the employees, key consultants, board members, senior management and key outside advisors (“key persons”) of the Company and its subsidiaries. In accordance with the terms of the plan, as approved by shareholders, employees may be granted stock options and/or restricted stock units.
The stock options are granted to key persons of the Company and its subsidiaries. The stock options may be granted to purchase ordinary shares at an exercise price. The stock options have been granted free of charge. Each employee’s stock option converts into one ordinary share of the Company upon exercise. The stock options carry neither rights to dividends nor voting rights. Stock options
The stock options granted vest, in principle, as follows:
Stock options granted to non-executive directors vest on the third anniversary of the date of grant. Upon leave of the key persons stock options must be exercised before the later of (i) 90 days after the last working day at argenx, or (ii) March 31 of the 4th year following the date of grant of those stock options, and in any case no later than the expiration date of the option. In order to prefinance the taxes that are paid upon the grant of stock options, Belgian employees have the ability, in exchange for the taxes due upon the grant of the stock options, to transfer the economic benefits related to part of those stock options to a third party. In the year ending December 31, 2023, the economic benefits of 43,336 stock options, for which accelerated vesting applies, were transferred to a third party. No other conditions are attached to the stock options. F-26 The following stock option arrangements were in existence during the current and prior years and which are exercisable at the end of each period presented:
F-27
(*) amounts have been converted to USD at the closing rate of the respective period. The weighted average share price at the date of exercise of options exercised during the year ended December 31, 2023 was $456.8, compared to $336.5 during the year ended December 31, 2022 and $305.9 during the year ended December 31, 2021. The weighted average remaining contractual life of the stock options outstanding amounted to 5.9 years on December 31, 2023 compared to 6.2 years on December 31, 2022 and 6.3 years on December 31, 2021. The table below shows the weighted average remaining contractual life for each range of exercise price:
The fair market value of the stock options has been determined based on the Black and Scholes model using the following unobservable assumptions:
Below is an overview of the parameters used in relation to the determination of the fair value of the grants during 2023:
F-28
Below is an overview of the parameters used in relation to the determination of the fair value of grants during 2022:
(*) amounts have been converted to USD at the applicable rate prevailing at the grant date. (1) In December 2022, the Company granted a total of 508,132 stock options. Belgian beneficiaries could choose between a contractual term of five or ten years impacting the parameters used in determination of the fair value of the grant. Once the acceptance period of 60 days has passed in which the beneficiaries made a choice between a contractual term of five or ten years, the parameters and fair value used in the financial year ending December 31, 2022 has been reassessed. Below is an overview of the parameter used in relation to the determination of the fair value of grants during 2021:
(*) amounts have been converted to USD at the closing rate of the respective period. The total share-based payment expense related to stock options recognized in the consolidated statements of profit or loss totaled $164.0 million for the year ended December 31, 2023, compared to $120.2 million for the year ended December 31, 2022 and $171.2 million for the year ended December 31, 2021.
The RSUs are granted to key persons of the Company and its subsidiaries. The RSUs have been granted free of charge. Each employee’s RSUs converts into one ordinary share of the Company upon vesting. The RSUs carry neither rights to dividends nor voting rights. RSUs once converted into ordinary shares, may be sold at any time from the date of vesting, have no expiry date and may be held by the participant without limitation. The fair value of RSUs is based on the closing sale price of the Company’s common stock on the day prior to the date of issuance. RSUs vest over a period of 4 years with 1/4th of the total grant vesting at each anniversary of the date of grant. F-29 The following restricted stock units arrangements were in existence during the current and prior years:
The total share-based payment expense related to RSUs recognized in the consolidated statements of profit or loss totaled $69.0 million for the year ended December 31, 2023 compared to $36.9 million for the year ended December 31, 2022 and $8.1 million for the year ended December 31, 2021.
The carrying amounts of trade and other payables approximate their respective fair values. Trade payables correspond primarily to clinical and manufacturing activities and include accrued expenses related to these activities. Short-term employee benefits include payables and accruals for salaries and bonuses to be paid to the employees of the Company.
F-30 The following table summerizes the movement in the gross-to-net-accruals for the year ended December 31, 2023, 2022:
For the twelve months ended December 31, 2023, the product net sales was related to sales of VYVGART and VYVGART SC. For the twelve months ended December 31, 2022, the product net sales was related to sales of VYVGART. Refer to note 18 for the breakdown of Product net sales by country of sale. F-31
The following table summarizes details of collaboration revenues for the year ended December 31, 2023, 2022 and 2021 by collaboration agreement and by category of revenue: upfront payments, milestone payments, research and development service fees and other revenue.
For the years ended December 31, 2023, 2022 and 2021, the collaboration revenue was generated under the agreements with Zai Lab, J&J and AbbVie, each as described below. Zai Lab On January 6, 2021, argenx and Zai Lab announced the License agreement for the development and commercialization of efgartigimod in Greater China, granting Zai Lab the exclusive rights to develop and commercialize efgartigimod in Greater China. Under the terms of the agreement, the Company received $175.0 million in collaboration payments, comprised of a $75 million upfront payment in the form of 568,182 newly issued Zai Lab shares calculated at a price of $132 per share, $75 million as guaranteed non-creditable, non-refundable payment, received in the first quarter of 2021, and an additional $25 million milestone payment upon regulatory approval of efgartigimod by FDA in the U.S. The Company is also eligible to receive tiered royalties (mid-teen to low twenties on a percentage basis) based on annual net sales of efgartigimod in Greater China. As stated in the accounting policies regarding this collaboration with Zai Lab, the Company concluded there are two performance obligations under IFRS 15, being the transfer of a license and the at arms-length supply of clinical and commercial product. The transaction price of these two agreements was composed of a fixed part, that being an upfront payment of $75 million in the form of newly issued Zai Lab shares, and a $75 million guaranteed, non-creditable, non-refundable payment and $25 million milestone for approval of efgartigimod in the U.S. and the consideration received in return for the supply of clinical and commercial product. The fixed part of the transaction price, as well as the $25 million milestone for approval of efgartigimod in the U.S. has been allocated to the transfer of a license performance obligation, which has been satisfied as of the effective date of the contract, being January 2021 and therefore the revenue is recognized at that point in time. Under the collaboration agreement, the Company provides clinical supply to Zai Lab. The revenue related to clinical supply is recorded under line item “Other revenues” within the collaboration revenue. The income related to F-32 royalties is recorded as “Other revenues” under “collaboration revenue”. During the year ending December 31, 2023 the first revenue related to commercial supply and related royalties are recognized. Please refer to Note 2 for the material accounting policies on the remainder elements of the agreement. AbbVie In April 2016, the Company entered into a collaboration agreement with AbbVie to develop and commercialize ARGX-115 (ABBV-151). The Company granted AbbVie an exclusive option, for a specified period following completion of IND enabling studies, to obtain a worldwide, exclusive license to the ARGX-115 (ABBV-151) program to develop and commercialize products. In October 2023, the Company achieved the second development milestone upon initiation of a non-pivotal Clinical Trial, triggering a $30.0 million payment. Subject to the continuing progress of ARGX-115 (ABBV-151) by AbbVie, the Company is eligible to receive future development, regulatory and commercial milestone payments in aggregate amounts of up to $50 million, $190 million and $325 million, respectively, as well as tiered royalties on sales at percentages ranging from the mid-single digits to the lower teens, subject to customary reductions. J&J Innovative Medicines On June 4, 2021, the Company received a termination notification from Cilag GmbH International, an affiliate of J&J Innovative Medicines (J&J), which results in the termination of the Collaboration Agreement to jointly develop and commercialize cusatuzumab. Following the termination, the Company concluded that it has substantially satisfied the performance obligation, and as a consequence, recorded $315.1 million for the 12 months ending December 31, 2021.
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F-32
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No conditions related to the above government grants were unfulfilled, nor were there any contingencies related thereon at the date of the approval of these financial statements, except for those described in note 7.2 of this report.
Other Incentives
Research and development incentives
The Company has accounted for a tax incentive following a research and development tax incentive scheme in Belgium according to which the incentive will be refunded after a five year period, if not offset against the current tax payable over the period.
| Payroll tax rebates |
The Company accounted for payroll tax rebates as a reduction in withholding income taxes for its highly qualified personnel employed in its research and development department.
F-33
|
|
The Company manages its activities and operates as one business unit which is reflected in its organizational structure and internal reporting. The Company does not distinguish in its internal reporting different segments, neither business nor geographical segments. The chief operating decision-maker is the Board of Directors.
Following table summarizes the product net sales by country of sales based on the country of the entity that recognizes product net sales:
| | | | | | |
| | Year Ended | ||||
| | | December 31, | |||
(in thousands of $) |
| 2023 |
| 2022 | ||
United States | | $ | 1,046,592 | | $ | 377,659 |
Japan | | | 56,432 | | | 15,764 |
EMEA | | | 72,852 | | | 7,297 |
China | | | 14,907 | | | — |
Total product net sales |
| $ | 1,190,783 |
| $ | 400,720 |
The Company sells its products through a limited number of distributors and wholesellers. Four U.S. customers represent approximately 86% of the product net sales in U.S. during twelve months ended December 31, 2023 (compared to 91% for the same period in 2022).
Collaboration revenue is generated by external customers with their main registered office geographically located as shown in the table below:
| | | | | | | | | | |
| | Year ended | | |||||||
| | December 31, | | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 |
| |||
Denmark |
| $ | — |
| $ | 5,365 |
| $ | 1,389 |
|
United States |
| | 30,000 |
| | — |
| | 317,396 |
|
China | | | 5,533 | | | 4,238 | | | 178,370 | |
Other |
| | — |
| | 424 |
| | 123 |
|
Total collaboration revenue |
| $ | 35,533 |
| $ | 10,026 |
| $ | 497,277 |
|
The property plant and equipment and intangible assets of the Company are geographically located as shown in the table below:
| | | | | | | | | |
| | Non-current assets | |||||||
| | At December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Netherlands |
| $ | — |
| $ | — |
| $ | — |
Belgium |
| | 138,252 |
| | 186,923 |
| | 182,118 |
United States |
| | 6,219 |
| | 2,275 |
| | 3,091 |
Japan |
| | 2,971 |
| | 1,938 |
| | 2,319 |
Germany | | | 461 | | | — | | | — |
Total |
| $ | 147,903 |
| $ | 191,136 |
| $ | 187,528 |
Prior year amounts were updated/recast to match current year presentation
F-34
|
|
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 | | 2021 | |||
Personnel expenses |
| $ | 226,344 |
| $ | 162,010 |
| $ | 160,464 |
External research and development expenses |
| | 483,192 |
| | 366,955 |
| | 382,902 |
Materials and consumables |
| | 4,057 |
| | 2,396 |
| | 2,735 |
Depreciation and amortization |
| | 105,546 |
| | 102,132 |
| | 3,742 |
IT expenses | | | 19,935 | | | 12,678 | | | 7,798 |
Other expenses |
| | 20,418 |
| | 17,194 |
| | 22,879 |
Total Research and development expenses |
| $ | 859,492 |
| $ | 663,366 |
| $ | 580,520 |
20. |
|
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Personnel expenses |
| $ | 303,033 |
| $ | 234,740 |
| $ | 164,646 |
Marketing services |
| | 202,146 | | | 115,950 |
| | 59,968 |
Professional fees | | | 108,820 | | | 62,620 | | | 42,707 |
Supervisory board |
| | 8,362 |
| | 6,912 |
| | 12,958 |
Depreciation and amortization | | | 2,366 | | | 2,211 | | | 2,126 |
IT expenses | | | 20,408 | | | 17,431 | | | 8,977 |
Other expenses |
| | 66,770 |
| | 32,268 |
| | 16,263 |
Total Selling, general and administrative expenses |
| $ | 711,905 |
| $ | 472,132 |
| $ | 307,644 |
21. |
|
The personnel expenses mentioned in notes 19 and 20 above are as follows:
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Short‑term employee benefits—Salaries |
| $ | 266,482 |
| $ | 216,847 |
| $ | 135,676 |
Short‑term employee benefits—Social Security |
| | 19,231 |
| | 16,274 |
| | 12,785 |
Post‑employment benefits |
| | 7,758 |
| | 5,406 |
| | 2,864 |
Termination benefits |
| | 1,089 |
| | 401 |
| | 818 |
Share‑based payment |
| | 226,830 |
| | 151,912 |
| | 167,965 |
Employer social security contributions stock options |
| | 7,987 |
| | 5,910 |
| | 5,002 |
Total personnel expenses |
| $ | 529,377 |
| $ | 396,750 |
| $ | 325,110 |
The post-employment benefits relate to the pension plans the Company has in place for its employees.
The average number of full-time equivalents (FTE) employees by function is presented below:
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
Average Number of FTE |
| 2023 |
| 2022 |
| 2021 | |||
Research and development |
| | 607.3 |
| | 474.8 |
| | 349.7 |
Selling, general and administrative |
| | 681.2 |
| | 442.4 |
| | 264.4 |
|
| | 1,288.5 |
| | 917.2 |
| | 614.1 |
F-35
| Leases |
The statements of financial position shows the following amounts relating to leases:
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | | December 31, | | December 31, | |||
In thousands of $ |
| 2023 | | 2022 | | 2021 | |||
Right-of-use assets |
| | | | | | | | |
Buildings |
| $ | 16,798 |
| $ | 10,867 |
| $ | 9,688 |
Vehicles | | | 3,191 | | | 1,835 | | | 1,664 |
Equipment | | | 160 | | | 196 | | | 230 |
|
| $ | 20,149 | | $ | 12,897 | | $ | 11,583 |
| | | | | | | | | |
| | | | | | | | | |
Lease liabilities |
| | | | | | | | |
Current |
| $ | 4,646 |
| $ | 3,417 |
| $ | 3,509 |
Non-current | | | 15,354 | | | 9,009 | | | 7,956 |
|
| $ | 20,000 | | $ | 12,426 | | $ | 11,465 |
Additions to the right-of-use assets amounted to $11.1 million for the year ended December 31, 2023, compared to $4.2 million and $5.7 million for the years ended December 31, 2022 and 2021 respectively.
The table below shows a maturity analysis of the lease liabilities as on December 31, 2023:
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(in thousands of $) | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years | | Total contractual cash flows | | Carrying amount | ||||||
Lease liabilities | $ | 4,286 |
| $ | 8,136 | | $ | 5,754 | | $ | 1,824 | | $ | 20,000 |
| $ | 20,000 |
The consolidated statements of profit or loss and the consolidated statements of other comprehensive income (loss) shows the following amounts relating to leases:
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
In thousands of $ |
| 2023 |
| 2022 | | 2021 | |||
Depreciation charges |
| | | | | | | | |
Buildings |
| $ | 2,839 |
| $ | 2,179 |
| $ | 2,714 |
Vehicles | | | 971 | | | 735 | | | 651 |
Equipment | | | 36 | | | 35 | | | 34 |
|
| $ | 3,846 |
| $ | 2,949 |
| $ | 3,399 |
| | | | | | | | | |
| | | | | | | | | |
Interest expense (included in finance cost) | | $ | 693 | | $ | 1,343 | | $ | 412 |
Expense relating to short-term leases | | | 1,517 | | | 732 | | | 212 |
Expense relating to leases of low-value assets that are not shown above as short-term leases | | | 40 | | | 21 | | | 7 |
The total cash outflow for leases in 2023, 2022 and 2021 was $3.8 million, $4.2 million and $4.5 million respectively.
The Company did not enter into any lease agreement with variable lease payments or residual value guarantees. The Company has leases that include extension options. These options provide flexibility in managing the leased assets and align with the Company’s business needs. The Company exercises judgement in deciding whether it is reasonably certain that the extension options will be exercised.
F-36
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| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Interest income |
| $ | 92,962 |
| $ | 24,741 |
| $ | 3,489 |
Net gain on cash equivalents & current financial assets held at fair value through profit or loss and cash equivalents |
| | 14,424 |
| | 2,924 |
| | 144 |
Financial income |
| $ | 107,386 |
| $ | 27,665 |
| $ | 3,633 |
| | | | | | | | | |
Net loss on cash equivalents & current financial assets held at fair value through profit or loss and cash equivalents | | $ | (2) | | $ | (1,713) | | $ | (3,482) |
Other financial expense | | | (904) | | | (2,193) | | | (1,096) |
Financial expense | | $ | (906) | | $ | (3,906) | | $ | (4,578) |
| | | | | | | | | |
Realized exchange gains/(losses) |
| $ | 29 |
| $ | (3,743) |
| $ | 15 |
Unrealized exchange gains/(losses) | | | 14,044 | | | (28,989) | | | (50,068) |
Exchange gains/(losses) |
| $ | 14,073 |
| $ | (32,732) |
| $ | (50,053) |
The exchange gains of $14.1 million for the year ended December 31, 2023 were primarily attributable to unrealized exchange rate gains on the cash and cash equivalents and current financial assets position in EUR due to the fluctuation of the EUR/USD exchange rate over the period.
24. | Income taxes |
Income taxes recognized in the income statements can be detailed as follows:
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Current year |
| $ | (9,592) |
| $ | (27,162) |
| $ | (15,224) |
Income tax prior years |
| | (2,080) |
| | (12) |
| | 398 |
Current tax (expense) / benefit |
| | (11,672) |
| | (27,174) |
| | (14,826) |
| | | | | | | | | |
Originating and reversal of temporary differences | | | 21,115 | | | 46,894 | | | 6,304 |
Deferred tax (expense) / benefit |
| | 21,115 |
| | 46,894 |
| | 6,304 |
| | | | | | | | | |
Total tax (expense) / benefit | | $ | 9,443 | | $ | 19,720 | | $ | (8,522) |
F-37
The difference between the provision for income taxes and the amount that would result from applying the Dutch statutory tax rate to income before provision for income taxes is as follows:
| | | | | | | | | |
| | Year Ended | |||||||
| | December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Loss before taxes |
| $ | 304,496 |
| $ | 729,314 |
| $ | 399,743 |
Income tax (expense)/benefit calculated at the Dutch statutory federal income tax rates for applicable tax years (1) |
| | 78,560 |
| | 188,163 |
| | 99,936 |
Effect of intercompany asset deal / transaction | | | 396 | | | (112,200) | | | — |
Effect of expenses not deductible in determining taxable results |
| | (2,674) |
| | (1,570) |
| | (4,441) |
Effect of share based payment expenses that are not deductible in determining taxable results | | | (43,040) | | | (27,043) | | | (29,925) |
Effect of stock issue expenses that are not taxable in determining taxable results |
| | 18,620 |
| | 11,412 |
| | 14,119 |
Effect of concessions |
| | 87,123 |
| | 18,263 |
| | 13,413 |
Effect of change of (de)recognition of deferred tax assets on tax losses | | | (2,282) | | | (194) | | | (44,232) |
Effect of different tax rates in jurisdictions in which the company operates |
| | (3,509) |
| | (5,566) |
| | (2,084) |
Effect of change of (de)recognition of deferred tax assets |
| | (124,457) |
| | (51,320) |
| | (50,389) |
Withholding tax paid | | | (68) | | | — | | | (5,076) |
(Underprovided)/overprovided in prior years | | | (2,080) | | | (12) | | | 398 |
Other | | | 2,854 | | | (213) | | | (241) |
Income tax (expense)/benefit recognized in the consolidated statements of profit or loss |
| $ | 9,443 |
| $ | 19,720 |
| $ | (8,522) |
The exchange losses of €5.8 million
(1) | Applicable tax rates are 25.8% for |
During 2022, argenx Benelux BV transferred certain pipeline activities to argenx BV through a transfer of assets, (hereafter referred to as “asset deal”), for a total amount of $449.0 million. As a result of the asset deal, argenx Benelux BV realised a capital gain on this intellectual property, which results in the rate reconciling item categorized as “effect of intercompany asset deal / transaction”.
The available deferred tax assets relates to argenx US Inc., argenx UK Ltd and argenx Japan KK which are profitable due to the global transfer pricing model of argenx, and the deferred tax liabilities are related to argenx BV. The amount of deferred tax assets and liability by type of temporary difference can be detailed as follow:
| | | | | | | | | |
| | At December 31, 2023 | |||||||
(in thousands of $) |
| Assets | | Liabilities |
| Net | |||
Deferred tax assets / (liabilities) | | | | | | | | | |
Accruals and allowances | | $ | 13,189 | | $ | — | | $ | 13,189 |
Income tax benefit from excess tax deductions related to share-based payments | | | 23,310 | | | — | | | 23,310 |
Profit in inventory | | | 52,026 | | | — | | | 52,026 |
Other tax carryforwards | | | 6,339 | | | — | | | 6,339 |
Property, plant and equipment | | | 2,136 | | | (1,550) | | | 586 |
Non-current fixed assets | | | — | | | (5,155) | | | (5,155) |
Other | | | 1,760 | | | — | | | 1,760 |
Netting by taxable entity | | | (1,549) | | | 1,550 | | | 1 |
| | | | | | | | | |
Net deferred tax assets / (liabilities) |
| $ | 97,211 |
| $ | (5,155) |
| $ | 92,056 |
F-38
| | | | | | | | | |
| | At December 31, 2022 | |||||||
(in thousands of $) |
| Assets | | Liabilities |
| Net | |||
Deferred tax assets / (liabilities) | | | | | | | | | |
Accruals and allowances | | $ | 8,884 | | $ | — | | $ | 8,884 |
Income tax benefit from excess tax deductions related to share-based payments | | | 26,887 | | | — | | | 26,887 |
Profit in inventory | | | 29,711 | | | — | | | 29,711 |
R&D capitalized expense | | | 11,316 | | | — | | | 11,316 |
Property, plant and equipment | | | 856 | | | (549) | | | 307 |
Intangible assets | | | — | | | (3,430) | | | (3,430) |
Non-current fixed assets | | | — | | | (4,975) | | | (4,975) |
Other | | | 2,117 | | | — | | | 2,117 |
Netting by taxable entity | | | (549) | | | 549 | | | — |
| | | | | | | | | |
Net deferred tax assets / (liabilities) |
| $ | 79,222 |
| $ | (8,406) |
| $ | 70,817 |
| | | | | | | | | |
| | At December 31, 2021 | |||||||
(in thousands of $) |
| Assets | | Liabilities |
| Net | |||
Deferred tax assets / (liabilities) | | | | | | | | | |
Accruals and allowances | | $ | 2,858 | | $ | — | | $ | 2,858 |
Income tax benefit from excess tax deductions related to share-based payments | | | 26,026 | | | — | | | 26,026 |
Profit in inventory | | | 3,305 | | | — | | | 3,305 |
Property, plant and equipment | | | 532 | | | (740) | | | (208) |
Intangible assets | | | — | | | (2,714) | | | (2,714) |
Non-current fixed assets | | | — | | | (3,725) | | | (3,725) |
Other | | | 210 | | | — | | | 210 |
Netting by taxable entity | | | (740) | | | 740 | | | — |
| | | | | | | | | |
Net deferred tax assets / (liabilities) |
| $ | 32,191 |
| $ | (6,438) |
| $ | 25,753 |
The change in net deferred taxes recorded in the consolidated statements of financial position can be detailed as follows:
| | | | | | |
| | | | | | |
| | | | | | |
(in thousands of $) |
| Deferred tax assets |
| Deferred tax liabilities | ||
Balance at January 1, 2023 |
| $ | 79,222 |
| $ | (8,406) |
Recognized in profit or loss | | | 17,685 | | | 3,430 |
Recognized in equity | | | 381 | | | — |
Effects of change in foreign exchange rate | | | (77) | | | (179) |
Balance at December 31, 2023 | | $ | 97,211 | | $ | (5,155) |
| | | | | | |
(in thousands of $) |
| Deferred tax assets |
| Deferred tax liabilities | ||
Balance at January 1, 2022 |
| $ | 32,191 |
| $ | (6,438) |
Recognized in profit or loss | | | 49,075 | | | (2,180) |
Recognized in equity | | | (1,960) | | | — |
Effects of change in foreign exchange rate | | | (84) | | | 212 |
Balance at December 31, 2022 | | $ | 79,222 | | $ | (8,406) |
F-39
| | | | | | |
(in thousands of $) |
| Deferred tax assets |
| Deferred tax liabilities | ||
Balance at January 1, 2021 |
| $ | 15,038 |
| $ | (1,487) |
Recognized in profit or loss | | | 11,385 | | | (5,082) |
Recognized in equity | | | 5,494 | | | — |
Effects of change in foreign exchange rate | | | 274 | | | 131 |
Balance at December 31, 2021 | | $ | 32,191 | | $ | (6,438) |
The unrecognized deferred tax asset on unused tax losses amounts to $196.1 million on December 31, 2023, compared to $189.3 million on December 31, 2022 and $203.8 million on December 31, 2021. The Company has unused tax losses carried forward for an amount of $783.3 million on December 31, 2023, compared to $756.1 million on December 31, 2022, and $789.6 million on December 31, 2021. All available tax losses carried forward are in Belgium ($750.1 million on December 31, 2023 versus $720.7 million on December 31, 2022 and $764.7 million on December 31, 2021) and the Netherlands ($33.2, million on December 31, 2023 versus $35.4 million on December 31, 2022 and $24.9 million on December 31, 2021), and do not have an expiration date based upon the applicable enacted tax legislation.
As a company active in research and development in Belgium, we expect to benefit from the innovation income deduction, or IID, in Belgium. The innovation income deduction regime allows net profits attributable to revenue from among others patented products to be taxed at a lower effective tax rate than other revenues. At the end of 2023, 2022 and 2021, we had $654.9 million, $428.8 million and $213.6 million of cumulative carry-forward IID in Belgium (argenx BV). The unrecognized deferred tax asset on IID amounts to $163.7 million on December 31, 2023, compared to $107.2 million on December 31, 2022, and $53.4 million on December 31, 2021.
Also, the unrecognized deferred tax asset on the excess depreciations on R&D costs in Belgium amounts to $278.2 million on December 31, 2023 compared to $204.7 million on December 31, 2022 and $166.3 million on December 31, 2021 (argenx BV).
Additionally, argenx BV has unrecognized deferred tax asset amounting to $106.3 million on December 31, 2023 compared to $112.2 million on December 31, 2022 on the future amortizations on IP assets.
As of December 31, 2023, the Company had an estimated $127.9 million of undistributed earnings attributable to foreign subsidiaries for which no provision for deferred tax liabilities have been recognized because the Company has control over the timing of the reversal of the temporary differences and there are no plans of distributions in the foreseeable future.
25. | Loss per share |
| | | | | | | | | |
| | Year Ended December 31, | |||||||
(in thousands of $) |
| 2023 |
| 2022 |
| 2021 | |||
Loss for the year |
| $ | (295,053) |
| $ | (709,594) |
| $ | (408,265) |
Weighted average number of shares outstanding |
| | 57,169,253 |
| | 54,381,371 |
| | 51,075,827 |
Basic and diluted (loss) per share (in $) |
| $ | (5.16) |
| $ | (13.05) |
| $ | (7.99) |
Earnings/losses per ordinary share are calculated by dividing the loss for the period by the weighted average number of ordinary shares during the year.
As the Company reported a net loss in 2023, 2022 and 2021, stock options and RSUs have an anti-dilutive effect rather than a dilutive effect. As such, there is no difference between basic and diluted loss per ordinary share.
26. | Financial risk management |
The financial risks are managed centrally. The Company coordinates the access to national and international financial markets and considers and manages continuously the financial risks concerning the Company’s activities. These relate to the financial markets risk, credit risk, liquidity risk and currency risk. There are no other important risks,
F-40
such as interest rate risk on borrowings, as the Company has no financial debt. The Company does not buy or trade financial instruments for speculative purposes.
Categories of financial assets and liabilities:
| | | | | | | | | | | |
| | Measurement category | | Carrying amount | |||||||
| | | | At December 31, | |||||||
(in thousands of $) |
| |
| 2023 | | 2022 |
| 2021 | |||
Financial assets — non-current |
| FVTPL |
| $ | 21,715 | | $ | 21,715 |
| $ | 17,459 |
Financial assets — non-current | | FVTOCI | | | 15,528 | | | 17,443 | | | 35,710 |
Research and development incentive receivables — non-current |
| Amortised cost | | | 76,706 | | | 47,488 |
| | 32,707 |
Restricted cash — non-current |
| Amortised cost | | | 2,419 | | | 1,736 |
| | 1,707 |
Trade and other receivables | | Amortised cost | | | 496,687 | | | 275,697 |
| | 38,221 |
Financial assets—current | | FVTPL | | | — | | | 46,162 | | | 73,052 |
Financial assets—current | | Amortised cost | | | 1,131,000 | | | 1,345,646 | | | 929,000 |
Research and development incentive receivables — current | | Amortised cost | | | 2,584 | | | 1,578 | | | — |
Cash and bank balances |
| Amortised cost | | | 20,744 | | | 77,477 |
| | 242,494 |
Cash equivalents | | FVTPL | | | 1,678,100 | | | 669,147 | | | 997,092 |
Cash equivalents | | Amortised cost | | | 350,000 | | | 54,116 | | | 95,090 |
Trade and other payables | | Amortised cost | | | 414,013 | | | 295,679 |
| | 293,415 |
The carrying amounts of trade and other payables and trade and other receivables are considered to be the same as their fair values, due to their short-term nature.
Financial assets held at fair value through profit or loss or OCI
Financial assets held at fair value through profit or loss or OCI consisted of equity instruments of listed and non-listed companies and money market funds.
The Company has no restrictions on the sale of these equity instruments and the assets are not pledged under any of its liabilities. These instruments are classified as financial assets held at fair value through profit or loss or OCI which qualify for:
● | Level 1 fair value measurement with respect to
The market price of these financial instruments might face fluctuations and might be affected by a variety of factors, such as the global economic situation. Current financial assets and cash equivalents include collective investment funds nominated in € and $ of which the underlying investments include bonds and other international debt securities. Based on the weighted average maturity of the underlying instruments, amongst others, these investments are either classified as current financial assets or cash equivalents. The maximum exposure to credit risk is the carrying amount at reporting date. F-41 The Company carried the following assets at fair value on December 31, 2023, 2022 and 2021 respectively:
During the disclosed calendar year, no transfers occurred between the applicable categories. Non-current financial assets – Level 3 In March 2019, the Company entered into a license agreement with AgomAb Therapeutics NV for the use of HGF-mimetic SIMPLE Antibodies™, developed under the Company’s Immunology Innovative Program. In exchange for granting this license, the Company received a profit share in AgomAb Therapeutics NV. In March 2021, AgomAb Therapeutics NV secured $74.0 million in Series B financing by issuing 286,705 of Preferred B Shares. The Company used the post-money valuation of Series B financing round and the number of outstanding shares in determining the fair value of the profit-sharing instrument, which results in a change in fair value of non-current financial assets of $11.2 million recorded through profit or loss. Since AgomAb Therapeutics NV is a private company, the valuation of the profit share is based on level 3 assumptions. In June 2022, AgomAb Therapeutics NV secured €38.4 million as a result of the extension of Series B. The Company used the post-money valuation of this Series B financing round and the number of outstanding shares in determining the fair value of the profit-sharing instrument, which results in a change in fair value of non-current financial assets of $4.3 million recorded through profit or loss. In October 2023, AgomAb Therapeutics NV secured $100.0 million as a result of a Series C financing round. The Company’s profit share diluted as the number of shares held by the company stayed stable where the post-money valuation of AgomAb increased, which results in unchanged fair value of the non-current asset. Non-current financial assets – Level 1 In January 2021, as part of the license agreement for the development and commercialization for efgartigimod in Greater China (see note 16 for further information), the Company obtained, amongst others, 568,182 newly issued Zai Lab shares calculated at a price of $132 per share. The fair value of the equity instrument at period-end is determined by reference to the closing price of such securities at each reporting date (classified as level 1 in the fair value hierarchy), resulting in a change in fair value. The Company made the irrevocable election to recognize subsequent changes in fair value through OCI. F-42 Capital risk The Company manages its capital to ensure that it will be able to continue as a going concern. The capital structure of the Company consists of equity attributed to the holders of equity instruments of the Company, such as capital, reserves and accumulated losses as mentioned in the consolidated statements of changes in equity. The Company makes the necessary adjustments in the light of changes in the economic circumstances, risks associated to the different assets and the projected cash needs of the current and projected research activities. On December 31, 2023, cash and cash equivalents amounted to $2,048.8 million, current financial assets amounted to $1,131.0 million and total capital amounted to $5,658.6 million. The current cash situation and the anticipated cash generation and usage are the most important parameters in assessing the capital structure. The Company’s objective is to maintain the capital structure at a level to be able to finance its activities for at least twelve months. Cash income from existing and new partnerships is taken into account and, if needed and possible, the Company can issue new shares or enter into financing agreements. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. Concentrations in credit risk are determined based on an analysis of counterparties and their importance on the overall outstanding contractual obligations at year-end. The Company has a limited number of collaboration and license partners and therefore has a significant concentration of credit risk. However, it has policies in place to ensure that credit exposure is kept to a minimum and significant concentrations of credit exposure are only granted for short periods of time to high credit quality collaboration partners. The Company applied the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all receivables. To measure the expected credit losses, receivables have been grouped based on credit risk characteristics and the days past due. The provision for expected credit losses was not significant given that there have been no credit losses over the last three years and the high quality nature of the Company’s customers. Cash and cash equivalents and current financial assets are invested with several highly reputable banks and financial institutions. The Company holds its cash and cash equivalents mainly with different banks which are independently rated with a minimum rating of ‘A-’. The Company also holds cash equivalents in the form of money market funds with a recommended investment horizon of 6 months or shorter but with a low historical volatility. These money market funds are highly liquid investments, can be readily convertible into a known amount of cash. The company has adopted a policy whereby money market funds must have an average rating of “BBB” or higher. Liquidity risk The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company’s main sources of cash inflows are obtained through sale of commercial product, capital increases and collaboration agreements. This cash is invested in savings accounts, term accounts and short term investment funds in the form of money market funds. These money market funds represent the majority of the Company’s available sources of liquidity. Since all of these are immediately tradable and convertible in cash they have a no impact on the liquidity risk. Interest rate risk The only variable interest-bearing financial instruments are cash and cash equivalents and current financial assets. Changes in interest rates may cause variations in interest income and expense resulting from short-term interest-bearing assets. Interest rate cuts may have a negative impact on the interest income of the Company. F-43 For the year ended December 31, 2023, if applicable interest rates would increase/decrease by 25 basis points, this would have a positive/negative impact of $7.9 million (compared to $6.2 million for the year ended December 31, 2022 and $0.9 million for the year ended December 31, 2021). Foreign exchange risk The Company undertakes transactions denominated in foreign currencies, causing exposures to exchange rate fluctuations. The Company is mainly exposed to the Euro, Japanese yen, British pound and Swiss franc. To limit this risk, the Company attempts to align incoming and outgoing cash flows in currencies other than USD. The net exposure to exchange differences of the monetary assets (being cash, cash equivalents and current financial assets) of the Company at the end of the reporting period are as follows:
On December 31, 2023, if the EUR would have strengthened/weakened versus the USD by 10%, this would have had a negative/positive impact of $92.3 million, compared to $61.4 million and $53.8 million on December 31, 2022 and December 31, 2021, respectively. On December 31, 2023, if other currencies would have strengthen/weakened against the USD by 10%, this would have had no significant impact.
|
| Relationship and transactions |
In July 2022, the Company entered into a joint venture agreement with the University of Colorado Anschutz Medical Campus and UCHealth and created a separate legal entity, OncoVerity, Inc., which is focused on optimizing and advancing the development of cusatuzumab, a novel anti-CD70 antibody, in AML. The Company contributed $2 million in 2022 and $13 million in 2023. The investment has been accounted under IAS 28 Investment in associates and joint ventures using the equity method of accounting and has been designated as “investment in joint venture” in the consolidated statements of financial position. The share of net loss resulting from investment in joint ventures is presented in consolidated statements of profit or loss and the consolidated statements of other comprehensive income (loss) in line “Loss from investment in joint ventures”. The cash contributions made by the Company to the Joint Venture is reported under Cash flow from investing activities under “Investment in joint venture”.
27.2 | Relationship and |
See note 31 for an overview of the consolidated companies of the group, which are all wholly-owned subsidiaries of argenx SE.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
27.3 | Relationship and transactions with key personnel |
The Company’s key management personnel consists of the members of the management team and the members of the board of directors.
F-44
Remuneration of key management personnel
On December 31, 2023, the senior management consisted of 8 members: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Scientific Officer, General Counsel, Chief Medical Officer, Vice President Corporate Development and Strategy and Global Head of Quality Assurance. They provide their services on a full-time basis.
On December 31, 2023, the board of directors consisted of 9 members: Peter Verhaeghe, Don deBethizy, Pamela M. Klein, A.A. Rosenberg, James M. Daly, Camilla Sylvest, Ana Cespedes, Steve Krognes and Tim Van Hauwermeiren.
Only the Chief Executive Officer is a member of both the senior management team and the board of directors. The Chief Executive Officer does not receive any remuneration for his board membership, as this is part of his total remuneration package in his capacity as member of the senior management team.
The remuneration package of the members of key management personnel comprises:
| | | | | | | | | |
|
| Year Ended December 31, | |||||||
(in thousands of $, except for the number of stock options & RSUs) |
| 2023 |
| 2022 |
| 2021 | |||
Remuneration of key management personnel |
| | |
| | |
| | |
Short-term benefits for senior management members as a group |
| | |
| | |
| | |
Gross salary | | $ | 4,161 | | $ | 4,199 | | $ | 3,465 |
Variable pay | | | 2,816 | | | 3,077 | | | 2,020 |
Employer social security | | | 807 | | | 1,015 | | | 789 |
Other short term benefits | | | 545 | | | 372 | | | 274 |
Termination Benefits | | | — | | | — | | | 382 |
Post-employment benefits for senior management members as a group | | | 167 | | | 104 | | | 150 |
Cost of stock options granted in the year for senior management members as a group | | | 27,983 | | | 18,393 | | | 15,060 |
Cost of restricted stock units granted in the year for senior management members as a group | | | 11,694 | | | 9,594 | | | 8,025 |
Employer social security cost related to stock options | | | (494) | | | 1,101 | | | 4,172 |
Total benefits for key management personnel | | | 47,679 | | | 37,855 | | | 34,337 |
Numbers of stock options granted in the year | | | | | | | | | |
Senior Management as a group | | | 132,100 | | | 117,600 | | | 101,446 |
Numbers of restricted stock units granted in the year | | | | | | | | | |
Senior Management as a group | | | 30,425 | | | 26,500 | | | 22,888 |
| | | | | | | | | |
Remuneration of non-executive directors | | | | | | | | | |
Board fees and other short-term benefits for non-executive directors | | | 533 | | | 437 | | | 435 |
Cost of stock options granted in the year for non-executive directors | | | 2,280 | | | 3,643 | | | 3,263 |
Cost of restricted stock units granted in the year for non-executive directors | | | 1,034 | | | 1,850 | | | 1,731 |
Total benefits for non-executive board members | | $ | 3,847 | | $ | 5,929 | | $ | 5,429 |
Numbers of stock options granted in the year | | | | | | | | | |
Non-executive directors | | | 12,400 | | | 21,600 | | | 22,950 |
Numbers of restricted stock units granted in the year | | | | | | | | | |
Non-executive directors | | | 2,713 | | | 4,800 | | | 5,100 |
F-45
Other
No loans, quasi-loans or other guarantees were given by the Company or any of its subsidiaries to members of the board of directors or the senior management. We have not entered into transactions with the Company’s key management personnel, other than as described above with respect to remuneration arrangements relating to the exercise of their mandates as members of the senior management and the board of directors.
28. | Contingencies |
The Company is currently not facing any outstanding claims or litigations that may have a significant adverse impact on the Company’s consolidated financial position.
29. | Commitments |
At balance sheet date, there were no commitments signed for the acquisition of property, plant and equipment.
In February 2019, and as amended in September 2020, the Company entered into a global collaboration and license agreement with Halozyme Therapeutics, Inc. Under the terms of the agreement, the Company will pay up to $124.0 million to achievement of specific regulatory and sales-based milestones related to VYVGART SC. This amount represents the maximum amount that would be paid if all milestones would be achieved but excludes variable royalty payments based on unit sales. Further, the Company will pay $12.5 million per target for future target nominations and potential future payments of up to $160.0 million per selected target subject to achievement of specified development, regulatory and sales-based milestones and up to $40.0 million subject to the achievement of additional, specified sales-based milestones. This amount represents the maximum amount that would be paid if all milestones would be achieved but excludes variable royalty payments based on unit sales.
The Company’s manufacturing commitments with Lonza, its drug substance manufacturing contractor, relate to the ongoing execution of the biologic license application (BLA) services for efgartigimod and its manufacturing activities related to the potential future commercialisation. In December 2018, the Company signed its first commercial supply agreement with Lonza related to the reservation of commercial drug substance supply capacity for efgartigimod. In the aggregate, the Company has outstanding commitments for efgartigimod under the commercial supply agreements of $361.8 million.
During 2022, Company signed an agreement with Fujifilm, for activities relating to the large-scale manufacturing of efgartigimod drug substance. In the aggregate, the Company has outstanding commitments for efgartigimod under the commercial supply agreement of $13.3 million.
As of December 31, 2023, the Company had a line of credit totalling to $7.2 million (€6.5 million) with the banks.
30. | Audit fees |
The following auditors’ fees were expensed in the consolidated statements of profit or loss and the consolidated statements of other comprehensive income (loss):
| | | | | | | | | |
| | Year Ended December 31, | |||||||
Fees |
| 2023 |
| 2022 |
| 2021 | |||
| | in thousands of $ | |||||||
Audit fees (1) |
| $ | 1,979 |
| $ | 1,394 |
| $ | 1,183 |
Audit-related fees |
| | 330 |
| | 380 |
| | 267 |
Tax fees (2) |
| | — |
| | — |
| | 79 |
Total |
| $ | 2,309 |
| $ | 1,774 |
| $ | 1,529 |
(1) | Auditor services performed by Deloitte Accountants B.V. as the
|
(2) | Tax services performed by the Deloitte network. |
F-46
|
The parent company argenx SE is domiciled in the Netherlands. The Company, argenx SE, has two subsidiaries, argenx BV and argenx Benelux BV, based in Belgium. argenx BV has ten subsidiaries. Details of the Company’s consolidated entities at the end of the reporting period are as follows:
| | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Name | Country | Participation | ||||||||||||||||||||||||||||||||||||||||||||||||
argenx SE | | The | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx | Belgium | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||
argenx | | Belgium | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx US, Inc.
|
|
| 100.00 | % | ||||||||||||||||||||||||||||||||||||||||||||||
argenx Switzerland, SA | | Switzerland | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx Japan KK | Japan | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||
argenx France SAS | | France | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx Germany GmbH | | Germany | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx Canada Inc. | | Canada | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx UK Ltd. | | United Kingdom | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx Netherlands Services B.V. | | The Netherlands | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx Italy S.r.l. | | Italy | | 100.00 | % | |||||||||||||||||||||||||||||||||||||||||||||
argenx Spain S.L. | | Spain | | 100.00 | % |
32. | Events after the balance sheet date
|
No events have occurred after the balance sheet date that could have a material impact on the consolidated financial statements.
F-47
F-46
$
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