UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
OR
For the fiscal year ended December 31, 20202023
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) |
|
Tim Van Hauwermeiren TVanHauwermeiren@argenx.com |
(Name, telephone, e-mail and/or facsimile number and address of company contact person) |
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 | Nasdaq Global Select Market |
Ordinary shares with a nominal value of €0.10 per | | Nasdaq Global Select Market* |
* 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, 2020 47,571,2832023
59,194,488 ordinary 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 ◻
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 every Interactive Data File required to be submitted 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 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-2 of the Exchange Act.
Large accelerated filer X | 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.◻
† 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
† The term “new or revisedIf securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial accounting standard” refersstatements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any update issuedof those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Financial Accounting Standards Boardregistrant’s executive officers during the relevant recovery period pursuant to its Accounting Standards Codification after April 5, 2012.§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-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 ◻
| | |
| | Page |
|
| |
| | |
1 | ||
1 | ||
1 | ||
1 | ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
105 | ||
105 | ||
106 | ||
118 | ||
121 | ||
| 121 | |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
163 | ||
| 163 | |
| 163 | |
| ||
166 | ||
168 | ||
168 | ||
168 | ||
169 | ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
ii
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| | |
|
| |
|
| |
| ||
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
| |
| ||
| ||
| ||
| ||
| ||
| ||
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
| |
| ||
| ||
| ||
| 200 | |
200 | ||
200 | ||
| | |
|
| |
|
| |
| ||
| ||
|
iii
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; |
● | the expansion of our business, including the further development of our sales and marketing abilities and our Immunology Innovation Program (IIP), and the value of our pipeline; |
● | 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; |
● | our ability to advance product candidates into, and successfully complete, clinical trials; |
● | our |
● | the commercialization of our products and product candidates, including new indications, alternative dosing regimens and treatment modalities, if approved; |
● | the anticipated timing of |
● | the anticipated pricing and reimbursement of our products and product candidates, if approved; |
● | our plans to have various programs to help patients afford our products, including patient assistance and co-pay coupon programs for eligible patients; |
● | the timing or likelihood of regulatory filings and |
● | 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; |
● | 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 |
● | 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
● | the rate and degree of market acceptance of our products and product candidates, if approved; |
● | the potential benefits of our current |
● | our plans and ability to enter into collaborations for additional programs or product candidates; |
● |
● | 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-
iv
lookingforward-looking statements. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. 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.
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"“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 prospectus supplement,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.
vvi
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 |
● |
● | 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 |
● |
● | 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 |
● | We are subject to |
● | 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 |
● | 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 |
● | 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 |
● | Disruptions caused by our reliance on third parties for our manufacturing process may delay or |
● | 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 |
● | We |
● |
● | Holders of our ADSs are not treated as holders of our ordinary shares and may be subject to limitations on |
● | We are a Dutch European public company with limited liability (Societas Europaea or SE). The rights of our |
● | Claims of U.S. civil liabilities may not be enforceable against us or the members of our management and |
● | 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. |
viviii
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 and for the years ended December 31, 2020, 2019 and 2018 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 and for the year ended December 31, 2017 and 2016 have been extracted from our consolidated audited 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.
| | | | | | | | | | | | | | | |
| | Year ended | |||||||||||||
| | December 31, | |||||||||||||
|
| 2020 |
| 2019 | | 2018 | | 2017 |
| | 2016 | ||||
| | (In thousands, except share and per share data) | |||||||||||||
Consolidated statement of profit and loss and other comprehensive income: | | |
| | |
| | | | | | | | |
|
Revenue |
| € | 36,425 | | € | 69,783 | | € | 21,482 | | € | 36,415 | | € | 14,713 |
Other operating income |
|
| 18,109 | |
| 12,801 | |
| 7,749 | |
| 4,841 | |
| 2,439 |
Total operating income | | | 54,534 | | | 82,584 | | | 29,232 | | | 41,257 | | | 17,152 |
Research and development expenses |
|
| (325,479) | |
| (197,665) | |
| (83,609) | |
| (51,740) | |
| (31,557) |
Selling, general and administrative expenses |
|
| (149,367) | |
| (64,569) | |
| (27,471) | |
| (12,448) | |
| (7,011) |
Total operating expenses | | | (474,846) | | | (262,234) | | | (111,080) | | | (64,188) | | | (38,568) |
Change in fair value on non-current financial assets | | | 2,544 | | | 1,096 | | | — | | | — | | | — |
Operating loss |
|
| (417,769) | |
| (178,554) | |
| (81,849) | |
| (22,932) | |
| (21,416) |
Financial income/(expenses) |
|
| (1,414) | |
| 14,275 | |
| 3,694 | |
| 1,250 | |
| 73 |
Exchange gains/(losses) |
|
| (106,956) | |
| 6,066 | |
| 12,308 | |
| (5,797) | |
| (31) |
Loss before taxes |
|
| (526,139) | |
| (158,213) | |
| (65,847) | |
| (27,479) | |
| (21,374) |
Income tax expense |
|
| (2,784) | |
| (4,752) | |
| (794) | |
| (597) | |
| — |
Loss for the year and total comprehensive loss |
| € | (528,923) | | € | (162,965) | | € | (66,641) | | € | (28,076) | | € | (21,374) |
Weighted average number of shares outstanding |
|
| 45,410,442 | |
| 38,619,121 | |
| 33,419,356 | |
| 24,609,536 | |
| 18,820,612 |
Basic and diluted loss per share (in €) |
| € | (11.65) | | € | (4.22) | | € | (1.99) | | € | (1.14) | | € | (1.14) |
1
| | | | | | | | | | | | | | | |
| | As of December 31, | |||||||||||||
|
| 2020 |
| 2019 | | 2018 | | 2017 |
| 2016 | |||||
| | (In thousands) | |||||||||||||
Condensed consolidated statement of financial position: | | | | | | | | | | | | | | | |
Cash and cash equivalents and current financial assets | | € | 1,626,968 | | € | 1,335,821 | | € | 564,569 | | € | 359,775 | | € | 96,728 |
Total assets |
|
| 1,857,693 | |
| 1,433,339 | |
| 578,458 | |
| 370,908 | |
| 105,772 |
Deferred revenue — current and non-current |
|
| 257,002 | |
| 290,370 | |
| 2,161 | |
| 10,070 | |
| 30,206 |
Total liabilities |
|
| 492,110 | |
| 382,593 | |
| 40,063 | |
| 25,977 | |
| 42,398 |
Share capital | | | 4,757 | | | 4,276 | | | 3,597 | | | 3,217 | | | 2,012 |
Share premium | | | 2,058,123 | | | 1,308,539 | | | 673,454 | | | 430,518 | | | 126,358 |
Total equity |
|
| 1,364,373 | |
| 1,050,746 | |
| 538,395 | |
| 344,931 | |
| 63,374 |
| | | | | | | | | | | | | | | |
| | As of December 31, | |||||||||||||
|
| 2020 |
| 2019 | | 2018 | | 2017 |
| 2016 | |||||
| | (In thousands) | |||||||||||||
Condensed consolidated statement of cash flows: | | | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of the period | | € | 331,282 | | € | 281,040 | | € | 190,867 | | € | 89,897 | | € | 35,514 |
Net cash flows (used in) / from operating activities |
|
| (346,349) | |
| 134,584 | |
| (53,839) | |
| (36,546) | |
| 10,599 |
Net cash flows (used in) / from investing activities |
|
| 310,250 | |
| (744,338) | |
| (107,542) | |
| (162,052) | |
| (806) |
Net cash flows (used in) / from financing activities |
|
| 747,897 | |
| 659,359 | |
| 244,671 | |
| 305,365 | |
| 44,621 |
Effect of exchange rate differences on cash and cash equivalents |
|
| (51,471) | |
| 637 | |
| 6,883 | |
| (5,797) | |
| (31) |
Cash and cash equivalents at end of the period | | € | 991,609 | | € | 331,282 | | € | 281,040 | | € | 190,867 | | € | 89,897 |
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-looking statements that involve risks and uncertainties. See “Cautionary Statement with Respect to Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-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.”
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:
2
Risks Related to Ourargenx’s Financial Position and Need for Additional Capital
We have incurred significant losses since our inception and expect to incur losses for the foreseeable future. We may never achieve or maintainsustain profitability.
We are a clinical-stage biopharmaceutical company with a limited operating history. We do not currently have any approved products and have never generated any revenue from product sales. Since our inception, we have incurred significant operating losses, totaling €758.5$2,405 million of cumulative losses overlosses. To date we have commercialized VYVGART for the financial years 2018, 2019 and 2020.treatment of gMG. We do not currently have any marketing approvals for 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, pre-commercial activities and from general and administrative costs associated with our operations. In addition, we expect to continue to incur significant costs associated with our listings in the United Statescommercial roll out and in Europe. In the future, weexpansion. We intend to continue to conduct research and development, preclinical testing, clinical trials and regulatory compliance activities 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 establish aexpand our sales, marketing and distribution infrastructure. These expenses, together with anticipated general and administrative expenses, willmay result in incurring further significant losses for at least the next several years.foreseeable future. We anticipate that our operating expenses will increase substantially if and as we execute our business plan as further set out in “Item 4.B. — Business Overview – Our Strategy” and “Item 5.A. — Operating Results — Overview”strategic objectives and as we experience delays or encounter issues relating thereto, including failed studies,clinical trials, ambiguous clinical trial results, safety issues or other regulatory challenges. If our losses become greater than expected,
1
Although we may require additional financing than anticipatedhave generated net product sales of $1.2 billion from global product net sales in fiscal 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 such financing may not be available to us on acceptable termscommercialize VYVGART and VYVGART SC in other indications or at all.
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 may nevernot succeed in some or even all of these activities, and even if we do, we may nevernot generate revenue that is significant enough to achieve profitability. For instance, even if we receive approval of and commercialize efgartigimod for the treatment of MG in the United States, we can provide no assurances that we will be able to achieve profitability based on sales in that indication alone or that we will be able to receive approval of and commercialize efgartigimod in other indications or in other countries.
Even if we do generate product royalties or product sales, weWe may never achieve or sustain profitability on a quarterly or annual basis. Our failure to achieve or sustain profitability could impair our abilityneed to raise capital,
3
expand our business, diversify our product offerings or continue our operations and as such could have a material adverse impact on our business, financial condition and results of operations.
Substantialsubstantial additional funding may be required in order to complete the development and commercialization of our product candidates butwhich may not be available to us on acceptable terms or at all.
Notwithstanding ourWe have significant positionpositions of cash and cash equivalents of $2,049 million and current financial assets of $1,131 million as of December 31, 2021, we expect to require additional funding in the future to sufficiently finance our operations, to advance development of our2023. Developing products and product candidates, including new indications, and to continue our business activities relating to researchconducting clinical trials is time-intensive, expensive and development and the commercialization of our products.risky. Our future capital requirements for efgartigimod or our preclinical programs will depend on many factors, including those set out in “Item 5.B — Liquidityincluding: (i) the success, cost and Capital Resources”.
We expect our cash burn to increase significantly in 2021. The increased spend will support our transition to an integrated immunology company, including the build-out of global commercial infrastructure and drug product inventory ahead of the expected launch of efgartigimod in MG, the advancementtiming of our clinical-stage pipeline, including sevendevelopment activities, preclinical testing and clinical trials of efgartigimod,for our product and continued investmentproduct candidates, (ii) the time and costs involved in our immunology innovation program. Any failure by us to keep the cash burn under control by applying our funds effectivelyobtaining regulatory approvals and managing our cash and investments appropriately could result in financial losses that could have a material adverse effect on our business.
Until such timeany delays we may encounter, including as we can generate significantseek 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 sales,candidates, if ever, we expect toapproved.
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. Adequate additional financing may not be available to us on acceptable terms, or at all. The inability for usIf we are unable to raise additional capital asif and when needed, would have a negative impact on our financial condition and our ability to pursueor if the terms are not acceptable, our business strategy could be impacted, and as a result we may be forced to delay, reduce or terminate the development or commercialization of all or part of our research programs or product candidates, 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 candidates, including new indications, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired or we may be unable to take advantage of future business opportunities, all of which may have a material adverse impact on our business, financial condition and results of operations.
TheOur 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.
As of December 31, 2020,2023, we had cash and cash equivalents and current financial assets of €1,627.0 million. We historically have invested substantially all$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, pending their use in our business.funds. Any future investments may include term deposits, corporate bonds, commercial paper, certificatecertificates of deposit, government securities and money market funds in accordance with our cash managementinvestment policy. These investments may be subject to general credit, liquidity, and market, inflation, foreign currency and interest rate risks. For example,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. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our cash flows and investment portfolio may have an adverse effect onadversely affect our results of operations, liquidity and financial condition.
42
RisksDue 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 results and financial condition.
Risk Factors Related to the DevelopmentCommercialization of argenx’s Products and Clinical Testing of Our Product Candidates, Including for New Indications
We will face significant challenges in successfully commercializing our products and additional product candidates after they are launched.
AllThe commercialization of VYVGART in new indications or other approved product candidates, or entrance of any of our products or product candidates are eitherinto 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 preclinical, early-stage clinical or clinical development or marketcertain 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 requested for them, but has not (yet) been granted. Our trialsobtained 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 fail to launch or market our products effectively. Recruiting and eventraining 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 any reason, we would have prematurely or unnecessarily incurred these commercialization expenses, and our investment would be lost if theywe 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 perform 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 wein entering into arrangements with third parties to sell and market our products or may be unable to commercialize anydo so on terms that are favorable to us.
3
The commercial success of our products and product candidates, including in new indications or allmethods of administration, will depend on the degree of market acceptance.
Our products and product candidates, including for new indications or methods of administration, if and when approved and available on the market, may never achieve an adequate level of acceptance by physicians, patients, the medical community, or healthcare payors for us to be profitable. This will depend on a number of factors, many of which are beyond our control, 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 products and product candidates for the treatment of different indications, negative results in a clinical trial evaluating the efficacy and safety of a product or product candidate for one indication could negatively impact the perception of the efficacy and safety of such product or product candidate in a
4
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 AbbVie, 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 VYVGART, as well as products that are similar to some of our product candidates due to a lack of, or delay in, regulatory approval orcandidates. Competition for other reasons.(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).
ForCompetitive 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, succeedor necessary for, the development of our products.
There can be no assurance that our competitors are not currently developing, or will not in the future develop, technologies and in order to obtain the requisite regulatory approvals to marketproducts that are equally or more effective, are more economically attractive, and sellcan be administered more easily than any of our current or future technologies or products.
5
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 collaborators for such candidates must successfully demonstrate through extensive preclinical studies and clinical trials that our products are safe, pure and potent or effective in humans. Clinical testingtechnology platforms do not compete effectively, it is expensive and can take many yearslikely to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process and our future clinical trial results may not be successful. There is 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 in earlier studies, and any such setbacks in our clinical development could have a material adverse effect on our business, operatingfinancial condition and results of operation.
Our 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 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 biologics license application (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.
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, 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 the 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 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 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 regulatory 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 their reference products and other 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.
6
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.
7
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 or 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 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 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 condition.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
8
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 experience delaysnot 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 ongoingproducts 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
9
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 coverage, 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 trials, including aseffectiveness, 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 resultspecific price for the medicinal product or it may instead adopt a system of COVID-19,direct or indirect controls on the profitability of the company placing the medicinal product on the market. Our results of operations may suffer if we or our collaborators 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 knowhave 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 plannedthe 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
10
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 indication 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,
11
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 complete extensive preclinical testing and clinical trials that support our investigational new drug (IND) or planned IND applications in the U.S. or Japan, or our clinical trial applications (CTAs) in the UK or in the EU, or a comparable application in other jurisdictions. We cannot be sure that we will beginbe able to submit INDs or CTAs or comparable applications for our preclinical programs on time, need to be redesigned, enroll patients on time or be completed on schedule,the timelines we 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.
12
Clinical trials canmust be delayed, suspended, or terminated for a large variety of reasons outside our control, including delays of approval fromconducted in accordance with Relevant Regulatory Authorities and other applicable regulatory authorities,authorities’ legal requirements and regulations and are subject to oversight by these governmental agencies and institutional review boards or(IRBs) and ethics committees delays or failure to recruit or retain patients, failuresat 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 third parties to comply with regulatory or contractual requirements or issues relating to the quantity, quality or stability of theour products and product candidate.
candidates produced under current good manufacturing practices (cGMPs) and other regulations. We could encounter delays for example if a clinical trial is suspended or terminated, by us, by the institutional review boards,IRBs or IRBs,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, 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, 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 athe product or product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. We could also experience operational challenges as we undertake an increasing number of clinical trials.
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. |
13
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
14
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
15
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
16
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.
17
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.
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 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.condition significantly.
Clinical trials must be conducted in accordance with the EMA, FDA, PMDA 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 theWe could also experience operational challenges as we undertake an increasing number of 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 contract research organizations or CROs and clinical trial sites 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
5
increased costs, program delays or both, which may harm our business. In addition, clinical trials that arethose conducted in countries outside the European UnionEU, UK and the United StatesU.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-European Unionnon-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 EMA, FDA or other regulatory authorities,Relevant Regulatory Authorities, and apply different standards of diagnosis, screening and medical care.
BeforeIf we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned Investigational New Drug applications, or INDs,experience delays in the United Statescompletion of, or Japan, or a Clinical Trial Authorization Applications, or CTAs, in Europe, or a comparable application in other jurisdictions. We cannot be certaintermination of, the timely completion or outcomeany clinical trial of our preclinical testing and studies and cannot predict if the EMA, FDA or other regulatory authorities 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 or comparable applications for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or CTAs or comparable applications will result in the EMA, FDA or other regulatory authorities allowing clinical trials to begin.
Even if clinical trials do begin for these preclinical programs, our development efforts may not be successful, and clinical trials that we conduct or that third parties conduct on our behalf may not demonstrate sufficient safety, purity and potency or efficacy to obtain the requisite regulatory approvals for any of our product candidatesproducts or product candidates, employing our technology. Even if we obtain positive results from preclinical studies or initialcommercial prospects may be harmed. Any delays in completing our clinical trials we may not achieve the same success in future trials.
Any of these occurrences may harmincrease our business, results of operationscosts, slow down our product candidate development and financial condition significantly. In addition, manyapproval 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.
The time required Significant clinical trial delays could also allow our competitors to obtain approval bybring products to market before we do or shorten any periods during which we have the FDA, the EMAexclusive right to commercialize our products and comparable foreign authorities is unpredictable but typically takes many years, if obtained at all, following the commencementproduct candidates.
18
If we decide to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatorypursue accelerated approval for any product candidate and it is possible that none of our existing product candidates, it may not lead to a faster development or anyregulatory review or approval process and does not increase the likelihood that our product candidates we may seek to develop in the future will ever obtain regulatoryreceive marketing approval. We have limited experience in submitting and supporting the applications necessary to seek regulatory approvals and expect to rely on third-party CROs to assist us in this process. Securing regulatory approval requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate's safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
If we are unable to obtain regulatory approval of our product candidates on a timely basis or at all, our business will be materially impacted. For instance,under an accelerated pathway, we have incurred significant time and expense related to preparation for the build-out of our global commercial infrastructure and drug product inventory ahead of the expected launch of efgartigimod in MG in the United States. If efgartigimod is not approved in the United States, or if such approval is significantly delayed, it could have a material adverse effect on our business and cause the price of the ordinary shares to decline.
6
Business interruptions resulting from the COVID-19 pandemic could cause a disruption of the development of our product candidates and adversely impact our business.
Public health crises such as pandemics or similar outbreaks could adversely impact our business, such as the COVID-19 pandemic. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures.
The extent to which the COVID-19 pandemic impacts our business and operations and those of our collaborators, including clinical development and regulatory efforts, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements, vaccines, and business closures to contain and treat the disease. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our clinical and regulatory activities and those of our partners, healthcare systems or the global economy as a whole. However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described herein.
Operational impacts of COVID-19
We conduct our clinical trials globally, including in areas impacted by COVID-19 in North America, Europe and Japan. The continued spread of COVID-19 has and could continue to adversely impact our business and operations, including our or our third-party partners’ discovery activities, preclinical studies and clinical trials. The COVID-19 pandemic, and measures undertaken to control the spread of the virus, could impair our or our third-party partners’ ability to initiate clinical trial sites and recruit and retain patients because principal investigators and site staff, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography or due to prioritization of hospital resources toward the outbreak and restrictions in travel. Furthermore, some patients may be unwilling to enroll in our or our third-party partners’ trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. Patients in our and our third-party partners’ trials are at increased risk for COVID-19-related health issues due to a number of factors, including their age, the nature of their disease or stage of their disease. If patients in our or our third-party partners’ trials contract COVID-19, it could adversely impact the outcome of the trial, including by limiting the quality, completeness and interpretability of data that we are able to collect. As a result of these restrictions, enrollment in some of the ongoing trials we or our third-party partners are conducting has been or may be delayed, but the extent of the full impact is not quantifiable until the trajectory of the pandemic is better understood. The pandemic may also lead to delayed and missed dosing or delayed and missed disease evaluations for patients that have already been enrolled in ongoing trials. We and our third-party partners will continue to monitor the impact of COVID-19 on all ongoing clinical trials and will implement changes as necessary.
Economic impacts of COVID-19
The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our ADSs and/or our ordinary shares.
7
Impacts of COVID-19 on employees or other stakeholders
COVID-19 may also negatively impact our employees and our other stakeholders. Precautionary measures that we have taken, such as temporarily requiring employees to work remotely, suspending all non-essential travel for our employees and discouraging employee attendance at industry events, may not succeed in minimizing the risk of infection to our employees, and such measures, together with the COVID-19 pandemic, could negatively impact the productivity or emotional health and wellbeing of our employees.
We may face ongoing obligations and additional expenses even if our product candidates are approved, and we may face restrictions, market withdrawal and penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
If the EMA, FDA or a comparable 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 expensive 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 and therefore cannot be sold in the United States if we do not obtain a BLA. 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.
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 revoke, suspend or withdraw our marketing authorizations, requiring usrequired to conduct additional clinical trials changebeyond 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 decide to pursue accelerated approval for one or more of our product labelingcandidates. For example, under the FDA’s accelerated approval program, the FDA may approve a drug or submit additional applicationsbiological product for marketing authorization.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 clinical endpoint that can be measured earlier than irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible 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 were to pursue accelerated approval for a product candidate for a disease or condition, 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 these events occurs, our abilitycompetitors were to sellreceive 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 specify conditions of any required post-approval clinical trial and requires sponsors to submit 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 a longer time period to commercialization of such product may be impaired,candidate, if any, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affectincrease the cost of development of such product candidate and harm our business, financial conditioncompetitive position in the marketplace.
19
Our products and results of operations.
Our product candidates may have serious adverse, undesirable or unacceptable side effects or even death.
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.
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 EMA, FDA or other comparable regulatory 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-benefit perspective, we have observed adverse events and treatment emergent adverse events (TEAEs) in our clinical studiestrials to date, and we may see additional adverse events and treatment emergent adverse events or TEAEs in our ongoing and future trials, whichclinical trials. Such side effects may be more serious than those observed to date, and as a result, our ongoing and future clinical trials may be negatively impacted.
The drug-related Moreover, as we seek to develop product candidates, including products in new indications, patients may experience new or more 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, results of operation and financial condition 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 efgartigimod, are based on our SIMPLE AntibodyTM platform, any adverse safety or efficacy
8
findings related to any product candidate or preclinical program may adversely impact the viability 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 arise, including:
● | regulatory authorities may withdraw approvals or revoke licenses of such products and require us to take |
● | 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; |
● | regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or |
● | we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; |
● | we may be subject to limitations on how we may promote the product; |
● | sales of the product may decrease significantly; |
● | we may be subject to litigation, |
● | our reputation may suffer. |
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 orlicense, which could substantially increase commercialization costsharm our reputation and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our products. For example, we understand that another company developing an FcRn antagonist recently initiated a voluntary pause of its ongoing clinical trials after an observed signal of elevated total cholesterol and LDL levels in one of its ongoing trials. We have evaluated efgartigimod in over 350 subjects and patients and we are not aware of any elevation of cholesterol markers related to treatment with efgartigimod. However, if we were to observe unexpected adverse events of whatever kind, our trials could be similarly paused and it could have a material adverse effect on our ability to further the advancement ofcommercialize VYVGART.
If our product candidates.
We face significant competition for our drug discovery and development efforts.
The market for pharmaceutical productstarget patient population 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 resourcessmaller than we have. A detailed analysis of the intense competition we face in the autoimmune field, the field of leukemia and lymphoma and the monoclonal antibody drug discovery field is set out in “Item 4.B. — Business Overview — Competition”. 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 and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our products.
9
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 beforeexpected, we are ableunable to recover our researchsuccessfully enroll and development and commercialization expenses. If we, our 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.
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.
Identifying and qualifyingCurrently, 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 to participatewith these disorders is smaller than we expected, we may encounter difficulties in enrolling sufficient patients in our clinical trials, is criticalthereby delaying or preventing
20
development and approval of our products 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 may therefore fail to identify these conditions in their patients and therefore may not refer them to our success. clinical 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'clinicians’ and patients'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 pools available 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; PF; CIDP; 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.
We are exposed to potential product liability and professional indemnity risks that are inherentIn addition, certain of patients enrolled 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 collaborators in clinical trials and the potential sale of any approved productsare located in the future, may expose usareas subject to liability claims. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies, our collaboratorsconflict, hostilities 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 candidateswar, 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:
10
Although we maintain product liability insurance for our product candidates and 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, we may not be able to maintain insurance coverage at a reasonable cost or to 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 theother disruptive events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Commercialization of Our Product Candidates
We will face significant challenges in successfully commercializing our products.
We are in the process of setting up our sales and marketing infrastructure, have no experience in the sale or marketing of pharmaceutical products and may not timely have the appropriate infrastructure in place yet (including, such as information technology, enterprise resource planning and forecasting). 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 plan 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, the United States and Japan. 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. Recruiting and training a sales force is expensive and costs of creating an independent sales and marketing organization and of marketing and promotion could be above those anticipated by us. In addition, recruiting and training a sales force is time consuming and could delay any product launch. In the event that any such launch (e.g. the expected launch of efgartigimod in MG in the U.S.) 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 retain or reposition our sales and marketing personnel.
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 controlcontrol. See Item 3.D. “Risk Factors—Risk Factors Related to argenx’s Organization 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,Operations—‘Global geo- and our obligations under our arrangements may be adversely affected by business combinations or significant changes in our collaborator’s business strategy. In
11
addition, we may not be successful in entering into arrangements with third parties to sellsocio-political threats 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, financial condition and results of operations.
The future commercial success of our product candidates will depend on the degree of market acceptance.
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. For instance, our product candidates may not achieve an adequate level of acceptance by physicians because of dosing complexity or from patients because of infusion fatigue. 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. 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:
If our product candidates 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, the market may prove not to be large enough to allow us to generate significant revenues.
12
Our product candidates for which we intend to seek approval as biological 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. See also “Item 4.B. — Business Overview — Government Regulation”.
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 product, 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.
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 Unionmacro-economic uncertainty 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. A detailed description of the relevant legislative and regulatory initiatives and changes is contained in “Item 4.B. — Business Overview — Government Regulation”. If such legislative and/or regulatory initiatives and changes would lead to increased restrictions on marketing our products, or lead to limiting the funds available for healthcare in jurisdictions relevant to us which may reduce reimbursement levels and is likely to affect the prices we may set, we would be negatively impacted in our ability to successfully and profitably market our product candidates.
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, European, Japanese and Chinese 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 may impact, among other things, our proposed sales, marketing and education programs and constrain our business and financial arrangements and
13
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 be subject to patient data privacy and security regulation by both the U.S. federal government and the other states and countries 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 regulatory authorities in jurisdictions in which we conduct 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. We have no experience in the sale or marketing of pharmaceutical products and, in light of any future approval and commercialization, we will need to continue building an internal program to ensure compliance with the different health care laws and regulations. The establishment of an internal compliance program will involve substantial costs and the program may not be successful in complying with the different reporting requirements. For an overview of some of the laws and regulations which may affect our ability to operate, please refer to “Item 4.B. — Business Overview — Government Regulation”.
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 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. 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. 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.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. 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. For further details and examples, we refer “Item 4.B — Business Overview — Government Regulation”.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. For example, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is generally not permitted in the countries that form part of the European Union. Some European Union 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 United Kingdom has enacted such laws through the Bribery Act 2010. Infringements of these laws can result in substantial fines and imprisonment. EU Directive 2001/83/EC, which is the EU Directive governing medicinal products for human use, further provides that, where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and relevant to the practice of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so remains applicable in the UK despite its departure from the EU. 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.
14
We may be subject to privacy laws, regulation and enforcement. Our failure to comply with these laws could harm our results of operations and financial conditions.
In Europe, Directive 95/46/EC of the European Parliament and of the Council of October 24, 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, or the Directive, and Directive 2002/58/EC of the European Parliament and of the Council of July 12, 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (as amended by Directive 2009/136/EC), or the e-Privacy-Directive, have required the European Union, or EU member states, to implement data protection laws to meet strict privacy requirements. Violations of these requirements can result in administrative measures, including fines, or criminal sanctions. The e-Privacy Directive will likely be replaced in time by a new e-Privacy Regulation which may impose additional obligations and risk for our business.
Beginning on May 25, 2018, the Directive was replaced by Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, or the GDPR. The GDPR imposes a broad range of strict requirements on companies subject to the GDPR, such as us, including requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside the European Economic Area, or the EEA, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping. The GDPR substantially increases the penalties to which we could be subject in the event of any non-compliance, including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover 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 particular, national laws of member states of the EU are in the process of being adapted to the requirements under the GDPR, thereby implementing national laws which may partially deviate from the GDPR and impose different obligations from country to country, so that we do not expect to operate in a uniform legal landscape in the EU. Also, in the field of handling genetic data, the GDPR specifically allows national laws to impose additional and more specific requirements or restrictions, and European laws have historically differed quite substantially in this field, leading to additional uncertainty.
We must also ensure that we maintain adequate safeguards to enable the transfer of personal data outside of the EEA, in particular to the United States in compliance with European data protection laws, including the GDPR. We expect that we will continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy laws will be sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties. Any such investigation or charges by European 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 European or multi-national 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, including the GDPR. 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 materially harm our business, prospects, financial condition and results of operations.
15
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 either affecting not more than five in 10,000 persons in the European Union or 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. 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 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 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. If we fail to obtain or if we lose orphan drug status for one or more of our 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 candidate.
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 efgartigimod for the treatment of MG, in January 2019 the FDA granted orphan drug designation for the use of efgartigimod for the treatment of Primary Immune Trombocytopenia and for the use of cusatuzumab for the treatment of acute myeloid leukemia. 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.
We may not obtain or maintain adequate coverage or reimbursement status for our product candidates.
Even if our product candidates are approved for marketing, sales of such product candidates will depend, in part, on the extent to which third-party payors, including government health programs in the United States (such as Medicare and Medicaid) and other countries, 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 European Union, the United States, China and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for
16
newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. For instance, access to efgartigimod for the treatment of MG may be restricted by limited payer coverage due to treatment criteria, which may prevent us from realizing its full commercial potential. A detailed analysis of some of the most relevant developments and challenges regarding coverage and reimbursement is set out in “Item 4.B. — Business Overview — Government Regulation”.
Limitations on reimbursement and reimbursement levels may diminish or prevent altogether any significant demand for our products and/or may prevent us entirely from entering certain markets, which would prevent us from generating significant revenues or becoming profitable, which would adversely affect our business, financials and results of operations.
We may not be able to successfully achieve support among healthcare providers and third-party payors for our product candidates, and our relationships with such parties are subject to regulations.
Our current and future arrangements with providers, researchers, consultants, third-party payors and customers are subject to broadly applicable national, federal and state fraud and abuse, 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.
We will be required 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 more information see “Item 4.B — Business Overview — Government Regulation”). Violations of these 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-compliance with these laws, reputational harm, and the required curtailment or restructuring of our operations. Moreover, we expect that there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our business, financial condition and results of operations.
Risks Related to Our Business 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, refusals and withdrawal of approvals, as well as fines.
The international biopharmaceutical and medical technology industry is subject to a high level of regulation by the FDA, the EMA, the PMDA and other comparable regulatory authorities and by other national or supra-national regulatory authorities. Applicable regulations impose substantial requirements covering nearly all aspects of our activities and the activities of our partners and licensees, notably on research and development, manufacturing, preclinical tests, clinical trials, labeling, marketing, sales, storage, record keeping, promotion and pricing of our product candidates.
Failure to (timely) comply with regulatory requirements could have far reaching consequences for us, including significant delay in our product development as a result of regulatory authorities recommending non-approval or restrictions on approval of a product candidate. Any failure or delay 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.
17
Regulations differ substantially per jurisdiction and are subject to constant change. 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 approval. Moreover, clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the EMA, the FDA or the PMDA does not ensure approval by the comparable 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 EMA, the FDA or the PMDA.
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 product candidates. Each of the FDA, EMA and other comparable regulatory 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, EMA or one or more other comparable foreign authority. The FDA, EMA or other comparable regulatory 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.
The FDA, EMA and other comparable regulatory authorities have substantial discretion in the approval process and determining when or whether regulatory approval will be obtained for any of our product candidates. Any of the FDA, EMA and other comparable regulatory authorities may disagree with our interpretation of data submitted for their review. 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, EMA or any other regulatory authority. For instance, we announced positive Phase 3 data and submitted a BLA to the FDA in December 2020, for efgartigimod for the treatment of gMG. The FDA must inform us within 60 days of submission if it has accepted our BLA submission and filed it for regulatory review. If the FDA determines that our BLA submission is incomplete or insufficient for filing, the FDA may refuse to file the BLA. Any such refusal by the FDA could require us to expend additional time and resources to revise and resubmit our BLA or harm our business and reputation. We can provide no assurances that our BLA will be approved on the timeline that we expect or at all. Furthermore, the FDA announced plans to resume prioritized domestic inspections in July 2020. We may not be ready for such an inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities in view of the commercial launch of efgartigimod for the treatment of MG.
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 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.
The time required to obtain approval by the FDA, EMA and comparable regulatory 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. 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 efgartigimod for the treatment of gMG, which would significantly harm our business, results of operations and prospects.
18
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.
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 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.
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 and relevant third parties 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, EMA and other comparable regulatory 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 in other countries; 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, results of operations and financial condition, 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. or international 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
19
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. These risks may be particularly heightened given our lack of experience with commercialization and the rapid growth of our sales and marketing function. Furthermore, due to the highly regulated environment in which we operate and our heavy reliance on approval of our products by governmental entities and healthcare providers, reputational risks related to the misconduct or other improper behavior as described above are likely to have a bigger impact on us than on most companies operating in other industries.
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, EMA and other comparable 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.
We may face service, manufacturing or supply chain failures or other failures, business interruptions or other disasters.
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
20
processes. Problems with these manufacturing processes, such as capacity issues, or 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 manufacturing failures or product defects, resulting in lot failures, product recalls, product liability claims and insufficient inventory. Furthermore, our supply chain failures would create a risk of non-compliance toward partners due to shortages, for example, if argenx BV is not able to deliver its product to its partner in China.
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 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 financial conditionperformance.’ and results of operations.
Certain of the raw materials required in the manufacture 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 to substitute for these sources to comply with European regulatory requirements, our clinical development or commercial activities may be delayed or interrupted.
‘We face the risk of computer system failures, data leaks and cybercrimes.
Despite the implementation of security measures, our internal computer systems and those of our third-party service providers are vulnerablerisks related to damage from computer viruses, unauthorized access, natural disasters terrorism, war and telecommunication and electrical failure. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Cyber-attacks also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.
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. If the integrity of our cybersecurity systems is breached, we may incur significant effects such as remediation expenses, lost revenues, litigation costs and increased insurance premiums and may also experience reputational damage and the erosion of shareholder value. Furthermore, we may incur additional costs to remedy the damage caused by these disruptions or security breaches. Like other companies, we have on occasion experienced, and will continue to experience, threats to our data and systems, including malicious codes and viruses, phishing, business email compromise attacks, or other cyber-attacks. Whereas none of these instances had a material impact so far, the number and complexity of these threats continue to increase over time. If a material breach of our information technology systems or those of our third party service providers occurs, the market perception of the effectiveness of our security measures could be harmed and our reputation and credibility could be damaged.
21
We could be required to expend significant amounts of money and other resources to respond to these threats or breaches and to repair or replace information systems or networks, and could suffer financial loss or the loss of valuable confidential information. In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacypublic health issues, related to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely and there can be no assurance that any measures we take will prevent cyber-attacks or security breaches that could adverselynegatively affect our business.
In order to successfully commercializebusiness and market our products in the future we may need to implement additional enterprise resource management systems which is a complex process that may cause us to face delays. We may also need to implement computer systems such as additional global enterprise research systems, or ERP systems, in which we have limited experience and which may prove a complex process that could cause delays in our commercialization process.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 licensees, independent clinical investigators, CROs, CMOs and other third-party CROs,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 partners, third-party contractors andcollaborators or the CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA, EMA and comparable 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, EMA or 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. 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 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.
22
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 results of operations.
We rely and will continue to rely on collaborative partners regarding the development of our research pro-grams 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 Janssen,
21
AbbVie, Shire, Zai 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 subjects us to a number of risks, including, butmay not limited to termination of theadhere or terminate collaboration agreements with all itsassociated consequences disagreementor disagree on the interpretation of contractual termsterms. 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 no adherenceother obligations to us or uncertainties as part ofany disruption in the ongoing collaboration.relationships between us and our collaborative partners, could have a material adverse effect on our product pipeline and business.
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'scollaborator’s resources and expertise, the terms and conditions of the proposed partnership and the proposed collaborator'scollaborator’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.
23
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.
22
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. Furthermore, we use Vetter Pharma International GmbH's fill and finish services for our 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 affectand product candidates.
Although we do not control the manufacturing process at our business, financial conditionCMOs and resultsare completely dependent on them for the production of operation.
Weour products and product candidates in accordance with relevant regulations (such as cGMPs), we are responsible for ensuring that our third-party suppliers may also be subjectproducts comply with regulatory requirements. If our CMOs cannot successfully manufacture material that conforms to audits byour specifications and the FDA, EMA strict regulatory requirements of the Relevant Regulatory Authoritiesor other comparable regulatory authorities. If anyauthorities, 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. Alternative production plans in place or disaster-recovery facilities available to us may not be sufficient. In case of a disruption, we may have to establish
23
additional alternative manufacturing sources. This would require substantial investment on our part, which we may not be able to obtain on commercially acceptable terms or at all. Additionally, we may experience significant 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 facili-ties.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.
The manufacturing of all of our 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 cGMP. 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 vials of the master cell banks are left at the alternative storage site to continue manufacturing. We believe sufficient working cell banks could be produced from the vials of the master cell bank stored at 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 affect our business, prospects, financial condition and results of operations.
24
Accuracy and timing of our financial reporting is partially dependent on information received from third partythird-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 that we believe have promising utility in disease areas or patient populations that are better served by resources of larger biopharmaceutical companies. See “Collaborations” in “Item 4.B.—Business Overview” for a more detailed description of these collaborations.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. In the event thatIf our collaboration partners fail to provide us with the necessary financial information within the agreed upon timeframes, or if such financial information proves partially inaccurate, this is likely toit would adversely impact the timing and accuracy of our own financial reporting. Our reliance on financial information received from our collaboration partners may impact our own internal and external financial reporting and any delay in the provision of such financial information to us or any failure by us to identify mistakes in the financial information provided to us may cause our own financial statements to be partially inaccurate. Any inaccuracy in our financial reporting could cause investors to lose confidence in our financial reporting. This in turn may lead to reputational damage and/or affect our ability to obtain, and the terms on which we may, obtainof, any future (equity) financing, which may harm our business.
RisksWe 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 Intellectual Propertyargenx’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 relyare 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 patentsits evolution and enhancement. Our program includes efforts such as risk assessment and monitoring, fostering a culture encouraging employees and third parties to raise good
24
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 current and future use of products 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
25
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 could be delayed.
26
We are highly dependent on public perception of our products.
We are highly dependent upon consumer perceptions of the safety and quality of our products. We could be adversely 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 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.
Risk Factors Related to argenx’s Intellectual Property
Failure to adequately enforce or protect our intellectual property rights to protect ourin products, product candidates and platform technologies. Failure to enforce or protect these rights adequatelytechnologies 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. Specifically, we are materially dependent on patent and other proprietary protection related to our core platform technologies, described in “Platform Technologies” in “Item 4.B. —Business Overview — Intellectual Property”, and our product candidates, as described in “Product Candidates: Wholly-Owned Programs” in “Item 4.B. —Business Overview — Intellectual Property” and “Product Candidates: Partnered Programs” in “Item 4.B. —Business Overview — Intellectual Property”.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. The enforcement, defensecandidates and maintenance of such patents and other intellectual property rightserode or negate any competitive advantage we may be challenging and costly.have.
We cannot be certain that patents will be issued or granted with respect to applications that are currently pending. As a biopharmaceutical company our patent position is 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. 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 potential. 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 “Licensure and Regulation of Biologics in the United States” in Item 4.B. —Business Overview — Government Regulation for more details regarding biosimilar regulatory exclusivities.
25
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'licensors’, licensees'licensees’ or collaboration partners'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 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'licensors’, licensees'licensees’ or collaboration partners'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.
27
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 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'licensors’ or collaboration partners'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
26
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 AntibodyTM, NHance® and ABDEGTM 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 counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States or in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. A claim for a validity challenge may be based on failure to meet any 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, we cannot be certain that there is no invalidating prior art, of 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 AntibodyTM, NHance® and ABDEGTM 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 patents or other intellectual property rights.
Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates and may harm our competitive position.
Our competitive position may suffer if patents issued to third parties or other third-party intellectual property rights cover our products or elements thereof, 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. In such cases, we may not be in a position to develop or commercialize products or product candidates unless we successfully pursue litigation to nullify or invalidate the third-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 cusatuzumab and ARGX-111. The patent relating to cusatuzumab 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, 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 aspects of the targets 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 identify 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. In general, patent applications in the United States and elsewhere are published approximately
27
18 months after the earliest filing from which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our products or platform technology could have been filed by others 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.
Third-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. 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.
If we fail in any such dispute, in additionmake additional payments to being forced to pay damages, we or our licensees may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We might, if possible, also be forced to redesign product candidates so that we no longer infringe the third-partysecure intellectual property rights. Or, we 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), 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 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 future 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. Potential intellectual property litigation could also, amongst other things, force us to stop selling, incorporating, manufacturing or using certain of our products, to obtain a license to sell or use certain technology from a third party asserting its intellectual property rights, to redesign certain products or processes that use any allegedly infringing or misappropriated technology or pay damages, including the possibility of treble damages in a patent case if a court finds us to have willfully infringed certain intellectual property rights, which may result in significant cost and/or delay to us. Moreover, certain licenses may not be available on reasonable terms, or at all, or may be non-exclusive thereby giving our
28
competitors access to the same technologies licensed to us and redesigning certain products or processes could be technically infeasible.
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 may negatively impact us. 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.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 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'sconsultant’s or employee'semployee’s former employer or have breached their non-competition agreement. LitigationAdditionally, 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 our policy to require our employees and contractors who may be necessaryinvolved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful 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 bring claims against third parties or defend claims they may bring against these claims.us to determine the ownership of what we regard as our intellectual property.
There is no guarantee we will be successful in defending such claims, which would result in us paying monetary damages, or lose valuable personnel or intellectual property rights.
28
Third-party intellectual property rights could adversely affect our ability to commercialize our products and product candidates.
Our competitive position may suffer if third-party intellectual property rights cover our products or product candidates or our manufacture or uses relevant to our development 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 costly and time-consuming proceedings to nullify or invalidate the third-party intellectual property right concerned or enter into a license agreement with the intellectual property right holder. 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. 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, we could be prevented from continuing to develop or commercialize our product. Similarly, other companies have filed patent applications or have patents on the targets for certain of our 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.
It is also possible that we are unaware of relevant patents or applications or of relevant scientific discoveries. In general, patent applications in the U.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. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our products or platform technologies.
Third-party intellectual property right holders, including our competitors, may actively bring infringement claims against us that we may not be able to successfully settle or otherwise resolve.
If we fail in prosecuting or defending any such claims, in additiondispute, we or our licensees may be prohibited from commercializing any of our products and product candidates that are held to paying monetary damages,be 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 may lose valuableno longer infringe the third-party intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we couldrights. We may be required to obtainseek a license fromto any such third partytechnology that we are found to commercialize our technology or products. Such ainfringe, which license may not be available on commercially reasonable terms, or at all. Even if we successfully prosecute or defend against such claims,our licensors or collaboration partners obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaboration partners. 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 products 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 result in substantial costs and distract management.be compromised by disclosure during this type of litigation.
We may not be successful in obtaining or maintaining necessary rights to our products and product candidates through acquisitions and 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-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-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. 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'sinstitution’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.
29
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-party intellectual property rights on terms that would allow us
29
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 program and our business and financial condition could suffer.program.
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 failurewhich could result in us being unable to adequately protect such license agreements could prevent us from commercializing product candidatesdevelop, manufacture, market and sell products that are covered by the licensed intellectual property.technology. Moreover, we could incur significant costs and/or disruption to our business and distraction of our management defending against any breach alleged by the licensor. Several of our existing license agreements are sublicensessub-licenses from third parties whichwho are not the original licensorlicensors 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 weresublicense, causing us to occur, we would no longer havelose our rights to the applicable intellectual property and, in the case of a sublicense, if we were not ableare unable 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.terms.
Disputes may arise regarding intellectual property subject to a licensing agreement, including:
IfFurther, 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
30
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.
If we doWe may not be able to 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. 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.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-Waxman Act and similar legislation in the European Union.EU and the Asia Pacific region. The Hatch-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.
3130
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, results of operations and financial condition 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.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage and changesChanges in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products.
The America Invents Act, or the AIA, has been enactedChanges in patent law and regulations in the United States, resultingvarious countries or jurisdictions or changes in significantthe governmental bodies that enforce them or changes in how 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 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.
32
Any inability of usWe may be unable to protect the confidentiality of our competitive advantage with regardtrade secrets and know-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 suppliers.
We require our employees, consultants, advisors and potential collaborators to enter into confidentiality agreements. Moreover, we put in place appropriate procedures to identify confidential material and restrict access to documentation. However, current or former employees, consultants, advisors and potential 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 other confidential information increases the risk that such trade secrets become known to our competitors or inadvertently incorporated into the technology of others. Any disclosure, either intentional or unintentional, or misappropriation by third parties (such as through a cybersecurity breach) of 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 and is using trade secrets is expensive, time-consuming and the outcome is unpredictable, and the enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction. Moreover, if any of our product candidates may prevent us from successfully monetizing such product candidate and this could materially adversely affect our business, prospects, financial condition and results of operations.
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 duetrade secrets were 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 withlawfully obtained or independently developed by a number of procedural, documentary, fee payment andcompetitor or 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. Ifthird party, 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.no right to prevent them from using that technology or information to compete with us.
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 directors and executive management, as described in detail in “Item 6.A.—Directors and Senior Management”.
Thesenior management team. 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
31
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; |
32
● | 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 managersreplace these cell banks, which could materially adversely affect our business, prospects, financial condition and qualified scientific, commercial, regulatoryresults of operations.
Public health issues could also negatively affect our business and financial personnelcondition. 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 or any of the third parties with whom we engage, including the suppliers, contract manufacturers, clinical trial sites, regulators and other third parties, were to developexperience shutdowns, quarantines, or other business disruptions due to natural disasters or global public health issues, it may impair our business if we expand into fields that will require additional skills. Our inabilityor our third-party partners’ ability to attractinitiate clinical trials and recruit and retain these key personspatients, particularly if quarantine or travel
33
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 the 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 and may dilute our corporate culture, which in turn may
33
make it more difficult to attract and retain employees.commercialization rights. Any inability to manage growth could delay the execution of our business plansstrategic objectives or disrupt our operations, which in turn could materially harm our business and prospects.
Public health issues or other catastrophic events could disrupt the supply, delivery or demand of products, which could negatively affect our operations and performance.
Public health crises such as pandemics or similar outbreaks could adversely impact our business. To date, the outbreak of COVID-19 has already resulted in extended shutdowns of certain businesses in many countries all over the world. The spread of COVID-19 has impacted the global economy and may impact our operations, including the potential interruption of our clinical trial activities and our supply chain, and the operations of our key business partners. Global health concerns, such as the recent developments around COVID-19, could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. We have also taken temporary precautionarybenefitted from certain research and severely restrictive measures intended to help minimize the risk of COVID-19 to our employees, including temporarily requiring our employees to work remotely, suspending non-essential travel worldwide for our employees and discouraging employee attendance at industry events and in-person work-related meetings.development incentives. These measures could negatively affect our business. COVID-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, contract manufacturers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns such as this one could disproportionately impact the clinical sitesimpacted by changes in which we conduct anylaw (or interpretation), changes of our clinical trials, which could have a material adverse effect on our business and our results of operation and financial condition.
In addition, a catastrophic event that results in the destruction or disruption of our data centers or our critical business or information technology systems would severely affect our ability to conduct normal business operations and,fact (such as a result, our operating results would be adversely affected.change in ownership), or challenge by tax authorities.
We have obtained significant funding from agencies of the government of the Flemish region of BelgiumAs 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.
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.
34
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 and the significant position of cash we need to have available to continue our business activities, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies. Our net sales and costs will be affected by fluctuations in the rate of exchange particularly between the U.S. dollar, our new functional currency as per January 1, 2021, and the euro, Swiss francs, Japanese Yen and British pounds, which are our main financing and potential revenue currencies beyond the U.S. dollar. The majority of our operating expenses are paid in euros, but we also receive payments and we regularly acquire services, consumables and materials in euros, Swiss francs and British pounds. As a result, our business may be affected by fluctuations in foreign exchange rates between the U.S. dollar and 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.
Recent developments relating to the United Kingdom’s withdrawal from the European Union could adversely affect us.
The recent withdrawal of the United Kingdom from its membership in the European Union, often referred to as “Brexit”, could lead to legal and regulatory uncertainty in the United Kingdom and may lead to the United Kingdom and European Union adopting divergent laws and regulations, including those related to the pricing of prescription pharmaceuticals, 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 pricing of prescription pharmaceuticals, we could face significant new costs. As a result, Brexit could impair our ability to transact business in the European Union and the United Kingdom.
The United Kingdom. and the EU have signed a EU-UK Trade and Cooperation Agreement, or TCA, which became provisionally applicable on January 1, 2021 and will become formally applicable once ratified by both the United Kingdom and the EU. This agreement provides details on how some aspects of the United Kingdom and EU’s relationship will operate going forwards however there are still many uncertainties. The uncertainty concerning the United Kingdom’s legal, political and economic relationship with the European Union may be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).
These developments, or the perception that any of them could occur, have had, and may continue to have, a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial markets. In particular, it could also lead to a period of considerable uncertainty in relation to the United Kingdom financial and banking markets, as well as on the regulatory process in Europe. Asset valuations, currency exchange rates and credit ratings may also be subject to increased market volatility.
If other EU Member States pursue withdrawal, barrier-free access among the EEA overall could be diminished or eliminated. The long-term effects of Brexit will depend on how the terms of the TCA take effect in practice and any further agreements (or lack thereof) between the United Kingdom and the EU. Such a withdrawal from the EU is unprecedented, and it is unclear how the U.K. access to the European single market for goods, capital, services and labor within the EU, and the wider commercial, legal and regulatory environment, will impact our United Kingdom. operations.
We may also face new regulatory costs and challenges that could have an adverse effect on our operations and development programs. For example, the United Kingdom will lose the benefits of global trade agreements negotiated by the EU on behalf of its members, which may result in increased trade barriers that could make our doing business in the EU and the EEA more difficult. There may continue to be economic uncertainty surrounding the consequences of Brexit, which could adversely affect our financial condition, results of operations, cash flows and market price of our common stock.
35
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 affect us.have a material impact. Compliance with these laws and regulations will be more challenging as we expand
34
our international operations, including in connection with potential approvals of our products and product candidates in Europe, Japan, the United StatesU.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 as the innovation deduction. For example, whetherby the tax authorities in Belgium will agree with argenx BV's qualifications and proposed application of patent box tax advantages willor other country where we have material operations would have a significant taxation impact on argenx BV.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, 2020, we had €567.8 million of consolidatedhave considerable material tax loss carry forwards. In general,assets in Belgium and some of these tax losses 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 BV may lose its tax loss carry forwards and other tax incentives 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 BV. The tax burden would increase if profits, if any, could not be offset against tax loss carry forwards.
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.
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.
36
The market price of the ADSs may fluctuate significantly due to a variety of factors, many of which are beyond our control, including:
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. In addition, the stock 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.
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 be required to devote substantial time to compliance initiatives and corporate governance practices.
As a public company, and particularly now that we no longer qualify as an "emerging growth company" as defined in the U.S. Jumpstart Our Business Startups Act of 2012, 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). The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market, or Nasdaq, 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 are and will continue to 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, these rules and regulations 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.
37
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.
Future sales, or the possibility of future sales, of a substantial number of our securities could adversely affect the price of ADSs and ordinary shares and dilute shareholders.
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. We are also unable to predict the effect that such sales
In addition, an active public trading market for our ADSs or our ordinary shares may have on the prevailing market price of ADSs and ordinary shares.
Fluctuationsnot be sustained. Further, fluctuations in exchange rates may increasealso impact the riskprice of holding our 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 Janssen, 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 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 orderdifferences, or impact the proceeds holders receive.
35
If we fail to financemaintain an effective system of disclosure controls and internal control over financial reporting, our ability to comply with applicable regulations could be impaired, and the growthtrading price of our activitiesADSs may be negatively impacted.
We are required to comply with various corporate governance and financial requirements under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Nasdaq listing rules and requirements (Nasdaq Listing Rules), and other applicable securities rules and regulations. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting and an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation. Moreover, any failure to maintain internal control over financial reporting or any material weaknesses or significant deficiency thereover, could result in a loss of investors’ in the United States, we have invested in U.S. dollar denominated cash deposit accountsaccuracy, completeness and in current financial assets with a significant portion of the proceeds from our initial U.S. public offering completed in May 2017 and our follow-on U.S. public offerings completed in December 2017, September 2018 and June 2020. Depending on the exchange rate fluctuations of the U.S. dollar, this may result in unrealized exchange rate losses which may impact negatively the reportingreliability of our cash, cash equivalents and current financial assets at reporting dates when translatingstatements, subject us to euros these U.S. denominated cash deposits accounts and current financial assets. In addition, as a resultsanctions or investigations, or negatively impact the trading price 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 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
38
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.
You willHolders of our 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.
If 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
36
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 being a Foreign Private Issuer or a Dutch Company
The risks in 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 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.
We are a Dutch European public company with limited liability. The rights of shareholders and the responsibilities of members of our Board of Directors may be different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions.
As a result of these differences between Dutch corporate law and our Articles of Association, on the one hand, and the U.S. federal and state laws, on the other hand, in certain instances, our shareholders and holders of our ADSs could receive less protection than they would as shareholders or ADS holders of a listed U.S. company.
Provisions of our Articles of Association 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 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.
Holders of our ordinary shares outside the Netherlands, and ADS holders of ADSs may not be able to exercise pre- emptivepre-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 pre-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).
However, making pre-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 StatesU.S. would not be able to participate in a pre-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 pre-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.
39
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.
We are a Dutch European public company with limited liability (Societas Europaea or SE). Our corporate affairs are governed by our Articles of Association and by the laws governing companies incorporated in the Netherlands. The rights of shareholders and the responsibilities of members of our board of directors 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 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.
Because we are a U.S.-listed public company, our board of directors will be required to devote substantial time to compliance initiatives and corporate governance practices.
As a U.S.-listed public company, we expect 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). The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Stock Market, or Nasdaq, 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 are and will continue to 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.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our board of directors on our internal control over financial reporting. We are also required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To maintain compliance with these requirements, we must document and evaluate our internal control over financial reporting, which is challenging and involves substantial accounting expenses. In this regard, we will need to dedicate internal resources, including significant management time, 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 financial reporting. Despite our efforts, there is a risk that we will not be able to conclude that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
40
Certain significant shareholders own a substantial number of our securities and as a result, may be able to exercise control over us, including the outcome of shareholder votes. These shareholders may have different interests from us or your interests.
We have a number of significant shareholders. For an overview of our current significant shareholders, please see “Item 7A.—Major Shareholders.” As of the date of this annual report, these significant shareholders and their affiliates, in the aggregate, own approximately 68.22% of our ordinary shares and ADSs.
Currently, we are not aware that any of our existing shareholders have entered 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.
Provisions of our Articles of Association 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. 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.
We do not expect to pay cash dividends in the foreseeable future.
We have not paid any cash dividends since 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 exceeds the sum of our paid-in and called-up share capital plus the reserves required to be maintained by Dutch law or by our Articles of Association. Accordingly, investors cannot rely on cash dividend income from ADSs and any returns on an investment in the ADSs will likely depend entirely upon any future appreciation in the price of the ADSs.
We are not obligated to, and do not comply with, all the best practice provisions of the Dutch Corporate Governance Code,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, 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
41
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 16.G.—Corporate Governance.”report filed in the Netherlands.
37
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. 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 be enforceable in Belgium.Belgium unless the underlying claim was re-litigated before a Dutch or Belgian court of competent jurisdiction. This will depend on the applicable Dutch or Belgian national rules.
In order to obtain 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 a 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 Netherlands 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 the enforceability in Belgium of a U.S. final and conclusive judgment, a declaration of enforceability by a Belgian judge will have to be obtained via a specific court procedure. A U.S. judgment will not be declared enforceable in Belgium if it infringes upon one or more of the grounds for refusal listed in the 2004 Belgian Code of Private International Law, or the PIL Code. Based on the same grounds for refusal, the recognition and enforcement of a U.S. judgment may be challenged before the Belgian judge. Notably, enforcement and recognition need to be refused if (a) due process has not been observed, (b) the Belgian courts have exclusive jurisdiction to determine the matter or (c) the effect of recognizing this judgment or declaring it enforceable would be manifestly incompatible with Belgium's (international) public policy principles. Punitive damages awards for example may be denied recognition and enforcement under the latter refusal ground. In the review of the request for enforcement or the challenge of the recognition of a U.S. judgment, the Belgian judge will not, however, review the merits of the case, nor does any reciprocity requirement apply. Enforcement and recognition of judgments of U.S. courts in Belgium are solely governed by the provisions of the PIL Code.
Under the PIL Code, in addition to the possibility of being recognized and enforced, before a Belgian court, a U.S. judgment may also serve as evidence of the factual determination of the U.S. judge provided that (i) it meets the conditions required for the authenticity of judgments according to relevant U.S. laws and (ii) the consequences thereof would not be manifestly contrary to Belgium’s (international) public policy principles.
U.S. judgments ordering to pay a certain amount that are declared enforceable in Belgium are subject to the applicable registration tax in the same way as Belgian judgments. As such, a registration tax at the rate of 3% of the amount awarded is payable by the debtor(s), if the sum of money exceeds €12,500. If multiple debtors were held jointly liable to pay, the debtors are also jointly liable to pay the registration tax.
42
A stamp duty is payable as of the second certified copy, with a maximum of €1,450.
In light of the 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 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.” Accordingly, youpractices may not have the same protections afforded to shareholders of companies that are subject to these Nasdaq requirements.
differ significantly from other corporate governance 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
43
longer be a foreign private issuer as of June 30, 2021 (the end of our second fiscal quarter), 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, 2022 and would also trigger a 10-K filing for the year ended December 31, 2021. 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-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, 2021,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 lose 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
38
coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our boardBoard of directors.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 deemed to be material weaknesses or that may require prospective or retroactive changes to our 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 and is required to issue an annual report on internal control over financial reporting, and our independent registered public accounting firm is now required to undertake an assessment of our internal control over financial reporting, which 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. The rules governing the standards that must be met for our management to assess our internal control over financial reporting pursuant to Section 404 of the Sarbanes- Oxley Act are complex and require significant documentation, testing and possible remediation. These stringent standards require that our audit and compliance committee be advised and regularly updated on management’s review of internal control over financial reporting in connection with issuing our consolidated financial statements as of and for the year ended December 31, 2020.
Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of the ADSs or ordinary shares could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of the ADSs or ordinary shares. Irrespective of compliance with Section 404, any failure of our internal control over financial
44
reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.
If securities or industry analysts cease coverage of us, or publish inaccurate or unfavorable research about our business, the price of the 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 for the ADSs and ordinary shares would likely be negatively affected. If one or more of the analysts who cover us downgrade the ADSs or ordinary shares or publish inaccurate or unfavorable research about our business, the price of the ADSs or ordinary shares 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 or ordinary shares could decrease, which might cause the price of the ADSs or ordinary shares and trading volume to decline.
We believe that we were not classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the 2020 taxable year, and do not anticipate being classified as a PFIC for U.S. federal income tax purposes for the 2021 taxable year, but this conclusion is a factual determination that is made annually and thus is subject to change. If we were to be classified as a PFIC,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.
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.”
We do not believe that we were a PFIC for our most recent taxable year and do not expect to be classified as a PFIC for the 2020current taxable year and, based uponor for the expected value of our assets, including any goodwill, and the expected composition of our income and assets, we do not anticipate being classified as a PFIC with respect to the 2021 taxable year.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.
45
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.VN.V. and its legal predecessors. Since August 28, 2009, all our research and development activities have been performed by our wholly ownedwholly-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, 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, as ofsince 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 as an inactive textual reference only.Annual Report. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The registered agent for service of process in the United StatesU.S. is CT Corporation System, with an address at 111 8th Avenue, New York, NY 10011.
Our actualFor information on our capital expendituresexpenditure for the years ended December 31, 2020, 20192023, 2022 and 2018 amounted2021, please see “Note 4—Property, plant and equipment” and “Note 5—Intangible assets” in our consolidated financial statements which are appended to €4.5 million, €41.7 million and €0.7 million respectively. These capital expenditures primarily consisted of acquired In-Process R&D, office and laboratory equipment and information technology 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 20212024 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.”
No takeover bid has been instigated by third parties in respect of our equity during the current or previous fiscal years.
39
B. | BUSINESS OVERVIEW |
We are a clinical-stage biotechnologycommercial-stage, global, fully-integrated biopharma company developing a deep pipeline of differentiated therapies for the treatment of severe autoimmune diseases and cancer. We have a particular focus on neuromuscular and hematology indications withindiseases. By combining our franchises. Our suite of antibody engineering technologies and our Immunology Innova-tion Program, or IIP, exploring novelwith the disease biology enables usexpertise of our research collaborators, we aim to focustranslate immunology breakthroughs into a pipeline of novel antibody-based medicines through our discovery engine, the IIP. We developed and are commercializing the first approved FcRn blocker in the U.S., Japan, Israel, the EU, Mainland China and Canada. We are evaluating efgartigimod in multiple serious autoimmune diseases and advancing several earlier stage experimental medicines.
For additional information regarding our Company’s principal markets and revenue breakdown, see Item 5.A. “Operating Results” and “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.
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 second 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 approved or under regulatory review in three indications, including gMG, CIDPand ITP, and is being evaluated in more than 10 additional serious autoimmune indications. We are well on developing product candidatesour 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 novel 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 the potentialleading disease biologists who are researching first-in-class disease targets or pathways. Our IIP has a track record of success and nine programs have been tested in humans since our inception.
Reach More Patients Globally with VYVGART
● | VYVGART is now approved in the U.S., Japan, Europe, the UK, Israel, Mainland China and Canada for the treatment of gMG. VYVGART SC is now approved in the U.S., Europe, the UK and Japan for the treatment of gMG. This makes VYVGART the only gMG treatment available as both an IV and a simple SC injection, providing choice to patients in how and where they are treated. In 2023, we generated product net sales of $1.2 billion |
● | 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 |
40
● | A supplemental Biologics License Application (sBLA) for SC efgartigimod for CIDP has been accepted for priority review by the FDA, with a Prescription Drug User Fee Act (PDUFA) target date of June 21, 2024 |
● | We have filed for approval of VYVGART SC in Mainland China and we expect a decision on approval by the end of 2024 through our partnership with Zai Lab |
● | 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 eitherapproved 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 sBLA for SC efgartigimod was submitted on December 21, 2023 and is under review by the FDA with a PDUFA date of June 21, 2024 |
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 start in first quarter of 2024 |
● | Hematology/rheumatology indications: |
● | ADVANCE-IV: positive clinical trial results formed basis of filing in Japan for ITP; topline results published in The Lancet in September 2023 |
● | ADVANCE-SC: topline data from SC efgartigimod in ITP announced on November 28, 2023 |
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) |
41
● | 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 PF on December 20, 2023 |
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 first cohort of the Phase 2 POC ARDA clinical trial establishing POC in MMN. Empasiprubart demonstrated a 91% reduction in the need for IV immunoglobulin (Ig,in IV formulation,IVIg) rescue compared to placebo [HR: 0.09 95% CI (0.02; 0.044)]. Safety profile was consistent with Phase 1 data |
● | Phase 2 POC clinical trials ongoing in DGF and DM |
● | ARGX-119 (MuSK agonist): |
● | Phase 1 dose-escalation clinical trial in healthy volunteers ongoing; Phase 1b/2a clinical trials expected to start in 2024 to assess early signal detection in patients with CMS and ALS, respectively |
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. |
42
● | 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 |
43
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 againstantibody 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, including gMG, CIDP and ITP, and is being evaluated in more than 10 additional serious autoimmune 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 empasiprubart has the potential to be a pipeline-in-a-product candidate and is being evaluated in 3 serious autoimmune diseases |
● | ARGX-119 (MusK agonist): ARGX-119 is an agonist SIMPLE ANTIBODY™ to the MuSK receptor with potential in multiple neuromuscular indications. It is currently being evaluated in a Phase 1 dose escalation clinical trial in healthy volunteers |
● | Preclinical Candidates: Preclinical work is ongoing for each of the following candidates: |
o | ARGX-213, targets FcRn, furthering argenx’s leadership in this new class of medicine |
44
o | ARGX-121 and ARGX-220 are first-in-class targets broadening argenx’s focus across the immune system |
o | ARGX-109, targets IL-6, which plays an important role in inflammation |
● | In addition to our wholly-owned pipeline, we have candidates that emerged from our IIP that we out-licensed to a partner for further development and for which we have milestone, royalty or profit-share agreements. These candidates include, amongst others: cusatuzumab (anti-CD70 antibody – Oncoverity), ARGX-112 (LP-0145 – anti-IL-22R antibody – LEO Pharma), ARGX-114 (AGMAB-101 – agonistic anti-MET antibody – Agomab) and ARGX-115 (ABBV-151 – anti-GARP antibody – AbbVie). |
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 or best-in-class against known, but complex, targetsand together, in order to treat diseases with a significant unmet medical need. Through our "argenx 2021" vision, we are on track to becoming a global, fully integrated company with the potential launch of our first product, efgartigimod, in the United States in 2021, if approved.
46
Our suite of technologies
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 proprietary and licensed technologies. Togethercollaboration with our antibody discoveryscientific and development expertise, this suite of technologies has enabledacademic 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 across all stagesand advance our long-term strategy to be a sustainable, integrated immunology company.
Examples of development and we believe will ensure continuous development of innovative and relevant programs. Our key technologies are outlined below:our IIP programs include:
● |
● | Empasiprubart was built in collaboration with Broteio Pharma B.V. (Broteio). Broteio was launched in 2017 with support from Professor Erik Hack and the University of Utrecht, to conduct research demonstrating preclinical POC of the mechanism of action of empasiprubart. Professor Hack is a renowned researcher in the role of inflammation in disease, specifically in the complement system, and has contributed research and expertise to the approval of 2 complement inhibitors. His understanding of the mild phenotype associated with a natural C2 deficiency and C2’s unique positioning at the junction of the classical and lectin pathways led to our interest in engineering empasiprubart, with our proprietary NHANCE™ mutations and LALA mutations. |
● | 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
● | 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 |
45
human homology, or similarity, in their V-regions when immunized with targets of human disease. |
● |
● | Halozyme’s |
● | 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). |
Our Products and Product Candidates
47
The following table summarizes key information on our portfolio of lead product and product candidates as of the date of this registration document:Annual Report.
46
Our Programs
VYVGART
Approval in gMG
Our programstwo approved medicines for gMG are VYVGART and 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.
EfgartigimodThe 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 generalised 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 VYVGART 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.
47
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 2018,2023 for the treatment of adult gMG patients. Under the Zai Lab Agreement, we reported datareceived 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 fueled 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 our ABDEG™ mutations that is designed to target the FcRn and reduce IgG. FcRn is foundational to the immune system and functions to recycle IgG,
48
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 and removes them from circulation.
49
Based on its mechanism of action in targeting FcRn to selectively reducing IgGs, efgartigimod has the potential to address a multitude of severe autoimmune diseases where pathogenic IgGs are believed to be mediators of disease.
As of the end of 2023, we are evaluating efgartigimod in more than 10 serious autoimmune indications. We plan to expand efgartigimod into new indications and plan to be in 15 indications by 2025.
Indication Selection Strategy
We utilize the following 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 efgartigimod to address the needs of patients, physicians, and payors across indications and geographies, including IV efgartigimod (VYVGART) and SC efgartigimod (VYVGART SC).
IV (VYVGART)
We conducted a Phase 1 clinical trial indicatingin 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 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 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
50
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 the samea dose level the of 10 mg/kg every seven days.
SC formulation was comparable across key measures, including half-life, pharmacodynamics, or PD, and tolerability, to the IV formulation used in clinical studies to date. (VYVGART SC) - Partnership with Halozyme
In July 2019, we also evaluated a first generation of SC formulation of efgartigimod developed incorporating the ENHANZE®that incorporates Halozyme’s ENHANZE® SC drug delivery technology (licensed from Halozyme) in a Phase 1 clinical trial in healthy volunteers, which demonstrated retained PD profile of IV-formulatedIV efgartigimod. Pursuant
ENHANZE® has demonstrated across multiple FDA-approved products the ability to ourremove 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,Halozyme. Under the expansion, we have exclusivegained the ability to access to Halozyme’s ENHANZE® subcutaneousENHANZE® 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 targetsC2.
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 VYVGART SC for the treatment of adult patients with gMG in the U.S., the EU, the UK and four additional targetsJapan.
Currently, we have not yet selectedare developing a pre-filled syringe presentation for an exclusive commercial license. We believe the ENHANZE®same SC formulation using the Halozyme technology, could potentially shorten drug administration time, reduceto allow for a convenient delivery and the potential for self-administration, reducing the healthcare practitioner time and offer additionalfurther increasing flexibility and convenience for patients. We continueAs 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 efgartigimod’s pipeline-in-a-product opportunity and we therefore intend to announce a fifth and sixth indicationhigh concentration technology for efgartigimod in 2021 and have plannedup to begin enrollment in clinical trials in eachone additional target. Please refer to Item 4.B. “Business Overview—License Agreements—Our Exclusive License with Elektrofi for efgartigimod” for more information.
51
Efgartigimod Indications
gMG
Overview
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, IgG autoantibodies either bind and occupy or cross-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 autoantibodies can cause destruction of the fifthneuromuscular junction by recruiting complement, a potent cell-destroying mechanism of the human immune system. The muscle weakness associated with MG usually presents initially in ocular muscles and sixth indicationscan then spread into a generalized form affecting multiple muscles, known as gMG. Approximately 85% of efgartigimod this year.
Also,people with MG progress to gMG within 24 months (source: Behin et al. New Pathways and Therapeutics Targets in December 2018 we successfully completed the Phase 2 clinical trial for efgartigimod in immune thrombocytopenia, or ITP, a rare hematological autoimmune disorder, and reported proof-of-concept for our lead product candidate in a second indication with strong clinical improvement observed over placebo. These Phase 2 trial results have been publishedAutoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277). MG in the peer-reviewed journal Hematology in December 2019. In October 2020, we announced an updated plan for a potential registration programocular form initially causes droopy eyelids and blurred or double vision due to include two Phase 3 trials to run concurrently. The first potential registrational Phase 3 trialpartial paralysis of IV efgartigimod in ITP, the ADVANCE trial, was initiatedeye movements. As MG becomes generalized it affects muscles in the fourth quarter of 2019neck and jaw, causing problems in speaking, chewing and swallowing. MG can also cause weakness in skeletal muscles leading to evaluate a dose of 10 mg/kg IV efgartigimod. We expectproblems in limb function. In the most severe cases, respiratory function can be weakened to enroll 156 patients in this Phase 3 trial. The second potential registrational Phase 3 trial of SC efgartigimod in ITP, the ADVANCE-SC trial was initiatedpoint where it becomes life-threatening. These respiratory crises occur at least once in the fourth quarterlives of 2020approximately 15% to evaluate a dose20% of 1000 mg SC efgartigimod. We expect to enroll 156 patientsMG patients. The U.S. prevalence of MG is estimated at approximately 20 cases per 100,000 (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 this trial as well.Autoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277).
At the end of 2019, we announced the initiation of a proof-of-concept Phase 2 clinical trial evaluating SC efgartigimod (co-formulated with Halozyme’s ENHANZE® drug-delivery technology), the ADHERE trial, in chronic demyelinating polyneuropathy, or CIDP, a rare neurological autoimmune disease.
48
In May 2020, we presented updated interim detailed proof-of-concept dataannounced positive topline results from a Phase 2the pivotal ADAPT clinical trial of efgartigimod for the treatment of a third indication, pemphigus vulgaris, or PV,gMG. The topline results from the ADAPT clinical trial showed that efgartigimod was well-tolerated, demonstrated clinically meaningful improvements in strength and pemphigus foliaceous, rare autoimmune blistering (skin) diseases, atquality of life measures, and provided the Societyoption of an individualized dosing schedule for Investigative Dermatology, or SID, Virtual Annual Meeting.gMG patients. The presentation included updatedfull Phase 3 ADAPT results were published in The Lancet Neurology in July 2021. The data from 34 evaluable patients treated with 10 mg/kg or 25 mg/kgthe ADAPT clinical trial and the subsequent open-label extension (OLE) (ADAPT+) formed the basis for the regulatory approvals of IV efgartigimod throughVYVGART in the U.S., Japan, the EU, Mainland China, Israel, the UK and Canada.
On March 25, 2020. Consistent with previously22, 2022, we announced data, rapid disease control andpositive topline results from the Phase 3 ADAPT-SC s clinical remission was observed withtrial, a favorable tolerability profile. We started a potential registrational Phase 3non-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.
52
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 in 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 platelet receptors can be detected. They accelerate platelet clearance and destruction, inhibit platelet production, and impair platelet function, resulting in increased risk of bleeding and impaired quality of life. Primary ITP is differentiated from secondary 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 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).
53
Phase 3 ADVANCE Clinical Trials
In 2019, the first of two 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 was initiated in 2020.
In 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 expected in the first 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 persistent 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 primary endpoint of a sustained platelet count response in chronic 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 observed safety and tolerability profile was consistent with ADVANCE-IV and the confirmed safety profile of VYVGART and VYVGART SC.
Pemphigus
Overview
PV is an autoimmune disorder associated with mucosal and skin blisters that lead to pain, difficulty swallowing and skin infection. This chronic, potentially life-threatening disease is triggered by IgG autoantibodies targeting desmoglein-1 and -3, which are present on the surface of keratinocytes and important for cell-to-cell adhesion in the epithelium. Autoantibodies targeting desmogleins result in loss of cell adhesion, the primary cause of blister formation in PV. Similar to MG and ITP, disease severity of pemphigus correlates to the amount of pathogenic IgGs targeting desmogleins. Currently, there are an estimated 19,000 pemphigus patients in the U.S., of which an estimated 13,100 patients are suffering from PV. Several disease activity measurements exist for the clinical evaluation of PV patients, including the pemphigus disease area index (PDAI), autoimmune bullous skin disorder intensity score, and the PV activity score (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
In 2020, the registrational ADDRESS clinical trial was initiated of SC efgartigimod for the treatment of PV and PF. 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 222 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 fourth quarteroptimized dosing regimen from the Phase 2 POC clinical trial. The primary endpoint assessed the proportion of 2020, in which we will enroll 150 patients or fewer dosed with 1000 mg SC efgartigimod.who achieve sustained complete remission on a minimal steroid dose within 30 weeks. The ADDRESS clinical trial will evaluateevaluated efficacy and safety, including the potential to drive fast onset of disease control and complete remission and the ability to taper corticosteroids.
In May 2020, we also announced positive topline results from our first Phase 3 trial, the ADAPT trial, for intravenous, or IV, efgartigimod, or ARGX-113, our most advanced product candidate targeting FcRn for the treatment of the rare neurological autoimmune disease generalized myasthenia gravis, or gMG. The topline results from the ADAPT trial showed that efgartigimod was well-tolerated and able to drive responses that support plans to offer individualized dosing to gMG patients. In October 2020, we announced additional data from the ADAPT trial, which reinforced the topline data in May 2020 and in December 2020, we submitted the Biologics License Application, or BLA, for efgartigimod in gMG. We are also on track to submit a Japanese Marketing Authorization Application to Japan’s Pharmaceuticals and Medical Devices Agency in the first half of 2021 and to submit a Marketing Authorization Application to the European Medicines Agency in the second half of 2021. A Market Authorization submission in China is expected to occur shortly following potential approval in the United States.
In January 2021, we initiated a bridging study for subcutaneous, or SC, efgartigimod in gMG based on an association between total IgG reduction and clinical benefit, and feedback from the U.S. Food and Drug Administration, or FDA. The study is a registrational, non-inferiority trial comparing the pharmacodynamic effect of 1000 mg SC efgartigimod with 10 mg/kg IV efgartigimod and is expected to enroll approximately 50 patients.
In February 2021, we announced a "GO" decision to transition into the second, placebo controlled stage of this trial based on a planned efficacy and safety assessment following the enrollment of 30 patients into the initial part of the ADHERE trial. See ‘‘—Recent developments—Interim analysis from ADHERE trial’’ below. In the Phase 3 ADAPT study in gMG, as well as in the Phase 2 studies in gMG, ITP, PV and CIDP to date, efgartigimod was observed to have a favorable tolerability profile consistent with that observed in our Phase 1 clinical trials.
In March 2021, the BLA for treatment of efgartigimod in gMG was accepted for review by the FDA, with an action date set for December 17, 2021 under the Prescription Drug User Free Act, the PDUFA.
In March 2021, we launched our pre-approval access program (PAA) in the U.S. and Europe to open availability of efgartigimod to people living with gMG who have a high degree of unmet clinical need and are not able to participate in a clinical trial.
Cusatuzumab
Beyond efgartigimod, we co-develop our second lead product candidate, cusatuzumab, or ARGX-110, (targeting CD70) with our collaborator, Cilag GmbH International, an affiliate of the Janssen Pharmaceutical Companies of Johnson & Johnson, or Cilag, for the rare and aggressive hematological cancer acute myeloid leukemia, or AML, as well as high-risk myelodysplastic syndrome, or MDS. In December 2016, we initiated the dose-escalation part of the Phase 1/2 clinical trial of cusatuzumab in combination with azacytidine. In December 2018, we initially reported a 92% response rate in the treated group of newly diagnosed AML patients, which we updated in December 2019 to a 100% response rate. The transition into the Phase 2 part of this clinical trial was announced in August 2018. In the first half of 2020, the Part 1 dose escalation of this Phase 1 study was published in Nature Medicine.
In July 2020, we announced that the development strategy for clinical trials of cusatuzumab initiated under the global cusatuzumab collaboration and licensing agreement with Cilag has been aligned with the evolving
4954
treatment landscape and anticipated global adoption of venetoclax in acute myeloid leukemia, or AML, clinical practice.
In January 2021, we announced interimTopline data from the Phase 2 CULMINATE3 ADDRESS clinical trial evaluating cusatuzumabwere announced in combination with azacitidineDecember 2023, in newly-diagnosed, elderly AMLwhich the results show the proportion of PV patients who are ineligible for intensive chemotherapy. The 20 mg/kg dose has been selected for ongoingachieving the primary endpoint of complete remission on CRmin was not significantly different between SC efgartigimod and future trials. Cusatuzumab was observed to be well-toleratedplacebo. We will not pursue additional development in pemphigus and the safety data were consistent with prior studies. Final results from the CULMINATE trialwe will be presented in a peer-reviewed forum. The decision to initiate additional studies in theprioritize clinical development of cusatuzumab, under the collaboration agreement with Cilag, will be determined following review of data from the ongoing Phase 1b ELEVATE trial, which is evaluating cusatuzumab in combination with venetoclax and azacitidine in newly-diagnosed, elderly patients with AML who are ineligible for intensive chemotherapy. This trial is enrolling again after a pause due to COVID-19.
ARGX-117, ARGX-118 and Immunology Innovation Program
In May 2019, we announced the addition of two new therapeutic candidates discovered via our IIP, ARGX-117 and ARGX-118, to our proprietary antibody pipeline. ARGX-117 targets the complement compound C2 with potential in severe autoimmune indications. In the third quarter of 2020, we initiated a Phase 1 healthy volunteer trial of IV and SC ARGX-117 to evaluate safety and tolerability and establish a dosing regimen. Following analysis of Phase 1 data, we plan to launch a Phase 2 proof-of-concept trial in multifocal motor neuropathy within our neuromuscular franchise and to develop ARGX-117 in additional autoimmune indications. ARGX-118 is designed to address Galectin-10 and targets airway inflammation. Two new therapeutic candidates have been added to our pipeline from our IIP, ARGX-119, which is a program that will focus on neuromuscular disease, and ARGX-120, which will focus on an undisclosed target.
Partnerships
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 potential and benefits in disease areas or patient populations that are better served by the resources of larger biopharmaceutical companies. As such, we have entered into collaborations with a number of biopharmaceutical companies, including our collaborations with Zai Lab and Cilag.
In January 2021, we entered into an exclusive license agreement with Zai Lab Limited, or Zai Lab, for the development and commercialization of efgartigimod in China, Taiwan, Hong Kongits ongoing severe autoimmune indications.
BP
Overview
BP is the most common autoimmune blistering disease and Macauis 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 accelerationincidence increases with age. BP is associated with a high disease burden and can have a significant impact on the quality of efgartigimod development through Phase 2 proof-of-concept trialslife of patients. The mortality of BP in new autoimmune indications. Zai Lab will also contribute Chinese patients to argenx’s global Phase 3 trials of efgartigimod. Under the termsU.S. is 2.4% or higher than the mortality in the general population of the agreement, wesame age. There are entitledcurrently 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 receive $175 millionhemidesmosomal proteins, BP180 and BP230, initiates a cascade of inflammatory events resulting in collaboration payments comprisedblister formation. BP180 and BP230 are involved in the stable attachment of upfront Zai Lab equitykeratinocyte to the underlying matrix. The autoantibody actions include mechanical disruption of $75 million (received in January 2021), a $75 million guaranteed development cost-sharing payment,keratinocyte adhesion and a $25 million milestone payment upon U.S. efgartigimod approval. We will also be eligible for tiered royalties based on annual net salescytokine release. Immune complex formation initiates complement activation leading to the recruitment mast cells, neutrophils, eosinophils and other immune cells and to the release of efgartigimod in China, Taiwan, Hong Kongproteases and Macau.
In January 2019, we received a $300 million upfront payment pursuant to collaborationinflammatory mediators. All these effects, which start with Cilag and Johnson & Johnson Innovation Inc. invested €176.7 million (approximately $200.0 million based on the exchange rate in effect asbinding of the dateautoantibodies, induce the agreement was signed)blistering observed in BP.
BALLAD Clinical Trial
We initiated the form of an equity investment. Under our collaboration with Cilag, in December 2019, we announced the achievement of our first milestone of $25 million for achievement of an enrollment milestone in first Phase 2 trial. In addition, in August 2018, our collaborator AbbVie S.A.R.L, or AbbVie, exercised its exclusive option to license ARGX-115 (now referred to as ABBV-151), a cancer immunotherapy-focused product candidate against the novel target glycoprotein A repetitions predominant. In March 2019, AbbVie started a first-in-human2/3 BALLAD registrational clinical trial with ABBV-151, triggering a $30 million milestone payment by AbbVie to us.
Recent developments
50
Interim analysis from ADHERE trial
On February 1, 2021, we announced our plan to continue enrollment in the ADHERE trial evaluating SC efgartigimod in CIDP. BP in 2022.
The ADHEREclinical 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 expectedthe proportion of participants in complete remission while off oral corticosteroids for at least eight weeks at week 36. Secondary endpoints relate to enroll approximately 130cumulative 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 totalBALLAD and we plan to support potential registrationcommunicate 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. |
55
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 FDA-approved therapies for IMNM or ASyS. IVIg (Octagam 10%) was approved by the FDA for the treatment of DM 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 the treatment of CIDP.Myositis in 2022. The "GO" decision wasclinical trial plans to enroll approximately 240 patients in three Myositis subtypes, IMNM, ASyS and DM. The clinical trial will be conducted in two Phases, with an analysis of the Phase 2 portion of the clinical trial, including 30 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 response, and duration of response in TIS, as well as change from baseline in individual TIS components. Other secondary endpoints include quality of life and other functional scores.
An interim analysis of the first 30 patients in each subset is expected in the second half of 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.
56
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 initialOLE. 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
57
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 assessment followingof 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 enrollmentchange in urine protein creatinine ratio (UPCR) from baseline to end of 30the 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.
58
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 initialPhase 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.
59
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
60
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.
| | |
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 ADHERE trial. The interim analysis achieves the pre-defined threshold for continuation, which was based on response rates seen in precedent clinical trials of current standard of care in CIDP. The decisiontrial, we evaluated 32 subjects to continue enrollment was confirmed by an independent data monitoring committee. In addition,understand the safety and tolerability data observedof repeated administrations and in particular to date is consistent with thatgenerate a data-set to optimally inform a PK/PD model.
61
Both single and multiple administrations of empasiprubart or placebo had a favorable safety and tolerability profile supporting the investigation of clinical trial drug in otherpatient 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
InterimIn June 2023, argenx announced its plan to advance to a second cohort with the Phase 2 ARDA clinical trial of empasiprubart in MMN. This decision followed a planned interim analysis of the first dose cohort by an Independent Data Monitoring Committee (IDMC) meeting.
The IDMC reviewed interim safety data from all patients (n=22) enrolled in the first cohort of the ARDA 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 Cusatuzumab CULMINATE Phase 21 clinical trial
and recommended advancing to the second cohort. Combined with the early efficacy signals observed, supporting POC of empasiprubart in MMN, argenx started the second cohort of the ARDA clinical trial.
In January 2021, we2024, argenx announced interimpositive data from the first cohort (n=22) of the Phase 2 CULMINATEPOC ARDA clinical trial evaluating cusatuzumabestablishing POC in combinationMMN. 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 PK/PD model to inform the Phase 3 clinical trial dose selection.
Phase 2 ARDA Clinical Trial Design
The Phase 2 POC ARDA clinical trial is a randomized, double-blinded, placebo-controlled multicenter clinical trial to evaluate the safety and tolerability, efficacy, PK, PD, and immunogenicity of two dose regimens of empasiprubart in adults with azacitidineMMN. 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 newly-diagnosed, elderly AMLa 2x1 randomization. The dosing for Cohort 2 was established after a planned interim analysis of the first nine patients whoto 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 ineligiblecurrently 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
62
this basis, combined with the significant unmet medical need, we have chosen DGF after kidney transplantation as second indication for intensive chemotherapy.empasiprubart.
Phase 2 POC VARVARA Clinical Trial
The Phase 2 POC VARVARA clinical trial was initiated in 2023 and is a randomized, placebo-controlled, double-blinded clinical trial to evaluate the efficacy, safety and tolerability of empasiprubart 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 include 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 administration of steroids. IVIg is the only approved treatment for DM.
Phase 2 POC EMPACIFIC Clinical Trial
The EMPACIFIC clinical trial is a Phase 2 POC, randomized, double-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 103 patients were56 adult participants with a clinical diagnosis of DM and active muscle disease will be randomized (1:1:1:1) to one of four treatment arms (three empasiprubart dose regimens and one placebo arm). Participants will receive either 10 mg/kg (n=51) or 20 mg/kg (n=52) cusatuzumab plus azacitidine as part of a dose identification. The 20 mg/kg dose has been selected for ongoingloading doses on Days 1 and future trials. A pre-planned interim analysis was conducted8, followed by maintenance doses every four weeks until the end of the 52-week treatment phase. The primary objective is to evaluate safety and tolerability. The secondary objective is to evaluate clinical efficacy, using the mean TIS at weeks 13, 25, and 52 patients (46.2% adverse ELN risk classification) receiving 20 mg/kg cusatuzumab plus azacitidine treatment (intent-to-treat population, or ITT). The results from the ITT analysis showedas endpoint.
ARGX-119 Development
ARGX-119 is a complete remission, or CR, rate of 27% (14/52)humanized agonist mAb that specifically targets and composite complete remission, or CRc, including CRs with incomplete hematologic recovery, rate of 40% (21/52). The 30-day mortality rateactivates MuSK to promote maturation and stabilization of the ITT population was 9.6% (5/52)neuromuscular junction (NMJ). InWe plan to develop ARGX-119 in a cohort whererange 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 received at least two treatment cycles (20 mg/kg cusatuzumab plus azacitidine), 42% (14/33) achieved CRwith neuromuscular disease, such as CMS and 64% (21/33) achieved CRc. Cusatuzumab was observed to be well-toleratedALS. This mAb is derived from llamas and discovered using the argenx SIMPLE ANTIBODY™ platform technology. We developed ARGX-119 through our IIP program in collaboration with the world leading key opinion leaders on MuSK and the safetyneuromuscular 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 were consistent with prior studies. Final results from the CULMINATE trial will be presentedin Dok7 congenital myasthenic syndrome, observed in a peer-reviewed forum.
Priority Review Voucher
In November 2020, we announcedmouse model bearing the agreement to acquire an FDA Priority Review Voucher, or PRV, from Bayer Healthcare Pharmaceuticals, Inc. for $98 million. A PRV entitles the holder to FDA priority review of a single New Drug Application or BLA, which reduces the target review timemost common patient mutation and may potentially lead to an
51
expedited approval. We expect to redeem the PRV for a future marketing application for efgartigimod. We will not use the PRV for the BLA submission of IV efgartigimod in gMG.
Strategy and Objectives
Strategy
Our goal is to deliver therapies that are either first-in-class or best-in-class to patients suffering from severe autoimmune and hematological diseases and various cancers for which there exists a significant unmet medical need. We are also focusedALS using ALS patient derived NMJ on-a-chip models. Based on attaining this goal in a manner that is disciplined for a company of our size. We plan to:
52
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. These companies are highly sophisticated and often strategically collaborate with each other.
We compete with a wide range of pharmaceutical companies, biotechnology companies, academic institutions and other research organizations for novel therapeutic antibody targets, new technologies for optimizing antibodies, talent, financial resources, intellectual property rights and collaboration opportunities. Many of our competitors and potential competitors have substantially greater scientific, research and product development capabilities as well as greater financial, manufacturing, marketing and sales and human resources than 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
53
to support the research, development and commercialization of products that may be competitive with ours. Accordingly, our competitors may be more successful than we may be in developing, commercializing and achieving widespread market acceptance.
Competition 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 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 (Remicade/rheumatoid arthritis and Stelera/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 ARGX-119 was initiated as activation of MuSK by ARGX-119 may stabilize, mature, and
63
improve the treatmentfunction of autoimmune diseases. In addition to the current standard of care, we are aware that Alexion Pharmaceuticals, Inc. is selling Soliris for the treatment of adultNMJ in patients with generalized MG whoCMS or ALS, significantly reducing weakness and fatigability and improving quality of life.
A Phase 1 dose-escalation clinical trial in healthy volunteers started in 2023 and is ongoing. A Phase 1b and 2a clinical trial in CMS and ALS respectively are anti-acetylcholine receptor antibody positiveplanned to start in 2024 to assess early signal detection in patients.
ARGX-109, ARGX-220, ARGX-121 and that GSK; Roche; Novartis AG; CSL Behring; Grifols, S.A.; BioMarin Pharmaceutical Inc.; Curavac; Millenium Pharmaceuticals, Inc., UCB S.A./RA Pharma; Johnson & Johnson Innovation Inc., among others, are developing drugs that may have utility forARGX-213 Development
We continue to invest in our discovery engine, the treatment of MG. We are aware that Rigel Pharmaceuticals, Inc.; Dova Pharmaceuticals.; Bristol-Myers Squibb; Shire; Immunomedics; Protalex Inc.; Principia Biopharma and others are developing drugs that may have utility forIIP, to drive long-term sustainable pipeline growth. Through the treatment of ITP. We are aware that Roche is selling Rituxan for the treatment of moderate to severe PV and Principia; Alexion and others are developing drugs that may have utility for the treatment of PV. Furthermore, we are aware of competing products specificallyIIP, four new pipeline candidates were nominated in 2023, including: ARGX-213 targeting FcRn and being developed by UCB S.A.; Johnson & Johnson Innovation Inc.; Alexion; Immunovantfurthering argenx’ leadership in this new class of medicine; ARGX-121 and Affibody.
CompetitionARGX-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 the leukemiainflammation. Preclinical work is ongoing for each candidate 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 for the treatment of Hodgkin's lymphoma, non-Hodgkin's lymphoma, multiple myeloma or other blood cancers. We are aware of AML drugs recently approvedwe expect to file four IND applications by the FDA, such as Daurismo (Pfizer), Mylotarg (Pfizer), Rydapt (Amgen), Vyxos (Jazz Pharmaceuticals, Inc.)end of 2025.
Antibody Engineering 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 cusatuzumab in the future if it is approved. We anticipate that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available.Other Technology Capabilities
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 (ABBV-151) and a product candidate in development by Ionis Pharmaceuticals, Inc. may compete with STT-5058 (formerly ARGX-116), if they are approved.
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 to patients suffering from severe autoimmune, and hematological/oncological diseases for which the current treatment paradigm is inadequate. Our competitive strengths include:
54
55
Our Product Candidates
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.
As shown in Figure 1, we apply a unique suite of technologies to create antibodies with optimized V-regions and an enhanced Fc region. Used alone or in combination, we believe that our suite of technologies enables 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 AntibodyTMANTIBODY™ Platform
Our proprietary SIMPLE AntibodyTM PlatformANTIBODY™ 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
56
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 AntibodyTM PlatformANTIBODY™ platform technology 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 proprietary FcAntibody Engineering Technologies
OurThrough licensing we have obtained access to a broad range of antibody engineering technologies—NHance®technologies. NHANCE™, ABDEGABDEG™, POTELLIGENTTM® and POTELLIGENT®—the DHS mutations focus on engineering the Fc region of antibodies, in orderwhile SMART-Ig® and ACT-Ig® technologies allow to make sweeping antibodies.
Fc engineering can augment theirantibodies 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®NHANCE™ and ABDEGTMABDEG™ engineering technologies enable us to modulate the interaction of the Fc region with FcRn, which is responsible for regulating half-life, tissue distribution and pharmacodynamicPD properties of IgG antibodies. Similarly, our POTELLIGENT®the POTELLIGENT engineering technology modulates the 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.(ADCC).
64
NHance® NHANCE™and ABDEGTMABDEG™: Modulation of Fc Interaction with FcRnFcRn.
An illustration of the FcRn-mediated antibody recycling mechanism is shown in Figure 2. 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 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.
57
NHANCE™
NHance® NHANCE™refers to two mutations that we introduce into the Fc region of an IgG antibody. NHance®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 35, [1] NHANCE™, NHance® antibodies bind to FcRn with higher affinity, specifically under acidic pH conditions. [2] Due to these tighter bonds, NHance®NHANCE™ FcRn-mediated antibody recycling is strongly favored over lysosomal degradation, although some degradation does occur. NHance®[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, ARGX-117empasiprubart and a number of our discovery-stage programs utilize NHance®NHANCE™.
58
Figure 3: NHance®5: NHANCE™ mutations favor the FcRn-mediated recycling of IgG antibodiesantibodies.
ABDEG™
ABDEGTM
ABDEGTMABDEG™ 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®NHANCE™, ABDEGTMABDEG™-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 autoantibodies. We use our ABDEGTMABDEG™ technology to reduce the level of these pathogenic autoantibodies in the circulation by increasing the rate at which they are cleared by the lysosomes. ABDEGTMABDEG™ is a component in a number of our products and product candidates, including efgartigimod.
66
As shown in Figure 4,6, our ABDEGTMABDEG™ technology can also be used with our pH-dependent SIMPLE AntibodiesANTIBODY™ generated antibodies in a mechanism referred to as sweeping. Certain antibodies generated through the SIMPLE AntibodiesANTIBODY™ 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 degraded in the lysosome. [4] However, when equipped with our ABDEGTMABDEG™ 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.
59
Figure 4:6: SIMPLE AntibodyTMANTIBODY™ and ABDEGTMABDEG™ platform technologies work in concert to sweep disease targetsdiseases targets.
POTELLIGENT®: Modulation of Fc Interaction with NK CellsPOTELLIGENT®
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®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. Cusatuzumab and ARGX-111 utilize POTELLIGENT®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
Our Wholly-Owned ProgramsIn 2020, we entered into a research license and option agreement with Chugai under which we may access 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 extend the serum half-life of therapeutic antibodies.
Genmab collaboration
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 followingmultiyear collaboration is expected to leverage the pipelineantibody engineering expertise and knowledge of our wholly owned productdisease 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 discovery programs
Efgartigimod (formerly referred to as ARGX-113)
We are developing our lead product candidate, efgartigimod, forcancer. Under the treatmentterms of patients with MG (Phase 3), ITP (Phase 3), PV (Phase 2; Phase 3)the collaboration, argenx and CIDP (Phase 2/3), all of which are rare and severe autoimmune diseases associated with high levels of circulating pathogenic IgG antibodies for which there are few innovative biologic treatments and a severe unmet medical need exists. We expect to start clinical development in a fifth and sixth indication in 2021.Genmab each
6067
Efgartigimod utilizes our ABDEGTM engineering technology and is designed to block the recycling of IgG antibodies, which results in their removal from circulation. We believe that our approach presents potential benefits relativehave access to the current standardsuites of care for MG, ITP and PV: corticosteroids and immunosuppressants inproprietary antibody technologies of both companies to advance the early stages, followed by intravenous IgG, or IVIg, and plasma exchange, or plasmapheresis, as theidentification of lead antibody candidates against differentiated disease progresses. The current standard of care for CIDP is IVIg. We believe efgartigimod’s 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. Data reported to-date have shown that efgartigimod is well-tolerated, with reductions in pathogenic autoantibodies correlating with improvements in clinical scores.targets.
Efgartigimod in MG – orphanSC drug status in the U.S., Europe and Japandelivery technologies
We announced full data from a double-blind, placebo-controlled Phase 2 clinical trial of efgartigimod in 24 patients with generalized MG in April 2018. In May 2019, we announced the publication of these Phase 2 results in the peer-reviewed journal, Neurology. The Phase 3 ADAPT trial was launched in September 2018 evaluating IV efgartigimod in gMG and topline data was announced on May 26, 2020. Also, in 2020 we have engaged the U.S. Food and Drug Administration (FDA) on a potential bridging strategy for 1,000mg subcutaneousexclusive access to Halozyme’s ENHANZE® SC ENHANZE® efgartigimod in gMG. We have presented additional data consistent with the topline results in October 2020. We expect to file a Japanese Marketing Authorization Application (J-MAA) with the Pharmaceuticals and Medical Devices Agency (PMDA) in the first half of 2021 with an expected efgartigimod launch in gMG in Japan. The commercial infrastructure readiness activities, including activities with global supply chain, are on trackdrug delivery technology for the launch timeline in the U.S.FcRn and Japan. We expect to submit a market authorization application in China shortly after following potential approval in the U.S. Furthermore, we expect to file a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) in the second half of 2021.
Efgartigimod in ITP – orphan drug status in the U.S.C2 targets and Europe
In 2018, we performed a second Phase 2 clinical trial of IV efgartigimod in 38 patients with ITP for which the full study data were published in the peer-reviewed journal, Hematology in December 2019. The Phase 3 program of IV efgartigimod, ADVANCE, was initiated in the fourth quarter of 2019 and will evaluate the potential of IV efgartigimod for both induction and maintenance of platelet response. The ADVANCE SC Phase 3 trial in ITP has started in fourth quarter 2020 will evaluate the fixed dose of SC ENHANZE® efgartigimod.
Efgartigimod in PV
A Phase 2 proof-of-concept trial of IV efgartigimod is ongoing in PV and positive proof-of-concept data were presented at a medical conference during 2020. A registrational Phase 3 trial has been initiated during 2020.
Efgartigimod in CIDP
At the end of 2019, we initiated the Phase 2 ADHERE trial of SC ENHANZE® efgartigimod in patients with CIDP. We have completed the enrollment of the first 30 patients. The potential decision to expand the trial up to 130-140 patients is now expected in first quarter 2021.
Formulation Options for Efgartigimod
We are developing three formulations of efgartigimod to address the needs of patients, physicians and payors across indications and geographies, including IV efgartigimod and two SC formulations (the standalone ENHANCE® SC formulation and the SC formulation that is dosed as maintenance after IV induction).
Overview of Myasthenia Gravis
MG is an autoimmune disorder associated with muscle weakness that is triggered by IgG autoantibodies. These antibodies attack critical signaling proteins at the junction between nerve and muscle cells, thereby
61
impairing their communication signals. As shown in Figure 5, in MG these autoantibodies either bind and occupy or cross-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 autoantibodies can cause destruction of the neuromuscular junction by recruiting complement, a potent cell-destroying mechanism of the human immune system.
Figure 5: MG is caused by autoantibodies 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. MG 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. 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 (source: Philips et al, Ann NY Acad Sci. 2003; www.myasthenia.org/LinkClick.aspx?fileticket=EjpV6nDv8pU=&tabid=84). Currently, there are an estimated 64,000 MG patients 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, which we believe represents a majority of generalized MG patients.
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 treatment results in a large increase in the quantity of IgG antibodies in circulation.
62
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.
Both 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 (source: J Clin Neuromuscul Dis. 2011 Dec; 13(2):85–94. doi: 10.1097/CND.0b013e31822c34dd). 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.
In October 2017, the FDA and European Medicines Agency approved the use of Soliris® for the treatment of generalized MG patients who have autoantibodies directed against the acetylcholine receptor. Soliris is an anti-C5 antibody blocking the activity of complement recruited by the pathogenic IgGs directed against the acetylcholine receptor at the neuromuscular junction. However, Soliris does not address the blocking 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 efgartigimod 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 efgartigimod could further expand its use in patients requiring chronic therapy, potentially outside of the hospital setting.
Overview of 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, 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. ITP affects approximately 72,000 patients in the United States (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).
Limitations of Current ITP Treatments
Treatment for ITP is focused on either reducing the autoimmune activity that is causing accelerated platelet destruction and allowing the platelets to recover on their own, or directly stimulating platelet production
63
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 treatment 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 the platelet count within days in most patients, but the effect is usually transient. IVIg introduces high levels of exogenously added IgG antibodies to the blood stream that compete with the patient's autoantibodies for various pathways including the FcRn-dependent antibody recycling pathway, thereby lowering the impact of the autoantibodies. IVIg treatment for ITP requires intravenous dosing of up to 2 g/kg per day of IVIg 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.
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),Eltrombopag (Promacta) and Fostamatinib (Rigel) are approved as last-line therapy for ITP and have generated global revenues of $584 million and $635 million in 2016, respectively (source: Amgen Inc. Annual Report on Form 10-K for Fiscal Year Ended December 31, 2016 (page 126)).
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-threatening disease is triggered by IgG autoantibodies targeting desmoglein-1 and -3, which are present on the surface of keratinocytes and important for cell-to-cell adhesion in the epithelium. Autoantibodies targeting desmogleins result in loss of cell adhesion, the primary cause of blister formation in PV. Similar to MG and ITP, disease severity of PV correlates to the amount of pathogenic IgGs targeting desmogleins.
Currently, there are an estimated 17,400 pemphigus patients in the United States, 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; autoimmune bullous skin disorder intensity score, or ABSIS; and the PV activity score, or PVAS. The PDAI is reported to have the highest validity and is recommended for use in clinical trials of PV.
Limitations of Current PV Treatments
The goals for the treatment of PV are twofold: (1) decrease blister formation and promote healing of blisters 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 was recently approved by the FDA for the treatment of moderate to severe PV. Rituxan carries infusion reaction risks, including anaphylaxis, and the risk of opportunistic infections, including progressive multifocal leukoencephalopathy, a rare and usually fatal viral disease.
64
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.
Overview of Chronic Inflammatory Demyelinating Polyneuropathy
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 16,000 patients in the United States.
Limitations of Current CIDP Treatments
Most CIDP patients require treatment and intravenous immunoglobulin, or IVIg, which is the preferred first-line therapy. 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. While IVIg therapy can usually control CIDP, most patients require repeated treatments every two to six weeks for many years. This is due to the fact that IVIg monotherapy does not usually lead to long-term remission. IVIg introduces high levels of exogenously added IgG antibodies to the blood stream that compete with the patient’s autoantibodies for various pathways, including the FcRn-dependent antibody recycling pathway, thereby lowering the impact of the autoantibodies. IVIg treatment for CIDP requires intravenous dosing of up to 2 g/kg per day of IVIg and is associated with many of the adverse events seen with IVIg treatment of other autoimmune diseases, such as MG. Both IVIg and plasmapheresis, when used to treat CIDP, carry a high cost burden on the healthcare system as they do when used to treat myasthenia gravis, or MG, or ITP. CIDP is the largest indication for IV/SC Ig in the United States.
Our Solution: efgartigimod
Our lead product candidate, efgartigimod, is an antibody Fc fragment that we believefour additional targets. ENHANZE® has the potential to overcome many of the limitations of the current standard of care for MG, ITP, PV and CIDP, including with respect toshorten drug administration time, of onset, magnitude and duration of therapeutic benefit and safety profile. We developed efgartigimod using our ABDEGTM Fc engineering technology.
Efgartigimod 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 autoantibodies of the IgG1 and IgG3 classes, while in the case of ITP these autoantibodies consist mainly of the IgG1 class. In the case of PV, the pathogenic autoantibodies consist mainly of the IgG1 and IgG4 class. As shown in Figure 6, efgartigimod'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. As a result of our ABDEGTM technology and the modifications we made to the Fc region, efgartigimod binds to FcRn with high affinity making this receptor unavailable to circulating IgG antibodies. 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, efgartigimod acts in a highly selective manner by reducing IgG antibody levels, while leaving levels of antibodies of the immunoglobulin A, or
65
IgA, immunoglobulin M, or IgM, and immunoglobulin D, or IgD, types as well as all components of the innate immune system intact.
Figure 6: Efgartigimod’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 efgartigimod has the potential to reduce levels of pathogenic IgG antibodies. Our clinical data suggest that efgartigimod reduces circulating IgG antibodies more rapidly than current therapies, which we believe could translate into faster therapeutic benefit if replicated with respect to pathogenic IgG antibodies. Our clinical data also suggest that the quantity of efgartigimod required to achieve and maintain suppression of circulating antibodies is lower than the levels of IVIg required for therapeutic benefit, which could translate into fewer infusions, shorter infusionhealthcare practitioner time, and a more favorable safetyoffer additional flexibility and tolerability profile.convenience for patients.
In addition, in April 2021, we entered into the Elektrofi Agreement with Elektrofi to MG, ITP, PV and CIDP, we believe there are other autoimmune diseases that may benefit from the mechanism of action of efgartigimod therapy. We intend to pursue initial approval for MG and then plan to expand potentially to ITP, PV and CIDP because these diseases have significant unmet medical needs. We then intend to expand our clinical development effortsexplore new SC formulations utilizing Elektrofi’s high concentration technology for efgartigimod, into additional indications also mediat-ed 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.
Global and Broad Clinical Development Plan
We are currently evaluating efgartigimod in Phase 3 clinical trials in MG and ITP. A global, multi-center Phase 3 ADAPT clinical trial, including ADAPT+ one-year open-label extension study, is currently ongoing. The ADAPT trial completed patient enrolment at the end of 2019 and topline data was announced on May 26, 2020. For ITP, a global Phase 3 program includes two potential registrational trials to be run concurrently. The first trial,
66
ADVANCE is launched and will evaluate 10mg/kg IV efgartigimod on top of standard of care medication. The second trial is launched in the fourth quarter of 2020 and will evaluate the 1000 mg SC ENHANZE® efgartigimod.
A Phase 2 proof-of-concept clinical trial of efgartigimod for the treatment of pemphigus vulgaris is still ongoing and positive interim proof-of concept data were reported in May 2020 during a medical meeting in 2020. We have initiated a Phase 3 ADRESS trial of efgartigimod for the treatment of pemphigus during the fourth quarter of 2020.
Finally, at the end of 2019, we initiated the Phase 2 ADHERE trial of SC ENHANZE® efgartigimod in CIDP patients, and we expect to start clinical development in a fifth and sixth indication in 2021.
Phase 2 Clinical Trial in MG
We conducted a randomized, double-blind, placebo-controlled Phase 2 clinical trial to evaluate the safety and tolerability, efficacy, pharmacodynamics and pharmacokinetics of efgartigimod. This clinical trial was conducted 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, and who are on 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 the 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 efgartigimod, 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 efgartigimod or placebo. Patients received follow-up for eight weeks after treatment.
The primary objectives of this Phase 2 clinical trial were to evaluate the safety and tolerability of efgartigimod with primary endpoints evaluating the incidence and severity of adverse events and serious adverse events, and evaluating vital signs, electrocardiogram and laboratory assessments. Secondary endpoints of 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.
Phase 2 Topline Results
We announced full data from this Phase 2 clinical trial in April 2018 and the data were published in the peer-reviewed journal, Neurology, in 2019. The primary endpoint analysis demonstrated efgartigimod to be well-tolerated in all patients, with most treatment emergent adverse events or TEAEs observed characterized as mild (CTCAE Grading 1 and 2). No TEAEs severity with CTCAE Grade 3 or higher were reported. No clinically significant laboratory, vital signs and/or electrocardiogram findings were observed. No laboratory abnormality including albumin similar to the findings cynomolgus monkeys and in clinical trials. No TEAE leading to discontinuation, no serious TEAE and no deaths were reported during the trial. The observed tolerability profile was consistent with the Phase 1 healthy volunteer trial as well as our Phase 2 clinical trial in ITP.
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 efgartigimod Phase 2 Clinical Trial in MG
67
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abbreviation: TEAE = treatment-emergent adverse event.
Data are n (%).
The secondary endpoint measures relating to efficacy showed efgartigimod 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 efgartigimod achieved a clinically meaningful response (MG-ADL>2). 75% of patients treated with efgartigimod 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).
Clinical benefit in the efgartigimod 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 efgartigimod treatment group versus placebo with increasing MG-ADL and QMG thresholds at day 29 (1 week after last dosing) as shown in Figure 7.
Figure 7: Increasing differentiation in patient MG-ADL and QMG thresholds (treatment group vs. placebo)
* Missing data point in one patient
68
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. Total IgG reduction in patients was consistent with the Phase 1 healthy volunteer trial showing a mean maximum IgG reduction of up to 70.7% among treated patients. Reduction of IgG levels was consistent across IgG subtypes, including AChR autoantibodies (IgG1 and IgG3).one additional target.
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 efgartigimod and in three out of 12 patients receiving placebo. In one active-treated patient, positive post-dose ADA titers were detected 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 efgartigimod pharmacokinetics or pharmacodynamics.
Phase 2 Clinical Trial in ITP
We completed a randomized, double-blind, placebo-controlled Phase 2 clinical trial to evaluate the safety, efficacy and pharmacokinetics of efgartigimod in 38 adult primary ITP patients, who have platelet counts lower than 30 x 109/L while being on a stable dose of standard-of-care treatments consisting of corticosteroids, permitted immunosuppressants or thrombopoietin receptor agonists, or after having undergone a splenectomy or while being monitored under a 'watch & wait' approach. We conducted the clinical trial at 19 clinical centers across eight countries in the European Union. Patients were randomly assigned to three arms of 12 or 13 patients for the placebo or efgartigimod arms, respectively. All patients in this clinical trial on a drug standard-of-care treatment were to continue to receive their stable dose of standard-of-care treatment as per the protocol. One treatment arm received 5 mg/kg efgartigimod, the second arm received 10 mg/kg efgartigimod and the third arm received placebo. Dosing took place in a three-week period, which included four weekly doses of efgartigimod or placebo. Patient follow-up continued for 21 weeks after treatment. Patients from all three cohorts were eligible to enroll in a one-year open-label extension study at the 10mg/kg dose of efgartigimod, subject to meeting enrollment criteria, including platelet counts lower than 30 x 109/L.
Phase 2 Topline Results
The primary objectives of this Phase 2 clinical trial were to evaluate safety and tolerability of efgartigimod 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 included evaluation of efficacy, based on platelet count, use of rescue treatment and bleeding events, pharmacokinetics, pharmacodynamics, and immunogenicity.
We announced full data from this Phase 2 clinical trial in December 2018 and in December 2019, we announced a peer-reviewed publication of these data in The Journal of Hematology. The primary endpoint analysis demonstrated efgartigimod to be well-tolerated in all patients, with most treatment emergent adverse events (TEAE) observed characterized as mild (CTCAE Grading 1 and 2). Two serious TEAEs were reported for 2 (15.4%) out of 13 patients both in the efgartigimod 10 mg/kg treatment group (1 case of bronchitis and 1 case of thrombocytopenia); both serious TEAE were considered not related to the trial treatment and both serious TEAEs were downgraded after the study database locked. No deaths were reported during the study. The observed
69
tolerability profile was consistent with the Phase 1 healthy volunteer trial as well as our Phase 2 clinical trial in MG.
All non-bleeding TEAEs reported, as well as non-bleeding TEAEs deemed to be drug-related by the investigator in at least two patients, are summarized in Table 2.
Table 2: Overview of TEAEs and drug related TEAEs reported in at least two patients in efgartigimod Phase 2 Clinical Trial in ITP
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
| |||||
|
|
|
| ||||
|
|
|
| ||||
|
|
|
|
Abbreviations: N, number of patients in the analysis set; n, number of patients with event within each treatment group under safety analysis set; TEAE, treatment emergent adverse event.
Clinically meaningful improvements in platelet counts were seen across ITP classifications and standard of care. 46% of patients demonstrated improved platelet count to ≥ 50x109/L during two or more visits in each of the 5 mg/kg and 10 mg/kg dosing cohorts compared to 25% in the placebo cohort. 67% of patients in the OLE trial demonstrated improved platelet count to ≥ 50x109/L during two or more visits following the first dosing cycle. Responders from the 10 mg/kg arm in the primary trial all responded again upon retreatment in the OLE trial. Onset of platelet count reaching 50x109/L for the first time ranged from week 1 to week 10, consistent with disease heterogeneity. For efgartigimod-treated patients with clinically meaningful platelet responses (≥ 50x109/L during two or more visits), the mean duration of platelet response was 40 days versus 16 days for placebo treated patients, with responses lasting the trial duration.
38% of efgartigimod-treated patients showed durable platelet count improvements to clinically meaningful and statistically significant levels of ≥ 50x109/L for at least 10 cumulative days, compared to 0% of placebo patients (p=0.03). These data are summarized in figures 8 and 9.
Figure 8: Patients achieving platelet counts of ≥ 50x109/L at least two times.
70
Figure 9: Post-hoc analysis of increasing thresholds of efficacy
Note: Increasing threshold analysis based exact logistic regression model with the baseline result as a factor
The frequency of bleeding related events, as defined in the protocol, was evaluated separately. This was done due to the nature of the disease, as low platelet levels in ITP patients may induce bleeding events in a proportion of patients, and signs and symptoms vary widely. Bleeding events were assessed using three metrics—adverse event reporting, the WHO scale and the ITP-BAT scale—and showed that efgartigimod reduced bleeding events across each scale. Adverse event reporting showed no severe bleeding events in any patient, mild bleeding events only were reported in the 10 mg/kg arm and mild and moderate in the 5 mg/kg and placebo arm. Incidence of bleeding events was reduced by efgartigimod treatment as assessed by the WHO bleeding scale, with separation from placebo as early as the third dose in the 10 mg/kg arm. Incidence of bleeding events in the skin was reduced by efgartigimod treatment as assessed by the ITP-BAT bleeding scale, with no clear signal of bleeding events in the mucosa or organs in either treatment arm. Efgartigimod treatment resulted in clear correlation between IgG reduction, platelet count improvement and bleeding event reduction.
Analysis of the pharmacokinetic and pharmacodynamic endpoints was generally consistent with the findings from the Phase 1 clinical trial as well as the MG Phase 2 clinical trial. Lasting IgG reductions were consistent with levels achieved in previous studies. All efgartigimod-treated patients showed a rapid and deep
71
reduction of total IgG levels, consistent with the pharmacodynamic effects observed in previous clinical trials. Reduction of IgG levels was consistent across IgG subtypes. Reduction in platelet-associated autoantibodies were observed in the majority of patients with clinically meaningful platelet increase. Low titer of anti-drug antibodies was detected in 16.7% of placebo patients and 30.8% of treated patients in the 10 mg/kg arm with no apparent effect on pharmacokinetics or pharmacodynamics.
Figure 10: Reduction of total IgGs correlates with increased platelet counts and reduced bleeding event
Phase 2 Clinical Trial in PV
We are conducting an open-label, non-controlled Phase 2 clinical trial to evaluate the safety, efficacy, pharmacodynamics and pharmacokinetics of efgartigimod in a minimum of 12 patients with mild to moderate PV who are either newly diagnosed or relapsing. We conduct the clinical trial at 12 sites across Europe, Ukraine and Israel. The trial design comprises three cohorts of a minimum of four patients each. The first cohort received 10 mg/kg of efgartigimod in four weekly doses as induction therapy, followed by five weeks of maintenance therapy with efgartigimod dosed at 10 mg/kg at week 1 and week 5 of the maintenance period, followed by an eight-week follow-up period with no dosing of efgartigimod. In newly diagnosed patients and relapsing patients off-therapy, efgartigimod will be dosed as monotherapy, in absence of standard of care therapy. In relapsing patients on prednisone, efgartigimod 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 (IDMC) 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.
The primary objectives of this Phase 2 clinical trial are to evaluate safety and tolerability of efgartigimod, 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.
Phase 2 Interim Results and Next Steps
In the first cohort of the Phase 2 trial, six mild to moderate PV patients with no or low-dose corticosteroid therapy were treated with efgartigimod. Disease control was reached in three out of six patients in one week, which was characterized by patients having signs of healing of existing lesions and the absence of new lesions forming. One patient reached disease control after four weeks. Two patients had progression of disease. In all patients exhibiting disease control, a mean maximum reduction in Pemphigus Disease Area Index (PDAI) of 55% correlated with a mean maximum decrease in pathogenic autoantibodies levels of 57%. No meaningful anti-drug antibody signals were reported.
72
The IDMC evaluated the results of the first patient cohort and determined the tolerability profile to be favorable. The IDMC recommended maintaining the dose at 10 mg/kg but adjusted the dosing frequency and duration of the maintenance phase for the next cohort. The second patient cohort will dose every two weeks during the maintenance phase and will add two additional administrations for a period of eight total weeks of maintenance, up from six weeks in cohort 1.
The Phase 2 proof-of-concept were presented in 2020. The presentation included updated data from 34 evaluable patients (31 evaluable for efficacy) treated with 10mg/kg or 25mg/kg of IV efgartigimod through May 16, 2020. In this trial, we observed that:
The data demonstrated a clear correlation between pathogenic IgG reduction and the Pemphigus Disease Area Index score improvement (Fig. 11). 90% (28/31) of patients achieved rapid disease control; median time to disease control for both monotherapy and combination therapy was 15 and 22 days, respectively. Complete clinical remission was observed in 70% (7/10) of the patients receiving an optimized dosing regimen determined to be efgartigimod dosed at least every two weeks in combination with oral prednisone (0.25-O.5 mg/kg), and CR was achieved within 2-13 weeks. This data suggested the potential for corticosteroid sparing treatment. In addition, an independent data review committee concluded tolerability to be favorable.
Figure 11: IgG reduction correlates to PDAI score improvement in responders
A potential registrational trial has been started in the fourth quarter of 2020.
73
Phase 1 Clinical Trial for Subcutaneous Formulation of efgartigimod (fixed maintenance dose used after IV induction)
In addition to the intravenous product formulation of efgartigimod, we are also developing a subcutaneous product formulation designed to enable administration of efgartigimod to larger patient populations, including patients requiring chronic therapy, potentially outside the hospital setting.
We evaluated the intravenous and subcutaneous formulations of efgartigimod head-to-head in a preclinical cynomolgus monkey model. The results suggest that both formulations result in comparable half-life in circulation of efgartigimod, a favorable bioavailability of 75% of the subcutaneous formulation and a comparable pharmacodynamic effect shown by reduction of total IgG antibodies.
We initiated a Phase 1 clinical trial in healthy volunteers for a subcutaneous formulation for the treatment of chronic autoimmune diseases. The open-label, Phase 1 trial enrolled 32 healthy volunteers and included three treatment arms: one each of single dose SC and IV efgartigimod, and one evaluating an IV induction followed by a SC maintenance dose. In the single dose treatment arms, the data showed the SC formulation to have comparable half-life, pharmacodynamics and tolerability to the IV formulation, and a bioavailability of approximately 50%. In addition, initial IV dosing followed by weekly 300 mg (2 ml) SC administration of efgartigimod provided sufficient exposure to maintain IgG suppression at a steady state IgG reduction of approximately 50%. The data also suggested a favorable tolerability profile and no meaningful anti-drug antibody signals were reported. The SC formulation supports key manufacturing improvements, including a high product concentration (150mg/ml), low viscosity and optimal stability.
Phase 1 Clinical Trial ENHANZE® SC efgartigimod (standalone SC formulation)
In addition to the subcutaneous product formulation of efgartigimod, we developed a standalone SC formulation of efgartigimod as part of our collaboration with Halozyme based on a co-formulation of efgartigimod with Halozyme’s proprietary ENHANZE® drug delivery technology (hyaluronidase, rHuPH20), designed to enable a smooth and convenient SC administration with larger volumes of efgartigimod with short injection times.
We initiated a Phase 1 clinical trial in healthy volunteers for the ENHANZE® subcutaneous formulation for the treatment of chronic autoimmune diseases. The open-label, Phase 1 trial enrolled 33 healthy volunteers and included four treatment arms: three with fixed doses of SC ENHANZE® efgartigimod, and one evaluating a body weight-based dose of SC ENHANZE® efgartigimod. Clear dose dependent reductions in mean total IgG and the different IgG subtypes concentration were observed. Using PK-PD modelling, we selected a dose of 1000 mg SC ENHANZE® efgartigimod to be equivalent to the 10 mg/kg IV efgartigimod formulation with respect to the effect on IgG levels.
The SC ENHANZE® efgartigimod formulation was quickly injected with mean injection times lower than 1 minute for the smallest dose.
Single dose of SC ENHANZE® efgartigimod of 750 mg, 1250 mg, 1750 mg, or 10 mg/kg was well tolerated by all healthy subjects. No obvious TEAE were reported beyond mild and transient injection site reactions, in line with reported ENHANZE® coformulation findings. No meaningful immunogenicity was reported.
First-in-Human Clinical Development Plan and Clinical Data
We have completed enrollment in a double blind, placebo-controlled Phase 1 clinical trial in healthy volunteers to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics 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 of efgartigimod or placebo up to a maximum of 25 mg/kg.
74
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. The full results from this clinical trial have been published in a peer reviewed during 2017.
Single Ascending Dose
We observed that a single two-hour infusion of 10 mg/kg efgartigimod 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 12. 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 12. Selective reduction of IgG by administration of efgartigimod to healthy volunteers in the single ascending dose part of our Phase 1 clinical trial
Administration of efgartigimod 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 efgartigimod 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 efgartigimod has the potential to be a highly selective immunosuppressant.
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 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 13. 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 efgartigimod 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 efgartigimod and the effect of the ABDEGTM technology on increasing the intracellular
75
recycling of efgartigimod. Similar to the single ascending dose part, no significant reductions in IgM, IgA or serum albumin were observed.
Figure 13. 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 efgartigimod in healthy volunteers at a dose of 10 mg/kg every seven days
Administration of multiple efgartigimod 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 efgartigimod. 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 observed, nor had any of the subjects with at least one positive ADA sample an apparent different pharmacokinetic/pharmacodynamic profile.
Cusatuzumab (formerly referred to as ARGX-110)
We are developing cusatuzumab in hematological cancer indications, currently AML, as well as high-risk MDS. We are developing cusatuzumab with our collaborator Janssen. See “Collaboration Agreements" below.
AML is rare and aggressive hematological cancer for which significant unmet medical needs exist. MDS, a rare bone marrow disorder, is often a precursor to AML. cusatuzumab is a SIMPLE AntibodyTM designed to potently block the CD70/CD27 interaction and kill CD70-positive cells via its potent antibody effector functions through the use of POTELLIGENT® technology.
76
Cusatuzumab is currently being evaluated in an open label registration directed Phase 2 clinical trial, CULMINATE, in combination with azacytidine, in newly diagnosed AML patients who are unfit for intensive chemotherapy or in patients with high-risk MDS. A Phase 1b platform trial is also underway in various AML subpopulations and settings with an initial trial evaluating combinations of cusatuzumab, venetoclax and azacitadine.
We reported results for the first 12 patients from the dose-escalation part of the Phase 1/2 clinical trial in combination with azacytidine in AML or high-risk MDS in December 2019, which demonstrated a favorable tolerability profile of the combination therapy and suggested evidence of biological activity across the evaluated doses.
In addition, we reported results of the Phase 2 part of the Phase 1/2 clinical trial in relapsed or refractory CD70-positive CTCL patients and an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma.
In June, 2020, we presented maturing data from the Phase 2 CULMINATE trial of cusatuzumab in combination with azacytidine in newly diagnosed, elderly patients with AML who are ineligible for intensive chemotherapy which have shown that complete response rates are not likely to exceed those from the VIALE-A trial of venetoclax in combination with azacytidine. In this trial, we observed that:
On January 8, 2021, we presented interim data from the Phase 2 CULMINATE trial of cusatuzumab. A pre-planned interim analysis was conducted of the 52 patients (46.2% adverse ELN risk classification) receiving 20mg/kg cusatuzumab plus azacitidine treatment (intent-to-treat population (ITT)). The results from the ITT analysis showed a complete remission (CR) rate of 27% (14/52) and composite complete remission (CRc), including CRs with incomplete hematologic recovery, rate of 40% (21/52). The 30-day mortality rate of the ITT population was 9.6% (5/52). In a cohort where patients received at least two treatment cycles (20mg/kg cusatuzumab plus azacitidine), 42% (14/33) achieved CR and 64% (21/33) achieved CRc. Cusatuzumab was observed to be well-tolerated and the safety profile was consistent with prior studies. Final results from the CULMINATE trial will be presented in a peer-reviewed forum.
Overview of Acute Myeloid Leukemia and Myelodysplastic Syndrome
AML is a hematological 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 (Siegel et al., Cancer J Clin 2015) 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 remis-sion. 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 that can also be used in elderly patients. Because relapse is often due to leukemic stem cells present next
77
to the malignant AML cells, 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 13,000 new cases annually. There are currently an estimated 60,000 MDS patients 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 at high risk to develop AML and are treated in a similar way as AML patients.
Our Solution: cusatuzumab
We developed cusatuzumab using our SIMPLE AntibodyTM Platform and the POTELLIGENT® Fc engineering technology. Cusatuzumab 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. In AML, CD70 is also expressed on leukemic stem cells. 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 in our clinical trial suggest cusatuzumab could be active both at the circulating and bone marrow blast level and at the leukemic stem cell level. Cusatuzumab 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.
Clinical Development Plan
In December 2016, we initiated an open-label Phase 1/2 clinical trial of cusatuzumab at three sites in Switzerland for the treatment of newly diagnosed AML or high-risk MDS patients. We reported interim results from the dose-escalation part of this clinical trial in December 2019.
The Phase 2 CULMINATE clinical trial is enrolling up to 150 patients with previously untreated AML who are not eligible for intensive chemotherapy. In this two-part trial, patients will first be randomized to receive one of two dose levels of cusatuzumab (10mg/kg and 20mg/kg) in combination with azacytidine (75mg/m2) followed by an expansion cohort to evaluate efficacy of the selected dose of cusatuzumab. A Phase 1b trial is also ongoing in AML with the initial ELEVATE trial evaluating combinations of cusatuzumab, venetoclax and azacitadine. In addition, a Phase 1 trial in Japan was initiated of cusatuzumab in combination with azacytidine evaluating newly diagnosed elderly AML patients who are ineligible for intensive chemotherapy. A randomized Phase 2 BEACON trial in higher-risk myelodysplastic syndromes (MDS) is paused due to COVID-19.
In addition, cusatuzumab was evaluated in an open-label Phase 1/2 clinical trial in relapsed or refractory CD70-positive CTCL patients and an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma. Prior to this, cusatuzumab was evaluated in an extensive Phase 1 clinical trial in patients with advanced malignancies expressing CD70, following a stepwise adaptive clinical trial design enrolling a total of 86 patients (of whom 85 patients have been treated).
78
Phase 1/2 Clinical Trial in Combination with Azacytidine in Patients with AML or High-Risk MDS (ongoing)
We are evaluating cusatuzumab 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 cusatuzumab in combination with 75 mg/m2 azacitidine (standard of care for AML). Patients receive two weeks of cusatuzumab monotherapy prior to starting the combination dosing. During the Phase 1 dose-escalation part of the clinical trial, four doses of cusatuzumab, 1 mg/kg, 3 mg/kg,10 mg/kg and 20 mg/kg administered bi-weekly are being evaluated. We enrolled 12 patients in the Phase 1 part.
26 AML patients were enrolled in the Phase 2 part of its Phase 1/2 clinical trial using a 10 mg/kg dose of cusatuzumab. This is a multi-center clinical trial conducted in Europe.
We reported updated interim results for the 12 evaluable patients from the Phase 1 dose-escalation part of this clinical trial in December 2019 at the ASH annual meeting, representing the data as of February 2019. Six out of twelve Phase 1 patients were still on treatment at the time of the interim data. These interim results showed for the first 12 patients that no dose-limiting toxicity was observed for cusatuzumab and that cusatuzumab was overall reported to be well-tolerated with signs of clinical activity. To date, the tolerability profile of cusatuzumab in this Phase 1/2 clinical study in combination with azacitidine appears to be similar to what we observed in the other cusatuzumab clinical trials. We believe that the observed Grade 3 and 4 hematological toxicity for cusatuzumab in combination with azacitidine corresponds to the reported safety profile of azacitidine monotherapy and can be seen in Table 2 below. No grade 5 TEAEs were observed.
Table 2. Grade 3 or higher treatment emergent adverse events of cusatuzumab in combination with azacitidine open-label, Phase 1 dose-escalation part (first 12 evaluable patients, ongoing, as of February 2019).
Escalation phase – cusatuzumab |
| 1 mg/kg |
| 3 mg/kg |
| 10 mg/kg |
| 20 mg/kg |
| Total |
|
TEAEs grade 3 and 4* | | Number of patients | | ||||||||
Blood and lymphatic disorders | | 2 | | 3 | | 2 | | 3 | | 10 | |
Anemia | | 1 | | 3 | | 1 | | — | | 5 | |
Febrile neutropenia | | 2 | | — | | 1 | | 2 | | 5 | |
Leukopenia | | — | | — | | 1 | | — | | 1 | |
Neutropenia | | — | | — | | 1 | | 2 | | 3 | |
Thrombocytopenia | | — | | — | | 1 | | — | | 1 | |
Cardiac disorders | | 1 | | — | | — | | 1 | | 2 | |
GI disorders | | — | | 1 | | — | | 1 | | 2 | |
General disorders and administration site conditions | | — | | 1 | | 1 | | — | | 2 | |
Infections and infestations | | 1 | | 2 | | — | | 3 | | 6 | |
Laboratry abnormalities | | 3 | | 3 | | — | | 1 | | 7 | |
Reproductive system and breast disorders | | — | | — | | | 1 | | 1 | | |
Vascular disorders | | — | | 1 | | — | | — | | 1 | |
IRR AEs# | | 1 | | 1 | | — | | — | | 2 | |
More specifically at the time of the interim data, 12 out of 12 AML (100%) patients showed a response, including complete remission in eight out of 12 patients, complete remission with incomplete blood count recovery in two out of 12 patients and partial remission in two out of 12 patients. One of the patients who achieved a complete remission successfully bridged to allogeneic stem cell transplant after five cycles. One patient
79
discontinued from the study following an adverse event. Three patients responded during cusatuzumab monotherapy in the first two weeks.
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
The Phase 1/2 clinical trial in relapsed or refractory CD-70 positive CTCL patients completed enrollment, consisting of 27 heavily pre-treated patients with CD70-positive CTCL.
The primary endpoint of the Phase 2 part of the clinical trial is efficacy, and secondary endpoints include safety and characterization of pharmacokinetics and immunogenicity.
Of the 26 evaluable patients (out of 27 recruited patients) under analysis, we observed an overall response rate of 23% (one complete response, five partial responses and eight patients with stable disease). Patients received a 1 mg/kg or 5 mg/kg dose of cusatuzumab. Cusatuzumab was well tolerated at both doses with a total of 106 treatment-emergent adverse events (TEAE) reported in 26 patients. Most common was pyrexia and asthenia (5 patients each). Forty events in 16 patients were considered drug-related by the investigator of which infusion-related reactions (IRRs) were the most common (22 events in 8 patients). Eighteen SAEs were reported in 11 patients, one was considered drug related.
Phase 1 Part of Phase 1/2 Clinical Trial in Patients with Advanced Malignancies Expressing CD70
Cusatuzumab was evaluated in an extensive Phase 1 part of a Phase 1/2 clinical trial in patients with advanced malignancies expressing CD70, following a stepwise adaptive clinical trial design enrolling a total of 86 patients (of whom 85 patients have been treated). No dose-limiting toxicities were observed. The most frequent grade 3 and 4 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 3.2.2 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
Dose-escalation Part and Cohorts 1-4 |
| 0.1 mg/kg |
| 1 mg/kg |
| 2 mg/kg |
| 5 mg/kg |
| 10 mg/kg |
|
Number of patients | | 6 | | 15 | | 7 | | 42 | | 5 | |
Fatigue | | 1 | | — | | — | | 3 | | — | |
Anaemia | | — | | — | | — | | 1 | | — | |
Decreased appetite | | 1 | | — | | — | | — | | — | |
Electrocardiogram qt prolonged | | — | | 1 | | — | | — | | — | |
Febrile neutropenia | | — | | — | | — | | 1 | | — | |
Hypoxia | | 1 | | — | | — | | — | | — | |
Infusion related reactions | | — | | — | | — | | 1 | | — | |
Thrombocytopenia | | — | | — | | — | | 1 | | — | |
80
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.
ARGX-117
We are developing ARGX-117 with therapeutic potential in both orphan and large autoimmune inflammatory diseases. ARGX-117 is a highly differentiated therapeutic antibody equipped with our proprietary Fc engineering technology NHance® that addresses a novel target in the classic pathway of the complement cascade. With a potentially differentiated mechanism of action, ARGX-117 represents a broad pipeline opportunity across several autoantibody-mediated indications and may have a synergistic effect with lead autoimmune compound efgartigimod.
The classical pathway of the complement system is composed of a series of proteins that are activated when IgG or IgM autoantibodies bind to their targets. This mechanism contributes to tissue damage and organ dysfunction in a number of autoimmune inflammatory diseases. The ARGX-117 target is key in the lysis of antibody-decorated cells and is active when an immune reaction is taking place.
We obtained the rights to ARGX-117 as part of our Immunology Innovation Program through which we identified the work on this antibody with Broteio Pharma. argenx and Broteio launched a collaboration in 2017 to conduct research, with support from the University of Utrecht, to demonstrate preclinical proof-of-concept of the mechanism of ARGX-117. Based on promising preclinical data generated under this collaboration agreement, we have exercised the exclusive option to license the program and assumed responsibility for further development and commercialization.
In the third quarter of 2020, we initiated a Phase 1 healthy volunteer trial of IV and SC ARGX-117 to evaluate safety and tolerability and establish a dosing regimen. Following analysis of Phase 1 data, we plan to launch a Phase 2 proof-of-concept trial in multifocal motor neuropathy within our neuromuscular franchise and to develop ARGX-117 in additional autoimmune indications.
ARGX-118
We have exercised our option to exclusively acquire rights to ARGX-118, a highly differentiated antibody against Galectin-10, the protein of Charcot-Leyden crystals, which are implicated as a major contributor to severe asthma and to the persistence of mucus plugs. ARGX-118 has the following differentiated features:
ARGX-118 was developed under a collaboration with VIB, a life sciences research institute based in Flanders, Belgium. Lead optimization work on ARGX-118 for airway inflammation will continue in 2021.
81
Our Partnered Programs
Our product candidate pipeline enabled by our suite of technologies is set forth below:
The following is the pipeline for our partnered product candidates and discovery programs. For more information on our collaborations, see “Collaboration Agreements" below.please refer to Item 4.B. “Business Overview—Collaboration Agreements” and to Item 4.B. “Business Overview—License Agreements.”
LP0145 (formerly ARGX-112) (partnered with LEO Pharma)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 |
68
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 LP0145for the treatment of dermatologic indications involving inflammation, together with our collaboration partner LEO Pharma.
LP0145 employs our SIMPLE AntibodyTM technology and blocks the interleukin-22 receptor, or IL-22R, in order to neutralize the signaling of cytokines implicated in autoimmune diseases of the skin.
The program is in a Phase 1 clinical trial and LEO Pharma is responsible to fund the clinical development of the program.
ARGX-115 (ABBV-151) (partnered with AbbVie)
ARGX-115 (ABBV-151) is being developed as a cancer immunotherapy against the novel target GARP by our collaborator AbbVie.
ARGX-115 (ABBV-151) employs our SIMPLE AntibodyTM 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.
In August 2018, AbbVie exercised its exclusive license option to develop and commercialize ARGX-115 (ABBV-151). ARGX-115/ ABBV-151 is currently being explored in a phase 1 clinical trial by Abbvie (https://www.clinicaltrials.gov/ct2/show/NCT03821935?term=NCT03821935&draw=2&rank=1).
STT-5058 (formerly ARGX-116) (partnered with Staten Biotechnology)
We are developing STT-5058products for the treatment of dyslipidemia, togethergMG 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 our collaboration partner Staten Biotechnology.
STT-5058 employs our SIMPLE AntibodyTM technology and blocks APOC3, a metabolic target involved in triglyceride metabolism.
82
STT-5058 isaccuracy the first of up to three research programs under the collaboration. Under the termstiming or impact of the collaboration, the parties are jointly responsible for conducting research under a mutually agreed research program,introduction of competitive products that treat diseases and conditions like those treated by our products or product candidates. In addition, our competitors compete with Staten reimbursing us for all costs of carrying out our research responsibilities under each research program.
In December 2018, Staten Biotechnology announced that it will collaborate with Novo Nordisk A/S to co-develop STT-5058.
Staten initiated dosing in first-in-humanrecruit and retain qualified scientific and management personnel, establish clinical trial of STT-5058.
ARGX-114 (partnered with AgomAb)
ARGX-114 is an HFG-mimetic SIMPLE AntibodyTM directed against the MET receptor.
ARGX-109 (partnered with Genor Biopharma)
ARGX 109 employs our SIMPLE AntibodyTMsites and NHance®patient registration for clinical trials, as well as in acquiring technologies and blocks interleukin 6,complementary to, or IL 6, a cell signaling protein that is an important driver of inflammatory response implicated in the transition from acute to chronic inflammation.
In October 2012, we entered into an exclusive license agreement with Bird Rock Bio, Inc. (formely known as RuiYi Inc. and Anaphore, Inc.), to develop and commercialize ARGX-109. In 2018, Bird Rock Bio and argenx mutually agreed to terminate this exclusive license agreement. Genor Biopharma, a sublicensee of Bird Rock Bio, will continue to develop ARGX-109necessary for, the Chinese market.
Immunology Innovation Program
We have developed a program designed to secure access to early, cutting edge targets, which we call our Immunology Innovation Program. Through our Immunology Innovation Program, we are able to serially collaborate with leading academic labs by providing them access to our SIMPLE AntibodyTM Platform technology with the goal of expediting the validation of new targets and accelerating the addition of new product candidates to our pipeline. In return, we receive early access to these targets and provide academic groups or biotechnology companies a simple path to clinical validation and future commercialization of promising ideas in which we and the academic lab or biotechnology company both share in the upside potential.
One example of the value of the Immunology Innovation Program is ARGX-115 (ABBV-151), which was devel-oped in collaboration with the de Duve Institute / Université Catholique de Louvain. We provided antibodies to the academic groups to help validate the target. This in turn, allowed the groups to advance their work successfully, including the facilitation of supportive publications. Subsequently, this program formed the basisdevelopment of our collaboration with AbbVie. ARGX-115 (ABBV-151) exemplifies howproducts. 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 Immunology Innovation Program enables us to generate product candidates against novel targets that may be of high interest for collaboration with biopharmaceutical partners. Another example is STT-5058, 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 Immunology Innovation Program with Broteio Pharma B.V. to develop an antibody against a novel target in the complement cascade, ARGX-117. Under the terms of the agreement, wedrug discovery and Broteio jointly developed 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 exercised an exclusive option to license the program in March 2018 and assumed responsibilitydevelopment efforts.” for further development and commercialization.details on the competition we face.
Manufacturing and Supply
We utilize third-party contract manufacturers who act in accordance with the FDA's good laboratory practices, or GLP, and current good manufacturing practices, cGMP,FDA’s 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.
Efgartigimod, cusatuzumab, ARGX-111 and LP0145 are each manufactured using an industry-standard mammalian cell culture of a Chinese hamster ovary cell line that expresses the product, followed by multiple purification and filtration steps typically used in producing monoclonal antibodies.
All of our antibodies are manufactured by starting with cells, which are stored in a cell bank. We have one master cell bank for each product manufactured in accordance with cGMP. Half of each master cell bank is stored at a separate site with the goal that, in case of a catastrophic event at one site, sufficient vials of the master cell bank would remain at the alternative storage site to continue manufacturing.
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
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, 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-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 "Platform Technologies"Item 4.B. “Business Overview—Intellectual Property—Platform Technologies”, and our product candidates, as described in " Product Candidates: Wholly-OwnedItem 4.B. “Business Overview—Intellectual Property—Our Internal Programs "”, and " Product Candidates:Item 4.B. “Business Overview—Intellectual Property—Our Partnered Programs ", below.”.
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.
AsThe term of January 1, 2021, ourindividual 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 portfolio (which includes both proprietaryterm 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 in-licensedRegulation 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 families) comprises at least 211 granted and 209 pending patents, including 30that covers an approved drug. It is possible that issued U.S. patents 9covering 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, European patents and 172 issued foreign patents.
84
Platform Technologies
With regard to our platform technologies, we own or have intellectual property rights in patents and patent applications directed to our SIMPLE AntibodyTMANTIBODY™ discovery platform, the ABDEGTMABDEG™ and NHance® platforms and the POTELLIGENT® platform.NHANCE™ technologies.
70
With regard to our SIMPLE AntibodyTMANTIBODY™ 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, Canada, Europe, United Kingdom, Israel, India and Japan, and pending applications in China and Japan (divisional). In addition, we have a secondbroad patent family containing patents granted inportfolio providing exclusivity on the United States (two), Australia, Europe, United Kingdom, Israel, IndiaSIMPLE ANTIBODY™ platform. We expect to enjoy exclusivity under this patent portfolio until between 2029 and Japan, and one patent application pending in Canada, 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 patents have a basic patent expiry date in 2031.2033.
With regard to the ABDEGTMABDEG™ platform, we co-own the technology with UT Southwestern and exclusivelyenjoy certain exclusive license from,rights. We have a broad patent portfolio covering the University of Texas, a patent family containing a granted U.S. patent with composition of matter claims directedand uses of certain FcRn antagonists 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,achieve certain biological effects. The composition of matter and method of use claims directed to a method of using such an FcRn-antagonist to treat certain antibody mediated disorders. Theother relevant patents in the U.S. patentis expected to expire in 2036. In addition,2036 whereas in this patent family, we also have granted patents in Australia, China, Eurasia, Europe, Japan, Mexico, New Zealand and Singapore, and we have 13 patent applications pending in U.S. (divisional) and variousmany other countries and regions in North America, South America, Europe, Asia and South Africa. The granted patents have a basicthe base expiry date inis 2034. In addition, we own a second patent family containing pending patent applications in the United States and 15 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®NHANCE™ platform, we have exclusively licensed from the University of Texas 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 the POTELLIGENT® platform, which is currently used in the production of our cusatuzumabwholly-owned ARGX-109 product candidate, we have non-exclusively licensed from BioWa certainone patent rights that relate to different aspects of the POTELLIGENT® platform.
Product Candidates: Wholly-Owned Programs
With regard to the efgartigimod product candidate, efgartigimod incorporates the ABDEGTM technology platform, the coverage of which is discussed above under "Platform Technologies".
With regard to the cusatuzumab product candidate, we have three issued U.S. patents, onefamily with composition of matter claims directed to the cusatuzumab antibody, one with claims directedARGX-109. The patent family has a basic expiry date in 2033. We anticipate several more patient innovations to the epitope cusatuzumab binds to, and one with claims directed to a polynucleotide that encodes antibodies that bind to the epitope cusatuzumab binds to and two pending U.S.evolve during development for which we will seek additional patent applications with method of use claims directed to the
85
treatment of cancer and immunological disorders with the cusatuzumab antibody. The issued U.S. patents expire in 2032 and 2033, and the U.S. patent applications, if issued as a U.S. patent, is expected to expire in 2032, without taking a potential patent term extension into account. In addition, we have patents that have been granted in Australia, China, Europe, Israel, India, Japan and Russia and five patent applications pending in Brazil, Canada, Indonesia and U.S. (two divisionals pending).protection. Furthermore, cusatuzumabARGX-109 incorporates or employs the SIMPLE AntibodyTMANTIBODY™ platform technology and POTELLIGENT® technology platforms, which are covered by one or more of the patents and patent applications discussed above under "Platform Technologies".NHANCE™ platform technology.
Empasiprubart Product Candidate
With regard to the ARGX-117empasiprubart product candidate, we own or have rights in 4to multiple patent families (including 1one in-licensed patent family from Broteio Pharma)Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, Europethe EU and Asia, directed to composition of matter claims and method of treatment claims. The in-licensed patent family from Broteio Pharma has granted pa-tents in Australia, China, Europe, Hong Kong, Mexico and U.S. (2 issued patents in U.S.), which haveseveral countries/regions and has a basic expiry date in 2034. The other 3Additional patent families have granted patents with basic expiry dates in 2039 2040 and 2041.2040. 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 1a patent familyportfolio with VIB VZWvzw (VIB), an inflammation research center in Ghent, Brussels, and Universiteit Gent,Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, Europethe EU and Asia. The patent family has a basic expiry date in 2039.
Product Candidates:71
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 Université Catholique de Louvain,UCL, we have a grantedpatent portfolio that includes a U.S. patent 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. The U.S. patenthas a basic expiry date in 2034, without taking a potential patent term extension into account. In addition,There is a second family with meaningful patent coverage to the patent family contains at least 18 patent applications pending in U.S. (CIP) and 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 2 more patent families with composition of matter and epitope claims directedthat are expected 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. The 2 patent families have basic expiry datesexpire in 2036 and 2038. Furthermore, ARGX-115 (ABBV-151) incorporates or employs the SIMPLE AntibodyTM technologyANTIBODY™ platform which is covered by one or more of the patents and patent applications discussed above under "Platform Technologies".technology.
With regard to the ARGX-109 product candidate, we have one patent family with composition of matter claims directed to ARGX-109. This patent family has granted patents in Australia, Canada, China, Colombia, Hong Kong, Israel, Japan, Mexico, New Zealand, Russia, U.S. and South Africa, and four pending patent applications in Brazil, Chili, India and U.S. (continuation application). The patent family has a basic expiry date in 2033. Furthermore, ARGX-109 incorporates or employs the SIMPLE AntibodyTM technology and the NHance® technology, which is covered by one or more of the patents and patent applications discussed above under "Platform Technologies".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 AntibodyANTIBODYTM technology, which is covered by one or more of the patentsplatform technology.
Collaboration 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-provisional patent application.
In the United States, the term of a patent covering an FDA-approved drug may be eligible for a patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process. The period of extension may be up to five years beyond the expiration of the patent but
86
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. Similar provisions are available in Europe 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.
Trade secret protection1
In addition to patent protection, we also rely on trade secret protection 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.
Collaboration AgreementsLicenses
We havefollow a disciplined strategy to maximize the value of our pipeline whereby wepipeline. We plan to retain all development and commercialization rights to those products and product candidates that we believe we can ultimately 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 are better served bymay 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.
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. Below are summaries of our agreements with pharmaceutical partners.
Our Strategic Partnership with Janssen (for cusatuzumab)
In December 2018, we entered into a collaboration agreement with Cilag GmbH International, an affiliate of Janssen, to jointly develop and commercialize cusatuzumab.
We have granted Janssen a license to the cusatuzumab program to develop, manufacture and commercialize cusatuzumab. For the US, the granted commercialization license is co-exclusive with us, while outside the US, the granted license is exclusive to Janssen. We and Janssen will assume development obligations, and will be jointly responsible for all research, development and regulatory costs relating to cusatuzumab.
Under the terms of the agreement, Janssen has paid us $300 million in an upfront, non-refundable and non-creditable payment. In conjunction with the collaboration agreement, we entered into an investment agreement with JJDC, Inc., or JJDC, an affiliate of Johnson & Johnson. At the closing of the transaction in January 2019, JJDC purchased 1,766,899 newly issued shares, representing 4.68% of our then outstanding shares at a price of €100.02 per share ($113.19 based on the exchange rate in effect as of the date the payment was received), for a total of €176.7 million (approximately $200.0 million based on the exchange rate in effect as of the date the payment was received).
1 in the URD the trade secret protection section if followed by “Tendencies” – should this be included in the 20-F as well?
87
We are eligible to receive potentially up to $1.3 billion in development, regulatory and commercial milestone payments, in addition to tiered royalties on sales for the territory outside of the U.S. at percentages ranging from the low double digits to the high teens, subject to customary reductions. In December 2019 we announced the achievement of the first milestone of $ 25 million for achievement of an enrollment milestone in first Phase 2 trial under the collaboration. Janssen will be responsible for commercialization worldwide. We retain the option to participate in co-commercialization efforts in the U.S., where the companies have agreed to share royalties on a 50/50 basis, and outside the U.S., Janssen will pay double-digit sales royalties to us. The agreement includes customary standstill and lock-up provisions.
Under the terms of the collaboration agreement, we agreed to a joint global clinical development plan to develop cusatuzumab in AML, MDS and other potential indications in the future. Unless otherwise determined by the parties, Janssen shall be responsible for conducting the development activities specified in the global clinical development plan, to the extent that they are not allocated to the Company. The parties have equal decision-making authority and shall make consensus decisions regarding the global clinical development plan, with certain exceptions related to the territory outside of the U.S. Development costs shall be borne by both parties based on a cost sharing arrangement.
With respect to commercialization activities in the U.S., we shall have the right, but not the obligation, to elect to perform certain of the commercial efforts. Janssen has sole responsibility, at its sole cost and expense, to commercialize cusatuzumab outside of the U.S., subject to diligence obligations in respect of commercialization of each licensed product.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends on a product-by-product, country-by-country basis, upon the expiration of all payment obligations in such country. With respect to the U.S., the agreement shall survive so long as any product covered by the agreement is being sold in the U.S. For the outside of U.S. territory, the 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, (ii) such time as there are no valid claims covering such product or (iii) the expiration of regulatory exclusivity for such product in such country.
Our Strategic Partnership with AbbVie (for ARGX-115 (ABBV-151))
In April 2016, we entered into a collaboration agreement with AbbVie S.À.R.L., or AbbVie, to develop and commercialize ARGX-115 (ABBV-151). Under the terms of the collaboration agreement, we were responsible for conducting and funding all ARGX-115 (ABBV-151) research and development activities up to completion of 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 (ABBV-151) program to develop and commercialize products. Following the exercise of the option, AbbVie is subject to diligence obligations in respect of continuation of development and commercialization of the licensed product(s), and AbbVie 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 (ABBV-151). During the course of the collaboration, we achieved two pre-defined preclinical milestones, each of which trig-gered a $10.0 million payment (€8.9 million based on the exchange rate in effect as of the date the first pre-clinical milestone payment was received and €8.7 million based on the exchange rate in effect as of the date the second pre-clinical milestone payment was received). In addition, in March 2019 we have achieved the first pre-defined clinical milestone, triggering a $30.0 million payment.
In August 2018, AbbVie exercised its option to develop and commercialize ARGX-115 (ABBV-151) and has now assumed development obligations, including being solely responsible 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
88
payments in aggregate amounts of up to $110.0 million, $190.0 million and $325.0 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.
We have the right, on a product-by-product basis to co-promote ARGX-115 (ABBV-151)-based products in the European Economic Area and Switzerland and combine the product with our own future oncology programs. 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 agreement, the term of the optionpartners and license agreement ends, with respect to the ARGX-115 (ABBV-151) 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 Genor Biopharma (for ARGX 109)
In October 2012, we entered into an exclusive license agreement with Bird Rock Bio, Inc. (formely known as RuiYi Inc. and Anaphore, Inc.), to develop and commercialize ARGX-109. In 2018, we and Bird Rock Bio mutually agreed to terminate this exclusive license agreement. Recently, we agreed a direct licensing agreement with Genor Biopharma and Genor Biopharma continues to develop ARGX-109 for the Chinese market.
Our Strategic Partnership with LEO Pharma (for LP0145)
In May 2015, we entered into a collaboration agreement with LEO Pharma A/S, or LEO Pharma, to develop and commercialize LP0145. Under the terms of the collaboration, 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. Now that CTA approval of a first product in a Phase 1 clinical trial has been received (in April 2018), LEO Pharma is solely responsible for funding the clinical development of the program.
We received a non-refundable, non-creditable upfront payment from LEO Pharma of €3.0 million in cash. In February 2016, June 2017 and April 2018, we achieved preclinical milestones under this collaboration for which we received milestone payments. 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 LP0145 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. In such case LEO Pharma is subject to diligence obligations in respect of continuation of development and commercialization of such product. If LEO Pharma elects to exercise this option, it must pay us an option fee. 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 agreed 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 LP0145 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.
89
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.
Our Research Collaboration with Staten (for STT-5058)
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 sought to discover and characterize antibodies against a human target with therapeutic relevance in the field of dyslipidemia and/or cardiovascular disease. The parties may also commence two further research programs for targets with therapeutic relevance in these areas. Each research program will last no more than 24 months from commencement unless the parties agree otherwise. The first research program under this agreement proceeded as planned and was extended to December 2017, with STT-5058 identified as the initial product candidate. Staten exercised its exclusive option to license STT-5058 in March 2017. Under the terms of the collaboration, the parties were and are jointly responsible for conducting research under a mutually agreed research plan, 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 (as it has for STT-5058), 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. Following exercise of its exclusive option, Staten is under the diligence obligation to continue to develop and commercialize at least one product during the term of the agreement.
In December 2018, Staten announced that it had entered into a collaboration and exclusive option agreement with Novo Nordisk, to develop novel therapeutics for the treatment of hypertriglyceridemia. Specifically, Novo will provide research and development funding and support to Staten, to develop its lead asset STT-5058 for the treatment of dyslipidemia. Novo has the right under the agreement to acquire Staten and gain worldwide rights to STT-5058. Staten and its shareholders will potentially receive signing and exercise fees, research and development funding, and milestone payments of up to €430.0 million.
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 STT-5058 research program.
90
Our Strategic Collaboration with Shire
In February 2012, we entered into a collaboration agreement with Shire AG (now(Shire, 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. Underdiseases (Shire Collaboration Agreement). Pursuant to the terms 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.
UpShire Collaboration Agreement, up through a specified period, following completion of each study for a target, 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 a study and to obtain an exclusive, worldwide license under our intellectual property which is necessary to further develop and commercialize products incorporating such antibodies. Following exercise of its exclusive option, Shire has the diligence obligation to continue to develop and commercialize at least one licensed 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 ABDEGTM engineering technologies and to provide an option to a sublicense to the POTELLIGENT® technology of BioWa, Inc. The initial three-year term of this expanded agreement expired on May 30, 2017, and Shire opted to extend the collaboration term for a further year until May 30, 2018, but no further beyond May 2018.
Shire may exercise exclusive options to develop and commercialize programs arising under our expanded agreement, in which case an option fee is due on a per program basis. In July 2018, Shire exercised such an exclusive option to in-license an antibody discovered and developed using our licensed technologies, which exercise triggered a milestone payment by Shire to us, in an amount undisclosed due to contractual obligations of confidentiality.
In addition to option fees, Shire would also be obligated to pay us on a per-product basis upon achievement of specified development, regulatory and commercial milestones and a percentage of net sales as a royalty. Milestones are paid on a first product per indication per study target basis, and we are eligible to receive payments in aggregate amounts of up to $3.8 million, $4.5 million and $22.5 million, upon achievement of development, regulatory and commercial milestones, respectively, for a product generated against one of the three initial targets named in the 2012 agreement. For products generated against additional targets nominated under the 2014 agreement, development and regulatory milestone payments remain the same, and 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 digit and are subject to customary reductions. Through December 31, 2020, 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) $12.6 million in research and development funding. In addition, Shire purchased 12.0 million of our ordinary shares in July 2014 by participating in our initial public offering on Euronext Brussels.
collaboration. If Shire does not exercise its option with respect to any discovered antibody within a specified period, then we are free to research,
72
develop and commercialize antibodies in relation to the applicable studyclinical trial target, subject to negotiation of a license from ShireShire.
OncoVerity for cusatuzumab
In 2022, we, the useUniversity of any antibodies that were discovered duringColorado Anschutz Medical Campus and 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 developmentUniversity of such antibody or (iii) the agreement is terminated other than for our breach or insolvency,Colorado Health (UCHealth) created an asset-centric spin-off, OncoVerity, Inc (OncoVerity), focused on optimizing and (b) Shire is no longer pursuing a development program with respect to the applicable study target, then we may elect to continueadvancing 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 antibody at our sole costcosts 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 expense,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 negotiationdiligence 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 licenseproduct-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 Shire under which Shire willthe Zai Lab Payments. We are also eligible to receive either specifiedtiered royalties if we commercialize the program ourselves, or(mid-teen to low-twenties on a percentage basis) based on annual net sales of sublicensing revenues, if the program is subsequently sublicensed to a third party.efgartigimod in Greater China.
9173
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 agreement,AbbVie Collaboration Agreement, the collaboration term of the license agreement ends, with respect to the expiryARGX-115 (ABBV-151) program, upon fulfilment of the last royalty termall payment obligations under the agreement. Each
AbbVie may terminate the AbbVie Collaboration Agreement for any reason upon prior written notice to us. AbbVie’s royalty term expires,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 (ii)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. Shire may terminate the agreementAbbVie Collaboration Agreement.
Our Exclusive License with Elektrofi for any reason upon prior written notice to us.efgartigimod
License Agreements — General
We are a party to several license agreements under whichIn April 2021, we license patents, patent applications and other intellectual property to third parties. We have also entered into severalthe 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.
74
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 agreements under which we license patents, patent applications and other intellectual property from third parties.The licensed intellectual property covers someoption 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 sometherapeutic dose, by potentially modifying their half-life, tissue penetration, rate of disease target clearance and potency.
Our Non-exclusive License with the Fc engineering technologies thatClayton Foundation for DHS mutations
In October 2020, we use. Someentered 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 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.therapeutic candidates.
Our Exclusive License with Halozyme (ENHANZE®)for ENHANZE®
In February 2019, we entered into a licensean in-license agreement with Halozyme Inc., or Halozyme for the use of certain patents, materials and know-how owned by Halozyme and relating to its ENHANZE® Technology,ENHANZE®, for application in the field of prevention and treatment of human diseases. ENHANZE® Technology is referred to herein as ENHANZE®diseases (the ENHANZE® License Agreement). Under and subjectPursuant to the terms of the license,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 subcutaneousSC formulations of our therapeutic antibody-based product candidates.
Our first therapeutic target for which we have received an exclusive license from Halozyme iswas FcRn, which allows us to apply ENHANZE®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®ENHANZE® in the context of an FcRn-targeted product. Our second therapeutic target for which we received an exclusive license from Halozyme iswas human complement factor C2 associated with the product candidate ARGX-117,empasiprubart, which is being developed to treat severe autoimmune diseases. UnderPursuant to the license terms,ENHANZE® License Agreement, we also have the right to nominate future targets - again for an exclusive ENHANZE®ENHANZE® license if the target in question has not already been licensed by Halozyme or is not already being pursued by Halozyme. From the effective date of the license agreement, we have a four-year period in which to conduct research and preclinical studies on other target-specific molecules in combination with ENHANZE® and may nominate a maximum of one additional target we have not yet nominated for an exclusive commercial license during the four-year term.
In return for the FcRn exclusive license, we have made a $30.0 million upfront payment to Halozyme. In return for the nomination of and exclusive license on C2 we made a $10.0 million milestone payment to Halozyme in May 2019. In return for achieving the first patient dosed for ARGX-113 Ph3 for ITP we made a $15.0 million milestone payment in February 2021. Upon nomination of any future target for an exclusive commercialization license and confirmation by Halozyme that such a license is available, we will pay $10 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. Throughout the term of the agreement, we must provide Halozyme on an annual basis a guidance forecast setting out all projected milestone payments for products for the following four calendar quarters. 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, and it is reduced by a maximum of 50% if following 10 years from the first commercial sale of the product in a country, the last valid claim within the licensed ENHANZE® patent(s) expires. Throughout the term of the agreement, we must provide Halozyme on an annual basis an estimate of royalty payments anticipated for the following four calendar quarters. 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).
92
In October 2020, we have expanded our collaboration with Halozyme for ENHANZE®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.
Under and subjectPursuant to the terms of the license,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 has no rights to any of our current or future product candidates which use the ENHANZE® technology. Halozyme provides dedicated specialist support to us which it has accrued over ten10 years of licensing ENHANZE®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).
75
We may terminate the license agreementENHANZE® 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 agreementENHANZE® License Agreement will automatically expire upon the expiry of our royalty payment obligations under the agreement. In the event the agreementENHANZE® 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 agreementENHANZE® 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 non-executive director James M. Daly is also a non-executive member of the board of directors of Halozyme. Despite the foregoing, our entering into the license agreement with Halozyme was not a related party transaction in accordance with IAS 24 – Related Party Disclosures, since Mr. Daly, in his role as non-executive director, does not control or have significant influence over our company or Halozyme. Mr. Daly did not participate in any discussions and decision making relating to the Halozyme license agreement. Consequently, no further disclosures regarding Halozyme have been added in "Related Party Transactions".
Our Exclusive License with AgomAb (ARGX-114)Agomab Therapeutics NV (Agomab) for ARGX-114 (AGMB-101)
In March 2019, we entered into an exclusive licenseout-license with AgomAb Therapeutics NV, or AgomAb,Agomab for the use of certain patentspatent rights relating to our proprietary suite of technologies for the development and commercialization of a series of agonistic anti-METanti-mesenchymal-epithelial transition factor (MET) SIMPLE Antibodies,ANTIBODYTM generated antibodies, including ARGX-114 an HFG-mimetic SIMPLE AntibodyTM(AGMB-101), a halofuginone-mimetic antibody directed against the MET receptor. AgomAbAgomab 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 sharingprofit-sharing certificate which entitles us to 20% of all distributions to AgomAb’sAgomab’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 IPOinitial public offering of AgomAb,Agomab, the profit sharingprofit-sharing certificate will automatically be converted into anthe equivalent number of ordinary shares of AgomAb.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 (ARGX-117)for empasiprubart
In March 2017, we entered into a collaboration under our Immunology Innovation Program with Broteio Pharma B.V., or Broteio,in connection with our IIP, to develop an antibody against a novel target in the complement cascade, ARGX-117.empasiprubart (Broteio Agreement). Under the terms of the agreement,Broteio Agreement, we and Broteioare jointly developeddeveloping the complement-targeted antibody to seek to establish preclinical proof-of-conceptPOC using our proprietary suite of technologies. Upon successful completion of these studies,clinical trials, we exercised an exclusive option to licensein-license the program in March 2018 and assumed responsibility for further development and commercialization. Under this agreement,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 this agreementthe Broteio Agreement for convenience upon 90 days prior written notice. This agreementThe Broteio Agreement is also subject to mutual termination for material breach or insolvency and automatically expires upon the expiration of our financial obligations thereunder.
In return for achieving the first patient dosed for ARGX-117 Phase 1 we made a €1.0 million development milestone payment to Broteio in September 2020.
93
Our Exclusive License with VIB (ARGX-118)for ARGX-118
In November 2016, we entered into a collaboration under our Immunology Innovation ProgramIIP with VIB vzw or (VIB an inflammation research center in Ghent, Brussels,) to develop antibodies against Galectin-10, the protein of Charcot-LeydenCharcot-Ley-den Crystals, which play a major role in severe asthma and the persistence of mucus plugs, including ARGX-118. UnderARGX-118 (VIB Agreement). Pursuant to the terms of the agreement,VIB Agreement, we and VIBare jointly developeddeveloping antibodies against Galectin-10 using our proprietary suite of technologies. Upon successful completion of this initial research, we exercised an exclusive option to licensein-license the program and assumed responsibility for further development and commercialization. Under this agreement,the VIB Agreement, including aas amended in November 2018, amendment, 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 this agreementthe VIB Agreement for convenience upon 90 days prior written notice. This agreementThe 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 (NHance®for NHANCE™ and ABDEGTM)ABDEG™
In February 2012, we entered into an exclusive licensein-license with Thethe Board of Regents of Thethe University of Texas System or UoT,(UT BoR) for the use of certain patentspatent rights relating to the NHance®NHANCE™ platform for any use worldwide.worldwide (the
76
UT Agreement). The agreementUT Agreement was amended on December 23, 2014 to also include certain additional patent rights relating to the ABDEGTMABDEG™ platform.
Upon commercialization of any of our products that use the in-licensed patent rights, we will be obligated to pay UoT 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 this agreement,the UT Agreement, but in any event does not exceed 1%. In addition, we must make annual license maintenance payments to UoTUT BoR until termination of the agreement. WeUT Agreement and we have assumed certain development and commercial milestone payment obligations and must report on our progress in achieving product sales on a quarterly basis. The maximum milestone payments we would be required to make is approximately $0.5 million in total. Through December 31, 2020, we have paid UoT an aggregate of $0.8 million, which includes reimbursement for UoT's patent prosecution and maintenance costs and development milestones on products using the in-licensed patent rights.obligations. We also have diligence requirements with respect to development and commercialization of products which use the in-licensed patent rights.
Under and subjectPursuant to the terms of the license,UT Agreement, we may grant sublicenses to third parties. If we receive any non-royalty income in connection with such sublicenses, we must pay UoTUT 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 our agreement with UoT.the UT Agreement.
We may unilaterally terminate the license agreementUT Agreement for convenience upon prior written notice. Absent early termination, the agreementUT Agreement will automatically expire upon the expiration of all issued patents and filed patent applications within the patent rights covered by the agreement.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 (POTELLIGENT®)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., or (BioWa) for the use of certain patents and know-how owned by BioWa and relating to its POTELLIGENT® Technology,POTELLIGENT® platform technology, for use in the field of prevention and treatment of human diseases. POTELLIGENT® Technology is referred to herein as POTELLIGENT®diseases (the BioWa Agreement). Under and subjectPursuant to the terms of the license,BioWa Agreement, we are granted a non-exclusive right to use POTELLIGENT®POTELLIGENT® to research develop and commercializedevelop antibodies and products containing such antibodies using POTELLIGENT®POTELLIGENT®.
In 2013 and 2014, we entered into non-exclusive license agreements for POTELLIGENT® CHOK1SV with BioWa retains a right of first negotiationand Lonza for the exclusive right to developfurther development, manufacturing and commercialize, in certain countries only, any product we develop using POTELLIGENT®. We successfully
94
applied POTELLIGENT® to cusatuzumab, an anti-CD70 mAb,ARGX-110 and ARGX-111, an anti-c-Met mAb, under this license.respectively (the POTELLIGENT® License Agreements).
Upon commercialization of our products developed using POTELLIGENT®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.
Under and subjectPursuant to the terms of the license,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 license agreement POTELLIGENT® License Agreementsat any time by sending BioWa and Lonza prior written notice. Absent early termination, the agreementPOTELLIGENT® License Agreements will automatically expire upon the expiry of our royalty obligations under the agreement.POTELLIGENT® License Agreements. In the event the agreementa POTELLIGENT® License Agreement is terminated for any reason, the license granted to us would terminate but BioWa would grant our
77
sublicensees a direct license following such termination. In the event the agreementPOTELLIGENT® 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 Licensesnon-exclusive license with BioWa and Lonza (POTELLIGENT® CHOK1SV)for Multi-product GS Xceed-License
To scale up production of our product candidates cusatuzumab and ARGX-111 for clinical trial and commercial supply, we required a license to a GMP cell line in which POTELLIGENT® antibodies could be expressed. This cell line, POTELLIGENT® CHOK1SV, was jointly developed by BioWa and Lonza. In December 2013 and August 2014, respectively,On February 4, 2015, we entered into a non-exclusive commercial license agreementsmulti-product in-license agreement with Lonza (the Multi-Product License) for cusatuzumabuse of Lonza’s proprietary glutamine synthetase gene expression system known as GS Xceed™ consisting of Chinese hamster ovary cell line and ARGX-111 with BioWa and Lonza Sales AG, or Lonza,the vectors for the usemanufacturing of certain patentsdrug substance (the System). The System is used for the manufacturing of, amongst others, efgartigimod, empasiprubart and know-how relatingARGX-119.
Pursuant to the POTELLIGENT® CHOK1SV Technology, which is a combination of Lonza's GS System and BioWa's POTELLIGENT® Technology, for use inMulti-Product License, we have 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 casegrant sublicenses to certain pre-approved third parties without prior written consent of cusatuzumab 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. This right of first negotiation is not applicable in cases where we intend to grant a global license to a third party to develop and commercialize a product - as was the case with our exclusive, global collaboration and license agreement for cusatuzumab with Cilag GmbH International, an affiliate of Janssen, which was entered into on December 3, 2018. BioWa retains a right of first negotiation for the exclusive right to develop and commercialize our anti-c-Met antibody ARGX-111, in certain countries only.
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
95
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,otherwise we must make annual commercial license maintenance payments to BioWa on a per product basis which cease with commencement of payment of the BioWa royalty for the respective product, 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.obtain Lonza’s prior written consent.
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.Lonza. We are required to pay such milestones to BioWa under only one license—eitherusing the POTELLIGENT® agreement or the POTELLIGENT® CHOK1SV agreement, but not both. Payments related to the development and commercialization of cusatuzumab 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.System. 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, 2020, we have paid BioWa an aggregate amount of $2.5 million, which includes a one-off milestone payment, 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, 2020, we have paid Lonza an aggregate amount of £0.5 million, which includes milestone payments under our POTELLIGENT® CHOK1SV agreement.
Under the terms of both cusatuzumab and ARGX-111 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. No prior written consent was required from either BioWa or Lonza for our exclusive global collaboration and license agreement for cusatuzumab with Cilag GmbH International, an affiliate of Janssen.Lonza.
We may terminate the non-exclusive commercial license agreements at any timeMulti-Product License on a product-by-product basis by sending BioWa andgiving Lonza prior written notice. Lonza may terminate the Multi-Product License solely in case of breach or insolvency events. Absent early termination, the agreementsMulti-Product License will automatically expire upon the expiry of the last valid claim for such product. We or our royalty obligations under the respective agreement. In the event an agreement is terminated for any reason, the license granted to us would terminate but BioWa and Lonza would grant our sublicensees a direct license following such termination. In the event an agreement is terminated other than for our failure to make milestone or royalty payments, westrategic partners would retain the right to sell the respective 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.
Our Collaboration with UCLUniversité Catholique de Louvain (UCL) and Sopartec (GARP)S.A. (Sopartec) for GARP
In January 2013, we entered into a collaboration and exclusive product license agreement with Université Catholique de Louvain, or UCL and its technology transfer arm Sopartec S.A., orcompany Sopartec to discover and develop novel human therapeutic antibodies against GARP. UnderGARP (GARP Agreement). Pursuant to the terms of the collaboration with UCL,GARP Agreement, each party wasis 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 beenwere granted under the GARP Agreement to enter into an exclusive, worldwide commercial licensein-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 (ABBV-151) which was discovered under the original collaboration.collaboration (GARP License). Upon the expiration of the agreement, this license wouldGARP Agreement, the GARP License will become a fully paid up,paid-up, perpetual worldwide exclusive license under the GARP intellectual property for any purpose, subject to UCL'sUCL’s retention of non-commercial research rights.
96
Under and subjectPursuant to the terms of the license,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 from our collaborationin connection with AbbVie (see "Our Strategic Partnership with AbbVie" above),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 (ABBV-151) product. We also have diligence obligations with respect to the continued development and commercialization of ARGX-115 (ABBV-151) products. Through December 31, 2020, we paid an aggregate amount of €6.8 million to Sopartec, as a result of the upfront and milestone payments we received from AbbVie.
Our Exclusive License with Zai Lab Limited (ARGX-113)NYU Langone Health and LUMC for ARGX-119
In January 2021,2019 and 2020, we entered into ancollaboration and exclusive license agreementagreements with Zai Lab Limited, or Zai Lab,NYU Langone Health and LUMC under our IIP to develop antibodies targeting the MuSK, for the developmenttreatment neuromuscular diseases, which play a major role at the neuromuscular junction (NYU and commercializationLUMC Agreements). Pursuant to the NYU and LUMC Agreements, we, NYU and LUMC jointly developed antibodies against MuSK using our proprietary suite of efgartigimod in Greater China, including mainland China, Hong Kong, Taiwan and Macau.technologies. Under the termsNYU and LUMC Agreements, as amended, we are obligated to make milestone payments upon
78
the agreement, Zai Lab obtains the exclusive right to developoccurrence of certain development milestones, commercialization milestones and commercialize efgartigimod in Greater China. Zai Lab will also contribute Chinese patients to argenx’s global Phase 3 trials of efgartigimod. Additionally, this agreement is expected to accelerate efgartigimod global development by enabling our partner Zai Lab to initiate multiple Phase 2 proof-of-concept trials in new autoimmune indications.
Under the terms of the agreement, argenx will receive up to $175.0 million in collaboration payments, comprised of a $75.0 million upfront paymentpay tiered royalties on net sales in the formlow 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 568,182 newly issued Zai Lab shares atour 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 price of $132.00 per share, $75.0 million as a guaranteed non-creditable, non-refundable development cost-sharing payment,result, we may be unable to meaningfully protect our trade secrets and an additional $25.0 million milestone payment upon approval of efgartigimod in the U.S.. argenx 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.proprietary information.
Regulatory Framework
IntroductionRegulation
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-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 other 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-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'sFDA’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.
97
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:
● |
● | submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin; |
79
● | approval by an |
● | performance of adequate and well-controlled human clinical trials to establish the safety, potency and purity of the product candidate for each proposed indication, in accordance with |
● | preparation and submission to the FDA of a |
● |
one or more FDA inspections of the manufacturing facility or facilities, including those of third parties, at which the product, or components thereof, are produced to assess compliance with |
● | FDA audits of the clinical |
● | payment of user fees and securing FDA approval of the BLA and licensure of the new biological product; and |
● | compliance with any post-approval requirements, including the potential requirement to implement a |
Nonclinical Studies and Investigational New Drug Application
Before testing any biological 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 studyclinical 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 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 biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance.
98
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 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,
80
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-designed and well-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. Information about certain clinical studies must be submitted within specific timeframes to the National Institutes of Health for public dissemination at www.clinicaltrials.gov.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.
● | Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects, dose tolerance, absorption, metabolism, distribution, excretion and |
● | Phase 2 POC clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, evaluate the efficacy of the product candidate for specific targeted indications and determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials POC may be conducted by the sponsor to obtain information prior to beginning larger Phase 3 clinical trials. |
● | Phase 3 clinical trials proceed if the Phase 2 POC clinical trials demonstrate that a dose range of the product candidate is potentially effective and has an acceptable safety profile. Phase 3 clinical trials are undertaken within an expanded patient population to gather additional information about safety and effectiveness necessary to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling. |
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'scandidate’s safety and effectiveness after approval. Such post-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
99
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 fifteen15 days after the clinical trial sponsor determines the information qualifies for reporting for serious and unexpected suspected adverse events, findings from other studiesclinical 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.
81
A drug being studied in clinical trials may be made available to individual patients in certain circumstances. Pursuant to the 21st21st 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'sagency’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-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
100
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
82
information or clarification regarding information already provided in the submission withinwhich may be deemed as substantial information.
After the last three months before the PDUFA goal date.
On the basis of the FDA'sFDA’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, or 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 biological products or biological 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. 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-approval studies, including Phase 4 clinical trials, to further assess the product'sproduct’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-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-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-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'sproduct’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
101
effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must
83
pay applicable user fees. However, the FDA's time periodFDA’s 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-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-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-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-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'sFDA’s goal for taking action on a marketing application from 10 months to six6 months.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life-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.
102
The accelerated approval pathway is usually contingent on a sponsor'ssponsor’s agreement to conduct, in a diligent manner, additionala post-approval confirmatory clinical trial or studies to verify and describe the product'sproduct’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-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
84
clinical trial be designed, initiated, and/or fully enrolled prior to approval. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-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.
Orphan 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 post-approval regulatory requirements as well as any post-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
85
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-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 biological 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'smanufacturer’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 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-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:
● |
| restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; |
● |
| fines, untitled letters or warning letters or holds on post-approval clinical trials; |
● |
| refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; |
● |
| product seizure or detention, or refusal to permit the import or export of products; or |
● |
| 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
103
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-label uses, and a company that is found to have improperly promoted off-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 an acceptable confidential request made under the regulatory provisions. 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 theconjunction 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 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(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
86
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'sFDA’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. Unless otherwise required by regulation, PREA does not apply to a biologic for an indication for which orphan 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
104
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-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-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'sFDA’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"“biosimilar to” or "interchangeable with"“interchangeable with” a previously approved biological product or "reference“reference product."” For 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'ssponsor’s own nonclinicalpreclinical data and data from adequate and well-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. 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 which are governedas dictated by individual state pharmacy 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 Drug Price Competition and Patent Term RestorationHatch-Waxman Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permitthat 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
87
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 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
105
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 Great Britainthe 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 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 the United KingdomGreat 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-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 EMA or to competent authorities in European UnionEU Member States forof 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 European Union,EU, a separate marketing authorization will beMAA is required in order to place medicinal products on the market in the Great Britain (England, Wales and Scotland) (under the Northern IrishIreland Protocol, the European UnionEU regulatory framework will continue to apply in Northern Ireland and centralized European Unionin this regard). Centralized EU marketing authorizations will continue to be recognized).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 a 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 come into effect following confirmation of the full functionality of the Clinical Trials Information System, the centralized European Union portal and database for clinical trials foreseen by the new Clinical Trials Regulation, through an independent audit. This is currently expected to occur in December 2021. 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 set 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. Thehas 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 has 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
88
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 regulation ofmedicines regulator, ran a consultation on reforms to the UK clinical trials is currently aligned with European Union regulations.legislation, which closed in March 2022. The extentoutcome of that consultation was published in March 2023 and includes proposals to whichreform the regulation ofclinical trials legislative framework, although content and timeline for reform are not yet determined. The future regulatory framework for clinical trials in the UK will mirror the new European Union Clinical Trials Regulation once that comes into effect is unknown at present.therefore remains uncertain.
106
Orphan Drug 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 EuropeanEU 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, and(2) either (i) the prevalence of the condition is not more than five in ten thousand persons in the European UnionEU when the application is made, or (ii) without incentives it is unlikely that the marketing of the drugproduct in the European UnionEU would generate sufficient return to justify the necessary investment in its development. For either of these conditions, the applicant must demonstrate thatdevelopment and (3) there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been authorized in the European UnionEU or, if such method exists, the drugproduct has to be of a significant benefit compared to products available for the condition.
An orphan drug designation provides a number of benefits, including fee reductions and, regulatory assistance. If a marketing authorization is granted for an orphan drug,medicinal product, this results in a ten-year period of market exclusivity. During this market exclusivity period, neither the EMA, nor the European Commission ornor the EU Member States can accept an application or grant a marketing authorization for a "similar“similar medicinal product."” A "similar“similar medicinal product"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 drug 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 consents;for the authorized orphan product consents to the second orphan application; or (ii)(iii) the marketing authorization holder for the authorized orphan product cannot supply enough orphan medicinal product.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.
FromSince January 1, January 2021, a separate process for orphan drug designation will applyhas applied in Great Britain. There will beis now no pre-marketing authorization orphan designation (as there is in the European Union)EU) and the application for orphan designation will be reviewed by the Medicines and Healthcare products Regulatory Agency, or MHRA, the UK medicines regulator, at the time of an MAA for a MAA.UK or Great Britain marketing authorization. The criteria are the same as in the European Union,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 aan MAA, either to the EMA using the centralized procedure or to competent authorities in European Economic Area, or EEA, (the European Union Member States plus Iceland, Liechtenstein and Norway)the 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 EEA.EU. Regulation (EC) No. 1901/2006 provides that prior to obtaining a marketing authorization in the EEA,EU, an applicant must demonstrate compliance with all measures included in an EMA-approved Pediatric Investigation Plan, or pediatric investigation plan (PIP), covering all subsets of the pediatric population, unless the EMA has granted a product-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 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
89
tissue engineered products) and products with a new active substance indicated for the treatment of certain diseases, including products for the treatment of cancer and auto-immune diseases. Fordiseases 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 the centralized procedure iswhose authorization would be in the interest of public health in the centralized procedure may be optional.EU.
107
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 EuropeanEU 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. Now that
Following the departure of the UK has leftfrom the European Union,EU, Great Britain willis no longer be covered by centralized marketing authorizations (under the Northern IrishIreland Protocol, centralized European UnionEU authorizations will continue to be recognized in Northern Ireland). All medicinal products with a current centralized authorization were automatically converted to Great BritainUK marketing authorizations on January 1, January 2021. For2021, and there is a further period of two years from 1 January 2021,to December 31, 2023, during which the MHRA may rely on a decision taken by the EuropeanEU 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.authorization European Commission Decision Reliance Procedure (ECDRP). A separate application will,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 required.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
90
authority of the authorizing Member Statemember state for a nationally authorized product. To that end, the marketing authorization holder must provide the EMA or the competent authority with 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. 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-year renewal period. Any marketing authorization that is not followed by the placement of the drug on the EEAEU market (in the case of the centralized procedure) or on the market of the authorizing Member State formember state (for a nationally authorized productproduct) 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-authorization studies and additional monitoring obligations can be imposed. In addition, the manufacturing of authorized products, for which a separate manufacturer'smanufacturer’s license is mandatory, must also be conducted in strict compliance with the EMA'sEMA’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-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. Great Britain
The aforementioned EU rules are generally applicable in the EEA, and similar arrangements apply in the UK.
Proposal for new EU Pharmaceutical Legislation
On April 26, 2023, the European Commission has 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 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 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 European UnionEU 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 at present therefore largely aligns with European Union Regulation, however it is possible thatcurrent EU regulations. However, these regimes willmay diverge in futureincreasingly as time passes, now that Great Britain’s regulatory system is independent from the European Union.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.
91
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 Minister of Health, Labour and Welfare (Minister or MHLW),MHLW, primarily under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals and Medical Devices (Pharmaceutical(Pharmaceutical and Medical Device Act)Devices Act). This entails the satisfactory completion of pharmaceutical development, nonclinicalpreclinical 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 (PMDA)(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 DeviceDevices Act, a person is required to obtain from the MinisterMHLW 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 MinisterMHLW a manufacturing license for each manufacturing site.
Marketing Approval
Under the Pharmaceutical and Medical DeviceDevices Act, it is generally required to obtain marketing approval from the MinisterMHLW for the marketing of each medical product. An application for marketing approval must be made through the PMDA, which implements a marketing approval review.
Clinical Trial
Under the Pharmaceutical and Medical DeviceDevices Act, it is required to file notification of clinical trials with the PMDAPMDA. 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 Minister,MHLW, such as Good Laboratory Practice (GLP)GLPs and Good Clinical Practice (GCP)GCPs stipulated by the ministerial ordinances of the Minister.MHLW.
Regulatory Requirements after Marketing Approval
A marketing license-holder that has obtained marketing approval for a new medical productpharmaceutical must have that medical productpharmaceutical re-examined by the Minister or 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 medical productpharmaceutical 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 MinisterPMDA 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 MinisterPMDA pursuant to the Pharmaceutical and Medical DeviceDevices 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)(NHI) price list published by the Minister.Minister of the MHLW. Accordingly, a marketing license-holder of medical products
92
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.
109
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 absence of comparable medical products, by the cost calculation method, determined after considering of the opinion of the manufacturer. Prices on the NHI price list will be subject to revision, generally once every year, on the basis of the actual prices at which the 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-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 European Union,EU, the United StatesU.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, 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 and patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-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 health carehealthcare 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. TheNo 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, onceon 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. Third-party payors may limit coverage isto specific products on a formulary, which might not include all of the approved products for a particular indication. 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-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.
93
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 or (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 National Reimbursable Drug List, or 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
110
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 NRDLnational 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. 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-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 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 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 our ability to generate revenue. Further, due to the COVID-19 pandemic, millions of individuals have lost/will be losinglose employer-based insurance coverage, which may adversely affect our ability to commercialize our products,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.
94
The containment of healthcare costs also has become a priority of U.S. federal, state and international governments and the prices of pharmaceuticals have been a focus in this effort. Governments have shown significant interest in implementing cost-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-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our potential revenue from the sale of any products for which we may obtain approval. Coverage policies and third-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 we or our collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future. 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, 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. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that compares the
111
effectiveness of any product candidates we may develop to other available therapies to support cost-effectiveness. The conduct of such a clinical trial could be expensive, involve additional risk and result in delays in our commercialization efforts.
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-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 UnionEU Member States and parallel trade (arbitrage between low-priced and 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-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 United States,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 United States,U.S., the reimbursement for our products may be reduced compared with the United StatesU.S. and may be insufficient to generate commercially reasonable revenue and profits.
The delivery of healthcare in the European Union,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 European Union,EU, law and policy.
95
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 statesEU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European UnionEU 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
96
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.
97
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-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-party payors and customers are subject to broadly applicable federal and state fraud
112
and abuse, 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:
● | the |
● | the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act and federal civil monetary penalty laws, which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim or obligation to pay or transmit money to the federal government, |
98
● | the U.S. federal Health Insurance Portability and Accountability Act of 1996 |
113
● | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 |
● |
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 |
● |
● | federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; |
● | analogous state laws and regulations, including: state |
99
● |
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
114
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. 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
100
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-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.
101
Healthcare Reform
In the United States,U.S., the European UnionEU and other foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare systemsystems that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United StatesU.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, inthe ACA, effective since March 2010, 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.
AmongHealthcare reforms that have been adopted, and that may be adopted in the provisionsfuture, could result in further reductions in coverage and levels of reimbursement for pharmaceutical products, increases in rebates payable under U.S. government rebate programs and additional 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 prices and drug payment. The HHS plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices and disincentivize price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency. As discussed above, these initiatives culminated in the enactment of the ACA of importance to our potential product candidates are the following:
115
Since its enactment, some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial, congressional, and executive challenges. As a result, there have been delaysIRA in the implementation of, and action taken to repeal or replace, certain aspects of the ACA.
Since January 2017, former President Trump has signed several executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. On January 20, 2017, former President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Further, on October 13, 2017, former President Trump signed an executive order terminating the cost-sharing subsidies, or CSRs, that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. On August 14, 2020, the Court of Appeals for the Federal Circuit affirmed a lower court ruling that the federal government is liable to insurers selling marketplace health plans for the loss of cost-sharing reduction reimbursements mandated under the ACA. It is unclear what impact this will have on our business. Further, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. On April 27, 2020, the United States Supreme Court reversed the Federal Circuit decision and remanded the case to the U.S. Court of Federal Claims, concluding the government has an obligation to pay these risk corridor payments under the relevant formula. In December 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine this risk adjustment. In addition, CMS published a final rule that would give states greater flexibility, starting in 2020, in setting benchmarks for insurers in the individual and small group marketplaces,
116
2022, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Since then, the ACA risk adjustment program payment parameters have been updated annually. It is unclear what effect this will have on our business.
While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision that decreased the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year, commonly referred to as the “individual mandate,” to $0, effective January 1, 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The Trump administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018, the same judge issued an order staying the judgment pending appeal. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari (a petition for review of a lower court decision) to review this case, and held oral arguments on November 10, 2020. It is unclear how this decision and any subsequent appeals and other efforts to repeal and replace the ACA will impact the ACA and our business. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results. We will continue to evaluate the effect that the ACA and its possible repeal and replacement has on 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,allows, among other things, created measuresHHS 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 spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion11 years (7 years for single-source drugs) can qualify for negotiation, with the negotiated price taking effect two years 2012 through 2021, was unableafter 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 reach required goals, thereby triggeringparticipate in 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 wentnegotiations. 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 AprilJanuary 1, 20132026. The IRA also penalizes drug manufacturers that increase prices of Medicare Part B and duePart D drugs at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to subsequent legislative amendmentsimplement many of these provisions through guidance, as opposed to the statute, including without limitation the Bipartisan Budget Act of 2015, will remain in effect through 2030 unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, and subsequent legislation, these Medicare sequester reductions are suspended from May 1, 2020 through March 30, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. 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 periodregulation, for the governmentinitial years. Manufacturers that fail 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 methodologiescomply with the IRA may be subject to changesvarious penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in healthcare legislation and regulatory initiatives. The Trump administration’s budget proposal for fiscalACA marketplaces through plan year 2021 includes a $135 billion allowance2025. These provisions will take began taking progressively starting in 2023, although they may be subject to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Additionally, the Trump administration previously released a "Blueprint" to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out-of-pocket costs of drug products paid by consumers. At the state level, legislatures are increasingly 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
117
other countries and bulk purchasing. The Department of Health and Human Services (HHS) has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority.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 May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. However,multiple lawsuits. Thus, while it is unclear whetherhow the Biden administration will challenge, reverse, revoke or otherwise modify these executive and administrative actions after January 20, 2021.
Recently there has been other types of 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.
On July 24, 2020 and September 13, 2020, former President Trump announced several executive orders related to prescription drug pricing that seek to implement several of the administration's proposals. As a result, on November 20 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement ratesIRA will be calculated for certain drugs and biologicals basedimplemented, it will likely have a significant impact on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and would have applied in all U.S. states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027. However, in response to a lawsuit filed by several industry groups, on December 28, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure Act. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register. Additionally, on November 20, 2020, HHS finalized a regulation removing the safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, 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 pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Further, implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed. Although a number of these and other proposed measures will require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, Congress has each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Several bills have been introduced in both chambers, but due to increased focus on COVID-19 relief efforts, it is not clear when, and if any, proposed legislation regarding drug costs will advance.industry.
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 U.S. Congress of the FDA'sFDA’s approval process may significantly delay or prevent
118
marketing approval, as well as subject us to more stringent product labeling and post-marketing conditions and other requirements.
Individual states in the United StatesU.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,
102
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,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 European UnionEU (such as the EU Pharmaceutical Legislation) or Member Statemember state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union,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 European Union,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 European UnionEU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European UnionEU 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 StatesU.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 business.
Environmental issues which may influence the use of our material fixed assets
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, required by us for the manner in which we use said facilities.
New 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 deducted from equity. The total net cash proceeds from the offering amounted to $1.2 billion.
119103
The following table shows the developments in our share capital for the fiscal year ending December 31, 2023 and 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 |
As of December 31, 2020, we had five2023, 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).
| | | | | |
| ||
| |
|
|
| |
| ||
|
| Country |
|
| | |||
argenx SE |
| The Netherlands | | 100.00 | % | |||
argenx BV |
| Belgium |
| 100.00 | % |
| ||
argenx | | Belgium | | 100.00 | % |
| ||
argenx US, Inc. |
| USA |
| 100.00 | % |
| ||
argenx Switzerland, SA | | Switzerland | | 100.00 | % |
| ||
argenx Japan KK |
| Japan |
| 100.00 | % | |||
| | 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.
104
D.PROPERTY, PLANTS AND EQUIPMENT
We lease our operational offices and laboratory space, which consists of approximately 4,086 square meters, located in Zwijnaarde, Belgium. The lease for this facility expires in 2025. We also lease office space in Breda, the Netherlands, Boston, Massachusetts, and Tokyo, Japan.
In January 2021, we have entered into a binding lease agreement in relationrelated to the envisioned relocation of our Zwijnaarde facility to a newly built office in Zwijnaarde, with an annual base rent of €1.7$1.8 million, which wouldwill be operational in the secondthird quarter of 2023,2028, and with an initial term of 10.5 years. IncludedThe 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 bindingperiod ended December 31, 2023 and which are incorporated herein by reference.
We also lease commitment is a rent free period of 6 months following the completion of the building.
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 January 2021, we have entered intoaddition, our lease liabilities include a lease agreementplan for company cars with maturity dates up to four years.
For a discussion of contractual obligations, please see “Note 29—Commitments” in relationour consolidated financial statements which are appended to officeour 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 located in Geneva, Switzerland for an initial term of 1 year including 2 office spaces.
We have a total of fourZwijnaarde, Belgium. The following table sets forth our material leased facilities worldwide owned or leased as of December 31, 2020, as set forth in the following table:2023:
|
|
|
|
|
| |
Facility location |
| Use | Approx. size (m2) |
| Lease expiry | |
Zwijnaarde, Belgium (leased) | | Operations and Laboratory Space |
| 4,678 |
|
|
|
|
|
| |||
Boston, Massachusetts (leased) | | Office Space |
| 914 |
| August 31, |
Tokyo, Japan (leased) | | Office Space | | 546 |
| January 17, |
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”.
120
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.
105
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
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. We areIn 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, hematological disorders and cancer.diseases. Leveraging our technology suite and clinical expertise, we have advanced six productseveral candidates into late-stage clinical development —efgartigimod, cusatuzumab, ARGX-111, ARGX-109, LP0145 (formerly ARGX-112) and ARGX-115 (ABBV-151); three into the preclinical stage — STT-5058 (formerly ARGX-116), ARGX-117 and ARGX-118; and we currently have multiple programs in the discovery stage. Through December 31, 2020, we have raised aggregate gross proceeds of €2,127.7 million, including
In addition, as of December 31, 2020, we have received upfront payments, milestone payments and research and development service fees from our collaborators totaling €442.8 million and have received €29.0 million in grants and incentives from governmental bodies. As of December 31, 2020,2023 and December 31, 2022, we had cash, cash equivalents and current financial assets of €1,627.0 million. This balance does not include payments or proceeds from recently announced business development transactions, including the purchase of a priority review voucher from Bayer HealthCare Pharmaceuticals, Inc.$3,180 million and the exclusive license agreement with Zai Lab for efgartigimod in Greater China.$2,193 million, respectively.
Our balance sheetstatement of financial position shows our total assets accumulate to €1,857.7of $4,542 million for the year ended December 31, 2020,2023, compared to €1,433.3$3,134 million for the year ended December 31, 2019 and €587.5 million for the year ended December 31, 2018.2022. The main reason for the material change in balance sheet total are the various equity financing rounds, completed over the periodperiods 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
121
one or more of our product candidates, which may never occur. For the years ended December 31, 20192023 and 2020,2022, we incurred total comprehensive losses of €163.0$295 million and €528.9$730 million, respectively. As of December 31, 2020,2023, we had accumulated losses of €861.5$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 substantially in connection withas we expand our ongoing transition to an integrated immunology company, including the build-out of global commercial infrastructure and drug product inventory aheadfor VYVGART and VYVGART SC for the treatment of gMG, the expectedcommercial launch of efgartigimod in MG,VYVGART SC for the treatment of CIDP if and when approval obtained, the advancement of our clinical-stage pipeline, including seven
106
ongoing registrational clinical trials across five indications of efgartigimod, and continued investment in our immunology innovation program. In addition, we expect to continue to incur significant 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 Developmentdevelopment activities:
● |
● |
● | Execute the seamless phase 2/3 clinical trials of efgartigimod in |
● | Execute the phase 3 clinical trials of efgartigimod in |
● | Launch phase 2 and/or phase 3 in other indications with efgartigimod |
● | Execute the phase 2 clinical trials of empasiprubart in MMN, DGF and DM |
● | Execute the phase 1 clinical trial of ARGX-119 in healthy volunteers and the phase 1b / phase 2a clinical trials in CMS and ALS, respectively |
● | continue the research and development of our other clinical- and preclinical-stage product candidates and discovery stage |
● |
seek regulatory approvals for any product candidates, including new indications, that successfully complete clinical |
Pre-commercial and commercial activitiesactivities:
● | further |
● |
expand our global reach enabling us to commercialize any product candidates, including new indications, for which we may obtain regulatory |
Other activitiesactivities:
● | seek to enhance our technology platform and discover and develop additional product candidates; |
● | maintain, expand and protect our intellectual property portfolio, including litigation costs associated with defending against alleged patent infringement claims; |
● | add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts; and |
● | experience any delays or encounter any issues, including failed studies, ambiguous clinical trial results, safety issues or other regulatory challenges. |
We expect that the costs of development and commercialization might also significantly increase due to current and future collaborations with research and development partners as well as commercial partners. As some
107
Information pertaining to the yearyears ended December 31, 20182022 and December 31, 2021 was included in our annual reportreports on Form 20-F for the yearyears ended December 31, 20192022 and December 31, 2021, respecively, under Item 5 “Operating“Operating and Financial Review and Prospects,” which waswere filed with the SEC on March 31, 2020.16, 2023 and March 21, 2022, respectively.
122
Basis of Presentation
Foreign 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.
Revenue 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 agreementsLicense Agreements
Revenues to date have consisted principally of milestones, license fees, non-refundable upfront fees and research and development service fees in correctionconnection with collaboration and license agreements.
The Company recognizesWe recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expectswe expect to receive in exchange for those goods and services. In order to determine revenue recognition for agreements that the Company determineswe determine to be in the scope of IFRS 15, following five steps are performed:
1. Identifywe followed the contracts
In its currentIFRS 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 mainly licensing itsmore 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.
108
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 and/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 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 providingloss and the 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 services, which might include a cost sharing mechanism and/or inactivities represent one single performance obligation. The Company concluded that the future, selling its products to collaborative partner entities. Revenuelicense is generated through these arrangements via upfront payments, milestone payments based on clinical and regulatory criteria, research and development service fees and future sales based milestones and sales based royalties. In some cases the arrangements also include an equity subscription component, for which is analyzed if the criteria to combine contracts, as set out by IFRS 15, are met.
2. Identify performance obligations
Depending on the type of the agreement, there can be one or morenot distinct performance obligations under IFRS 15. This is based on an assessment of whether the promises in an agreement are capable of being distinct and are distinct from the other promises to transfer goods and/or services in the context of the contract.
The Company has assessed that theretransaction price is one single performance obligation in our material ongoing collaboration and license agreements, being the transfercomposed of a fixed part, that being an upfront license combined with performancefee, and a variable part, being milestone payments and cost reimbursements of research and development services.
This is because the Company considers the performance obligations cannot be distinct in the context of the contract as the license has no stand-alone value without the Company being further involved in the research and development collaboration and that there is interdependence between the license and the research and development services to be provided.
3. Determine the transaction price
Our material ongoing collaboration and license agreements include non-refundable upfront payments or license fees; milestone payments, the receipt of which is dependent upon the achievement of certain clinical, regulatory or commercial milestones; royalties on sales and research and development service fees.
3.1 Non-refundable upfront payments or license fees
If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable upfront fees allocated to this license at the point in time the license is transferred to the customer and the customer has the right to use the license.
For all our material ongoing collaboration and license agreements, the Company considers the performance obligations related to the transfer of the license as not distinct from the other promises to transfer goods and/or services; the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time
123
or at a point in time. If over time, revenue is then recognized based on a pattern that best reflects the transfer of control of the service to the customer.
3.2activities delivered. Milestone payments other than sales based milestones
A milestone payment, being a variable consideration, isare only included in the transaction price to the extent it is highly probable that a significant reversal in the amount of cumulative revenue recognition will not occur when the uncertainty associatedassociate with the variable consideration is subsequently resolved. The CompanyManagement 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 is thenhas been allocated to each performance obligation on a stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and, if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment.
3.3 Research and development service fees
Our material ongoing collaboration and license agreements may include reimbursement or cost sharing for research and development services. R&D services are performed and satisfied over time given that the customer simultaneously receives and consumes the benefits provided by us. Such costs reimbursements received are recognized in revenues when costs are incurred and agreed by the parties.
3.4 Sales based milestone payments and royalties
Our material ongoing collaboration and license agreements include sales based royalties, including commercial milestone payments based on the level of sales, and the license has been deemed to be de predominant item to which the royalties and commercial milestone payments relate. Related revenue is recognized as the subsequent underlying sales occur.
4. Allocate the transaction price
In principle, an entity shall allocate the transaction price to each performance obligation identified in the contract on a relative stand-alone selling price basis. As our ongoing license and collaboration arrangements only contain one single performance obligation and revenues has been recognized over the transaction price is entirely allocated to this singleestimated 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.
5. Recognize revenue
Revenue isobligation has been fulfilled at that time. Milestone payments that become highly probable after the performance obligation has been fulfilled are therefore recognized when the customer obtains control of the goods and/or services as provided in the collaboration and license agreements. The control can be transferred over time or at a point in time – which results in the recognition of revenue over time or at athat point in time.
As our ongoing license and collaboration arrangements only contain one single performance obligation which is, as the customer simultaneously receive the benefits provided by the Company’s performance, satisfied over time, the Company recognizes revenue over time.
The recognition of revenue over time is based on a pattern that best reflects the satisfaction of the related performance obligation, applying the input method. The input method estimates the satisfaction of the performance obligation as the percentage of total collaboration costs that are completed each period compared to the total estimated collaboration costs.
124
Research and development service fees are recognized as revenue when costs are incurred and agreed by the parties as the Company is acting as a principal in the scope of its stake of the research and development activities of its ongoing collaboration and license agreements.
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 incurred in our research and development efforts. The primary grants, research and development incentives and payroll tax rebates are as follows:
Government Grants
Research and Development Incentives
Payroll Tax Rebates
Research and Development Expenses
Research and development expenses consist principally of:
● |
● | personnel expense related to compensation of research and development staff and related expenses, including salaries, benefits and share-based payment expenses; |
● | materials and consumables expenses; |
109
● | depreciation and amortization of tangible and intangible fixed assets used to develop our product candidates; and |
125
● | IT expenses; |
● | other expenses |
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 Staten, our collaboration partner reimbursed 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. Under our agreement with Janssen, we assume certain development obligations, and are jointly responsible with Janssen for all research, development and regulatory costs relating to the product. Under our agreement with Zai, we are responsible for certain costs relating to future clinical trials involving efgartigimod conducted partially by Zai.
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 efgartigimod and cusatuzumabempasiprubart 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 “ItemItem 3.D.— “Risk Factors,” and including the uncertainty of:
● | the scope, rate of progress and expense of our research and development activities; |
● | the successful enrollment in, and completion of clinical trials; |
● | the ability to market, commercialize and achieve market acceptance for efgartigimod |
● | 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 |
● | the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property |
our current and future collaborators continuing their collaborations with us. |
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 |
110
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 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 with preparatorydue to marketing and market accesspromotional 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.
126
Changes in fair value on non-current financial assets
In 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 Innovative Access Program. In exchange for granting this license, the Company received a profit share in AgomAb Therapeutics NV. The profit share has been designated as a non-current financial asset held at fair value through profit or loss. As a result, any change in fair value of the profit sharing instrument results in a fair value gain on financial assets at fair value through profit or loss.candidates.
Financial Income (Expense)
Financial income mainly reflects interest earned on our cash and cash equivalents and current financial 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 net losses on cash and cash equivalents and current financial assets held at fair value through profit or loss and other financial expenses.loss.
Exchange Gains (Losses)
Our exchange gains (losses) relate to (i) our transactions denominated in foreign currencies, mainly in U.S. dollars, Swiss francs, British poundseuro, and Japanese yens, 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 wasis our functional and presentation currency until January 1, 2021 and therefore the presentation currency throughout this reporting period.currency. For more information on currency exchange fluctuations on our business, please see “Item 11—Quantitative“Note 26—Financial risk management—Foreign exchange risk” in our consolidated financial statements which are appended to our Annual Report for the period 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-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 consolidated statements of financial position.
We are incurringincur current income tax expense on the profit generatedand recognize deferred tax assets in argenx US, Inc and argenx Japan K.K.various subsidiaries in view of the transfer price agreementspricing policy set up between argenx BV and argenx US, Inc.these subsidiaries.
For more information on income tax and between argenx BVdeferred 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 argenx Japan K.K.which are incorporated herein by reference.
111
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 |
|
| — |
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 |
|
| (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.
112
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 the Company’s accounting policies, which 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.
127
The following areas are areas where key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Critical estimates in applying accounting policies
ResearchGross to net adjustments
The product gross sales are subject to various deductions, which are primarily composed of rebates to government agencies, distributors, health insurance companies and development cost accruals
managed 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. These adjustments are deducted from product gross sales to arrive at product net sales. The Company recognizes costssignificant components of €52.6 million, as specifiedvariable consideration under revenue recognition policy summarizes the nature of these deductions and how the deduction is estimated, see “Note 2.17 —Product net sales” in note 15 to theour consolidated financial statements incurredwhich are appended to our Annual Report for clinical trial activities and manufacturing of drug products, as research and development expenses based on an evaluation of its vendors’ progress toward completion of specific tasks. Timing of payment may differ significantly from the period ended December 31, 2023 and which are incorporated herein by reference. After recording these, product net sales represent the Company’s best estimate of the cash that we expect to ultimately collect. If in whichfuture periods the costs are recognized as expense, resulting in clinical trial accruals recognized within “Trade and other payables”actuals vary from prior period best estimates, this would affect revenue in the consolidated statementsperiod of financial position.adjustment.
Quantification113
Results of Operation
Comparison of Years Ended December 31, 20202023 and 20192022
| | | | | | | | | | | | | | | | | | |
| | Year ended | | Year ended | ||||||||||||||
| | December 31, | | December 31, | ||||||||||||||
|
| 2020 |
| 2019 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||||||
| | | (In thousands) | | | | ||||||||||||
Revenue |
| € | 36,425 | | € | 69,783 | | (48) | % | |||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| | | (In thousands) | | | | ||||||||||||
Product net sales |
| $ | 1,190,783 | | $ | 400,720 | | 197 | % | |||||||||
Collaboration revenue |
|
| 35,533 | |
| 10,026 | | 254 | % | |||||||||
Other operating income |
|
| 18,109 | |
| 12,801 | | 41 | % | | | 42,278 | | | 34,520 | | 22 | % |
Total operating income |
|
| 54,534 | |
| 82,584 | | (34) | % |
|
| 1,268,594 | |
| 445,267 | | 185 | % |
Cost of sales | | | (117,835) | | | (29,431) | | 300 | % | |||||||||
Research and development expenses |
|
| (325,479) | |
| (197,665) | | 65 | % | | | (859,492) | | | (663,366) | | 30 | % |
Selling, general and administrative expenses |
|
| (149,367) | |
| (64,569) | | 131 | % |
|
| (711,905) | |
| (472,132) | | 51 | % |
Loss from investment in joint venture |
|
| (4,411) | |
| (677) | | 552 | % | |||||||||
Total operating expenses | | | (474,846) | | | (262,234) | | 81 | % | | | (1,693,643) | | | (1,165,607) | | 45 | % |
Change in fair value on non-current financial assets | | | 2,544 | | | 1,096 | | 132 | % | |||||||||
Operating loss |
|
| (417,769) | |
| (178,554) | | 134 | % |
|
| (425,049) | |
| (720,340) | | (41) | % |
Financial income/(expenses) |
|
| (1,414) | |
| 14,275 | | (110) | % | |||||||||
Exchange gains (losses) |
|
| (106,956) | |
| 6,066 | | (1,863) | % | |||||||||
Loss before taxes |
| € | (526,139) | | € | (158,213) | | 233 | % | |||||||||
Income tax expense | | | (2,784) | | | (4,752) | | (41) | % | |||||||||
Loss for the period and total comprehensive loss | | € | (528,923) | | € | (162,965) | | 225 | % | |||||||||
Financial income |
|
| 107,386 | |
| 27,665 | | 288 | % | |||||||||
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 | | | 45,410,442 | | | 38,619,121 | | | | | | 57,169,253 | | | 54,381,371 | | | |
Basic and diluted loss per share (in €) | | | (11.65) | | | (4.22) | | | | |||||||||
Basic and diluted (loss) per share (in $) | | | (5.16) | | | (13.05) | | | |
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 |
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 | | | - |
128114
Revenue
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2020 |
| 2019 |
| % Change | |||
| | | (In thousands) | | | | |||
Upfront payments |
| € | 30,348 |
| € | 22,360 | | 36 | % |
Janssen |
| | 29,818 |
| | 20,056 | | 49 | % |
AbbVie |
| | 497 |
| | 761 | | (35) | % |
Agomab |
| | — |
| | 1,499 | | (100) | % |
Other | | | 33 | | | 44 | | (25) | % |
Milestone payments | | | 3,021 | | | 28,085 | | (89) | % |
Janssen | | | 2,333 | | | 1,569 | | 49 | % |
AbbVie | | | 671 | | | 26,494 | | (97) | % |
Other | | | 17 | | | 22 | | (25) | % |
Research and development service fees | | | 3,056 | | | 19,338 | | (84) | % |
Janssen | | | 2,807 | | | 18,968 | | (85) | % |
Other | | | 249 | | | 370 | | (33) | % |
Total revenue | | € | 36,425 | | € | 69,782 | | (48) | % |
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 decreasedincreased by €33.4$26 million to $36 million for the year ended December 31, 2020 to €36.4 million,2023, compared to €69.8$10 million for the year ended December 31, 2019, a2022. The collaboration revenue recognized in the year ended December 31, 2023 was mainly the result of the recognition of a decrease in$30 million development milestone related to the AbbVie collaboration agreement. The revenue recognitionrecognized during the year ended December 31, 2022, from milestone payments and research and development service fees, partly offsetprimarily relates to €5 million triggered by an increase in revenue recognition from upfront payments.
the option exercised by LEO Pharma to enter into the LEO Pharma Collaboration Agreement for ARGX-112. The increase in revenue recognition from upfront payments is“Other collaboration revenues” of $1 million was primarily driven by the increased over-time recognitionroyalties on net sales of the upfront payment received under the collaboration and license agreement for cusatuzumab with Janssen.
The decreaseVYVGART in revenue recognition from milestone payments of €25.0 million is mainly driven by revenue recognition in 2019 of the $30.0 million (€26.6 million) milestone payment under the AbbVie collaboration, following the first-in-human clinical trial with ABBV-151, achieved in 2019, whereas in 2020 no such milestone payments were achieved.
The decrease in revenue recognition from research and development service fees of €16.2 million is primarily driven by the decrease under the Janssen collaboration. In 2020, the Company transferred the activities related to the development of cells banks, development of manufacturing process and the production of drug substance to Janssen, resulting in a decrease in costs reimbursement under the cost sharing arrangement.Greater China through Zai Lab.
Other Operating Incomeoperating income
| | | | | | | | | | | | | | | | | | |
| | Year ended | | Year ended | ||||||||||||||
| | December 31, | | December 31, | ||||||||||||||
|
| 2020 |
| 2019 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||||||
| | | (In thousands) | |||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| | | (In thousands) | |||||||||||||||
Grants |
| € | 1,226 | | € | 2,289 | | (46) | % |
| $ | 2,538 | | $ | 2,186 | | 16 | % |
Research and development incentives |
|
| 8,875 | |
| 4,818 | | 84 | % |
|
| 27,815 | |
| 19,502 | | 43 | % |
Payroll tax rebates |
|
| 8,008 | |
| 5,694 | | 41 | % |
|
| 11,925 | |
| 8,576 | | 39 | % |
Change in fair value on non-current financial assets | | | — | | | 4,256 | | (100) | % | |||||||||
Total |
| € | 18,109 | | € | 12,801 | | 41 | % |
| $ | 42,278 | | $ | 34,520 | | 22 | % |
129
Other operating income increased by €5.3$8 million to $42 million for the year ended December 31, 2020 to €18.1 million,2023, compared to €12.8$35 million for the year ended December 31, 2019.2022. The $8 million increase iswas 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 |
● | the increase in payroll tax rebates for the year ended December 31, 2023, as a |
● | 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 | | Year ended | ||||||||||||||
| | December 31, | | December 31, | ||||||||||||||
|
| 2020 |
| 2019 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||||||
| | | (In thousands) | |||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| | | (In thousands) | |||||||||||||||
Personnel expense |
| € | 75,121 | | € | 45,733 | | 64 | % |
| $ | 226,344 | | $ | 162,010 | | 40 | % |
External research and development expenses |
|
| 228,438 | |
| 137,050 | | 67 | % |
|
| 483,192 | |
| 366,955 | | 32 | % |
Materials and consumables |
|
| 3,099 | |
| 2,027 | | 53 | % |
|
| 4,057 | |
| 2,396 | | 69 | % |
Depreciation and amortization |
|
| 2,472 | |
| 1,641 | | 51 | % |
|
| 105,546 | |
| 102,132 | | 3 | % |
IT expenses | | | 19,935 | | | 12,678 | | 57 | % | |||||||||
Other expenses |
|
| 16,349 | |
| 11,214 | | 46 | % |
|
| 20,418 | |
| 17,194 | | 19 | % |
Total |
| € | 325,479 | | € | 197,665 | | 65 | % |
| $ | 859,492 | | $ | 663,366 | | 30 | % |
Our researchResearch and development expenses totaled €325.5$859 million and €197.7$663 million for the years ended December 31, 20202023 and 2019,2022, respectively. The increase of €127.8$196 million in fiscal year 2023 as compared to 2019fiscal 2022 is primarily results from an increase in externaldriven by Personnel expense and External research and development expensesexpenses.
Personnel expense primarily relates to internal and personnel expenses, primarily related to the efgartigimod program in various indications, cusatuzumab program and other clinical and preclinical programs. Furthermore, the personnel expenses increased due to a planned increase in headcount.
external personnel. The increase of €29.4 million in personnel expense for the year ended December 31, 2020 corresponded primarily to (i) an increase of €13.9 million foralso includes share-based compensation expenses related to the grant of stock options and RSUs to our research and development employees, and (ii) increased costs associated with additional research and development personnel.employees. We employed on average 213.0 full time607 full-time equivalents in our research and development functions in the year ended December 31, 2020,2023, compared to 121.6475 in the year ended December 31, 2019.2022.
Our externalExternal research and development expenses for the year ended December 31, 20202023 totaled €228.4to $483 million, compared to €137.1$367 million for the year ended December 31, 2019.2022. The increaseexpense reflects higher clinical trial costs and manufacturing expenses related to the development of our product candidate portfolio. 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, | |||||||
|
| 2020 |
| 2019 |
| % Change | |||
| | | (In thousands) | ||||||
efgartigimod |
| € | 160,379 | | € | 84,180 | | 91 | % |
cusatuzumab |
|
| 43,672 | |
| 38,692 | | 13 | % |
Other programs |
|
| 24,388 | |
| 14,178 | | 72 | % |
Total |
| € | 228,438 | | € | 137,050 | | 67 | % |
(*) 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 efgartigimod totaled €160.4$362 million for the year ended December 31, 2020,2023, compared to €84.2$281 million for the year ended December 31,
130
2019. 2022. This increase of €76.2 million corresponds primarily to increased manufacturing and clinical development activities in relation to:
● | the execution of two Phase 3 clinical trials in MG |
● |
the execution of two Phase 3 clinical trials in |
● | the execution of |
● | 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 cusatuzumabempasiprubart totaled €43.7 million for the year ended on December 31, 2020 compared to €38.7$48 million for the year ended December 31, 2019.2023 compared to $32 million for the year ended December 31, 2022. This increase of €5.0$15 million resulted primarily from:was due to the ramp up of Ph2 clinical trials in MMN, DGF and DM and futher investments in Discovery activities.
External research and development expenses on other programs increased by €10.2$19 million to €24.4$60 million for the year ended December 31, 2020,2023, compared to €14.2$40 million for the year ended December 31, 2019. The increase is primarily due to increased2022. Of the total External research and development expense, $27 million relates to general allocation of expenses.
Selling, general and administrative expenses in relation to the advancement of our ARGX-117 program, a complement-targeting antibody against C2.\
| | | | | | | | | |
| | 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 | % |
Selling, General and Administrative Expenses
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2020 |
| 2019 |
| % Change | |||
| | | (In thousands) | ||||||
Personnel expense |
| € | 94,251 | | € | 40,082 | | 135 | % |
Consulting fees |
|
| 42,459 | |
| 16,343 | | 160 | % |
Supervisory board |
|
| 4,243 | |
| 2,792 | | 52 | % |
Other expenses |
|
| 8,414 | |
| 5,352 | | 57 | % |
Total |
| € | 149,367 | | € | 64,569 | | 131 | % |
Our selling,Selling, general and administrative expenses totaled €149.4$712 million and €64.6$472 million for the years ended December 31, 20202023 and 2019,2022, respectively. The increase in our selling,Selling, general and administrative expenses for the year ended December 31, 20202023 was principally due to an increase of personnel expense and consulting fees, resulting from:
● | increased professional and marketing fees, including promotional and marketing costs primarily due to the commercial launch of VYVGART and VYVGART SC; |
● | increased costs of the |
● | increased costs associated with additional employees recruited to strengthen our selling, general and administrative activities, |
● |
We employed on average 119.5 full time681 full-time equivalents in our selling, general and administrative functions in the year ended December 31, 2020,2023, compared to 56.3442 in the year ended December 31, 2019.2022.
131
Financial Income (Expense)income and (expense)
For the year ended December 31, 2020,2023, financial expenseincome amounted to €1.4$107 million compared to a financial income of €14.3$28 million for the year ended December 31, 2019.2022. The decreaseincrease of €15.7$80 million in 20202023 related primarily to higher interest.
For the year ended December 31, 2023, financial expenses incurred as a result of a decrease in net asset value on the current financial assets following the impact of the COVID-19 outbreak on the financial markets, partly offset by the interest received on our cash and cash equivalents and current financial assets.
Exchange Gains (Losses)
Exchange losses totaled €107.0expense amounted to $1 million compared to $4 million for the year ended December 31, 2020, compared to exchange2022.
117
Exchange gains of €6.1(losses)
Exchange gains totaled $14 million for the year ended December 31, 2019.2023, compared to exchange losses of $33 million for the year ended December 31, 2022. The decrease was mainly attributable to unrealized exchange rate gains on the cash, cash equivalents and current financial assets position in euro during the year ended December 31, 2023 as compared to unrealized exchange rate losses on the cash, cash equivalents and current financial assets position in U.S. dollars.during the year ended December 31, 2022.
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, 2020,2023, we have raised gross proceeds of €2,127.7 million$5.6 billion from private and public offerings of equity securities, received €442.8 million in revenue from our collaborators, and €29.0 million in grants and incentives from governmental bodies.securities. We have made product net sales of $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, 2020,2023, we had cash, cash equivalents and current financial assets of €1,627.0$3,180 million, compared to €1,335.8$2,193 million on December 31, 2019.2022.
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 a line of credit totalling to $7.2 million, leases and our commitments to Halozyme, Lonza and Fujifilm which are detailed in “Note“Note 29—Commitments”Commitments” in our consolidated financial statements which are appended to our annual reportAnnual Report for the period ended December 31, 20202023 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“Note 26—Financial management”risk management” in our consolidated financial statements which are appended to our annual reportAnnual Report for the period ended December 31, 20202023 and which are incorporated herein by reference.
132118
Cash Flows
Comparison for the Years Ended December 31, 20202023 and 20192022
The table below summarizes our cash flows for the years ended December 31, 20202023 and 2019.2022.
| | | | | | | | | | | | | | | | | | |
| | Year ended | | Year ended | ||||||||||||||
| | December 31, | | December 31, | ||||||||||||||
|
| 2020 |
| 2019 |
| Variance |
| 2023 |
| 2022 |
| Variance | ||||||
| | (In thousands) | ||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
| | (In thousands) | ||||||||||||||||
Cash and cash equivalents at beginning of the period | | € | 331,282 | | € | 281,040 | | € | 50,242 | | $ | 800,740 | | $ | 1,334,676 | | $ | (533,936) |
Net cash flows (used in) / from operating activities |
|
| (346,349) | |
| 134,584 | |
| (480,933) |
|
| (420,327) | |
| (862,807) | |
| 442,480 |
Net cash flows (used in) / from investing activities |
|
| 310,250 | |
| (744,338) | |
| 1,054,588 | |||||||||
Net cash flows (used in) / from financing activities |
|
| 747,897 | |
| 659,359 | |
| 88,538 | |||||||||
Effect of exchange rate differences on cash and cash equivalents |
|
| (51,471) | |
| 637 | |
| (52,108) | |||||||||
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 | | € | 991,609 | | € | 331,282 | | € | 660,327 | | $ | 2,048,844 | | $ | 800,740 | | $ | 1,248,104 |
Net Cash Usedcash used in Operating Activitiesoperating activities
Net cash outflow fromused in our operating activities increaseddecreased by €480.9$442 million to a net outflow of €346.3$420 million for the year ended December 31, 2020,2023, compared to a net inflowoutflow of €134.6$863 million for the year ended December 31, 2019. 2022.
The decrease in net cash outflow used in operating activities results primarily from operatingan 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 / from investing activities
Investing activities for the year ended December 31, 2020 resulted2023, consist primarily from (i) the research and development expenses incurred in relation to the manufacturing and clinical development activities of efgartigimod, cusatuzumab and the advancement of other preclinical and discovery-stage product candidate, (ii) the personnel expenses and consulting expenses incurred in preparation of the potential commercial launchnet desinvestment of efgartigimod$272 million in the U.S.,current financial assets, and (iii) the manufacturing of pre-launch inventory ahead of the potential commercial launch of efgartigimodinterests received, partly offset by payments related to regulatory and sales based milestones to Halozyme and investement in the U.S. . The netOncoVerity, resulting in a cash inflow of €134.6 million$308 million.
Investing activities for the year ended December 31, 2019 was primarily influenced by the closing of the exclusive global collaboration and license agreement for cusatuzumab with Janssen, which triggered a $300 million upfront payment, whereas in the year ended December 31, 2020 no such cash inflows occurred.
Net Cash Used in Investing Activities
Investing activities consist2022, consists primarily of the divestmentnet investment of $369 million in current financial assets, interestand purchase of a 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 inflow of €310.2 million for the year ended December 31, 2020, compared to a net outflow of €744.3 million for the year ended December 31, 2019. The net inflow for the year ended December 31, 2020 related primarily to the net divestment of €307.6 million of current financial assets, including money market funds and U.S. term deposit accounts to money market funds classified as cash equivalents, compared to a net investment of €708.1 for the year ended December 31, 2019.$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 €747.9$1,337 million for the year ended December 31, 2020,2023, compared to a net cash inflow of €659.4$844 million for the year ended December 31, 2019.2022. The net cash inflow for the year ended December 31, 2020 wasinflows were attributed to (i) €731.1 million net cash proceeds from our global offering and concurrent private placement in May 2020, compared to €655.9 million$1.2 billion net cash proceeds from our global offering in November 2019 andJuly 2023, compared to $0.8 billion net cash proceeds from our private placementglobal offering in January 2019 following the closing of the exclusive global collaboration and license agreement for cusatuzumab with Janssen in January 2019February 2022 and (ii) €19.1$158 million proceeds received from the exercise of stock options in 2020,2023, compared to €4.8$93 million for the year ended December 2019.2022.
133119
Operating and Capital Expenditure Requirements
We have never achieved profitability and, as of December 31, 2020,2023, we had accumulated losses of €861.5$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 commercialization of our product candidates.commercialize VYVGART and VYVGART SC in other indications or in other countries.
On the basis of current 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. Our future equity capital will depend on multiple factors. Because of the numerous risks and uncertainties associated with the development and commercialization of efgartigimod cusatuzumab 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 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 efgartigimod cusatuzumab 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; |
● | 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; |
● | manufacturing activities undertaken |
● | 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 |
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, 2020 toended December 31, 2020 that2023 and which are reasonablyincorporated herein by reference.
134Working capital statement
TableIn accordance with item 3.1 of ContentsAnnex 11 of the Commission Delegated Regulation (EU) 2019/980 we make the following statement:
likely to haveIn 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-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.
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Below an overview is given of our material contractual obligations at December 31, 2020
Lease obligations
| | | | | | | | | | | | | | | |
| | Payments due by period | |||||||||||||
|
| | |
| Less than |
| | |
| | |
| More than | ||
| | Total | | 1 year | | 1–3 years | | 3–5 years | | 5 years | |||||
| | (In thousands) | |||||||||||||
Lease liabilities | | € | 8,299 | | € | 3,043 | | € | 4,085 | | € | 1,171 | | € | — |
Lease commitments not commenced | | € | 16,911 | | € | — |
| € | 282 | | € | 3,382 | | € | 13,247 |
We signed lease agreements for laboratory and office space in Zwijnaarde, Belgium, offices in Breda, Netherlands, Boston, USA, and Tokyo, Japan, as disclosed in “Item 4.D.—Property, Plant and Equipment”.
In January 2021, we have 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 €1.7 million, which would be operational in the second quarter of 2023, and with an initial term of 10.5 years. Included in the binding lease commitment is a rent free period of 6 months following the completion of the building. The total future cash outflows related to this lease are represented above as “Lease commitments not commenced”.
In addition, our lease liabilities include a lease plan for company cars with maturity dates up to four years.C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
For a discussion of contractual obligations,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 see “Noterefer 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 our annual reportthis Annual Report for the period ended December 31, 20202023 and which are incorporated herein by reference.
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.
135121
E. CRITICAL ACCOUNTING ESTIMATES
See Item 5.A. “Operating Results—Critical Accounting Estimates”.
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-tier board structure consisting of an executive director who is 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 seveneight 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.
122
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, 2020:2023:
| | | | | | | | | | | |
Name |
| Age |
| Position |
| Nationality |
| Date of last (re)- |
| Term | |
Tim Van Hauwermeiren | | 49 | | Executive Director (Chief Executive Officer) | | BE | | May 8, 2018 | | 2022 | |
Peter K.M. Verhaeghe | | 62 | | Non-Executive Director (chairperson) | | BE | | May 8, 2018 | | 2022 | |
David L. Lacey | | 68 | | Non-Executive Director | | US | | May 8, 2018 | | 2022 | |
Werner Lanthaler | | 52 | | Non-Executive Director (vice chairperson) | | AT | | May 8, 2018 | | 2022 | |
J. Donald deBethizy | | 70 | | Non-Executive Director | | US | | May 7, 2019 | | 2023 | |
Pamela Klein | | 59 | | Non-Executive Director | | US | | May 12, 2020 | | 2024 | |
A.A. Rosenberg | | 68 | | Non-Executive Director | | UK | | April 26, 2017 | | 2021 | |
James M. Daly | | 59 | | Non-Executive Director | | US | | May 8, 2018 | | 2022 |
The address for our directors is our registered office, Willemstraat 5, 4811 AH, Breda, the Netherlands.
A.A. Rosenberg is expected to be nominated for re-appointment at the General Meeting to be held in 2021.
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 Hauwermeirenco-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. Mr. Van Hauwermeiren currently holds the positions set out in the table “Our Executive Management” below.
Peter K. M. Verhaeghe has served as a member and chairperson of the supervisory board of arGEN-X B.V. since October 2008 and as non-executive director on 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, French, US and Swiss life sciences companies. Mr. Verhaeghe served as the president of the board of directors of Merisant France SAS, as a
136
member of the management board of Merisant Company 2 sàrl and as a member of the board of directors of CzechPak Manufacturing s. r. o. He previously also served as director of Innogenetics (Belgium), Tibotec-Virco NV, Biocartis SA, and as the chairman of the board of directors of PharmaNeuroBoost NV and as liquidator in charge of KBC Private Equity Fund Biotech NV from April 2009 to December 2012. Mr. Verhaeghe serves the board of directors of Participatiemaatschappij Vlaanderen (PMV) NV since May 2018, as chairman of the board of Haretis SA (Luxembourg) since March 2011, and as member of the Board of Directors of miDiagnostics since April 2020. Mr. Verhaeghe also serves as the chairman of the LP & advisory committee of Bioqube Factory Fund I Nv. 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 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 and board work 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, Lophora ApS 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, and from July 2015 to November 2017, he served as chairman of Rigotec GmbH. He previously served on the boards of Asceneuron SA, Serendex Pharmaceuticals A/S, Enbiotix Inc., Targacept Inc. and Biosource Inc. Dr. 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 and is a Consulting CMO for Olema Oncology in San Francisco, Calif. 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, his own consultancy firm advising on business development, licensing and mergers and acquisitions and as consultant to PJT Ltd and SB Biotech. Previously Mr. Rosenberg
137
held the positions of Managing Director at MPM Capital, a venture capital firm (2015 until 2020), Head of M&A and Licensing of Novartis International (2013 to 2015) and Head of Business Development and Licensing at Novartis Pharma (2005 to 2012). Mr. Rosenberg currently serves on the boards of directors of SiO2 Material Science, Oculis SA (chairman) and Cullinan Oncology (chairman), and previously served on the boards of directors at Radius Health Inc., TriNetX, Inc., iOmx Therapeutics AG and Clinical Ink. 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 M. Daly has served as a member of our board of directors since May 2018. He joined GlaxoSmithKline in 1985 where he held various positions, including Sr. Vice President – Respiratory Division with full responsibility for sales, marketing and medical affairs. He moved to Amgen in 2002 where he was Sr. Vice President for the North America Commercial Operations 2011. In 2012 he joined Incyte, a publicly traded company focused on oncology and inflammation, where he was chief commercial officer until June 2015. James Michael Daly currently serves as a director of Chimerix, Inc., Acadia Pharmaceuticals Inc., Halozyme Therapeutics, Inc., Bellicum Pharmaceuticals, Inc. and Madrigal Pharmaceuticals, all Nasdaq-listed companies. James Michael Daly holds a Bachelor in Science and a Master in Business Administration from the State of New York University.
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, 2020:
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The address for our executive management is Industriepark Zwijnaarde 7, Building C, 9052 Zwijnaarde (Ghent), Belgium.
Please note that as part of our evolution to become a commercial-stage company, we have planned to recruit a U.S. based Chief Financial Officer. In this regard, we plan to enter into a transition agreement with Mr. Castaldi.
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 29 years of international financial executive management experience, including 20 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 SA, a Euronext-listed French biopharmaceutical company specializing in oncology. From 1987 to 1989, Mr. Castaldi served as chief financial officer/chief operating officer of Safety-Kleen Corp. From 1989 to 1997, he served as chief financial officer/chief operational officer of MY Kinda Town PLC. Mr. Castaldi graduated with a degree in finance, accountancy and administration from the University of Nice.
138
Keith Woods has served as our Chief Operating Officer since April 2018. Mr. Woods has over 25 years of experience in the biopharmaceutical industry. He most recently served as Senior Vice President of North American Operations for Alexion Pharmaceuticals Inc. (Alexion), where he managed a team of several hundred people in the U.S. and Canada and was responsible for more than $1 billion in annual sales. Within Alexion, he previously served as Vice President and Managing Director of Alexion UK, overseeing all aspects of Alexion’s U.K. business; Vice President of U.S. Operations; and Executive Director of Sales, leading the launch of Soliris in atypical hemolytic uremic syndrome. Prior to joining Alexion, he held various positions of increasing responsibility within Roche, Amgen and Eisai over a span of 20 years. Keith Woods holds a B.S. in Marketing from Florida State University.
Wim Parys obtained a MD degree from the Katholieke Universiteit Leuven, Belgium. He was in private practice for 9 years before joining the Janssen Research Foundation in Beerse, Belgium where he held several R&D positions and developed galantamine (Reminyl™ / Razadyne™) for Alzheimer’s Disease. In 2000 he became the Head of Development at the biotech company Tibotec and relocated to the US to establish Tibotec Inc., the US based subsidiary. Under his tenure, Tibotec (then acquired by J&J) developed and launched Prezista™, Intelence™ and Edurant™, three innovative HIV drugs. As Development Head of Janssen’s Infectious Diseases and Vaccines therapeutic area, he lead the discovery and development of other medicines for HIV, Hepatitis C (Incivo™, Olysio™/Sovriad™), TB (Sirturo™) and respiratory viral diseases. In 2013 he became the R&D head of the newly established Global Public Health group, responsible for a portfolio including programs in HIV, TB, other mycobacterial infections, Dengue and Malaria. Wim joined argenx early 2019 as a development consultant and transitioned to the role of Chief Medical Officer on July 1, 2019.
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.
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 board of directors of Cubigo NV and The Fourth Law 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.
Arjen Lemmen serves as the head of our strategy and corporate development activities. He joined argenx in 2016 and has successfully executed several transactions including a number of programs within our Immunology Innovation Program and our strategic collaboration with Janssen on cusatuzumab. Prior to joining argenx, he served as a corporate finance specialist at Kempen & Co focusing on M&A, Equity Capital Markets and strategic advisory transactions in the European life sciences industry. Mr. Lemmen holds a B.Sc. in Life Science & Technology from the University of Groningen (the Netherlands) and Master of Engineering Management from Duke University. Arjen was promoted to Vice-President of Corporate Development & Strategy per June 1, 2019.
Marc Schorpion joined argenx as Global Head of Human Resources in December 2018. Mr. Schorpion spent his 35-year career with Johnson & Johnson, most recently as Vice President, Human Resources. In this role, he had global responsibility for talent management and leadership support covering all R&D and Science-based Innovation organizations across Johnson & Johnson. From 2003-2013, Mr. Schorpion led worldwide Human Resources for the Johnson & Johnson Pharmaceuticals Group. He started his career with Johnson & Johnson in 1983 at Janssen Pharmaceutica in Belgium. He holds a Licentiate degree in Applied Economics and a Master of Business Administration from the University of Antwerp. In 2019 Mr. Schorpion co-founded United Support for Mothers and Children of India (USMCI), a U.S.-based not-for-profit organization. Mr. Schorpion also serves on the Board of Directors of IGNITE Growth Bands and International School Services (ISS).
139
Andria Wilk joined argenx as Global Head of Quality in January 2020. Mrs. Wilk has more than 20 years of experience in QA within the pharmaceutical industry. Most recently, Mrs. Wilk served as Senior Director, Head of Medical, Regulatory & Clinical QA (MRC QA) at 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 programmes 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, Takeda Global Research and Development (TGRD) and Astellas Pharmaceuticals. Mrs. Wilk holds a joint B.Sc. in Pharmacology and Biochemistry and is a member of Research Quality Association (MRQA).
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:
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.
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:
140
Fixed base compensation. The base compensation of our executive management is 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 75th percentile of the compensation offered by the European peer group for executive management living in Europe and 50th percentile offered by the US peer group for executive management living in US, each time as identified by the independent consulting firm used in this analysis. The base compensation of the executive director will be determined around the median compensation levels payable within a blend of both European and US peer group.
Short-term variable compensation. The objective of this short-term annual 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 short-term variable incentive of his/her annual base compensation. The target percentage for this purpose was set at 55% of the annual base compensation of a member of the executive management team. 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, or Option Plan, as set out below. Typically, options are granted annually in accordance with our stock option grant scheme which is regularly reviewed by our board of directors and particularly our remuneration and nomination committee.
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.
The following table sets forth information regarding compensation paid by us for Tim Van Hauwermeiren during the year ended December 31, 2020:
Name |
| Age |
| Position |
| Nationality |
| Date of Initial |
| Date of last |
| Term | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tim Van Hauwermeiren
Peter K. M. Verhaeghe Peter Verhaeghe has served as a member and chairperson of the board of arGEN-X B.V. since October 2008 and as non-executive director on 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, French, U.S. and Swiss life sciences companies. Mr. Verhaeghe has served on the boards of directors of Participatiemaatschappij Vlaanderen NV since May 2018 and miDiagnostics NV since April 2020. He has also served as chairman of the board of Haretis SA (Luxembourg) since March 2011 and as chairman of the LP & advisory committee of Bioqube Factory Fund I NV since September 2020. Mr. Verhaeghe previously served as a member of the board of directors of CzechPak Manufacturing s.r.o., Innogenetics NV (now Fujirebio Europe N.V.), Tibotec-Virco NV, and Biocartis SA. He was also the president of the board of directors of Merisant France SAS, a member of the management board of Merisant Company 2 sàrl., and chairman of the board of directors of PharmaNeuroBoost NV. Mr. Verhaeghe holds a degree in law from the University of Leuven and an LL.M. degree from Harvard Law School. Dr. Werner Lanthaler (until February 27, 2023) Dr. Werner Lanthaler served as a member of our Board of Directors from July 2014 until February 27, 2023. Dr. Lanthaler served as the CEO of Evotec SE until January 2024, a global drug discovery and development organization, a position he held since March 2009. He also serves on the supervisory board of AC Immune SA (Switzerland). 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. 123
|