Our products and interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues, more patient data become available and we issue our final clinical trial report. Interim, topline and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary and interim data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to the interim data could significantly harm our business prospects.
Our product candidates may have serious adverse, undesirable or unacceptable side effects whichor even cause death, and we or others may delayidentify undesirable or prevent marketing approval. If suchunacceptable side effects are identified during the developmentcaused by VYVGART or any of our products or product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences followingafter they have received marketing approval, if any.approval.
Undesirable side effects that may be caused by our product candidates, or by the combination of our product candidates with other medical products could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive labellabeling or the delay or denial of regulatory approval by the FDA, the EMA or other comparable foreign authorities.Relevant Regulatory Authorities. While our preclinical studies and clinical studiestrials for our product candidates to date show that our product candidates have generally been well tolerated from a risk‑benefitrisk-benefit perspective, the results fromwe have observed adverse events and treatment emergent adverse events (TEAEs) in our clinical trials to date, and we may see additional adverse events and TEAEs in our ongoing and future clinical trials. Such side effects may be more serious than those observed to date, and as a result, our ongoing and future clinical trials may not support this conclusion.
In the single ascending dose part of the Phase 1 clinical trial of ARGX‑113, there were no drug‑ or infusion‑related serious adverse events associated with doses upbe negatively impacted. Moreover, as we seek to 50 mg/kg. The most frequently reported drug‑related adverse events included abnormal white blood cell count, increased C‑reactive protein levels, headache, dizziness and chills. All of these adverse events were mild or moderate and reported only in the two highest dose groups (25 mg/kg and 50 mg/kg). In the multiple ascending dose part of the Phase 1 clinical trial of ARGX‑113, one serious adverse event, hyperventilation, was observed in the multiple ascending dose part. This event, which occurred six days after drug administration, was considered by the clinical investigator as unlikely to be related to ARGX‑113. Some patients had changes to C‑reactive protein levels that were considered clinically significant. The most frequently reported drug‑related adverse events included headache, feeling cold, chills and fatigue, all of which were mild or moderate and reported only in the highest dose group of 25 mg/kg.
In the Phase 2 clinical trial of ARGX‑113 in MG, most adverse events were characterized as mild and not deemed to be drug‑related. Twenty (out of twenty-four) patients reported at least one treatment emergent adverse event, or TEAE, and nearly all were considered as mild (i.e., Grade 1), except for seven patients who experienced a moderate adverse event. No TEAEs Grade 3 or higher were reported. The most frequent TEAEs deemed to be drug‑related per investigator were headache in 25.0% of patients, monocyte count decrease in 16.7% of patients and rhinorrhea in 8.3%
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of patients receiving ARGX‑113, respectively. Herpes zoster (shingles) of moderate intensity was reported in one patient and deemed to be possibly drug‑related by the investigator. One patient in the ARGX‑113 group moved to rescue therapy. No clinically significant laboratory, vital signs and/or electrocardiogram findings were observed. No deaths, serious adverse events or TEAEs leading to discontinuation of treatment were reported during the trial.
In the dose‑escalation part of the Phase 1 part of our Phase 1/2 clinical trial for ARGX‑110 in patients with advanced malignancies expressing CD70, we observed serious adverse events in some patients, including seven patient deaths, of which five deaths were attributed to disease progression, one death was attributed to sepsis and one death was attributed to respiratory failure. None of these deaths were deemed to be drug‑related according to the investigator. In the first two completed safety‑expansion cohorts (one in patients with CD70‑positive solid tumors and one in patients with CD70‑positive hematological tumors), a similar tolerability profile as seen in the dose‑escalation part was observed. Fourteen patient deaths were reported in these cohorts (all at a dose of 5 mg/kg), of which 10 deaths were attributed to disease progression, one death was attributed to aspergillosis, one death was attributed to a fatal pleural hemorrhage, one death was attributed to pneumonia and one death, which was deemed drug‑related by the investigator, occurred in a heavily pre‑treated patient with Waldenstrom Macroglobulinemia and was attributed to sepsis and general condition deterioration. In this context, heavily pre‑treated means having failed multiple lines of prior treatment. In the dose‑escalation part, anti‑drug antibodies were observed in all doses except the 10 mg dose and appeared to be inversely related to the administered dose. In our two completed safety‑expansion cohorts, anti‑drug antibodies were detected.
In a preclinical mouse efficacy model of acute lymphocytic leukemia, or ALL, the administration of an ARGX‑110 variant at higher doses led to the acute death of some animals with high tumor load. The cause of death in this preclinical mouse study has not been determined, although a literature search conducted on our behalf revealed some similarities of this symptomatology with anecdotal reports in ALL patients treated with compounds having antibody‑dependent cell‑mediated cytotoxicity enhanced, or ADCC‑enhanced, Fc regions who experienced a cytokine storm, a potentially fatal immune reaction to immunotherapy. We are not currently evaluating ARGX‑110 for patients with ALL and have no intention of doing so. However, we cannot guarantee that we will not see evidence of cytokine storm or similar adverse events, which could potentially lead to serious life threatening side‑effects or even death, in patients with other forms of cancer, such as those being evaluated in our current Phase 1/2 clinical trial in patients with either AML or high‑risk MDS.
We are conducting one Phase 2 clinical trial in cutaneous T‑cell lymphoma, or CTCL; and one Phase 1/2 clinical trial in AML and high‑risk MDS; and one Phase 1 clinical trial in nasopharyngeal carcinoma. In the Phase 1 safety‑expansion cohorts in patients with CD70‑positive CTCL and in patients with CD70‑positive PTCL and Phase 2 clinical trial in CTCL, one Grade 3 event deemed to be drug‑related was observed in 1 mg/kg and 5 mg/kg doses. No grade 4 drug‑related toxicities were observed among this patient population. In the dose‑escalation part of the Phase 1/2 clinical trial of ARGX‑110 in combination with azacitidine in patients with AML or high‑risk MDS, in the first set of six evaluable patients receiving doses of 1 mg/kg and 3 mg/kg we observed 17 Grade 3 and 4 adverse events in patients receiving the 1 mg/kg dose (one with intermittent cases of thrombocytopenia) and 14 Grade 3 and 4 adverse events in patients receiving the 3 mg/kg dose (one with intermittent cases of anemia). Evaluation of the 10 mg/kg cohort is ongoing, and to date the observed tolerability profile in the 10 mg/kg dose cohort appears to be in line with the lower dose cohorts.
In the dose‑escalation part of the Phase 1 clinical trial for ARGX‑111 in treatment‑refractory patients whose tumors overexpress c‑Met, we observed 19 serious adverse events in 12 patients (four events in two patients at a dose of 0.3 mg/kg, two events in one patient at a dose of 1 mg/kg, seven events in six patients at a dose of 3 mg/kg and six events in three patients at a dose of 10 mg/kg). Except for six events of infusion‑related reactions and one event of bone pain, no drug‑related serious adverse events were observed. Seven patient deaths were reported (one at a dose of 0.3 mg/kg, one at a dose of 1 mg/kg, four at a dose of 3 mg/kg and one at a dose of 10 mg/kg), all of which were due to underlying disease and disease progression and were not deemed to be drug‑related according to the investigator. In the completed safety‑expansion cohort of ARGX‑111 in five treatment‑refractory MET‑amplified cancer patients using a 3 mg/kg dose of ARGX‑111 every two weeks, eight serious adverse events were seen in four of these patients. Except for one case of infusion‑related reaction, none of those were deemed drug‑related according to the investigator. One patient death attributed to disease progression and pneumonia was reported and was not deemed to be drug‑related according to the investigator.
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The results of future clinical studies may show that ourdevelop product candidates, cause undesirableincluding products in new indications, patients may experience new or unacceptable side effects or even death. In such an event, our trials could be suspended or terminated and the FDA, the EMA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug‑relatedmore serious effects. Drug-related side effects could affect patient recruitment, or the ability of enrolled patients to complete the clinical trial, or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly. Further, because allclaims, damage sales of our existing products, result in significant reputational damage for us and our product candidatesdevelopment, and preclinical programs, other than ARGX‑113, are based on our SIMPLE Antibody platform, any adverse safety or efficacy findings related to any product candidate or preclinical program may adversely impactissues including the viabilitydelay of our other product candidates or preclinical programs.
Additionally, if any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects caused by such products,VYVGART or any of our other product candidates after they receive marketing approval, a number of potentially significant negative consequences could result,arise, including:
| 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 that we implement a risk evaluation and mitigation strategy |
| 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 or product liability claims; and |
| our reputation may suffer. |
Any of these events could preventnegatively impact us, our collaborators or our potential future partners from achievingpartners. Further, we are developing a subcutaneous (SC) formulation of efgartigimod co-formulated with rHuPH20, an SC drug delivery technology, for the treatment of gMG and other indications, and side effects or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the saleadverse events associated with rHuPH20, may affect multiple of our products.
We face significant competition forproducts, and our drug discovery and development efforts, and if we do not compete effectively, our commercial opportunities will be reducedproduct candidates. Further, the Relevant Regulatory Authorities could require a change of label or eliminated. We may not be successful in our efforts to use and expand our SIMPLE Antibody platform, our NHance and ABDEG technologies, oreven revoke the licensed POTELLIGENT technology, to build a pipeline of product candidates and develop marketable products due to significant competition and technological change,license, which could limit or eliminate the market opportunity forharm our product candidatesreputation and technology platforms.
The market for pharmaceutical products is highly competitive. Our competitors include many established pharmaceutical companies, biotechnology companies, universities and other research or commercial institutions, many of which have substantially greater financial, research and development resources than we have. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and manufacturing pharmaceutical products. Smaller and early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites
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and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our products. The fields in which we operate are characterized by rapid technological change and innovation. There can be no assurance that our competitors are not currently developing, or will not in the future develop, technologies and products that are equally or more effective or are more economically attractive than any of our current or future technology or product. Competing products or technology platforms may gain faster or greater market acceptance than our products or technology platforms and medical advances or rapid technological development by competitors may result in our product candidates or technology platforms becoming non‑competitive or obsolete before we are able to recover our research and development and commercialization expenses. If we, our product candidates or our technology platforms do not compete effectively, it may have a material adverse effect on our business, prospects, financial condition and resultsability to commercialize VYVGART.
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Competition in the autoimmune spaceIf our target patient population is intense and involves multiple monoclonal antibodies, other biologics and small molecules either already marketed or in development by many different companies including large pharmaceutical companies such as AbbVie Inc. (Humira/rheumatoid arthritis); Amgen Inc. (Enbrel/rheumatoid arthritis); Biogen, Inc. (Tysabri/multiple sclerosis); GlaxoSmithKline plc (Benlysta/lupus); F. Hoffmann‑La Roche AG, or Roche (Rituxan/often used off label) and Janssen Pharmaceuticals Inc., or Janssen (Remicade/rheumatoid arthritis and Stelara/psoriasis). In some cases, these competitors are also our collaborators. In addition, these and other pharmaceutical companies have monoclonal antibodies or other biologics in clinical development for the treatment of autoimmune diseases. In addition to the current standard of care,smaller than expected, we are aware that Alexion Pharmaceuticals, Inc. has received FDA approval for Soliris for the treatment of adult patients with generalized MG who are anti‑acetylcholine receptor antibody positiveunable to successfully enroll and that GSK; Roche; Novartis AG; CSL Behring; Grifols, S.A.; BioMarin Pharmaceutical Inc.; Curavac and Millennium Pharmaceuticals, Inc., among others, are developing drugs that may have utility for the treatment of MG. We are aware that Rigel Pharmaceuticals, Inc.; Eisai Inc.; Bristol‑Myers Squibb; Shire Immunomedics; Protalex Inc. and others are developing drugs that may have utility for the treatment of ITP. We are aware that Roche and Syntimmune, Inc. and others are developing drugs that may have utility for the treatment of PV. Furthermore, we are aware of competing products specifically targeting FcRn and being developed by UCB S.A.; Momenta, Inc.; Syntimmune, Inc. and Hannal Biotech.
Competition in the leukemia and lymphoma space is intense, with many compounds in clinical trials by large multinational pharmaceutical companies and specialized biotech companies. Rituxan (Roche), Adcetris (Seattle Genetics Inc./Takeda Pharmaceutical Company Ltd), Darzalex (Janssen) and Poteligeo (Kyowa Hakko Kirin Co., Ltd.) are some examples of monoclonal antibodies approved for the treatment of Hodgkin’s lymphoma, non‑Hodgkin’s lymphoma, multiple myeloma or other blood cancers. We are aware of AML drugs recently approved by the FDA, such as Mylotarg (Pfizer), Rydapt (Amgen), Vyxos (Jazz Pharmaceuticals, Inc.) and IDHIFA (Agios, Inc. and Celgene). In addition, we are aware of a number of other companies with development stage programs that may compete with ARGX‑110 in the future. We anticipate that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available.
Similarly, other companies have monoclonal antibody drug discovery platforms that may compete with us in the search for novel therapeutic antibody targets, including Adimab LLC; Merus N.V.; Regeneron Pharmaceuticals Inc.; Xencor Inc.; and MorphoSys AG. We are aware that a product candidate in development by Scholar Rock, Inc. may compete with ARGX‑115 and a product candidate in development by Ionis Pharmaceuticals, Inc. may compete with ARGX‑116, if they are approved.
We depend on enrollment ofretain patients in our clinical trials, for ouror experience significant delays in doing so, we may not realize the full commercial potential of any products or product candidates.
Currently, we mainly develop products or product candidates for the treatment of rare diseases for which the target patient population can be small. If the actual number of patients with these disorders is smaller than we are unable to enrollexpected, we may encounter difficulties in enrolling sufficient patients in our clinical trials, thereby delaying or preventing development and approval of our researchproducts or product candidates. Physicians, who are an important source of referral of patients for clinical trials, may also be less familiar with these rare diseases and development effortsmay therefore fail to identify these conditions in their patients and business, financial condition and results of operations could be materially adversely affected.
Identifying and qualifying patientstherefore may not refer them to participate in our clinical trials is critical to our success. trials.
Patient enrollment, a significant factor in the timing of clinical trials, depends on many factors, including the size and nature of the patient population, eligibility criteria for the clinical trial, the proximity of patients to clinical sites, competition for patient recruitment from competing clinical trials, the design of the clinical protocol, the availability of competingeligibility criteria for the clinical trials, the availability of new drugsalternate approved therapies for the indication the clinical trial is investigating, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies. Since some ofWe compete with other companies to enroll target patient populations, as set forth in the risk factor “—We face significant competition for our drug discovery and development efforts.” Even if product candidates obtain significant market share for their approved indications, because certain potential target populations are focused on addressing rare diseases and conditions, there are limited patient
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pools from which to draw in order to complete our clinical trials in a timely and cost‑effective manner. For example, the number of patients suffering from each of MG; ITP; PV; T‑cell lymphoma, or TCL; and acute myeloid leukemia, or AML, is small, and has not been established with precision. If the actual number of patients with these disorders is smaller than we anticipate, we may encounter difficultiesnever recoup our investment in enrolling patients in our clinical trials, thereby delaying or preventing development andsuch product candidate without obtaining regulatory approval of our drugfor additional indications for such product candidates.
Even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials.
Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials. In addition, any negative results we may report in clinical trials of our drug candidatecandidates may make it difficult or impossible to recruit and retain patients in other clinical trials of that same drug candidate. Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
We may become exposed to costly and damaging liability claims, either when testing our product candidatesIn addition, certain of patients enrolled in the clinic or at the commercial stage; and our product liability insurance may not cover all damages from such claims.
We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently, we have no products that have been approved for commercial sale; however, the current and future use of product candidates by us and our corporate collaborators in clinical trials and the potential sale of any approved productsare located in the future, may expose us to liability claims. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies, our corporate collaborators or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates or any prospects for commercialization of our product candidates. Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:
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Although we maintain adequate product liability insurance for our product candidates, it is possible that our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.
The regulatory approval processes of the FDA, the EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA, the EMA and comparable foreign authorities is unpredictable but typically takes many years, if obtained at all, following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
Our product candidates could fail to receive regulatory approval for many reasons, including the following:
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This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations and prospects. The FDA, the EMA and other comparable foreign authorities have substantial discretion in the approval process, and determining when or whether regulatory approval will be obtained for any of our product candidates. Even if we believe the data collected from clinical trials of our product candidates are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post‑marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
Even if our product candidates obtain regulatory approval, we will beareas subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirementsconflict, hostilities or experience unanticipated problems with our products.
If the FDA, the EMAwar, or a comparable foreign regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post‑marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trialscountries that we conduct post‑approval, all of which may result in significant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post‑marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.
Our product candidates are classified as biologics in the United States and, therefore, can only be sold if we obtain a BLA from the FDA. The holder of a BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. The holder of a BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Failure to comply with a BLA or any other ongoing regulatory obligation may result in suspension of approval to manufacture or distribute the relevant product, as well as fines or imprisonment for violations.
If there are changes in the application of legislation, regulations or regulatory policies, or if problems are discovered with a product or our manufacture of a product, or if we or one of our distributors, licensees or co‑marketers fails to comply with regulatory requirements, the regulators could take various actions. These include imposing fines on us, imposing restrictions on the product or its manufacture and requiring us to recall or remove the product from the market. The regulators could also suspend or withdraw our marketing authorizations, requiring us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations.
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Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.
Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the biopharmaceutical industry, in particular for our lead product candidates, our business, financial condition and results of operations could be materially adversely affected.
Risks Related to Commercialization of Our Product Candidates
Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.
In the United States, the European Union and other foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives atimpacted by COVID-19. See the United States federalrisk factors under the headers “—Global geo- and state levels that seek to reduce healthcare costssocio-political threats and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
Among the provisions of the ACA of importance to our potential product candidates are the following:
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There have been legal and political challenges to certain aspects of the ACA. Since January 2017, President Trump has signed two executive ordersmacro-economic uncertainty and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal legislation, the future of the ACA remains uncertain. We continue to evaluate how the ACA and recent efforts to repeal and replace or limit the implementation of the ACA will impact our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These new laws may result in additional reductions in Medicare and other healthcare funding. For example, on August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, including without limitation the Bipartisan Budget Act of 2015, will remain in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our customers and accordingly, our financial operations.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. The U.S. Department of Health and Human Services has set a goal of moving 30% of Medicare payments to alternative payment models by 2016 and 50% of Medicare payments into these alternative payment models by the end of 2018. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Further, legislative and regulatory proposals have been made to expand post‑approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition, increased scrutiny by the
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U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post‑marketing conditions and other requirements.
Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third‑party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
In the European Union, similarunforeseen political economic and regulatory developments may affect our ability to profitably commercialize our current or any future products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever‑increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post‑approval activities and affect our ability to commercialize any products for which we obtain marketing approval. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
We may be subject to healthcare laws, regulation and enforcement. Our failure to comply with these laws could harm our results of operations and financial conditions.
Although we do not currently have any products on the market, our current and future operations may be directly, or indirectly through our customers and third‑party payors, subject to various U.S. federal and state healthcare laws and regulations, including, without limitation, the U.S. federal Anti‑Kickback Statute. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. These laws impact, among other things, our proposed sales, marketing and education programs and constrain our business and financial arrangements and relationships with third‑party payors, healthcare professionals who participate in our clinical research program, healthcare professionals and others who recommend, purchase, or provide our approved products, and other parties through which we market, sell and distribute our products for which we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation by both the U.S. federal government and the states in which we conduct our business. Finally, our current and future operations are subject to additional healthcare‑related statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. The laws that may affect our ability to operate include:
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It is possible that governmental authorities will conclude that our business practices may not comply with 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.
The risk of us being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. For example, the definition of the “remuneration” under the federal Anti‑Kickback Statute has been interpreted to include anything of value. Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti‑Kickback Statute is violated.
Additionally, recent healthcare reform legislation has strengthened federal and state healthcare fraud and abuse laws. For example, the ACA amends the intent requirement of the federal Anti‑Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.
If we fail to obtain orphan drug designation or obtain or maintain orphan drug exclusivity for our products, our competitors may sell products to treat the same conditions and our revenue will be reduced.
Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, after a recommendation from the EMA’s Committee for Orphan Medicinal Products, or COMP, the European Commission grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life‑threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life‑threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user‑fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of
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market exclusivity following drug or biological product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
We may from time to time seek orphan drug designation in the United States or Europe for certain indications addressed by our product candidates. For example, in September 2017, the FDA granted orphan drug designation for the use of ARGX‑113 for the treatment of MG. Even if we are able to obtain orphan designation, we may not be the first to obtain marketing approval for such indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan‑designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, the FDA or the EMA can subsequently approve the same drug with the same active moiety for the same condition if the FDA or the EMA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate reimbursement levels and pricing policies. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third‑party payors are essential for most patients to be able to afford products such as our product candidates, assuming approval. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize, and attract additional collaboration partners to invest in the development of our product candidates. Assuming we obtain coverage for a given product by a third‑party payor, the resulting reimbursement payment rates may not be adequate or may require co‑payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
Third‑party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third‑party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third‑party payor may consider our product candidate and other therapies as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidate, pricing of existing drugs may limit the amount we will be able to charge for our product candidate. These payors may deny or revoke the reimbursement status of a given drug product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on products that we may develop.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third‑party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third‑party payors may require pre‑approval of coverage for new or innovative devices or drug therapies before they will reimburse health care providers who use such therapies. It is difficult to predict at this time what third‑party payors will decide with respect to the coverage and reimbursement for our product candidates.
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Obtaining and maintaining reimbursement status is time‑consuming and costly. No uniform policy for coverage and reimbursement for drug products exists among third‑party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time‑consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost‑containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever‑increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post‑approval activities and affect our ability to commercialize any products for which we obtain marketing approval.
Moreover, increasing efforts by governmental and third‑party payors in the European Union, the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
The future commercial success of our product candidates will depend on the degree of market acceptance of our potential products among physicians, patients, healthcare payers and the medical community.
Our product candidates are at varying stages of development and we may never have a product that is commercially successful. To date, we have no product authorized for marketing. Our lead product candidates are in early stages of clinical development. Our lead product candidates will require further clinical investigation, regulatory review, significant marketing efforts and substantial investment before they can provide us with any revenues. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many other companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain regulatory approval for the marketing of their product. Due to the inherent risk in the development of pharmaceutical products, it is probable that not all or none of the product candidates in our portfolio will successfully complete development and be commercialized. We do not expect to be able to commercialize any of our products for a number of years. Furthermore, when available on the market, our products may not achieve an adequate level of acceptance by physicians, patients and the medical community, and we may not become profitable. In addition, efforts to educate the medical community and third‑party payers on the benefits of our products may require significant resources and may never be successful which would prevent us from generating significant revenues or becoming profitable.
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Market acceptance of our future products by physicians, patients and healthcare payers will depend on a number of factors, many of which are beyond our control, including, but not limited to:
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If our product candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to provide a satisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove not to be large enough to allow us to generate significant revenues.
We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize our products on our own or together with suitable collaboration partners.
We do not have a sales or marketing infrastructure and have no experience in the sale or marketing of pharmaceutical products. To achieve commercial success for any approved product, we must develop or acquire a sales and marketing organization, outsource these functions to third parties or enter into collaboration arrangements with third parties.
We may decide to establish our own sales and marketing capabilities and promote our product candidates if and when regulatory approval has been obtained in the major European Union countries and the United States. There are risks involved should we decide to establish our own sales and marketing capabilities or enter into arrangements with third parties to perform these services. Even if we establish sales and marketing capabilities, we may fail to launch our products effectively or to market our products effectively since we have no experience in the sales and marketing of pharmaceutical products. In addition, recruiting and training a sales force is expensive and time consuming and could delay any product launch. In the event that any such launch is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses, and our investment would be lost if we cannot
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retain or reposition our sales and marketing personnel. Factors that may inhibit our efforts to commercialize our products on our own include:
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If we enter into arrangements with third parties to perform sales and marketing services, our product revenues or the profitability of these product revenues to us could be lower than if we were to market and sell any products that we develop ourselves. Such collaborative arrangements may place the commercialization of our products outside of our control and would make us subject to a number of risks including that we may not be able to control the amount or timing of resources that our collaborative partner devotes to our products or that our collaborator’s willingness or ability to complete its obligations, and our obligations under our arrangements may be adversely affected by business combinations or significant changes in our collaborator’s business strategy. In addition, we may not be successful in entering into arrangements with third parties to sell and market our products or may be unable to do so on terms that are favorable to us. Acceptable third parties may fail to devote the necessary resources and attention to sell and market our products effectively.
If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we may not be successful in commercializing our products, which in turn would have a material adverse effect on our business, prospects, financial condition and results of operations.
Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA‑licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12‑year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well‑controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12‑year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non‑biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
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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 highly regulated by the FDA, the EMA and other comparable foreign authorities and by other national or supra‑national regulatory authorities that impose substantial requirements covering nearly all aspects of our activities notably on research and development, manufacturing, preclinical tests, clinical trials, labeling, marketing, sales, storage, record keeping, promotion and pricing of our product candidates. Such regulation is further subject to regular review by the FDA, the EMA and other comparable foreign authorities which may result in changes in applicable regulation. If we do not comply with one or more of these requirements in a timely manner, or at all, our product development could experience significant delays as a result of the FDA, the EMA or other comparable regulatory authorities recommending non‑approval or restrictions on approval of a product candidate, leading to an inability to successfully commercialize any of our product candidates, which would materially harm our business. Any failure of any of our product candidates in clinical studies or to receive regulatory approval could have a material adverse effect on our business, results of operations and financial condition. If any of our product candidates fails to obtain approval on the basis of any applicable condensed regulatory approval process, this will prevent such product candidate from obtaining approval in a shortened time frame, or at all, resulting in increased expenses which would materially harm our business.
Compliance with requirements laid down by local regulatory authorities is necessary in each country where we, or any of our partners or licensees, conduct said activities in whole or in part. Local regulatory authorities notably include the EMA and the FDA. In order to market our future products in regions such as the European Economic Area, United States of America, Asia Pacific and many other foreign jurisdictions, we must obtain separate regulatory approvals. The approval procedures vary among countries and can require additional clinical testing, and the time required to obtain approval may differ from that required to obtain for example FDA or EMA approval. Moreover, clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA or EMA does not ensure approval by the comparable foreign authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA or EMA.
There can be no assurance that our product candidates will fulfil the criteria required to obtain necessary regulatory approval to access the market. Also, at this time, we cannot guarantee or know the exact nature, precise timing and detailed costs of the efforts that will be necessary to complete the remainder of the development of our research programs and products candidates. Each of the FDA, the EMA and other comparable foreign authorities may impose its own requirements, may discontinue an approval or revoke a license, may refuse to grant approval, or may require additional data before granting approval, notwithstanding that approval may have been granted by the FDA, the EMA or one or more other comparable foreign authority. The FDA, the EMA or other comparable foreign authorities may also approve a product candidate for fewer or more limited indications or patient sub‑segments than requested or may grant approval subject to the performance of post‑marketing studies. The EMA’s, the FDA’s or other regulatory authority’s approval may be delayed, limited or denied for a number of reasons, most of which are beyond our control. Such reasons could include, among others, the production process or site not meeting the applicable requirements for the manufacture of regulated products, or the products not meeting applicable requirements for safety, purity or potency, or efficacy, during the clinical development stage or after marketing. No assurance can be given that clinical trials will be approved the FDA, the EMA or other comparable foreign authorities or that products will be approved for marketing by such regulatory authorities in any pre‑determined indication or intended use. Any of the FDA, the EMA and other comparable foreign authorities may disagree with our interpretation of data submitted for their review.
We and our collaborative partners are, or may become subject to, numerous ongoing other regulatory obligations, such as data protection, environmental, health and safety laws and restrictions on the experimental use of animals. The costs of compliance with such applicable regulations, requirements or guidelines could be substantial, and failure to comply could result in sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorization of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or
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recalls of products, operating restrictions and criminal prosecutions, any of which could significantly increase our or our collaborative partners’ costs or delay the development and commercialization of our product candidates.
Because we are subject to environmental, health and safety laws and regulations, we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities which may adversely affect our business and financial condition.
Our operations, including our research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood‑borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.
As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed and our financial condition and results of operations may be materially adversely affected.
Our employees, independent contractors, principal investigators, CROs, consultants, vendors and collaboration partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants, vendors and collaboration partners may engage in fraudulent conduct or other illegal activities. Misconduct by these parties could include intentional, reckless and negligent conduct or unauthorized activities that violate: (i) the regulations of the FDA, the EMA and other comparable foreign authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad; or (iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self‑dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials or creating fraudulent data in our preclinical studies or clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs, individual imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliance with these laws, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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Our high dependency on public perception of our products may negatively influence the success of these products.
If any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of the safety and quality of our products. We could be adversely affected if we were subject to negative publicity or if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Because of our dependence upon consumer perception, any adverse publicity associated with illness or other adverse effects resulting from patients’ use or misuse of our products or any similar products distributed by other companies could have a material adverse impact on our business, prospects, financial condition and results of operations.
Future adverse events in research into the cancer, inflammation and severe autoimmune diseases that we focus our research efforts on, or the biopharmaceutical industry more generally, could also result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approvals of our products. Any increased scrutiny could delay or increase the costs of obtaining regulatory approval for our product candidates.
Failure to successfully identify, develop and commercialize additional products or product candidates could impair our ability to grow.
Although a substantial amount of our efforts will focus on the continued preclinical and clinical testing and potential approval of our product candidates in our current pipeline, a key element of our long‑term growth strategy is to develop and market additional products and product candidates. Because we have limited financial and managerial resources, research programs to identify product candidates will require substantial additional technical, financial and human resources, whether or not any product candidates are ultimately identified. The success of this strategy depends partly upon our ability to identify, select and develop promising product candidates and products. Our technology platforms may fail to discover and to generate additional product candidates that are suitable for further development. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate may not be suitable for clinical development as a result of its harmful side effects, limited efficacy or other characteristics that indicate that it is unlikely to be a product that will receive approval by the FDA, the EMA and other comparable foreign regulatory authorities and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our technological approach, we may not be able to obtain product or collaboration revenues in future periods, which would adversely affect our business, prospects, financial condition and results of operations.
Our long‑term growth strategy to develop and market additional products and product candidates is heavily dependent on precise, accurate and reliable scientific data to identify, select and develop promising pharmaceutical product candidates and products. Our business decisions may therefore be adversely influenced by improper or fraudulent scientific data sourced from third parties. Any irregularities in the scientific data used by us to determine our focus in research and development of product candidates and products could have a material adverse effect on our business, prospects, financial condition and results of operations.
Service or supply failures, or other failures, business interruptions or other disasters affecting the manufacturing facilities of any party participating in the supply chain would adversely affect our ability to supply our products.
Our product candidates are biologics and require processing steps that are more difficult than those required for most chemical pharmaceuticals. Accordingly, multiple steps are needed to control the manufacturing processes. Problems with these manufacturing processes, even minor deviations from the normal process or from the materials used in the manufacturing process, which may not be detectable by us in a timely manner, could lead to product defects or manufacturing failures, resulting in lot failures, product recalls, product liability claims and insufficient inventory.
Also, certain raw materials or other products necessary for the manufacture and formulation of our product candidates, some of which are difficult to source, are provided by single‑source unaffiliated third‑party suppliers. In addition, we rely on certain third parties to perform filling, finishing, distribution, laboratory testing and other services related to the manufacture of our product candidates, and to supply various raw materials and other products. We would be unable to obtain these raw materials, other products, or services for an indeterminate period of time if any of these
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third parties were to cease or interrupt production or otherwise fail to supply these materials, products, or services to us for any reason, including due to regulatory requirements or actions (including recalls), adverse financial developments at or affecting the supplier, failure by the supplier to comply with cGMPs, contamination, business interruptions, or labor shortages or disputes. In any such circumstances, we may not be able to engage a backup or alternative supplier or service provider in a timely manner or at all. This, in turn, could materially and adversely affect our ability to supply product candidates, whichcrises could materially and adversely affect our business and future prospects.
Certain of the raw materials required in the manufacturefinancial performance” and the formulation of our product candidates may be derived from biological sources, including mammalian tissues, bovine serum and human serum albumin. There are certain European regulatory restrictions on using these biological source materials. If we are required“—We face risks related to substitute for these sources to comply with European regulatory requirements, our clinical development or commercial activities may be delayed or interrupted.
Our business may be adversely affected as a result of computer system failures.
Any of the internal computer systems belonging to us or our third‑party service providers are vulnerable to damage from computer viruses, unauthorized access, natural disasters terrorism, war and telecommunicationpublic health issues, such as the COVID-19 pandemic, that could negatively affect our business and electrical failure. Any system failure, accident or security breach that causes interruptions in our own or in third‑party service vendors’ operations could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our or our partners’ regulatory approval efforts and significantly increase our costs in order to recover or reproduce the lost data. To the extent that any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability, our product development programs and competitive position may be adversely affected and the further development of our product candidates may be delayed. Furthermore, we may incur additional costs to remedy the damage caused by these disruptions or security breaches.financial condition.”
RisksRisk Factors Related to Ourargenx’s Dependence on Third Parties
We rely, and expect to continue to rely, on third parties including independent clinical investigators and CROs, to conduct some of our preclinical studiesresearch activities and clinical trials.trials and for parts of the development and commercialization of our existing and future research programs, products and product candidates. If theseour relationships with such third parties doare not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates andsuccessful, our business couldmay be substantially harmed.adversely affected.
We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators, CROs, CMOs and third‑party CROs,other third-party service providers, to assist us in the conduct of certain of our preclinical studiesresearch activities and clinical trials and to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials. We also depend on our collaborators 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 studies and clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. We andTo the extent our third party contractors andcollaborators or the CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principalor investigators and trial sites. If we, our investigators or any of our CROs fail to comply with applicable GCPs, the clinical data generated inenroll participants for our clinical trials, may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
Further, these investigators and CROs are not our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any
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product candidates that we develop. In addition, the use of third‑party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated.
Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated.
There is a limited number of third‑party service providers that specialize or have the expertise required to achieve our business objectives. If any of our relationships with these third‑party CROs or clinical investigators terminate, we may not be able to enter into arrangements with alternative CROs or investigators or to do so on commercially reasonable terms. If CROs or clinical investigators do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy ofconduct the clinical data they obtain is compromised duetrial to the failure to adhere to our clinical protocols,GCP standards or in full compliance with legal and regulatory requirements or are delayed for other reasons, our a significant time in the execution of
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clinical trials, including achieving full enrollment, we may be extended, delayedaffected by increased costs, program delays or terminated and weboth, which may not be able to obtain regulatory approval for or successfully commercializeharm our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.business.
Switching or adding additional CROs (or investigators) involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
We rely and will continue to rely on collaborative partners regarding the development of our research programs and product candidates. If we fail to enter into new strategic relationships our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.
We are, and expect to continue to be, dependent on partnerships with partners and licensees relating to the development and commercialization of our existing and future research programs, products and product candidates. We currently have collaborative research relationships with various pharmaceutical companies such as AbbVie and ShireSARL (AbbVie), Zai Lab 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 and Genpharm for the distribution of VYVGART. We had, have and will continue to have discussions on potential partnering opportunities with various pharmaceutical companies. If we fail to enter into or maintain collaborations on reasonable terms or at all, our ability to develop our existing or future research programs and product candidates and to commercialize our existing or future products could be delayed, the commercial potential of our products could change and our costs of development and commercialization could increase.
While we have agreements governing our relationships with these third parties, we have limited influence over their actual performance and control only certain aspects of their activities. If independent investigators, third-party service providers or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop. In addition, regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we, our investigators or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the Relevant Regulatory Authoritiesor comparable regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Upon inspection by a given regulatory authority, such regulatory authority may determine that our clinical trials do not fully comply with GCP regulations, which may require us to repeat clinical trials and delay the regulatory approval process. Our dependence on collaborative partners subjectsmay not adhere or terminate collaboration agreements with all associated consequences or disagree on the interpretation of contractual terms. We may not be able to control our collaborative partners’ compliance with all applicable requirements for the commercialization of our products, which could adversely affect such commercialization and the profitability of such products. Failures by our collaborative partners to meet their contractual, regulatory, or other obligations to us toor any disruption in the relationships between us and our collaborative partners, could have a number of risks, including, but not limited to, the following:material adverse effect on our product pipeline and business.
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We face significant competition in seekingestablishing successful relationships with third-party service providers and appropriate collaborative partners. These third-party service providers may have contractual relationships with other entities, some of which may be our competitors, which may draw their time and resources away from our programs. In addition, some of our third-party service providers or CROs have the ability to terminate their respective agreements with us, and if such agreements terminate, we may not be able to enter into arrangements with alternative CROs or investigators or to do so on commercially reasonable terms. In addition, we may not be able to find appropriate collaboration partners. Our ability to reach a definitive agreement for a partnership will depend, among other things, upon an assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed partnership and the proposed collaborator’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of regulatory approval, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership regardless of the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a partnership could be more attractive than the one with us.
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We relyDisruptions caused by our reliance on third parties for our manufacturing process may delay or disrupt our business, product development and commercialization efforts.
We do not have the ability to supply and manufactureinternally source the raw materials necessary to produce our product candidates, and we expect to continue to rely on third parties to manufacture our products, if approved. The development of suchor 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.
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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.
Reliance on Third-Party Suppliers and Service Providers
For some of our clinical studies or for commercial supply, if our products are approved. Instead,raw materials, we rely on a single source of supply and expect to continue to rely on contract manufacturing organizations, or CMOs. We currently rely mainly on Lonza Sales AG, or Lonza, based in Slough, UK and Singapore for the manufacturingthere are limited supplies of the drug substance of all our products and the production cell line POTELLIGENT CHOK1SV jointly owned by Lonza and BioWa, Inc. for clinical and commercial scale production of ADCC enhanced antibody products. Reliance on third‑party providers may expose us to more risk than if we were to manufacture our product candidates ourselves. We do not control the manufacturing processes of the CMOs we contract with and are dependent on those third parties for the production of our product candidates in accordance with relevant regulations (such as cGMP), which includes, among other things, quality control, quality assurance and the maintenance of records and documentation.
raw materials. If we were to experience an unexpected loss of supply of or if any supplier werewas unable to meet our demand for any of our products and product candidates, including for example if VYVGART is approved for additional indications, we could experience delays in our research or planned clinical studiestrials or commercialization. Werisk shortages in commercial supply which could materially impact our revenue potential. These issues could be unablemade worse during a pandemic or due to find alternative suppliersgeopolitical events, including trade disputes or economic sanctions enacted as a result of acceptable quality,international conflict.
Additionally, certain of the raw materials required in the appropriate volumesmanufacture and at an acceptable cost. Moreover,the formulation of our suppliersproducts and product candidates may be derived from biological sources, including mammalian tissues, bovine serum and human serum albumin. There are often subject to strict manufacturing requirements andcertain European regulatory restrictions on using these biological source materials including rigorous testing requirements, which could limit or delay production. The long transition periods necessaryIf there are changes in the regulation requirements that our suppliers are unable to switch manufacturers and suppliers, if necessary, would significantly delaymeet, our clinical studiesdevelopment or commercial activities may be delayed or interrupted.
We may not be able to engage a back-up or alternative supplier or service provider in a timely manner or at all if any of these third parties were to cease or interrupt production or otherwise fail to supply these materials, products, or services to us for any reasons, including due to regulatory requirements or actions (including recalls), adverse financial developments at or affecting the supplier, failure by the supplier to comply with cGMPs, contamination, business interruptions, or labor shortages or disputes. Interruptions in the supply of these materials, products or services may also result from international conflict, trade disputes or economic sanctions enacted by, or imposed on, the U.S., the UK, the EU or any other country or region.
Reliance on Third-Party Manufacturing
We rely on and expect to continue to rely on CMOs.We also rely on certain third parties to perform filling, finishing, distribution, laboratory testing and other services related to the commercializationmanufacture of our products if approved, which would materially adversely affect our business, prospects, financial condition and results of operation.product candidates.
In complying withAlthough we do not control the manufacturing process at our CMOs and are completely dependent on them for the production of our products and product candidates in accordance with relevant regulations (such as cGMPs), we are responsible for ensuring that our products comply with regulatory requirements. If our CMOs cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, the EMA and other comparable foreign authorities, we and our third‑party suppliers must spend significant time, money and effort in the areas of design and development, testing, production, record‑keeping and quality control to assure that the products meet applicable specifications and other regulatory requirements. The failure to comply with these requirements could result in an enforcement action against us, including the seizure of products and shutting down of production. We and any of these third‑party suppliers may also be subject to audits by the FDA, the EMA Relevant Regulatory Authoritiesor other comparable foreign authorities. If anyregulatory authorities, our business could be adversely affected in a number of ways, including an inability to initiate or continue clinical trials of product candidates under development, delay in submitting regulatory applications, or receiving regulatory approvals for product candidates, including new indications, subjecting third-party manufacturing facilities to additional inspections by regulatory authorities, requirements to cease distribution or to recall batches of our third‑party suppliers failsproducts or product candidates and an inability to complymeet commercial demands for our marketed products.
We contract with cGMPLonza Sales AG (Lonza) based in Slough, UK, Portsmouth, U.S. and Singapore and FUJIFILM Diosynth Biotechnologies Denmark ApS (Fujifilm) 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
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vandalism at the CMO could significantly interrupt our manufacturing capability. We currently do not have alternativeAlternative production plans in place or disaster‑recoverydisaster-recovery facilities available.available to us may not be sufficient. In case of a disruption, we willmay have to establish additional alternative manufacturing sources. This would require substantial capitalinvestment on our part, which we may not be able to obtain on commercially acceptable terms or at all. Additionally, we would likelymay experience months ofsignificant manufacturing delays as we build or locate replacement facilities and seek and obtain necessary regulatory approvals. If this occurs, we will be unable to satisfy manufacturing needs on a timely basis, if at all. Also, operating any new facilities may be more expensive than operating at our current facility.facilities. Further, business interruption insurance may not adequately compensate us for any losses that may occur, and we would have to bear the additional cost of any disruption. For these reasons, a significant disruptive event of the manufacturing facility could have drastic consequences, including placing our financial stability at risk.
Accuracy and timing of our financial reporting is partially dependent on information received from third-party partners, which we do not control.
We have collaborated, and plan to continue to collaborate, with third parties, including distributor and licensing partners, on certain product candidates. As part of some of these collaborations, our collaboration partners are responsible for providing us with financial information regarding specific projects, including funds spent, liabilities incurred and expected future costs, on which we rely for our own financial reporting. If our collaboration partners fail to provide us with the necessary financial information within the agreed upon timeframes, or if such financial information proves inaccurate, it would adversely impact the timing and accuracy of our own financial reporting. Any inaccuracy in our financial reporting could cause investors to lose confidence in our financial reporting. This in turn may lead to reputational damage or affect our ability to obtain, and the terms of, any future financing, which may harm our business.
We and our third-party manufacturers and suppliers may become exposed to liability, fines, penalties or other sanctions and substantial expenses in connection with environmental compliance or remediation activities.
Our and our third-party manufacturers and suppliers operations, including research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, laboratory procedures and exposure to pathogens. We do not have control over our manufacturers’ or suppliers’ compliance with environmental, health and safety laws and regulations. If we, or they fail to comply with such laws and regulations, we could be subject to liability, fines, penalties or other sanctions and incur substantial expenses to comply or remediate the activities.
We face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed, and our financial condition and results of operations may be materially adversely affected.
Risk Factors Related to argenx’s Business and Industry
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, or insider trading violations, which could significantly harm our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with governmental regulations, comply with healthcare fraud and abuse and anti-kickback laws and regulations in the U.S. and other markets, or failure to report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including improper trading based upon, information obtained in the course of clinical studies, which could result in regulatory sanctions and serious harm to our reputation. We maintain a global
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compliance program and remain focused on its evolution and enhancement. Our program includes efforts such as risk assessment and monitoring, fostering a culture encouraging employees and third parties to raise good faith questions or concerns, and defined processes and systems for reviewing and remediating allegations and identified potential concerns. It is not always possible, however, to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
We may become exposed to costly and damaging liability claims.
We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products and marketing of human therapeutic products. The manufacturingcurrent and future use of allproducts and product candidates by us and our collaborators in clinical trials and the sale of any approved products may further expose us to liability claims. If any of our products or product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies, physicians, payors, caregivers, investors, employees, government agencies, or our collaborators or others selling such products. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our products and product candidates or any prospects for commercialization of our products and product candidates. Any such claims, regardless of their merit, could also adversely affect our reputation and the trust that physician and patients place in our products.
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
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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, 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 information 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 (including COVID-19), terrorism, war (including the ongoing conflict in Ukraine), 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 information, and the development and potential commercialization of our product candidates requires using cells whichcould be delayed.
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We are stored in a cell bank. highly dependent on public perception of our products.
We have one master cell bank for each product manufactured in accordance with cGMP. Working cell banks have not yet been manufactured. Half of each master cell bank is stored at a separate site so that in case of a catastrophic event at one site we believe sufficient vialsare highly dependent upon consumer perceptions of the master cell banks are left at the alternative storage site to continue manufacturing.safety and quality of our products. We believe sufficient working cell banks could be producedadversely affected if we, or any of our collaborators, are subject to negative publicity or if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to patients, or for example, be deemed cruel to animals. Because of our dependence upon consumer perception, any adverse publicity associated with illness or other adverse effects resulting from the vialspatients’ use or misuse of the master cell bank stored atour products or any similar products distributed by other companies could have a given site to assure product supply for the future. However, it is possible that we could lose multiple cell banks and have our manufacturing significantly impacted by the need to replace these cell banks, which could materially adversely affectmaterial adverse impact on our business, prospects, financial condition and results of operations.
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RisksRisk Factors Related to argenx’s Intellectual Property
We rely on patents and otherFailure to adequately enforce or protect our intellectual property rights to protect ourin products, product candidates and the SIMPLE Antibody, NHance and ABDEG platform technologies the enforcement, defense and maintenance of which may be challenging and costly. Failure to enforce or protect these rights adequately could harmadversely affect our ability to competedevelop and impairmarket our business.products and product candidates.
Our commercial success depends in part on obtaining and maintaining patents and other forms of intellectual property rights for our products, product candidates methods used to manufacture those products and the methods for treating patients using those products, or on licensing in such rights.platform technologies. Failure to protect or to obtain, maintain or extend adequate patent and other intellectual property rights, which may be challenging and costly, could materially adversely affect our ability to develop and market our products and product candidates.candidates and erode or negate any competitive advantage we may have.
We cannot be certain that patents will be issued or granted with respect to applications that are currently pending, or that issued or granted patents will not later be found to be invalid or enforceable. The patent position of biopharmaceutical companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the European Patent Office, the United States Patent and Trademark Office, or USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biopharmaceutical patents. Consequently, patents may not issue from our pending patent applications. As such, we do not know the degree of future protection that we will have on our proprietary products and technology.pending. The scope of patent protection that the European Patent Office and the U.S. Patent and 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 antibodies almost identical to ours including biosimilar antibodies, thereby decreasing our market share. However, a competitor cannot submit to the FDA an application for a biosimilar product based on one of our products until four years following the date of approval of our “reference product,” and the FDA may not approve such a biosimilar product until 12 years from the date on which the reference product was approved. See the section of this annual report titled “Item 4.—Business—Government Regulation—Licensure and Regulation of Biologics in the United States—Biosimilars and Exclusivity” for more details regarding biosimilar regulatory exclusivities.potential.
The patent prosecution process is expensive and time‑consuming, and weWe and our current or future licensors, licensees or collaboration partners may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors, licensees or collaboration partners will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Further, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’, licensees’ or collaboration partners’ patent rights are highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued that protect our technology or products, in whole or in part, or that effectively prevent others from commercializing competitive technologies and products. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, or we may need to enter into new license or royalty agreements, covering technology that we license from or license to third parties or have developed in collaboration with our collaboration partners and are reliantrely on patent procurement activities of our licensors, licensees or collaboration partners. Therefore, these patents and applicationspartners or obtain additional costly licenses. Such parties may not be prosecuted and enforced in a manner consistentfully comply with the best interests of our business. If our current or future licensors, licensees or collaboration partners fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors, licensees or collaboration partners are not fully cooperativeapplicable patent rules or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. The patent examination process may require us or our licensors, licensees or collaboration partners to narrow the scope of the claims of our or our licensors’, licensees’ or collaboration partners’ pending and future patent applications, which may limit the scope of patent protection that may be obtained. We cannot assure you that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application.rights. Even if patents do successfully issue and even if such
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patents cover our products and product candidates, third parties may initiate an opposition, interference, re‑examination, post‑grant review, inter partes review, nullification or derivation action in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated. Our and our licensors’, licensees’ or collaboration partners’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology.
BecauseFurthermore, because patent applications are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to a product and product candidate. Furthermore, as to the United States, if third parties have filed such patent applications on or before March 15, 2013, an interference proceeding can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such applications after March 15, 2013, a derivation proceeding can be initiated by such third parties to determine whether our invention was derived from theirs. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing our invention where the other party can show that they used the invention in commerce before our filing date, or if the other party is able to obtain a compulsory license. 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.
IssuedWe enjoy only limited geographical protection with respect to certain patents covering one or more ofand may face difficulties in certain jurisdictions. We often file our productsfirst patent application (i.e., priority filing) at the UK Intellectual Property Office, the European Patent Office or the SIMPLE Antibody, NHanceUSPTO. International applications under the Patent Cooperation Treaty are usually filed within twelve months after the priority filing. We have so far not filed for patent protection in all national and ABDEG platform
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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 for a given period after allowance or grant, during which time 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 litigation in order to enforce or defend any patents or other intellectual property rights owned by or licensed to us, or to determine or challenge the scope or validity of patents or other intellectual property rights of third parties. Enforcement of intellectual property rights is difficult, unpredictable and expensive, and many of our or our licensors’ or collaboration partners’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaboration partners can. Accordingly, despite our or our licensors’ or collaboration partners’ efforts, we or our licensors or collaboration partners may not prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect those rights as fully as in the European Union and the United States. We may fail in enforcing our rights—in which case our competitors may be permitted to use our technology without being required to pay us any license fees. In addition, however, litigation 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 or use our SIMPLE Antibody, NHance and ABDEG platform technologies, and then compete directly with us, without payment to us.
If we wereWe may be subject to initiate legal proceedings against a third party to enforce a patent covering oneclaims challenging the inventorship or ownership of our products, the defendant could counterclaimintellectual property or be required to make additional payments to secure intellectual property from collaborators.
Many of our consultants and employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these consultants and employees executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our patentconsultants and employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these consultants and employees have used or disclosed confidential information or intellectual property of any such consultant’s or employee’s former employer or have breached their non-competition agreement. Additionally, many of our collaborators do not commit to assigning all intellectual property arising out of the collaboration to us and, instead, grant us options to acquire intellectual property or commit to making such intellectual property available to us at a fair price. As such, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our products and product candidates.
In addition, while it is invalid or unenforceable. In patent litigationour policy to require our employees and contractors who may be involved in the United States or in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. A claim for a validity challengedevelopment of intellectual property to execute agreements assigning such intellectual property to us, we may be based on failureunsuccessful in executing such an agreement with such party. Our and their assignment agreements may not be self-executing or may be breached and we may be forced to meet anybring claims against third parties or defend claims they may bring against us to determine the ownership of several statutory requirements, for example, lack of novelty, obviousness or non‑enablement. A claim for unenforceability could involve an allegation that someone connected with prosecution of the patent withheld relevant information from the European Patent Office or the USPTO or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example,what we cannot be certain that thereregard as our intellectual property.
There is no invalidating prior art, ofguarantee we will be successful in defending such claims, which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our SIMPLE Antibody, NHance and ABDEG platform technologies. Such a loss of patent protection could have a material adverse impact on our business. Further, litigation could result in substantial costs and diversion of management resources, regardless of the outcome, and this could harm our business and financial results. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patentsus paying monetary damages, or otherlose valuable personnel or intellectual property rights.
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IntellectualThird-party intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, such that we could be required to litigate or obtain licenses from third parties in order to develop or market ourproducts and product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.
Our competitive position may suffer if patents issued to third parties or other third‑partythird-party intellectual property rights cover our products or elements thereof,product candidates or our manufacture or uses relevant to our development plans, the targets of our product candidates, or other attributes of our product candidates or our technology.plans. In such cases, we may not be in a position to develop or commercialize products or product candidates unless we successfully pursue costly and time-consuming litigation to nullify or invalidate the third‑partythird-party intellectual property right concerned or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms.holder. We are aware of certain U.S. issued patents held by third parties that some may arguearguably cover certain aspects of our product candidates, including ARGX‑110 and ARGX‑111. Thecusatuzumab. One such third-party patent relatingfamily of potential relevance to ARGX‑110cusatuzumab is scheduled to expire in 2026, and the patents relating to ARGX‑111 are scheduled to expire between 2024 and 2032.2028. 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 aspectsthe targets for certain of the targetsour products or their uses. There can be no assurance any such patents will not be asserted against us or that we will not need to seek licenses from such third parties. We may not be able to secure such licenses on acceptable terms, if at all, and any such litigation would be costly and time‑consuming.
It is also possible that we failed to identifyare unaware of relevant patents or applications. For example, certain U.S. applications filed after November 29, 2000 that will not be filed outside the United States may remain confidential until patents issue.or of relevant scientific discoveries. In general, patent applications in the United StatesU.S. and elsewhere are published approximately 18 months after the earliest filing from which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Additionally, publications of discoveries in scientific literature often lag behind the actual discoveries. Therefore, patent applications covering our products, product candidates or platform technology could have been filed by others and relevant discoveries may have been made without our knowledge. Furthermore, we operate in a highly competitive field, and given our limited resources, it is unreasonable to monitor all patent applications purporting to gain broad coverage in the areas in which we are active. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our products or the use of our products.platform technologies.
Third‑partyThird-party intellectual property right holders, including our competitors, may actively bring infringement claims against us. The granting of orphan drug status in respect of any of our product candidates does not guarantee our freedom to operate and is separate from our risk of possible infringement of third parties’ intellectual property rights. Weus that we may not be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage or continue costly, unpredictable and time‑consuming litigation and may be prevented from or experience substantial delays in marketing our products.resolve.
If we fail in any such dispute, in addition to being forced to pay damages, we or our licensees may be temporarily or permanently prohibited from commercializing any of our products and product candidates that are held to be infringing. We might, if possible, also be forced to redesign products and product candidates so that we no longer infringe the third‑partythird-party intellectual property rights. Or, weWe may be required to seek a license to any such technology that we are found to infringe, which license may not be available on commercially reasonable terms, or at all. Even if we or our licensors or collaboration partners obtain a license, it may be non‑exclusive (for example, the POTELLIGENT platform),non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaboration partners. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. Any of these events, even if we were to ultimately prevail, could
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require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
In addition, if the breadth or strength of protection provided by our or our licensors’ or collaboration partners’ patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or futureproducts and product candidates. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Our ability to compete may be adversely affected if we are unsuccessful in defending against any claims by competitors or others that we are infringing upon their intellectual property rights.
The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, companies producing therapeutics to treat and potentially cure cancer have employed intellectual property litigation as a means to gain an advantage over their competitors. As a result, we may be required to defend against claims of intellectual property infringement that may be asserted by our competitors against us and, if the outcome of any such litigation is adverse to us, it may affect our ability to compete effectively.
Our involvement in litigation, and in, e.g., any interference, derivation, reexamination, inter partes review, opposition or post‑grant proceedings or other intellectual property proceedings inside and outside of the European Union or the United States may divert management time from focusing on business operations, could cause us to spend significant amounts of money and may have no guarantee of success. Any current and potential intellectual property litigation also could force us to do one or more of the following:
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Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, this could have a substantial adverse effect on the price of the ADSs. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
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We may not be successful in obtaining or maintaining necessary rights to our products and product candidates through acquisitions and in‑licenses.in-licenses.
Because our programs may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in‑license, maintain or use these proprietary rights. We may be unable to acquire or in‑license any compositions, methods of use, processes, or other third‑partyin-license third-party intellectual property rights from third parties that we identify as an appropriate strategic fit for our Company and necessary for our product candidates. The licensingcandidates and acquisition of third‑party intellectual property rights is a competitive area, and atechnology. A number of more established companies with greater resources may pursue strategies to license or acquire third‑partythird-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
For example, weWe sometimes collaborate with U.S. and non‑U.S.non-U.S. academic institutions to accelerate our preclinical research or development under written agreements with these institutions.development. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license
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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.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third‑partythird-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain a license to third‑party intellectual property rights necessary for the development of a product candidate or program,investment, in which case we may have to abandon development of that product candidate or programprogram.
Existing license agreements impose various development, payment and other obligations. If we fail to comply with our businessobligations under these agreements, the licensor may have the right to terminate the license. Several of our existing license agreements are sub-licenses from third parties who are not the original licensors of the intellectual property at issue. If the licensors fail to comply with their obligations under these upstream license agreements, the original third-party licensor may have the right to terminate the original license, which may terminate the sublicense, causing us to lose our rights to the applicable intellectual property if we are unable to secure our own direct license with the owner of the relevant rights on reasonable terms.
Further, if disputes over intellectual property that we have licensed or our associated obligations prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and financial condition could suffer.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. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademarks. If we attempt to enforce our trademarks and assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable or that the party against whom we have asserted trademark infringement has superior rights to these trademarks and trade names, which we need to build name recognition by potential partners or customersthe marks in our markets of interest.question. Over the long term, if we are unable to establish name recognition, based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.effectively. If other entities use trademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout the world.
Although we have trademark registrations for arGEN-X, this trademark may be considered as confusing with other registered trademarks and weWe may not be in a positionable to keep exclusive rights over the use of it. We do not expect the potential loss of this trademark registration to have an adverse impact on our business as we are not planning to use arGEN-X as a product name.
If we do not obtain protection under the Hatch‑Waxman AmendmentsHatch-Waxman Act and similar non‑U.S.non-U.S. legislation for extending the term of patents covering each of our products and product candidates, our business may be materially harmed.
Patents have a limited duration. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non‑provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates, their manufacture, or use are obtained, once the patent life has expired, we may be open to competition from competitive medications, including biosimilar medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
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candidates.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch‑WaxmanHatch-Waxman Act and similar legislation in the European Union.EU and the Asia Pacific region. The Hatch‑WaxmanHatch-Waxman Act permits a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. The patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent applicable to an approved drug may be extended. However, we may not receive an extension if we fail to apply within applicable deadlines fail to applyor prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner than we expect. As a result, our revenue from applicable products could be reduced, possibly materially.
We enjoy only limited geographical protection with respect to certain patents and may face difficulties in certain jurisdictions, which may diminish the value of intellectual property rights in those jurisdictions.
We often file our first patent application (i.e., priority filing) at the UK Intellectual Property Office, the European Patent Office or the USPTO. International applications under the Patent Cooperation Treaty, or PCT, are usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in additional jurisdictions where we believe our product candidates may be marketed. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national/regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.
Competitors may use our and our licensors’ or collaboration partners’ technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors or collaboration partners have patent protection, but enforcement is not as strong as that in the United States and the European Union. These products may compete with our product candidates, and our and our licensors’ or collaboration partners’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States and the European Union, and companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions.
Some countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired and our business and results of operations may be adversely affected.
Proceedings to enforce our and our licensors’ or collaboration partners’ patent rights in foreign jurisdictions could result in substantial costs and divert our and our licensors’ or collaboration partners’ efforts and attention from other aspects of our business, could put our and our licensors’ or collaboration partners’ patents at risk of being invalidated or interpreted narrowly and our and our licensors’ or collaboration partners’ patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors or collaboration partners. We or our licensors or collaboration partners may not prevail in any lawsuits that we or our licensors or collaboration partners initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.
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If we fail to comply with our obligations under the agreements pursuant to which we license intellectual property rights from third parties, or otherwise experience disruptions to our business relationships with our licensors, we could lose the rights to intellectual property that are important to our business.
We are a party to license agreements under which we are granted rights to intellectual property that are important to our business and we expect that we may need to enter into additional license agreements in the future. Existing license agreements impose, and we expect that future license agreements will impose, various development obligations, payment of royalties and fees based on achieving certain milestones, as well as other obligations. If we fail to comply with our obligations under these agreements, the licensor may have the right to terminate the license. The termination of any license agreements or failure to adequately protect such license agreements could prevent us from commercializing product candidates covered by the licensed intellectual property. Several of our existing license agreements are sublicenses from third parties which are not the original licensor of the intellectual property at issue. Under these agreements, we must rely on our licensor to comply with its obligations under the primary license agreements under which such third party obtained rights in the applicable intellectual property, where we may have no relationship with the original licensor of such rights. If the licensors fail to comply with their obligations under these upstream license agreements, the original third‑party licensor may have the right to terminate the original license, which may terminate the sublicense. If this were to occur, we would no longer have rights to the applicable intellectual property and, in the case of a sublicense, if we were not able to secure our own direct license with the owner of the relevant rights, which it may not be able to do at a reasonable cost or on reasonable terms, it may adversely affect our ability to continue to develop and commercialize the product candidates incorporating the relevant intellectual property.
Disputes may arise regarding intellectual property subject to a licensing agreement, including:
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If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:
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Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. ObtainingChanges in patent law and enforcing patentsregulations in the biopharmaceutical industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time‑consuming and inherently uncertain. In addition, the America Invents Act,various countries or the AIA, has been enactedjurisdictions or changes in the United States, resultinggovernmental bodies that enforce them or changes in significanthow the relevant governmental authority enforces them may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future. We cannot predict future changes in the interpretation of patent laws or changes to thepatent laws that might be enacted into law by U.S. patent system.
An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first‑to‑file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The AIA and its
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implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Additionally,foreign legislative bodies. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard toSuch changes may materially affect our patents or patent applications and our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtainadditional patent protection in the future.
Confidentiality agreements with employeesWe may be unable to protect the confidentiality of our trade secrets and others may not adequately prevent disclosureknow-how.
In addition to patent protection, we rely on trade secret protection for our proprietary information, including, for example, certain aspects of our llama immunization and antibody affinity maturation approaches. However, trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our numerous licensors, collaborators and protect other proprietary information.suppliers.
We consider proprietary trade secrets, confidential know‑how and unpatented know‑how to be important to our business. We may rely on trade secrets or confidential know‑how to protect our technology, especially where patent protection is believed to be of limited value. However, trade secrets and confidential know‑how are difficult to maintain as confidential.
To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractorsadvisors and advisorspotential collaborators to enter into confidentiality agreements with us.agreements. Moreover, we put in place appropriate procedures to identify confidential material and restrict access to documentation. However, current or former employees, consultants, contractorsadvisors and adviserspotential collaborators may unintentionally or willfully disclose our confidential information to competitors despite these procedures or in violation of our confidentiality agreements. In addition, the need to share trade secrets and confidentiality agreements may not provide an adequate remedy inother confidential information increases the eventrisk that such trade secrets become known to our competitors or inadvertently incorporated into the technology of unauthorizedothers. Any disclosure, either intentional or unintentional, or misappropriation by third parties (such as through a cybersecurity breach) of confidential information. our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements.
Enforcing a claim that a third party illegally obtained illegally and is using trade secrets or confidential know‑how is expensive, time consumingtime-consuming and unpredictable. Thethe outcome is unpredictable, and the enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction. Furthermore,Moreover, if a competitorany of our trade secrets were to be lawfully obtained or independently developed any of our trade secrets,by a competitor or other third party, we would have no right to prevent such competitorthem from using that technology or information to compete with us, which could harm our competitive position. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.us.
Failure to obtain or maintain trade secrets or confidential know‑how trade protection could adversely affect our competitive position. Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful in obtaining such patent protection, our competitors could limit our use of our trade secrets or confidential know‑how.
Under certain circumstances, we may also decide to publish some know‑how to attempt to prevent others from obtaining patent rights covering such know‑how.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our consultants and employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these consultants and employees executed proprietary rights, non‑disclosure and non‑competition agreements in connection with such previous employment. Although we try to ensure that our consultants and employees do not use the proprietary information or know‑how of others in their work for us, we may be subject to claims that we or these consultants and employees have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such consultant’s or employee’s former employer, or have breached their non‑competition agreement. Litigation may be necessary to defend against these claims.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or
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products. Such a license may not be available on commercially reasonable terms or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non‑compliance with these requirements.
Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO, the European Patent Office and foreign patent agencies in several stages over the lifetime of the patent. The USPTO, the European Patent Office and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non‑compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non‑payment of fees and failure to properly legalize and submit formal documents. If we or our licensors or collaboration partners fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have an adverse effect on our business.
RisksRisk Factors Related to Ourargenx’s Organization and Operations
Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.
OurAs a global organization in a highly competitive and specialized industry, our success depends upon the continued contributions of our key management, scientific, medical and technical personnel, many of whom have been instrumental for us and have substantial experience with our therapiesproduct and related technologies. These key management individuals include the members of our boardBoard of directorsDirectors and executivesenior management including Tim Van Hauwermeiren, our co‑founder and Chief Executive Officer; Eric Castaldi, our Chief Financial Officer; Prof. Hans de Haard, our co‑founder and Chief Scientific Officer; Dr. Nicolas Leupin, our Chief Medical Officer; Torsten Dreier, our co‑founder and Chief Development Officer; Debbie Allen, our Senior Vice President of Business Development; and Dirk Beeusaert, our General Counsel.
Theteam. Difficulties in recruiting or the loss of key managers, and senior scientistsscientific, medical or technical personnel could delay our research and development activities. In addition, our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our abilityit may be difficult to attract and retain highly qualified management, scientific and medical personnel. personnel, particularly if we expand into fields that will require additional skills.
As a Dutch company listed on Euronext Brussels in addition to the NasdaqGlobal 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 our competitors. For example, the DCGCplaces 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
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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 and other challenges affecting the global economy, including the Russia-Ukraine conflict, 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.
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 may negatively impact our ability to conduct or complete clinical trials in the affected regions, which could adversely affect our business and financial performance. For example, a relevant minority of the patients in the ADDRESS trial of SC efgartigimod for pemphigus vulgaris (PF) and pemphigus foliaceus (PV) are participating in studies conducted in Ukraine or Russia. The U.S. Department of the Treasury’s Office of Foreign Assets Control has issued General License 6B, which authorizes “ongoing clinical trials and medical research activities”. 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; |
| ● | 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 |
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| ● | 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.
We face risks related to natural disasters and public health issues, such as the COVID-19 pandemic, that could negatively affect our business and financial condition.
Our business could be adversely impacted by the effects of catastrophic global events including natural disasters such as an earthquake, fire, hurricane, tornado, flood or significant power outage and pandemics, such as the COVID-19 pandemic.
For example, the manufacturing of all of our products and product candidates requires using cells which are stored in a cell bank. We have one master cell bank for each product manufactured in accordance with cGMPs. However, it is possible that we could lose multiple cell banks and have our manufacturing significantly impacted by the need to recruit new managers and qualified scientific personnel to developreplace these cell banks, which could materially adversely affect our business, prospects, financial condition and results of operations.
Public health issues could also negatively affect our business and financial condition. We operate and conduct our clinical trials globally, including in areas impacted by COVID-19 in North America, Europe, the PRC and Japan. We cannot presently predict the scope and severity of any potential future business shutdowns or disruptions as a result of COVID-19. 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 experience shutdowns, quarantines, or other business disruptions to stop the spread of a pandemic, it may impair our or our third-party partners’ ability to initiate clinical trials and recruit and retain patients, particularly if quarantine or travel restrictions impede healthcare provider or patient movement, impact the usability of the data due to treatment interruptions and require protocol amendments. 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. In addition, if we expand into fieldsand/or one of our partners elect not to move forward with some or all of our clinical programs as a result of the COVID-19 pandemic or otherwise, we would not be entitled to some or all of the future payments which we are eligible to receive under the collaboration agreement with such partner.
The COVID-19 pandemic has also impacted third parties in a number of different ways. For example, we were informed by our drug substance and drug product manufacturing partners about potential limitations in the availability of critical manufacturing materials due to the demand outweighing the available manufacturing capacity for these materials and prioritizations imposed by the U.S. government on the manufacturing of COVID-19 vaccines and therapeutics. Moreover, as of the date of this Annual Report, the FDA is subject to ongoing travel restrictions that will require additional skills. Our inabilityimpact FDA oversight operations. Should the FDA determine that an inspection is necessary for approval of a marketing application and an inspection cannot be completed during the review cycle due to attractrestrictions on travel, the FDA has stated that it generally intends to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be completed. While the number of FDA inspection-related delays decreased in 2022, there is a risk that such delays may occur again. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and retain these key personsmay experience delays in their regulatory activities. Such restrictions and delays 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.
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We expect to expandmay encounter difficulties efficiently managing our growth and our increasing development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We have grown significantly in the number of employees and scope of operations over recent years and expect to experience significant growth in the number of our employees and the scope of our operations also in the near future, particularly in the areas of drug research, drug development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. In particular, we must efficiently leverage our own sales and marketing capabilities in order to launch or market our products candidates effectively.
Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansionOur limited financial, manufacturing and management resources, could cause us to forgo or delay the pursuit of our operations may leadopportunities with potential product candidates that later prove to significant costshave greater market potential, fail to capitalize on viable commercial products or profitable market opportunities or relinquish rights to such product candidates through collaborations, licensing or royalty arrangements in circumstances where it would have been more advantageous for us to retain sole development and may divert our management and business development resources.commercialization rights. Any inability to manage growth could delay the execution of our business plansstrategic objectives or disrupt our operations.
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We may not be able to integrate efficiently or achieve the expected benefits of any acquisitions of complementary businesses, product candidates or technologies.
Since our inceptionoperations, which in 2008, we have grown organically without any acquisitions. Should we in the future contemplate to acquire any complementary business, product candidates or technologies, our ability to integrate and manage acquired businesses, product candidates or technologies effectively will depend upon a number of factors including the size of the acquired business, the complexity of any product candidate or technology and the resulting difficulty of integrating the acquired business’s operations, if any. Our relationship with current employees or employees of any acquired business may become impaired. We may also be subject to unexpected claims and liabilities arising from such acquisitions. These claims and liabilities could be costly to defend, could be material to our financial position and might exceed either the limitations of any applicable indemnification provisions or the financial resources of the indemnifying parties. There can also be no assurance that we will be able to assess ongoing profitability and identify all actual or potential liabilities of a business, product candidate or technology prior to its acquisition. If we acquire businesses, product candidates or technologies that result in assuming unforeseen liabilities in respect of which it has not obtained contractual protections or for which protection is not available, thisturn could materially adversely affectharm our business prospects, financial condition and results of operations.prospects.
Our business is subject to economic, political, regulatory and other risks associated with international operations.
Our business is subject to risks associated with conducting business internationally. Accordingly, our future results could be harmed by a variety of factors, including:
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We have obtained significant funding from agencies of the government of the Flemish region of Belgium and have benefited from certain research and development incentives.incentives in Belgium, which may be re-evaluated if our shareholder base changes significantly. The taxBelgian authorities may challenge our eligibility for or our calculation of such incentives.
We have contracted over the past year numerous funding agreements with agencies of the Flemish government to partially finance our research and development programs. These funding agreements are subject to various criteria linked to employment and investment in the Flemish region of Belgium. We have committed to establish our operational site in the Flemish region, which must remain our major effective operational site, and to maintain our site and all our existing activities, including research and development in the Flemish region. Similarly, our funding agreement with one such agency of the Flemish government requires us to maintain substantial research and development activities in the Flemish region. Such undertakings restrict our ability to choose the most convenient or cost‑effective location of our premises.
If we were to breach these contractual obligations, we may be held liable by the agencies of the Flemish government with which we have funding agreements for any damage incurred by the such agencies resulting from the breach of contract and we could be required to reimburse in full the subsidies granted by such agencies.
Further, pursuant to the general terms of each grant, certain Flemish agencies are entitled to re‑evaluate the subsidies granted to us in case of a fundamental change in our shareholding base, which is not defined in the general terms, but we believe would involve a change of control of us. Any such reevaluation could negatively impact the funding that we receive or have received from the Flemish agencies.
The research and development incentives from which we have benefited asAs a company active in research and development in Belgium, we have benefited from certain research and development tax incentives, in particular a tax credit and a payroll withholding tax exemption. The tax credit is calculated as a percentage of qualifying investments in research and development; it can be offset against Belgian corporate income tax due.and is refunded to us in cash after five years to the extent it could not be offset. The excess portion may be refunded atpayroll tax exemption results in a reduction of the end of a five‑year fiscal periodpayroll cost for the Belgianhighly qualified personnel engaged in research and development incentive.projects. We also expect to benefit from the Belgian innovation income deduction, which allows net profits attributable to revenue from among others patented products (or products for which the patent application is pending) to be taxed at a lower effective tax rate than other revenues. The research and development incentives are both calculated based on the amount of eligible research and development expenditure. Therelevant 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, certainsuch tax reductions or deductions in respect of our research and development activitiesincentives 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 significant impact on our results of operations and future cash flows. In case of a change of control of the Company, we could be exposed to the risk of losing the unused tax credit and innovation income deduction. Furthermore, if the Belgian government decidelegislator decides to eliminate, or change the conditions for claiming, such tax incentives, or reduce the scope or the rate of, the research and development incentive benefit, eithersuch incentives, any of which it could decide to do at any time, our results of operations could be adversely affected.
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Exchange rate fluctuations or abandonment of the euro currency may materially affect our results of operations and financial condition.
Due to the international scope of our operations, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the U.S. dollar, British pound and Swiss francs. Our functional currency is the euro and the majority of our operating expenses are paid in euros, but we also receive payments from our main business partners AbbVie and Shire in U.S. dollars and we regularly acquire services, consumables and materials in U.S. dollars, Swiss francs and British pounds. Further, potential future revenue may be derived from abroad, particularly from the United States. As a result, our business and share price may be affected by fluctuations in foreign exchange rates between the euro and these other currencies, which may also have a significant impact on our reported results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.
In addition, the possible abandonment of the euro by one or more members of the European Union could materially affect our business in the future. Despite measures taken by the European Union to provide funding to certain European Union member states in financial difficulties and by a number of European countries to stabilize their economies and reduce their debt burdens, it is possible that the euro could be abandoned in the future as a currency by countries that have adopted its use. This could lead to the re‑introduction of individual currencies in one or more European Union member states, or in more extreme circumstances, the abandonment of the euro or the dissolution of the European Union. The effects on our business of a potential dissolution of the European Union, the exit of one or more European Union member states from the European Union or the abandonment of the euro as a currency, are impossible to predict with certainty, and any such events could have a material adverse effect on our business, financial condition and results of operations
Recent developments relating to the United Kingdom’s referendum vote in favor of withdrawal from the European Union could adversely affect us.
The United Kingdom held a referendum on June 23, 2016 in which a majority voted for the United Kingdom’s withdrawal from the European Union, or Brexit. As a result of this vote, on March 29, 2017 the United Kingdom officially started the separation process and negotiations are expected to commence to determine the terms of the United Kingdom’s withdrawal from the European Union as well as its relationship with the European Union going forward, including the terms of trade between the United Kingdom and the European Union. The effects of Brexit have been and are expected to continue to be far‑reaching. Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally and could continue to contribute to instability in global financial and foreign exchange markets. Brexit could also have the effect of disrupting the free movement of goods, services and people between the United Kingdom and the European Union; however, the full effects of Brexit are uncertain and will depend on any agreements the United Kingdom may make to retain access to European Union markets.
In addition, we expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace. If the United Kingdom were to significantly alter its regulations affecting the pharmaceutical industry, we could face significant new costs. It may also be time‑consuming and expensive for us to alter our internal operations in order to comply with new regulations. Altered regulations could also add time and expense to the process by which our product candidates receive regulatory approval in the United Kingdom and European Union. Similarly, it is unclear at this time what Brexit’s impact will have on our intellectual property rights and the process for obtaining, maintaining and defending such rights. It is possible that certain intellectual property rights, such as trademarks, granted by the European Union will cease being enforceable in the United Kingdom absent special arrangements to the contrary, and we may be required to refile our trademarks and other intellectual property applications domestically in the United Kingdom. As a result of the Brexit, other European countries may seek to conduct referenda with respect to their continuing membership in the European Union. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, we cannot be certain of the full extent to which Brexit could adversely affect our business, results of operations and financial condition.
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We are exposed to unanticipated changes in tax laws and regulations, adjustments to our tax provisions, exposure to additional tax liabilities, or forfeiture of our tax assets.
The determination of our provision for income taxes and other tax liabilities requires significant judgment, including the adoption of certain accounting policies and our determination of whether our deferred tax assets are, and will remain, tax effective.fully available in future periods. We cannot guarantee that our interpretation of applicable tax laws or our structure will not be questioned by the relevant tax authorities, or that the relevant tax laws and regulations, or the interpretation thereof, including through tax rulings, by the relevant tax authorities, will not be subject to change. Any adverse outcome of such a review or change in law may lead to adjustments in the amounts recorded in our financial statements and could have a materially adverse effect on our operating results and financial condition.
We are subject to laws and regulations on tax levies and other charges or contributions in different countries, including transfer pricing and tax regulations for the compensation of personnel and third parties. Dealings between current and former group companies as well as additional companies that may form part of our group in the future are subject to transfer pricing regulations, which may be subject to change and could adversely affect us. Compliance with these laws and regulations will be more challenging as we expand our international operations,
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including in connection with potential approvals of our products and product candidates in Europe, the U.S. and elsewhere.
Our effective tax rates could be adversely affected by changes in tax laws, treaties and regulations both internationally and domestically, or the interpretation thereof by the relevant tax authorities in countries where we have material operations, including changes to the patentBelgian innovation income deduction, possible changes to the corporate income tax base, wage withholding tax incentive for qualified research and development personnel in Belgium andor to other tax incentives and the implementation of new tax incentives. A successful challenge to our qualifications for and application of these tax incentives such asby the innovation deduction.tax authorities in Belgium or other country where we have material operations would have a significant impact on our effective tax rate and on our tax assets. An increase of the effective tax rates could have an adverse effect on our business, financial position, results of operations and cash flows.
On December 14, 2022, the Council of the EU adopted Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (Pillar Two Directive). The Pillar Two Directive should be implemented in the EU Member States’ national law by December 31, 2023. If the Pillar Two Directive is implemented under domestic laws in any of the jurisdictions in which the Group operates, or via international treaties entered into between such jurisdictions, the Pillar Two Directive may have an impact on the Group’s effective tax rate as well as increase the Group’s tax compliance costs incurred to track and collect such taxes. Based on current information, we expect that the Group could become subject to the Pillar Two Directive and implementing domestic laws as early as 2025. However, whether the Pillar Two Directive will have an impact on the Group’s tax liabilities and operations cannot be determined accurately and remains uncertain.
In addition, we may not be able to use, or changes in tax regulations may affect the use of, certain unrecognized tax assets or credits that we have built over the years. For instance, as of December 31, 2017, we had €113.6 million of consolidatedhave considerable material tax loss carry forwards. In general,assets in Belgium and some of these tax loss carry forwardsassets may be forfeited in whole, or in part, as a result of various transactions, including corporate reorganizations or transactions relating to our shareholding structure, or their utilization may be restricted by statutory law in the relevant jurisdiction. Any corporate reorganization by us or any transaction relating to our shareholding structure may result in partial or complete forfeiture of tax loss carry forwards. For instance, under Belgian law, argenx BVBA may lose its tax loss carry forwards in case of a change of control, through an acquisition or otherwise, not meeting legitimate financial or economic needs as well as in case of a tax neutral reorganization, such as a merger or a demerger, involving argenx BVBA. The tax burden would increase if profits, if any, could not be offset against tax loss carry forwards. As such, our redomiciliation as described in “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation—Transfer of Our Registered Office from the Netherlands to Belgium,” will have no impact on the tax loss carry forwards of argenx BVBA. For a description of the tax impact of our restructuring, see the risk factor below and “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation.”
Furthermore, the Belgian government recently announced its intention to limit the use of tax loss carry forwards as of January 1, 2018. If adopted, this rule would result in the tax loss carry forwards (and certain other tax deductions) being no longer tax deductible against 30% of our profits exceeding the first €1.0 million.
The restructuring and its contemplated tax treatment is subject to approval by the Belgian tax authorities.
We have engaged with the Dutch and Belgian tax authorities in order to reach an agreement on the tax effects of our proposed restructuring. The Dutch tax authorities have confirmed in a ruling dated April 20, 2017 that they agree (i) that, for Dutch corporate income tax purposes, the economic ownership of our intellectual property rights was transferred to argenx BVBA on August 28, 2009 and (ii) that the indemnification payment to be paid by argenx BVBA to argenx SE entails an arm’s length consideration for (a) the value of economic ownership of our intellectual property rights at that time, (b) accrued interest thereon and (c) related transfer pricing adjustments. See “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation.”
The Belgian tax authorities have not yet issued a binding ruling confirming these points and may take a different position. The Belgian tax authorities may consider that the economic ownership of the intellectual property rights will not be transferred to argenx BVBA until the completion of our restructuring. The Belgian tax authorities may
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not accept the amount of the indemnification payment to be paid by argenx BVBA to argenx SE as agreed upon with the Dutch tax authorities and may disagree with its arm’s length character and its qualification as a deductible cost for argenx BVBA. If the Belgian tax authorities do not accept the qualification of the indemnification payment as a deductible cost for argenx BVBA, we will not be allowed to treat the amount of €80 million as a deductible cost and would thus not be able to offset this amount against potential taxable profits in the future. See “Item 4.A.—Overview of Our Restructuring and Anticipated Redomiciliation.” In addition, as long as our redomiciliation is not successfully completed, we will not qualify for a recently introduced Belgian tax scheme under which argenx SE may transfer losses to argenx BVBA (subject to certain conditions and limitations), which scheme could result in a reduction of argenx BVBA’s corporate tax due.
If our redomiciliation is not successfully completed, we will not be able to reduce our compliance burden and costs.
We face a compliance burden from an organizational and regulatory perspective as a European public company with limited liability under Dutch law with our shares listed on Euronext Brussels and with the majority of our operations in Belgium. Accordingly, depending on the entry into force of major changes to Belgian corporate law, we may seek shareholder approval for our redomiciliation from the Netherlands to Belgium. The redomiciliation is expected to be implemented through a series of complex cross‑border steps, including obtaining shareholder and governmental approvals, all of which are beyond our control. See “Item 4.A.— Overview of Our Restructuring and Anticipated Redomiciliation.” We cannot assure you that we will receive these approvals, and we may be unable to implement our redomiciliation.
If our redomiciliation is not successfully completed, we will remain a European public company with limited liability under Dutch law. In such event, we will not be able to reduce our compliance burden. Our legal and financial compliance costs will remain higher and some activities will continue to be more time‑consuming and costly than if we would be a company incorporated under Belgian law. For example, if our redomiciliation is not successfully completed, we would continue to need the services provided by our independent auditors as required under both Dutch law in respect of argenx SE and Belgian law in respect of argenx BVBA and would continue to owe increased fees in respect thereof. In addition, if our redomiciliation is not successfully completed, we would need to continue leasing our office in Breda, the Netherlands.
Risks Related to the ADSs
The price of theour ADSs and ordinary shares may be volatile and may fluctuate due to factors beyond our control. An active public trading market may not be sustained. And you may not be able to resell the ADSs at or above the public offering price.
The trading price of the ADSs and the ordinary shares has fluctuated, and is likely to continue to fluctuate, substantially. The trading price of those securities depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. In addition, although the ADSs are listed on the Nasdaq Global Select Market and our ordinary shares are listed on Euronext Brussels, we cannot assure you that a trading market for those securities will be maintained.
Since the ADSs were sold at our initial U.S. public offering in May 2017 at a price of $17.00 per ADS, the price per ADS has ranged as low as $17.33 and as high as $87.00 through March 20, 2018. During this same period, ordinary share prices have ranged from as low as €15.15 to as high as €70.50. The market price of the ADSs may fluctuate significantly due to a variety of factors, many of which are beyond our control, including:
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These and other market and industry factors may cause the market price and demand for the ADSs and ordinary shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs or ordinary shares and may otherwise negatively affect the liquidity of the ADSs and ordinary shares. In addition, the stock marketmarkets 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 2022, the closing sales price of our ADSs representing our ordinary shares on Nasdaq fluctuated greatly, ranging from $254.45 to $402.31. 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, which may limit or prevent investors from readily selling their ADSs or ordinary shares and may otherwise negatively affect the liquidity of our ADSs and ordinary shares. Sales of a substantial number of ADSs or ordinary shares in the public market, or the perception that these sales might occur, could depress the market price of ADSs and ordinary shares and could impair the market price of our securities or our ability to raise capital through the sale of additional equity securities.
In addition, an active public trading market for our ADSs or our ordinary shares may not be sustained. Further, fluctuations in exchange rates may also impact the price of our ADSs and ordinary shares which may result in heavy trading by investors seeking to exploit such differences, or impact the proceeds holders receive.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to comply with applicable regulations could be impaired, and the trading price of our ADSs may be negatively impacted.
We will continue to incur, increased costs as a result of operating as a U.S.‑listed public company, and our board of directors will beare required to devote substantial time to new compliance initiatives andcomply with various corporate governance practices.
As a public company, and particularly after we no longer qualify as an emerging growth company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a public company listed on Euronext Brussels. We are a Dutch European public company with limited liability (Societas Europaea or SE). If our redomiciliation is completed, we will be a Belgian European public company with limited liability (Societas Europaea or SE). The Sarbanes‑Oxleyfinancial requirements under the Sarbanes-Oxley Act of 2002, the Dodd‑FrankDodd-Frank Wall Street Reform and Consumer Protection Act, the Nasdaq listing 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 will be required to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time‑consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.
However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
regulations. Pursuant to Section 404 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002, or Section 404, we are
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required to furnish a report by our boardmanagement on, among other things, the effectiveness of directors on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to includereporting and an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 withinUndetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the prescribed period, we are engaged in a processexpense of remediation. Moreover, any failure to document and evaluate ourmaintain internal control over financial reporting which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over
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financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or moreany material weaknesses itor significant deficiency thereover, could result in an adverse reaction in the financial markets due to a loss of confidenceinvestors’ in the accuracy, completeness and reliability of our financial statements.
Certain significant shareholders own a substantial number of our securities and as a result, may be ablestatements, subject us to exercise control over us, including the outcome of shareholder votes. These shareholders may have different interests from ussanctions or your interests.
We have a number of significant shareholders. For an overview of our current significant shareholders, please see “Item 7.A.—Major Shareholders.”
Currently, we are not aware that any of our existing shareholders have enteredinvestigations, or will enter into a shareholders’ agreement with respect to the exercise of their voting rights. Nevertheless, depending on the level of attendance at our general meetings of shareholders, or the General Meeting, these significant shareholders could, alone or together, have the ability to determine the outcome of decisions taken at any such General Meeting. Any such voting by these shareholders may not be in accordance with our interests or those of our shareholders. Among other consequences, this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of the ADSs.
Future sales, or the possibility of future sales, of a substantial number of our securities could adversely affect the price of the shares and dilute shareholders.
If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our securities in the public market,impact the trading price of the ADSs could decline significantly. In addition, ordinary shares subject to outstanding options under our equity incentive plans and the ordinary shares reserved for future issuance under our equity incentive plan will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. In addition, we intend to register all ordinary shares that we may issue under our equity compensation plans. Once we register these ordinary shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and lock‑up agreements.ADSs.
ProvisionsHolders of our Articles of Association or Dutch corporate law, or, following our redomiciliation, our Belgian Articles of Association or Belgian corporate law, might deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the then board of directors.
Provisions of our Articles of Association may make it more difficult for a third party to acquire control of us or effect a change in our board of directors. We have adopted several provisions that may have the effect of making a takeover of our company more difficult or less attractive. These provisions include a requirement that certain matters, including an amendment of our Articles of Association, may only be brought to our shareholders for a vote upon a proposal by our board of directors. If we complete our redomiciliation, Belgian corporate law will allow for various protective measures. In addition, several provisions of Belgian corporate law and certain other provisions of Belgian law, such as obligations to disclose significant shareholdings and merger control regulations, may apply to us following completion of our redomiciliation and may make an unsolicited tender offer, merger, change in management or other change in control of our company more difficult. These provisions could discourage potential takeover attempts that other shareholders may consider to be in their best interest and could adversely affect the market price of our securities. These provisions may also have the effect of depriving ADS holders of the opportunity to sell their ADSs at a premium. In addition, the board of directors of Belgian companies may in certain instances, and subject to prior authorization by the shareholders, deter or frustrate public takeover bids through dilutive issuances of equity securities (pursuant to the authorized capital) or through share buy‑backs. Although the authorization of the board of directors to increase a company’s share capital through contributions in kind or in cash with restriction or limitation of the preferential subscription right of the existing shareholders is suspended upon the notification to the company by the FSMA of a public takeover bid on the securities of the company, the company’s shareholders at the General Meeting can, under certain conditions, expressly authorize the board of directors to increase the capital of the company by issuing shares in an amount of not more than 10% of the existing shares of the company at the time of such a public takeover bid. If
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Belgian corporate law is amended, these and/or other provisions may have a similar effect. See “Management Upon Redomiciliation.”
Fluctuations in exchange rates may increase the risk of holding ADSs and ordinary shares.
Due to the international scope of our operations, our assets, earnings and cash flows are influenced by movements in exchange rates of several currencies, particularly the euro, U.S. dollar, British pound and Swiss franc. Our functional currency is the euro, and the majority of our operating expenses are paid in euros, but we also receive payments from our main business partners AbbVie and Shire in U.S. dollars, and we regularly acquire services, consumables and materials in U.S. dollars, Swiss francs and British pounds. Further, potential future revenue may be derived from abroad, particularly from the United States. As a result, our business and the price of the ADSs and ordinary shares may be affected by fluctuations in foreign exchange rates between the euro and these other currencies, which may also have a significant impact on our reported results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.
Moreover, because our ordinary shares currently trade on Euronext Brussels in euros, and the ADSs will trade on the Nasdaq Global Select Market in U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and the euro may result in temporary differences between the value of the ADSs and the value of our ordinary shares, which may result in heavy trading by investors seeking to exploit such differences.
In order to finance the growth of our activities in the United States, notably with the opening of our U.S. office in October 2017, we have invested in U.S. dollar denominated cash deposit accounts and in current financial assets with a significant portion of the proceeds from our initial U.S. public offering completed in May 2017. Depending on the exchange rate fluctuations of the U.S. dollar, this may result in unrealized exchange rate losses which may impact negatively the reporting of our cash, cash equivalents and current financial assets at reporting dates when translating to euros these U.S. denominated cash deposits accounts and current financial assets. In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the euro, the U.S. dollar equivalent of the proceeds that a holder of the ADSs would receive upon the sale on Euronext Brussels of any ordinary shares withdrawn from the depositary and the U.S. dollar equivalent of any cash dividends paid in euros on our ordinary shares represented by the ADSs could also decline.
Holders of ADSs are not treated as holders of our ordinary shares and may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.
HoldersADSs are transferable on the books of the depositary. However, holders of ADSs are not treated as holders of our ordinary shares, unless they withdraw the ordinary shares underlying their ADSs in accordance with the deposit agreement and applicable laws and regulations. The depositary is the holder of the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as holders of our ordinary shares, other than the rights that they have pursuant to the deposit agreement. See “Item 12.D.—American Depositary Shares.”
Holders of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.
ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to the right of ADS holders to cancel their ADSs and withdraw the underlying ordinary shares.reason. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our ordinary shares. In addition, ADS holders may not be able to cancel their ADSs and withdraw the underlying ordinary shares when they owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.
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You willour ADSs do not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise yourtheir right to vote.
Except as described in this annual report and theAnnual Report or any deposit agreement, holders of the ADSs will not be able to exercise voting rights attaching to the ordinary shares represented by the ADSs. Under the terms of the deposit agreement, holders of the ADSs may instruct the depositary to vote the ordinary shares underlying their ADSs. Otherwise,agreements, holders of ADSs willare not be able to exercise their right to votetreated as our shareholders unless they withdraw the ordinary shares underlying their ADSs toADSs. The depository, 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 itstheir name atsat midnight (Central European Time) at the end of the twenty‑eighthtwenty-eighth 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 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.
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We do not expect to pay cash dividendsare 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 foreseeable future.laws of U.S. jurisdictions.
We have not paid any cash dividends sinceare a Dutch European public company with limited liability. The rights of shareholders and the responsibilities of members of our incorporation. Even if future operations lead to significant levelsBoard 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 dividendsDirectors may be made only if our shareholders’ equity exceedsdifferent from the sumrights and obligations of our paid‑shareholders in and called‑up share capital pluscompanies governed by the reserves required to be maintained bylaws of U.S. jurisdictions.
As a result of these differences between Dutch corporate law or byand our Articles of Association. If we completeAssociation, on the one hand, and the U.S. federal and state laws, on the other hand, in certain instances, our redomiciliation, under Belgian corporate law, we may pay dividends only up to an amount equal to the excessshareholders and holders of our shareholders’ equity over the sumADSs could receive less protection than they would as shareholders or ADS holders of (i) paid‑up or called‑up share capital, and (ii) reserves not available for distribution pursuant to law ora listed U.S. company.
Provisions of our Belgian Articles of Association based onmight deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the most recent statutory audited financial statements, prepared in accordance with the generally accepted accounting principles in Belgium, or Belgian GAAP. In addition, under Belgian law, prior to distributing dividends, we must allocate an amountthen board of 5%directors.
Provisions of our annual net profit on an unconsolidated basisArticles of Association may make it more difficult for a third party to acquire control of us or effect a legal reservechange in our unconsolidated financial statements until such reserve equals 10%Board of Directors. We have adopted several provisions that may have the effect of making a takeover of our share capital. If Belgian corporate law is amended, these and/Company more difficult or less attractive. These provisions could discourage potential takeover attempts that other provisionsshareholders may contain similar restrictions. See “Description of Share Capitalconsider to be in their best interest and Group Structure Upon Completion of Our Redomiciliation.” Accordingly, investors cannot rely on cash dividend income from ADSs and any returns on an investment incould adversely affect the ADSs will likely depend entirely upon any future appreciation in themarket price of the ADSs.our securities.
Holders of our ordinary shares outside the Netherlands, or, if we complete our redomiciliation, Belgium, and ADS holders of ADSs may not be able to exercise preemptive rights.pre-emptive rights or preferential subscription rights, respectively.
In the event of an increase in our share capital, holders of our ordinary shares are generally entitled under Dutch law to full preemptivepre-emptive rights, unless these rights are excluded either by a resolution of the shareholders at thea General Meeting, or by a resolution of the boardBoard of directorsDirectors (if the boardBoard of directorsDirectors has been designated by the shareholders at thea General Meeting for this purpose). If we complete our redomiciliation, in the event of a share capital increase for cash by way of the issue of new shares, or in the event of an issue of shares, convertible bonds or warrants, or equity interests, all our shareholders will generally have a preferential subscription right unless these rights are restricted or canceled either by a resolution of the shareholders at the General Meeting or by a resolution of our board of directors in Belgium, or our Belgian Board, (if the Belgian Board has been authorized by the shareholders at the General Meeting for
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this purpose). See “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation—Preferential Subscription Rights.” If Belgian corporate law is amended, these and/or similar provisions may contain similar rights. See “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation.” However, making preemptivepre-emptive rights available to holders of ordinary shares or ADSs representing ordinary shares also requires compliance with applicable securities laws in the jurisdictions where holders of those securities are located, which we may be unable or unwilling to do. In particular, holders of ordinary shares or ADSs located in the United States and holders of the ADSsU.S. would not be able to participate in a preemptivepre-emptive rights offering unless we registered the securities to which the rights relate under the Securities Act or an exemption from the registration requirements of that Act is available.requirements. In addition, ADS holders would not be able to participate in a preemptivepre-emptive rights offering unless we made arrangements with the depositary to extend that offering to ADS holders of ADSs, which we are not required to do.
We are a Dutch European public company with limited liability (Societas Europaea or SE). If we complete our redomiciliation, we will be a Belgian European public company with limited liability (Societas Europaea or SE). The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.
We are a Dutch European public company with limited liability (Societas Europaea or SE). If we complete our redomiciliation, we will be a Belgian European public company with limited liability (Societas Europaea or SE). Our corporate affairs are, or will be, governed by our Articles of Association and by the laws governing companies incorporated in the Netherlands, and if we complete our redomiciliation, by our Belgian Articles of Association and by the laws governing companies incorporated in Belgium, respectively. The rights of shareholders and the responsibilities of members of our board of directors or if our redomiciliation is completed our Belgian Board may be different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Dutch law to, and the Belgian Board may under Belgian law, consider the interests of our company, our shareholders, our employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder. See “Item 16G.—Corporate Governance” and “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation—Comparison of Belgian Corporate Law and U.S. Corporate Law—Corporate Governance.”
We are not obligated to, and do not comply with, all the best practice provisions of the Dutch Corporate Governance Code, and we do not expect to comply with all principles and provisions of the Belgian Corporate Governance Code if we complete our redomiciliation,DCGC, which may affect your rights as a shareholder.shareholders’ rights.
As a Dutch European public company with limited liability, (Societas Europaea or SE), we are subject to the Dutch Corporate Governance Code dated December 8, 2016, which is in force as of the financial year starting on or after January 1, 2017, or the DCGC. The DCGC contains both principles and best practice provisions for board of directors, management boards, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC applies to all Dutch companies listed on a regulated market, including Euronext Brussels. The principles and best practice provisions apply to our board of directors (in relation to role and composition, conflicts of interest and independency requirements, board committees and remuneration), shareholders and the General Meeting (for example, regarding anti‑takeover protection and our obligations to provide information to our shareholders) and financial reporting (such as external auditor and internal audit requirements). We do not comply with all the best practice provisions of the DCGC. As a Dutch company, we are required to disclose in our annual report, filed in the Netherlands, whether we comply with the provisions of the DCGC. If we do not comply with the provisions of the DCGC (for example, because of a conflicting Nasdaq requirement or otherwise), we must list the reasons for any deviation from the DCGC in our annual report. See “Item 16G.—Corporate Governance.”
If we complete our redomiciliation, as a Belgian European public company with limited liability (Societas Europaea or SE), we will be subject toreport filed in the Belgian Corporate Governance Code of March 12, 2009, or the Belgian Corporate Governance Code. The Belgian Corporate Governance Code contains principles, provisions and guidelines for the management and control of companies. The Belgian Corporate Governance Code applies to all Belgian companies listed on a regulated market, including Euronext Brussels. If we complete our redomiciliation, the principles, provisionsNetherlands.
and guidelines will apply to the Belgian Board (in relation to role and composition, conflicts of interest and independency requirements, board committees and remuneration), our executive management (in relation to role and composition, conflicts of interest and remuneration) and shareholders and the General Meeting (for example, regarding their role and our obligations to provide information to our shareholders). We do not expect to comply with all the provisions and guidelines of the Belgian Corporate Governance Code. If we complete our redomiciliation, under the Belgian Corporate Governance Code, as a Belgian company, we will be required to include a corporate governance statement in our annual report describing whether we comply with all provisions of the Belgian Corporate Governance Code. If we do not comply with the provisions of the Belgian Corporate Governance Code (for example, because of a conflicting Nasdaq requirement or otherwise), we must explain our reasons for any deviation from the Belgian Corporate Governance Code in this corporate governance statement. See “Description of Share Capital and Group Structure Upon Completion of Our Redomiciliation—Comparison of Belgian Corporate Law and U.S. Corporate Law—Belgian Corporate Governance Code.” If the Belgian Corporate Governance Code is replaced, these and/or other provisions will apply. See “Management Upon Redomiciliation.”
This may affect your rights as a shareholder and you may not have the same level of protection as a shareholder in another Dutch or Belgian European public company with limited liability (Societas Europaea or SE) listed on a regulated market that fully complies with the DCGC or, respectively, the Belgian Corporate Governance Code, as applicable.
Claims of U.S. civil liabilities may not be enforceable against us.us or the members of our management and our Board of Directors.
We are incorporated under the laws of the Netherlands. If we complete our redomiciliation, we will be incorporated under the laws of Belgium. Substantially all of our assets are located outside the United States.U.S. The majority of the members of our board ofsenior management team and our directors reside outsideare not U.S. residents and we do not have significant assets in the United States.U.S. As a result, it may not be possible, or may be very difficult, for investors to effect service of process within the United StatesU.S. upon such persons or to enforce against them or us in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws.
The United States currently does not have a treaty There are no treaties between the U.S. with either the Netherlands or Belgium providing for
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the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States,U.S. based on civil liability, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in the Netherlands or Belgium. In order to obtainin Belgium unless the underlying claim was re-litigated before a judgment which is enforceable in the Netherlands, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim with aDutch or Belgian court of competent jurisdiction in the Netherlands. Such party may submit to the Dutch court the final judgment rendered by the U.S. court. If and to the extent that the Dutch court finds that the jurisdiction of the U.S. court has been based on grounds which are internationally acceptable and that proper legal procedures have been observed, the court of the Netherlandsjurisdiction. This will in principle, give binding effect to the judgment of the U.S. court, unless such judgment contravenes principles of public policy of the Netherlands. Dutch courts may deny the recognition and enforcement of punitive damages or other awards. Moreover, a Dutch court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages. Enforcement and recognition of judgments of U.S. courts in the Netherlands are solely governed by the provisions of the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering).
In order to obtain a judgment for the payment of money based on civil liability which is enforceable in Belgium, the judgment must be recognized and be declared enforceable by a Belgian court pursuant to the relevant provisions of the 2004 Belgian Code of Private International Law, or the PIL Code. Recognition or enforcement does not imply a review of the merits of the case and is irrespective of any reciprocity requirement. A U.S. judgment will, however, not be recognized or declared enforceable in Belgium if it infringes upon one or more of the grounds for refusal which are listed in article 25 of the PIL Code. In addition to recognition or enforcement, a judgment by a federal or state court in the United States against us may also serve as evidence in a similar action in a Belgian court if it meets the conditions required for the authenticity of judgments according to the law of the state where it was rendered. In addition, with regard to enforcements by legal proceedings in Belgium (including the recognition of foreign court decisions in Belgium), a registration tax at the rate of 3% of the amount of the judgment is payable by the debtor, if the sum of money which the debtor is ordered to pay by a Belgian court, or by a foreign court judgment that is either
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(i) automatically enforceable and registered in Belgium, or (ii) rendered enforceable by a Belgian court, exceeds €12,500. The registration tax is payable by the debtor. The creditor is jointly liable up to a maximum of one‑half of the amount the creditor recovers from the debtor. A stamp duty is payable for each original copy of an enforcement judgment rendered by a Belgian court, with a maximum of €1,450.
Baseddepend on the lackapplicable Dutch or Belgian national rules. In light of a treaty as describedthe above, U.S. investors may not be able to enforce against us or members of our board of directors or certain experts named herein who are residents of the Netherlands or Belgium or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.laws, against us, members of our management or our Board of Directors or certain experts named herein who are residents of the Netherlands, Belgium or countries other than the U.S.. In addition, there is doubt as to whether a Dutch or Belgian court would impose civil liability on us or the members of our management or of our Board of Directors in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction against us, our management or directors.
We areAs a foreign private issuer, and, as a result, we are not subjectexempt from certain rules under U.S. securities laws and are permitted to file less information with the SEC than a U.S. proxycompany.
As a “foreign private issuer” defined in the SEC’s rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non‑U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act,regulations, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10‑Q containing unaudited financial and other specified information, or current reports on Form 8‑K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20‑F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10‑K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers. However, wecompanies.
We are subject to Dutch laws and regulations and if we complete our redomiciliation, Belgian laws and regulations, with regard to such matters and intend tomatters. While we furnish quarterly unaudited financial information to the SEC on Form 6‑K.6-K, the information we furnish to the SEC is less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers.
As a foreign private issuer, and aswe are permitted by the listing requirements of Nasdaq, we rely onto adopt certain home country governance practices rather than the corporate governance requirements of Nasdaq. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.
We qualify asAs a foreign private issuer. As a result, in accordance with theissuer listed on Nasdaq, we are subject to corporate governance listing requirements of Nasdaq,standards. However, we are permitted to rely on home country governance requirements and certain exemptions thereunder rather than relying on the corporate governance requirements of Nasdaq. In accordance with Dutch law and generally accepted business practices, our Articles of Association do not provide quorum requirements generally applicable to General Meetings. To this extent, our practice varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one‑third of the outstanding voting stock. Although we must provide shareholders with an agenda and other relevant documents for the General Meeting, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands, thus our practice will vary from the requirement of Nasdaq Listing Rule 5620(b). In addition, we have opted out of certain Dutch shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity‑based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events. For an overviewthereunder. Certain of our corporate governance principles, see “Item 16G.—Corporate Governance.” In addition, if we complete our redomiciliation, these andpractices may differ significantly from other variations from the corporate governance requirements of Nasdaq may exist. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to these Nasdaq requirements.listing standards, as set forth in Item 16.G.“Corporate Governance.”
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We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.
We are a foreign private issuer, and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We may no longer be a foreign private issuer as of June 30, 2018 (the end of our second fiscal quarter in the fiscal year after our initial U.S. public offering), which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers as of January 1, 2018. In order to maintain our current status as a foreign private issuer, either (a) a majority of our ordinary shares must be either directly or indirectly owned of record by non‑residentsnon-residents of the United StatesU.S. or (b)(i) a majority of our executive officers or directors may not be U.S. citizens or residents, (ii) more than 50% of our assets cannot be located in the United StatesU.S. and (iii) our business must be administered principally outside the United States.U.S. As of March 16, 2018,February 1, 2023, we believe at least 50% of our outstanding ordinary shares were held by U.S. residents (assuming that all our ordinary shares represented by ADSs were held by residents of the United States)U.S.). If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules.
The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable toas a U.S. domestic issuer may be significantly higher than the costthose we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain 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.
We are an “emerging growth company,” andIf we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make the ADSs less attractive to investors.
We are an “emerging growth company,” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continuewere to be an “emerging growth company,” we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an “emerging growth company,” we are required to report only two years of financial results and selected financial data compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to the last day of the fiscal year ending after the fifth anniversary of our initial U.S. public offering, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our ordinary shares held by non‑affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our fiscal year‑end). We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractiveclassified as a result, there may be a less active trading market for the ADSs and the price of the ADSs may be more volatile.
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
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financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of the ADSs.
Our management is required to assess the effectiveness of our internal controls and procedures annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” for up to five years from the closing of our initial U.S. public offering. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
If securities or industry analysts cease coverage of us, or publish inaccurate or unfavorable research about our business, the price of the ADSs and our trading volume could decline.
The trading market for the ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If no or too few securities or industry analysts cover us, the trading price for the ADSs would likely be negatively affected. If one or more of the analysts who cover us downgrade the ADSs or publish inaccurate or unfavorable research about our business, the price of the ADSs would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for the ADSs could decrease, which might cause the price of the ADSs and trading volume to decline.
We do not anticipate being treated as a passive foreign investment company, or PFIC for U.S. federal income tax purposes, for the current taxable year, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to qualify as a PFIC, this could result in adverse U.S. tax consequences to certain U.S. holders.
Generally, if,If our Company is classified as PFIC for any taxable year, U.S. investors may be subject to adverse U.S. federal income tax consequences described under Item 10.E. “Taxation–Certain Material U.S. Federal Income Tax Considerations for U.S. Holders–Passive Foreign Investment Company Considerations.”Our Company will be a PFIC
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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,income.
We do not believe that 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, 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 statuswere classified as a PFIC depends onfor the composition of our income2022 taxable year and, the composition and value 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.”
Basedbased upon the expected value of our assets, including any goodwill, and the expected composition of our income and assets, we do not anticipate being treatedclassified as a PFIC with respect to the current2023 taxable year, and should not be treated as such for subsequent taxable years.year. However, our status as a PFIC is a fact‑intensivefactual determination made on an annual basis, and we cannot provide any assurances regarding our PFIC status for the current prior or future taxable years.
ITEM 4. INFORMATION ON THE COMPANY
| A. | HISTORY AND DEVELOPMENT OF THE COMPANY |
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Our legal and commercial name is argenx SE. We were incorporated under the laws of the Netherlands on April 25, 2008, as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid). From incorporation until August 28, 2009, our research and development activities were initially performed in the Netherlands, then Belgium, by argenx N.V. and its legal predecessors. Since August 28, 2009, all our research and development activities have been performed by our wholly owned subsidiary, argenx BV, under a license provided by argenx N.V. Throughout this time, argenx BV assigned all resulting intellectual property to argenx N.V. On May 28, 2014, we converted to a Dutch public company with limited liability (naamloze vennootschap). On April 26,
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2017, we converted to a Dutch European public company with limited liability (Societas Europaea or SE). On May 5, 2017, we transferred the legal ownership of all intellectual property rights of argenx SE to argenx BV, effective retroactively as of January 1, 2017. As a result, since January 1, 2017, (i) argenx BV holds all legal and economic ownership of our intellectual property rights, and (ii) the research and development agreement between argenx SE and argenx BV has been terminated.
Our official seat is in Rotterdam, the Netherlands, and our registered office is at Willemstraat 5, 4811 AH, Breda,Laarderhoogtweg 25, 1101 EB Amsterdam, the Netherlands. We are registered with the trade register of the Dutch Chamber of Commerce under number 24435214. Our European legal entity identifier number (LEI) is 7245009C5FZE6G9ODQ71. Our ordinary shares are listed on Euronext Brussels under ISIN Code NL0010832176 under the symbol “ARGX.” The ADSs are listed on the Nasdaq under the symbol “ARGX.” Our telephone number is +32 9 310 34 00.+31 (0) 10 70 38 441. Our website address is http://www.argenx.com. The information contained on, or that can be accessed through, ourThis website is not a part of, and shall not be incorporated by reference into,in this annual report. We have included our website address asAnnual Report. The SEC maintains an inactive textual reference only.Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The registered agent for service of process in the United StatesU.S. is C TCT Corporation System, with an address at 111 8th8th Avenue, New York, NY 10011.
Our actual capital expenditures for the years ended December 31, 2015, 20162022, 2021 and 20172020 amounted to €0.3$108.2 million, €0.9$121.4 million and €0.4$5.1 million respectively. These capital expenditures primarily consisted of a FDA priority review voucher (PRV) which the Company can use to obtain the priority review by the FDA for one of its future regulatory submissions or may sell or transfer to a third party, acquired in-process research and development, office and laboratory equipment and ITinformation technology equipment. We expect our capital expenditures to increase in absolute terms in the near term as we continue to advance our research and development programs and grow our operations.operations, including in connection with expanding the commercialization of VYVGART™ beyond the VYVGART Approved Countries (as defined above). We anticipate our capital expenditure in 20182023 to be financed from the cash flows from operating activities and cash reserves. For more information on our capital expenditures, see the section of this annual report titled “ItemItem 5.B.— “Liquidity and Capital Resources—Resources—Cash Flows—Flows—Operating and Capital Expenditure Requirements.Requirements.”
Overview of Our Restructuring and Anticipated Redomiciliation
Background
From our incorporation in 2008 until August 28, 2009, our research and development activities were performed in the Netherlands by argenx N.V. On August 28, 2009, we moved our research and development activities to Belgium for various business reasons. Accordingly, as of August 28, 2009, our wholly owned subsidiary, argenx BVBA, or the Belgian BVBA, has been performing all research and development activities under a license provided by argenx N.V. (since April 26, 2017, argenx SE) and has been assigning all resulting intellectual property rights to argenx N.V. As a consequence, argenx N.V. remained the legal owner of the intellectual property rights relating to our platform technologies.
The diagram below sets out our group structure and legal ownership of our intellectual property, or IP, rights as of December 31, 2016:
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Since all our research and development activities have been performed by the Belgian BVBA since August 28, 2009, we believe that value creation is not adequately aligned with our intellectual property ownership structures as required under the Base Erosion and Profit Shifting project of the Organization for Economic Co-operation and Development. Additionally, we face a compliance burden from an organizational and regulatory perspective, as a company incorporated and existing under Dutch law, while our shares are listed on Euronext Brussels. Accordingly, we have implemented a business restructuring, as described below, and we intend to seek shareholder approval to reorganize under the laws of Belgium.
Restructuring
In view of the above considerations, a business restructuring has been implemented, which we refer to as the restructuring, which involves two principal steps as described below.
Step 1: Conversion of argenx N.V. to argenx SE
In order to allow for the transfer of our registered office from the Netherlands to Belgium, we have converted to a Dutch European public company with limited liability (Societas Europaea or SE), since there is currently no clear legal framework under Dutch law for such transfer of registered office by a Dutch public company with limited liability (naamloze vennootschap). However, it is possible for a European public company with limited liability (Societas Europaea or SE) to cross- border transfer its registered office pursuant to the relevant provisions of the European Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (Societas Europaea or SE), or the SE regulation. At our General Meeting held on April 26, 2017, our shareholders approved our conversion into a Dutch European public company with limited liability (Societas Europaea or SE) pursuant to a notarial deed of conversion and amendment, which notarial deed was executed on the same date.
The diagram below sets out our group structure and legal ownership of intellectual property rights effective as of April 26, 2017:
Step 2: Transfer of ownership of intellectual property rights to the Belgian BVBA
On May 5, 2017, we transferred the legal ownership of all intellectual property rights of argenx SE to the Belgian BVBA, effective as of January 1, 2017, resulting in the Belgian BVBA holding all legal and economic ownership of our intellectual property rights. As a consequence, the research and development agreement between argenx SE and the Belgian BVBA has been terminated effective as of January 1, 2017.
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The diagram below sets out our group structure and legal ownership of intellectual property rights following completion of the transfer of ownership of intellectual property rights to the Belgian BVBA, as of the date of this annual report:
Transfer of Our Registered Office from the Netherlands to Belgium
Following our restructuring, and also in view of the above considerations, we intend to transfer our corporate seat located in Rotterdam, the Netherlands and our registered office located at Willemstraat 5, 4811 AH, Breda, the Netherlands, to Industriepark Zwijnaarde 7, Building C, 9052 Zwijnaarde (Ghent), Belgium, or our redomiciliation. If we complete our redomiciliation, we will no longer have any presence in the Netherlands. We may seek shareholder approval to reorganize under the laws of Belgium, and in light of the contemplated legislative changes in Belgium, we may postpone our redomiciliation until these changes have entered into force. On July 20, 2017, the Belgian council of ministers approved a draft new Belgian companies code, which will replace the current Belgian Companies Code and will contain major changes in Belgian corporate law. Following the approval by the Belgian council of ministers, the draft new Belgian companies code has been submitted for review by the Belgian Council of State and will subsequently go through the parliamentary approval process, resulting in the publication of the new Belgian companies code in the Belgian Official Gazette (Belgisch Staatsblad), the timing of which is unclear as of the date of this annual report. It is contemplated that the new Belgian companies code will enter into force on January 1 of the year following publication of the new Belgian companies code in the Belgian Official Gazette (Belgisch Staatsblad). In addition, a new Belgian corporate governance code replacing the Belgian Corporate Governance Code and incorporating the draft new Belgian companies code is being prepared. Given these contemplated major changes to Belgian corporate law, we may postpone seeking shareholder approval for our redomiciliation until the entry into force of the new companies code, which decision may depend on the actual timing of the entry into force of the new Belgian companies code. If we seek to implement our redomiciliation, this will be subject to a procedure governed by the SE regulation, which can be summarized as follows:
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The diagram below sets out our group structure and legal ownership of intellectual property rights effective upon the completion of our redomiciliation:
We may not be able to successfully complete our redomiciliation, in which case we will remain a European public company with limited liability (Societas Europaea or SE) under Dutch law.
Tax Considerations
In view of the above considerations, on April 20, 2017, we reached an agreement with the Dutch tax authorities on the following aspects of the restructuring:
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In view of the above considerations, on April 4, 2017, we requested a tax ruling from the Belgian ruling commission with respect to the following aspects of the restructuring:
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In summary, the restructuring will result in a taxable amount for argenx SE of €2.4 million subject to Dutch corporate income tax at a tax rate set out above and an elimination of its tax loss carry forwards for Dutch corporate income tax purposes an amount of €77.5 million. On the other hand, the restructuring is expected to bring additional deductible costs to the Belgian BVBA for an amount of up to €80 million.
As set out in “Item 3.D.—Risk Factors—Risks Related to Our Organization and Operations—The restructuring and its contemplated tax treatment is subject to approval by the Belgian tax authorities,” we may not obtain the tax ruling from the Belgian ruling commission, and we may not be allowed to treat the amount of €80 million as a deductible cost for the Belgian BVBA.
We are a clinical‑stage biotechnologycommercial-stage, global, fully-integrated biopharma company developing a deep pipeline of differentiated antibody‑based therapies for the treatment of severe autoimmune diseases and cancer. Utilizingdiseases. By combining our suite of antibody engineering technologies with the disease biology expertise of our research collaborators, we areaim to translate immunology breakthroughs into a pipeline of novel antibody-based medicines through our discovery engine, the
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immunology innovation program (IIP). We have a particular focus on rare, autoimmune diseases that fit into our growing commercial franchises focused on developing product candidates withneurology, hematology and rheumatology, dermatology and nephrology. Through the building and use of commercial franchises, we plan to leverage capabilities and an organizational footprint for subsequent potential to be either first‑in‑class against novel targets or best‑in‑class against known, but complex, targetslaunches across our broad immunology pipeline. On December 17, 2021, the FDA approved efgartigimod in order to treat diseases with a significant unmet medical need. Our SIMPLE Antibody Platform, based on the powerful llama immune system, allows us to exploit novel and complex targets, and our three antibody Fc engineering technologies are designed to enable us to expand the therapeutic index of our product candidates. Together with our antibody discovery and development expertise, this suite of technologies has enabled our pipeline of seven product candidates. Two of our product candidates are in clinical proof‑of‑concept trials for three indications, one ofU.S., which has achieved clinical proof‑of‑concept and is being prepared for Phase 3 clinical development.
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We recently completed a Phase 2 clinical trial for ARGX‑113, our most advanced product candidate,marketed as VYVGART (efgartigimod alfa-fcab), for the treatment of the rare autoimmune disease myasthenia gravis, or MG, and we reported topline data from this trialgMG in December 2017. ARGX‑113 demonstrated strong clinical improvement and statistically significant benefit over placebo. ARGX‑113 treatment resulted in a strong clinical improvement over placebo during the entire duration of the study as measured by all four predefined clinical efficacy scales. In addition, ARGX‑113 was observed to have a favorable tolerability profile consistent with that observed in our Phase 1 clinical trial. In March 2017, we initiated a Phase 2 clinical trial of ARGX‑113adult patients who are AChR-AB+. On January 20, 2022, MHLW approved VYVGART (efgartigimod alfa) for the treatment of another rare autoimmune disease, primary immune thrombocytopenia,adult patients with gMG who do not have sufficient response to steroids or ITP. In September 2017, we initiated a Phase 2 clinical trial of ARGX‑113non-steroidal immunosuppressive therapies (ISTs). On August 11, 2022 the EU Commission granted marketing authorization for VYVGART (efgartigimod alfa-fcab) as an add-on to standard therapy for the treatment of adult patients with gMG who are AChR-AB+ in the VYVGART Approved Countries. With these regulatory milestones, VYVGART is the first-and-only approved FcRn blocker in the U.S, Europe and Japan.
2023 Outlook
The table above is subject to risks and uncertainties that may materially impact the achievement of our 2023 outlook. For more information, please refer to Item 3.D. “Risk Factors” of this Annual Report for a third rare autoimmune disease, pemphigus vulgaris, or PV. We are currently developing our second lead product candidate, ARGX‑110, for rarediscussion of such risks and aggressive hematological cancers, initially for T‑cell lymphoma, or TCL, and acute myeloid leukemia, or AML, as well as high‑risk myelodysplastic syndrome, or MDS. In December 2016, we commenced a Phase 1/2 clinical trialuncertainties.
Our pipeline
| ● | Efgartigimod (FcRn blocker): efgartigimod is a human immunoglobulin (Ig) G1 Fc fragment that is designed to target the neonatal FcRn and reduce Ig G (IgG). FcRn is foundational to the immune system and functions to recycle IgG, 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. It has the potential to address a multitude of severe autoimmune diseases where pathogenic IgGs are believed to be mediators of disease. We are evaluating both intravenous (IV) efgartigimod (10mg/kg) (VYVGART) and SC efgartigimod (1000mg efgartigimod PH20). SC efgartigimod is co-formulated with recombinant human hyaluronidase PH20 (rHuPH20), Halozyme, Inc.’s (Halozyme) ENHANZE® drug delivery technology. ENHANZE® facilitates the SC injection delivery of biologics that are typically administered via IV infusion. |
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| ● | gMG: In May 2020, we announced positive topline results from the Phase 3 ADAPT clinical trial of IV efgartigimod for the treatment of gMG. The topline results from the ADAPT clinical trial showed that efgartigimod was well-tolerated, demonstrated clinically meaningful improvements in strength and quality of life measures, and provided the option of an individualized dosing schedule for gMG patients. The full Phase 3 ADAPT results were published in The Lancet Neurology in July 2021. Data from the ADAPT clinical trial and the subsequent open-label extension (ADAPT+) formed the basis for the regulatory approvals of VYVGART in the U.S., Japan and the EU. |
| ● | In March 2022, we announced positive topline results from the Phase 3 ADAPT-SC study. 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 announced the acceptance of a BLA by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date that was recently extended by three months to June 20, 2023. |
| ● | Registrational clinical trials are ongoing in five additional autoimmune indications: |
| o | ITP: The ADVANCE trial of VYVGART was initiated in the fourth quarter of 2019 and positive topline data of IV efgartigimod for primary ITP were announced on March 22, 2022. The ADVANCE-SC trial of SC efgartigimod started in the fourth quarter of 2020 and topline data are expected in the second half of 2023. |
| o | PV and PF: The ADDRESS trial of SC efgartigimod was initiated in 2020. The topline data of SC efgartigimod for PF and PV are expected in the second half of 2023. |
| o | CIDP: The ADHERE trial of SC efgartigimod was initiated at the end of 2019 and topline data are expected in the second quarter of 2023. |
| o | Bullous pemphigoid (BP): The BALLAD trial of SC efgartigimod in BP was initiated in the second half of 2022. An interim analysis of the first 40 patients is expected in 2024. |
| o | Idiopathic inflammatory myopathy(Myositis): The ALKIVIA trial of SC efgartigimod initiated in the third quarter of 2022 for three subtypes of Myositis, including immune-mediated necrotizing myopathy (IMNM), anti-synthetase syndrome (ASyS) and dermatomyositis (DM). Interim analysis of the first 30 patients of each subset is expected in 2024. |
| ● | Clinical trials in four additional autoimmune indications through partnership agreements with Zai Lab and IQVIA Ltd. (IQVIA)started in 2022: |
| o | Zai Lab launched the Phase 2 proof-of-concept trials in two kidney indications, LNand MN. |
| o | IQVIA launched the Phase 2 proof-of-concept trials in Primary SjS and PC-POTS. Topline results from the PC- POTS trial are expected in the fourth quarter of 2023 and from the Primary SjS trial in 2024. |
| o | ARGX-117 (C2 inhibitor): ARGX-117 is a novel complement inhibitor targeting C2, blocking function of both the classical and lectin pathways while leaving the alternative pathway intact. ARGX-117 has the potential to be a pipeline-in-a-product candidate with indications that fit within our commercial franchises. |
| o | Final Phase 1 data of ARGX-117 confirmed the interim data reported in July 2021 showing a favorable safety profile across single and multiple ascending doses (MADs) of both IV and SC formulations. Pharmacokinetic (PK) and pharmacodynamic (PD) profiles demonstrated potential for infrequent dosing schedules. |
| o | Phase 2 ARDA proof-of-concept trial started at the end of 2021 in MMN and interim data are expected in mid-2023. |
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| o | Phase 2 proof-of-concept clinical trial to start in DGF following kidney transplantation in the second half of 2023. |
| o | DM was announced as the third indication for ARGX-117. |
| o | ARGX-119 (MusK agonist): ARGX-119 is an agonist SIMPLE Antibody™ to the MuSK receptor with potential in multiple neuromuscular indications. Phase 1 dose-escalation clinical trial started in the first quarter of 2023 with a subsequent Phase 1b clinical trial planned to assess early signal detection in patients thereafter. |
| o | ARGX-118 (Galectin-10): ARGX-118 is an antibody against Galectin-10, the protein of Charcot-Leyden crystals which are implicated as a major contributor to airway inflammation and to the persistence of mucus plugs. |
| o | 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: |
| o | ARGX-112 (LP-0145), a SIMPLE Antibody inhibitor of interleukin-22 receptor (IL-22R) and out-licensed to LEO Pharma. |
| o | ARGX-114 (AGMB-101), a SIMPLE Antibody agonist to the mesenchymal-epithelial transition factor (MET) receptor and out-licensed to AgomAb Therapeutics NV (AgomAb). |
| o | ARGX-115 (ABBV-151), a SIMPLE Antibody inhibitor of glycoprotein A repetitions predominant (GARP) transforming growth factor beta (TGF-b) and out-licensed to AbbVie. |
| o | ARGX-116 (STT-5058), a SIMPLE Antibody inhibitor of ApoC3 and out-licensed to Staten Biotechnology B.V. |
| o | Cusatuzumab (Anti-CD70 Antibody): Cusatuzumab is an anti-CD70 monoclonal antibody. CD70, a tumor necrosis factor receptor ligand, and its receptor CD27 are expressed on leukemic stem cells and AML blasts but not on hematopoietic stem cells. OncoVerity, Inc. (OncoVerity)an asset-centric spin-off was created to focus on optimizing and advancing the development of cusatuzumab, a novel anti-CD70 antibody, in AML. OncoVerity is an entity of co-creation, combining the extensive translational biology insights from Dr. Clayton Smith, M.D. from the University of Colorado with the experience from argenx on the CD70/CD27 pathway. |
Immunology Innovation Program
Our IIP is a core business strategy of co-creation and innovation. Our IIP also serves as our discovery engine to identify novel targets and together, in collaboration with our scientific and academic partners, to build potential new pipeline candidates. Every current pipeline candidate from both our wholly-owned and partnered pipeline emerged from an IIP collaboration. As part of a Phase 1/our long-term strategy, we continue to invest in our IIP.
For example:
| ● | Efgartigimod emerged from a collaboration with Professor Sally Ward and the University of Texas Southwestern Medical Center (UT Southwestern) that later became one of the blueprints for our IIP collaborations. Professor Ward’s research identified the crucial role that FcRn plays in maintaining and distributing IgGs throughout the body. Efgartigimod is a human IgG1 Fc fragment that is equipped with ABDEG mutations, which we in-licensed from UT Southwestern. These proprietary mutations modified efgartigimod to increase its affinity for FcRn while retaining the pH-dependent binding that is characteristic of FcRn interactions with its natural ligand, endogenous IgG. |
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| ● | ARGX-117 was built in collaboration with Broteio Pharma B.V. (Broteio) which was launched in 2017 with support from Professor Erik Hack and the University of Utrecht, to conduct research to demonstrate preclinical proof-of-concept of the mechanism of ARGX-117. Professor Hack has done renowned research in the role of inflammation in disease, specifically in the complement system, and has contributed research and expertise to the approval of two complement inhibitors. His understanding of the mild phenotype associated with a natural component 2 (C2) deficiency and C2’s unique positioning at the junction of the classical and lectin pathways led to our interest in engineering ARGX-117, which is equipped 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 the 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 trial of ARGX‑110 for the treatment of cutaneous TCL, or CTCL. We reported interim data for both clinical trials in December 2017.
We have a disciplined strategy to maximize the value of our pipeline whereby we plan to retain development and commercialization rights to those product candidates that we believe we can ultimately commercialize successfully on our own if they are approved. We plan to collaborate on product candidates that we believe have promising utility inpartners bring a wealth of disease areas or patient populations that are better served by the resources of larger biopharmaceutical companies. We have entered into collaborations with a number of biopharmaceutical companies, including our collaboration with AbbVie S.À.R.L, or AbbVie, for ARGX‑115, a cancer immunotherapy‑focused product candidate against the noveland target glycoprotein A repetitions predominant, or GARP. We received a $40.0 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) upfront payment and a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) preclinical milestone payment in connection with this collaboration.biology expertise.
Our product candidates are focused on indications for which there is a solid biological rationale and for which we believe there is an advantage to utilizing our suite of technologies outlined below:
| SIMPLE Antibody platform: Our proprietary SIMPLE Antibody |
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| ● | Halozyme’s ENHANZE SC drug delivery technology: We have exclusive access to ENHANZE for the FcRn and C2 targets and four additional targets. The global collaboration and license agreement with Halozyme was announced in February 2019 and expanded in October 2020. The ENHANZE® technology has the potential to shorten drug administration time, reduce healthcare practitioner time and offer additional flexibility and convenience for patients. |
| ● | In April 2021, we entered into a collaboration and license agreement with Elektrofi, Inc. (Elektrofi) to explore Elektrofi’s high-concentration, low-volume delivery technology for efgartigimod, and up to one additional target. |
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Our Products and Product Candidates
The following table summarizes key information on our portfolio of lead product candidate pipeline includes both wholly‑owned and partnered programs. product candidates as of the date of this Annual Report:
Our programs
VYVGART
Approval
On December 17, 2021, the FDA approved VYVGART for the treatment of gMG in adult patients who are AChR-AB+. These patients represent approximately 85% of the total gMG population (Behin et al. New Pathways and Therapeutics Targets in Autoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277). On January 20, 2022, MHLW approved VYVGART (efgartigimod alfa) for the treatment of adult patients with gMG who do not have sufficient response to steroids or non-steroidal ISTs. On August 11, 2022 the EU Commission granted marketing authorization for VYVGART as an add-on to standard therapy for the treatment of adult patients with gMG who are AChR-AB+. With these regulatory milestones, VYVGART is the first-and-only approved neonatal FcRn blocker in the U.S., Japan and the EU.
gMG is a rare and chronic neuromuscular disease characterized by debilitating and potentially life-threatening muscle weakness. VYVGART is a human IgG1 antibody fragment that binds to FcRn, resulting in the reduction of circulating IgG antibodies. The action of AChR autoantibodies at the neuromuscular junction is a key driver of gMG (Howard JF Jr, Utsugisawa K, Benatar M, et al. Safety and efficacy of efficacy of eculizumab in AChR antibody-positive refractory gMG (REGAIN): a phase 3, randomized, double-blind, placebo-controlled, multicenter study. Lancet Neurol. 2017; 16: 976-86).
The approval of VYVGART is based on results from the global Phase 3 ADAPT clinical trial, which were published in the July 2021 issue of The Lancet Neurology.
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We referintegrated input from the gMG community into the ADAPT clinical trial design. Through listening to programsand learning from the gMG patient community, we understand that every gMG patient experiences the course of disease differently. As a result, we designed a clinical trial to reflect the individualized nature of gMG with a dosing approach that we believe is adapted to each patient’s individual response.
The Phase 3 ADAPT clinical trial was a randomized, double-blind, placebo-controlled, multi-center, global clinical trial evaluating the safety and efficacy of efgartigimod in patients with gMG. A total of 167 adult patients with gMG in North America, Europe and Japan enrolled in the clinical trial and were treated. Patients were eligible to enroll in ADAPT regardless of antibody status, including patients with AChR antibodies and patients where AChR antibodies were not detected. Patients were randomized in a 1:1 ratio to receive efgartigimod or placebo for whicha total of 26 weeks. ADAPT was designed to enable an individualized treatment approach with an initial treatment cycle followed by a variable number of subsequent treatment cycles.
The ADAPT clinical trial met its primary endpoint, demonstrating that significantly more anti-AChR-AB+ gMG patients were responders on the myasthenia gravis (MG)-activities of daily living (MG-ADL) scale following treatment with VYVGART compared with placebo (68% vs. 30%; p<0.0001). Responders were defined as having at least a two-point reduction on the MG-ADL scale sustained for four or more consecutive weeks during the first treatment cycle.
Additionally, there were significantly more responders on the quantitative MG (QMG) scale following treatment with VYVGART compared with placebo (63% vs. 14%; p<0.0001). Responders were defined as having at least a three-point reduction on the QMG scale sustained for four or more consecutive weeks during the first treatment cycle.
As shown in figure 1, minimal symptom expression (MSE) is an increasingly important data point for physicians and patients because it is a measure of symptom-free status. In ADAPT, 40% of patients achieved MSE – or an MG-ADL score of 0 or 1 - at any time during cycle one. The right side shows depth of response. Over half of patients treated with efgartigimod experienced an improvement of five points or more on the MG-ADL scale by week four.
Figure 1: Percentage of patients with MG-ADL and QMG total score change four weeks after initial infusion of the first cycle in AChR-Ab+ population.
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Figure 2: Mean change in total MG-ADL from cycle 1 baseline over time in AChR-Ab+ population.
VYVGART had a demonstrated safety profile in the ADAPT clinical trial. The most common adverse events in ADAPT were respiratory tract infection (33% vs 29% placebo), headache (32% vs 29% placebo), and urinary tract infection (10% vs. 5% placebo).
There is a pre-approval access program (PAA) for gMG patients that remains open in the EU, the UK, Hong Kong and Canada for eligible patients.
Commercialization and Regulatory Plans
VYVGART was launched in the U.S. in January 2022, in Japan in May 2022 and in Germany in September 2022 following approval in each region. The European commercial launch of VYVGART is still ongoing.
We have established our own sales force in the U.S., Japan and Europe for VYVGART for the treatment of gMG. We plan to expand our own sales and marketing capabilities and promote our products and product candidates if and when regulatory approval has been obtained in the relevant jurisdictions. For example, we retainestablished argenx Canada in the exclusive right to developfirst quarter of 2022 in preparation for a potential Health Canada approval request and commercialize the product candidate on a worldwide basis as our wholly‑owned programs.if granted commercial launch in Canada. We refer to programsalso established argenx UK in August 2022 in preparation for whichpotential MHRA approval.
Development and commercialization may also be done through collaborations with third parties. In January 2021, we have entered into collaboration agreementsan exclusive out-license agreement with third partiesZai Lab, a commercial-stage biopharmaceutical company, for the development and commercialization of efgartigimod in Greater China (Zai Lab Agreement). Zai Lab filed for approval in the product candidate as our partnered programs. WhilePRC in the second quarter of 2022. Under the Zai Lab Agreement, we havereceived a $75.0 million upfront payment in the form of 568,182 newly issued Zai Lab shares calculated at a price of $132.0 per share, a $75.0 million guaranteed non-creditable, non-refundable development cost-sharing payment and a $25.0 million milestone payment in connection with FDA approval of VYVGART (Zai Lab Payments). We will also be eligible for tiered royalties based on annual net sales of efgartigimod in Greater China.
In October 2021, we announced an investigational new drug application, or IND,exclusive distribution agreement with Medison to commercialize efgartigimod for gMG in effectIsrael (Medison Agreement). Medison will also be responsible for ARGX‑113seeking requisite regulatory approvals, and Medison filed for approval in Israel in the second quarter of 2022. On June 6, 2022 we announced an exclusive multi-regional agreement with Medison to commercialize efgartigimod in 14 countries, including Poland,
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Hungary, Slovenia, Czech Republic, Romania, Bulgaria, Lithuania, Croatia, Slovakia, Estonia, Latvia, Greece, and Cyprus, for the treatment of MGadult 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).
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 our Annual Report for the period ended December 31, 2022.
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 PAA on February 21, 2022 through which investigational therapies are made available in certain circumstances to treat gMG patients who are unable to participate in an ongoing clinical trial. As of the date of this Annual Report, the PAA has approved over 150 gMG patients in ten countries. With the approval of VYVGART in the U.S., Japan and EU, the PAA program remains open only in countries where VYVGART is not yet launched or reimbursed.
Efgartigimod (formerly ARGX-113) Development
Mechanism of Action
As shown in figure 3, 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, 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. As of the date of this Annual Report, efgartigimod has been evaluated in over 1,300 subjects with a cumulative exposure of over 1,000 patient years. 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.
In a randomized, double-blind, placebo-controlled first-in-human study of 62 healthy volunteers, efgartigimod treatment resulted in rapid and specific clearance of serum IgG levels. Single administration of efgartigimod reduced IgG levels up to 50% while multiple dosing further lowered IgGs on average by 75% from baseline. Approximately eight weeks following the last administration, IgG levels returned to baseline. Efgartigimod did not alter homeostasis of
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albumin or Igs other than IgG and no serious adverse events as defined by the competent authorities related to efgartigimod infusion were observed.
Figure 3:Efgartigimod’s mechanism of action blocks the recycling of IgG antibodies and removes them from circulation
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 date of this Annual Report, we continue to evaluate efgartigimod in ten autoimmune indications where significant unmet need exists despite the availability of commonly used therapies. These include gMG, CIDP and idiopathic inflammatory myopathy(Myositis) within our neurology franchise; ITP, post-COVID-19 postural orthostatic tachycardia syndrome (PC-POTS) and Sjögren’s syndrome (Primary SjS) within our hematology and rheumatology franchise; PV, PF and BP within our dermatology franchise; and lupus nephritis (LN) and membranous nephrology (MN) within our nephrology franchise. In 2023, we announced our intention to expand efgartigimod into three new indications: thyroid eyes disease (TED), anti-neutrophil cytoplasmic antobody-associated vasculitis (AV) and antibody-mediated rejection (AMR).
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 IV Ig (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. For example, steroids and ISTs are often used to treat a multitude of autoimmune diseases, but for the indications in our pipeline thus far, these have been observed to be lacking in both safety and tolerability. |
| ● | Furthermore, for each indication, there is a defined path forward with established precedent for how to run proof-of-concept and registrational clinical trials with generally accepted clinical and regulatory endpoints. |
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| ● | Finally, as we work towards achieving our ‘argenx 2025’ vision, we select indications where there is a reasonable fit within our growing commercial franchises. |
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 the ENHANZE® (licensed from Halozyme) SC formulation.
IV (VYVGART)
We conducted a Phase 1 clinical trial in healthy volunteers to evaluate the safety, tolerability, PK, 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 4. 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 U.S. Foodmechanism of action of efgartigimod and Drug Administration, or FDA, we have only conducted partthe effect of our Phase 2 clinical developmentproprietary ABDEG technology (detailed in MGItem 4.B. “Platform Technologies”) on increasing the intracellular recycling of efgartigimod. In both the single and MAD portions, no significant reductions in the United States.
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Our product candidate pipeline enabled by our suite of technologies is set forth below:
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We believe that our clinical expertise and execution capabilities position us well to advance our product pipeline and enter into collaborations designed to maximize the value of our portfolio. We have assembled a team of over 90 employees and consultants with experience across the spectrum of antibody drug discovery and development and business development. Members of our board of directors and management team have extensive experience in the life sciences industry and have previously served at companies including Cambridge Antibody Technology Group Plc; Celgene Corporation; Galapagos NV; GlaxoSmithKline plc; Janssen Pharmaceuticals, Inc.; Micromet, Inc.; Nicox S.A.; The Procter & Gamble Company; Quintiles IMS Holdings, Inc. and Unilever NV.
Our Competitive Strengths
We believe that the combination of our technologies, expertise and disciplined focus will enable us to overcome many of the challenges associated with antibody drug development and positions us to be a leader in delivering therapies
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to patients suffering from severe autoimmune disease and cancers for which the current treatment paradigm is inadequate. Our competitive strengths include:IgM, IgA or serum albumin were observed.
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SC - Partnership with Halozyme
In 2020, we and Halozyme expanded the existing global collaboration and license agreement that was signed in February 2019. Under the expansion, we gained the ability to access Halozyme’s ENHANZE® drug delivery technology
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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 the human FcRn and C2.
In July 2019, we evaluated an SC formulation of efgartigimod that incorporates Halozyme’s ENHANZE® drug delivery technology in a Phase 1 clinical trial in healthy volunteers, which demonstrated retained PD profile of IV-formulated efgartigimod.
ENHANZE® has demonstrated across multiple FDA-approved products the ability to remove traditional limitations on the volume of biologics that can be delivered subcutaneously, potentially shortening drug administration time, reducing healthcare practitioner time, and offering additional flexibility and convenience for patients.
In November 2022, we announced that the FDA accepted for priority review a BLA for SC efgartigimod (1000mg efgartigimod-PH20) for the treatment of adult patients with gMG who are AChR-AB+. The BLA has been granted a PDUFA target action date of June 20, 2023.
SC – Partnership with Elektrofi
In April 2021, we entered into a collaboration and license agreement with Elektrofi to explore Elektrofi’s high-concentration, low-volume delivery technology for efgartigimod, and up to one additional target. See “—Our Exclusive License with Elektrofi for efgartigimod” below for more information.
Efgartigimod (formerly ARGX-113) 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 neuromuscular 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 can then spread into a generalized form affecting multiple muscles, known as gMG. Approximately 85% of people with MG progress to gMG within 24 months (source: Behin et al. New Pathways and Therapeutics Targets in Autoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277). MG in the ocular form initially causes droopy eyelids and blurred or double vision due to partial paralysis of eye movements. As MG becomes generalized it affects muscles in the neck and jaw, causing problems in speaking, chewing and swallowing. MG can also cause weakness in skeletal muscles leading to problems in limb function. In the most severe cases, respiratory function can be weakened to the point where it becomes life-threatening. 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).
Patients with confirmed AChR antibodies account for approximately 85% of the total gMG population (Behin et al. New Pathways and Therapeutics Targets in Autoimmune Myasthenia Gravis. J Neuromusc Dis 5. 2018. 265-277).
In May 2020, we announced positive topline results from the pivotal ADAPT clinical trial of efgartigimod for the treatment of gMG. The topline results from the ADAPT clinical trial showed that efgartigimod was well-tolerated, demonstrated clinically meaningful improvements in strength and quality of life measures, and provided the option of an individualized dosing schedule for gMG patients. The full Phase 3 ADAPT results were published in The Lancet Neurology in July 2021. The data from the ADAPT clinical trial and the subsequent open-label extension (ADAPT+) formed the basis for the regulatory approvals of VYVGART in the U.S., Japan and the EU.
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ADAPT-SC Trial Design
In January 2021, we initiated ADAPT-SC, a registrational non-inferiority bridging study of SC efgartigimod for the treatment of gMG. The design of the bridging study is based on the demonstrated association between total IgG reduction and clinical benefit in gMG and incorporates feedback from the FDA. The study is comparing the PD effect of 1000 mg SC efgartigimod with 10 mg/kg IV efgartigimod. The primary endpoint is the percent change from baseline of total IgG levels measured at day 29.
On March 22, 2022, we announced positive topline results from the Phase 3 ADAPT-SC study. 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 announced the acceptance of a BLA by the FDA with a PDUFA target action date that was recently extended by three months to June 20, 2023.
Other clinical trials
We are currently evaluating alternative dosing regimens of efgartigimod IV in adult gMG patients in the ADAPT NXT clinical trial. In addition, a clinical trial of efgartigimod IV 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.
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).
Phase 3 ADVANCE Clinical Trials
In the fourth quarter of 2019, the first of two registrational clinical trials, the ADVANCE Phase 3 clinical trial, was initiated to evaluate 10 mg/kg IV efgartigimod (VYVGART) for the treatment of primary ITP. The second registrational ADVANCE-SC clinical trial of 1000mg SC efgartigimod for the treatment of primary ITP was initiated in the fourth quarter of 2020. Positive phase 3 topline data for the ADVANCE clinical trial were announced on May 5, 2022. ADVANCE was the second registrational clinical trial of VYVGART and the first Phase 3 clinical trial of a neonatal FcRn blocker in ITP. The ADVANCE clinical trial enrolled 131 adult patients with chronic and persistent ITP. Patients were heavily pretreated and 67% of patients had received three or more prior ITP therapies, including 59% who had prior thrombopoietin receptor agonist (TPO-RAs) experience, 34% with prior rituximab experience and 37% with a history of splenectomy.
The clinical trial met its primary endpoint 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
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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.
Key platelet-derived secondary endpoints showed VYVGART-treated patients had a statistically significant benefit compared to placebo on (1) cumulative number of weeks where platelet counts were at least 50x109/L in the chronic ITP population (p=0.0009) and (2) sustained platelet response in the overall population, including both chronic and persistent ITP patients (p=0.0108). Numerically fewer WHO-classified bleeding events occurred in treated patients throughout the clinical trial but the difference from placebo was not statistically significant. A higher proportion of treated patients in the overall population achieved a durable, sustained platelet response compared to placebo, defined as a sustained platelet response on at least six of the last eight scheduled visits between weeks 17 and 24 of treatment (p=0.0265), but was not considered statistically significant based on hierarchical testing.
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:
| ● | 51.2% of VYVGART-treated patients were classified as IWG responders and 27.9% as complete responders compared to 20% of placebo patients as IWG responders and 4.4% as complete responders. |
| ● | IWG responders are defined as having a platelet count of at least 30x109/L, a two-fold increase in platelet count from baseline, and the absence of bleeding for two separate, consecutive weekly visits. Complete responders are patients with platelet counts of 100x109/L and the absence of bleeding for two separate, consecutive weekly visits. |
Mean platelet count change from baseline: VYVGART-treated patients demonstrated a rapid onset of platelet count improvement with statistically significant separation from placebo observed at week one and maintained through 20 out of 24 weeks of the clinical trial.
Ten VYVGART-treated patients switched to a biweekly (every two weeks) dosing schedule after achieving platelet counts of 100x109/L for three out of four consecutive visits, compared to one placebo patient. Nine of the ten treated patients achieved a sustained platelet response.
VYVGART was well-tolerated in this 24-week study and the observed safety and tolerability profile was consistent with previous clinical trials.
SC efgartigimod is being evaluated in a second registrational clinical trial in ITP, ADVANCE-SC topline data are expected in the second half of 2023. The clinical trial design for ADVANCE-SC is the same as for ADVANCE but the target enrollment was increased based on the results of the Phase 3 ADVANCE clinical trial.
Phase 2 Trial
We completed a randomized, double-blind, placebo-controlled Phase 2 clinical trial to evaluate the safety, efficacy and PK of efgartigimod in 38 adult primary ITP patients.
Full results from the Phase 2 clinical trial were published in the peer-reviewed American Journal of Hematology. Efgartigimod was well-tolerated and showed a correlation of reduced IgG levels, increased platelet counts and reduced bleeding in ITP patients.
The primary endpoint analysis demonstrated efgartigimod to be well-tolerated in all patients, with most TEAEs observed characterized as mild (Common Terminology Criteria for Adverse Events grading 1 and 2). There were no dose-related safety observations and the safety profile was consistent with previous observations in healthy volunteers and MG patients. No increased risk of infection was apparent in the efgartigimod-treated groups compared to the placebo group.
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PV
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 the fourth quarter of 2020, the registrational ADDRESS clinical trial was initiated of SC efgartigimod for the treatment of PV and PF. This is a randomized, double-blinded, placebo-controlled study, where the objective is to assess efficacy, safety and tolerability in up to 150 newly diagnosed or relapsing patients with moderate to severe pemphigus. Patients are randomized to receive either SC efgartigimod or placebo for 30 weeks. Patients start on concomitant steroids based on what we determine to be the optimized dosing regimen from the Phase 2 study. The primary endpoint will assess the proportion of patients who achieve complete remission on a minimal steroid dose at 30 weeks. The ADDRESS clinical trial will evaluate efficacy and safety, including the potential to drive fast onset of disease control and complete remission and the ability to taper corticosteroids. A relevant minority portion of the patients in the ADDRESS clinical trial are participating at sites in Ukraine or Russia. 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.
Phase 2 Trial
We completed an open-label Phase 2 adaptive clinical trial in which, through sequential cohorts, 34 patients were dosed at 10 or 25mg/kg IV efgartigimod (VYVGART) with various dosing frequencies, as monotherapy or add-on therapy to low dose oral prednisone. The primary endpoint of the clinical trial was safety and tolerability. The full Phase 2 clinical trial results were published in The British Journal of Dermatology.
In this clinical trial, we observed:
| ● | a favorable tolerability profile, consistent with data from previous efgartigimod studies and those adverse events were mostly mild; |
| ● | a major decrease in serum total IgG |
| ● | that 90% (28/31) of |
| ● | complete clinical remission in 64% (14/22) of patients receiving optimized prolonged treatment with efgartigimod in combination with a median dose of 0.26mg/kg/day prednisone within 2-41 weeks; and |
| ● | a favorable tolerability profile, consistent with data from previous efgartigimod studies. |
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Novel translational data from the open-label Phase 2 study of efgartigimod for the treatment of PV that further support the potential role of FcRn blockade and potential of efgartigimod in autoimmune skin blistering disorders were published in the journal Frontiers of Immunology and presented during the Society for Investigative Dermatology annual meeting in May 2022.
Chronic Inflammatory Demyelinating Polyneuropathy
Overview of CIDP
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 U.S.
Most CIDP patients require treatment and 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.
ADHERE Clinical Trial
At the end of 2019, we initiated the registrational ADHERE clinical trial evaluating SC efgartigimod for the treatment of CIDP. The ADHERE clinical trial is a randomized, withdrawal study evaluating 1000mg weekly SC efgartigimod expected to enroll approximately 130 patients. The clinical trial consists of an open-label Stage A followed by a randomized, placebo-controlled Stage B with a planned interim responder analysis after the first 30 patients enroll in Stage A. In order to enter Stage A and receive efgartigimod, both patients who are treatment-naïve or on therapy must first receive a confirmed diagnosis of CIDP by an independent panel of experts and demonstrate active disease. To show active disease, patients who are on current CIDP therapy have to demonstrate a minimal clinically meaningful worsening after treatment withdrawal based on at least one CIDP clinical assessment tool, including the Inflammatory Neuropathy Cause and Treatment Disability Score (INCAT Disability Score), Inflammatory Rasch-built Overall Disability Scale (I-RODS) or mean grip strength. To advance to Stage B, patients need to demonstrate a minimal clinically meaningful response to efgartigimod equivalent with the loss observed on the same efficacy scale on which worsening is observed during the withdrawal period. In Stage B, patients are randomized to either SC efgartigimod or placebo for up to 48 weeks. The primary endpoint is event-driven and based on the adjusted INCAT Disability Score in Stage B.
Interim Analysis from ADHERE Clinical Trial
In February 2021, we announced a “go” decision to transition into the second, placebo-controlled stage of this clinical trial based on a planned efficacy and safety assessment following the enrollment of 30 patients into the initial part of the ADHERE clinical trial. The ADHERE clinical trial is expected to enroll at least 130 patients in total to support potential registration of SC efgartigimod for the treatment of CIDP. The interim analysis achieved 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 decision to continue enrollment was confirmed by an independent data monitoring committee. In addition, the safety and tolerability data observed to date is consistent with that of efgartigimod in other clinical trials.
We expect to announce the topline data of the ADHERE clinical trial in the second quarter of 2023.
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Myositis
Overview of Myositis
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. 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 Myositisin the third quarter of 2022. The study plans to enroll approximately 240 patients in three Myositis subtypes, IMNM, ASys and DM. The study will be conducted in 2 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.
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 2024.
Bullous Pemphigoid
Overview
BP is the most common autoimmune blistering disease and is driven by autoantibodies affecting the skin. The disease typically affects elderly people and early key symptoms are itch and rash and patients develop fluid-filled blisters during disease progression. The prevalence of BP is twelve per 100,000 adults and the incidence increases with age. BP is associated with a high disease burden and can have a significant impact on the quality of life of patients. The mortality of BP in the U.S. is 2.4% or higher than the mortality in the general population of the same age. There are currently no approved therapies available for BP. First line treatment consists of topical or systemic corticosteroids, which result in substantial morbidity and increased mortality, conventional immunosuppressants as corticosteroid-sparing agents, rituximab and IVIg.
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BP is a well characterized autoimmune disease in which the binding of autoantibodies to hemidesmosomal proteins, BP180 and BP230, initiates a cascade of inflammatory events resulting in blister formation. BP180 and BP230 are involved in the stable attachment of keratinocyte to the underlying matrix. The autoantibody actions include mechanical disruption of keratinocyte adhesion and cytokine release. Immune complex formation initiates complement activation leading to the recruitment mast cells, neutrophils, eosinophils and other immune cells and to the release of proteases and inflammatory mediators. All these effects, which start with the binding of the autoantibodies, induce the blistering observed in BP.
BALLAD Trial
We initiated the Phase 2/3 BALLAD registrational clinical trial evaluating SC efgartigimod in BP in the second half of 2022, in which we plan to enroll 160 patients.
The clinical trial population are newly diagnosed and relapsing patients within one year from diagnosis. Patients will be randomized 1-to-1 to receive efgartigimod or placebo for total duration of 36 weeks. The primary endpoint is the proportion of participants in complete remission while off oral corticosteroids for at least eight weeks at week 36. Secondary endpoints relate to cumulative steroid doses, IGA BP score, time to achieving control of disease activity, change from baseline in average itch, and quality of life measures. In our Half Year 2022 report, we announced that the registrational BALLAD clinical trial is ongoing of SC efgartigimod for BP with interim analysis planned of first 40 patients in 2024.
New Efgartigimod Indications
We are also evaluating four indications in proof-of-concept clinical trials through our partnerships with Zai Lab and IQVIA:
| ● | MN is an autoimmune, glomerular disease and the most frequent cause of nephrotic syndrome. MN is characterized by thickening of the glomerular capillary walls caused by immune complex deposition. 70% of MN patients have IgG autoantibodies against PLA2R. In patients without PLA2R autoantibodies, there can be detectable anti-THSd7A or anti-NELL1 antibodies. 20-30% of patients progress to end-stage renal disease. There are no current approved therapies for MN. |
| ● | LN is a glomerulonephritis and one of the most severe and common organ manifestations of the autoimmune disease systemic lupus erythematosus (SLE). |
| ● | Primary SjS is a |
| ● | PC-POTS has been emerging after resolution of COVID-19 infection in previously healthy patients. PC-POTS is a disorder of the |
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Zai Lab Limited
Our Zai Lab strategic collaboration allows us to accelerate development of efgartigimod into new autoimmune indications with Zai Lab taking operational leadership of the Phase 2 proof-of-concept clinical trials.
Zai Lab initiated the Phase 2 proof-of-concept clinical trials in 2022 in MN and LN, which both fall within our emerging nephrology franchise.
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.
Primary SjS and PC-POTS are the first indications we identified to be further developed under the Asset Development Agreement.
In 2022, IQVIA launched the Phase 2 clinical trials in Primary SjS and PC-POTS.
Additional efgartigimod indications
In January 2023, we announced our plans to launch clinical trials in three new indications including a registrational clinical trial in TED and proof-of-concept clinical trials in AV and AMR.
ARGX-117 Development
ARGX-117 is a highly differentiated therapeutic monoclonal antibody 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 ARGX-117 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.
ARGX-117 exhibits both pH- and calcium dependent binding. These unique characteristics enable ARGX-117 to capture free C2 in circulation and release it in the endosome to be sorted for degradation in the lysosome. ARGX-117 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 ARGX-117 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 proof-of-concept of the mechanism of ARGX-117. 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.
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ForIn addition to an IV formulation, we have exclusive access to Halozyme’s ENHANZE® SC drug delivery technology for the C2 target.
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Phase 1 Data
We conducted a breakdownPhase 1 healthy volunteer clinical trial of IV and SC ARGX-117. This first-in-human clinical trial was a double-blind placebo-controlled study designed to assess the safety, tolerability, PK and PD of a broad dose range of ARGX-117 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 study, we evaluated 32 subjects to understand the safety and tolerability of repeated administrations and in particular to generate a data-set to optimally inform a PK/PD model.
The majority of the observed TEAEs were categorized as grade 1 (or mild). Few grade 2 (or moderate) TEAE were observed and, in the MAD part of the study, no grade 2 or higher TEAEs were observed. Overall, we concluded that single and multiple administrations of ARGX-117 or placebo have a favorable safety and tolerability profile supporting the investigation of study drug in patient studies.
We observed a dose-dependent reduction of free C2 levels. After one dose of 30mg/kg ARGX-117, free C2 levels were reduced by 95% for more than 100 days. In the MAD part of the study, 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 proof-of-concept clinical trial in multifocal motor neuropathy and current treatment (MMN) in the fourth quarter of 2021 within our total revenuesneuromuscular franchise. Proof-of-concept ARDA clinical trial is ongoing to evaluate safety, tolerability, and potential dosing regimen in MMN. Interim data from ARDA are expected in mid-2023.
Overview of MMN and Current Treatment
MMN is a debilitating neuromuscular autoimmune disorder that is characterized by activityslowly progressive muscle weakness due to motor neuron degeneration. It mainly affects hands and geographic market, please see “Note 5.3—Segment reporting”forearms, mainly in our consolidated financial statements appendedmales, and the median age of diagnosis is around 40 years. Diagnosis takes about a year and a half and is usually misdiagnosed as amyotrophic lateral sclerosis (ALS). There are estimated to be around 13,000 patients with MMN in the U.S. and this annual report.number is increasing.
Specific pathophysiologic characteristics of MMN include the presence of IgM autoantibodies 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.
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IVIg is the only approved treatment for MMN and needs to be dosed regularly to address the disease’s progressive nature.
Delayed graft function (DGF) and/or allograft failure
Our We intend to start a phase 2 proof-of-concept clinical trial in the second half of 2023 to evaluate ARGX-117 for the prevention of DGF (n) and/or allograft failure after kidney transplantation. This occurs in up to 40% of kidney transplant recipients and is often a result of ischemia reperfusion injury.
There is compelling evidence from kidney biopsies of mannose-binding lectin and C4d co-staining indicating involvement of both the classical and lectin pathways, making C2 an ideal target. Furthermore, there is a well-established process to measure kidney function and establish proof-of-concept and achieve registration. On this basis, combined with the significant unmet medical need, we have chosen DGF (n) and allograft failure after kidney transplantation as second indication for ARGX-117.
Dermatomyositis
In January 2023, we announced DM as the third indication for ARGX-117.
Strategy and objectives
Company’s Strategies
Our goal is to deliver therapies that are either first‑in‑class or best‑in‑classfirst-in-class and best-in-class to patients suffering from severeserious autoimmune diseases and various cancers for which there exists a significant unmet medical need.need exists. We are also focusedfocus on attaining this goal in a manner that is disciplined for a company of our size. We plan to:
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| ● | Advance our pipeline of assets.In addition to new indications for efgartigimod, we plan to advance our other product candidates. In particular, we have advanced the clinical development of ARGX-117 in a Phase |
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| ● | 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. |
Our SuiteCompetitive position
We participate in a highly innovative industry characterized by a rapidly growing understanding of Technologiesdisease 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.
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 interactWe compete 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.
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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 enable us to create product candidates with potential first‑in‑class and best‑in‑class therapeutic activity against a wide range of targets.
Figure 1: Overviewbiopharmaceutical companies, who are developing products for the treatment of gMG and other autoimmune diseases, including products that are in the same class as VYVGART, as well as products that are similar to some of our product candidates. We are aware of several FcRn inhibitors that are in clinical development. Competitive product launches may erode future sales of our products, including our existing products and those currently under development, or result in unanticipated product obsolescence. Such launches continue to occur, and potentially competitive products are in various stages of development. We could also face competition for use of limited international infusion sites, particularly in new markets as competitors launch new products. We cannot predict with accuracy the timing or impact of the introduction of competitive products that treat diseases and conditions like those treated by our products or product candidates. In addition, our competitors compete with us to recruit and retain qualified scientific and management personnel, establish clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of our products.
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 (Humira/rheumatoid arthritis), Amgen, Inc. (Amgen) (Enbrel/rheumatoid arthritis), Biogen Inc. (Tysabri/multiple sclerosis), GlaxoSmithKline plc (GSK) (Benlysta/lupus), F. Hoffman-La Roche AG (Roche) (Rituxan/often used off label) and Janssen Pharmaceuticals, Inc. (Janssen) (Remicade/rheumatoid arthritis and Stelara/psoriasis). In addition, these and other pharmaceutical companies have monoclonal antibodies or other biologics in clinical development for the treatment of autoimmune diseases.
In addition to the current standard of care, we are aware that AstraZeneca PLC is selling Soliris and Ultomiris for the treatment of adult patients with gMG who are AChR-AB+ and that GSK, Roche, Novartis AG, CSL Behring, Grifols, S.A., BioMarin Pharmaceutical, Inc., Curavac, UCB S.A./RA Pharmaceuticals, Inc., DAS Therapeutics, Inc.,
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Takeda Pharmaceutical Co Ltd, RemeGen Co, Immunovant, Inc., Cartesian Therapeutics, Inc., Horizon Therapeutics PLC, AstraZeneca PLC, Chugai/Genentech, Inc., Regeneron Pharmaceuticals, Inc./Alnylam Pharmaceuticals, Inc. and Johnson & Johnson Innovation, Inc., among others, are developing drugs that may have utility for the treatment of MG. Competitive product launches may erode future sales of our products, including our existing products and those currently under development, or result in unanticipated product obsolescence. Such launches continue to occur, and potentially competitive products are in various stages of development.
Our Competitive Strengths
We believe that the combination of our technologies, expertise and 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, neuromuscular, hematology, dermatology and nephrology diseases for which the current treatment paradigm is inadequate.
Productive discovery capabilities through our IIP fuel a deep pipeline of clinical and preclinical product candidates. We are advancing a deep pipeline of both clinical- and preclinical-stage product candidates for the treatment of severe autoimmune diseases. Leveraging our technology suite and clinical expertise, we have advanced several candidates and believe this level of productivity affords us a breadth of options with regard to independently advancing or partnering our pipeline assets.
In November 2020, we announced the agreement to acquire a PRV from Bayer Healthcare Pharmaceuticals, Inc. for $98.0 million. A PRV entitles the holder to FDA priority review of a single new drug application (NDA) or BLA, which reduces the target review time and may potentially lead to an expedited approval. During the third quarter of 2022, the Company utilized this PRV and submitted it with the BLA filing for SC efgartigimod for the treatment of gMG.
In November 2022, we announced an agreement to acquire a new PRV for $102 million, which we expect to redeem for a future marketing application for efgartigimod.
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 where we bring to the collaboration our unique suite of antibody engineering technologies and experience in clinical development and our partners bring a wealth of disease and target biology expertise.
Together with our antibody discovery and development expertise, this suite of technologies has enabled us to build our broad pipeline of products and product candidates, across all stages of development and we believe will ensure continuous development of innovative and relevant programs. Our key technologies are outlined below:
Antibody Engineering and Other Technology Capabilities
Our Proprietary SIMPLE Antibody Platform
Our proprietary SIMPLE Antibody Platformplatform sources V‑regionsV-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‑regionsV-regions when immunized with human disease targets. We then combine these llama V‑regionsV-regions with Fc regions of fully human antibodies, resulting in antibodies that we then produce in industry‑validatedindustry-validated production cell lines. The resulting antibodies are diverse and, due to their similarity to human antibodies, we believe they are well suited to human therapeutic use. With this breadth of antibodies, we are able to test many different epitopes. Being able to test many different epitopes with our antibodies enables us to search for an optimized combination of safety, potency and species cross‑reactivitycross-reactivity with the potential for maximum therapeutic effect on disease. These antibodies are often cross‑reactivecross-reactive with the rodent version of chosen disease targets. This rodent cross‑reactivitycross-reactivity enables more efficient
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preclinical development of our product candidates because most animal efficacy models are rodent‑based.rodent-based. By contrast, most other antibody discovery platforms start with antibodies generated in inbred mice or synthetic antibody libraries, approaches that we believe are limited by insufficient antibody repertoires and limited diversity, respectively. Our SIMPLE Antibody Platformplatform allows us to access and explore a broad target universe, including novel and complex targets, while minimizing the long timelines associated with generating antibody candidates using traditional methods.
Our Fc Engineering Technologies
Our antibody engineering technologies—technologies – NHance, ABDEG, POTELLIGENT and POTELLIGENT—DHS mutations – focus on engineering the Fc region of antibodies in order to augment their interactions with components of the immune system, thereby potentially expanding the therapeutic index of our product candidates by modifying their half‑life,half-life, tissue penetration, rate of disease target clearance and potency. In addition, we obtained a non-exclusive research license and option for the SMART-Ig and ACT-Ig technologies. For example, our NHance and ABDEG engineering technologies enable us to modulate the interaction of the Fc region with FcRn, which is responsible for regulating half‑life,half-life, tissue distribution and pharmacodynamicPD properties of IgG antibodies. Similarly, ourthe POTELLIGENT engineering technology modulates the
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interaction of the antibody Fc region with receptors located on specialized immune cells known as natural killer or (NK) cells. These NK cells can destroy the target cell, resulting in enhanced antibody‑dependent cell‑mediatedantibody-dependent cell-mediated cytotoxicity or ADCC.
(ADCC). NHance and ABDEG: Modulation of Fc Interaction with FcRnFcRn.
An illustration of the FcRn‑mediatedFcRn-mediated antibody recycling mechanism is shown in Figure 2. (1)figure 6. [1] Serum proteins, including IgG antibodies, are routinely removed from the circulation by cell uptake. (2)[2] Antibodies can bind to FcRn, which serves as a dedicated recycling receptor in the endosomes, which have an acidic environment, and then (3A)[3A] return to the circulation by binding with their Fc region to FcRn. (3B)[3B] Unbound antibodies end up in the lysosomes and are degraded by enzymes. Because this Fc/FcRn interaction is highly pH‑dependent,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)7. 4) in the circulation.
Figure 2:6: The FcRn‑mediatedFcRn-mediated recycling mechanism
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NHANCE
NHance
NHance refers to two mutations that we introduce into the Fc region of an IgG antibody. NHance is designed to extend antibody serum half‑lifehalf-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
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frequently. As shown in Figure 3, (1)figure 7, [1] NHance antibodies bind to FcRn with higher affinity, specifically under acidic pH conditions. (2)[2] Due to these tighter bonds, NHance FcRn‑mediatedFcRn-mediated antibody recycling is strongly favored over lysosomal degradation, although some degradation does occur. (3)[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‑109ARGX-109, ARGX-111, ARGX-117 and a number of our discovery‑stagediscovery-stage programs utilize NHance.
Figure 3: NHance mutations favor theFcRn‑mediated recycling of IgG antibodies7
ABDEG
ABDEG refers to five mutations that we introduce in the Fc region that increase its affinity for FcRn at both neutral and acidic pH. In contrast to NHance, ABDEG‑modifiedABDEG-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.self-antigens. These self‑directedself-directed antibodies are referred to as auto‑antibodies.autoantibodies. We use our ABDEG technology to reduce the level of these pathogenic auto‑antibodiesautoantibodies in the circulation by increasing the rate at which they are cleared by the lysosomes. ABDEG is a component in a number of our products and product candidates, including ARGX‑113.efgartigimod.
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As shown in Figure 4,figure 8, our ABDEG technology can also be used with our pH‑dependentpH-dependent SIMPLE Antibodies in a mechanism referred to as sweeping. Certain SIMPLE Antibodies bind to their target in a pH‑dependentpH-dependent manner. These antibodies (1)[1] bind tightly to a target at neutral pH while in circulation, and (2)[2] release the target at acidic pH in the endosome. (3)[3] The unbound target is degraded in the lysosome. (4)[4] However, when equipped with our ABDEG technology, the therapeutic antibodies remain tightly bound to FcRn at all pH levels and are not degraded themselves. Instead, they are returned to the circulation where they can bind new targets. We believe this is especially useful in
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situations where high levels of the target are circulating or where the target needs to be cleared very quickly from the system.
Figure 4:8: SIMPLE Antibody and ABDEG
technologies work in concert to sweep diseases targets.
disease targets
POTELLIGENT: Modulation of Fc Interaction with NK CellsPOTELLIGENT
POTELLIGENT modulates the interaction of the Fc region with the Fc gamma receptor IIIa located on specialized immune cells, known as NK cells. These NK cells can destroy the target cell, resulting in enhanced ADCC. POTELLIGENT changes the Fc structure by excluding a particular sugar unit such that it enables a tighter fit with the Fc gamma receptor IIIa. The strength of this interaction is a key factor in determining the killing potential of NK cells. An independent publication reported that the exclusion of this sugar unit of the Fc region increases the ADCC‑mediated cell‑killingADCC-mediated cell-killing potential of antibodies by 10‑10- to 1000‑fold. ARGX‑1101000-fold. Cusatuzumab and ARGX‑111ARGX-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).
Chugai and Clayton
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Our Wholly‑Owned Programs
The following is“Sweeping Antibody” technology) and ACT-Ig (Antibody half-life extending technology). In 2020, we also entered into a non-exclusive research agreement with the pipeline of our wholly‑owned product candidates and discovery programs:
ARGX‑113
We are currently developing our lead product candidate, ARGX‑113, forClayton Foundation under which we may access the treatment of patients with MG, ITP and PV, 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. ARGX‑113 utilizes our ABDEG engineering technology and is designedClayton Foundation’s proprietary DHS mutations to blockextend the recycling of IgG antibodies, which results in their removal from circulation. We believe that our approach presents potential benefits relative to the current standard of care for MG, ITP and PV: corticosteroids and immunosuppressants in the early stages, followed by intravenous IgG, or IVIg, and plasma exchange, or plasmapheresis, as the disease progresses. We believe these potential benefits include improved time of onset, increased magnitude and durationserum half-life of therapeutic benefit, a more favorable safety and tolerability profile and a reduced cost burden to the healthcare system.antibodies.
SC drug delivery technologies
We have completed the single and multiple ascending dose parts of a double‑blind, placebo‑controlled Phase 1 clinical trial of ARGX‑113 in 62 healthy volunteers. This clinical trial was conducted at one site in Belgium.
We announced topline data from a double‑blind, placebo‑controlled Phase 2 clinical trial of ARGX‑113 in 24 patients with generalized MG in December 2017. This clinical trial has been performed at multiple sites in Europe, Canada and the United States. We planexclusive access to advance ARGX‑113 into Phase 3 clinical development before the end of 2018, subject to discussions at an end‑of‑Phase 2 meeting with the FDA, which we intend to schedule in 2018, aiming for a first approval in this indication. We announced in September 2017 that the FDA granted orphanHalozyme’s ENHANZE® SC drug designationdelivery technology for the use of ARGX‑113 for the treatment of MG.
In parallel, we are performing a second Phase 2 clinical trial of ARGX‑113 in patients with ITP in EuropeFcRn and expect to report topline data in the second half of 2018. In addition, we launched a third Phase 2 clinical trial of ARGX‑113 in patients with PV in September 2017 at multiple sites in Europe, UkraineC2 targets and Israel. Depending on the outcome of the ITP and PV clinical trials and subject to discussions with regulatory agencies, we intend to enter into Phase 3 clinical development of ARGX‑113 in one or both of these indications. In addition to the intravenous formulation of ARGX‑113 that we are using in our current clinical trials, we are also developing a subcutaneous formulation designed to make ARGX‑113 accessible to larger patient populations, including patients requiring chronic therapy, potentially outside of the hospital setting. We initiated a Phase 1 clinical trial in healthy volunteers for a subcutaneous formulation of ARGX‑113 in October 2017 for the treatment of chronic autoimmune diseases.
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Overview of Myasthenia Gravis
MG is an autoimmune disorder associated with muscle weakness that is triggered by IgG auto‑antibodies. These antibodies attack critical signaling proteins at the junction between nerve and muscle cells, thereby impairing their communication signals. As shown in Figure 5, in MG these auto‑antibodies 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 auto‑antibodies 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 auto‑antibodies attacking the transmission of nerve impulses to muscles
four additional targets. 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. 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.
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Limitations of Current MG Treatments
Early in their disease, patients are treated with cholinesterase inhibitors, such as pyridostigmine, followed by corticosteroids and immunosuppressants. The majority of patients with MG require some form of immunotherapy at some point during their illness. Corticosteroids are associated with a number of significant side effects, including bone thinning, weight gain, diabetes, hypertension, osteoporosis and depression. The side effects of immunosuppressants, depending on the particular immunosuppressant, include weakness, sweating, transaminase elevations, neutropenia, including severe neutropenia with infection, acute deep venous thrombosis, nausea, vomiting and the incidence of cancer. As MG becomes more advanced, patients can be treated with IVIg and plasmapheresis. Both of these approaches are associated with significant side effects.
Treatment with IVIg is based on the principle of altering the balance between synthesis and degradation of antibodies in the body. IVIg treatment results in a large increase in the quantity of IgG antibodies in circulation. This excess of exogenously added IgG antibodies competes with the endogenous autoimmune antibodies for various pathways including the FcRn antibody recycling pathway. Saturation of this pathway with exogenous IgG antibodies promotes antibody destruction, which in turn leads to a decrease in the level of autoimmune antibodies. IVIg treatment is associated with a number of adverse events including fever, myalgia, headache, nausea and impaired kidney function or kidney disease, and IVIg can lead to life‑threatening complications such as pulmonary edema, acute kidney dysfunction or stroke in elderly patients.
Plasmapheresis involves collecting blood from a patient and physically removing the IgG antibodies and other serum proteins from the plasma before returning it to the patient. Plasmapheresis is also associated with known limitations and drawbacks. Potential complications include thrombotic events, bleeding, catheter occlusion, infection, nausea, hypotension and arrhythmias. In most cases, these symptoms are mild and transient, but in some cases they can be severe and life‑threatening.
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. In addition to patients experiencing an MG crisis, we believe a substantial number of MG patients receive chronic IVIg or plasmapheresis for which they require frequent hospitalization
Recently, the FDA and European Medicines Agency approved the use of Soliris® 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 ARGX‑113 may offer advantages over IVIg and plasmapheresis, including the potential to deliver a faster onset of action, a larger and longer lasting therapeutic effect and an improved safety and tolerability profile. In addition, a subcutaneous formulation of ARGX‑113 could further expand its use to patients requiring chronic therapy, potentially outside of the hospital setting.
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Overview 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.
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 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 auto‑antibodies for various pathways including the FcRn‑dependent antibody recycling pathway, thereby lowering the impact of the auto‑antibodies. IVIg treatment for ITP requires intravenous dosing of up to 2 g/kg per day of 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) and Eltrombopag (Promacta) are approved as last‑line therapy for ITP and have generated global revenues of $584 million and $635 million in 2016, respectively.
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 auto‑antibodies targeting desmoglein‑1 and −3, which are present on the surface of keratinocytes and important for cell‑to‑cell adhesion in the epithelium. Auto‑antibodies 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.
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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 carries infusion reaction risks, including anaphylaxis, and the risk of opportunistic infections, including progressive multifocal leukoencephalopathy, a rare and usually fatal viral disease.
Even with aggressive PV therapy, it takes two to three weeks for blisters to stop forming and about six to eight weeks for blisters to heal. Even with IVIg and Rituxan, complete remissions may take several months, and some patients do not respond to these treatments. The serious complications that can arise from use of these drug classes leave a large unmet medical need for effective therapy with a faster onset of action and better safety profile.
Our Solution: ARGX‑113
Our lead product candidate, ARGX‑113, is an antibody Fc fragment that we believeENHANZE® has the potential to overcome many of the limitations of the current standard of care for MG, ITP and PV, including with respect toshorten drug administration time, of onset, magnitude and duration of therapeutic benefit and safety profile. We developed ARGX‑113 using our ABDEG Fc engineering technology.
ARGX‑113 targets FcRn with high affinity, thereby reducing levels of all four classes of IgG antibodies, which are referred to as IgG1, IgG2, IgG3 and IgG4. In the case of MG, the large majority of patients have auto‑antibodies of the IgG1 and IgG3 classes, while in the case of ITP these auto‑antibodies consist mainly of the IgG1 class. In the case of PV, the pathogenic auto‑antibodies consist mainly of the IgG1 and IgG4 class. As shown in Figure 6, ARGX‑113’s mechanism of action is to block the recycling of IgG antibodies and remove them from circulation. Antibodies are routinely removed from circulation by being internalized into cells, where they can either become destined for degradation in the lysosomes or recycled back into circulation. IgG antibodies not bound to FcRn are degraded, while those bound to FcRn are recycled back into circulation. [(1)] As a result of our ABDEG technology and the modifications we made to the Fc region, ARGX‑113 binds to FcRn with high affinity making this receptor unavailable to circulating IgG antibodies. [(2)] The IgG antibodies can then no longer effectively be rescued and end up in the lysosomes where they are degraded. Compared to alternative immunosuppressive approaches, such as B‑lymphocyte, or B‑cell, depleting agents, ARGX‑113 acts in a highly selective manner by reducing IgG antibody levels, while leaving
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levels of antibodies of the immunoglobulin A, or IgA, immunoglobulin M, or IgM, and immunoglobulin D, or IgD, types as well as all components of the innate immune system intact.
Figure 6: ARGX‑113’s mechanism of action blocks the recycling of IgG antibodies and removes them from circulation
Based on our preclinical studies and early clinical trial results, we believe that ARGX‑113 has the potential to reduce levels of pathogenic IgG antibodies. Our clinical data suggest that ARGX‑113 reduces circulating IgG antibodies more rapidly than current therapies, which we believe could translate into faster therapeutic benefit if replicated with
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respect to pathogenic IgG antibodies. Our clinical data also suggest that the quantity of ARGX‑113 required to achieve and maintain suppression of circulating 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, to MG, ITP and PV, we believe there are other autoimmune diseases that may benefit from the mechanism of action of ARGX‑113 therapy. We intend to pursue initial approval for MG and then plan to expand to ITP and, potentially, PV because these diseases have significant unmet medical needs. We then intend to expand our clinical development efforts for ARGX‑113 into additional indications also mediated by pathogenic IgG antibodies. Pathogenic auto‑antibodies have been shown to be associated with other neuromuscular diseases such as Guillain‑Barré, Lambert Eaton, chronic inflammatory demyelinating polyradiculoneuropathy; with other hematological diseases such as hemolytic anemia; and with other autoimmune blistering diseases such as bullous pemphigoid and epidermyolysis bullosa; as well as with systemic lupus erythematosus and multiple sclerosis, which affect larger numbers of patients.
Clinical Development Plan
We recently completed a Phase 2 clinical trial of ARGX‑113 in patients with MG, and we are currently evaluating ARGX‑113 in two Phase 2 clinical trials, one in patients with ITP and one in patients with PV. We reported topline data from the MG clinical trial in December 2017, and we expect to report topline data from the ITP clinical trial and interim data from the PV clinical trial in the second half of 2018. We plan to advance ARGX‑113 into Phase 3 clinical development before the end of 2018, subject to discussions at an end‑of‑Phase 2 meeting with the FDA, which we intend to schedule in 2018, aiming for a first approval in MG. Depending on the outcome of the ITP and PV clinical trials and subject to discussions with regulatory agencies, we intend to enter into Phase 3 clinical development of ARGX‑113 in one or both of these indications. In addition to the current intravenous formulation of ARGX‑113, we are also developing a subcutaneous formulation designed to make ARGX‑113 accessible to larger patient populations including patients requiring chronic therapy, potentially outside of the hospital setting. We initiated a Phase 1 clinical trial in healthy volunteers for a subcutaneous formulation of ARGX‑113 in October 2017 for the treatment of chronic autoimmune diseases.
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 ARGX‑113. 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 ARGX‑113, and the other treatment arm received placebo. All patients continued to receive the standard of care. Dosing took place during a three‑week period which included four weekly doses of ARGX‑113 or placebo. Patients received follow‑up for eight weeks after treatment.
The primary objectives of this Phase 2 clinical trial were to evaluate the safety and tolerability of ARGX‑113 with primary endpoints evaluating the incidence and severity of adverse events and serious adverse events, and evaluating vital signs, electrocardiogram and laboratory assessments. Secondary 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 topline data from this Phase 2 clinical trial in December 2017.
Primary endpoint analysis demonstrated ARGX‑113 to be well‑tolerated in all patients, with most adverse events observed characterized as mild and not deemed to be drug‑related. The majority of treatment emergent adverse events, or TEAEs, observed were considered as mild (i.e., Grade 1). No TEAEs Grade 3 or higher were reported. No
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clinically significant laboratory, vital signs and/or electrocardiogram findings were observed. No deaths, serious adverse events or TEAEs leading to discontinuation of treatment were reported during the trial. The observed tolerability profile was consistent with the Phase 1 healthy volunteer trial.
In total, 20 out of 24 (83.3%) patients reported at least one TEAE, and nearly all TEAEs were considered mild by the investigator, except for seven patients who experienced a moderate adverse event. No patients reported experiencing vomiting during the clinical trial. We did not observe any clinically significant increase in C‑reactive protein in the clinical trial.
The most frequent TEAEs deemed to be drug‑related per investigator were headache in 25.0% of patients, monocyte count decrease in 16.7% of patients and rhinorrhea in 8.3% of patients receiving ARGX‑113, respectively. Herpes zoster (shingles) of moderate intensity was reported in one patient and deemed to be possibly drug‑related by the investigator. One patient in the ARGX‑113 group moved to rescue therapy.
All TEAEs reported, as well as TEAEs deemed to be drug‑related by the investigator in at least two patients, are summarized in Table 1.
Table 1. Overview of TEAEs and drug‑related TEAEs reported in at least two patients in ARGX‑113 Phase 2 Clinical Trial in MG
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The secondary endpoint measures relating to efficacy showed ARGX‑113 treatment resulted in a strong clinical improvement over placebo as measured by all four predefined clinical efficacy scales during the entire duration of the trial. Patients in the treatment arm showed rapid onset of disease improvement, with clear separation from placebo one week after the first infusion.
83% of patients treated with ARGX‑113 achieved a clinically meaningful response (MG‑ADL≥2). 75% of patients treated with ARGX‑113 had a clinically meaningful and statistically significant improvement in MG‑ADL scores (at least a two‑point reduction from baseline) for a period of at least six consecutive weeks versus 25% of patients on placebo (p = 0.0391).
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Clinical benefit in the ARGX‑113 treatment group maximized as of one week after the administration of the last dose, achieving statistical significance over the placebo group (p = 0.0356) on the MG‑ADL score. Increasing differentiation was observed between the ARGX‑113 treatment group versus placebo with increasing MG‑ADL and QMG thresholds as shown in Figure 7.
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Figure 7: Increasing differentiation in patient MG‑ADL and QMG thresholds
(treatment group vs. placebo)
Analysis of the pharmacokinetic and pharmacodynamic endpoints was generally consistent with the findings from the Phase 1 clinical trial. We observed disease improvement to be correlated with reduction in pathogenic IgG levels. Moreover, we observed a reduction of acetylcholine receptor autoantibodies following a similar kinetic as the total IgG level reduction.
In line with findings in the Phase 1 healthy volunteer trial, positive anti‑drug antibody, or ADA, titers were detected in a limited number of patients. In the Phase 2 clinical trial, positive post‑dosing ADA titers were detected in four out of 12 patients receiving ARGX‑113 and in three out of 12 patients receiving placebo. Positive ADA titers were detected in one active‑treated patient as of two weeks after the last infusion, and these titers may have the tendency to slightly increase over the course of the trial. In line with the results obtained in the Phase 1 healthy volunteer trial, the majority of ADA signals in active‑treated patients were just above the detection limit of the assay and were typically only found once or twice during the course of the trial. Positive post‑dose ADA titers had no apparent effect on ARGX‑113 pharmacokinetics or pharmacodynamics.
Phase 2 Clinical Trial in ITP
We are conducting a randomized, double‑blind, placebo‑controlled Phase 2 clinical trial to evaluate the safety, efficacy and pharmacokinetics of ARGX‑113 in 36 ITP patients, who have platelet counts lower than 30 × 109/L and who are stable on standard‑of‑care treatment, consisting of corticosteroids, permitted immunosuppressants and/or thrombopoietin receptor agonists. We intend to conduct the clinical trial at approximately 35 sites across Europe. Patients will be randomly assigned to three arms of 12 patients each. All patients in this clinical trial will continue to receive standard‑of‑care treatment. One treatment arm will receive 5 mg/kg ARGX‑113, the second arm will receive 10 mg/kg ARGX‑113 and the third arm will receive placebo. Dosing will take place in a three‑week period with four weekly doses of ARGX‑113 or placebo. The ITP trial protocol was amended by extending the follow-up period from 8 weeks to 21 weeks. In addition, a one-year open label extension study was added as a second amendment to allow (re)treatment of ITP patients from the first study (dosed at 10mg/kg).
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The primary objectives of this Phase 2 clinical trial are to evaluate safety and tolerability of ARGX‑113 with primary endpoints evaluating the incidence and severity of adverse events and serious adverse events and evaluating vital signs, electrocardiogram and laboratory assessments. Secondary objectives include evaluation of efficacy, based on platelet count, use of rescue treatment and bleeding events; pharmacokinetics; pharmacodynamics; and immunogenicity.
In September 2017, we announced that the clinical trial had achieved 50% enrollment.
Phase 2 Clinical Trial in PV
We are conducting an open‑label, non‑controlled Phase 2 clinical trial to evaluate the safety, efficacy, pharmacodynamics and pharmacokinetics of ARGX‑113 in 12 patients with mild to moderate PV who are either newly diagnosed or relapsing. We intend to conduct the clinical trial at 12 sites across Europe, Ukraine and Israel. The trial design comprises three cohorts of four patients each. The first cohort will receive 10 mg/kg of ARGX‑113 in four weekly doses as induction therapy, followed by five weeks of maintenance therapy with ARGX‑113 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 ARGX‑113. In newly diagnosed patients and relapsing patients off‑therapy, ARGX‑113 will be dosed as monotherapy, in absence of standard of care therapy. In relapsing patients on prednisone, ARGX‑113 will be dosed on top of a stable dose of prednisone during the induction phase. The prednisone dose may be changed (decreased or increased) from the beginning of the maintenance phase up to study end according to standard of care (i.e., corticosteroids, immunosuppressants, IVIg, plasma exchange and rituximab). An independent data monitoring committee may recommend adapting the dose during both the induction and the maintenance period, or the dosing frequency at maintenance, or the duration of dosing during the maintenance period with a maximum of two extra doses per cohort for a following cohort based on the outcome of the previous cohort. In case of a dose increase, the maximum dose would be 25 mg/kg.
The primary objectives of this Phase 2 clinical trial are to evaluate safety and tolerability of ARGX‑113, with primary endpoints evaluating the incidence and severity of adverse events and serious adverse events and evaluating vital signs, electrocardiogram, physical examination abnormalities and laboratory assessments. Secondary objectives include evaluation of pharmacodynamics including assessment of total IgG and pathogenic IgG levels, efficacy based on the PDAI score, pharmacokinetics, and immunogenicity.
Phase 1 Clinical Trial for Subcutaneous Formulation of ARGX‑113
In addition to the intravenous product formulation of ARGX‑113 that we are currently using in our clinical trials, we are also developing a subcutaneous product formulation designed to enable administration of ARGX‑113 to larger patient populations, including patients requiring chronic therapy, potentially outside the hospital setting.
We evaluated the intravenous and subcutaneous formulations of ARGX‑113 head‑to‑head in a preclinical cynomolgus monkey model. The results suggest that both formulations result in comparable half‑life in circulation of ARGX‑113, a favorable bioavailability of 75% of the subcutaneous formulation and a comparable pharmacodynamic effect shown by reduction of total IgG antibodies. We believe these results suggest subcutaneous dosing of ARGX‑113 in humans may be feasible. We initiated a Phase 1 clinical trial in healthy volunteers for a subcutaneous formulation in October 2017 for the treatment of chronic autoimmune diseases.
We are evaluating a subcutaneous formulation of ARGX‑113 in a randomized, open‑label, parallel group, single‑center study in approximately 32 healthy male subjects to compare the pharmacokinetics, pharmacodynamics, safety and tolerability of this formulation with the current intravenous formulation being administered in our ongoing Phase 2 clinical trials. Single and repeat dosing regimens are being studied, and doses are aligned with doses used in the continuing Phase 2 clinical trials of ARGX‑113 using the intravenous formulation. This clinical trial is taking place in a single clinical center in the Netherlands.
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Phase 1 Clinical Data
We have completed enrollment in a double‑blind, placebo‑controlled Phase 1 clinical trial in healthy volunteers to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and immunogenicity of single and multiple doses of ARGX‑113. In the first part of the clinical trial, 30 subjects were randomized to receive a single dose of ARGX‑113 or placebo ranging from 0.2 mg/kg to 50 mg/kg. In the second part of the clinical trial, 32 subjects were randomized to receive multiple ascending doses of ARGX‑113 or placebo up to a maximum of 25 mg/kg.
We announced interim data from this Phase 1 clinical trial in June 2016 and at a workshop we sponsored in conjunction with the American Society of Hematology annual meeting in December 2016. We expect that the full results from this clinical trial will be published in a peer‑reviewed journal during the first half of 2017.
Single Ascending Dose
We observed that a single two‑hour infusion of 10 mg/kg ARGX‑113 was associated with an approximate 50% reduction of circulating IgG antibody levels. We observed that a reduction of circulating IgG antibody levels persisted for more than four weeks after the last dose, as shown in Figure 8. We believe this sustained reduction would be clinically meaningful if replicated with respect to pathogenic IgG antibodies because IVIg and plasmapheresis typically result in a 30% to 60% reduction in pathogenic IgG antibody levels.
Figure 8. Selective reduction of IgG by administration of ARGX‑113 to healthy volunteers in the single ascending dose part of our Phase 1 clinical trial
Administration of ARGX‑113 at single doses up to 25 mg/kg was reported to be well‑tolerated and administration of a single dose of 50 mg/kg was reported to be moderately tolerated. There were no drug‑ or infusion‑related serious adverse events associated with doses up to 50 mg/kg. The most frequently reported drug‑related adverse events included abnormal white blood cell count, increased C‑reactive protein levels, headache, dizziness and chills. All of these adverse events were mild or moderate and reported only in the two highest dose groups (25 mg/kg and 50 mg/kg). While ARGX‑113 was associated with a decrease in the levels of IgG antibodies, there were no observed changes in IgM or IgA levels or serum albumin observed in the clinical trial, suggesting that ARGX‑113 has the potential to be a highly selective immunosuppressant.
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Multiple Ascending Dose
In the multiple ascending dose part of the Phase 1 clinical trial, repeat administration of both 10 mg/kg and 25 mg/kg of ARGX‑113 every seven days, four doses in total, and 10 mg/kg every four days, six doses in total, was associated with a gradual reduction in levels of all four classes of IgG antibodies by 60% to 85%, with 10 mg/kg dose results shown in Figure 9. For all doses, we observed the reduction in circulating IgG antibody levels to persist for more than four weeks after the last dose with levels below 50% at approximately three weeks, and did not return to baseline levels for more than one month. Pharmacokinetic analysis of serum baseline levels of ARGX‑113 indicates that it has a half‑life of approximately three to four days with no drug accumulation following subsequent weekly dosing. The prolonged activity on the levels of IgG antibodies is consistent with the mechanism of action of ARGX‑113 and the effect of the ABDEG technology on increasing the intracellular recycling of ARGX‑113. Similar to the single ascending dose part, no significant reductions in IgM, IgA or serum albumin were observed.
Figure 9. Reduction in the levels of four IgG antibody classes and total IgG levels in the multiple ascending dose part of our Phase 1 clinical trial of ARGX‑113 in healthy volunteers at a dose of 10 mg/kg every seven days
Administration of multiple ARGX‑113 doses of 10 mg/kg and 25 mg/kg were reported to be well‑tolerated. One serious adverse event, hyperventilation, was observed in the multiple ascending dose part. This event, which occurred six days after drug administration, was considered by the clinical investigator as unlikely to be related to ARGX‑113. Some patients had changes to C‑reactive protein levels that were considered clinically significant. The most frequently reported drug‑related adverse events included headache, feeling cold, chills and fatigue, all of which were mild or moderate and reported only in the highest dose group of 25 mg/kg.
In a limited number of pre‑ and post‑dose samples originating from both active‑ and placebo‑treated individuals, positive ADA titers were detected. During the single ascending dose part of the clinical trial, three out of 20 subjects on drug and one out of 10 subjects on placebo showed positive post‑dose ADA titers. During the multiple ascending dose part of the clinical trial, one out of 23 subjects on drug and two out of eight subjects on placebo showed positive post‑dose ADA titers. Signals typically were just above the detection limit of the assay and were only found once during the clinical trial for the majority of subjects. No increase of ADA titers over time for individual subjects was
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observed, nor had any of the subjects with at least one positive ADA sample an apparent different pharmacokinetic/pharmacodynamic profile.
Preclinical Data
We conducted several preclinical studies of ARGX‑113. The role of FcRn in maintaining IgG homeostasis was observed in knockout mice lacking functional FcRn. In preclinical in vitro studies, ARGX‑113 bound to human FcRn with an affinity that was 30 to 500 times higher than the naturally occurring Fc region of human IgG1. In preclinical testing in cynomolgus monkeys, ARGX‑113 specifically blocked IgG antibody recycling and did not lead to reductions in IgA, IgM or serum albumin levels. In preclinical animal efficacy models of MG, ITP, rheumatoid arthritis and MS, different prototypes of ARGX‑113 showed the potential to reduce pathogenic IgG antibodies, thereby reducing disease symptoms.
ARGX‑110
We are developing ARGX-110 in cancer indications, initially for TCL and AML, as well as high-risk MDS. TCL and AML are rare and aggressive hematological cancers for which significant unmet medical needs exist. MDS, a rare bone marrow disorder, is often a precursor to AML. ARGX-110 is a SIMPLE Antibody 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.
ARGX-110 is currently being evaluated in an open-label Phase 1/2 clinical trial, in combination with azacitidine, in newly diagnosed AML patients who are unfit for intensive chemotherapy or in patients with high-risk MDS and an open-label Phase 1/2 clinical trial in 27 patients (13 patients in the Phase 1 part and 14 patients in the Phase 2 part) relapsed or refractory CD70-positive CTCL patients.
We reported interim results for the first six patients from the dose-escalation part of the Phase 1/2 clinical trial in combination with azacitidine in AML or high-risk MDS in December 2017, which demonstrated a favorable tolerability profile of the combination therapy and suggested evidence of biological activity across the evaluated doses. We expect to report topline data for this trial in the second half of 2018.
We reported interim data from the Phase 2 part of the Phase 1/2 clinical trial in CTCL in December 2017, which demonstrated a favorable tolerability profile and disease control in six out of nine evaluable patients. We expect to report topline data from the Phase 2 part of this clinical trial in the second half of 2018.
In addition, ARGX-110 is being evaluated in an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma. To date, 11 patients have been enrolled in this clinical trial.
Overview of Acute Myeloid Leukemia and Myelodysplastic Syndrome
AML is a hematologic cancer characterized by excessive proliferation of myeloid stem cells and their failure to properly differentiate into mature white blood cells. AML is the second most common subtype of leukemia in adults. In the United States, AML has an incidence of approximately 22,000 new cases annually. AML is generally a disease of elderly people, with more than 60% of diagnosed patients being older than 60 years, and AML is uncommon before the age of 45. The average five-year survival rate for patients with AML is 27%, but there are significant differences in prognosis depending on several factors, including the age of the patient at diagnosis. For patients under the age of 45, the five-year survival rate is approximately 57%, while for those over the age of 65 it is only 6%. There are likely multiple reasons for this discrepancy, including the ability of younger patients to tolerate more aggressive therapy.
Current first-line treatments in AML typically involve aggressive chemotherapy, including alkylating agents and cytarabine potentially followed by stem cell transplantation, for younger patients with the aim to induce remission. This therapy is not recommended for older patients or patients with comorbidities, who are often treated with hypomethylating agents. We believe there is a significant need for safer, more effective AML treatments that can also be used in elderly patients. Because relapse is often due to leukemic stem cells present next to the malignant AML cells,
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or blasts, therapies targeting both blasts and leukemic stem cells may be more efficacious than chemotherapy only and could increase survival rates.
MDS also affects bone marrow cells, reducing their ability to produce red and white blood cells or platelets. In the United States, MDS has an incidence of approximately 13,000 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.
Overview of T-Cell Lymphoma
Lymphoma is the most common type of blood cancer and occurs when lymphocytes, a type of white blood cell such as B-cells and/or T-cells, grow and multiply uncontrollably. Cancerous lymphocytes can travel to many parts of the body, including the blood and bone marrow, giving rise to leukemias, and to lymph nodes, spleen, skin or other organs, forming a mass known as a tumor.
TCL accounts for 6% of all cases of lymphoma and can be divided into various subtypes. These subtypes differ by location, distribution and aggressiveness of the primary tumor as well as by specific changes to the affected lymphocytes. CTCL is a subtype of TCL and overall, there are approximately 7,900 new cases of TCL in the United States each year. According to the Cutaneous Lymphoma Foundation, the incidence of CTCL in the United States is approximately 3,000 new cases per year.
The two most common types of CTCL are mycosis fungoides, representing approximately 50% of CTCL patients, and a more advanced form known as Sézary syndrome, representing approximately 15% of CTCL patients. In both mycosis fungoides and Sézary syndrome, visible skin lesions offer an ongoing means with which to monitor both the progression of disease and the impact of treatment. Sézary syndrome is distinguished by the presence of malignant lymphocytes in the blood, an extensive rash covering over 80% of the body and tumors visible on the skin.
Advanced TCL is generally very aggressive and is typically treated with standard anticancer chemotherapy agents used in combination with or without the addition of biologics. The five-year survival for TCL patients is 65%, with poor prognosis for subtypes such as Sézary syndrome underscoring the unmet need for effective, long-lasting TCL treatments.
Our Solution: ARGX‑110
Our product candidate ARGX-110 is an antibody that we believe has the potential to add to the treatment paradigm for lymphomas and leukemias by both increasing the response rates and extending the duration of response for patients with CD70-positive advanced-stage cancers.
We developed ARGX-110 using our SIMPLE Antibody Platform and the POTELLIGENT Fc engineering technology. ARGX-110 binds to the cell surface protein CD70 with high affinity, blocking the interaction between CD70 and its receptor CD27 and targeting CD70 expressing cells for destruction by multiple immune pathways. CD70 is a cell surface protein that is highly expressed in cancer, including in T-cell and B-cell lymphomas, leukemias and certain solid tumors. In normal tissues, CD70 expression is either low or absent. Binding of CD70 to its receptor, CD27, initiates a cascade of intracellular events leading to cell proliferation and survival. As a byproduct of CD70 binding to CD27, the extracellular portion of CD27 is cleaved, creating a soluble form of CD27 known as sCD27, which can easily be measured. sCD27 may serve as a biomarker for CD70 activity, potentially allowing us to identify target patients based on the likelihood of response to treatment, monitor disease progression and measure the impact of anti-CD70 therapy. ARGX-110 exhibits potent ADCC and antibody dependent cellular phagocytosis potential through the use of POTELLIGENT technology as well as complement-dependent cytotoxicity leading to the killing of cells expressing CD70.
Based on the broad overexpression of CD70 in hematological cancers, we may decide to study ARGX-110 in additional hematological cancer indications beyond TCL, AML and MDS. In addition to ARGX-110’s potential as a
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monotherapy, we believe that it may be suitable for combination therapy given its reported tolerability to date; the fact that certain cancer treatments, such as histone deacetylase inhibitors, hypomethylating agents and irradiation, may upregulate CD70; and resistance to certain treatment with tyrosine kinase inhibitors may be effected through CD70 overexpression.
Clinical Development Plan
In December 2016, we initiated an open-label Phase 1/2 clinical trial of ARGX-110 at three sites in Switzerland for the treatment of newly diagnosed AML or high-risk MDS patients. We expect the majority of patient enrollment in this clinical trial to be AML patients. We reported interim results from the dose-escalation part of this clinical trial in December 2017. Patient recruitment is currently ongoing, and we have recruited nine AML patients to date.
We are also currently evaluating ARGX-110 in an open-label, multi-site Phase 1/2 clinical trial in Europe in patients with relapsed or refractory CD70-positive CTCL, with interim data from the Phase 1 and Phase 2 parts of this clinical trial reported in December 2017. We expect to report topline results from the Phase 2 part of this clinical trial in the second half of 2018.
Prior to this, ARGX-110 was evaluated in an extensive Phase 1 clinical trial in patients with advanced malignancies expressing CD70, following a step-wise adaptive clinical trial design enrolling a total of 86 patients (of whom 85 patients have been treated): a dose-escalation part (60 patients) and four safety-expansion cohorts in solid tumors (20 patients), hematological cancers (19 patients), CTCL patients (14 patients, of whom 13 have been treated) and PTCL (seven patients). This clinical trial design was adaptive in that it allowed us to make data driven decisions and open-up new cohorts in indications where we have seen the most promising early signals of biological activity. While the primary goal of the Phase 1 part of this clinical trial is to investigate safety and pharmacokinetics, we have also observed evidence of biological activity in several of the patients treated. These results led us to pursue the further evaluation of ARGX-110 in AML and CTCL.
In addition, ARGX-110 is being evaluated in an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma. To date, 11 patients have been enrolled in this clinical trial.
Phase 1/2 Clinical Trial in Combination with Azacitidine in Patients with AML or High-Risk MDS (ongoing)
We are evaluating ARGX-110 in an open-label, dose-escalating Phase 1/2 clinical trial to evaluate its safety, tolerability and efficacy in combination with azacitidine in newly diagnosed AML patients unfit for chemotherapy or high-risk MDS patients. The clinical trial was initiated in December 2016. All patients in this clinical trial are receiving ARGX-110 in combination with 75 mg/m2 azacitidine (standard of care for AML). During the dose-escalation part of the clinical trial, three doses of ARGX-110, 1 mg/kg, 3 mg/kg and 10 mg/kg administered bi-weekly are being evaluated. This trial design was amended in February 2018 by adding a 20 mg/kg dose cohort to the dose–escalation part to best inform the recommended dose for a Phase 2 trial.
Patients will be dosed every two weeks until disease progression for a maximum duration of 12 months. The primary objective of the Phase 1 part of the clinical trial is to determine the maximum tolerated dose of ARGX-110 and/or the recommended Phase 2 dose in combination with azacitidine. Once the dose for the combination therapy is selected, efficacy will be evaluated in a dedicated Phase 2 clinical trial. This is a multi-center clinical trial conducted in Europe, with three sites currently open in Switzerland. To date, we have enrolled a total of nine patients in the Phase 1 part of this clinical trial. We reported interim results for a first set of six evaluable patients from the dose-escalation part of this clinical trial in December 2017 representing the data as of November 15, 2017. These six patients constituted the 1 mg/kg and 3 mg/kg dose cohorts. Three patients have also been enrolled in the 10 mg/kg dose cohort, but were non-evaluable at the time of the interim data. Six out of nine patients were still on treatment at the time of the interim data. These interim results showed for the first six patients that no dose-limiting toxicity was observed for ARGX-110 and that ARGX-110 was overall reported to be well-tolerated with signs of clinical activity. To date, the tolerability profile of ARGX-110 in this Phase 1/2 clinical study in combination with azacitidine appears to be similar to what we observed in the other ARGX-110 clinical trials. We believe that the observed Grade 3 and 4 hematological toxicity for ARGX-110
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in combination with azacitidine corresponds to the reported safety profile of azacitidine monotherapy and can be seen in Table 2.
Table 2. Grade 3 and 4 adverse events of ARGX-110 in combination with azacitidine open-label, Phase 1 dose‑escalation part (first set of six evaluable patients, ongoing, uncleaned data as of November 15, 2017*)
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* The collection of safety data for the three patients enrolled in the 10 mg/kg dose cohort is ongoing. Through November 15, 2017, the observed tolerability profile in the 10 mg/kg dose cohort appeared to be in line with the lower dose cohorts.
** Intermittent toxicities for the same patient.
More specifically, at the time of the interim data, six out of six AML patients showed signs of clinical activity, including complete remission in three out of six patients, complete remission with incomplete blood count recovery in one out of six patients and partial response in two out of six patients. One of the patients who achieved a complete remission successfully bridged to allogeneic stem cell transplant after five cycles. One patient discontinued from the study following an adverse event. The preliminary responses as of November 15, 2017, observed in the first six evaluable AML patients can be seen in Table 3.
Leukemic stem cells are demonstrated to give rise to a large population of more mature leukemic blasts which lack self-renewal capacity in AML. Leukemic stem cells reside in the bone marrow and are considered difficult to target specifically. Preliminary data from the first set of patients suggest ARGX-110 could be active both at the circulating and bone marrow blast level and at the leukemic stem cell level.
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Table 3. Overview of six AML patients treated with ARGX-110 in the Phase 1 dose-escalation
part of the Phase 1/2 clinical trial in combination with azacitidine in patients with AML or
high-risk MDS (uncleaned data as of November 15, 2017)
Phase 2 Part of Clinical Trial in Patients with Relapsed or Refractory CD70-positive CTCL and Phase 1 Safety‑Expansion Cohorts in Patients with CD70-positive CTCL (ongoing, completed enrollment)
A Phase 1 safety-expansion cohort completed enrollment, consisting of heavily pre-treated patients with CD70-positive CTCL. In total, we have recruited 14 CTCL patients (13 of whom have been treated). We transitioned into the open-label Phase 2 part of our Phase 1/2 clinical trial of ARGX-110 in 14 adult, relapsed or refractory CD70-positive CTCL patients in April 2017. We announced interim results from the 13 patients in the CTCL safety-expansion cohort of the Phase 1 part and nine patients in the Phase 2 part of the clinical trial in December 2017 for a total of 22 CTCL patients, who demonstrated signs of clinical activity and a favorable tolerability profile in line with what was observed earlier in the dose-escalation part of the Phase 1 trial and previous safety-expansion cohorts of the Phase 1/2 clinical trial in patients with advanced malignancies expressing CD70.
Based on the ongoing biomarker and pharmacokinetic analysis from those CTCL patients treated in the Phase 1 part of the Phase 1/2 clinical trial,2021, we decided to increase the dose of ARGX-110 from 1 mg/kg to 5 mg/kg every three weeks for the Phase 1 safety-expansion CTCL cohort. All patients in the Phase 2 part of the clinical trial will receive a 5 mg/kg dose of ARGX-110 monotherapy. We are conducting this Phase 2 part of the clinical trial at multiple centers in Europe. Patients will cease treatment if necessary for either safety reasons or disease progression. The primary endpoint of this part of the clinical trial is efficacy, and secondary endpoints include safety and characterization of pharmacokinetics and immunogenicity. We expect to report topline results from this clinical trial in the second half of 2018.
As of December 2017, of the 22 patients under analysis, we observed one complete response, two partial responses and 10 patients with stable disease, and five patients were still on the study at a 5 mg/kg dose. As of December 2017, ARGX-110 has continued to show a favorable tolerability profile in these patients. Grade 3 and 4 drug-related adverse events from the CTCL safety expansion cohort of the Phase 1 and the Phase 2 parts of the clinical trial are
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summarized in Table 4. No Grade 4 drug-related toxicities were observed among this patient population. The preliminary responses as of November 7, 2017, observed in the first 22 evaluable CTCL patients can be seen in Table 5.
Table 4. Grade 3 and 4 adverse events in 1 mg/kg and 5 mg/kg doses of ARGX 110 in open-label, Phase 1 safety‑expansion CTCL cohort and Phase 2 CTCL part (ongoing, uncleaned data as of November 7, 2017)
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Table 5. Overview of 13 CTCL patients treated with ARGX-110 in the CTCL safety expansion cohort of the Phase 1 part and nine CTCL patients treated with ARGX-110 in the CTCL Phase 2 part of the Phase 1/2 clinical trial (uncleaned data as of November 7, 2017)
Note: Best responses are based on the modified Severity Weighted Assessment Tool, or mSWAT, a widely used method for scoring of skin lesions in CTCL. The mSWAT score takes into account the number and severity of skin lesions as well as the total body surface area affected. A stable disease score is given if the mSWAT score does not increase by more than 25%. A partial response is deemed to have occurred with a 50% reduction in the mSWAT score. A complete response requires a 100% reduction in mSWAT score.
Phase 1 Part of Phase 1/2 Clinical Trial in Patients with Advanced Malignancies Expressing CD70 (ongoing, completed enrollment)
ARGX-110 was evaluated in an extensive Phase 1 part of a Phase 1/2 clinical trial in patients with advanced malignancies expressing CD70, following a step-wise adaptive clinical trial design enrolling a total of 86 patients (of whom 85 patients have been treated to date): a dose-escalation part (26 patients) and four safety-expansion cohorts in solid tumors (20 patients), hematological cancers (19 patients), PTCL (seven patients) and the previously mentioned cohort in CTCL patients (14 patients, of whom 13 have been treated) . This clinical trial design was adaptive in that it allowed us to make data driven decisions and open-up new cohorts in indications where we have seen the most promising early signals of biological activity. While the primary goal of the Phase 1 part of this clinical trial was to
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investigate safety and pharmacokinetics, we also observed evidence of biological activity in several of the patients treated.
No dose-limiting toxicities were observed. The most frequent drug-related adverse events were fatigue in 48.2% of patients and mild (Grade 1–2) infusion-related reactions in 34.1% of patients. Other monoclonal antibodies engineered using POTELLIGENT or similar third-party products that augment ADCC such as mogamulizumab, obinutuzumab and imgatuzumab also have infusion-related reaction rates of 24% to 77%. Premedication with acetaminophen, antihistamines and/or corticosteroids are used to reduce the impact of infusion-related reactions.
There were 83 serious adverse events seen in 42 of these pre-treated patients. Many patients who enrolled in this study have failed more than one prior therapy. All drug-related adverse events referenced in this paragraph were evaluated by the investigators according to the Common Terminology Criteria for Adverse Events guidelines (CTCAE v4.03). One Grade 1 (pyrexia), seven Grade 2 (infusion-related reactions), four Grade 3 (febrile neutropenia, anaemia, thrombocytopenia and fatigue—included in Table 6) and no Grade 4 serious adverse events were reported by the investigator as being drug-related. 23 patient deaths were reported in the phase 1 clinical trial, of which 17 deaths were attributed to disease progression. One patient death (Grade 5), which was deemed drug-related by the investigator, occurred in a heavily pre-treated patient with Waldenstrom Macroglobulinemia and was attributed to sepsis and general condition deterioration.
Table 6. Grade 3 and 4 drug-related adverse events (including serious adverse events), in ARGX-110 in open‑label, Phase 1 clinical trial
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Dose-escalation Part and Cohorts 1-4 |
| 0.1 mg/kg |
| 1 mg/kg |
| 2 mg/kg |
| 5 mg/kg |
| 10 mg/kg |
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Number of patients |
| 6 |
| 15 |
| 7 |
| 42 |
| 5 |
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Fatigue |
| 1 |
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| 3 |
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Anaemia |
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| 1 |
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Decreased appetite |
| 1 |
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Electrocardiogram qt prolonged |
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| 1 |
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Febrile neutropenia |
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| 1 |
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Hypoxia |
| 1 |
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Infusion related reactions |
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| 1 |
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Thrombocytopenia |
| — |
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| ��1 |
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Note: All Grade 3 drug-related adverse events. No Grade 4 drug-related adverse events reported.
All other serious adverse events were considered non-drug-related by the treating investigator.
In the dose-escalation part of this clinical trial, the half-life of ARGX-110 was observed to be approximately 13 days. Anti-drug antibodies were detected in 50% of all patients, the majority of which were seen at the 0.1 mg/kg and 1 mg/kg doses.
Phase 1 Clinical Trial in Nasopharyngeal Carcinoma (ongoing, completed enrollment)
In addition, ARGX-110 is being evaluated in an open-label Phase 1 clinical trial in patients with nasopharyngeal carcinoma at various stages of its natural history (adjuvant vs. metastatic). To date, 11 patients have been enrolled in this clinical trial. Patients receive a 5 mg/kg dose of ARGX-110, which can be administered as monotherapy or in combination with chemotherapy agents, including cisplatin, carboplatin, 5-fluorouracil, gemcitabine and paclitaxel. The clinical trial is currently ongoing, and no Grade 3 or 4 drug-related adverse events have been reported to date.
Preclinical Data
We conducted preclinical studies of ARGX-110 in support of our clinical program. In preclinical testing in cynomolgus monkeys, ARGX-110 was well-tolerated. In preclinical mouse efficacy models, ARGX-110 variants
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showed the potential to prolong survival in Burkitt’s lymphoma, overcome tyrosine kinase inhibitor resistance thereby prolonging survival in chronic myeloid leukemia, or reduce blast and leukemic stem cell burden thereby prolonging survival in AML. In a preclinical mouse efficacy model of acute lymphocytic leukemia, the administration of an ARGX-110 variant led to the acute death of some animals with high tumor load.
ARGX‑111
We are developing ARGX‑111 for the treatment of patients with certain solid tumors that overexpress c‑Met, a receptor associated with tumor growth and metastasis, or tumors that are mesenchymal‑epithelial transition factor, or MET, amplified. MET‑amplified tumors possess multiple copies of the MET gene, resulting in elevated c‑Met levels. While c‑Met overexpression and MET amplification both result in elevated c‑Met levels, clinical and preclinical evidence suggests c‑Met from MET‑amplified tumors is a disease driver in some cancers. ARGX‑111 employs our SIMPLE Antibody, NHance and POTELLIGENT technologies to drive tissue penetration in the body and to increase its ability to enhance ADCC. ARGX‑111 binds to c‑Met with high affinity and does not cause dimerization of the c‑Met receptor, which differentiates it from other, earlier attempts to direct antibodies against c‑Met. Dimerization is a process which can result in receptor activation, undermining the intended therapeutic effect of antibodies blocking hepatocyte growth factor, or HGF, binding to c‑Met. By blocking both HGF‑dependent and independent c‑Met activation, ARGX‑111 is able to block c‑Met receptor activation which could trigger survival, proliferation and metastasis of tumor cells. Thus, we believe ARGX‑111 may have a differentiated clinical profile.
Clinical Development Plan
Phase 1b Clinical Trial in Patients with Advanced Cancer Overexpressing the c‑Met Protein
We conducted a Phase 1 clinical trial in Europe consisting of a dose‑escalation part in 19 treatment‑refractory patients whose tumors overexpress c‑Met and a safety‑expansion part in five treatment‑refractory patients whose tumors were MET‑amplified. We chose to focus the safety‑expansion part on MET‑amplified tumors, rather than c‑Met overexpressing tumors, because of the accumulating preclinical and clinical evidence suggesting MET amplification is an oncogenic driver. The primary objective of this Phase 1 clinical trial was to determine the recommended Phase 2 dose of ARGX‑111, with the primary endpoint evaluating the incidence of dose‑limiting toxicity. As a secondary objective, safety, immunogenicity, pharmacokinetics and pharmacodynamics were characterized, with secondary endpoints being the pharmacokinetics and pharmacodynamics profile of ARGX‑111, as well as tumor response.
Dose‑Escalation Part
In the dose‑escalation part of the Phase 1 clinical trial, ARGX‑111 was dosed every three weeks at 0.3 mg/kg, 1 mg/kg, 3 mg/kg and 10 mg/kg in treatment‑refractory patients whose tumors overexpress c‑Met. Dose‑limiting infusion‑related reactions were observed at 10 mg/kg, and it was determined to continue further clinical testing at a dose of 3 mg/kg. Nineteen serious adverse events were seen in 12 patients (four events in two patients at a dose of 0.3 mg/kg, two events in one patient at a dose of 1 mg/kg, seven events in six patients at a dose of 3 mg/kg and six events in three patients at a dose of 10 mg/kg). Except for six events of infusion‑related reactions and one event of bone pain, no drug‑related serious adverse events were observed. Seven patient deaths were reported (one at a dose of 0.3 mg/kg, one at a dose of 1 mg/kg, four at a dose of 3 mg/kg and one at a dose of 10 mg/kg), all of which were due to underlying disease and disease progression and were not deemed to be drug‑related according to the investigator.
Safety‑Expansion Part
One safety‑expansion cohort has been completed in five treatment‑refractory MET‑amplified cancer patients using a 3 mg/kg dose of ARGX‑111 every two weeks. Eight serious adverse events were seen in four of these patients. Except for one case of infusion‑related reaction, none of those were deemed drug‑related according to the investigator. One patient death attributed to disease progression and pneumonia was reported and was not deemed to be drug‑related according to the investigator.
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Although neither the dose‑escalation part nor the safety‑expansion part were designed to evaluate the efficacy of ARGX‑111, we anecdotally observed reduced tumor burden at various sites and stable disease in a gastric cancer patient with bone metastases who was refractory to multiple rounds of prior treatment and in a MET‑amplified renal cancer patient with metastases and progressive disease. Overall, we observed signs of biological activity for ARGX‑111 in seven out of 19 patients in the dose‑escalation part, including one partial response, and in three out of five patients in the safety‑expansion cohort.
Preclinical Data
In preclinical orthotopic breast cancer models in mice, ARGX‑111 was observed to reduce circulating tumor cells and cancer metastasis both in the adjuvant and the neo‑adjuvant setting.
Intent to Partner
Given the size of the potential patient populations and the costs of clinical development for ARGX‑111, we intend to begin Phase 2 development only if and when we have entered into a collaboration and license agreement with an appropriate partner.Elektrofi to explore new SC formulations utilizing Elektrofi’s small volume injection technology for efgartigimod, and up to one additional target.
Our Partnered Programs
The following is the pipeline for our partnered product candidates and discovery programs. For more information on our collaborations, see “—Collaborations.“—Collaboration Agreements.”
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Other IIP Programs
ARGX‑115 (partnered with AbbVie)
We are developing ARGX‑115 as a cancer immunotherapy against the novel target GARP,In January 2022, we announced that ARGX-119 is an antibody that targets MuSK, a protein present onlocated at the surface of activated regulatory T‑cells,neuromuscular junction, in an agonistic or Tregs.activating manner. We are developing ARGX‑115 with our collaboration partner AbbVie. See “—Collaborations.”
ARGX‑115 employs our SIMPLE Antibody technology and works by stimulating a patient’s immune system after a tumor has suppressed the immune system by co‑opting immunosuppressive cells such as Tregs. While the normal function of Tregs isintend to suppress portions of the immune system to prevent a self‑directed immune response through the release of active transforming growth factor beta, or TGF‑β, Tregs can also prevent the immune system from recognizing and suppressing pathogenic cells including cancer cells. By binding to GARP, which plays a key role in the regulation of production and release of active TGF‑β, ARGX‑115 works to limit the immunosuppressive activity of Tregs and thereby stimulate the immune system to attack cancer cells. We believe this specific inhibition of TGF‑β release by Tregs is
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potentially superior as a therapy to systemic inhibition of TGF‑β activity or the depletion of Tregs, the presumed mode of action of ipilimumab (Yervoy), and that its specificity has the potential to provide an improved safety profile.
ARGX‑115 was observed to be activedevelop ARGX-119 in a mouse modelrange of graft‑versus‑host disease, or GVHD, where it was able to completely block the activityneuromuscular diseases, potentially including congenital MG, a rare hereditary subtype of Tregs, suggesting its potential to re‑activate the immune system against cancer cells. In this model, human peripheral blood lymphocytes, or PBMCs, are introduced into mice leading toMG, MuSK MG, a rapid onsetrare autoimmune subtype of disease, caused by these PBMCs attacking the mouse host. When human Tregs are added to the human PBMCs, they can significantly delay disease onsetMG, spinal muscular atrophy and reduce disease severity. However, the addition of ARGX‑115 completely neutralized the effect of human Tregs, resulting in a rapid onset of the disease again. The purpose of the experiment was to show that when ARGX‑115 binds to GARP on Tregs, the normal immune suppressive function of Tregs is itself suppressed so that the immune system is free to act. In this experiment, the PBMCs represent the human immune system. The Tregs suppress the PBMCs when they are added (illustrated by lower PBMC activity—in this case represented by less activity against the mouse host). ARGX‑115 suppresses the Tregs, allowing the immune system to act (as represented by the PBMCs once again attacking the mouse host). A prototype of ARGX‑115 devoid of cell‑killing ability was as effective as ARGX‑115 with cell‑killing ability as shown in Figure 10, leading us to believe the effect of ARGX‑115 is mainly due to blocking Treg activity.ALS, both rare, severe neuromuscular indications.
Figure 10. Preclinical data of ARGX‑115 in a graft‑versus‑host disease model
We are currently advancing ARGX‑115 through preclinical studies up to completion of IND‑enabling studies, at which point AbbVie has the right to exercise an option to obtain a worldwide, exclusive license to ARGX‑115.
ARGX‑109 (partnered with Bird Rock Bio)
ARGX‑109 (gerilimzumab) is being developed for the treatment of rheumatoid arthritis, or RA, by our collaboration partner Bird Rock Bio. See “—Collaborations.”
ARGX‑109 employs our SIMPLE Antibody and NHance technologies and blocks interleukin 6, or IL‑6, a cell‑signaling protein that is an important driver of inflammatory response implicated in the transition from acute to chronic inflammation. Chronic inflammation is a notable feature of several diseases, including RA, psoriatic arthritis and chronic kidney disease. In particular, IL‑6 has been shown to stimulate the immune system to increase tissue destruction and joint damage in RA patients. By targeting a unique epitope, ARGX‑109 potentially enables blocking of IL‑6 with high potency, with the goal of mitigating inflammatory responses at lower and less frequent doses than current therapies directed at IL‑6.
Bird Rock Bio has completed two Phase 1 clinical trials of ARGX‑109 in 50 healthy volunteers to assess the safety and tolerability of the compound in single and multiple ascending doses compared to placebo. The clinical trials
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also explored the pharmacokinetics of ARGX‑109. In these clinical trials, ARGX‑109 was reported to be well‑tolerated with no serious adverse events. Further, ARGX‑109 was observed to have a prolonged half‑life in circulation. In January 2017, Bird Rock Bio announced that it had received approval for the initiation of a Phase 2dose-escalation clinical trial in Brazilhealthy volunteers started in approximately 200the first quarter of 2023, with a subsequent Phase 1b clinical trial to assess early signal detection in patients with RA.thereafter.
Bird Rock BioARGX-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.
argenx have mutually agreed to terminate Bird Rock Bio’s license agreement to develop and commercialize ARGX-109. Genor, a sublicensee of Bird Rock Bio, willVIB vzw (VIB) continue to develop ARGX-109 for the Chinese market. Hence, we will not be entitled to receive some or all of the milestone or other payments under this exclusive license agreement with Bird Rock Bio.
ARGX‑112 (partnered with LEO Pharma)
We are developing ARGX‑112 for the treatment of dermatologic indications involving inflammation, together with our collaboration partner LEO Pharma. See “—Collaborations.”
ARGX‑112 employs our SIMPLE Antibody technology and blocks the interleukin‑22 receptor, or IL‑22R, in order to neutralize the signaling of interleukin‑22, or IL‑22, and interleukin‑20, or IL‑20, both of which are cytokines involved in the proliferation and differentiation of skin cells. When overexpressed, IL‑22 and IL‑20 are implicated in autoimmune diseases of the skin, including atopic dermatitis, psoriasis and pustular psoriasis. In preclinical studies, ARGX‑112 was observed to have high neutralization potency for IL‑22R and favorable in vivo pharmacokinetics and distribution to the skin.
Under the collaboration, LEO Pharma will fund more than half of all product development costs up to approval of a clinical trial application, or CTA, in Europe for a first product in a Phase 1 clinical trial. After CTA approval of a first product in a Phase 1 clinical trial, LEO Pharma will be solely responsible to fund the clinicalpursue pre-clinical development of the program.
ARGX‑116 (partnered with Staten Biotechnology)
We are developing ARGX‑116 for the treatment of dyslipidemia, together with our collaboration partner Staten Biotechnology. See “—Collaborations.”
ARGX‑116 employs our SIMPLE Antibody technology and blocks APOC3, a metabolic target involved in triglyceride metabolism. APOC3 is supported as a therapeutic target by human genetic evidence suggesting that deactivating mutations in the APOC3 gene results in a favorable lipoprotein profile, lower insulin sensitivity, longevity and protection from cardiovascular disease.
ARGX‑116 is the first of up to three research programsprogram under the collaboration. Under the terms
Other Partnered Programs
See “—Collaboration Agreements” and “—License Agreements” for a description of the collaboration the parties are jointly responsible for conducting research under a mutually agreed research program, with Staten reimbursing us for all costs of carrying out our research responsibilities under each research program.
Innovative Access Program
Weand license agreements that we have developed a program designed to secure access to early, cutting edge targets, which we call our Innovative Access Program. Through our Innovative Access Program, we are able to serially collaborate with leading academic labs by providing them access to our SIMPLE Antibody 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 Innovative Access Program is ARGX‑115, which was developed 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
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facilitation of supportive publications. Subsequently, this program formed the basis of our collaboration with AbbVie. ARGX‑115 exemplifies how our Innovative Access Program enables us to generate product candidates against novel targets that may be of high interest for collaboration with biopharmaceutical partners. Another example is ARGX‑116, which was discovered in close collaboration with disease biology experts from Staten Biotechnology, an emerging biotechnology company specialized in the field of dyslipidemia.
In March 2017, we entered into a collaboration underto further leverage our Innovative Access Program with Broteio Pharma B.V. to develop an antibody against a novel target in the complement cascade with therapeutic potential in autoantibody‑ and complement‑mediated indications including autoimmune haemolytic anemia and antibody mediated rejection following organ transplantation. Under the terms of the agreement, we and Broteio will jointly develop the complement‑targeted antibody to seek to establish preclinical proof‑of‑concept using our proprietary suite of technologies. Upon successful completion of these studies, we may exercise an exclusive option to license the program and assume responsibility for further development and commercialization.IIP.
Manufacturing and Supply
We utilize third‑partythird-party contract manufacturers who act in accordance with the FDA’s good laboratory practices or GLP,(GLPs) and current good manufacturing practices cGMP, 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 contract with Lonza Sales AG, or Lonza based in Slough, UK, Portsmouth, U.S. and Singapore 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 contracted with Fujifilm based in Hillerød, Denmark, for activities relating to the large-scale manufacturing of efgartigimod drug substance. We use additional contract manufacturers to fill, label, package, store and distribute investigational(investigational) drug products.
ARGX‑113, ARGX‑110, ARGX‑111 and ARGX‑112 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.
For a description of the sources and availability of raw materials, see section of this annual report titled “Item 3.D. —Risk Factors—Risks Related to Our Business and Industry.”
Competition
We participate in a highly innovative industry characterized by a rapidly growing understanding of disease biology, quickly changing technologies, strong intellectual property barriers to entry, 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 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
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pharmaceutical companies such as AbbVie Inc. (Humira/rheumatoid arthritis); Amgen Inc. (Enbrel/rheumatoid arthritis); Biogen, Inc. (Tysabri/multiple sclerosis); GlaxoSmithKline plc, or GSK, (Benlysta/lupus); F. Hoffman‑La Roche AG, or Roche, (Rituxan/often used off label); and Janssen Pharmaceuticals, Inc., or Janssen (Remicade/rheumatoid arthritis and Stelara/psoriasis). In some cases, these competitors are also our collaborators. In addition, these and other pharmaceutical companies have monoclonal antibodies or other biologics in clinical development for the treatment of autoimmune diseases. In addition to the current standard of care, we are aware that Alexion Pharmaceuticals, Inc. has received FDA approval for Soliris for the treatment of adult patients with generalized MG who are anti‑acetylcholine receptor antibody positive and that GSK; Roche; Novartis AG; CSL Behring; Grifols, S.A.; BioMarin Pharmaceutical Inc.; CuraVac, Inc.; and Millennium Pharmaceuticals, Inc., among others, are developing drugs that may have utility for the treatment of MG. We are aware that Rigel Pharmaceuticals, Inc.; Eisai Inc.; Bristol‑Myers Squibb; Shire Immunomedics; Protalex Inc. and others are developing drugs that may have utility for the treatment of ITP. We are aware that Roche and Syntimmune, Inc. and others are developing drugs that may have utility for the treatment of PV. Furthermore, we are aware of competing products specifically targeting FcRn and being developed by UCB S.A.; Momenta, Inc.; Syntimmune, Inc. and Hannal Biotech.
Competition in the leukemia and lymphoma space is intense, with many compounds in clinical trials by large multinational pharmaceutical companies and specialized biotech companies. Rituxan (Roche), Adcetris (Seattle Genetics, Inc./Takeda Pharmaceutical Company Ltd), Darzalex (Janssen), Poteligeo (Kyowa Hakko Kirin Co., Ltd.) are some examples of monoclonal antibodies approved for the treatment of Hodgkin’s lymphoma, non‑Hodgkin’s lymphoma, multiple myeloma or other blood cancers. We are aware of AML drugs recently approved by the FDA, such as Mylotarg (Pfizer), Rydapt (Amgen), Vyxos (Jazz Pharmaceuticals, Inc.) and IDHIFA (Agios, Inc. and Celgene). In addition, we are aware of a number of other companies with development stage programs that may compete with ARGX‑110 in the future 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.
There are several monoclonal antibody drug discovery companies that may compete with us in the search for novel therapeutic antibody targets, including Adimab LLC; Merus N.V.; Regeneron Pharmaceuticals, Inc.; Xencor Inc. and MorphoSys AG. We are aware that a product candidate in development by Scholar Rock, Inc. may compete with ARGX‑115 and a product candidate in development by Ionis Pharmaceuticals, Inc. may compete with ARGX‑116, if they are approved.
Our commercial opportunity could be reduced or eliminated if our competitors’ products prove to be safer and more tolerable, more effective, more convenient to dose, less expensive, faster to approve, or more effectively marketed and reimbursed than any of our product candidates that may gain regulatory approval. In addition, the level of generic competition and the availability of reimbursement from government and other third‑party payors will impact the commercial viability of our programs.
Collaborations
We have entered into multiple collaboration agreements with pharmaceutical partners. We expect to continue to collaborate selectively with pharmaceutical and biotechnology companies to leverage our discovery platform and accelerate product candidate development.
Our Strategic Partnership with AbbVie (for ARGX‑115)
In April 2016, we entered into a collaboration agreement with AbbVie S.À.R.L., or AbbVie, to develop and commercialize ARGX‑115. Under the terms of the collaboration agreement, we will be responsible for conducting and funding all ARGX‑115 research and development activities up to completion of IND‑enabling studies.
We have granted AbbVie an exclusive option, for a specified period following completion of IND‑enabling studies, to obtain a worldwide, exclusive license to the ARGX‑115 program to develop and commercialize products. Following the exercise of the option, AbbVie will assume certain development obligations, and will be solely responsible for all research, development and regulatory costs relating to the products. We received an upfront, non‑refundable, non‑creditable payment of $40.0 million (€35.1 million based on the exchange rate in effect as of the
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date the payment was received) from AbbVie for the exclusive option to license ARGX‑115, and we achieved the first of two preclinical milestones, triggering a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) payment, and are eligible to receive a second preclinical milestone of $10.0 million. We are also eligible, if AbbVie exercises its option and develops a product, to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to $110.0 million, $190.0 million and $325.0 million, respectively, as well as tiered royalties on sales at percentages ranging from the mid‑single digits to the lower teens, subject to customary reductions.
We have the right, on a product‑by‑product basis to co‑promote ARGX‑115‑based products in the European Economic Area and Switzerland and combine the product with our own future immuno‑oncology programs. The co‑promotion effort would be governed by a co‑promotion agreement negotiated in good faith by the parties. In addition to the ARGX‑115 program, and upon reaching a predetermined preclinical stage milestone, AbbVie will fund further GARP‑related research by us for an initial period of two years. AbbVie will have the right to license additional therapeutic programs emerging from this research, for which we could receive associated milestone and royalty payments.
If AbbVie does not exercise its option to license ARGX‑115, we have the right to pursue development and commercialization of ARGX‑115 by ourselves or with another partner.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the term of the option and license agreement ends, with respect to the ARGX‑115 program, upon the earliest of (i) a technical failure of the IND‑enabling studies which is outside of our control, (ii) AbbVie’s election to not exercise its option, or (iii) following AbbVie’s exercise of the option, fulfilment of all payment obligations under the agreement. AbbVie may terminate the agreement for any reason upon prior written notice to us. AbbVie’s royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) such time as there are no valid claims covering such product, (ii) expiration of regulatory or market exclusivity in respect of such product or (iii) 10 years after the first commercial sale of such product sold in that country under the agreement.
Our Collaboration with Bird Rock Bio (for ARGX‑109)
In October 2012, we entered into an exclusive license agreement with Bird Rock Bio, Inc. (formerly known as RuiYi, Inc. and Anaphore, Inc.), or Bird Rock Bio, to develop and commercialize ARGX‑109. Under the terms of the collaboration, Bird Rock Bio is solely responsible for and bears all costs incurred in the research, development and commercialization of ARGX‑109.
We have granted Bird Rock Bio an exclusive, worldwide, royalty‑bearing license to develop and commercialize ARGX‑109. Bird Rock Bio has certain diligence obligations with regard to development and commercialization of ARGX‑109 and must report their progress in achieving these milestones on an annual basis. We received a non‑refundable, non‑creditable upfront payment from Bird Rock Bio of €0.5 million in cash plus shares of Bird Rock Bio stock, and we are eligible to receive additional development milestone payments of up to approximately €10.0 million in cash and additional shares of Bird Rock Bio stock, regulatory milestone payments of up to €10.0 million in cash and commercial milestone payments of up to €12.0 million in cash. We are eligible to receive tiered royalties on Bird Rock Bio’s commercial sales of ARGX‑109 at percentages ranging from the low to high single digits and a tiered percentage of Bird Rock Bio’s sublicensing income ranging from the mid-teens to high twenties, subject to customary reductions. In connection with the collaboration, we also granted Bird Rock Bio a sublicense under our license agreement with the University of Texas with respect to our NHance Fc engineering technology, which is incorporated into ARGX‑109.
In the event that Bird Rock Bio fails to achieve a certain performance milestone within a designated period after entering the agreement, we have the right to terminate the agreement, unless Bird Rock Bio pays us an amount equal to the milestone payment that would have been payable had the milestone event occurred. In addition, in the event that Bird Rock Bio does not meet certain sublicensing objectives with respect to a product, we have the option to enter a profit sharing arrangement with Bird Rock Bio, under which we have the option to fund 50% of remaining program costs for a
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product and waive future milestone and royalty payments in return for a 50% share of all profits with respect to that product.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends with the expiry of the last royalty term under the agreement. Each royalty term expires, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) 10 years after the first commercial sale of such product sold in that country under the agreement or (ii) such time as there are no valid claims covering such product. Bird Rock Bio may terminate the agreement upon prior written notice to us in the event of a technical failure in product development.
Bird Rock Bio and argenx have mutually agreed to terminate Bird Rock Bio’s license agreement to develop and commercialize ARGX-109. Genor, a sublicensee of Bird Rock Bio, will continue to develop ARGX-109 for the Chinese market. Hence, we will not be entitled to receive some or all of the milestone or other payments under this exclusive license agreement with Bird Rock Bio.
Our Strategic Partnership with LEO Pharma (for ARGX‑112)
In May 2015, we entered into a collaboration agreement with LEO Pharma A/S, or LEO Pharma, to develop and commercialize ARGX‑112. Under the terms of the collaboration, LEO Pharma will fund more than half of all product development costs up to CTA approval of a first product in a Phase 1 clinical trial, with our share of such costs capped. After CTA approval of a first product in a Phase 1 clinical trial, LEO Pharma will be solely responsible to fund the clinical development of the program.
Up through specified periods following the latest to occur of (i) submission of an application to commence a Phase 2b dose finding trial (or Phase 3 clinical trial if a Phase 2b is not conducted) or (ii) the availability of an International Preliminary Examination report for ARGX‑112 patent rights after completion of a Phase 2a clinical trial, LEO Pharma may exercise an option to obtain an exclusive, worldwide license to further develop and commercialize products. Following the exercise of the option, LEO Pharma would assume full responsibility for the continued development, manufacture and commercialization of such product, subject to certain diligence obligations. If LEO Pharma elects to exercise this option, it must pay us an option fee. We received a non‑refundable, non‑creditable upfront payment from LEO Pharma of €3.0 million in cash. In February 2016 and in June 2017, we achieved preclinical milestones under this collaboration for which we received milestone payments. We are also eligible to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to €11.5 million, € 6.0 million and €102.5 million, respectively, as well as tiered royalties on product sales at percentages ranging from the low single digits to the low teens, subject to customary reductions.
If LEO Pharma does not exercise its option prior to expiration of the applicable option period, if it does not meet certain development diligence obligations within a specified time, or if the agreement is terminated other than for reasons of our breach or insolvency, then we have the right to develop and commercialize ARGX‑112 alone, subject to our obligation to pay LEO Pharma low‑single digit percentage royalties on net sales of any product covered by any LEO Pharma patents, know‑how or rights in research results generated under the collaboration. If the agreement is terminated for reasons of our breach or insolvency, rights to product candidates in development at the time of such termination will be allocated to the parties through a mechanism specified in the agreement.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the term of the agreement ends upon the later of (i) the expiration of the option period, (ii) the expiration of the last license which has been granted under the agreement, and (iii) the fulfilment of all payment obligations which may arise under the agreement. LEO Pharma may terminate the agreement for any reason upon prior written notice to us. LEO Pharma’s royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) such time as there are no valid claims covering such product, (ii) in major market countries in which no composition of matter patent has been issued covering such product, the expiration of the data exclusivity period or (iii) in countries that are not major market countries, a double‑digit number of years after the first commercial sale of such product sold in that country under the agreement.
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Our Research Collaboration with Staten (for ARGX‑116)
In January 2015, we entered into a collaboration agreement with Staten Biotechnology B.V., or Staten, to develop and commercialize products in the area of dyslipidemia therapy. Under the collaboration agreement, the parties will seek to discover and characterize antibodies against at least one and up to three different human gene targets that have therapeutic relevance in the field of dyslipidemia and/or cardiovascular disease. Each research program will last no more than 24 months from commencement unless the parties agree otherwise. The first research program under this agreement has commenced and been extended to December 2017. ARGX‑116 will be the initial product candidate under the collaboration, and Staten exercised its exclusive option to license ARGX‑116 in March 2017. Under the terms of the collaboration, the parties are jointly responsible for conducting research under a mutually agreed research program, with Staten reimbursing us for all costs of carrying out our research responsibilities under each research program. Staten is also responsible for additional clinical development.
On a research program‑by‑research program basis, up through a specified period within such research program, we have granted Staten an option to obtain an exclusive, worldwide, permanent license to research, develop and commercialize products identified in that program. If Staten elects to exercise this option for a product, it would be obligated to pay us a percentage of any payments payable to or on behalf of Staten’s shareholders in the event of (i) a change of control of Staten, (ii) any licensing, sale, disposition or similar transaction relating to any such product, or (iii) otherwise from the research, development or commercialization of that product. This percentage varies by stage of development for an applicable product and ranges up to the low‑twenties, subject to downward proportional adjustment in the event a portion of the proceeds from the applicable transaction does not include payment for the product candidate we developed with Staten. Staten has certain diligence obligations to develop and commercialize at least one product during the term of the agreement and must report on their progress in doing so on an annual basis.
If Staten does not exercise its option with respect to a research program prior to expiration of the applicable option period, then we have the right to research, develop and commercialize product candidates in relation to the relevant target at our sole cost and expense.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends on the later of (i) January 2020, (ii) expiration of the last license granted by us under the agreement, (iii) expiration of last option period for Staten and (iv) fulfilment of all payment obligations which have arisen or may arise pursuant to the agreement. In addition, we may terminate the agreement in whole or with respect to a research program if no targets have been selected within 24 months of the effective date of the agreement, other than the target selected for the ARGX‑116 research program.
Our Strategic Collaboration with Shire
In February 2012, we entered into a collaboration agreement with Shire AG (now known as Shire International GmbH), or Shire, to discover, develop and commercialize novel human therapeutic antibodies against up to three targets to address diverse, rare and unmet diseases. Under 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.
Up through a specified period following completion of each study for a target, we have granted Shire an exclusive option to obtain all right, title and interest in any antibodies discovered under a study and to obtain an exclusive, worldwide 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 certain diligence obligations to develop and commercialize at least one product. To exercise this option with respect to antibodies discovered against any of the three initial targets named in the agreement, Shire paid us a one‑time option fee.
In May 2014, we expanded the collaboration agreement to accommodate research and development of additional novel targets implicated in multiple disease areas to provide Shire with a sublicense under our license agreement with the University of Texas with respect to our NHance and ABDEG engineering technologies and to provide an option to a sublicense to the POTELLIGENT technology of BioWa, Inc. The initial three year term of this
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expanded agreement expires on May 30, 2017, and Shire has opted to extend the collaboration term for a further year until May 30, 2018.
Shire may exercise options to develop and commercialize programs arising under our expanded agreement, in which case an option fee is due on a per program basis.
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, 2017, pursuant to the agreement Shire has paid us an aggregate total of (i) €3.4 million in upfront payments, (ii) €0.3 million in milestone payments and (iii) $12.0 million in research and development fees. In addition, Shire purchased €12.0 million of our ordinary shares in July 2014 by participating in our initial public offering on Euronext Brussels.
If Shire does not exercise its option with respect to any discovered antibody within the specified period, then we are free to research, develop and commercialize antibodies in relation to the applicable study target, subject to negotiation of a license from Shire for the use of any antibodies that were discovered during the applicable study, or any Shire confidential information, Shire intellectual property or Shire’s interest in any joint intellectual property. If (a) Shire (i) does not exercise its option with respect to any discovered antibody, or (ii) exercises its option but later abandons development of such antibody or (iii) the agreement is terminated other than for our breach or insolvency, and (b) Shire is no longer pursuing a development program with respect to the applicable study target, then we may elect to continue the development of such antibody at our sole cost and expense, subject to negotiation of a license from Shire under which Shire will receive either specified royalties, if we commercialize the program ourselves, or a percentage of sublicensing revenues, if the program is subsequently sublicensed to a third party.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the agreement, the collaboration term ends with the expiry of the last royalty term under the agreement. Each royalty term expires, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) such time as there are no valid claims covering such product or (ii) 10 years after the first commercial sale of such product sold in that country under the agreement. Shire may terminate the agreement for any reason upon prior written notice to us.
License Agreements
We are a party to a number of license agreements under which we license patents, patent applications and other intellectual property from third parties. We enter into these agreements to augment our proprietary intellectual property portfolio. The licensed intellectual property covers some of our product candidates and some of the Fc engineering technologies that we use. These licenses impose various diligence and financial payment obligations on us. We expect to continue to enter into these types of license agreements in the future.
Our Exclusive License with the University of Texas (NHance and ABDEG)
In February 2012, we entered into an exclusive license with The Board of Regents of The University of Texas System, or UoT, for use of certain patents rights relating to the NHance platform, for any use worldwide. The agreement was amended on December 23, 2014 to also include certain patent rights relating to the ABDEG platform.
Upon commercialization of any of our products that use the in‑licensed patent rights, we will be obligated to pay UoT a percentage of net sales as a royalty until the expiration of any patents covering the product. This royalty varies with net sales volume and is subject to an adjustment for royalties we receive from a sublicensee of our rights under this agreement, but in any event does not exceed 1%. In addition, we must make annual license maintenance
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payments to UoT until termination of the agreement. We have assumed certain development, regulatory and commercial milestone payment obligations and must report on our progress in achieving these milestones on a quarterly basis. The maximum amount of milestone payments we would be required to make is approximately $0.5 million. Through December 31, 2017, we have paid UoT an aggregate of $0.5 million, which includes reimbursement for UoT’s patent prosecution and maintenance costs. We also have certain diligence requirements with respect to development and commercialization of products which use the in‑licensed patent rights.
Under the terms of the license, we have the right to grant sublicenses to third parties, subject to certain restrictions. If we receive any non‑royalty income in connection with such sublicenses we must pay UoT a percentage of such income varying from low‑middle single digits to middle‑upper single digits depending on the nature of the sublicense. Such fees are waived if a sublicensee agrees to pay the milestone payments as set forth in our agreement with UoT.
We may unilaterally terminate the license agreement for convenience upon prior written notice. Absent early termination, the agreement will automatically expire upon the expiration of all issued patents and filed patent applications within the patent rights covered by the agreement. Our royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, at such time as there are no valid claims covering such product.
Our Non‑Exclusive License with BioWa (POTELLIGENT)
In October 2010, we entered into a non‑exclusive license agreement with BioWa, Inc., or BioWa, for use of certain patents and know‑how owned by BioWa and relating to its POTELLIGENT® Technology, for use in the field of prevention and treatment of human diseases. POTELLIGENT® Technology is referred to herein as POTELLIGENT. Under the terms of the license, we are granted a non‑exclusive right to use POTELLIGENT to research, develop and commercialize antibodies and products containing such antibodies. BioWa retains a right of first negotiation for the exclusive right to develop and commercialize, in certain countries only, any product we develop using POTELLIGENT. We successfully applied POTELLIGENT to ARGX‑110, an anti‑CD70 mAb, and ARGX‑111, an anti‑c‑Met mAb, under this license.
Upon commercialization of our products developed using POTELLIGENT, we will be obligated to pay BioWa a percentage of net sales of a licensed product as a royalty. This royalty varies with net sales volume, ranging in the low single digits, and it is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed patent(s) that covers the product expires or ends. In addition, we must make annual license maintenance payments which cease with commencement of our royalty payments to BioWa. We have certain diligence requirements with respect to development and commercialization of products. We have also assumed certain development, regulatory and commercial milestone payment obligations and must report on our progress toward achieving these milestones on an annual basis. Milestones are to be paid on a commercial target‑by‑commercial target basis, and we are obligated to make milestone payments in aggregate amounts of up to $36.0 million per commercial target should we achieve annual global sales of over $1.0 billion.
Under the terms of the license, we have the right to grant sublicenses to third parties, subject to certain restrictions.
We may terminate the license agreement at any time by sending BioWa prior written notice. Absent early termination, the agreement will automatically expire upon the expiry of our royalty obligations under the agreement. In the event the agreement is terminated for any reason, the license grant to us would cease but BioWa would grant our sublicensees a direct license following such termination. In the event the agreement is terminated other than for our breach or insolvency, we would retain the right to sell licensed products then on hand for a certain period of time post‑termination.
Our Non‑Exclusive Licenses with BioWa and Lonza (POTELLIGENT CHOK1SV)
To scale up production of our product candidates ARGX‑110 and ARGX‑111 for clinical trial supply, we required a license to a GMP cell line in which POTELLIGENT antibodies could be expressed. This cell line,
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POTELLIGENT CHOK1SV, was jointly developed by BioWa and Lonza. In December 2013 and August 2014, respectively, we entered non‑exclusive commercial license agreements for ARGX‑110 and ARGX‑111 with BioWa and Lonza Sales AG, or Lonza, for use of certain patents and know‑how relating to the POTELLIGENT® CHOK1SV Technology, which is a combination of Lonza’s GS System and BioWa’s POTELLIGENT® Technology, for use in the field of prevention and treatment of human diseases. Under the terms of each commercial license, we received a non‑exclusive right to research, develop and commercialize products containing an antibody generated specifically against a specific target using POTELLIGENT® CHOK1SV, namely the target CD70 in the case of ARGX‑110 and c‑Met in the case of ARGX‑111. Both targets are designated as reserved targets under our 2010 license agreement with BioWa, which continues to govern our research, development and commercialization of products utilizing BioWa’s POTELLIGENT® Technology. Under the terms of each commercial license, BioWa retains a right of first negotiation for the exclusive right to develop and commercialize, in certain countries only, any product we develop using POTELLIGENT® CHOK1SV.
Upon commercialization of our products developed using POTELLIGENT® CHOK1SV, we will be obligated to pay both BioWa and Lonza a percentage of net sales as a royalty. We are required to pay a royalty to BioWa on net sales for any specific licensed product under only one license—either the POTELLIGENT® agreement or the POTELLIGENT® CHOK1SV agreement, but not both. The BioWa royalty is tiered, ranging in the low single digits and is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed BioWa patent(s) that covers the product expires or ends. The Lonza royalty varies based on whether the product is manufactured by Lonza, us or a third party, but in any event is in the low single digits and is reduced by half if during the following 10 years from the first commercial sale of the product in a country the last valid claim within the licensed Lonza patent(s) that covers the product expires or ends. In addition, we must make annual license maintenance payments to BioWa which cease with commencement of payment of the BioWa royalty, and annual payments to Lonza in the event that any product is manufactured by a party other than Lonza, us or one of our affiliates or strategic partners named in the agreement.
We have assumed certain development, regulatory and commercial milestone payment obligations to both BioWa and Lonza and must report on our progress toward achieving these milestones on an annual basis. We are required to pay such milestones and royalties to BioWa under only one license—either the POTELLIGENT® agreement or the POTELLIGENT® CHOK1SV agreement, but not both. Payments related to the development and commercialization of ARGX‑110 and ARGX‑111 are foreseen under their respective POTELLIGENT® CHOK1SV agreements. Milestones are to be paid on a product‑by‑product basis, and we are obligated to make development, regulatory and commercial milestone payments to BioWa in aggregate amounts of up to $36.0 million per product should we achieve global annual sales of $1.0 billion. We are obligated to make development, regulatory and commercial milestone payments to Lonza in aggregate amounts of up to approximately £1.1 million per product, if such product is manufactured by Lonza, us or one of our affiliates or strategic partners, or £3.1 million per product, otherwise. Through December 31, 2017, we have paid BioWa an aggregate amount of $1.4 million, which includes target reservation fees and annual research license fees under our POTELLIGENT® agreement and commercial license fees and milestone payments under our POTELLIGENT® CHOK1SV agreement. Through December 31, 2017, we have paid Lonza an aggregate amount of £0.2 million, which includes milestone payments under our POTELLIGENT® agreement.
Under the terms of both commercial licenses, we have the right to grant sublicenses to certain pre‑approved third parties, but otherwise must obtain BioWa and Lonza’s prior written consent.
We may terminate the agreement at any time by sending BioWa and Lonza prior written notice. Absent early termination, the agreement will automatically expire upon the expiry of our royalty obligations under the agreement. In the event the agreement is terminated for any reason, the license grant to us would cease but BioWa and Lonza would grant our sublicensees a direct license following such termination. In the event the agreement is terminated other than for our failure to make milestone or royalty payments, we would retain the right to sell products then on hand for a certain period of time post‑termination. Our royalty payment obligations expire, on a product‑by‑product and country‑by‑country basis, on the date that is the later of (i) 10 years after the first commercial sale of such product sold in that country under the agreement or (ii) such time as there are no valid claims covering such product.
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Our Collaboration with UCL (GARP)
In January 2013, we entered into a collaboration and exclusive product license agreement with Université Catholique de Louvain, or UCL, and Sopartec S.A., or Sopartec, to discover and develop novel human therapeutic antibodies against GARP. Under the terms of the collaboration, each party was responsible for all of its own costs and in connection with the activities assigned to it under a mutually agreed research plan.
In January 2015, we exercised the option we had been granted to enter into an exclusive, worldwide commercial license for use of certain GARP‑related intellectual property rights owned by UCL and the Ludwig Institute for Cancer Research to further develop and commercialize licensed products. Upon the expiration of the agreement, this license became a fully paid up, perpetual worldwide exclusive license under the GARP intellectual property for any purpose, subject to UCL’s retention of non‑commercial research rights.
Under the terms of the license, we have the right to grant sublicenses to third parties, subject to certain restrictions. If we receive any income in connection with such sublicenses, we must pay Sopartec a percentage of that income varying from mid‑single digit to lower teen digit depending on the stage of development of the licensed products at the time the sublicense was entered into. In the event that we have not granted a sublicense, we are required to pay a percentage of net sales as a royalty. This royalty varies with net sales volume, but does not exceed 1% in all tiers, and the royalty is subject to customary reductions. This royalty obligation expires on a product‑by‑product and country‑by‑country basis when there are no valid claims covering such product. In the event that we have not granted a sublicense, we have certain development and commercial milestone payment obligations of up to approximately €0.9 million in the aggregate. In the event we have granted a sublicense, we are obligated to pay Sopartec a percentage of sublicense revenue received. We also have certain diligence obligations with respect to development and commercialization of products. Through December 31, 2017, we have an aggregate amount of €3.2 million payable to Sopartec, of which €2.7 million has been paid and the remainder is kept in escrow, which includes option fees and payments related to sublicense revenue we received.
Intellectual Property
Introduction
We strive to protect the proprietary technologies that we believe are important to our business, including pursuing and maintaining patent protection intended to cover the platform technologies incorporated into, or used to produce, our product candidates, the compositions of matter of our product candidates and their methods of use, as well as other inventions that are important to our business. 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 patent and other proprietary protection for commercially important technologies, inventions and know‑howknow-how related to our business, defend and enforce our intellectual property rights, particularly our patent rights, preserve the confidentiality of our trade secrets and operate without infringing valid and enforceable intellectual property rights of others. Specifically, we are materially dependent on patent and other proprietary protection related to our core platform technologies, described in “—Platform Technologies”, and our product candidates, as described in “—Our Internal Programs”and “—Our Partnered Programs.”
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The patent positions for biotechnology companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our platform technologies and product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
As of March 16, 2018,January 1, 2023, our patent estateportfolio (which includes both ownedproprietary and in‑licensedin-licensed patent rights) included 17families) comprised approximately 433 granted patents and approximately 402 pending patent applications, including approximately 46 issued U.S. patents, 15 pending U.S. patent applications, 60 issued foreign patents (including fiveapproximately 17 granted European patents that have been validated into 42 national patents) and 85 pending foreign patent applications (including 10 pending European patent applications).approximately 370 issued patents in other jurisdictions.
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Platform Technologies
With regard to our platform technologies, we own or have intellectual property rights in patents and patent applications directed to our SIMPLE Antibody discovery platform, the ABDEG and NHance platforms and the POTELLIGENT platform.technologies.
With regard to our SIMPLE Antibody discovery platform, we own a patent family containing six issued U.S. patents with composition of matter claims directed to chimeric antibodies containing variable domains comprising complementary determining regions (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, the UK, Israel, India and Israel,Japan, and at least five patentpending applications pending in various other countriesthe PRC and regions in North America, Europe and Asia.Japan (divisional). In addition, we have a second patent family containing patents granted in the United StatesU.S. (two), Australia, Europe, the UK, Israel, India and Australia,Japan, and eightone patent applicationsapplication pending in the United States and other countries in North America, Europe and Asia,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 U.S.patents have a basic patent and the pending U.S. patent application, if issued as a patent, are expected to expireexpiry date in 2029.2031.
With regard to the ABDEGABDEG™ platform, we co‑ownco-own with, and exclusively license from, the University of Texas,UT Southwestern, a patent family containing a pendinggranted U.S. patent application with composition of matter claims directed to an isolated FcRn‑antagonistFcRn-antagonist comprising ana variant immunoglobulinIg Fc region having an increased affinity for an Fc gamma receptor relative to a wild‑typewild-type IgG1 Fc region, and method of use claims directed to a method of using such an FcRn‑antagonistFcRn-antagonist to treat certain antibody mediatedantibody-mediated disorders. The U.S. parent patent application, if issued as a U.S.expires in 2036 (including patent is expected to expire in 2034.term adjustment). In addition, in this patent family, we also have granted patents in Australia, the PRC, Eurasia, Europe, Japan, Macao, Mexico, New Zealand and Singapore, and we have at least 10multiple patent applications pending in the U.S. (divisional) and various other countries and regions in North America, South America, Europe, Asia and Asia.South Africa. The granted patents have a basic expiry date in 2034. In addition, we own a second patent family containing pending patent applications in the United StatesU.S. and 1415 other jurisdictions with claims directed to methods of reducing the serum levels of an Fc‑containingFc-containing agent in a subject by administering to the subject an FcRn‑antagonistFcRn-antagonist containing a variant immunoglobulinIg Fc region containing certain amino acid substitutions. A U.S. patent, if issued from the U.S. patent application, is expected to expire in 2036.
With regard to the NHance platform, we have exclusively licensed from the University of TexasUT Southwestern two U.S. patents with composition of matter claims directed to an IgG molecule comprising a variant human Fc domain, and method of use claims directed to a method of blocking FcRn function in a subject by providing to the subject such an IgG molecule. The U.S. patents are expected to expire earliest in 2027 to 2028. The patent family also includes a granted European patent.
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Our Internal Programs
Efgartigimod
efgartigimod incorporates the ABDEG platform technology.
Our ARGX-109 Product Candidate
With regard to the POTELLIGENT platform, which is currently used in the production of our ARGX‑110 and ARGX‑111wholly-owned ARGX-109 product candidates,candidate, we have non‑exclusively licensed from BioWa certainone patent rights that relatefamily with composition of matter claims directed to different aspects ofARGX-109. This patent family has granted patents in Australia, Canada, Chile, the POTELLIGENT platform.PRC, Colombia, Hong Kong, Israel, Japan, Mexico, New Zealand, Russia, the U.S. and South Africa, and pending patent applications in Brazil, India and the U.S. (divisional application). The patent family has a basic expiry date in 2033. Furthermore, ARGX-109 incorporates or employs the SIMPLE Antibody platform technology and the NHance platform technology.
Our ARGX-117 Product Candidates: Wholly‑Owned ProgramsCandidate
With regard to the ARGX‑113ARGX-117 product candidate, ARGX‑113 incorporateswe own or have rights in three patent families (including one in-licensed patent family from Broteio) with several granted patents and pending patent applications in multiple jurisdictions in North America, South America, Europe and Asia, directed to composition of matter claims and method of treatment claims. The in-licensed patent family from Broteio has granted patents in Australia, the ABDEG technology platform,PRC, Europe, Hong Kong, Mexico and the coverage ofU.S. (two issued patents in the U.S.), which is discussed above under “Platform Technologies.” It is expected that U.S. patents, if they were to issue from thehave a basic expiry date in 2034. The other two patent families directed tohave basic expiry dates in 2039 and 2040. ARGX-117 product candidate incorporates or employs the ABDEG technologyNHance® platform are expected to expire in 2034 or 2036, without taking a potential patent term extension into account.technology.
Our ARGX-119 Product Candidate
With regard to the ARGX‑110ARGX-119 product candidate, we in-licensed two patent families from/with NYU Langone Health, a U.S. medical center based in New York, and three patent families from/with the LUMC, with one U.S. granted patent and several pending applications in multiple jurisdictions.
Our ARGX-118 Product Candidate
With regard to the ARGX-118 product candidate, we co-own one patent family with VIB, an inflammation research center in Ghent, Brussels, and Ghent University, with one U.S. granted patent and pending patent applications in multiple jurisdictions in North America, South America, Europe and Asia. The patent family has a basic expiry date in 2039.
Our Partnered Programs
Our Cusatuzumab (ARGX-110) Product Candidate
With regard to the cusatuzumab product candidate, we have threefive issued U.S. patents, including, one U.S. granted patent with composition of matter claims directed to the ARGX‑110cusatuzumab antibody, one U.S. granted patent with claims directed to the epitope ARGX‑110cusatuzumab binds to, and one U.S. granted patent with claims directed to a polynucleotide that encodes antibodies that bind to the epitope ARGX‑110cusatuzumab binds to, and, one U.S. granted patent applicationand one U.S. granted patent with method of use claims directed to the treatment of cancer and immunological disorders with the ARGX‑110cusatuzumab antibody. The issued U.S. patents expire in 2032 and 2033, and the U.S. patent application, if issued as a U.S. patent, is expected to
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expire in 2032, without taking a potential patent term extension into account. In addition, we have patents that have been granted in Japan and Russia and at least nine patent applications pending in various other countries and regions in North America, South America, Europe and Asia. Furthermore, ARGX‑110 incorporates or employs the SIMPLE Antibody and POTELLIGENT technology platforms, which are covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”
With regard to the ARGX‑111 product candidate, we have three issued U.S. patents, one with composition of matter claims directed to the ARGX‑111 antibody, one with method of use claims directed to the use of the ARGX‑111 antibody in the treatment of cancer, and one with claims directed to polynucleotides that encode the ARGX‑111 antibody and one U.S. patent application with composition of matter claims directed to ARGX‑111. The issued U.S. patents and the U.S. patent application, if issued as a U.S. patent, are expected to expire in 2031, without taking a potential patent term extension into account. In addition, we have patents that have been granted in Australia, Canada, the PRC, Europe, Indonesia, Israel, India, Japan and Russia and at least eight patent applications pending in various other countriesBrazil and regions in North America, South America, Europe and Asia. Furthermore, ARGX‑111 alsothe U.S. (divisional application). Cusatuzumab incorporates or employs the SIMPLE Antibody and POTELLIGENT and NHance technology platforms, which are covered by one or moreplatform technologies.
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Our ARGX-115 (ABBV-151) Product Candidates: Partnered ProgramsCandidate
With regard to the ARGX‑115ARGX-115 (ABBV-151) product candidate that we co‑ownco-own with, and exclusively license from, the Ludwig Institute for Cancer Research and Université Catholique de Louvain (UCL), we have a pendinggranted U.S. patent application with composition of matter claims directed to an antibody that binds GARP the presence of TGF‑transforming TGF-β and method of use claims directed to the use of such an antibody in the treatment of cancer. AThe U.S. patent if issued from the U.S. patent application, is expected to expirehas a basic expiry date in 2034, without taking a potential patent term extension into account. In addition, the patent family contains at least 1018 patent applications pending in U.S. (continuation-in-part) and various other countries and regions in North America, South America, Europe and Asia. In addition,Further, we co‑ownco-own with, and exclusively license from, the Université Catholique de LouvainUCL two more patent applications pending in the United States and Europefamilies with composition of matter claims directed to an antibody that binds an epitope of a complex formed by human GARP and TGF‑TGF-β andas well as method of use claims directed to the use of such an antibody in the treatment of cancer. A U.S.These two patent if issued from the U.S. patent application, is expected to expirefamilies have basic expiry dates in 2034.2036 and 2038. Furthermore, ARGX‑115ARGX-115 (ABBV-151) incorporates or employs the SIMPLE Antibody technology platform which is covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”technology.
Our ARGX-112 (LP-0145) Product Candidate
With regard to the ARGX‑109ARGX-112 (LP-0145) product candidate, we have a pending U.S.one patent application with composition of matter claims directed to ARGX‑109. A U.S. patent, if it were to issue, would be expected to expire in 2033, without taking a potential patent term extension into account. We also have counterpart patents and pending patent applications in various jurisdictions, including North America, Europe and Asia. Furthermore, ARGX‑109 incorporates or employs the SIMPLE Antibody technology and the NHance technology, which is covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”
With regard to the ARGX‑112 product candidate, we have a pending international applicationfamily with composition of matter claims directed to an antibody that binds human IL‑22R. A U.S.IL-22R. The patent if it were to issue, that claims priority to the international application would be expected to expirefamily has a basic expiry date in 2037, without taking a potential patent term extension into account.2037. Furthermore, ARGX‑112ARGX-112 (LP-0145) incorporates the SIMPLE Antibody technology, which is covered by one or more of the patents and patent applications discussed above under “Platform Technologies.”platform technology.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non‑provisionalnon-provisional patent application.
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In the United States,U.S., the term of a patent covering an FDA‑approvedFDA-approved drug may be eligible for a limited patent term extension under the Hatch‑WaxmanHatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process. The periodprocess as described in “—Licensure and Regulation of extension may be up to five years beyondBiologics in the expiration of the patent, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent among those eligible for an extension may be extended.U.S.” below. 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 Protection
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.
Government RegulationCollaboration Agreements
We follow a disciplined strategy to maximize the value of our pipeline. We plan to retain all development and commercialization rights to those products and product candidates that we believe we can commercialize successfully, if approved.
We have partnered, and plan to continue to partner to develop products and product candidates that we believe have promising utility in disease areas or have patient populations that may benefit from resources of other biopharmaceutical companies. We expect to continue to collaborate selectively with pharmaceutical and biotechnology
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companies to leverage our platform technology and accelerate product candidate development. We have entered into multiple collaboration agreements with pharmaceutical partners, as described below.
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 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 investigational new drug (IND)-enabling studies.
AbbVie has an exclusive option to obtain a worldwide, exclusive license to the ARGX-115 (ABBV-151) program to develop and commercialize products and has now 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 European Economic Area (EEA) and Switzerland and to combine the product with our own future oncology programs (if any). The co-promotion effort would be governed by a co-promotion agreement negotiated in good faith by the parties.
Unless earlier terminated upon mutual agreement, for material breach or as otherwise specified in the AbbVie Collaboration Agreement, the term of the option 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 AbbVie Collaboration Agreement for any reason upon prior written notice to us. AbbVie’s royalty payment obligations expire, on a product-by-product and country-by-country basis, on the date that is the later of (i) such time as there are no valid claims covering such product, (ii) expiration of regulatory or market exclusivity in respect of such product or (iii) ten years after the first commercial sale of such product sold in that country under the AbbVie Collaboration Agreement.
Our Strategic Partnership with Zai Lab for efgartigimod
Pursuant to the Zai Lab Agreement, Zai Lab obtains the exclusive right to develop and commercialize efgartigimod in the aforementioned countries. 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 proof-of-concept clinical trials in new autoimmune indications under our supervision; first indications for such proof-of-concepts studies are kidney conditions LN and MN.
Pursuant to the Zai Lab Agreement, we have received value worth $175.0 million from the Zai Lab Payments. We are also eligible to receive tiered royalties (mid-teen to low-twenties on a percentage basis) based on annual net sales of efgartigimod in the PRC.
Our Strategic Partnership with LEO Pharma A/S (LEO Pharma) for ARGX-112 (LP0145)
In May 2015, we entered into a collaboration agreement with LEO Pharma to develop and commercialize ARGX-112 (LP0145) for the treatment of dermatologic indications involving inflammation (LEO Pharma
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Collaboration Agreement). ARGX-112 (LP0145) employs our SIMPLE Antibody technology and blocks the IL-22R in order to neutralize the signaling of cytokines implicated in autoimmune diseases of the skin. LEO Pharma funded more than half of all product development costs up to CTA approval of a first product in a Phase 1 clinical trial, with our share of such costs capped, which was achieved in April 2018. Since then, LEO Pharma has been solely responsible for funding the clinical development of the program. In May 2021, CTA approval of a Phase 2a clinical trial for LP0145 was received.
LEO Pharma, against payment of an option fee to us, was granted an option to obtain an exclusive, worldwide license to further develop and commercialize a product, following the exercise of the option, LEO Pharma will assume full responsibility for the continued development, manufacture and commercialization of such product and be subject to diligence obligations in respect of continuation of development and commercialization of such product. We are eligible to receive additional development, regulatory and commercial milestone payments in aggregate amount of up to €120.0 million, as well as tiered royalties on product sales at percentages ranging from the low single digits to the low teens, subject to customary reductions.
Unless earlier terminated, the term of the LEO Pharma Collaboration Agreement ends upon the later of (i) the expiration of the last license granted under the agreement, and (ii) the fulfilment of all payment obligations under the agreement. LEO Pharma may terminate the LEO Pharma Collaboration Agreement for any reason upon prior written notice to us. LEO Pharma’s royalty payment obligations expire, on a product-by-product and country-by-country basis, upon the later of (i) a time when no valid claims covering such product, and (ii) (a) in major market countries with no composition of matter patent covering such product, the expiration of the data exclusivity period or (b) in countries that are not major market countries, a double-digit number of years after the first commercial sale of such product sold in that country.
In 2021, we signed two amendments to the LEO Pharma Collaboration Agreement, to extend LEO Pharma’s option period with six months, to allow LEO Pharma to undertake chemistry, manufacturing and control development work in advance of the exercise by LEO Pharma of its option, and updating the provisions regarding the management of patents.
In September 2022, LEO Pharma exercised its option and has assumed full responsibility of the program for the continued development, manufacture and commercialization of such product and be subject to diligence obligations in respect of continuation of development and commercialization of such product, which triggered a milestone payment of €5.0 million.
Our Strategic Collaboration with Shire
In February 2012, we entered into a collaboration agreement with Shire AG (Shire, now known as Shire International GmbH) to discover, develop and commercialize novel human therapeutic antibodies against up to three targets to address diverse, rare and unmet diseases (Shire Collaboration Agreement). Pursuant to the Shire Collaboration Agreement, for any target selected for study under the collaboration, the parties worked together to conduct research and development through discovery of antibodies with certain specificity for and functional activity against those targets.
Up through a specified period, 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 such exercise, Shire has the diligence obligation to continue to develop and commercialize at least one licensed product.
Shire may exercise exclusive options to develop and commercialize programs arising under our expanded agreement against an option fee. In July 2018, Shire exercised such an exclusive option to in-license an antibody discovered and developed using our licensed technologies, triggering a milestone payment by Shire to us.
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In addition to option fees, Shire is 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. Accordingly, 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 Shire Collaboration Agreement. For products generated against additional targets, 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.
If Shire does not exercise its option with respect to any discovered antibody within a specified period, we are free to research, develop and commercialize antibodies in relation to the applicable study target, subject to negotiation of a license from Shire for the use of any antibodies that were discovered during the applicable study, or any Shire confidential information, Shire intellectual property or Shire’s interest in any joint intellectual property. If (a) Shire (i) does not exercise its option, or (ii) exercises its option but later abandons development of such antibody or (iii) the Shire Collaboration Agreement is terminated other than for our breach or insolvency, and (b) Shire is no longer pursuing a development program with respect to the applicable study target, we may elect to continue the development of such antibody at our sole cost and expense, subject to negotiation of a license from Shire under which Shire will receive either specified royalties, if we commercialize the program ourselves, or a percentage of sublicensing revenues, if the program is subsequently sublicensed to a third party.
Unless earlier terminated, the collaboration term ends with the expiry of the last royalty term under the Shire Collaboration Agreement. Each royalty term expires, 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 or (ii) ten years after the first commercial sale of such product sold in that country under the Shire Collaboration Agreement. Shire may terminate the agreement for any reason upon prior written notice to us.
Creation of OncoVerity for cusatuzumab
In 2022, we, the University of Colorado Anschutz Medical Campus and UCHealth created an asset-centric spin-off, OncoVerity, focused on optimizing and advancing the development of cusatuzumab, a novel anti-CD70 antibody, in AML. OncoVerity is an entity of co-creation, combining the extensive translational biology insights from Dr. Clayton Smith, M.D. from the University of Colorado with the experience from argenx on the CD70/CD27 pathway.
License Agreements
We are 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 Fc 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.
Our Exclusive License with Elektrofi for efgartigimod
In April 2021, we entered into a collaboration and license agreement with Elektrofi to explore new SC formulations utilizing Elektrofi’s small volume injection technology for efgartigimod, and up to one additional target (the Elektrofi Agreement). 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.
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Our Non-Exclusive Research License with Chugai for SMART-lg and ACT-lg
In September 2020, we entered into a non-exclusive research license and option agreement with Chugai, allowing us to access Chugai’s SMART-lg and ACT-lg Fc engineering technologies for conducting feasibility studies. These technologies are designed to enable us to expand the therapeutic index of our product candidates, which is the ratio between toxic and therapeutic dose, by potentially modifying their half-life, tissue penetration, rate of disease target clearance and potency.
Our Non-exclusive License with the Clayton Foundation for DHS mutations
In October 2020, we entered into a non-exclusive research agreement with the Clayton Foundation relating to the non-exclusive in-license for the Clayton Foundation’s proprietary DHS mutations to extend the serum half-life of therapeutic candidates.
Our Exclusive License with Halozyme for ENHANZE®
In February 2019, we entered into an in-license agreement with Halozyme for the use of certain patents, materials and know-how owned by Halozyme and relating to its ENHANZE®, for application in the field of prevention and treatment of human diseases (the ENHANZE License Agreement). Pursuant to the ENHANZE License Agreement, we were granted exclusive rights to apply ENHANZE® to biologic products against pre-specified targets, in order to research, develop and commercialize SC formulations of our therapeutic antibody-based product candidates.
Our first therapeutic target for which we received an exclusive license from Halozyme was FcRn, which allows us to apply ENHANZE® to efgartigimod and any other product candidates selective and specific for FcRn. Moreover, the breadth of our exclusive license to FcRn precludes either Halozyme itself or any of its current or future partners from utilizing ENHANZE® in the context of an FcRn-targeted product. Our second therapeutic target for which we received an exclusive license from Halozyme was human C2 associated with the product candidate ARGX-117, which is being developed to treat severe autoimmune diseases. Pursuant to the ENHANZE License Agreement, we also have the right to nominate future targets for an exclusive ENHANZE® license if the target in question has not already been licensed by Halozyme or is not already being pursued by Halozyme.
In October 2020, we expanded our collaboration with Halozyme for ENHANZE® drug delivery technology to include three additional exclusive targets upon nomination bringing the total to six potential targets. From the effective date of the ENHANZE License Agreement, we have a seven-year period in which to conduct research and preclinical studies on other target-specific molecules in combination with ENHANZE® and may nominate up to four additional targets we have not yet nominated for an exclusive commercial license.
Pursuant to the ENHANZE License Agreement, we have the right to grant sublicenses to our subsidiaries and to third parties both for research/preclinical work (for example, to subcontractors) and for development and commercialization. Halozyme has no rights to any of our current or future product candidates which use ENHANZE®. Halozyme provides dedicated specialist support to us which it has accrued over ten years of licensing ENHANZE® to its collaborators.
In return for achieving the first patient dosed with SC efgartigimod in the Phase 3 study 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 $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. Throughout the term of the ENHANZE License 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 ten years from the first commercial sale of the product in a country, the last valid claim within the licensed ENHANZE® patent(s) expires. We have diligence obligations with respect to the continuation of development and commercialization
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of product candidates, but we are not obligated to utilize ENHANZE® for every product candidate directed to a given exclusive target(s).
We may terminate the ENHANZE License Agreement at any time, either in its entirety or on a target-by-target basis, by sending Halozyme prior written notice. Absent early termination, the ENHANZE License Agreement will automatically expire upon the expiry of our royalty payment obligations under the agreement. In the event the ENHANZE License Agreement is terminated for any reason, the license granted to us would terminate but Halozyme would grant our sublicensees a direct license following such termination. In the event the ENHANZE License Agreement is terminated other than for our breach, we would retain the right to sell licensed products then on hand for a certain period of time post-termination.
As also set out in Item 6 “Directors, Senior Management and Employees.” our non-executive director James M. Daly is also a non-executive member of the board of directors of Halozyme. The ENHANZE License Agreement does not constitute a related party transaction under IAS 24.
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 (efgartigimod alfa-fcab) IV formulation in gMG patients. Based on these results, we submitted a BLA to the FDA on September 21, 2022. The BLA has been granted a PDUFA target action date of June 20, 2023.
Our Exclusive License with AgomAb for ARGX-114 (AGMB-101)
In March 2019, we entered into an exclusive out-license with AgomAb for the use of certain patent rights relating to our proprietary suite of technologies for the development and commercialization of a series of agonistic anti-MET SIMPLE Antibodies, including ARGX-114 (AGMB-101), a halofuginone-mimetic SIMPLE Antibody directed against the MET receptor. AgomAb is required to use commercially reasonable efforts to develop and commercialize at least one licensed product. In connection with our entry into this agreement, we received a profit-sharing certificate which entitles us to 20% of all distributions to AgomAb’s shareholders (which shall be reduced to 10% following the filing of an IND and is subject to further adjustment upon the occurrence of certain financings). Upon the occurrence of a qualified initial public offering of AgomAb, the profit-sharing certificate will automatically be converted into the equivalent number of ordinary shares in AgomAb. This agreement is subject to mutual termination for material breach or insolvency and automatically expires upon the expiration of the last to expire of our licensed patent rights.
Our Exclusive License with Broteio for ARGX-117
In March 2017, we entered into a collaboration with Broteio in connection with our IIP, to develop an antibody against a novel target in the complement cascade, ARGX-117 (Broteio Agreement). Under the Broteio Agreement, we 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 in-license the program in March 2018 and assumed responsibility for further development and commercialization. Pursuant to the Broteio Agreement, we are obligated to make milestone payments upon the occurrence of certain development milestones (up to an aggregate of €4.0 million), commercialization milestones (up to an aggregate of €10.0 million) and pay tiered royalties on net sales in the low single digits. We may terminate the Broteio Agreement for convenience upon 90 days prior written notice. The Broteio Agreement is also subject to mutual termination for material breach or insolvency and automatically expires upon the expiration of our financial obligations thereunder.
Our Exclusive License with VIB for ARGX-118
In November 2016, we entered into a collaboration under our IIP with VIB to develop antibodies against Galectin-10, the protein of Charcot-Ley-den Crystals, which play a major role in severe asthma and the persistence of mucus plugs, including ARGX-118 (VIB Agreement). Pursuant to the VIB Agreement, we and VIB jointly developed antibodies against Galectin-10 using our proprietary suite of technologies. Upon successful completion of this initial research, we exercised an exclusive option to in-license the program and assumed responsibility for further development and commercialization. Under the VIB Agreement, including as amended in November 2018, we are obligated to make
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milestone payments upon the occurrence of certain development milestones (up to an aggregate of €4.0 million), commercialization milestones (up to an aggregate of €11.0 million) and pay tiered royalties on net sales in the low single digits. We may terminate the VIB Agreement for convenience upon 90 days prior written notice. The VIB Agreement is also subject to mutual termination for material breach, insolvency or certain patent challenges and automatically expires upon the expiration of VIB’s licensed patent rights.
Our Exclusive License with the University of Texas for NHance and ABDEG
In February 2012, we entered into an exclusive in-license with the Board of Regents of the University of Texas System (UT BoR) for the use of certain patent rights relating to the NHance platform for any use worldwide (the UT Agreement). The UT Agreement was amended on December 23, 2014 to also include certain additional patent rights relating to the ABDEG platform. Upon commercialization of any of our products that use the in-licensed patent rights, we will be obligated to pay UT BoRa percentage of net sales as a royalty until the expiration of any patents covering the product. This royalty varies with net sales volume and is subject to an adjustment for royalties we receive from a sublicensee of our rights under the UT Agreement, but in any event does not exceed 1%. In addition, we must make annual license maintenance payments to UT BoR until termination of the UT Agreement and we have assumed certain development and commercial milestone payment and reimbursement obligations. We also have diligence requirements with respect to development and commercialization of products which use the in-licensed patent rights.
Pursuant to the UT Agreement, we may grant sublicenses to third parties. If we receive any non-royalty income in connection with such sublicenses, we must pay UT BoR a percentage of such income varying from low-middle single digits to middle-upper single digits depending on the nature of the sublicense. Such fees are waived if a sublicensee agrees to pay the milestone payments as set forth in the UT Agreement.
We may unilaterally terminate the UT Agreement for convenience upon prior written notice. Absent early termination, the UT Agreement will automatically expire upon the expiration of all issued patents and filed patent applications within the patent rights covered by the UT Agreement. Our royalty payment obligations expire, on a product-by-product and country-by-country basis, at such time as there are no valid claims covering such product.
Our Non-Exclusive License with BioWa, Inc. (BioWa) and Non-Exclusive Commercial Licenses with BioWa and Lonza for POTELLIGENT
In October 2010, we entered into a non-exclusive license agreement with BioWa for the use of certain patents and know-how owned by BioWa and relating to its POTELLIGENT platform technology, for use in the field of prevention and treatment of human diseases (the BioWa Agreement). Pursuant to the BioWa Agreement, we are granted a non-exclusive right to use POTELLIGENT to research and develop antibodies and products containing such antibodies using POTELLIGENT.
In 2013 and 2014, we entered into non-exclusive license agreements for POTELLIGENT CHOK1SV with BioWa and Lonza for the further development, manufacturing and commercialization of ARGX-110 and ARGX-111, respectively (the POTELLIGENT License Agreements).
Upon commercialization of our products developed using POTELLIGENT, we will be obligated to pay BioWa and Lonza a percentage of net sales of a licensed product as a royalty. This royalty varies with net sales volume, ranging in the low single digits, and it is reduced by half if during the following ten 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.
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Pursuant to the POTELLIGENT License Agreements, we have the right to grant sublicenses to third parties. BioWa retains a right of first negotiation for the exclusive right to develop and commercialize, in certain countries only, any product we develop using POTELLIGENT.
We may terminate the POTELLIGENT License Agreementsat any time by sending BioWa and Lonza prior written notice. Absent early termination, the POTELLIGENT License Agreements will automatically expire upon the expiry of our royalty obligations under the POTELLIGENT License Agreements. In the event a POTELLIGENT License Agreement is terminated for any reason, the license granted to us would terminate but BioWa would grant our sublicensees a direct license following such termination. In the event the POTELLIGENT License Agreement is terminated other than for our breach or insolvency, we would retain the right to sell licensed products then on hand for a certain period of time post-termination.
Our non-exclusive license with Lonza for Multi-product GS Xceed-License
On February 4, 2015, we entered into a non-exclusive multi-product in-license agreement with Lonza (the Multi-Product License) for use of Lonza’s proprietary glutamine synthetase gene expression system known as GS Xceed™ consisting of Chinese hamster ovary cell line and the vectors for the manufacturing of drug substance (the System). The System is used for the manufacturing of, amongst others, efgartigimod, ARGX-117 and ARGX-119.
Pursuant to the Multi-Product License, we have the right to grant sublicenses to certain pre-approved third parties without prior written consent of Lonza, but otherwise must obtain Lonza’s prior written consent.
We have assumed certain development, regulatory and commercial milestone payment obligations to Lonza. We are required to pay such milestones using the System. We are obligated to make development, regulatory and commercial milestone payments to Lonza. Through December 31, 2022, we paid Lonza an aggregate amount of £0.6 million, which includes milestone payments made under the Multi-Product License. Upon commercialization of our products developed using the System, we are obligated to pay Lonza a percentage of net sales as a royalty for each product manufactured, except for ARGX-109, which is wholly-owned, and next generation efgartigimod. The Lonza royalty is tiered, ranging in the low single digits and is reduced by half if the product in a country is not protected by a valid claim. During 2022, we made an aggregate payment of $1.7 million to Lonza for the royalty on net sales for manufacturing of efgartigimod.
We may terminate the Multi-Product License on a product-by-product basis by giving Lonza prior written notice. Lonza may terminate the Multi-Product License solely in case of breach or insolvency events. Absent early termination, the Multi-Product License will automatically expire upon the expiry of the last valid claim for such product. We or our strategic partners would retain the right to sell the respective products then on hand post-termination.
Our Collaboration with UCL and Sopartec S.A. (Sopartec) for GARP
In January 2013, we entered into a collaboration and exclusive product license agreement with UCL and its technology transfer company Sopartec to discover and develop novel human therapeutic antibodies against GARP (GARP Agreement). Pursuant to the GARP Agreement, each party is responsible for all of its own costs in connection with the activities assigned to it under a mutually agreed research plan.
In January 2015, we exercised the option we were granted under the GARP Agreement to enter into an exclusive, worldwide commercial in-license for use of certain GARP-related intellectual property rights owned by UCL and the Ludwig Institute for Cancer Research to further develop and commercialize licensed products, including the GARP-neutralizing antibody ARGX-115 (ABBV-151) which was discovered under the original collaboration (GARP License). Upon the expiration of the GARP Agreement, the GARP License will become a fully paid-up, perpetual worldwide exclusive license under the GARP intellectual property for any purpose, subject to UCL’s retention of non-commercial research rights.
Pursuant to the GARP License, we may grant sublicenses to third parties and affiliates of such third parties. In 2016, we entered into an exclusive collaboration and license agreement with AbbVie regarding ARGX-115. From any
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income we receive in connection with these sublicenses, such as in connection with AbbVie Collaboration Agreement, we must pay Sopartec a percentage of that income in the lower teen digit range. Royalty payment obligations expire on a product-by-product and country-by-country basis when there are no valid claims covering the ARGX-115 (ABBV-151) product. We also have diligence obligations with respect to the continued development and commercialization of ARGX-115 (ABBV-151) products.
Our Exclusive License with NYU Langone Health and LUMC for ARGX-119
In 2019 and 2020, we entered into collaboration and exclusive license agreements with NYU Langone Health and LUMC under our IIP to develop antibodies targeting the MuSK, for the treatment neuromuscular diseases, which play a major role at the neuromuscular junction (NYU and LUMC Agreements). Pursuant to the NYU and LUMC Agreements, we, NYU and LUMC jointly developed antibodies against MuSK using our proprietary suite of technologies. Under the NYU and LUMC Agreements, as amended, we are obligated to make milestone payments upon the occurrence of certain development milestones, commercialization milestones and pay tiered royalties on net sales in the low single digits.
Distribution Agreements
We are parties to the Medison Agreement, the Medison Multi-Regional Agreement and the Genpharm Agreeement.
Regulatory Framework
Government authorities in the United States,U.S., at the federal, state and local level, and in the European UnionEU and other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post‑approvalpost-approval monitoring and reporting, and import and export of pharmaceutical products, including biological products. In addition, some jurisdictions regulate the pricing of pharmaceutical products. The processes for obtaining marketing approvals in the United StatesU.S. and in foreignother countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Licensure and Regulation of Biologics in the United StatesU.S.
In the United States, our product candidates are regulated asU.S., biological products used for the prevention, treatment, or biologics,cure of a disease or condition in a human being are subject to regulation under the Public Health Service Act, or PHSA, and theU.S. Federal Food, Drug, and Cosmetic Act or(FDCA) and its implementing regulations, with the exception that the section of the FDCA that governs the approval of drugs via NDAs does not apply to the approval of biologics. Biologics are approved for marketing under provisions of the Public Health Service Act (PHSA) via BLAs. However, the application process and their implementing regulations.requirements for approval of BLAs are very similar to those for NDAs. The failure to comply with the applicable U.S. requirements at any time during the product development process, including nonclinicalpreclinical testing and clinical testing, the approval process or post‑approvalpost-approval process may subject an applicant to delays in the conduct of a study, regulatory review and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not limited to, the FDA’s refusal to allow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning or untitled letters, adverse publicity, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines and civil or criminal investigations and penalties brought by the FDA or the Department of Justice or other governmental entities.
An applicant seeking approval to market and distribute a new biologic in the United StatesU.S. generally must satisfactorily complete each of the following steps:
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| submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin; |
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| 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 |
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| 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 |
| compliance with any post-approval requirements, including the potential requirement to implement a |
NonclinicalPreclinical Studies and Investigational New Drug ApplicationINDs
Before testing any biologicbiological product candidate in humans, the product candidate must undergo nonclinicalpreclinical testing. NonclinicalPreclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as animal studies to evaluate the potential for activity and toxicity. The conduct of the nonclinicalpreclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the nonclinicalpreclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an Investigational New Drug, or IND application. The IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the product candidate or conduct of the proposed clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks.risks, and places the proposed clinical trial on clinical hold. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns before the clinical trial can begin.
As a result, submission of the IND may result in the FDA not allowing the clinical trial to commence or on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either during this initial 30‑day period, or at any time during the IND process, it may choose to imposeimposes a partial or complete clinical hold. This order issued by the FDAhold, this action would delay either a proposed clinical studytrial or cause suspension of an ongoing study, or in the case of a partial clinical hold place limitations on the conduct of the study such as duration of treatment, until all outstanding concerns have been adequately addressed and the FDA has notified the company that investigation may proceed.proceed and then only under terms authorized by the FDA. This could cause significant delays or difficulties in completing planned clinical trials in a timely manner. The FDA may impose clinical holds on a biologicbiological product candidate at any time before or during clinical trials due to safety concerns or non‑compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA.non-compliance.
Human Clinical Trials in Support of a BLA
Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator in accordance with GCP
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requirements.GCPs. Clinical trials are conducted under study protocols detailing, among other things, the objectives of the study,
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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 need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of the BLA so long as the clinical trial is well‑designedwell-designed and well‑conductedwell-conducted in accordance with GCP,GCPs, including review and approval by an independent ethics committee, and the FDA is able to validate the study data through an onsite inspection, if necessary.
Further, each clinical trial must be reviewed and approved by an institutional review board, orthe IRB either centrally or individually at each institution at which the clinical trial will be conducted. The IRB 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, 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 study as planned, changes in study conduct, or cessation of the study at designated check points based on access to certain data from the study.
Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Additional studies 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 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 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 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 |
In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post‑approvalpost-approval clinical trials are typically referred to as Phase 4 clinical trials. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of biologics approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement or to request a change in the product labeling. Failure to exhibit due diligence with regard to conducting required Phase 4 clinical trials could result in withdrawal of approval for products.
Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators fifteen days after the clinical trial sponsor determines the information qualifies for reporting for serious and unexpected suspected adverse events, findings from other studies 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
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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.
A drug being studied in clinical trials may be made available to individual patients in certain circumstances. Pursuant to the 21st Century Cures Act, as amended, the manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 clinical trial of the investigational drug, or as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.
Compliance with cGMP Requirements
Before approving a BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in full compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency, and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in the manufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with the FDCA, cGMPs and other laws.requirements. Manufacturers may have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection by
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including biological products, are required to register and disclose certain clinical trial information on the FDAwebsite www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, clinical trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial. Competitors may leaduse this publicly available information to a product being deemed to be adulterated.gain knowledge regarding the progress of clinical development programs as well as clinical trial design.
Review and Approval of a BLA
The results of product candidate development, nonclinicalpreclinical testing and clinical trials, including negative or ambiguous results as well as positive findings, are submitted to the FDA as part of a BLA requesting a license to market the product. The BLA must contain extensive manufacturing information and detailed information on the composition of the product and proposed labeling as well as payment of a user fee.
The FDA has 60 days after submission of the application to conduct an initial review to determine whether the BLA is sufficient to accept for filingfile based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. If the FDA determines the BLA is not sufficiently complete, it will refuse to file the BLA. Once the submission has been accepted for filing,filed, the FDA begins an in‑depthin-depth review of the application. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or the PDUFA, the FDA has ten 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 2 months are added to the
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review clock, whether standard or priority review for a total review time of 12 or 8 months, respectively. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs. The review process may often be significantly extended by FDA requests for additional information or clarification.reviews. The review process and the PDUFA goal date may also be extended by three months if the FDA so requests or if the applicant otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.which may be deemed as substantial information.
On the basis ofAfter the FDA’s evaluation of the application and accompanying information, including the results of the inspectionany potential inspections of the manufacturing facilities and any FDA audits of clinical trial sites to assure compliance with GCPs, the FDA maywill issue an approval letter, denial letter, or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. Under the PHSA, the FDA may approve a BLA if it determines that the product is safe, pure and potent and the facility where the product will be manufactured meets standards designed to ensure that it continues to be safe, pure and potent. If the application is not approved, the FDA maywill issue a complete response letter, which will containidentify the deficiencies in the application and the conditions that must be met in order to secure final approval of the application, and when possible, will outline recommended actions the sponsor might take to obtain approval of the application. Sponsors that receive a complete response letter may submit to the FDA information that represents a complete response to the issues identified by the FDA.FDA, withdraw the application or request a hearing. The FDA will not approve an application until issues identified in the complete response letter have been addressed. The FDA issues a denial letter if it determines that the establishment or product does not meet the agency’s requirements.
The FDA may also refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. In particular, the FDA may refer applications for novel biologicbiological products or biologicbiological products that present difficult questions of safety or efficacy to an advisory committee. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions.
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The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
If the FDA approves a new product, it may limit the approved indications for use of the product. It may also require that contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may call for post‑approvalpost-approval studies, including Phase 4 clinical trials, to further assess the product’s safety after approval. The agency may also require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals and elements to assure safe use or ETASU.(ETASU). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patent registries. The FDA may prevent or limit further marketing of a product based on the results of post‑marketpost-market studies or surveillance programs.
After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Such regulatory reviews can result in denial or modification of the planned changes, or requirements to conduct additional tests or evaluations that can substantially delay or increase the cost of the planned changes.
Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life‑threateninglife-threatening disease or condition. These programs are referred to as fast track designation, breakthrough therapy designation and priority review designation.
The FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life‑threateninglife-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s application
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before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track applicationrolling review does not begin until the last section of the application is submitted. Fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life‑threateninglife-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross‑disciplinarycross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.
The FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case‑by‑casecase-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment‑limitingtreatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from 10ten months to six months.
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Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life‑threateninglife-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for suchbenefit or on a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality or (IMM) and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographicradio-graphic image, physical sign, or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post‑approvala post-approval confirmatory study or studies to verify and describe the product’s clinical benefit. As a result, a
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product candidate approved on this basis is subject to rigorous post‑marketingpost-marketing compliance requirements, including the completion of Phase 4 or post‑approvalpost-approval clinical trials to confirm the effect on the clinical endpoint. These confirmatory clinical trials must be completed with due diligence, and the FDA may require that the confirmatory clinical trial be designed, initiated, and/or fully enrolled prior to approval. Failure to conduct required post‑approvalpost-approval studies, or confirm a clinical benefit during post‑marketingpost-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. AllUnless otherwise informed by the FDA, all promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.agency. The Food and Drug Omnibus Reform Act (FDORA) was recently enacted and includes provisions related to the accelerated approval pathway. Pursuant to FDORA, the FDA is authorized to require a post-approval study 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 study not later than 180 days following approval and not less frequently than every 180 days thereafter until completion or termination of such study. Such conditions may include imposing milestones such as a target date of study 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 study, including a failure to meet any required conditions specified by the FDA or to submit timely reports.
Post‑ApprovalOrphan Drug Designation
Orphan drug designation in the U.S. is designed to encourage sponsors to develop products intended for rare diseases or conditions. In the U.S., a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the U.S. or that affects more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available the product for the disease or condition will be recovered from sales of the product in the U.S.
Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the date of the product’s marketing approval if granted by the FDA and if it is the first FDA approval for that product for the disease for which it has such designation. An application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. If the FDA grants orphan drug designation, the generic identity of the product and its potential orphan use are disclosed publicly by the FDA. The product must then go through the review and approval process like any other product in order to be marketed.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to the first drug. Whether a large molecule product (i.e., a biological product) is the same as another product is based on whether the two products have the same principal molecular structural features. More than one sponsor may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a complete request for designation.
If orphan drug exclusivity is granted by the FDA, the period of exclusivity begins on the date that the marketing application is approved by the FDA and applies only to the indication for which the product has been designated. The FDA may approve a second application for the same product for a different use or a second application for a clinically superior version of the product for the same use. The FDA cannot, however, approve the same product made by another sponsor for the same indication during the market exclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities of the product.
Post-Approval Regulation
If regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor will be required to comply with all regular post‑approvalpost-approval regulatory requirements as well as any post‑approvalpost-approval requirements that the FDA has imposed as part of the approval process. The sponsor will be required to report certain adverse reactions and production problems to the FDA, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional labeling. Manufacturers and other parties involved in the drug
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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 register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMP regulations,cGMPs, which impose certain procedural and documentation requirements upon manufacturers. Accordingly, the sponsor and its third‑partythird-party manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP regulationscGMPs and other regulatory requirements.
A biologicbiological product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official lot release, the manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in addition perform certain confirmatory tests on lots of some products before releasing the lots for
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distribution. Finally, the FDA will conduct laboratory research related to the safety, purity, potency and effectiveness of pharmaceutical products. Any distribution of prescription biological products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act and the PHSA.
Once an approval is granted, the FDA may withdrawrevoke or suspend the approval of the BLA if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post‑marketpost-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. FDA also has authority to require post-market studies, in certain circumstances, on reduced effectiveness of a product and may require labeling changes related to new reduced effectiveness information. Other potential consequences for a failure to maintain regulatory compliance include, among other things:
| 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 |
| 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 the provisions of the approved label.labeling. Although physicians may prescribe legally available products for unapproved uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), companies with approved products may not market or promote such off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑labeloff-label uses, and a company that is found to have improperly promoted off‑labeloff-label uses may be subject to significant liability.
Orphan Drug Designation
Orphan drug designation in the United States is designed to encourage sponsors to develop products intended for rare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United Statesliability, including investigation by federal and for which there is no reasonable expectation that the cost of developing and making available thestate authorities. Prescription biological product for the disease or condition willpromotional materials must be recovered from sales of the product in the United States.
Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the date of the product’s marketing approval if granted by the FDA. An application for designation as an orphan product can be made any time priorsubmitted to the filing of an application for approval to market the product. A product becomes an orphan when it receives orphan drug designation from the Office of Orphan Products Development,FDA in conjunction with their first use or OOPD, at the FDA based on acceptable confidential requests made under the regulatory provisions. The product must then go through the review and approval process like any other product.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to the 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 thepublication.
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same product for a different use or a second application for a clinically superior version of the product for the same use. The FDA cannot, however, approve the same product made by another manufacturer for the same indication during the market exclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act of 2003 (as amended, PREA), a BLA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations,sub-populations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements doPREA does not apply to products witha biologic for an indication for which orphan designation.designation has been granted, except that PREA will apply to an original BLA for a new active ingredient that is orphan-designated if the biologic is a molecularly targeted cancer product intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer.
Pediatric exclusivity is another type of non‑patentnon-patent marketing exclusivity in the United StatesU.S. and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non‑patent and orphan exclusivity. This six‑monthsix-month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application.
Biosimilars and Exclusivity
The Biologics Price Competition and Innovation Act, or BPCIA established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. To date, while biosimilar products have been approved by the FDA for use in the United States, no interchangeable biosimilars have been approved.
Under the BPCIA, a manufactureran applicant may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biological product or “reference product.” In order forFor the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity and potency. For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12twelve years from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own nonclinicalpreclinical data and data from adequate and well‑controlledwell-controlled clinical trials to demonstrate the safety, purity and potency of their product. However, to rely on such exclusivities for establishing or protecting our market position is not without risk, as such laws are subject to changes by the legislature.
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The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
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U.S. Patent Term Restoration
Depending upon the timing, duration and specifics of FDA approval of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act that permits restoration of the patent term of up to five years as compensation for patent term lost during the FDA regulatory review process. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date and only those claims covering such approved product, a method for using it or a method for 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 prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.
Regulation and Procedures Governing Approval of Medicinal Products in the European UnionEU and the UK
In order to market any medicinal product outside of the United States,U.S., a company also must comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can initiate clinical trials or marketing of the product in those countries or jurisdictions. Specifically, 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. The process governing approval of medicinal products in the European UnionEU and the UK generally follows the same lines as in the United States.U.S. It entails satisfactory completion of pharmaceutical development, nonclinicalpre-clinical studies and adequate and well‑controlledwell-controlled clinical trials to establish the safety and efficacy of the medicinal product for each proposed indication. ItThe EU also requires the submission to relevant competent authorities for clinical trials authorization and to the European Medicines Authority,EMA or EMA, forto competent authorities in EU Member States of a marketing authorization application or (MAA) and granting of a marketing authorizationsuch MAA by these authorities before the product can be marketed and sold in the European Union.EU. Following the UK’s departure from the EU, a separate MAA is required in order to place medicinal products on the market in the Great Britain (England, Wales and Scotland) (under the Northern Ireland Protocol, the EU regulatory framework will continue to apply in Northern Ireland in this regard and centralized EU marketing authorizations will continue to be recognized).
Clinical Trial Approval
Pursuant to the currently applicable Clinical Trials Directive 2001/20/EC and the Directive 2005/28/EC on GCP, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national authority of an European Union member state in which the clinical trial is to be conducted or in multiple member states if the clinical trial is to be conducted in a number of member states. Furthermore, the applicant may only start a clinical trial at a specific study site after the independent ethics committee has issued a favorable opinion. The clinical trial application, or CTA, must be accompanied by an investigational medicinal product dossier with supporting information prescribed by Directive 2001/20/EC and Directive 2005/28/EC and corresponding national laws of the member states and further detailed in applicable guidance documents.
In April 2014, the European UnionEU adopted athe new Clinical Trials Regulation (EU) No 536/2014, which is set to replacereplaced the current Clinical Trials Directive 2001/20/EC. It is expected thatEC as of January 31, 2022. The transitional provisions of the new Clinical TrialsRegulation offered sponsors the possibility to choose between the requirements of the previous Directive and the new Regulation 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, the clinical trial continues to be governed by the Directive until three years after the new Regulation became applicable (i.e., January 31, 2025). If a clinical trial continues for more than three years after the Regulation became applicable, the new Regulation will at that time begin to apply by 2019 with a three‑year transition period. It will overhaulto the current system of approvals for clinical trials in the European Union. Specifically, thetrial. The new regulation,Regulation (EU), which will beis directly applicable in all member states,EU Member States, aims at simplifyingto simplify and streamliningstreamline the approval of clinical trials in the European Union. For instance,EU. The main characteristics of the new Clinical Trials Regulation provides forinclude: a streamlined application procedure via a single-entry point through the Clinical Trials Information System; a single entry pointset of documents to be prepared and strictly defined deadlinessubmitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts (Part I contains scientific and medicinal product documentation and Part II contains the national and patient-level documentation). Part I is assessed by a coordinated review by the competent authorities of all EU Member States in which an application for authorization of a clinical trial applications.
Marketing Authorization
To obtain a marketing authorization for a product under the European Union regulatory system, an applicant must submit an MAA, either under a centralized procedure administered by the EMA or one of the procedures administered by competent authorities in European Unionhas been submitted (Concerned Member States (decentralized procedure, national procedure, or mutual recognition procedure). A marketing authorization may be granted only to an applicant established in the European Union. Regulation (EC) No. 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, an applicant must demonstrate compliance with all measures included in an EMA‑approved Pediatric Investigation Plan, or 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 authorizationdraft report prepared by the European Commission that is valid for all European Uniona reference 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 products and products with a new activestate. Part
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substance indicatedII is assessed separately by each Concerned Member State. Strict deadlines have also been established for the treatmentassessment of certain diseases, including products forCTAs.
Prior to its exit from the treatment of cancer. For products with a new active substance indicated forEU, the treatment of other diseases and products that are highly innovative or for which a centralized process is inUK implemented Directive 2001/20/EC into national law through the interest of patients, the centralized procedure may be optional.
Under the centralized procedure, the Committee for Medicinal ProductsMedicines 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. 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(Clinical Trials) Regulations 2004 (as amended). However, implementation of the CHMP. Accelerated evaluation may be granted bynew EU Clinical Trials Regulation took place after the CHMP in exceptional cases, when a medicinal product is of major interestUK’s departure from the point of view of public healthEU, and so the new Clinical Trial Regulation described in particular, from the viewpoint of therapeutic innovation. Ifpreceding paragraph does not apply to Great Britain. The MHRA, the CHMP accepts suchUK medicines regulator, ran a request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP may revertconsultation on reforms to the standard time limitUK clinical trials legislation which closed in March 2022. The outcome of that consultation has not yet been published and the future regulatory framework for the centralized procedure if it determines that it is no longer appropriate to conduct an accelerated assessment.
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 or by the competent authority of the authorizing member state. 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 European Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five‑year renewal period. Any authorization that is not followed by the placement of the drug on the European Union market (in the case of the centralized procedure) or on the market of the authorizing member state within three years after authorization ceases to be valid.
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’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’s license is mandatory, must also be conducted in strict compliance with the EMA’s GMP requirements and comparable requirements of other regulatory bodiesclinical trials in the European Union, which mandate the methods, facilities and controls used in manufacturing, processing and packing of drugs 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 drugs and/or the general public, are strictly regulated in the European Union under Directive 2001/83EC, as amended.UK is currently uncertain.
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 (1) a life‑threateninglife-threatening or chronically debilitating condition, affecting(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 (2) a life‑threatening, seriously debilitating or serious and chronic condition in the European Union and that(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. For either of these conditions, the applicant must demonstrate thatinvestment in its development and (3) there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been authorized in the 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 and the possibility to apply forassistance. If a centralized European Union marketing authorization. Marketing authorization is granted for an orphan
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drug leads to medicinal product, this results in a ten‑yearten-year period of market exclusivity. During this market exclusivity period, neither the EMA, nor the European Commission ornor the member statesEU Member States can accept an application or grant a marketing authorization for a “similar medicinal product.” A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The market exclusivity period for the authorized therapeutic indication may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan 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 for the authorized orphan product consents to the second orphan application; or (iii) the marketing authorization holder for the authorized orphan product cannot supply enough orphan medicinal product. Orphan designation must be requested before submitting an application for marketing approval. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Since January 1, 2021, a separate process for orphan designation has applied in Great Britain. There is now no pre-marketing authorization orphan designation (as there is in the EU) and the application for orphan designation will be reviewed by the MHRA, at the time of an MAA for a UK or Great Britain marketing authorization. The criteria are the same as in the EU, save that they apply to Great Britain only (e.g., there must be no satisfactory method of diagnosis, prevention or treatment of the condition concerned in Great Britain, as opposed to the EU, and the prevalence of the condition must be no more than five in 10,000 persons in Great Britain).
Marketing Authorization
To obtain a marketing authorization for a product under the EU regulatory system, an applicant must submit an MAA, either to the EMA using the centralized procedure or to competent authorities in 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 EU. Regulation (EC) No. 1901/2006 provides that prior to obtaining a marketing authorization in the EU, an applicant must demonstrate compliance with all measures included in an EMA-approved 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.
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The centralized procedure provides for the grant of a single marketing authorization by the EU 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 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 and other immune dysfunctions and neurodegenerative disorders. The centralized procedure is optional for products that contain a new active substance for any other indications, which are a significant therapeutic, scientific or technical innovation and whose authorization would be in the interest of public health in the EU.
Under the centralized procedure, the EMA’s Committee for Medicinal Products for Human Use (CHMP) is responsible for conducting the assessment of a product to define its risk/benefit profile. The CHMP recommendation is then sent to the EU Commission, which adopts a decision binding in all EEA Member States. Under the centralized procedure, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions asked by the CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 210 days. Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the time limit of 210 days will be reduced to 150 days (excluding clock stops), but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that it is no longer appropriate to conduct an accelerated assessment.
Following the departure of the UK from the EU, Great Britain is no longer covered by centralized marketing authorizations (under the Northern Ireland Protocol, centralized EU authorizations will continue to be recognized in Northern Ireland). However, all medicinal products with a current centralized authorization were automatically converted to UK marketing authorizations on January 1, 2021, and there is a further period, recently extended to December 31, 2023, during which the MHRA may rely on a decision taken by the EU Commission on the approval of a new marketing authorization in the centralized procedure, in order to more quickly grant a new Great Britain marketing authorization. A separate application is, however, still required.
European Data and Market Exclusivity
In the EU, innovative medicinal products, approved on the basis of a complete independent data package, qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. The data exclusivity, if granted, prevents generic or biosimilar applicants from referencing the innovator’s preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU, for a period of eight years from the date on which the reference product was first authorized in the EU. During the additional two-year period of market exclusivity, a generic or biosimilar MAA can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed in the EU until the expiration of the market exclusivity period. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains a marketing authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies. There is no guarantee that a product will be considered by the EMA to be an innovative medicinal product, and products may not qualify for data exclusivity. Even if a product is considered to be an innovative medicinal product so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained a marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials. Similar arrangements apply in the UK.
Periods of Authorization and Renewals
A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of a reevaluation of the risk benefit balance by the EMA for a centrally authorized product, or by the competent
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authority of the authorizing member state for a nationally authorized product. Once renewed, the marketing authorization is valid for an unlimited period, unless the EU 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 EU market (in the case of the centralized procedure) or on the market of the authorizing member state (for a nationally authorized product) within three years after authorization, or if the drug is removed from the market for three consecutive years, ceases to be valid. In Great Britain, centrally authorized products converted from EU to UK marketing authorizations will have the same renewal date.
Regulatory Requirements after Marketing Authorization
Following approval, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of the medicinal product. These include compliance with the EU’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’s license is mandatory, must also be conducted in strict compliance with the EMA’s GMP requirements and comparable requirements of other regulatory bodies in the EU, which mandate the methods, facilities and controls used in manufacturing, processing and packing of products 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 products and/or the general public, are strictly regulated in the EU under Directive 2001/83EC, as amended.
The aforementioned EU rules are generally applicable in the EEA, and similar arrangements apply in the UK.
Brexit and the Regulatory Framework in the UK
In June 2016, the electorate in the UK voted in favor of leaving the EU (commonly referred to as “Brexit”), and the UK officially withdrew from the EU on January 31, 2020. Pursuant to the formal withdrawal arrangements agreed between the UK and the EU, the UK was subject to a transition period until December 31, 2020, during which EU rules continued to apply. However, the EU and the UK concluded a trade and cooperation agreement (TCA), which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021. The TCA includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued, but does not foresee wholesale mutual recognition of UK and EU pharmaceutical regulations. The UK has implemented EU legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012 (as amended) and has not yet enacted significant legislative change in this area following its exit from the EU. The regulatory regime in Great Britain therefore largely aligns with current EU regulations. However, these regimes may diverge increasingly as time passes, now that Great Britain’s regulatory system is independent from the EU, and the TCA does not provide for mutual recognition of UK and EU pharmaceutical legislation. For example, as already explained, the new Clinical Trials Regulation which became effective in the EU on January 31, 2022 has not been implemented into UK law, and a separate application will need to be submitted for clinical trial authorization in the UK. Furthermore, the position in Northern Ireland differs in certain respects from that of the rest of the UK (England, Wales and Scotland) as some EU rules continue to be applicable to Northern Ireland following the UK’s departure from the EU.
Regulation and Procedures Governing Approval of Medicinal Products in Japan
In order to market any medical products in Japan, a company must comply with numerous and varying regulatory requirements in Japan regarding quality, safety and efficacy in the context, among other things, of clinical trials, marketing approval, commercial sales and distribution of products. A person who manufactures or markets medical products in Japan is subject to the supervision of the MHLW, primarily under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals and Medical Devices (Pharmaceutical and Medical Devices Act). This entails the satisfactory completion of pharmaceutical development, preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the medical product for each proposed indication. It also requires the filing of a notification of clinical trials with the Pharmaceuticals and Medical Devices Agency (Japan) (PMDA) and the obtaining of marketing approval from the relevant authorities before the product can be marketed and sold in the Japanese market.
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Business License
Under the Pharmaceutical and Medical Devices Act, a person is required to obtain from the MHLW a marketing license in order to conduct the business of marketing, leasing or providing medical products that are manufactured (or outsourced to a third party for manufacturing) or imported by such person.
Also, in order to conduct the business of manufacturing medical products which will be marketed in Japan, a person is required to obtain from the MHLW a manufacturing license for each manufacturing site.
Marketing Approval
Under the Pharmaceutical and Medical Devices Act, it is generally required to obtain marketing approval from the MHLW for the marketing of each medical product. An application for marketing approval must be made through the PMDA, which implements a marketing approval review.
Clinical Trial
Under the Pharmaceutical and Medical Devices Act, it is required to file notification of clinical trials with the PMDA. Also, the data of clinical trials and other pertinent data, which must be attached for an application for marketing approval, must be obtained in compliance with the standards established by the MHLW, such as GLPs and GCPs stipulated by the ministerial ordinances of the MHLW.
Regulatory Requirements after Marketing Approval
A marketing license-holder that has obtained marketing approval for a new pharmaceutical must have that pharmaceutical re-examined by the PMDA for a specified period after receiving marketing approval. Such re-examination period for VYVGART is stated to be ten (10) years after the marketing approval in January 2022. The purpose of this re-examination process is to ensure the safety and efficacy of a newly approved pharmaceutical by imposing on the marketing license-holder the obligation to gather clinical data for a certain period after the marketing approval was granted so that the PMDA has the opportunity to re-examine the product. Results of usage and other pertinent data must be attached for an application for a re-examination. A marketing license holder that has obtained a marketing approval is also required to investigate, among other things, the results of usage and to periodically report to the PMDA pursuant to the Pharmaceutical and Medical Devices Act.
Price Regulation
In Japan, public medical insurance systems cover virtually the entire Japanese population. The public medical insurance system, however, does not cover any medical product which is not listed on the National Health Insurance (NHI) price list published by the Minister of the MHLW. Accordingly, a marketing license-holder of medical products must first have a new medical product listed on the NHI price list in order to obtain its coverage under the public medical insurance system. The NHI price list listed VYVGART in April 2022.
The NHI price of a medical product is determined either by price comparison of comparable medical products with necessary adjustments for innovativeness, usefulness or size of the market; or, in the 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‑partythird-party payors, including government health programs in the United StatesU.S. (such as Medicare and Medicaid), commercial health insurers, and managed care organizations, provide coverage
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and establish adequate reimbursement levels for such product candidates. Moreover, increasing efforts by governmental and third-party payors in the EU, the U.S. and other markets to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
In the United StatesU.S. and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third‑partythird-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare costs.programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Patients are unlikely to use any product candidates we may develop unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of such product candidates.
Factors payors consider in determining reimbursement are based on whether the product is (i) a covered benefit under its health plan; (ii) safe, effective and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational.
The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates. No uniform policy for coverage and reimbursement for drug products exists among third-party payors in the U.S. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for determiningthe use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Each plan determines whether a payoror not it will provide coverage for a product, may be separate fromwhat amount it will pay the process for setting the price or reimbursement rate that the payor will paymanufacturer for the product, once coverage is approved. Third‑party payors are increasingly challengingon what tier of its formulary the priceproduct will be placed and examiningwhether to require step therapy. The position of a product on a formulary generally determines the medical necessityco-payment that a patient will need to make to obtain the product and cost‑effectivenesscan strongly influence the adoption of medical productsa product by patients and services and imposing controls to manage costs. Third‑partyphysicians. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of the product, and the cost of these studies would be in addition to the costs required to obtain FDA or other comparable marketing approvals. Even after pharmacogenomic studies are conducted, product candidates may not be considered medically necessary or cost effective. A decision by a third‑party payor not to cover any product candidates we may develop could reduce physician utilization of such product candidates once approved and have a material adverse effect on our sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. For example, the payor may require co‑paymentsco-payments that patients find unacceptably high. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. Third‑party
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 the PRC, the newly created National Healthcare Security Administration (NHSA) an agency responsible for administering the PRC’s social security system, organized a price negotiation with drug companies for certain new drugs
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that had not been included in the national Reimbursable Drug List (RDL) 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 the PRC’s National Drug Catalog for Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance, or provincial or local medical insurance catalogues for the national medical insurance program regularly, and the tier under which a drug or device will be classified, both of which affect the amounts reimbursable to program participants for their purchases of those drugs. These determinations are made based on a number of factors, including price and efficacy. We may also be invited to attend the price negotiation with NHSA upon receiving regulatory approval in the PRC, but we will likely need to significantly reduce our prices, and to negotiate with each of the provincial healthcare security administrations on reimbursement ratios. On the other hand, if the NHSA or any of its local counterpart includes our drugs and devices in the national RDL or provincial RDL, which may increase the demand for our drug candidates and devices, our potential revenue from the sales of our drug candidates and devices may still decrease as a result of lower prices. Moreover, eligibility for reimbursement in the PRC does not imply that any drug or device will be paid for in all cases or at a rate that covers our costs, including licensing fees, research, development, manufacture, sale and distribution.
Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely. Outside the U.S., we will face challenges in ensuring obtaining adequate coverage and payment for any product candidates we may develop. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. In order to secure coverage and reimbursement for any product that might be approved for sale, we have needed and may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, and the cost of these studies would be in addition to the costs required to obtain FDA or other comparable marketing approvals. Conducting such studies could be expensive, involve additional risk and result in delays in our commercialization efforts. Even after pharmacogenomic studies are conducted, product candidates may not be considered medically necessary or cost-effective. A decision by a third-party payor not to cover any product candidates we may develop could reduce physician utilization of such product candidates once approved and have a material adverse effect on our sales, results of operations and financial condition. Third-party reimbursement and coverage may not be adequate to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. The insurance coverage and reimbursement status of newly‑newly approved products for orphan diseases is particularly uncertain, and failure to obtain or maintain adequate coverage and reimbursement for any such product candidates could limit a company’sour ability to generate revenue. Further, due to the COVID-19 pandemic, millions of individuals have lost/will lose employer-based insurance coverage, which may adversely affect our ability to commercialize our products. As noted above, in the U.S., we plan to have various programs to help patients afford our products, including patient assistance programs and co-pay coupon programs for eligible patients. More specifically, patients can enroll into MY VYVGART Path, a patient support program that provides personalized support from a nurse case manager and committed support team. In addition to providing support on questions on the treatment and on navigating the insurance process, the program provides a VYVGART Co-pay Program to eligible patients, aids in referring patients to charitable foundations that may be able to help with out-of-pocket costs and informs patients of financial assistance programs that may be available.
The containment of healthcare costs also has become a priority of U.S. federal, state and foreigninternational governments and the prices of pharmaceuticals have been a focus in this effort. Governments have shown significant interest in implementing cost‑containmentcost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any future product candidate that we commercialize and, if reimbursement is available, the level of reimbursement. In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. Further, these prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs. Adoption of price controls and cost‑containmentcost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’sour potential revenue from the sale of any approved products.products for which we may obtain approval. Coverage policies and third‑partythird-party reimbursement rates may change at
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any time. Even if favorable coverage and reimbursement status is attained for one or more of our products for which a companywe or itsour collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Outside the United States, we will face challenges in ensuring obtaining adequate coverage Obtaining and payment for any product candidates we may develop. Pricing of prescription pharmaceuticalsmaintaining reimbursement status is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory
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marketing approval for a producttime-consuming and may require us to conduct a clinical trial that compares the cost effectiveness of any product candidates we may develop to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts.costly.
In the European Union,EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost effectivenesscost-effectiveness of a particular product candidate to currently available therapies (so called health technology assessments, or HTAs)assessments) in order to obtain reimbursement or pricing approval. For example, the European UnionEU provides options for its member statesMember States to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member statesEU Member States may approve a specific price for a product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member statesMember States allow companies to fix their own prices for products but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the European UnionEU have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union.EU. The downward pressure on health carehealthcare costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member statesEU Member States and parallel trade (arbitrage between low‑pricedlow-priced and high‑priced member states)high-priced Member States) can further reduce prices. Special pricing and reimbursement rules may apply to orphan drugs. Inclusion of orphan drugs in reimbursement systems tend to focus on the medical usefulness, need, quality and economic benefits to patients and the healthcare system as for any drug. Acceptance of any medicinal product for reimbursement may come with cost, use and often volume restrictions, which again can vary by country. In addition, results basedresults-based rules of reimbursement may apply. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. Historically, products launched in the EU do not follow price structures of the U.S. and generally prices tend to be significantly lower.
Outside the U.S., international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the U.S., the reimbursement for our products may be reduced compared with the U.S. and may be insufficient to generate commercially reasonable revenue and profits.
The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which we obtain marketing approval.
Government Pricing and Reimbursement Programs for Marketed Drugs in the U.S.
Medicaid, the 340B Drug Pricing Program, and Medicare
Federal law requires that a pharmaceutical manufacturer, as a condition of having its 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
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Medicaid drug rebate agreement between the manufacturer and the Secretary of HHS. The 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. 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 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 drugs 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, 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. 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, effective January 1, 2023, added a requirement 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 if those portions of the dispensed drug that are unused and discarded 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
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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 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 will also allow HHS to negotiate the selling price of certain drugs and biologics that CMS reimburses under Medicare Part B and Part D, although only high-expenditure single-source biologics that have been approved for at least 11 years (7 years for drugs) can be selected by CMS for negotiation, with the negotiated price taking effect two years after the selection year. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price. Beginning in October 2022 for Medicare Part D and January 2023 for Medicare Part B, the IRA will also penalize drug manufacturers that increase prices of Medicare Part D and Part B drugs at a rate greater than the rate of inflation.
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.
The accuracy of a manufacturer’s reported Non-FAMPs, FCPs, or FSS contract prices may be audited by the government. Among the remedies available to the government for inaccuracies is recoupment of any overcharges to the four specified federal agencies based on those inaccuracies. If a manufacturer were found to have knowingly reported false prices, in addition to other penalties available to the government, the law provides for significant civil monetary penalties per incorrect item. Finally, manufacturers are required to disclose in FSS contract proposals all commercial pricing that is equal to or less than the proposed FSS pricing, and subsequent to award of an FSS contract, manufacturers are required to monitor certain commercial price reductions and extend commensurate price reductions to the government, under the terms of the FSS contract Price Reductions Clause. Among the remedies available to the government for any failure to properly disclose commercial pricing and/or to extend FSS contract price reductions is recoupment of any FSS overcharges that may result from such omissions.
Healthcare Law and Regulation
Healthcare providers and third‑partythird-party payors play a primary role in the recommendation and prescription of pharmaceutical products that are granted marketing approval. Our current and future arrangements with providers, researchers, consultants, third‑partythird-party payors and customers are subject to broadly applicable federal and state fraud and abuse, anti‑kickback,anti-kickback, false claims, transparency and patient privacy laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations include, without limitation, the following:
| the |
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| for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and |
| Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. A person or entity can be found guilty of violating the AKS without actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute. Violations of the AKS carry potentially significant civil and criminal penalties, including imprisonment, fines, administrative civil monetary penalties, and exclusion from participation in federal healthcare programs. On December 2, 2020, the Office of Inspector General (OIG) published further modifications to the AKS. Under the final rules, OIG added safe harbor protections under the AKS for certain coordinated care and value-based arrangements among clinicians, providers, and others. This rule (with exceptions) became effective January 19, 2021. We continue to evaluate what effect, if any, the rule will have on our business; |
| ● | the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act and federal civil monetary |
| the U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) which |
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| HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and |
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|
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| federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; |
● | federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; |
| ● | analogous state |
| ● | EU, UK and other foreign law equivalents, including reporting requirements detailing interactions with and payments to healthcare providers and data privacy and security laws and regulations that may be more stringent than those in the U.S. |
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelinesApril 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and the relevant compliance guidance promulgated by the federal governmentManufacturers of America’s Code on Interactions with Healthcare Professionals, in addition to requiring pharmaceutical manufacturers to report information related to payments to physicians and other health carehealthcare providers or marketing expenditures. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state and require the registration of pharmaceutical sales representatives State and foreign laws, including for example the EU General Data Protection Regulation, which became effective May 2018, also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement, we could be subject to penalties.
We have and will be requiredcontinue to spend substantial time and money to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations. Recent healthcare reform legislation has strengthened these federal and state healthcare laws. For example, the ACA amends the intent requirement of the federal Anti‑Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Other laws that may affect our ability to operate include:
| ● | the anti-inducement law prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value |
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| (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 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 December 2, 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. Implementation of this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and PBM service fees has been delayed 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.
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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 can subject us to criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment and exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non‑compliancenon-compliance with these laws, reputational harm, and we may be required to curtail or restructure our operations. Moreover, we expect that there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our future operations and business.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, the exclusion from participation in federal and state healthcare programs, individual imprisonment, reputational harm, and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, defending against any such actions can be costly and time-consuming, and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment. If any of the above occur, our ability to operate our business and our results of operations could be adversely affected.
Healthcare Reform
A primary trend inIn the U.S. healthcare industry, the EU and elsewhere is cost containment. Thereother foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare systems that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state proposals during the last few yearslevels that seek to reduce healthcare costs and improve the costquality of care through changes in the healthcare system, including limits on the pricing, coverage and reimbursement of pharmaceutical and biopharmaceutical products, especially under government‑funded health care programs, and increased governmental control of drug pricing.
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By way ofhealthcare. For example, in March 2010, the United StatesACA entered into force. 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.
Healthcare reforms that have been adopted, and that may be adopted in the future, 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, enactedto 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 recently culminated in the ACA,enactment of the IRA in August 2022, which will, among other things, includes changesallow HHS to negotiate the coverageselling price of certain drugs and payment for productsbiologics that CMS reimburses under governmentalMedicare Part B and private insurance plans. Among the provisions of the ACA of importance to our potential product candidates are:
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at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. These provisions will take effect progressively starting in 2023, although they may be subject to legal and political challenges to certain aspects of the ACA. Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislationchallenges.
We expect that would repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal legislation, the future of the ACA remains uncertain. We continue to evaluate how the ACA and recent efforts to repeal and replace or limit the implementation of the ACAadditional U.S. federal healthcare reform measures will impact our business.
Other legislative changes have been proposed andbe adopted in the United States sincefuture, any of which could limit the ACA was enacted. For example,amounts that the U.S. federal government will pay for healthcare products and services, which could result in August 2011, the Budget Control Act of 2011, among other things, created measuresreduced demand for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through
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2024 unlessour product candidates or additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.pricing pressures.
There have been, and likely will continue to be,Further, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing conditions and other requirements.
Individual states in the U.S. have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our current or any future products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the foreign, federal andEU or member state levels directed at broadening the availabilitylevel may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment and containingoperation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or lowering the costdelay marketing approval of healthcare. Such reforms could have an adverse effect on anticipated revenues fromour product candidates, that we may successfully developrestrict or regulate post-approval activities and affect our ability to commercialize any products for which we may obtain marketing approval. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our overall financial conditionbusiness.
Environmental issues which may influence the use of our material fixed assets
Our primary research and ability to develop product candidates.
Additionally, there has been increasing legislativedevelopment activities take place in our facilities in Zwijnaarde, Belgium. For these activities we require, and enforcement interesthave obtained, the necessary environmental and biohazard permits from the responsible governments, required by us for the manner in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the costwhich we use said facilities.
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C. ORGANIZATIONAL STRUCTURE
C. | ORGANIZATIONAL STRUCTURE |
As of December 31, 2017,2022, we had twonine subsidiaries. The following table sets out for each of our principal subsidiaries, the country of incorporation, and percentage ownership and voting interest held by us (directly or indirectly through subsidiaries).
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argenx | | The Netherlands | | 100.00 | % | |
argenx BV |
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| | Belgium | | 100.00 | % | |
argenx US, Inc. |
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| | Switzerland | | 100.00 | % | |
argenx Japan KK | Japan | 100.00 | % | |||
argenx France SAS | | France | | 100.00 | % | |
argenx Germany GmbH | | Germany | | 100.00 | % | |
argenx Canada Inc. | | Canada | | 100.00 | % | |
argenx UK Ltd. | | UK | | 100.00 | % | |
argenx Netherlands Services B.V. | | The Netherlands | | 100.00 | % | |
argenx Italy S.r.l. | | Italy | | 100.00 | % | |
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D.PROPERTY, PLANTS AND EQUIPMENT
In January 2021, we entered into a binding lease agreement related to the envisioned relocation of our Zwijnaarde facility to a newly built office in Zwijnaarde, with an annual base rent of $1.8 million, which will be operational in the third quarter of 2028, and with an initial term of 10.5 years. Included in the binding lease commitment is a rent free period of six-months following the completion of the building. The total future cash outflows related to this lease are represented below in “Note 29—Commitments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2022, as “Lease commitments not commenced”.
In August 2022, we terminated our lease in Breda, the Netherlands in relation to office space and replaced this on the same date with an annual lease in Amsterdam, the Netherlands with an initial term of one year. We also lease office space in Boston (U.S.), Tokyo (Japan), Geneva (Switzerland), Munich (Germany), Issy Les Moulineaux (France), Vaughan Ontario (Canada), Gerrards Cross (UK) and Milan (Italy).
In addition, our lease liabilities include a lease plan for company cars with maturity dates up to four years.
For a discussion of contractual obligations, please see “Note 29—Commitments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2022.
We leasehave our principal executive, operational offices and laboratory space which consists of approximately 1,500 square meters, located in Zwijnaarde, Belgium. The lease for this facility expires in 2026. We believe our current facility is sufficient to meet our needs for the foreseeable future. We also lease an office in Breda, the Netherlands.
We lease additional office space in Boston, Massachusetts. The lease runs on a yearly basis, and we believe this Boston facility is sufficient for us to initiate U.S. activities in line with our business plan.
We have a total of threefollowing material facilities worldwide owned or leased as of December 31, 2017,2022, as set forth in the following table:
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Environment, Health and Safety
Our primary research and development activities take place in our facilities in Zwijnaarde, Belgium. For these activities we require, and have obtained, the necessary environmental and biohazard permits from the responsible governments.governments, required by us for the manner in which we use said facilities. See “ItemItem 3.D.— “Risk Factors—RisksRisk Related to Our Business and Industry.Industry.”
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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.
A. OPERATING RESULTS
The review of the financial condition and results of operations of certain items from fiscal year ended December 31, 2020, and year-to-year comparisons between fiscal year ended December 31, 2021, and December 31, 2020, that are not included in this Annual Report can be found in Item 5 “Operating and Financial Review and Prospects” of our Annual Report for the fiscal year ended December 31, 2021, which is incorporated by reference herein.
Overview
We are a clinical‑stage biotechnology company developing a deep pipeline of differentiated antibody‑based therapies for the treatment of severe autoimmune diseases and cancer. Utilizing our suite of technologies, we are focused on developing product candidates with the potential to be either first‑in‑class against novel targets or best‑in‑class against known, but complex, targets in order to treat diseases with a significant unmet medical need. Our SIMPLE Antibody Platform, based on the powerful llama immune system, allows us to exploit novel and complex targets, and our three antibody Fc engineering technologies are designed to enable us to expand the therapeutic index of our product candidates. Together with our antibody discovery and development expertise, this suite of technologies has enabled our pipeline of seven product candidates. Two of our product candidates are in clinical proof‑of‑concept trials for three indications, one of which has achieved clinical proof‑of‑concept and is being prepared for Phase 3 clinical development.
We recently completed a Phase 2 clinical trial for ARGX‑113, our most advanced product candidate, for the treatment of the rare autoimmune disease myasthenia gravis, or MG, and we reported topline data from this trial in December 2017. ARGX‑113 demonstrated strong clinical improvement and statistically significant benefit over placebo. ARGX‑113 treatment resulted in a strong clinical improvement over placebo during the entire duration of the study as measured by all four predefined clinical efficacy scales. In addition, ARGX‑113 was observed to have a favorable tolerability profile consistent with that observed in our Phase 1 clinical trial. In March 2017, we initiated a Phase 2 clinical trial of ARGX‑113 for the treatment of another rare autoimmune disease, primary immune thrombocytopenia, or ITP. In September 2017, we initiated a Phase 2 clinical trial of ARGX‑113 for the treatment of a third rare autoimmune disease, pemphigus vulgaris, or PV. We are currently developing our second lead product candidate, ARGX‑110, for rare and aggressive hematological cancers, initially for T‑cell lymphoma, or TCL, and acute myeloid leukemia, or AML, as well as high‑risk myelodysplastic syndrome, or MDS. In December 2016, we commenced a Phase 1/2 clinical trial of ARGX‑110 in combination with azacitidine for the treatment of newly diagnosed AML or high‑risk MDS patients, and in April 2017, we initiated the Phase 2 part of a Phase 1/2 clinical trial of ARGX‑110 for the treatment of cutaneous TCL, or CTCL. We reported interim data for both clinical trials in December 2017.
We have a disciplined strategy to maximize the value of our pipeline whereby we plan to retain development and commercialization rights to those product candidates that we believe we can ultimately commercialize successfully on our own if they are approved. We plan to collaborate on product candidates that we believe have promising utility in disease areas or patient populations that are better served by the resources of larger biopharmaceutical companies. We have entered into collaborations with a number of biopharmaceutical companies, including our collaboration with AbbVie S.Á.R.L., or AbbVie, for ARGX‑115, a cancer immunotherapy‑focused product candidate, against the novel target glycoprotein A repetitions predominant. We received a $40.0 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) upfront payment and a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) preclinical milestone payment in connection with this collaboration.
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Since our inception in 2008, we have focused most of our financial resources and efforts towards developing our SIMPLE AntibodyTM Platform and antibody engineering technologies, identifying potential product candidates, establishing process, development and manufacturing capabilities for our product candidates and advancing multiple discovery programs into the clinic. WeIn 2022, we executed on our global launch of VYVGART our first-in-class neonatal FcRn blocker, which is now approved in the U.S, Japan and Europe, the successful commercialization of which generated a global product net sales of $400.7 million. 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. Leveraging our technology suite and clinical expertise, we have advanced four internally developed productseveral candidates into late-stage clinical development—ARGX‑113, ARGX‑110, ARGX‑111development and ARGX‑109—three into the preclinical stage—ARGX‑115, ARGX‑112 and ARGX‑116—andwe currently have multiple programs in the discovery stages.stage. Through December 31, 2017,2022, we have raised an aggregate gross proceeds of €474.7$4,318.5 million, including (i) an aggregatetotal net cash proceeds of €46.0$761.0 million from the private placement of equity securities in 2008, 2009 and 2011, (ii) €41.8 million from our initial public offering on the Euronext Brussels in 2014, (iii) €46.0 million from the private placement of equity securities, primarily to U.S.‑based institutional investors, in 2016, (iv) $114.7 million from our initial U.S. public offering on the Nasdaq Global Select Market in May 2017 and (v) $265.5 million from our second U.S public offering on the Nasdaq Global Select Market in December 2017. In addition, as of December 31, 2017, we have received upfront payments, milestone payments and research and development service fees from our collaborators totaling €77.3 million and have received €13.2 million in grants and incentives from governmental bodies. March 2022.
As of December 31, 2017,2022 and December 31, 2021, we had cash, cash equivalents and current financial assets of €359.8 million.$2,192.5 million and $2,336.7 million, respectively.
Our balance sheet shows our total assets accumulate to $3,134.3 million for the year ended December 31, 2022, compared to $2,850.3 million for the year ended December 31, 2021 and $2,279.4 million for the year ended December 31, 2020. The main reason for the material change in balance sheet total are the various equity financing rounds, completed over the period covered by the financial statements.
Since our inception, we have incurred significant operating losses. We do not currentlySince our inception, we have any approved products and have never generated any revenue from product sales. Our ability to generate revenue sufficient to achieve profitability will depend significantly upon the successful development and eventual commercialization of one or more of our product candidates, which may never occur.incurred significant operating losses. For the years ended December 31, 20162022 and 2017,2021, we incurred total comprehensive losses of €21.4$730.3 million and €28.1$450.6 million, respectively. As of December 31, 2017,2022, we had accumulated losses of €100.6$2,109.8 million.
Although we have generated revenue of $400.7 million from global product net sales of VYVGART in the fiscal year ended December 31, 2022, 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 commercialize VYVGART in other indications or in other countries. On December 17, 2021, the FDA approved
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efgartigimod, which is marketed as VYVGART™ (efgartigimod alfa-fcab), for the treatment of gMG in adult patients who are AChR-AB+. On January 20, 2022, the PMDA approved VYVGART™ (efgartigimod alfa) for the treatment of adult patients with gMG who do not have sufficient response to steroids or non-steroidal ISTs. On August 11, 2022, the EU Commission granted marketing authorization for VYVGART™ (efgartigimod alfa-fcab) as an add-on to standard therapy for the treatment of adult patients with gMG who are AChR-AB+. These are the only approved products we currently have.
We expect our expenses to continue to increase substantiallyas we expand our global commercial infrastructure and drug product inventory for VYVGART™ for the treatment of gMG, the advancement of our clinical-stage pipeline, including ongoing registrational clinical trials across five indications of efgartigimod, and continued investment in connection with our ongoing development activities related to our preclinical and clinical programs. In addition, we expect to incur additional costs associated with operating as a public company in the United States.IIP. We anticipate that our expenses will increase substantially if and as we:
Research and development activities:
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Pre-commercial and commercial activities:
| ● | further build-out our sales, marketing and distribution infrastructure and scale-up manufacturing capabilities for the continued commercialization of VYVGART™ for which we obtained regulatory approval from the FDA, PMDA and EU Commission and any product candidate, including new indications, for which we may obtain approval; and |
| ● | expand our global reach enabling us to commercialize any product candidates, including new indications, for which we may obtain regulatory approval. |
Other activities:
| ● | seek to enhance our technology platform and discover and develop additional product candidates; |
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| 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, |
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As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
Collaboration Agreements
We have a disciplined strategy to maximizeexpect that the valuecosts of our pipeline whereby we plan to retain all development and commercialization rightsmight also significantly increase due to those product candidates that we believe we can ultimately commercialize successfully, if approved. We have partnered,current and plan to continue to partner, product candidates that we believe have promising utility in disease areas or patient populations that are better served by resources of larger biopharmaceutical companies. Below are summaries of our key collaborations. See “Item 4.B.—Business Overview—Collaborations” for a more detailed description of these agreements.
AbbVie. In April 2016, we entered into a collaboration agreementfuture collaborations with AbbVie to develop and commercialize ARGX‑115. Under the terms of the collaboration agreement, we will be responsible for conducting and funding all ARGX‑115 research and development activities up to completion of investigational new drug, or IND, -enabling studies.
We have granted AbbVie an exclusive option, for a specified period following completion of IND‑enabling studies, to obtain a worldwide, exclusive license to the ARGX‑115 program to develop and commercialize products. Following the exercise of the option, AbbVie will assume certain development obligations, and will be solely responsible for all research, development and regulatory costs relating to the products. We received an upfront, non‑refundable, non‑creditable payment of $40.0 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) from AbbVie for the exclusive option to license ARGX‑115, and we achieved the first of two preclinical milestones, triggering a $10.0 million (€8.9 million based on the exchange rate in effect as of the date the payment was received) payment, and are eligible to receive a second near‑term preclinical milestone of $10.0 million. We are also eligible, if AbbVie exercises its option, to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to $110.0 million, $190.0 million and $325.0 million, respectively,partners as well as tiered royalties on sales at percentages ranging from the mid‑single digitscommercial partners.
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Information pertaining to the lower teens, subject to customary reductions. In addition to the ARGX‑115 program, and upon reaching a predetermined preclinical stage milestone, AbbVie will fund further GARP‑related research by us for an initial period of two years. AbbVie will have the right to license additional therapeutic programs emerging from this research, for which we could receive associated milestone and royalty payments.
If AbbVie does not exercise its option to license ARGX‑115, we have the right to pursue development and commercialization of ARGX‑115 by ourselves or with another partner.
Bird Rock Bio. In October 2012, we entered into an exclusive license agreement with Bird Rock Bio, Inc. (formerly known as RuiYi, Inc. and Anaphore, Inc.), or Bird Rock Bio, under which we granted Bird Rock Bio an exclusive, worldwide, royalty‑bearing license to develop and commercialize ARGX‑109. We received a non‑refundable, non‑creditable upfront payment from Bird Rock Bio of €0.5 millionyear ended December 31, 2021 was included in cash plus shares of Bird Rock Bio stock, and we are eligible to receive additional development milestone payments of up to approximately € 10.0 million in cash and additional shares of Bird Rock Bio stock, regulatory milestone payments of up to €10.0 million in cash and commercial milestone payments of up to €12.0 million in cash. We are eligible to receive tiered royaltiesour annual report on Bird Rock Bio’s commercial sales of ARGX‑109 at percentages ranging from the low to high single digits and a tiered percentage of Bird Rock Bio’s sublicensing income ranging from the mid teens to high twenties, subject to customary reductions. Bird Rock Bio and argenx have mutually agreed to terminate Bird Rock Bio’s license agreement to develop and commercialize ARGX-109. Genor, a sublicensee of Bird Rock Bio, will continue to develop ARGX-109Form 20-F for the Chinese market. Hence, we will not be entitled to receive some or all of the milestone or other payments under this exclusive license agreement with Bird Rock Bio.
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LEO Pharma. In May 2015, we entered into a collaboration agreement with LEO Pharma A/S, or LEO Pharma, to develop and commercialize ARGX‑112. We received a non‑refundable, non‑creditable upfront payment from LEO Pharma of €3.0 million in cash. In February 2016 and June 2017, we achieved preclinical milestones under this collaboration for which we received milestone payments. We are also eligible to receive development, regulatory and commercial milestone payments in aggregate amounts of up to €11.5 million, €6.0 million and €102.5 million, respectively, as well as tiered royalties on product sales at percentages ranging from the low single digits to the low teens, subject to customary reductions. Under the terms of the collaboration, LEO Pharma will fund more than half of all product development costs up to approval of a Clinical Trial Authorization Application, or CTA, in Europe for a first product in a Phase 1 clinical trial, with our share of such costs capped. After CTA approval of a first product in a Phase 1 clinical trial, LEO Pharma will be solely responsible to fund the clinical development of the program.
Shire. In February 2012, we entered into a collaboration agreement with Shire AG (now known as Shire International GmbH), or Shire, to discover, develop and commercialize novel human therapeutic antibodies against up to three targets to address diverse rare and unmet diseases. In May 2014, we expanded the collaboration agreement to accommodate research and development on several novel targets implicated in multiple disease areas. In February 2017, Shire extended the collaboration term for a further year until May 30, 2018.
Throughended December 31, 2017, Shire has paid us an aggregate total of (i) €3.4 million in upfront payments, (ii) €0.3 million in milestone payments2021 under Item 5, “Operating and (iii) $12.0 million in researchFinancial Review and development fees. In addition, Shire purchased €12.0 million of our ordinary shares in July 2014 by participating in our initial public offeringProspects,” which was filed with the SEC on Euronext Brussels.March 21, 2022.
Shire has the option to license antibodies discovered under the agreement for further development and commercialization worldwide, in return for milestone payments and single‑digit percentage royalties on product sales.
Bayer. In May 2014, we entered into a research collaboration and exclusive product license option agreement with Bayer AG, focused on the creation of novel human therapeutic antibodies against complex targets in various therapeutic indications using our SIMPLE Antibody technology. We received technology access fees and research funding totaling €3.3 million. We concluded all research under this collaboration in 2016 and we have no further commitment pursuant to this agreement.
Basis of Presentation
RevenueForeign Currency Transactions
| 1. | Functional and presentation currency |
Items included in the consolidated financial statements of each of our entities are valued using the currency of their economic environment in which the entity operates. As of January 1, 2021, and for all periods thereafter, the consolidated financial statements are presented in USD, which is the Company’s presentation currency.
| 2. | Change in functional and presentation currency as of January 1, 2021 |
As of January 1, 2021, the Company changed its functional and presentation currency from EUR to USD. The change in functional currency was made to reflect that USD has become the predominant currency for the Company, representing a significant part of the Company’s cash flows and financing. The change has been implemented with prospective effect.
ToThe change in presentation currency, effective January 1, 2021, from EUR to USD is retroactively applied to comparative figures according to IAS 8 and IAS 21, as if USD had always been the presentation currency of the consolidated financial statements. The change was made to better reflect the economic footprint of the Company’s business going forward. The Company believes that the presentation currency change will give investors and other stakeholders a clearer understanding of the Company’s performance over time.
Revenue from sale of product
Revenue from the sale of goods is recognized at an amount that reflects the consideration that we expect 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. This means 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 consist of sales of VYVGART in U.S., Japan 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 is presented in the consolidated financial statements under “Note 15—Product net sales”. In accordance with IFRS 15 “Revenue from contracts with customers”, such revenue is recognized when the product is physically transferred, in accordance with the delivery and acceptance terms agreed with the customer. Payment of the transaction price is payable at the point the customer obtains the legal title to the goods.
Revenue from Collaborations and License Agreements
Revenues to date our revenue hashave consisted principally of collaboration revenue consisting of (i)milestones, license fees, non-refundable upfront payments, including upfront licensing fees (ii) milestone payments based on achievement of research and development goals and (iii) research and development service fees relatedin connection with collaboration and license agreements.
We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to chargesreceive in exchange for full time equivalents, those goods and services. In order to determine
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revenue recognition for agreements that we determine to be in the scope of IFRS 15, the following five steps are performed:
1. Identify the contracts
In our current collaboration and license agreements, we are mainly licensing our intellectual property and/or FTEs, at contracted rates and reimbursement ofproviding research and development expenses. We currently have noproducts/services, which might include a cost-sharing mechanism and/or in the future, selling our products approved for sale. Other than the sources of revenue described above, we do not expect to receive any revenue from any product candidates that we develop, including ARGX‑113, ARGX‑110collaborative partner entities. Revenue is generated through these arrangements via upfront payments, milestone payments based on clinical and our preclinical product candidates, until we obtain regulatory approval and commercialize such products, or until we potentially enter into collaborative agreements with third parties for the development and commercialization of such candidates and when we have obtained regulatory approval.
Collaborations typically contain license fees, non‑refundable upfront fees,criteria, research and development service fees and future sales-based milestones and sales-based royalties. In some cases, the collaboration and license agreements also include an equity subscription component. If this is the case, we analyze if the criteria to combine contracts, as set out by IFRS 15, are met.
2. Identify performance obligations
Depending on the type of contract, there can be one or more 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.
For our material ongoing collaboration and license agreement (i.e., the Zai Lab Agreement), we assessed that there is more than one distinct performance obligation, being the transfer of a license and supply of clinical and commercial product.
This is because we consider the performance obligation is distinct in the context of the contract as the license has stand-alone value without our further involvement in the research and development collaboration and that there is no interdependence between the license and the clinical and commercial supply to be provided.
For other material collaboration and license agreements, we assessed that there is one single performance obligation in our collaboration and license agreements, being the transfer of a license combined with performance of research and development services.
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 our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize 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, we consider the performance obligations related to the transfer of the license as distinct from the other promises to transfer goods and/or services; we use judgement to assess the nature of the performance obligation to determine whether the performance obligation is satisfied over time 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.
3.2 Milestone payments other than sales-based milestones
A milestone payment, being a variable consideration, is 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 associated with the variable consideration is subsequently resolved. We estimate the amount to be included
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in the transaction price upon achievement of the milestone event. The transaction price is then allocated to each performance obligation on a stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, we re-evaluate 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. Research and development 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 may involve multiple elements. We evaluate whetherroyalties
Our material ongoing collaboration and license agreements include sales-based royalties, including commercial milestone payments based on the elements under these arrangements have valuelevel of sales, and the license has been deemed to our collaboration partnerbe the 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 standalonerelative stand-alone selling price basis. IfAs our material ongoing collaboration and license agreement (i.e., the Zai Lab Agreement) contains more than one performance obligation, we determine that multiple deliverables exist,allocate the considerationtransaction price to all performance obligations identified.
5. Recognize revenue
Revenue is allocated to one or more units of accounting based uponrecognized when the best estimatecustomer obtains control of the selling price of each deliverable. Deliverables that do not meet these criteria are not evaluated separately forgoods and/or services as provided in the purposecollaboration and license agreements. The control can be transferred over time or at a point in time – which results in the recognition of revenue recognition.over time or at a point in time, respectively.
As our ongoing collaboration and license agreement (i.e., the Zai Lab Agreement) contains more than one performance obligation, we recognized revenue at the point in time of the transfer of license and we recognize revenue over time for supply of clinical and commercial products as the customer simultaneously receives the benefits provided by our performance, satisfied over time.
Other ongoing collaboration and license agreements only contain one single performance obligation which is, as the customer simultaneously receive the benefits provided by our performance, satisfied over time, we recognize 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.
Research and development service fees are recognized as revenue when costs are incurred and agreed by the parties as we act as a principal in the scope of our stake of the research and development activities of our ongoing collaboration and license agreements.
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Other Operating Income
As a company that carries extensive research and development activities, we benefit from various grants, research and development incentives and payroll tax rebates from certain governmental agencies. These grants and research and development incentives generally aim to partly reimburse approved expenditures incurred in our research and development efforts. The primary grants, research and development incentives and payroll tax rebates are as follows:
Government Grants
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We have received several grants from agencies of the Flemish government to support various research programs focused on technological innovation in Flanders. These grants require us to maintain a presence in the Flemish region for a number of years and invest according to pre-agreed budgets. |
Research and Development Incentives
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Companies in Belgium can benefit from tax savings on amounts spent on research and development by applying a one time or periodic tax deduction on research and development expenditures for the acquisition or development of patents. This tax credit is a reduction of the corporate income taxes for Belgian statutory purposes and is transferrable to the next four accounting periods. These tax credits are paid to us in cash after five years to the extent they have not been offset against corporate taxes due. |
Payroll Tax Rebates
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We also benefit from certain rebates on payroll withholding taxes for scientific personnel. The government grants and research and development incentives generally aim to partly reimburse approved expenditures incurred in our research and development efforts and are credited to the income statement, under other operating income, when the relevant expenditure has been incurred and there is reasonable assurance that the grant or research and development incentive is receivable.
Changes in fair value on non-current financial assets
In March 2019, we entered into a license agreement with AgomAb for the use of hepatocyte growth factor-mimetic SIMPLE Antibodies™, developed under the Company’s IIP. In exchange for granting this license, the Company received a profit share in AgomAb.
In June 2022, AgomAb secured €38.4 million as a result of the extension of Series B. We used the post-money valuation of this Series B financing round and the number of outstanding shares in determining the fair value of the profit-sharing instrument, which results in a change in fair value of non-current financial assets of $4.3 million recorded through profit or loss. The fair value of non-current financial assets is updated at the end of each reporting period.
Research and Development Expenses
Research and development expenses consist principally of:
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| external research and development expenses related to (i) chemistry, manufacturing and control costs for our product candidates, both for preclinical and clinical testing, all of which is conducted by specialized contract manufacturers, (ii) |
| ● | personnel expense related to compensation of research and development staff and related expenses, including salaries, benefits and share-based compensation expenses; |
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| materials and consumables expenses; |
| depreciation and amortization of tangible and intangible fixed assets used to develop our product candidates; and |
| other expenses consisting of (i) costs associated with obtaining and maintaining patents and other intellectual property and (ii) other costs such as travel expenses related to research and development activities. |
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The table below shows our research and development expenses for the past three fiscal years:
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| Year ended December 31, | ||||||
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| 2017 |
| 2016 |
| 2015 | |||
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| (in thousands) | ||||||
Total research and development expenses |
| € | 51,740 |
| € | 31,557 |
| € | 20,635 |
We incur various external expenses under our collaboration and license agreements for material and services consumed in the discovery and development of our partnered product candidates. Under our agreements with Shire, LEO Pharma and Bayer, our collaboration partner reimburses us for part or all of these external expenses and compensates us for time spent on the project by our employees. Under our agreement with AbbVie, our own research and development expenses arewere not reimbursed. Research and development expensesUnder our agreement with Zai Lab, we are recognized in the period in which they are incurred.
We typically utilize our employee, consultant and infrastructure resources across all of our development programs. We separately track external developmentresponsible for certain costs with respectrelating to ARGX‑113 and ARGX‑110, our most advanced product candidates.future clinical trials involving efgartigimod conducted partially by Zai Lab.
Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including the timing of the initiation of clinical trials, production of product batches and enrolment of patients in clinical trials. Research and development expenses are expected to increase as we advance the clinical development of ARGX‑113efgartigimod and ARGX‑110 and the preclinical development of ARGX‑115ARGX-117 and further advance the research and development of our other preclinical and discovery stage programs.early-stage pipeline candidates. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, as fully described in Item 3.D. “Risk Factors,” and including the uncertainty of:
| the scope, rate of progress and expense of our research and development activities; |
| the successful enrollment in, and completion of clinical trials; |
| the ability to market, commercialize and achieve market acceptance for efgartigimod or any other product candidate that we may develop in the future, if approved; |
● | establishing and maintaining a continued acceptable safety profile for our product candidates; |
| ● | the terms, timing and receipt of regulatory approvals from applicable regulatory authorities; |
| ● | the successful completion of preclinical studies necessary to support IND applications in the |
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| the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property |
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Any of these variables with respect to the development of ARGX‑113, ARGX‑110, ARGX-115 or any other product candidate that we may develop could result in a significant change in the costs and timing associated with, and the viability of, the development of such product candidates. For example, if the FDA, the EMA or other regulatory authority were to require us to conduct preclinical studies or clinical trials beyond those we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrolment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs and the viability of the product candidate in question could be adversely affected.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of:
| ● | personnel expenses relating to salaries and related costs for personnel, including share-based compensation, of our employees in executive, finance, business development, marketing, commercial and support functions; |
| ● | professional fees for business development, marketing, IT, audit, commercial, legal services and investor relations costs; |
| ● | Board of Directors expenses consisting of directors’ fees, travel expenses and share-based compensation for non-executive board members; |
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| ● | costs associated with commercial launch of VYVGARTTM for the treatment of gMG and marketing and promotional activities and continued investment in supply chain; |
| ● | allocated facilities costs; and |
| ● | other selling, general and administrative expenses, including leasing costs, office expenses, travel costs. |
We expect our selling, general and administrative expenses to increase as we continue to support our growth and operate as a public company in the United States.growth. Such costs include increases in our finance and legal personnel, additional external legal and audit fees,IT-related expenses, and expenses and costs associated with compliance with the regulations governing public companies. We expect our selling and marketing expenses to increase significantly, notably with the opening of our U.S. office and with preparatorydue to marketing and pricingpromotional activities with respect to the potential future commercializationongoing commercial launch of one or moreVYVGARTTM and preparation of commercial launch of our other product candidates, if approved. We also expect to incur increased costs for directors’ and officers’ liability insurance and an enhanced investor relations function.candidates.
Financial Income (Expense)
Financial income mainly reflects interest earned on the financial investments of our cash and cash equivalents and current financial assets.assets and net gains on our cash and cash equivalents and current financial assets held at fair value through profit or loss. Financial expense corresponds mainly to interestnet losses on cash and cash equivalents and current financial assets held at fair value through profit or loss and other financial expenses.
Exchange Gains (Losses)
Our exchange gains (losses) relate to (i) our transactions denominated in foreign currencies, mainly in U.S. dollarseuro, Swiss francs, British pounds and British pounds,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 is our functional and presentation currency.currency since January 1, 2021 and therefore the presentation currency throughout this Annual Report unless otherwise specified. For more information on currency exchange fluctuations on our business, please see “Note 26—Financial instruments and financial risk management—Foreign exchange risk” in our consolidated financial statements which are appended to our Annual Report for the section of this annual report titled “Item 11—Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange Risk.”period ended December 31, 2022. We have no derivative financial instruments to hedge interest rate and foreign currency risk.
Income Tax Expense
We have a history of losses. We expect to continue incurringto incur losses as we continue to invest in our clinical and pre‑clinicalpre-clinical development programs and our discovery platform, and as we prepareincur costs for the potential future commercial launch of one or more of our product candidates, if approved.VYVGART, following the regulatory approval by the FDA, the PMDA and the EU Commission. Consequently, we do not have any deferred tax asset regarding certain tax losses on our statementconsolidated statements of financial position.
We incur current income tax expense on the profit generated in various subsidiaries in view of the transfer price agreements set up between argenx BV and these subsidiaries.
Critical Accounting PoliciesEstimates and Significant Judgments and Estimates
In the application of ourthe Company’s accounting policies, wewhich are described above, the Company is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The following elements105
Critical estimates in applying accounting policies
Gross to net adjustments
Our product gross sales are areas where key assumptions concerning the future,subject to various deductions, which are primarily composed of rebates to government agencies, distributors, health insurance companies and other key sources of estimation uncertainty at the endmanaged healthcare organizations. These deductions represent estimates of the related obligations, requiring the use of judgment when estimating the effect of these sales deductions on product gross sales for a reporting period, have aperiod. These adjustments are deducted from product gross sales to arrive at product net sales. The significant riskcomponents of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
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Revenue Recognition
Evaluating the criteria forvariable consideration under revenue recognition with respect to our collaboration agreements requires management’s judgment to ensure that all criteria have been fulfilled prior to recognizing any amount of revenue in accordance to International Accounting Standard 18. In particular, such judgments are made with respect to determination ofpolicy summarizes the nature of transactions, whether simultaneous transactions shall be considered as one or more revenue‑generating transactions, allocationthese deductions and how the deduction is estimated. After recording these, product net sales represent our best estimate of the contractual price (upfront and milestone payments in connection with a collaboration agreement) to several elements included in an agreement. All of our revenue‑generating transactions have been subject to such evaluation by management.
We generate revenue under our collaboration agreements and recognize this revenue as follows:
Upfront Payments
Upfront payments for which there are subsequent deliverables are initially reported as deferred income and are recognized as revenue when earned over the period of the development collaboration or the manufacturing obligation. Upfront payments also include license fees received upfront.
Deferred revenue reflects the part of upfront paymentscash that has not been recognized as revenue immediately on receipt of payment and which relates to agreements with multiple components that cannot be separated. Deferred revenue is measured at nominal value.
Milestone Payments
Revenue associated with performance milestones is recognized based upon the achievement of the milestone event if the event is substantive, objectively determinable and represents an important point in the development life cycle of the product candidate.
Research and Development Services Fees
Research and development service fees are recognized as revenue over the life of the research agreement as the required services are provided and costs are incurred. These services are usually in the form of a defined number of FTEs at a specified rate per FTE.
Commercial collaborations resulting in a reimbursement of research and development costs are recognized as revenue as the related costs are incurred. The corresponding research and development expenses are included in research and development expenses in the consolidated financial statements.
With respect to the allocation of value to the separate elements, we use the stand alone selling prices or management’s best estimates of selling prices to estimate the fair value of the elements and account for them separately allocated to each deliverable based on the fair value of each individual element and is recognized when the revenue recognition criteria described above are met. Upfront fees under collaboration or licensing agreements are recognized over the expected duration of the performance obligations, unless there is no continuous involvement required. Management estimates this period at the start of the collaboration and validates the remaining estimated collaboration term at each closing date. The recognition of revenue is linked (i) to the period during which we are continuously involved in the development of the product candidates subject to the collaboration and (ii) in relation to the expenses incurred over the period, which defines a percentage of achievement compared to the original budget.
Measurement of Share‑Based Payments
We determine the costs of the share‑based payment plan (i.e., our stock option plan) on the basis of the fair value of the equity instrument at grant date in accordance with IFRS 2. For the determination of the fair value we are using the Black Scholes pricing model. This requires the input into the valuation model of amounts that require judgment, like the estimated useful life of the stock options and the volatility of our stock. Once calculated, the fair value
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of the stock options granted is recognized as an expense in our statement of comprehensive income and not re‑measured subsequently.
In accordance with the terms of our stock option plan, as approved by our shareholders, our employees, certain of our consultants and our directors may be granted options to purchase ordinary shares at an exercise price per ordinary share equal to the average of the closing share prices of the last 30 calendar days preceding the date of the grant by the board of directors. Each stock option converts into one ordinary share upon exercise. No amounts are paid or payable by the beneficiary upon receipt of the option. The stock options carry neither rights to dividends nor voting rights. Stock options may be exercised at any time from the date of vesting to the date of their expiry.
The stock options generally vest as follows:
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No other conditions are attached to the stock options.
On December 31, 2017, the total number of stock options outstanding was 2,862,216, compared to 2,293,636 on December 31, 2016. For the year ended December 31, 2017, no stock options had expired, a total of 203,412 stock options had been exercised and 2,369 stock options had been forfeited.
The expected volatility used in the Black Scholes model is based, for the periods before 2016, on the historical volatility of peer companies. The peer companies are publicly traded entities active in the business of developing antibody‑based therapeutics, treatments and drugs and are selected taking into consideration the availability of meaningful trading data history and market capitalization.
For grants beginning in 2016, we only considered the historical volatility of our stock price calculated since our initial public offering on Euronext Brussels. The selection of a relevant peer group requires significant judgments and refers to multiple factors which may vary over the time. For instance, we realized that one of the companies included in the initial peer group had experienced a clinical failure in 2016, which had a significant impact on its volatility over the considered period. In 2016, we looked at our own historical volatility and compared it to (i) the 2016 volatility of the initial peer group, (ii) the volatility of a selection of Belgian biotechnology companies and (iii) a new peer group combining some of the initial peer group companies and a selection of Belgian biotechnology companies. The conclusions were that some of the entities in the initial peer group were no longer deemed representative to estimate our expected volatility. Such entities were replaced in the peer group by selected Belgian biotechnology companies that were deemed more representative of our profile. The inclusion of such Belgian biotechnology companies in the new peer group decreased the average of the volatility of the peer group. We then calculated the impact of the various alternatives on the total fair value of the options granted in 2016 and concluded that the impact of using our own historical volatility would not be significantly different than using the other alternatives over the total vesting period of the stock options and in 2016. Therefore, we believe that excluding peer data as from 2016 is appropriate. We will continue to evaluate the need to use peer data in future years.
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| Stock options granted in |
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| June 2017 |
| December 2017 |
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Number of options granted |
| 120,536 |
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| 653,825 |
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Average fair value of options | € | 7.90 |
| € | 37.10 |
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Share price | € | 17.76 |
| € | 53.50 |
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Exercise price | € | 18.41 |
| € | 21.17 |
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Expected volatility |
| 36.60 | % |
| 36.14 | % |
Average expected option life (in years) |
| 10 |
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| 10 |
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Risk-free interest rate |
| 0.61 | % |
| 0.53 | % |
Expected dividends |
| — | % |
| — | % |
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| Stock options granted in |
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| May 2016 |
| June 2016 |
| December 2016 |
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Number of options granted |
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| 288,950 |
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| 60,000 |
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| 363,226 |
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Average fair value of options |
| € | 5.32 |
| € | 5.46 |
| € | 7.25 |
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Share price |
| € | 11.10 |
| € | 11.36 |
| € | 14.96 |
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Exercise price |
| € | 11.47 |
| € | 11.38 |
| € | 14.13 |
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Expected volatility |
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| 40.2 | % |
| 39.6 | % |
| 38.0 | % |
Average expected option life (in years) |
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| 10 |
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| 10 |
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| 10 |
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Risk‑free interest rate |
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| 0.52 | % |
| 0.46 | % |
| 0.67 | % |
Expected dividends |
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| — | % |
| — | % |
| — | % |
The grant date fair value of the options in the above table is estimated using the following assumptions:
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The total share‑based payment expense recognized in the consolidated statement of profit and loss and other comprehensive income was €4.3 million for the year ended December 31, 2017 and €2.8 million for the year ended December 31, 2016.
Recognition of Deferred Tax Assets and Liabilities
We are subject to income taxes in the Netherlands and in Belgium and expect to be subject to income taxes in the United States with the formation of our U.S. subsidiary and expansion of U.S. activities. Significant judgment is required in determining the use of net operating loss carry‑forwards and taxation of upfront and milestone payments for income tax purposes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.ultimately collect.
No tax charge or income was recognized during the reporting periods since we are in a loss‑making position and have a history of losses. We had consolidated tax loss carry forwards of €113.6 million as of December 31, 2017.
In the year ended December 31, 2017, a business restructuring was implemented, resulting in a taxable amount for our Dutch entity, argenx SE, of €2.4 million subject to a Dutch corporate income tax rate of 25%, or a tax amount of €0.6 million.
Deferred income tax assets are recognized for tax losses and other temporary differences to the extent that the realization of the related tax benefit through future taxable profits is probable. We recognize deferred tax assets arising from unused tax losses or tax credits only to the extent the relevant fiscal unity has sufficient taxable temporary differences or if there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilized by the fiscal unity. Our judgment is that sufficient convincing other evidence is not available and therefore, a deferred tax asset is not recognized.
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Results of Operation
Comparison of Years Ended December 31, 20172022 and 20162021
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| 2021 |
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| 2016 |
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Revenue |
| € | 36,415 |
| € | 14,713 |
| 148 | % | |||||||||
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Product net sales |
| $ | 400,720 | | $ | — | | 100 | % | |||||||||
Collaboration revenue |
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| 10,026 | |
| 497,277 | | (98) | % | |||||||||
Other operating income |
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| 4,841 |
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| 2,439 |
| 98 | % | | | 34,520 | | | 42,141 | | (18) | % |
Total operating income |
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| 41,256 |
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| 17,152 |
| 141 | % |
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| 445,267 | |
| 539,418 | | (17) | % |
Cost of sales | | | (29,431) | | | — | | 100 | % | |||||||||
Research and development expenses |
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| (51,740) |
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| (31,557) |
| 64 | % | | | (663,366) | | | (580,520) | | 14 | % |
Selling, general and administrative expenses |
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| (12,448) |
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| (7,011) |
| 78 | % |
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| (472,132) | |
| (307,644) | | 53 | % |
Loss from investment in joint venture |
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| (677) | |
| — | | 100 | % | |||||||||
Total operating expenses | | | (1,165,607) | | | (888,164) | | 31 | % | |||||||||
Operating loss |
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| (22,932) |
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| (21,416) |
| 7 | % |
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| (720,340) | |
| (348,746) | | 107 | % |
Financial income |
|
| 1,250 |
|
| 73 |
| 1,612 | % |
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| 27,665 | |
| 3,633 | | 661 | % |
Financial expenses |
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| — |
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| — |
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Exchange gains (losses) |
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| (5,797) |
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| (31) |
| 18,600 | % | |||||||||
Loss before taxes |
| € | (27,479) |
| € | (21,374) |
| 29 | % | |||||||||
Income tax expense |
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| (597) |
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| — |
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Loss for the period and total comprehensive loss |
| € | (28,076) |
| € | (21,374) |
| 31 | % | |||||||||
Financial expense |
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| (3,906) | |
| (4,578) | | (15) | % | |||||||||
Exchange loss | | | (32,732) | |
| (50,053) | | (35) | % | |||||||||
Loss for the year before taxes |
| $ | (729,314) | | $ | (399,744) | | 82 | % | |||||||||
Income tax (expense) / benefit | | | 19,720 | | | (8,522) | | (331) | % | |||||||||
Loss for the year | | $ | (709,593) | | $ | (408,266) | | 74 | % | |||||||||
Weighted average number of shares outstanding |
|
| 24,609,536 |
|
| 18,820,612 |
|
|
| | | 54,381,371 | | | 51,075,827 | | | |
Basic and diluted loss per share (in €) |
|
| (1.14) |
|
| (1.14) |
|
|
| |||||||||
Basic and diluted profit / (loss) per share (in $) | | | (13.05) | | | (7.99) | | | | |||||||||
Product net sales
| | | |
| | Year Ended | |
(in thousands of $) |
| December 31, 2022 | |
United States | | $ | 377,659 |
Japan | | | 15,764 |
Europe | | | 5,678 |
Other* | | | 1,619 |
Total product net sales |
| $ | 400,720 |
*The product net sales relate to sales made outside of the U.S., Japan and Europe and relate to named patient sales made with the U.S. label.
For the twelve months ended December 31, 2022, the product net sales were related to sales of VYVGART in the U.S. following the approval of VYVGART by the FDA on December 17, 2021, in Japan following the approval of VYVGART by PMDA on January 20, 2022 and the EU following the approval of VYVGART by the EU Commission on August 11, 2022. No product net sales were recognized during the comparable prior periods. Product gross sales for twelve
106
months ended December 31, 2022 was $446.9 million and the gross to net adjustment for twelve months ended December 31, 2022 was $46.2 million, resulting in $400.7 million of product net sales for twelve months ended December 31, 2022.
Collaboration Revenue
| | | | | | | | | | |||||||||
| | Year ended | ||||||||||||||||
| | December 31, | ||||||||||||||||
|
| 2022 |
| 2021 |
| % Change | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Year ended | ||||||||||||||||
|
| December 31, | ||||||||||||||||
|
| 2017 |
| 2016 |
| % Change | ||||||||||||
|
|
| (In thousands) |
|
|
| ||||||||||||
| | | (In thousands) | | | | ||||||||||||
Zai Lab |
| $ | — |
| $ | 151,903 | | (100) | % | |||||||||
Janssen |
| | — |
| | 292,279 | | (100) | % | |||||||||
AbbVie |
| | — |
| | 121 | | (100) | % | |||||||||
Upfront payments |
| € | 20,137 |
| € | 9,103 |
| 121 | % | | | — | | | 444,303 | | (100) | % |
Zai Lab | | | — | | | 25,634 | | (100) | % | |||||||||
Janssen | | | — | | | 22,865 | | (100) | % | |||||||||
AbbVie | | | — | | | 102 | | (100) | % | |||||||||
Other | | | 5,365 | | | 1,214 | | 342 | % | |||||||||
Milestone payments |
|
| 9,677 |
|
| 500 |
| 1,835 | % | | | 5,365 | | | 49,815 | | (89) | % |
Janssen | | | — | | | 2,028 | | (100) | % | |||||||||
Other | | | 424 | | | 298 | | 42 | % | |||||||||
Research and development service fees |
|
| 6,601 |
|
| 5,110 |
| 29 | % | | | 424 | | | 2,326 | | (82) | % |
Total |
| € | 36,415 |
| € | 14,713 |
| 148 | % | |||||||||
Zai Lab | | | 4,238 | | | 833 | | 409 | % | |||||||||
Other revenues | | | 4,238 | | | 833 | | 409 | % | |||||||||
Total revenue | | $ | 10,026 | | $ | 497,277 | | (98) | % | |||||||||
Our collaboration revenue increaseddecreased by €21.7$487.2 million to $10.0 million for the year ended December 31, 2017 to reach €36.4 million,2022, compared to €14.7$497.3 million for the year ended December 31, 2016, primarily related2021. The collaboration revenue recognized in the year ended December 31, 2021 was the result of the recognition of the transaction price from Janssen due to a €11.0 million increasethe termination of the collaboration agreement in 2021 and the closing of the strategic collaboration for efgartigimod with Zai Lab during 2021.
There was no revenue recognized from upfront payments and a €9.2 million increase in milestone payments.
during the year ended December 31, 2022. The increase of €11.0 million inrevenue recognition from upfront payments for the year ended December 31, 2017 compared to2021 was $444.3 million. The revenue recognized during the year ended December 31, 2016 corresponded principally to2021 was primarily driven by the paymentsrecognition of the upfront payment received in connection with entering intofrom Zai Lab upon strategic collaboration for efgartigimod and the recognition of the upfront payment received under the collaboration agreementsagreement with LEO Pharma in May 2015 and with AbbVie in April 2016. These upfront payments were recognized in revenue based on the progressJanssen upon termination of the research and development programs that are the subject of both collaborations.agreement.
The revenue recognition from milestone payment recognizedpayments for the year ended December 31, 2017 related to payments received under the AbbVie2022 and LEO Pharma collaborations.December 31, 2021 was $5.4 million and $49.8 million respectively. The milestone paymentsrevenue recognized forduring the year ended December 31, 2016 related2022, from milestone payments primarily relates to a payment received under€5.0 million triggered by the option exercised by LEO Pharma to enter into the LEO Pharma collaboration. In 2016, no milestone payment was received from AbbVie.
Collaboration Agreement for ARGX-112. The increase of €1.5 million in research and development service fees forrevenue recognized during the year ended December 31, 2017 compared2021, from milestone payments was mainly due to recognition of $25.0 million from Zai Lab upon regulatory approval of efgartigimod by the year ended December 31, 2016 related to payments underFDA in the U.S. and recognition of $22.9 million as a result of the termination of the collaboration agreementsagreement with LEO PharmaJanssen.
The increase in revenue recognition from other revenues of $3.4 million was primarily driven by the clinical and Shire.
commercial supply of efgartigimod to Zai Lab.
129107
Other Operating Income
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) | ||||||
Government grants |
| € | 422 |
| € | 779 |
| (46) | % |
Research and development incentives |
|
| 983 |
|
| 641 |
| 53 | % |
Payroll tax rebates |
|
| 3,436 |
|
| 1,019 |
| 237 | % |
Total |
| € | 4,841 |
| € | 2,439 |
| 99 | % |
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2022 |
| 2021 |
| % Change | |||
| | | (In thousands) | ||||||
Grants |
| $ | 2,186 | | $ | 4,398 | | (50) | % |
Research and development incentives |
|
| 19,502 | |
| 13,970 | | 40 | % |
Payroll tax rebates |
|
| 8,576 | |
| 12,621 | | (32) | % |
Change in fair value on non-current financial assets | | | 4,256 | | | 11,152 | | (62) | % |
Total |
| $ | 34,520 | | $ | 42,141 | | (18) | % |
Other operating income increaseddecreased by €2.4$7.6 million to $34.5 million for the year ended December 31, 2017 to €4.8 million,2022, compared to €2.4$42.1 million for the year ended December 31, 2016. For the year ended December 31, 2017, we accrued research and development incentives income of €1.0 million, compared to €0.6 million for the year ended December 31, 2016, corresponding to Belgian research and development incentives with regard to incurred research and development expenses which will be paid to us in cash after a five‑year period, if not offset against the taxable basis over the respective period. We accounted for €3.4 million of payroll tax rebates in the year ended December 31, 2017, compared to €1.0 million in the year ended December 31, 2016, for employing certain research and development personnel.2021. The decrease was primarily driven by:
| ● | the change in fair value on our profit share in AgomAb was $4.3 million for the year ended December 31, 2022, as compared to $11.2 million for the year ended December 31, 2021; |
| ● | the decrease in payroll tax rebates for the year ended December 31, 2022, as a result of lower research and development personnel expenses eligible for rebates for the year ended December 31, 2022; and |
| ● | the decrease was offset by an increase in research and development incentives due to a Belgian research and development tax incentive scheme, as a result of the overall increased research and development costs incurred. |
For more information regarding governmental policies that could affect our operations, see “ItemItem 4.B.— “Business Overview—Government Regulation.Overview—Healthcare Law and Regulation.”
Research and Development Expenses
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 16,473 |
| € | 9,844 |
| 67 | % |
External research and development expenses |
|
| 27,893 |
|
| 17,562 |
| 59 | % |
Materials and consumables |
|
| 1,562 |
|
| 1,180 |
| 32 | % |
Depreciation and amortization |
|
| 446 |
|
| 335 |
| 33 | % |
Other expenses |
|
| 5,366 |
|
| 2,636 |
| 104 | % |
Total |
| € | 51,740 |
| € | 31,557 |
| 64 | % |
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2022 |
| 2021 |
| % Change | |||
| | | (In thousands) | ||||||
Personnel expense |
| $ | 162,010 | | $ | 160,464 | | 1 | % |
External research and development expenses |
|
| 366,955 | |
| 382,902 | | (4) | % |
Materials and consumables |
|
| 2,396 | |
| 2,735 | | (12) | % |
Depreciation and amortization |
|
| 102,132 | |
| 3,742 | | 2,629 | % |
Other expenses |
|
| 29,872 | |
| 30,677 | | (3) | % |
Total |
| $ | 663,366 | | $ | 580,520 | | 14 | % |
Our research and development expenses totaled €51.7$663.4 million and €31.6$580.5 million for the years ended December 31, 20172022 and 2016, respectively,2021, respectively. The increase of $82.8 million for fiscal year 2022 as compared to fiscal year 2021 was primarily asfrom the derecognition of the PRV submitted with the BLA filing for SC efgartigimod for the treatment of gMG, which resulted in a result of higher external research and development expenses.expense of $99.1 million recorded under depreciation and amortization in the table above.
Personnel expense primarily relates to internal and external personnel. The increase of €6.6 million in personnel expense for the year ended December 31, 2017 corresponded principally to (i) costs associated with additional research and development personnel and (ii) increased share‑basedalso includes share-based compensation expenseexpenses related to the grant of stock options and RSUs to our research and development employees (including an increase of €3.2 million of social security costs on stock options granted to certain Belgian and non-Belgian resident employees).employees. We employed 58 employeeson average 474.8 full-time equivalents in our research and development function onfunctions in the year ended December 31, 2017,2022, compared to 48 employees on349.7 in the year ended December 31, 2016.2021.
108
Our external research and development expenses for the year ended December 31, 20172022 totaled €27.9approximately $367.0 million, compared to €17.6approximately $382.9 million for the year ended December 31, 2016, reflecting higher2021. The expense reflects clinical trial costs and manufacturing expenses related to the development of our product candidate portfolio. The increase of €2.7 million in other expenses for the year ended December 31, 2017 corresponded to (i) €0.1 million for patent expenses related to the growth of our product candidate portfolio, (ii) €2.3 million for license fees we paid to one of our licensors as a result of the signing of the AbbVie agreement, and (iii) €0.3 million for expenses corresponding principally to travel expenses, clinical trial
130
insurance premiums and recruitment fees for research and development employees. The table below provides additional detail on our external research and development expenses by program:
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) | ||||||
ARGX‑113 |
| € | 12,382 |
| € | 8,988 |
| 38 | % |
ARGX‑110 |
|
| 3,144 |
|
| 2,914 |
| 8 | % |
Other programs |
|
| 12,367 |
|
| 5,660 |
| 118 | % |
Total |
| € | 27,893 |
| € | 17,562 |
| 59 | % |
| | | | | | | | | |
| | Year ended | |||||||
| ��� | December 31, | |||||||
|
| 2022 |
| 2021 |
| % Change | |||
| | | (In thousands) | ||||||
efgartigimod |
| $ | 280,572 | | $ | 311,038 | | (10) | % |
cusatuzumab |
|
| 13,554 | |
| 24,630 | | (45) | % |
ARGX-117 | | | 32,384 | | | 22,759 | | 42 | % |
Other programs (*) |
|
| 40,445 | |
| 24,475 | | 65 | % |
Total |
| $ | 366,955 | | $ | 382,902 | | (4) | % |
(*) Other programs include general expenses not allocated to specific program of $22.7 million in 2022 and $6.6 million in 2021.
External research and development expenses for our lead product candidate ARGX‑113efgartigimod totaled €12.4$280.6 million for the year ended December 31, 2017,2022, compared to €9.0$311.0 million for the year ended December 31, 2016. The increase of €3.4 million of external research and development expenses for the year ended December 31, 2017 for ARGX‑113 corresponded2021. This decrease corresponds primarily to increased manufacturing and clinical development activities in relation with (i)to:
| ● | the execution of the bridging study for ENHANZE® efgartigimod in MG; |
| ● | the execution of two Phase 3 clinical trials in CIDP; |
| ● | the execution of two Phase 3 clinical trials in ITP; |
| ● | the execution of the Phase 3 clinical trial in PV and PF; |
| ● | the execution of Phase 2 clinical trial in BP; |
| ● | the execution of Phase 1 clinical trial in Myositis; and |
| ● | the execution of pre-clinical and Phase 1 trials in new indications identified. |
External research and development expenses for cusatuzumab totaled $13.6 million for the advancementyear ended December 31, 2022 compared to $24.6 million for the year ended December 31, 2021. This decrease of $11.1 million is the result of the Phase 2 clinical trials for MG and ITP, (ii) the preparation for and initiationtermination of the Phase 2 clinical trial for PV, and (iii) the Phase 1 clinical trial in healthy volunteers for a subcutaneous formulation.collaboration agreement with Janssen.
External research and development expenses for ARGX‑110ARGX-117 totaled €3.1 million for the year ended on December 31, 2017 compared to €2.9$32.4 million for the year ended December 31, 2016.2022 compared to $22.8 million for the year ended December 31, 2021. This increase of €0.2$9.6 million related principallywas due to increased research and development expenses in relation to the progressionadvancement of the Phase 1/2 clinical trial in patients with AML or high-risk MDS.our ARGX-117 program, a complement-targeting antibody against C2.
External research and development expenses on other programs increased by €6.7$16.0 million to €12.4$40.4 million for the year ended December 31, 2017,2022, compared to €5.7$24.5 million for the year ended December 31, 2016. This increase was primarily due to external2021. Of the total research and development expenses incurred under our collaboration agreements with LEO Pharma and AbbVie.expense, $22.7 million relates to general allocation of expenses.
109
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 6,745 |
| € | 3,256 |
| 107 | % |
Consulting fees |
|
| 3,289 |
|
| 2,563 |
| 28 | % |
Supervisory board |
|
| 621 |
|
| 446 |
| 39 | % |
Office costs |
|
| 1,793 |
|
| 746 |
| 140 | % |
Total |
| € | 12,448 |
| € | 7,011 |
| 78 | % |
| | | | | | | | | |
| | Year ended | |||||||
| | December 31, | |||||||
|
| 2022 |
| 2021 |
| % Change | |||
| | | (In thousands) | ||||||
Personnel expenses |
| $ | 234,740 | | $ | 164,646 | | 43 | % |
Professional and marketing fees |
|
| 178,570 | |
| 102,674 | | 74 | % |
Supervisory board |
|
| 6,912 | |
| 12,958 | | (47) | % |
Depreciation and amortization |
|
| 2,211 | |
| 2,126 | | 4 | % |
IT expenses | | | 17,431 | | | 8,977 | | 94 | % |
Other expenses | | | 32,268 | | | 16,263 | | 98 | % |
Total Selling, general and administrative expenses |
| $ | 472,132 | | $ | 307,644 | | 53 | % |
Our selling, general and administrative expenses totaled €12.4$472.1 million and €7.0$307.6 million for the years ended December 31, 20172022 and 2016,2021, respectively. The increase of €5.4 million in our selling, general and administrative expenses for the year ended December 31, 20172022 was principally due to:to an increase of personnel expense and professional and marketing fees, resulting from:
|
|
| ● | increased costs |
| ● | increased professional and |
| ● | continued investment in our |
|
|
131
|
|
|
|
On December 31, 2017, weWe employed 15 employeeson average 442.4 full-time equivalents in our selling, general and administration function,administrative functions in the year ended December 31, 2022, compared to 10 employees on264.4 in the year ended December 31, 2016.2021.
Financial Income (Expense)(and Expense)
For the year ended December 31, 2022, financial income amounted to $27.7 million compared to $3.6 million for the year ended December 31, 2021. The increase of $24.0 million in 2022 related primarily to higher interest on term accounts.
For the year ended December 31, 2017,2022, financial incomeexpense amounted to €1.3$3.9 million compared to €0.1$4.6 million for the year ended December 31, 2016. The increase of €1.1 million relates to (i) a €0.9 million realized gain on the sale of a participation in FairJourney Biologics LDA in December 2017 and (ii) an increase in the interest received on our cash, cash equivalents and current financial assets.2021.
Exchange Gains (Losses)
Exchange losses totaled €5.8$32.7 million for the year ended December 31, 2017.2022, compared to exchange losses of $50.1 million for the year ended December 31, 2021. The increase isdecrease was mainly attributable to unrealized exchange rate losses on ourthe cash, cash equivalents and current financial assets position in U.S. dollars due to the unfavorable fluctuation of the EUR/USD exchange rate.
Comparison of Years Ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) |
|
|
| |||
Revenue |
| € | 14,713 |
| € | 6,854 |
| 115 | % |
Other operating income |
|
| 2,439 |
|
| 3,101 |
| (21) | % |
Total operating income |
|
| 17,152 |
|
| 9,955 |
| 72 | % |
Research and development expenses |
|
| (31,557) |
|
| (20,635) |
| 53 | % |
General and administrative expenses |
|
| (7,011) |
|
| (4,925) |
| 42 | % |
Operating loss |
|
| (21,416) |
|
| (15,605) |
| 37 | % |
Financial income |
|
| 73 |
|
| 112 |
| (35) | % |
Financial expenses |
|
| — |
|
| — |
|
| % |
Exchange gains (losses) |
|
| (31) |
|
| 181 |
| (117) | % |
Loss before taxes |
| € | (21,374) |
| € | (15,312) |
| 40 | % |
Income tax income/(expense) |
|
| — |
|
| — |
|
| % |
Loss for the period and total comprehensive loss |
| € | (21,374) |
| € | (15,312) |
| 40 | % |
Weighted average number of shares outstanding |
|
| 18,820,612 |
|
| 15,734,007 |
|
|
|
Basic and diluted loss per share (in €) |
|
| (1.14) |
|
| (0.97) |
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) |
|
|
| |||
Upfront payments |
| € | 9,103 |
| € | 2,194 |
| 315 | % |
Milestone payments |
|
| 500 |
|
| 343 |
| 46 | % |
Research and development service fees |
|
| 5,110 |
|
| 4,317 |
| 18 | % |
Total |
| € | 14,713 |
| € | 6,854 |
| 115 | % |
132
Our revenue increased by €7.8 million foreuro during the year ended December 31, 2016 to €14.7 million,2022 as compared to €6.9 million forunrealized exchange rate losses on the cash, cash equivalents and current financial assets position during the year ended December 31, 2015.
The increase of €6.9 million in upfront payments for the year ended December 31, 2016 compared to the year ended December 31, 2015 corresponds principally to the payments received in connection with entering into the collaboration agreements with LEO Pharma in May 2015 and with AbbVie in April 2016. These upfront payments were recognized in revenue based on the progress of the research and development programs that are the subject of both collaborations.
The milestone payment recognized for the year ended December 31, 2016 related to a payment received under the LEO Pharma collaboration. The milestone payments recognized for the year ended December 31, 2015 related to a €0.2 million payment received from the Leukemia and Lymphoma Society under a partnership agreement relating to ARGX‑110 and a €0.1 million milestone payment received from Bird Rock Bio following the announcement in September 2015 of the first human dosing of ARGX‑109 for the treatment of autoimmune disorders including rheumatoid arthritis.
The increase of €0.8 million in research and development service fees for the year ended December 31, 2016 compared to the year ended December 31, 2015 related to payments under the collaboration agreements with LEO Pharma and Shire.
Other Operating Income
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
Government grants |
| € | 779 |
| € | 1,598 |
| (51) | % |
Research and development incentives |
|
| 641 |
|
| 608 |
| 5 | % |
Payroll tax rebates |
|
| 1,019 |
|
| 895 |
| 14 | % |
Total |
| € | 2,439 |
| € | 3,101 |
| (21) | % |
Other operating income decreased by €0.7 million for the year ended December 31, 2016 to €2.4 million, compared to €3.1 million for the year ended December 31, 2015, as a result of a decrease in grants received from the Flemish government. For the years ended December 31, 2016 and 2015, we accrued research and development incentives income of €0.6 million, corresponding to Belgian research and development incentives with regard to incurred research and development expenses which will be paid to us in cash after a five‑year period, if not offset against the taxable basis over the respective period. We received €1 million of payroll tax rebates for the year ended December 31, 2016, compared to €0.9 million for the year ended December 31, 2015, for employing certain research and development personnel.
Research and Development Expenses
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 9,844 |
| € | 6,665 |
| 48 | % |
External research and development expenses |
|
| 17,562 |
|
| 11,653 |
| 51 | % |
Materials and consumables |
|
| 1,180 |
|
| 1,050 |
| 12 | % |
Depreciation and amortization |
|
| 335 |
|
| 196 |
| 71 | % |
Other expenses |
|
| 2,636 |
|
| 1,071 |
| 146 | % |
Total |
| € | 31,557 |
| € | 20,635 |
| 53 | % |
Our research and development expenses totaled €31.6 million and €20.6 million for the years ended December 31, 2016 and 2015, respectively. The decrease of €1.8 million in personnel expense for the year ended December 31, 2016 corresponded principally to (i) costs associated with additional research and development personnel2021.
133110
and (ii) increased share‑based compensation expense related to the grant of stock options to our research and development employees. We employed 48 employees in our research and development function on December 31, 2016, compared to 35 employees on December 31, 2015.
Our external research and development expenses for the year ended December 31, 2016 totaled €17.6 million, compared to €11.7 million for the year ended December 31, 2015, reflecting higher clinical trial costs related to the development of our product candidate portfolio but lower manufacturing expenses compared to the same period in 2015. The increase of €1.6 million in other expenses for the year ended December 31, 2016 corresponded to (i) patent expenses of €0.3 million related to the growth of our product portfolio, (ii) license fees of €0.7 million we paid to one of our licensors as a result of the signing of the AbbVie agreement, and (iii) €0.6 million of expenses corresponding principally to travel expenses, clinical trial insurance premiums and recruitment for research and development employees. The table below provides additional detail on our external research and development expenses by program:
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
ARGX‑113 |
| € | 8,988 |
| € | 4,148 |
| 117 | % |
ARGX‑110 |
|
| 2,914 |
|
| 3,816 |
| (24) | % |
Other programs |
|
| 5,660 |
|
| 3,689 |
| 53 | % |
Total |
| € | 17,562 |
| € | 11,653 |
| 51 | % |
External research and development expenses for our lead product candidate ARGX‑113 totaled €9.0 million for the year ended December 31, 2016, compared to €4.1 million for the year ended December 31, 2015. The increase of €4.8 million of external research and development expenses for the year ended December 31, 2016 for ARGX‑113 corresponded to increased manufacturing and clinical development activities linked with the preparation of the Phase 2 clinical trials for MG and ITP. External research and development expenses for ARGX‑110 decreased by €0.9 million to €2.9 million during the year ended on December 31, 2016 compared to €3.8 million for the year ended December 31, 2015. For the year ended December 31, 2016, we increased clinical development expenses in connection with the preparation of the TCL and AML clinical trials, offset by a reduction in expenses on drug material compared to the year ended December 31, 2015. External research and development expenses on other programs increased by €2.0 million to €5.7 million for the year ended December 31, 2016, compared to €3.7 million for the year ended December 31, 2015. This increase was primarily due to external research and development expenses incurred under our collaboration agreements with LEO Pharma and AbbVie.
General and Administrative Expenses
|
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|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| % Change | |||
|
|
| (In thousands) | ||||||
Personnel expense |
| € | 3,256 |
| € | 1,607 |
| 103 | % |
Consulting fees |
|
| 2,563 |
|
| 2,395 |
| 7 | % |
Supervisory board |
|
| 446 |
|
| 165 |
| 170 | % |
Office costs |
|
| 746 |
|
| 758 |
| (2) | % |
Total |
| € | 7,011 |
| € | 4,925 |
| 42 | % |
Our general and administrative expenses totaled €7.0 million and €4.9 million for the years ended December 31, 2016 and 2015, respectively. The increase in our general and administrative expenses for the year ended December 31, 2016 was principally due to (i) an increase of €1.6 million of personnel expenses related to employees recruited to strengthen our general and administrative activities, including the share based compensation expenses related to the grant of stock options to our general and administrative employees, (ii) an increase of €0.2 million of consulting fees related to investor relations, business development, IT, legal and audit activities and (iii) an increase of €0.3 million of supervisory board expenses due to the reclassification of share based compensation expenses related to the grant of stock options to board members from personnel expenses to supervisory board expenses and to increases in
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the remuneration and travel expenses of the non‑executive members of our board of directors. On December 31, 2016, we employed 10 employees in our general and administration function, compared to six employees on December 31, 2015.
Financial Income (Expense)
For the year ended December 31, 2016, financial income amounted to €0.07 million compared to €0.1 million for the year ended December 31, 2015.
Exchange Gains (Losses)
The exchange losses of €0.03 million for the year ended December 31, 2016 and the exchange gains of €0.2 million recorded for the year ended December 31, 2015 were both realized by converting foreign currencies into euros.
B. LIQUIDITY AND CAPITAL RESOURCES
Sources of Funds
Since our inception in 2008, we have invested most of our resources toin developing our product candidates, building our intellectual property portfolio, developing our supply chain, conducting business planning, raising capital and providing general and administrative support for these operations. We do not currently have anyonly one approved productsproduct and have never generated any revenue fromas of the year ended December 31, 2022, net product sales.sales also started to contribute to the funding of our operations. To date, we have funded our operations through public and private placements of equity securities, upfront, milestone and expense reimbursement payments received from our collaborators, funding from governmental bodies and interest income from the investment of our cash, cash equivalents and financial assets. Through December 31, 2017,2022, we have raised gross proceeds of €474.7$4,318.5 million from private and public offerings of equity securities, received aggregate gross proceedssecurities. We have made net product sales of €77.3$400.7 million from our collaborators, and received €13.2 million in grants and incentives from governmental bodies.during the twelve months ended December 31, 2022.
Our cash flows may fluctuate and are difficult to forecast and will depend on many factors. On December 31, 2017,2022, we had cash, cash equivalents and current financial assets of €359.8 million.$2,192.5 million, compared to $2,336.7 million on December 31, 2021.
We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than operating leases.leases and our commitments to Lonza and Fujifilm which are detailed in “Note 29—Commitments” in our consolidated financial statements which are appended to our Annual Report for the period ended December 31, 2022.
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—RisksRisk Factors Related to Ourargenx’s Financial Position and Need for Additional Capital.Capital.”
For more information as to our financial instruments, please see “Note 6—“Note 26—Financial instruments and financial risk management—Overview of financial instruments”management” in our consolidated financial statements which are appended to this annual report.our Annual Report for the period ended December 31, 2022.
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Cash Flows
Comparison for the Years Ended December 31, 20172022 and 20162021
The table below summarizes our cash flows for the years ended December 31, 20172022 and 2016.2021.
| | | | | | | | | | |||||||||
| | Year ended | ||||||||||||||||
| | December 31, | ||||||||||||||||
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| 2022 |
| 2021 |
| Variance | ||||||||||||
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| |||||||||
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| Year ended | ||||||||||||||||
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| December 31, | ||||||||||||||||
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| 2017 |
| 2016 |
| Variance | ||||||||||||
|
| (In thousands) | ||||||||||||||||
| | (In thousands) | ||||||||||||||||
Cash and cash equivalents at beginning of the period |
| € | 89,897 |
| € | 35,514 |
| € | 54,383 | | $ | 1,334,676 | | $ | 1,216,803 | | $ | 117,873 |
Net cash flows (used in) / from operating activities |
|
| (36,546) |
|
| 10,599 |
|
| (47,145) |
|
| (862,807) | |
| (606,812) | |
| (255,995) |
Net cash flows (used in) / from investing activities |
|
| (162,052) |
|
| (806) |
|
| (161,246) |
|
| (461,184) | |
| (347,070) | |
| (114,114) |
Net cash flows (used in) / from financing activities |
|
| 305,365 |
|
| 44,621 |
|
| 260,744 |
|
| 843,757 | |
| 1,121,342 | |
| (277,585) |
Effect of exchange rate differences on cash and cash equivalents |
|
| (5,797) |
|
| (31) |
|
| (5,766) |
|
| (53,702) | |
| (49,587) | |
| (4,115) |
Cash and cash equivalents at end of the period |
| € | 190,867 |
| € | 89,897 |
| € | 100,970 | | $ | 800,740 | | $ | 1,334,676 | | $ | (533,936) |
Net Cash (Used in) Provided byUsed in Operating Activities
Net cash outflow from our operating activities increased by €48.1$256.0 million to a net outflow of €36.5$862.8 million for the year ended December 31, 2017,2022, compared to a net inflowoutflow of €10.6$606.8 million for the year ended December 31, 2016.2021. The increasednet cash used inoutflow from operating activities for the year ended December 31, 20172022 resulted primarily from increased(i) the research and development expenses incurred in relation to the manufacturing and clinical development activities of ARGX-113 and ARGX-110efgartigimod and the advancement of other clinical, preclinical and discovery-stage product candidate, (including external research(ii) the personnel
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expenses and developmentconsulting expenses incurred underfor the LEO Pharmacommercial launch of efgartigimod in the U.S., Japan, and AbbVie collaborations).Europe and (iii) the increase in working capital, primarily due to increase in accounts receivables related to product net sales and the increase in inventory levels. The net cash inflowoutflow of $606.8 million for the year ended December 31, 2016 is related2021 was primarily influenced by (i) the research and development expenses incurred in relation to the upfront paymentmanufacturing and clinical development activities of $40 million (€35.1 million based onefgartigimod and the exchange rateadvancement of other clinical, preclinical and discovery-stage product candidate, (ii) the personnel expenses and consulting expenses incurred in effect aspreparation of the datecommercial launch of efgartigimod in the payment was received) received from AbbVieU.S. and Japan and (iii) the manufacturing of inventory ahead of the commercial launch of efgartigimod in April 2016.the U.S.
Net Cash Provided by (Used in)Used in / from Investing Activities
Investing activities for the year ended December 31, 2022, consist primarily of the acquisitionpurchases of current financial assets purchase of laboratory equipment and interest received from the placements of our cash and cash equivalents and current financialintangible assets. Cash flow from investing activities represented a net outflow of €162.1$461.2 million for the year ended December 31, 2017,2022, compared to a net outflow of €0.8$347.1 million for the year ended December 31, 2016.2021. The net outflow for the year ended December 31, 20172022 related primarily to (i) the acquisitionnet investment of €162.1$368.5 million ofin current financial assets, including money market funds and a U.S. dollar term deposit account, (ii) the purchaseaccounts, compared to a net investment of € 0.3$228.2 million of office, information technology and laboratory equipment, and less (iii) € 0.4 million interest received from the placements of our cash, cash equivalents and current financial assets. The net outflow for the year ended December 31, 2016 related2021 and (ii) the cash outflow of $102.0 million during 2022 in relation to €0.7the purchase of a PRV compared to a cash outflow of $98.0 million to purchase office and laboratory equipment and €0.1 million to purchase information technology equipment.for a PRV which was acquired in 2020, however paid in 2021.
Net Cash Provided by Financing Activities
Financing activities primarily consist of net proceeds from our private placements and public offerings of our securities and exercise of stock options. The net cash inflow from financing activities was €305.4$843.8 million for the year ended December 31, 2017,2022, compared to a net cash inflow of €44.6$1,121.3 million for the year ended December 31, 2016.2021. The net cash inflow for the year ended December 31, 2017 wasinflows were attributed to (i) €93.2$760.6 million net cash proceeds from our initial U.S. publicglobal offering of ADSs on the Nasdaq Global Select Market in May 2017 (based on the exchange rate in effect of the date the proceeds were received), (ii) €211.5February 2022, compared to $1,091.7 million net cash proceeds offrom our follow onglobal offering of ADSs on the Nasdaq Global Select Marketand concurrent private placement in December 2017 (based on the exchange rate in effect of the date the proceeds were received)February 2021 and (iii) €0.7(ii) $93.2 million proceeds received from the exercise of stock options. The net cash inflow for the year ended December 31, 2016 was attributedoptions in 2022, compared to two private placements of our ordinary shares issued to institutional investors in January and June 2016 for total gross proceeds of €46.0 million.
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Comparison for the Years Ended December 31, 2016 and 2015
The table below summarizes our cash flows for the years ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| Variance | |||
|
| (In thousands) | |||||||
Cash and cash equivalents at beginning of the period |
| € | 35,514 |
| € | 32,180 |
| € | 3,334 |
Net cash flows (used in) / from operating activities |
|
| 10,599 |
|
| (13,897) |
|
| 24,496 |
Net cash flows (used in) / from investing activities |
|
| (806) |
|
| 16,812 |
|
| (17,618) |
Net cash flows (used in) / from financing activities |
|
| 44,621 |
|
| 238 |
|
| 44,383 |
Effect of exchange rate differences on cash and cash equivalents |
|
| (31) |
|
| 181 |
|
| (212) |
Cash and cash equivalents at end of the period |
| € | 89,897 |
| € | 35,514 |
| € | 54,383 |
Net Cash (Used in) Provided by Operating Activities
Cash provided by operating activities for the year ended December 31, 2016 was a net inflow of €10.6 million. Cash used by operating activities for the year ended December 31, 2015 was a net outflow of €13.9 million. The net cash inflow for the year ended December 31, 2016 related to the upfront payment of $40 million (€35.1 million based on the exchange rate in effect as of the date the payment was received) received from AbbVie in April 2016. The net cash outflow for the year ended December 31, 2015 related to increased operating losses due to increased clinical trial and product candidate manufacturing activities in 2015.
Net Cash Provided by (Used in) Investing Activities
Investing activities consist primarily of purchase of laboratory equipment and interest received from the placements of our cash and cash equivalents and current financial assets. Cash flow from investing activities represented a net outflow of €0.8$33.4 million for the year ended December 31, 2016, compared to a net inflow of €16.8 million for the year ended December 31, 2015. The net outflow for the year ended December 31, 2016 related to €0.7 million to purchase office and laboratory equipment and €0.1 million to purchase IT equipment. The net inflow for the year ended December 31, 2015 corresponded to the sale of a money market fund previously classified as current financial assets.2021.
Net Cash Provided by Financing Activities
Financing activities consist of net proceeds from our private placements and public offerings of our securities and exercise of stock options. The net cash inflow from financing activities was €44.6 million for the year ended December 31, 2016, compared to €0.2 million for the year ended December 31, 2015. The net cash inflow for the year ended December 31, 2016 was attributed to two private placements of our ordinary shares issued to institutional investors in January and June 2016 for total gross proceeds of €46.0 million.
Operating and Capital Expenditure Requirements
We have never achieved profitability and, as of December 31, 2017,2022, we had accumulated losses of €100.6$2,109.8 million. We expect to continue to incur significant operating losses for the foreseeable future as we continue our research and development efforts, incur higher costs for continued commercialization of VYVGART, and seek to obtain regulatory approval and commercialization of our productother pipeline candidates.
WeOn 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. We have based this estimateOur future equity capital will depend on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.many factors. Because of the numerous risks and uncertainties associated with the development and commercialization of ARGX‑113, ARGX‑110efgartigimod and our other product candidates and discovery stage programs and because the extent to which we may enter into collaborations with third parties for the development of these product candidates is unknown, we are unable to
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estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements for ARGX‑113, ARGX‑110efgartigimod and our other product candidates and discovery stage programs will depend on many factors, including:
| the progress, timing and completion of preclinical testing and clinical trials for our current or any future product candidates; |
| the number of potential new product candidates we identify and decide to develop; |
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| the time and costs involved in obtaining regulatory approval for our product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of our product candidates; |
| selling and marketing activities undertaken in connection with the commercialization of VYVGART or potential commercialization of any of our current or any future product candidates, if approved, and costs involved in the creation of an effective sales and marketing organization; |
|
|
| ● | the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our current or any future product candidates; |
| ● | the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties; |
| ● | the maintenance of our existing collaboration agreements and entry into new collaboration agreements; |
| ● | developments related to COVID-19 and its impact on the costs and timing associated with the conduct of our clinical trials, preclinical programs, manufacturing activities and other related activities; and |
| ● | developments related to the global economic uncertainties and political instability resulting from the conflict between Russia and the Ukraine. |
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.”
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
For a discussion of our research and development activities,policies, see the sections of this annual report titled “ItemItem 4.B.— “Business Overview”Overview” and “ItemItem 5.A.— “Operating Results.Results.”
Other than as disclosed elsewhere in this annual report,Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the current financial period from January 1, 2017 to December 31, 2017 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity, or capital resources or propsects, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. For a discussion of trends, see the sections of this annual reportAnnual Report titled “ItemItem 4.B.— “Business Overview,” “ItemItem 5.A.— “Operating Results”,Results” and “ItemItem 5.B.— “Liquidity and Capital Resources.Resources.”
E. OFF-BALANCE SHEET ARRANGEMENTSFollowing the approval of VYVGART™ for the treatment of gMG in the U.S. by the FDA on December 17, 2021, we transitioned from a clinical-stage to a commercial-stage biotechnology company, have commercialized VYVGART™ in the VYVGART Approved countries and are working to expand commercialization in other jurisdictions, and to launch new products and product candidates, including new indications.
We did not have duringThere has been no significant change in the periods presented, and we do not currently have, any off‑financial performance or the financial position of the Group since the balance sheet arrangements, as defined in the rules and regulationsdate 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.December 31, 2022.
E. CRITICAL ACCOUNTING ESTIMATES
Not applicable.
138113
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The table below summarizes our contractual obligations at December 31, 2017.
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| Payments due by period | |||||||||||||
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|
|
| Less than |
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|
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| More than | ||
|
| Total |
| 1 year |
| 1–3 years |
| 3–5 years |
| 5 years | |||||
|
| (In thousands) | |||||||||||||
Operating lease commitments |
| € | 1,526 |
| € | 1,028 |
| € | 465 |
| € | 33 |
| € | — |
Purchase obligation |
| € | 13,277 |
| € | 8,363 |
| € | 4,915 |
| € | — |
| € | — |
We signed a lease agreement effective April 2016 for new laboratory and office space in Zwijnaarde, Belgium. This lease agreement is for a period of nine years starting from April 1, 2016, with the possibility to terminate the lease by giving a notice of at least 12 months in advance at the occasion of the third and sixth anniversary of the agreement. Our operating lease commitments include a lease plan for company cars with maturity dates up to four years.
For our office in the Netherlands, we have a lease agreement renewable on an annual basis. For our office in Boston, Massachusetts, we have a lease agreement renewable on an annual basis.
The purchase obligation described above relates to contractual obligations with our manufacturing contractor, Lonza Sales AG.
The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty.
We have received various governmental grants that may need to be repaid if certain conditions related to these grants are not met. We believe that it is uncertain whether we will be required to repay these grants and, accordingly, have not included them in the table above.
In July 2017, we signed a letter of intent with our drug substance manufacturing contractor, Lonza Sales AG, or Lonza, related to the biologics license application for ARGX‑113. The total commitment under this letter of intent amounts to a minimum spend of £5.0 million before the end of calendar year 2018, of which we paid £1.0 million upon signature. In December 2017, we amended one of our manufacturing agreements with Lonza. This amendment expands the scope of Lonza’s services with additional services for ARGX‑113 to be performed at the Lonza facility in Tuas, Singapore. These services relate to the start‑up of Lonza Singapore as a potential future commercial manufacturing site. Pursuant to this amendment, we have additional contractual obligations in the aggregate amounts of approximately $9.3 million, with payments beginning in January 2018. In addition to the obligations for ARGX‑113, we have contractual obligations for ARGX‑110 for approximately £0.9 million, with payments beginning by the third quarter of 2018.
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Cautionary Statement with Respect to Forward Looking Statements” at the beginning of this annual report.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
Our Board of Directors
We have a one‑tierone-tier board structure consisting of executive directors who are responsible for our day‑to‑day management and non‑executive directors who are responsible for the supervision of the executive directors. Our executive directors and our non‑executive directors are collectively responsible for our general affairs. We may be represented by our board of directors or by two executive directors acting jointly. Our board of directors is currently comprised of one executive director and six non‑eight non-executive directors (as of December 31, 2022), and a senior management team (consisting of our chief executive directors, who we referofficer (CEO) and senior personnel reporting directly to individuallythe 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 2022. 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 Director and committee’s meetings’ agendas.
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 and Board By-Laws (terms of reference) concerning our Board of Directors.
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 residents ofavailable in the United States.governing Dutch language and an unofficial English translation thereof, and the Board By-laws are available in English, on our website.
The following table sets forth certain information with respect to the current members of our boardBoard of directors,Directors, including their ages as of December 31, 2017:2022:
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Name |
| Age |
| Position |
| Nationality |
| Date of |
| Term | |
Tim Van Hauwermeiren |
| 45 |
| Executive Director (Chief Executive Officer) |
| BE |
| July 9, 2014 |
| 2018 | |
Peter K.M. Verhaeghe |
| 59 |
| Non‑Executive Director (chairperson) |
| BE |
| July 9, 2014 |
| 2018 | |
David L. Lacey |
| 65 |
| Non‑Executive Director |
| U.S. |
| July 9, 2014 |
| 2018 | |
Werner Lanthaler |
| 49 |
| Non‑Executive Director (vice chairperson) |
| AT |
| July 9, 2014 |
| 2018 | |
J. Donald deBethizy |
| 67 |
| Non‑Executive Director |
| U.S. |
| May 13, 2015 |
| 2019 | |
Pamela Klein |
| 56 |
| Non‑Executive Director |
| U.S. |
| April 28, 2016 |
| 2020 | |
A.A. Rosenberg |
| 64 |
| Non‑Executive Director |
| U.K. |
| April 26, 2017 |
| 2021 | |
Name | Age | Position | Nationality | Date of Initial Appointment | Date of last (re-)appointment | Term expiration |
Tim Van Hauwermerien | 50 | CEO and executive director | Belgium | July 15, 2008 | May 10, 2022 | 2026 |
Peter K. M. Verhaeghe | 64 | Non-executive director (chairperson) | Belgium | October 15, 2008 | May 10, 2022 | 2026 |
Werner Lanthaler(1) | 54 | Non-executive director (vice-chairperson) | Austria | July 9, 2014 | May 10, 2022 | 2024 |
J. Donald deBethizy | 72 | Non-executive director | U.S. | May 13, 2015 | May 7 2019 | 2023 |
Pamela Klein | 61 | Non-executive Director | U.S. | April 28, 2016 | May 12, 2020 | 2024 |
Anthony A. Rosenberg | 69 | Non-executive director | UK | April 26, 2017 | May 11, 2021 | 2025 |
James M. Daly | 61 | Non-executive director | U.S. | May 8, 2018 | May 10, 2022 | 2026 |
Camilla Sylvest | 50 | Non-executive director | Denmark | September 8, 2022 | September 8, 2022 | 2026 |
Ana Cespedes | 49 | Non-executive director | Spain | December 12, 2022 | December 12, 2022 | 2026 |
(1) | Werner Lanthaler resigned effective February 27, 2023 and was succeeded by Steve Krognes effective February 27, 2023 whose term will expire at our 2027 annual General Meeting. |
The address for our non-executive directors is our registered office, Willemstraat 5, 4811 AH, Breda,Laarderhoogtweg 25, 1101 EB Amsterdam, the Netherlands.
Our board114
The following is the biographical information of the members of our board of directors:
Tim Van Hauwermeiren co‑founded our company in 2008 and has served as our Chief Executive Officer since July 2008. He has served as a member of our board of directors since July 2014. Mr. Van Hauwermeiren has more than 20 years of general management and business development experience across the life sciences and consumer goods sectors. Mr. Van Hauwermeiren holds a B.Sc. and M.Sc. in bioengineering from Ghent University (Belgium) andSteve Krognes was appointed at an Executive MBA from The Vlerick School of Management.
extraordinary General Meeting on February 27, 2023. Peter K.M. Verhaeghe, and James M. Daly were re-appointed at the 2022 General Meeting.
Our Board of Directors as of December 31, 2022 comprised the following eight non-executive directors:
Peter K. M. Verhaeghe
Peter Verhaeghe has served as a member and chairperson of ourthe board of directorsarGEN-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,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 biotechnologylife sciences companies. Mr. Verhaeghe also serves on the board of directors of Participatiemaatschappij Vlaanderen NV since May 2018, as chairman of the board of Haretis SA (Luxembourg) since March 2011, and diagnostics companies.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 served as the president of the board of directors of Merisant France SAS, as a member of the management board of Merisant Company 2 sàrl and serves as a member of the board of directors of CzechPak Manufacturing s.r.o. He previously also served as director of Innogenetics NV (Belgium), Tibotec-Virco NV, Biocartis SA, and as the chairman of the board of directors of PharmaNeuroBoost NV from December 2006 to January 2013 and as liquidator in charge of KBC Private Equity Fund Biotech NV from April 2009 to December 2012. Mr. Verhaeghe holds a degree in law (J.D.) from the University of Leuven and an LLMLL.M. degree from Harvard Law School. At the annual General Meeting held on May 10, 2022 (2022 Annual Meeting), he was reappointed for a new term of 2 years.
Dr. David L. LaceyWerner Lanthaler (until February 27, 2023)
Dr. Werner Lanthaler has served as a member of our boardBoard of directors sinceDirectors from July 2014. Dr. Lacey is a biopharmaceutical consultant at David L. Lacey LLC, where he advises academic institutions, biotechnology companies
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and venture capital firms, a position he has held since July 2011. He currently serves as a director of Inbiomotion SL, Atreca, Inc. and Nurix, Inc. From 19942014 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.February 27, 2023. Dr. Lanthaler is the chief executive officer of Evotec AG,SE, a global drug discovery researchand development organization, a position he has held since March 2009. He also serves on the supervisory board of AC Immune SA (Switzerland). 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.Ph. D. in business administration from Vienna University of Economics and Business and a Master’s degree in public administration from Harvard University. The Board of Directors nominated Mr. Lanthaler for re-appointment for a term of an additional 2 years during our 2022 General Meeting. Such reappointment beyond the first 8 years on our Board of Directors was deemed in the best interest of the Company, to allow for the successful selection, appointment and onboarding of Mr. Lanthaler’s successor. Mr. Lanthaler resigned from our Board of Directors following our board meeting of February 28, 2023 upon appointment and onboarding of Mr. Krognes, who was appointed as a non-executive director of the Company and chairperson of the Company’s audit and compliance committee.
Mr. Steve Krognes (effective February 27, 2023)
Mr. Krognes serves as a member of our Board of Directors and as a chairperson of our audit and compliance committee since February 27, 2023. Mr. Krognes also serves on the boards of directors of Guardant Health, Inc., Denali Therapeutics, Inc., and Gritstone bio, Inc. He previously served on the board of directors of RLS Global AB and Corvus Pharmaceuticals, Inc. Mr. Krognes was the chief financial officer of Denali Therapeutics, Inc., from 2015 until retiring from that position in April 2022. Steve joined Denali Therapeutics, Inc., as the founding chief financial officer, building and leading the finance team as well as supervising the IT and facilities functions. He led successful financings for Denali Therapeutics, Inc., including the initial public offering in 2017, and has contributed significantly to the company’s strategy, growth and strong financial position. His extensive leadership experience in the biotech and pharmaceutical industry includes 12 years in total at Roche and Genentech, Inc., serving as chief financial officer of Genentech, Inc., for six years and global head of Roche’s mergers & acquisition team for six years. He chaired the Genentech Access to Care Foundation and represented Genentech on the board and executive committee of the California Life Science Association. Before that, he worked as an investment banker at Goldman Sachs, as a management consultant at McKinsey & Company, and as a venture capitalist in Scandinavia. Mr. Krognes holds a master’s in business administration (MBA) from Harvard Business School and a Bachelor of Science in economics from the Wharton School of the University of Pennsylvania.
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Dr. J. Donald deBethizy
Dr. J. Donald deBethizy has served as a member of our boardBoard of directorsDirectors 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.ApS an executive coaching company. He currently serves on the supervisory boards of Lophora ApS, Newron Pharmaceuticals SpA, Proterris, Inc. and a board advisor for NDA Regulatory Service AB. 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‑founderco-founder and chief executive officer of Targacept Inc. (Targacept), a U.S. biotechnology company listed on Nasdaq. He currently serves on the supervisory boards of Albumedix A/S, Newron Pharmaceuticals SpA, Noxxon Pharma NV and AG, Rigontec GmbH and Proterris, Inc. From May 2013 to November 2014, he served as executive chairman of Contera Pharma ApS.ApS until it was sold to Bukwang Pharma (Korea), and from July 2015 to November 2017, he served as chairman of Rigotec GmbH until it was sold to Merck Inc. He previously served on the boards of Albumedix Ltd (Chair, company sold to Sartorius AG in September, 2022), Saniona AB (Chair), Asceneuron SA, TME Pharma NV (Chair, TME NV and AG), Serendex Pharmaceuticals A/S, Enbiotix Inc., Targacept, Inc.Ligocyte Pharmaceuticals until it was sold to Takeda Pharmaceutical Co Ltd and Biosource Inc. Mr.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.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
Dr. Pamela Klein has served as a member of our boardBoard of directorsDirectors 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 the board of directors of several companies including F-Star Therapeutics, Inc., I-Mab and Patrys Ltd; as well as various scientific advisor boards. Previously, Dr. Klein served on the board of directors of Jiya Acquisition Corp. Dr. Klein also spent seven years at the National Cancer Institute as Research Director of the NCI‑NavyNCI-Navy Breast Center, after which she joined Genentech and was VP,as Vice President, Development until 2001. She served as Chief Medical Officerchief medical officer for Intellikine, Inc., which was acquired by Takeda. She was previously Vice President, Development for Genentech.Takeda American Holdings. 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.Anthony A. Rosenberg
Anthony A. Rosenberg has served as a member of our boardBoard of directorsDirectors since April 2017. He currently serves as CEOchief executive officer of TR Advisory Services GmbH, ahis own consultancy firm advising on business development, licensing and mergers and acquisitions. Mr. Rosenberg has also been acurrently serves on the boards of directors of SiO2 Material Science, Oculis SA (chairman) and Cullinan Oncology (chairman). Previously Mr. Rosenberg held the positions of Managing Director ofat MPM Capital, a venture capital firm since April 2015. From January 2013(2015 until February 2015, he served as Corporate Head2020); head of M&A and Licensing atof Novartis Pharma. He served as Global HeadInternational (2013 to 2015) and head of Business Developmentbusiness development and Licensinglicensing at Novartis Pharma from March 2005(2005 to December 2012. Msc. A.A.2012). Mr. Rosenberg holds non‑executive board memberships in Idenix Pharmaceuticals,also previously served on the boards of directors at Radius Health Inc., TriNetX, Inc., Clinical Ink, Inc. and iOmx Therapeutics AG, and Cullinan Oncology Inc.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
James M. Daly is up for nomination to be appointedhas served as a member of our boardBoard of directors at our annual General Meeting inDirectors since May 2018. Mr. Daly served as Executive Vice President and Chief Commercial Officer at Incyte Corporation from 2012 to 2015. Prior to joining Incyte, Mr. Daly worked for Amgen, Inc. for ten years, holding multiple leadership positions. In his last role, Mr. Daly served as Senior Vice President, North America Commercial Operations, Global Marketing and Commercial Development. Previously, he served as Vice President and General Manager of Amgen’s Oncology Business Unit. His teams at Amgen were responsible for the successful launch of many products, including Aranesp®, Neulasta®, Vectibix®, Nplate®, Xgeva® and Prolia®. Previously, Mr. Daly spent over 16 years with Glaxo Wellcome/He joined GlaxoSmithKline in 1985 where he held roles of increasingvarious positions, including sr. vice president – respiratory division with full responsibility including Senior Vice President, General Manager, Respiratoryfor sales, marketing and Anti-Infective Business Unit,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 Corp, a publicly-traded company focused on oncology and led the U.S. launch of Advair®. Heinflammation, where he was chief commercial officer until June 2015. Mr. Daly currently serves on the
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Board of Directors of ChimerixAcadia Pharmaceuticals, Inc., Halozyme, Bellicum Pharmaceuticals, Inc. and Madrigal Pharmaceuticals, Inc., all Nasdaq-listed companies. Mr. Daly earned his B.S. in Pharmacyholds a Bachelor of Science and M.B.A.an MBA from the University at Buffalo, The State University of New York. He was reappointed for a new 4-year term at the 2022 General Meeting.
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Camilla Sylvest
Camilla Sylvest was appointed as non-executive director on September 8, 2022 and brings strong strategic and operational leadership in the scaling of global commercial pharmaceutical organizations with a specific focus on company culture and sustainability.
Camilla Sylvest currently serves as the executive vice president, commercial strategy & corporate affairs of Novo Nordisk A/S. Ms. Sylvest also serves as the vice chair of the World Diabetes Foundation Board and as a member of the board of directors of Danish Crown A/S. Camilla Sylvest has more than 25 years of working experience within Novo Nordisk A/S and was based in Switzerland, Denmark, Germany, Malaysia and the PRC.
Over the years, Camilla Sylvest headed up affiliates of growing size and complexity in Europe within Novo Nordisk A/S and she was also corporate vice president business area Oceania and Southeast Asia and senior vice president and general manager Novo Nordisk region China.
Camilla Sylvest holds a Master of Science in Economics from the University of Odense, Denmark and an executive MBA from the Scandinavian Management Institute in Copenhagen, Denmark.
Ana Cespedes
Ana Cespedes was appointed as non-executive director on December 12, 2022 and brings robust experience across a broad range of critical areas for commercialization and access, as well as for organizational effectiveness.
Ana Cespedes is the chief operating officer of the International AIDS Vaccine Initiative (IAVI), a global organization dedicated to developing accessible vaccines and antibodies for infectious diseases. Prior to joining IAVI, Ms. Cespedes held several roles at Merck KGaA, based in Boston, MA, most recently serving as senior vice president, global marketing & strategy. Ms. Cespedes founded and led the global market access and pricing function for the company and worked with stakeholders to communicate the clinical, economic, and societal value of innovative medicines. Prior to that, Ms. Cespedes led the first integrated corporate affairs group at Serono Iberia and Merck Spain, was managing director of the Spanish branch of the company’s nonprofit organization, and worked as a senior consultant at Arthur Andersen.
Ms. Cespedes is a founding member of the National Congress of Corporate Affairs in Spain, the London School of Economics Market Access Academy, and the Cooperation for Oncology Data. She is also the founder of Living Mindfulness S.L.
Ms. Cespedes holds a B.S. and a Pharm.D. from the Complutense University of Madrid, and an MBA from IESE Business School.
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Our ExecutiveSenior Management
The following table sets forth certain information with respect to the current members of our executivesenior management, including their ages, as of December 31, 2017:2022:
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The address for our executive management is Industriepark Zwijnaarde 7, Building C, 9052 Zwijnaarde (Ghent), Belgium.
The following is a brief summary of the biographical information of those members of our executive management who do not also serve on our board of directors:
Eric Castaldi has served as our Chief Financial Officer since April 2014 and served as a member of our board of directors from July 2014 to April 26, 2017. Mr. Castaldi has 28 years of international financial executive management experience, including 19 years in the biopharmaceutical industry. From 1998 to 2014, Mr. Castaldi served as chief financial officer and a member of the executive committee of Nicox SA, a Euronext‑listed biotechnology company. From 2008 to 2012, he served as a member of the board of directors and as chairman of the audit committee of Hybrigenics Services SAS, a Euronext‑listed French biopharmaceutical company specializing in oncology. Mr. Castaldi graduated with a degree in finance, accountancy and administration from the University of Nice.
Dr. Nicolas Leupin has served as our Chief Medical Officer since February 2016. Dr. Leupin has clinical and industry expertise in medical oncology as well as experience in drug development. He currently lectures at the University of Bern. From 2008 to 2015, Dr. Leupin served in different positions in clinical development at Celgene, including Director of Clinical Development of EMEA Celgene, where he contributed to building the clinical development department in Europe and then led the European lymphoma and myeloma teams, served as clinical lead for several compounds up to phase III clinical trials, and was responsible for running and managing hematology and oncology clinical trials, including both industry‑sponsored trials and academic cooperative groups, several of them through to registration. Among other activities, he was responsible for specific clinical documents of registration dossiers that lead to European and American registrations. Dr. Leupin holds an MBA from Jones International University and an M.D. from the University of Bern and was board certified in medical oncology (Switzerland).
Prof. Hans de Haard has served as our Chief Scientific Officer since July 2008. Prof. de Haard has been active in the antibody engineering field since 1989. He also serves as a Professor of Immunology at University of Franche Comté (France). Prof. de Haard holds an M.Sc. in biochemistry from the Higher Professional Education for Laboratory Technicians (Oss, the Netherlands) and a M.Sc. in chemistry from the Institute of Technology (Rotterdam, the Netherlands) and a Ph.D. in molecular immunology from Maastricht University.
Dr. Torsten Dreier has served as our Chief Development Officer since May 2008. Dr. Dreier has been developing antibodies for more than 20 years and led teams that progressed six antibody products from preclinical research into clinical trials. Dr. Dreier holds an M.Sc. and a Ph.D. in biochemistry from the University of Tübingen (Germany).
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Dr. Debbie Allen has served as our Senior Vice President of Business Development since November 1, 2010. Dr. Allen has been active in the antibody engineering field since the 1980s. She has more than 30 years of corporate and business development experience with small and large biotech companies focused on biopharmaceuticals. Dr. Allen is an inventor of HUMIRA (adalimumab). Prior to joining us, Dr. Allen acted as an independent consultant to emerging biotech companies, providing strategic management and business development support. Dr. Allen holds an B.Sc. in cellular pathology from the University of Bristol and a Ph.D. in viral oncology from the University of London.
Dirk Beeusaert has served as our General Counsel since April 1, 2017. Mr. Beeusaert has extensive general experience in corporate governance and as general counsel of a listed company. Mr. Beeusaert worked in various roles from February 1996 to July 2016 for Gimv NV, a European private equity company listed on Euronext Brussels, including chief legal officer from January 2001 to 2006, and general counsel from 2006 to July 2016, where he was co‑responsible for operations and corporate governance. Mr. Beeusaert currently serves as a member of the boards of directors of Pragma Capital SAS and Cubigo NV. Mr. Beeusaert holds a Bachelor in Law and a Master Law degree from Ghent University and an MBA in Fiscal Studies and Accounting Research, Tax and Accounting from Vlerick School of Management.
General Information About Our Directors and Executive Management
As of the date of this Annual Report, none of the members of our board of directors and executive management has a family relationship with any other member of our board of directors or executive management.
As of the date of this Annual Report and except as set out below, none of the members of our board of directors and executive management for at least the previous five years:
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Peter K.M. Verhaeghe—PharmaNeuroBoost NV
Mr. Verhaeghe was chairman of the board of directors of PharmaNeuroBoost NV, which voluntarily filed for bankruptcy in 2013 after its Phase 3 trial failed and no additional funding was found to continue its operations.
Peter K.M. Verhaeghe—KBC Private Equity Fund Biotech NV
Mr. Verhaeghe was a member of the board of directors of KBC Private Equity Fund Biotech NV, a Euronext‑listed fund, when it voluntarily liquidated pursuant to a decision of its shareholders. Mr. Verhaeghe was appointed as liquidator in charge and closed the liquidation by the end of 2012 with net proceeds for the shareholders of over €6 per share.
Compensation of Our Executive Management and Board of Directors
Our shareholders have adopted a policy governing the remuneration of our board of directors, which is aimed to attract, reward and retain highly qualified executive and non‑executive directors and to provide and motivate the members of our board of directors with a balanced and competitive remuneration that is focused on sustainable results and is aligned with the long‑term strategy of the company as set out in its business plan.
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At the General Meeting on April 28, 2016, the shareholders approved an amended remuneration policy, or the Remuneration Policy, which allows for the granting of compensation packages to our directors in line with a benchmarking analysis performed by an independent consulting firm engaged by our remuneration and nomination committee and an assessment of the duties of the directors, and includes competitive severance arrangements intended to attract and retain highly qualified personnel. At the extraordinary shareholders’ meeting of our shareholders held on November 7, 2017, the shareholders approved an amendment to the Remuneration Policy, discussed in more detail below. For a discussion of our employment arrangements with our executive management, see the section of this annual report titled “Item 7.B.—Related Party Transactions—Agreements with Our Executive Management.”
Except the arrangements described in the section of this annual report titled “Related‑Party Transactions—Agreements with Our Executive Management” there are no arrangements or understanding between us and any of the executive directors providing for benefits upon termination of their employment, other than as required by applicable law.
Compensation of Our Executive Management
The remuneration of our executive management (including our executive directors) consists of the following fixed and variable components:
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Fixed base salary. The base salary of our executive management was determined on the basis of a benchmarking analysis completed by an independent consulting firm. In accordance with this benchmarking analysis, our board of directors has resolved to aim for a compensation of our executive management in the 50th percentile of the compensation offered by the European peer group identified by the independent consulting firm used in this analysis. In line with the amended remuneration policy discussed above, our board of directors has amended the current contracts between us and our executive directors to be brought in line with the new remuneration policy.
Variable annual cash bonus. The objective of this short‑term annual cash incentive is to ensure that our executive management is incentivized to achieve performance targets in the shorter term. Our executive management is eligible for an annual cash incentive up to a maximum percentage of his/her annual base salary. On September 3, 2015, the maximum percentage for this purpose was set at 40% of base salary of the chief executive officer, and at 35% of base salary of the other executive management. Performance conditions are established by our board of directors before or at the beginning of the relevant calendar year and shall include criteria concerning our financial performance, qualitative criteria representing our performance and/or individual qualitative performance.
Long‑term incentive awards. Our board of directors intends to incentivize our executive management by issuing Options from time to time to be able to attract and retain well‑qualified executive management in connection with the argenx Employee Stock Option Plan, as set out below.
Severance arrangements. We have entered into management contracts and employment agreements with our executive management, each of which provides for certain minimum notice periods if their service or employment with us is terminated in certain circumstances as described below in “Related Party Transactions—Agreements with our Executive Management.”
Pension and fringe benefits. Our executive management participates in a defined contribution pension scheme operated by a third party pension insurance organization. Our executive management is entitled to customary fringe benefits, such as a company car and a hospitalization plan.
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The following table sets forth information regarding compensation paid by us for Tim Van Hauwermeiren during the year ended December 31, 2017:
Tim Van Hauwermeiren
50 | CEO and Executive Director | Belgium | July 15, 2008 | |||
Keith Woods(1) | 55 | Chief Operating Officer | U.S. | April 5, 2018 | ||
Karen Massey(1) | 44 | Chief Operating Officer | Australian | March 13, 2023 | ||
Karl Gubitz | 53 | Chief Financial Officer | South Africa | June 1, 2021 | ||
Prof. Hans de Haard(2) | 63 | Chief Scientific Officer | The Netherlands | July 1, 2008 | ||
Peter Ulrichts(2) | 43 | Chief Scientific Officer | Belgium | January 1, 2023 | ||
Malini Moorthy(3) | 53 | General Counsel | Canada | February 14, 2022 | ||
Arjen Lemmen | 38 | Vice-President Corporate Development & Strategy | The Netherlands | May 1, 2016 | ||
Andria Wilk | 50 | Global Head of Quality | UK | January 13, 2020 | ||
Luc Truyen(4) | 58 | Chief Medical Officer | Belgium | April 1, 2022 | ||
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(1) | Keith Woods retired as chief operating officer effective March 13, 2023 and was succeeded by Karen Massey effective March 13, 2023. |
(2)Hans de Haard retired effective January 1, 2023 and was succeeded by Peter Ulrichts effective January 1, 2023.
(€)
Base salary
303,941
Option awards(1)
2,968,195
Employer social security contribution stock options
—
Non‑equity incentive plan compensation
301,635
Pension contributions
14,315
Social security costs
9,459
Other(2)
9,601
Total
3,607,146
(3) | Malini Moorthy was appointed as general counsel effective February 14, 2022. |
(4) | Luc Truyen succeeded Wim Parys who retired as our chief medical officer effective April 1, 2022. |
The address for our senior management is Industriepark Zwijnaarde 7, Building C, 9052 Zwijnaarde (Ghent), Belgium.
Our senior management team acts as our executive management. Of these people, only our CEO, Mr. Tim Van Hauwermeiren, is part of our Board of Directors as executive director. Our senior management team comprised of the following persons in 2022 and on the date of this Annual Report (appointment / retirement dates noted as relevant):
Tim Van Hauwermeiren
Tim Van Hauwermeiren co-founded our Company in 2008 and has served as our CEO since July 2008. He has served as a member of our Board of Directors since July 2014. Mr. Van Hauwermeiren has more than 20 years of general management and business development experience across the life sciences and consumer goods sectors. Mr. Van Hauwermeiren holds a Bachelor of Science and Master of Science in bioengineering from Ghent University (Belgium) and an executive MBA from The Vlerick School of Management. Tim Van Hauwermeiren serves on the board of directors of iTeos Therapeutics, Inc., and Aelin Therapeutics NV where he is chairman. At our 2022 General Meeting, he was reappointed as executive director to the Board of Directors for a new term of four years.
Keith Woods
Keith Woods served as our chief operating officer from April 2018 to March 2023, at which time, he was succeeded by Karen Massey. Mr. Woods will transition to serve as an advisor to our Board of Directors. Mr. Woods has over 30 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 UK 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 Co., Ltd., over a span of 20 years. Keith Woods holds a Bachelor of Science. in marketing from Florida State University.
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Karen Massey (effective March 13, 2023)
Karen Massey has served as our chief operating officer since March 2023. Ms. Massey has over 20 years of experience in the pharmaceutical and biotechnology industry, including in commercial, product development, corporate strategy and innovation roles. Prior to joining argenx, Ms. Massey was with Genentech (Roche Group) for over nine years, where she most recently served as senior vice president of product development and global clinical operations and previously held various commercial leadership roles across marketing and business operations, including as the vice president of the multiple sclerosis and neuromyelitis optica business. Ms. Massey started her biopharmaceutical career in marketing at Pfizer Inc., and returned there, after two years as a management consultant at Bain & Company, to take on leadership positions in corporate strategy, sales and as a commercial lead in Latin America. Ms. Massey holds a Bachelor of Economics from the University of Sydney and an MBA from the NYU Stern School of Business.
Karl Gubitz
Karl Gubitz has served as our chief financial officer since June 2021. Mr. Gubitz worked at Pfizer Inc., for nearly 20 years, most recently as vice president of finance within the global oncology business. During his tenure at Pfizer Inc., he successfully negotiated the commercialization model for tanezumab with Eli Lilly and Company in all non-U.S. markets as well as the Myovant Sciences Ltd. co-commercialization agreement for Orgovyx™.
Within Pfizer Inc., Mr. Gubitz held country, regional, and global positions, and consistently delivered top-line growth. He managed teams of over 250 colleagues in financial leadership roles within the global internal medicine and global innovative products businesses. Prior to joining Pfizer Inc., in 2003, Mr. Gubitz held various management roles at PricewaterhouseCoopers LLP.
He holds an MBA from Henley Management College in the UK, Bachelor’s degree in computing from the University of South Africa, and Bachelor of commerce from the University of Pretoria.
Prof. Hans de Haard
Prof. Hans de Haard is a co-founder of argenx and 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 a Master of Science in biochemistry from the Higher Professional Education for Laboratory Technicians (Oss, the Netherlands) and a Master of Science in chemistry from the Institute of Technology (Rotterdam, the Netherlands) and a Ph. D. in molecular immunology from Maastricht University. Prof. de Haard retired as chief scientific officer as of December 31, 2022 and was subsequently appointed as member of our research and development committee, in which capacity Prof. de Haard will remain involved with the Company as scientific advisor and as ambassador of our IIP.
Dr. Peter Ulrichts
Peter Ulrichts has served as our chief scientific officer since January 2023. In this role, he oversees the development of all clinical and pre-clinical compounds within our pipeline. Dr. Ulrichts previously served in various roles at the Company since he joined us in 2010; most recently, as our head of clinical science. As a research scientist, Dr. Ulrichts was involved in the development of various therapeutic antibodies for the treatment of cancer and autoimmune diseases. In 2013, he headed the development of our FcRn antagonist efgartigimod until the first-in-human study. He subsequently transitioned to become the lead scientist of our efgartigimod program. Dr. Ulrichts holds a Bachelor of Science in chemistry from Katholieke Universiteit Leuven, Belgium, as well as a Master’s degree in Biotechnology and Ph.D. in Biomedical Sciences, both from the University of Ghent, Belgium.
Malini Moorthy
Malini Moorthy has served as our general counsel since February 2022. She has over 25 years of extensive global legal and compliance experience in the biopharmaceutical and medical device industries. She was most recently senior vice president and chief deputy general counsel, legal, compliance and government affairs at Medtronic plc, where she
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played a pivotal role in shaping and driving enterprise and functional strategies. Before joining Medtronic plc, Ms. Moorthy spent four years at Bayer Corporation as the head of global litigation and investigations and ten years at Pfizer Inc., where she progressed to lead civil litigation globally. Ms. Moorthy began her career as a law firm associate, first with McCarthy Tétrault LLP and Genest Murray Desbrisay Lamek LLP in Toronto, Canada and then Salans LLP (now Dentons US LLP) in New York City. She holds a Bachelor of Arts in political science and economics from the University of North Carolina at Chapel Hill and a Bachelor of Laws from the Faculty of Law at Queen’s University in Canada.
Luc Truyen
Luc Truyen has served as our chief medical officer since April 2022 and previously served as our head of research and development operations management from September 2021 to April 2022. Prior to this, Dr. Truyen was with Johnson & Johnson for over 20 years holding various leadership positions, primarily within neuroscience. In his most recent position prior to joining argenx, Dr. Truyen was global head of development and external affairs – neuroscience for neuroscience managing strategy and delivery of the early and late portfolio of assets for mood disorders and schizophrenia, and neurodegenerative and neuroinflammatory disorders. Besides Dr. Truyen’s strong track record in clinical development resulting in several global innovative drug approvals, his broad-based experience also includes leading global clinical development operations for the whole Johnson & Johnson pharmaceutical group as well as serving as head of the research and development and chief medical officer of Janssen Alzheimer Immunotherapy Research & Development LLC, an internal spin-out from Johnson & Johnson. Dr. Truyen holds an M.D. and Ph.D. in Neurology from the University of Antwerp, Belgium.
Wim Parys (until March 31, 2022)
Wim Parys joined the Company as chief medical officer in 2019 and retired on March 31, 2022. He had over 25 years of experience leading successful clinical programs in biopharma, including the development and regulatory submission of seven now-approved drugs. Prior to argenx, Mr. Parys was the research and development head of the newly established global public health group at Janssen (Johnson & Johnson) responsible for a portfolio including programs in human immunodeficiency virus (HIV) (developing first long-acting therapy), tuberculosis (TB), dengue fever and malaria. Before this, Mr. Parys was the head of development of the infectious disease therapeutic area of Janssen and Tibotec Pharmaceuticals Ltd. where he developed and launched innovative drugs for HIV (Prezista™, Intelence™ and Edurant™), Hepatitis C (Incivo™, Olysio™/Sovriad™), and TB (Sirturo™). Mr. Parys started his career within the Johnson & Johnson organization at the Janssen Research Foundation in Belgium where he led the research and development team developing galantamine (Reminyl™/Razadyne™) for Alzheimer’s disease. Mr. Parys obtained his medical degree from the Katholieke Universiteit in Leuven, Belgium and worked in private practice for nine years prior to joining the industry. Following his retirement, Mr. Parys was appointed as member of our research and development committee, in which capacity Mr. Parys has agreed to continue to serve as medical advisor to the Company.
Arjen Lemmen
Arjen Lemmen joined argenx in 2016 and has served as our vice president of corporate development & strategy since 2019. He has successfully executed several transactions including a number of programs within our IIP.
Prior to joining the Company, Mr. Lemmen served as a corporate finance specialist at Kempen & Co NV focusing on mergers and acquisitions, equity capital markets and strategic advisory transactions in the European life sciences industry. He holds a Bachelor of Science in life science & technology from the University of Groningen and a Master of engineering management from Duke University.
Andria Wilk
Andria Wilk joined argenx as global head of quality in 2020. Ms. Wilk has more than 20 years of experience in quality assurance (QA) within the pharmaceutical industry. Most recently, Ms. Wilk served as senior director, head of medical, regulatory & clinical QA (MRC QA) at H Lundbeck A/S (Lundbeck), where she managed the global MRC QA group based in the EU, U.S. and Asia. In this role, she was responsible for the global audit programs and QA support for all clinical trial and post-marketing activities and related computerized systems. Prior to Lundbeck, she held various QA
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positions of increasing responsibility within AstraZeneca PLC, Takeda Global Research and Development Centre Europe and Astellas Pharma Inc. Ms. Wilk holds a joint Bachelor of Science in pharmacology and biochemistry and is a member of Research Quality Association.
General Information About Our Directors and Senior Management
As of the date of this Annual Report (or in any period before), none of the members of our Board of Directors and senior management has or has had a family relationship with any other member of our Board of Directors or senior management and there are no arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.
As of the date of this Annual Report and except as set out below, none of the members of our Board of Directors and senior management team for at least the previous five years:
| ● | has been convicted of any fraudulent offenses; |
| ● | has been a senior manager or a member of the administrative, management or supervisory bodies of any company at the time of or preceding any bankruptcy, receivership, liquidation or of such company being put into administration; |
| ● | has been subject to any official public incrimination and/or sanction by any statutory or regulatory authority (including any designated professional body); or |
| ● | has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of any company or from acting in the management or conduct of affairs of any company. |
B. COMPENSATION
Remuneration Report
At our 2021 General Meeting, we received just over 51% approval for our 2021 remuneration report and compensation statement. Recognizing that there is room for improvement, we have since had over 30 bilateral engagement meetings with shareholders and shareholder representatives (jointly representing an estimated 50% or more of our share capital) to obtain their feedback and understand concerns with our remuneration policy and practices. We believe that shareholder engagement is a fundamental element in the decision-making process and therefore we seek feedback regularly. We have considered the feedback received and have reviewed our remuneration practices in the key markets where we compete for talent. We also compared our practices to our most recent reference group data (as of September 2022). The results of these efforts have led to a number of key changes to our remuneration practices and a higher level of detail in this remuneration report compared to prior years. We are committed to reviewing and improving our remuneration and remuneration reporting practices.
As a dual listed, global biotech company, we face some unique challenges in establishing an effective and appropriate performance-based remuneration program. In particular, it is challenging to balance adherence to local market (Dutch) remuneration best practices and those of the countries in which we are listed (Belgium and the U.S.) as these requirements are different and sometimes in conflict. Adding to this challenge, we strive to achieve a remuneration structure that is competitive in the global markets for talent in which we compete, in particular in the U.S. This is especially true with respect to the design of our long-term incentive program in the form of equity compensation, which was a recurring topic in most of the investor engagements we had in the 12-month period leading up to this Annual Report. To be successful in our global mission, we need to effectively compete for top talent across a number of regions which have differing and at times conflicting remuneration practices. To be able to effectively compete for talent, we collect benchmark data on the composition and size of remuneration packages offerred by our reference companies in these key jurisdictions, including for EU and U.S. companies in our reference group (as further detailed in “—Compensation of Our Senior Management” below), and to a large extent align our remuneration practices with those of our peers. We aim to take a balanced approach by adopting practices that help attract top talent while taking account of the best practices in our home jurisdiction (the Netherlands) and those of the countries in which our shares are listed (Belgium and the U.S.).
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Changes to our remuneration practices in response to shareholder dissent
The feedback we collected showed differing views on the various remuneration practices and components including on our equity incentive practices and other methods of linking pay and performance. In particular:
| 1. | We grant stock options to non-executive directors which is a form of performance-based incentives and as such not in line with Dutch remuneration best practices; |
| 2. | We grant stock options and RSUs to our executives which are linked to our share price performance but are not linked to individual performance targets; |
| 3. | Some shareholders were of the view that we did not sufficiently disclose the method of setting award levels under our equity plan; |
| 4. | The RSUs we grant vest in equal portions of 25% over a four-year period, and underlying shares may be sold on vesting. This is not in line with Dutch remuneration best practices (requiring a five-year holding period for shares). Additionally, we did not impose a holding requirement for executives; |
| 5. | We did not disclose in detail the short-term performance targets and their achievements and corresponding pay-outs for our CEO and other key executives; |
| 6. | Certain proxy voting agencies are of the view that we did not sufficiently address shareholder concerns raised in relation to our 2020 annual report (76% majority approved). |
In response to shareholder feedback, we made or will make the following changes to our remuneration practices:
| 1. | We grant stock options to our non-executive directors which is a form of performance-based incentives and is as such not in line with Dutch remuneration best practices. |
With regard to non-executive directors participating in our Equity Incentive Plan specifically: the DCGC recommends, as best practice, not to grant equity incentives to non-executive directors; in contrast, the Belgian Corporate Governance Code requires that at least part of the compensation of non-executive directors be paid in the form of equity. Moreover, granting equity to non-executive directors is common practice among the companies in our U.S. reference group (100% of these companies granted equity in 2021, 94% of which also offered stock options) and to a lesser but still significant extent, our 2022 EU reference group (56% grant equity, 33% of which also offered stock options). Considering the anticipated need to attract a number of new, highly qualified directors to our Board of Directors, our remuneration and nomination committee recommended our Board of Directors continue to align the remuneration practices for non-executive directors with those of our global reference group. We note that this practice continues to be fully aligned with our shareholder-approved remuneration policy. In 2022, based on the benchmarking exercise performed, we reduced the total number of equity instruments to be granted to non-executive directors, to re-align the projected value with the 50th percentile of our reference group.
In addition to stock options being a common remuneration component in the markets where we compete for talent, they have the advantage of aligning the interests of our non-executive directors with those of our shareholders. The use of stock options rewards a focus on long-term value creation over short-term successes, as the value of a stock option depends on the company’s value increasing in the time between the grant and exercise of the stock option. To further solidify this effect, we have implemented a three-year cliff vesting on stock options for non-executive directors and post-termination holding requirements, to ensure equity incentive instruments are held as long-term investments in the Company.
Some shareholders hold that alignment of interests between the non-executive directors and the shareholders should be avoided, as it could impact our directors’ independence. We note that each member of our Board of Directors (with the exception of our CEO) qualifies as independent under Dutch, Belgian, SEC and Nasdaq independence rules. To address this concern further, we have updated our Equity Performance Plan such that equity incentives granted to directors and vested will not be forfeited if directors leave our Board of Directors, unless they are discharged by the shareholders,
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thereby ensuring that directors are not disincentivized from resigning from the Board of Directors if they are unable to reconcile their views with management team’s or the other directors’. Directors who are discharged by shareholders, however, will lose their unvested equity. Finally, we have implemented post-termination holding requirements for non-executive directors which continue to apply for 24 months after a director leaves the Board of Directors.
| 2. | We grant stock options and RSUs to our executives which are linked to company (share price) performance but are not linked to individual performance targets. Some shareholders disagree with the use of stock options altogether. |
Stock options are by nature performance-linked equity instruments. When we grant options, the exercise price is set at the market value of the shares at the grant date. The stock options vest over an extended time period (three years) and are bound to further holding requirements or exercise restrictions for our directors and senior management team, in line with our equity holding guidelines. In addition, our executives who are Belgian tax residents (including our CEO) may not exercise stock options in the first three years after they are granted. As a result, only successful long-term value creation will lead to an actual value attribution to stock options, thereby directly aligning shareholder interests with the interests of individual key persons. Multi-year vesting periods ensure that decision making in favor of long-term value creation is prioritized over short-term successes. The post-termination holding requirements further amplify this effect.
A vast majority of our reference group companies continue to use stock options as an important compensation element. Moving away from stock options may harm our competitive position in the key jurisdictions where we operate and compete for talent, which we believe would not support long-term value creation.
Some shareholders have questioned the overall award levels or overall value generated in the form of stock options. We note that the number of stock options and RSUs we grant, is based on an expected value of such grant at the time the award level is set. Any value creation beyond the projected value at grant corresponds with real value generated for our stakeholders, including shareholders, patients and employees, by delivering on our key company goals and building our Company’s long-term success and value. We believe that award value realized should not be viewed in isolation, but should be viewed in light of the overall shareholder return realized. For illustration purposes, we provide shareholder return realized in the 5-year period for our shareholders versus European and U.S. biotech peers, as well as the Bel20 as reference for other large cap Belgian listed companies.
Period: 5 years (comparing closing prices on January 1, 2018 and December 31, 2022) | |
argenx stock price evaluation | +545% |
NASDAQ Biotech index | + 22.45% |
Next Biotech | + 23.55% |
Bel20 | -6.99% |
We have so far not linked the vesting or exercisability of stock options to individual performance targets. However, continued engagement with the Company is a requirement for vesting equity. Persons who have not performed adequately do not receive full recurring equity grants but may receive a reduced grant or no grant at all. As a result, granted and vested stock options are linked to Company performance but are no longer linked to individual performance, receiving and vesting a grant of stock options requires continued high performance of the individual.
| 3. | We are evaluating our options to address shareholder feedback with respect to linking equity awards to performance.Some shareholders were of the view that we did not sufficiently disclose the method of setting award levels under our equity plan. |
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We have included a more detailed explanation on how we set award levels under the Equity Incentive Plan in “—Reference group and setting reward levels”.
| 4. | The RSUs we grant, vest in equal portions of 25% over a four- year period, and underlying shares may be sold upon vesting. This is not in line with Dutch remuneration best practices (requiring a five-year holding period for shares). Additionally, we did not impose a holding requirement for executives. |
In addition to the participation of non-executive directors in our equity incentive plan, we also reviewed our reference group’s practices with respect to equity vesting and exercisability requirements. The DCGC recommends that any shares granted to executive directors are held for at least five years. However, 100% of our U.S. peers granted annual equity which vested after one year. Instead of a five-year lockup, our U.S. reference group companies typically implemented holding requirements which prescribe a continued holding of company stock at a certain multiple of an individual’s base salary, but they did not implement extended lock-up periods. In order not to risk the competitiveness of our plan and to ensure it is in line with market practice, we continue to allow RSUs to vest over four-years (25% each anniversary of the grant date). However, to ensure that our equity is held as a long-term investment by our non-executive directors and our senior management team, we have implemented holding requirements for the duration of their engagement with the Company and a period of 24 months thereafter, as further detailed below:
Holding requirements
Following feedback from our shareholders on our 2021 remuneration report, our Board of Directors introduced equity holding guidelines for our Board of Directors and senior management team. The guidelines became effective in February 2022. Under these guidelines, the following minimum shareholding requirements apply for the following persons:
Non-executive directors1-year cash compensation
Executive directors3-year base cash compensation
Senior management members1-year base cash compensation
The holding requirements must be built up over a period of no more than five years, and the shares beneficially held under such holding requirement may not be disposed of for the duration of such director or senior management member’s service period with the Company and a period of 24 months thereafter. The holding requirements do not apply to directors or executives who had already retired or announced their retirement prior to implementation of the policy on March 3, 2023.
| 5. | We did not disclose in detail the short term performance targets and their achievement and corresponding pay out for our CEO and other key executives. |
We now disclose (retrospectively) the full set of short term performance targets for our CEO, chief financial officer and chief operating officer, which we understand to be market practice for companies of our size and in our industry.
| 6. | Certain proxy voting agencies held that we did not sufficiently address shareholder concerns raised in relation to our 2021 report (76% majority approved). |
We have attempted to collect as much feedback as we could by reaching out to a large number of stakeholders. We have summarized the key findings of those engagements in this section and provided detailed explanations and (where appropriate) remediating actions accordingly.
Remuneration policy
Our remuneration policy rewards contributions to achieving Company objectives and generating stakeholder value. We aim to provide competitive remuneration packages that align with market practices in the key markets where
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we compete for talent. We conduct regular reviews (at least once every three years) of director and senior management members’ total remuneration compared to our reference companies. Our remuneration policy and total compensation aligns or slightly exceeds the market median for fixed compensation, benefits, and short-term variable compensation. The long-term incentive component consists of equity grants, is the size of which is positioned between the 50th and the 75th percentile of our global reference group. Our remuneration policy set forth in Exhibit 4.9 to this Annual Report was adopted at the 2021 General Meeting with a 76% majority vote.
Reference group and setting reward levels
With the help of an independent outside advisory firm, we conduct periodic reviews of compensation levels for senior management and the Board of Directors by comparing against our reference group compensation levels. We review the benchmark at least once every three years (the last review was conducted in September 2022). The outcome of these benchmarking activities is subsequently reviewed and discussed by our remuneration and nomination committee, which then prepares recommendations to the Board of Directors for the adjustment of our remuneration package composition, size and corresponding terms and conditions.
We use a combined reference group composed of U.S.- and European-based biopharmaceutical companies, as we consider Europe and the U.S. key markets for talent in which we compete. Japanese biopharmaceutical companies were not included in the reference group as we did not identify any Japanese company that meets the relevant combination of criteria defined by our remuneration and nomination committee (shared below). The companies included in the reference group take into account our global ambitions and include relevant industry peers based on a combination of key criteria as reflected in the below overview.
As the industry in which we operate is highly dynamic, marked by uncertainty, mergers, acquisitions, setbacks and successes we aim to maintain a reference group that is comprised out of at least 24 companies, meeting a combination of the defined key criteria. We deem this necessary to ensure that the reference group is representative of the industry’s current landscape in which we compete for talent and includes relevant companies with similar characteristics. As we grow and our industry evolves, companies may enter or exit the market, or their business models may shift, making it necessary to reassess the reference group for accurate comparisons. Therefore, regular updates to the reference group and the criteria used is essential to ensure accurate benchmarking and informed decision-making, and to ensure long-term stability and relevance of the benchmarking outcomes.
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Key Peer Company Selection Criteria for most recent benchmark (September 2022)
Element | Historical (up to 2021) Peer Company Selection Criteria | Current (as from 2022) Peer Company Selection Criteria |
Sector | ● Biotechnology and pharmaceutical industries | ● No change |
Stage of Development | ● Primarily phase 3 with some NDA/recently market-stage companies | ● Market-stage companies |
Market Capitalization | ● $5 billion to $50 billion based on our 30-day average market value of approximately $16 billion as of July 16, 2021 | ● 1/3x – 3x our 30-day average market value as of May 20, 2022 ● $5 billion to $50 billion (no change) |
Headcount | ● 200 to 2,000 employees based on our projected FYE 21 headcount at that time (650 employees) | ● 1/3x – 3x the midpoint of our projected FYE 22 and FYE 23 headcount ● 300 to 2,500 employees |
Revenue | ● N/A – not a criterion last year | ● Less than $1 billion in revenues |
Years Public (Secondary) | ● Preference towards companies that went public in the last 10 years | ● No change |
Current Reference Companies
U.S. Peers | EU Peers | ||
● Acadia Pharmaceuticals Inc. | ● Galapagos NV | ||
● Alnylam Pharmaceuticals, Inc. | ● UCB SA | ||
● Amicus Therapeutics Inc. | ● ALK-Abelló A/S | ||
● BeiGene Ltd | ● Ascendis Pharma A/S | ||
● Biohaven Pharmaceutical Holding Co Ltd | ● Genmab A/S | ||
● BioMarin Pharmaceutical Inc. | ● BioNTech SE | ||
● Blueprint Medicines Corp | ● Evotec SE | ||
● Denali Therapeutics Inc. | ● Incyte Corporation | ||
● Intellia Therapeutics Inc. | ● Horizon Therapeutics PLC | ||
● Intra-Cellular Therapies Inc. | ● Recordati S.p.A. | ||
● Ionis Pharmaceuticals Inc. | ● uniQure NV | ||
● Mirati Therapeutics Inc. | ● Swedish Orphan Biovitrum AB | ||
● Neurocrine Biosciences Inc. | ● CRISPR Therapeutics AG | ||
● Sarepta Therapeutics Inc. | ● Idorsia Ltd. | ||
● Seagen Inc. | ● Vifor Pharma AG | ||
● Abcam PLC | |||
● Hikma Pharmaceuticals PLC |
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Our Board of Directors sets award levels based on the outcome of our benchmarking exercise. Our remuneration policy, contains the following guidance in this respect:
(1)
| ||
| Non-executives | Senior management team (including our CEO) |
Cash-based compensation | 50th percentile of the companies in our global reference group | 50th percentile of U.S. companies in our reference group for U.S.-based executives, and at or around the 75th percentile of EU companies in our reference group for EU-based executives |
Equity-based compensation | 50th percentile of the U.S. companies in our reference group | 50th to 75th percentile of the U.S. companies in our reference group |
Remuneration Components of Our Senior Management
Pursuant to our shareholder-approved remuneration policy, the remuneration of our senior management (including our executive director(s)) consists of the following components:
| ● | fixed-base compensation; |
| ● | short-term variable compensation, based on the achievement of pre-determined targets; |
| ● | long-term variable compensation, in the form of stock options and RSUs; |
| ● | severance arrangements; and |
| ● | pension and fringe benefits. |
We note that, while our remuneration policy by law applies only to members of our Board of Directors, we apply its principles to all our employees.
Fixed-base compensation
We grant our senior management team members a fixed base (cash) compensation determined on the basis of our benchmarking exercise explained in “—Reference group and setting reward levels” above. The final determination of a senior management member’s fixed-base pay is made considering the benchmark, the individual’s skills, experience and performance, the remuneration practices and conditions across the wider organization and our interactions with key stakeholders to secure broad public support for our remuneration practices and the feedback from the individual on their own remuneration levels. The target fixed cash compensation levels are set in accordance with our remuneration policy but we note that the actual base cash remuneration for our executive director is below the targeted percentiles, taking into account the feedback from our executive director on proposals of the remuneration and nomination committee to increase the base pay to align more closely with the targeted percentile of the benchmark.
Short-term variable compensation based on the achievement of pre-determined targets
The objective of our short-term annual incentive compensation is to ensure that our senior management team is incentivized to achieve pre-defined performance targets in the shorter term. Variable cash incentives are granted for achieving predetermined specific performance targets. Our senior management team is eligible for an annual short-term variable incentive of their annual base compensation. The short-term target percentage is equal to up to 60% of the fixed-
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base compensation for our CEO, between 40-50% for our C-level employees (benchmarked per role) and up to 35% for vice president level members of our senior management team. The short-term incentive opportunity is capped at 200% of the target percentages, in line with the principles applied for the broader employee base at the Company. We have not established pay-out caps per individual target, but apply the pay-out cap of 200% of the total variable pay opportunity (i.e., in the case of our CEO, the maximum variable pay cap of 200% represents 120% of base cash remuneration).
Long-term variable compensation, in the form of stock options and RSUs
Stock options and RSUs may be awarded every year, in accordance with our Equity Incentive Plan, whereby the stock options vest over a three-year period and the RSUs vest over a four-year period. Stock options may not be exercised by our Belgian tax resident employees (including our CEO) until the fourth calendar year following the year of the grant. RSUs vest 25% of the total grant at each anniversary of the grant date. Shares obtained through the vesting of RSUs or through the exercise of stock options, are subject to our equity holding requirements further explained under “Changes to our remuneration practices in response to shareholder dissent”.
Severance arrangements
Our CEO has a severance arrangement in place of 18 months if he is discharged for reasons other than for cause.
Pension and fringe benefits
Pension and fringe benefits are awarded based on local market practices. For Belgian tax resident employees (including our CEO), this includes a defined contribution pension scheme operated by a third-party pension insurance organization, a company car (as from a certain paygrade level) and a hospitalization plan. We note that the pension arrangements offered to our Belgian tax resident executives (including our CEO) mirror those offered to Belgian tax resident employees.
Performance of scenario analyses
In accordance with the DCGC, when determining the remuneration package of our executive director(s), scenario analyses are performed annually and taken into account in setting the level of the base remuneration to be paid as well as the variable remuneration and the corresponding targets.
Executive remuneration paid in 2022
Compensation of our CEO
The following table sets forth information regarding compensation we paid to Mr. Van Hauwermeiren for services performed during the fiscal year ended December 31, 2022:
Amount shown represents the expenses recorded with respect to the option awards granted in 2017 to Mr. Van Hauwermeiren measured using the Black Scholes formula. For a description of the assumptions used in valuing these awards, see note 4.12 to our financial statements included elsewhere in this annual report. These amounts do not reflect the actual economic value realized by Mr. Van Hauwermeiren.
| | |
| Compensation | |
| ($) | |
Base salary | 638,901 | |
Short term incentive | | 766,682 |
Option awards (1) | 4,174,684 | |
Restricted Stock Units (2) | | 2,159,689 |
Employer social security contribution stock options (3) | | — |
Pension contributions | 23,384 | |
Social security costs | | — |
Other (4) | 14,958 | |
TOTAL | 7,778,298 |
| (1) | Amount shown represents the expenses with respect to the option awards granted in 2022 to Mr. Van Hauwermeiren measured using the Black Scholes formula. For a description of the assumptions used in valuing these awards, see “Note 13—Share-based payment” to our |