Results of Operation

Product Net Sales

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 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

Our collaboration revenue decreased by $487.2 million to $10.0 million for the year ended December 31, 2022, compared to $497.3 million for the year ended December 31, 2021. 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 the 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 during the year ended December 31, 2022. The revenue recognition from upfront payments for the year ended December 31, 2021 was $444.3 million. The revenue recognized during the year ended December 31, 2021 was primarily driven by the recognition of the upfront payment received from Zai Lab upon strategic collaboration for efgartigimod and the recognition of the upfront payment received under the collaboration agreement with Janssen upon termination of the agreement.

The revenue recognition from milestone payments for the year ended December 31, 2022 and December 31, 2021 was $5.4 million and $49.8 million respectively. The revenue recognized during the year ended December 31, 2022, from milestone payments primarily relates to €5.0 million triggered by the option exercised by LEO Pharma to enter into the LEO Pharma Collaboration Agreement for ARGX-112. The revenue recognized during the year ended December 31, 2021, from milestone payments was mainly due to recognition of $25.0 million from Zai Lab upon regulatory approval of efgartigimod by the FDA in the U.S. and recognition of $22.9 million as a result of the termination of the collaboration agreement with Janssen.

The increase in revenue recognition from other revenues of $3.4 million was primarily driven by the clinical and commercial supply of efgartigimod to Zai Lab.

Other Operating Income

Other operating income decreased by $7.6 million to $34.5 million for the year ended December 31, 2022, compared to $42.1 million for the year ended December 31, 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 section “Regulation”.

Research and Development Expenses

Our research and development expenses totaled $663.4 million and $580.5 million for the years ended December 31, 2022 and 2021, respectively. The increase of $82.8 million for fiscal year 2022 as compared to fiscal year 2021 was primarily from the derecognition of the PRV submitted with the BLA filing for SC efgartigimod for the treatment of gMG, which resulted in a research and development expenses of $99.1 million recorded under depreciation and amortization in the table above.

Personnel expense primarily relates to internal and external personnel. The expense also includes share-based compensation expenses related to the grant of stock options and RSUs to our research and development employees. We employed on average 474.8 full-time equivalents in our research and development functions in the year ended December 31, 2022, compared to 349.7 in the year ended December 31, 2021.

Our external research and development expenses for the year ended December 31, 2022 totaled approximately $367.0 million, compared to approximately $382.9 million for the year ended December 31, 2021. The expense reflects clinical trial costs and manufacturing expenses related to the development of our product candidate portfolio. The table below provides additional detail on our external research and development expenses by program:

External research and development expenses for our lead product candidate efgartigimod totaled $280.6 million for the year ended December 31, 2022, compared to $311.0 million for the year ended December 31, 2021. This decrease corresponds primarily to manufacturing and clinical development activities in relation 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 year 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 termination of the collaboration agreement with Janssen.

External research and development expenses for ARGX-117 totaled $32.4 million for the year ended December 31, 2022 compared to $22.8 million for the year ended December 31, 2021. This increase of $9.6 million was due to increased research and development expenses in relation to the advancement of our ARGX-117 program, a complement-targeting antibody against C2.

External research and development expenses on other programs increased by $16.0 million to $40.4 million for the year ended December 31, 2022, compared to $24.5 million for the year ended December 31, 2021. Of the total research and development expense, $22.7 million relates to general allocation of expenses.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses totaled $472.1 million and $307.6 million for the years ended December 31, 2022 and 2021, respectively. The increase in our selling, general and administrative expenses for the year ended December 31, 2022 was principally due to an increase of personnel expense and professional and marketing fees, resulting from:

• increased costs of the salary and wages and benefits to our selling, general and administrative employees due to planned increase in the headcount;
• increased costs associated with additional employees recruited to strengthen our selling, general and administrative activities, for the commercial launch of VYVGART;
• increased professional and marketing fees, including promotional and marketing costs primarily due to the commercial launch of VYVGART; and
• continued investment in our IT infrastructure.

We employed on average 442.4 full-time equivalents in our selling, general and administrative functions in the year ended December 31, 2022, compared to 264.4 in the year ended December 31, 2021.

Financial Income (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, 2022, financial expense amounted to $3.9 million compared to $4.6 million for the year ended December 31, 2021.

Exchange Gains (Losses)

Exchange losses totaled $32.7 million for the year ended December 31, 2022, compared to exchange losses of $50.1 million for the year ended December 31, 2021. The decrease was mainly attributable to unrealized exchange rate losses on the cash, cash equivalents and current financial assets position in euro during the year ended December 31, 2022 as compared to unrealized exchange rate losses on the cash, cash equivalents and current financial assets position during the year ended December 31, 2021.