Risk Factors Related to argenx’s Organization and Operations

Our Future Growth and Ability to Compete Depends on Retaining our Key Personnel and Recruiting Additional Qualified Personnel.

As 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 product and related technologies. These key management individuals include the members of our Board of Directors and senior management team. Difficulties in recruiting or the loss of key managers, scientific, medical or technical personnel could delay our research and development activities. In addition, it may be difficult to attract and retain highly qualified management, scientific and medical personnel, particularly if we expand into fields that will require additional skills.

As a Dutch company listed on Euronext Brussels in addition to 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 Dutch Corporate Governance Code 2016 (DCGC) places certain limitations on the ability to grant equity incentives to non-executive directors, while Belgian law requires non-executive directors to receive part of their remuneration in the forms of shares, but not stock options. The DCGC also places limitations on amount of severance payment permitted in the event of dismissal. In addition, the U.S. has proposed legislation that imposes restrictions on our ability to prevent departing employees from competing with us following their departure. If finalized, such legislation could also adversely affect our ability to retain employees who may go to competitors with more resources than us and who are not bound by similar remuneration policies.

Many other biotechnology and pharmaceutical companies and academic institutions that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Additionally, an inflationary environment, combined with the tight labor market for the recruitment and retention of skilled workers, could make it more costly for us to attract or retain employees. In order to meet the compensation expectations of our prospective and current employees due to inflationary factors, we may be required to increase our operating costs. Therefore, we might not be able to attract or retain these key persons on conditions that are economically acceptable.

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. Such geo- and socio-political threats could also result in volatility in stock markets in general, causing our stock to have extreme price and volume fluctuations unrelated to our business and financial performance.

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 PF and 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
• 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 replace 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 and/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 impact 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 restrictions 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 may experience delays in their regulatory activities. Such restrictions and delays could adversely affect our ability to obtain regulatory approval for and to commercialize our products and product candidates and have a material adverse effect on our business and financial results.

We may Encounter Difficulties Efficiently Managing our Growth and our Increasing Development, Regulatory and Sales and Marketing Capabilities, 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. Our limited financial, manufacturing and management resources, could cause us to forgo or delay the pursuit of opportunities with potential product candidates that later prove to have 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 commercialization rights. Any inability to manage growth could delay the execution of our strategic objectives or disrupt our operations, which in turn could materially harm our business and prospects.

We have benefited from certain research and development incentives in Belgium, which may be re-evaluated if our shareholder base changes significantly. The Belgian authorities may challenge our eligibility for or our calculation of such incentives.

As 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 corporate income tax and is refunded to us in cash after five years to the extent it could not be offset. The payroll tax exemption results in a reduction of the payroll cost for highly qualified personnel engaged in research and development 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 relevant Belgian authorities may challenge our eligibility for, or our calculation of, such tax incentives and, should such a challenge be successful, we may be liable for additional 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 legislator decides to eliminate, or change the conditions for claiming, such tax incentives, or reduce the scope or the rate of, such incentives, any of which it could decide to do at any time, our results of operations could be adversely affected.

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, 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.

Dealings between current and former group companies as well as additional companies that may form part of our group in the future are subject to transfer pricing regulations, which may be subject to change and could affect us. Compliance with these laws and regulations will be more challenging as we expand our international operations, 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 or the interpretation thereof by the relevant tax authorities in countries where we have material operations, including changes to the Belgian innovation income deduction, to the corporate income tax base, or to other tax incentives and the implementation of new tax incentives. A successful challenge to our qualifications for and application of these tax incentives by the 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, we have considerable material tax assets in Belgium and some of these tax assets 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.