Risk Appetite & Control
Before reading this section, please carefully review the following cautionary statement:
In this section we will make the required disclosures regarding our risk appetite and mitigating actions. We fully take the risk mitigation actions and risk management described in this section into account while preparing the description of the main risks and uncertainties we face, as set out in Section “Risk Factors”. Any mitigating language used in this section does not have any impact on the risks and uncertainties we face or their potential adverse effects as they are described in Section “Risk Factors”.
Section “Risk Factors” describes the main risks and uncertainties we face already fully having taken into account our risk management and the risk mitigating actions described herein.
Introduction
This Section 3 provides a general description of our willingness to mitigate the risks and uncertainties we face (also called our ‘risk appetite’), and to give a description of the mitigating actions we have taken with regard to our most relevant risks.
General Description of Our Risk Appetite
Our risk appetite serves as a guideline to determine the measures we may take in mitigating some of the risks and uncertainties we face. Our risk appetite is aligned with our strategy and priorities. The business we operate in is inherently high-risk. In general, we are willing, and in our view required, to take significant risks to be able to operate successfully in our line of business. Some of the risks and uncertainties we face are entirely outside of our control whereas others may be influenced or mitigated.
The process of developing, implementing and improving risk management procedures remains an ongoing effort. In accordance with guideline 400.110c of the Dutch Counsel for Annual Reporting (Raad voor de Jaarverslaggeving), this risk management section provides an overview of the risk mitigating actions taken or planned to be taken by us. The mentioning of these mitigating actions may not in any way be viewed as an implied or express guarantee that such mitigation will in practice be effective in limiting the risk exposure and/or the potential damage to us from any such risk materializing.
Controlling Actions We Take with Regard to Our Most Relevant Risks and Uncertainties
The following is a description of the main risks and uncertainties we face (being the first risk of each category of risk factors set out in Section “Risk Factors”) and a description of the measures we took to control them. A description of the expected impact upon materialization of these risks is included for each risk in Section “Risk Factors”.
RISK FACTOR
MEASURES TAKEN TO CONTROL THESE RISKS
The commercial success of our products and product candidates, including in new indications or methods of administration, will depend on the degree of market acceptance.
We plan to focus on the successful commercialization of the products and product candidates after they are launched. We aim to expand our sales and marketing organization, enter into collaboration arrangements with third parties, outsource certain functions to third parties, or use some combination of each to promote market acceptance of our products and product candidates. We have already built, and continue to expand, our sales forces in certain of the countries where VYVGART is approved and plan to further develop our sales and marketing capabilities to promote our products, and product candidates, including new indications or methods of administration.
Failure to successfully identify, select and develop our products in other indications, or additional products or product candidates could impair our ability to grow.
We remain committed to using technology and contracting with parties that are able to achieve the level of sophistication we need to accurately and reliably identify, select and develop efgartigimod in other indications, additional products or product candidates. We expect our spending to continue to increase as we continue to expand drug inventory for our products and the progress of our clinical-stage pipeline, including ongoing clinical trials for several indications with efgartigimod, empasiprubart and ARGX-119 and expand our global commercial infrastructure.
We rely, and expect to continue to rely, on third parties to conduct some of our research activities and clinical trials and for parts of the development and commercialization of our existing and future research programs, products and product candidates. If our relationships with such third parties are not successful, our business may be adversely affected.
We endeavor to meet our contractual obligations and any relevant milestone achievements under our collaboration contracts, maintain a rich pipeline of possible collaboration partners as well as foster good relationships with existing and potential future collaboration partners in order to limit reliance on a limited number of collaboration partners. Furthermore, third-party contractor selection and management is subject to our quality management system. Customary contractual agreements are put in place in an effort to protect us from under-performance. We are typically spreading operational risks over various service providers. Project management belongs to our core internal competences.
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 have adopted a Code of Conduct, that is applicable to all of our employees and directors, which addresses the key risks related to potential breaches of ethical standards. All employees have accepted and are trained (and retrained annually) on our Code of Conduct. We expect all newcomers to accept, and commit to, the contents of the Code of Conduct. To increase compliance and ensure our colleagues know where to go with questions on the Code of Conduct and its application, we have established the argenx COMPASS Helpline, where our employees can raise any concerns they may have regarding potential violations of our policy confidentially or anonymously (to the extent allowed by law).
We may be unable to adequately maintain, enforce or protect our intellectual property rights in products, product candidates and platform technologies which could adversely affect our ability to maximize the value for patients in our marketed products and product candidates.
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 future growth and ability to compete depends on maintaining our culture, retaining our key personnel and recruiting additional qualified personnel.
We offer competitive remuneration packages and share-based incentives in the form of the Equity Incentive Plan. We perform periodic benchmark analyses with an external service provider to ensure the competitiveness of the compensation offered to our key personnel in comparison to other (reference group) companies. We pay close attention to creating an environment that supports the further development of the talents of our key people. Our corporate culture, including fostering our key values, has been, and will be, a key contributor to our success. We therefore continue to build and promote internal programs focusing on our corporate culture and our five key values.
Material Impact of Risk Materialization in 2024
During the period between January 1, 2024 and December 31, 2024, we did not identify any material impact as a result of materialization of previously identified risks and uncertainties.
Financial Risks and Controls
In running our business, we seek to implement a sustainable policy regarding internal control and risk management. Our Board of Directors has delegated an active role to our Audit and Compliance Committee in the design, implementation and monitoring of an internal risk management and control system to manage the significant risks to which we are exposed.
Our financial reporting is structured within a tight framework of budgeting, reporting and forecasting. A distinction is made between reports for internal and external use. External reporting at group level consists of an annual report (in the form of this Annual Report), including financial statements audited by the independent auditor, as well semi-annual reporting and quarterly updates, containing summarized financial information. The external reports are based on the internal financial reporting.
Internal financial reporting consists of extensive consolidated monthly reports in which current developments are compared to the monthly (cumulative) budgets and previous forecasts. In addition, each quarter we reiterate or update our forecast for the annual results, including the cash flow position at the end of the year. The quarterly budgets are part of the annual group budget, which is prepared every year by our Senior Management Team and approved by our Board of Directors. Our specialized finance and administration department are primarily responsible for evaluating the draft internal and external reporting, before these are finally approved by our Board of Directors.
Our Board of Directors discusses the financial results of the group at all formal board meetings, which meetings are minuted.
Our internal controls over financial reporting are a subset of internal controls and include policies and procedures that:
- pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
- provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with IFRS as issued by the International Accounting Standards Board and as adopted by the EU, and that receipts and expenditures are being made only by authorized persons; and
- provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Since we have securities registered with the SEC and are a large accelerated filer within the meaning of Rule 12b-2 of the Exchange Act, we need to assess the effectiveness of our internal controls over financial reporting and provide a report on the results of our assessment. Our Board of Directors reviewed its internal controls over financial reporting based on criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and engaged an external advisor to help assess the effectiveness of its controls.
Recent or Current Developments in our System of Risk Management
We pay attention to pro-active risk management by continuing to have the evaluation of our core risks and uncertainties as a standing discussion topic for our Board of Directors. In addition, in 2024, we have added quarterly updates for specific risks to our Board of Directors agendas, including cyber security, privacy and healthcare compliance risks.