Quarterly Report • Dec 8, 2023
Quarterly Report
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| 1. MAIN EVENTS IN THE SIX MONTHS OF 2023 |
2 |
|---|---|
| 2. FINANCIAL HIGHLIGHTS |
3 |
| 3. RISK FACTORS |
4 |
| 4. FORWARD-LOOKING STATEMENTS |
4 |
| UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION | 6 |
| UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF PROFIT OR LOSS |
8 |
| UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME AND LOSS |
9 |
| UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | 10 |
| UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY | 11 |
| NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS | 12 |
See refer to our Q1 2023 press release
"We are thrilled to see the momentum continue across all aspects of our business, with a catalyst-rich first half of the year. For another quarter we saw consistent revenue growth with VYVGART, delivering on our promise to bring transformative change to the treatment of gMG and reaching more patients through global approvals and the launch of our SC offering. Now with the positive ADHERE data, we have strengthened our conviction in the potential of VYVGART for CIDP patients but also more broadly across IgG-mediated autoimmune diseases, motivating us to explore the full extent of the opportunity. Our ambition level is high and we are positioning argenx for long-term growth with VYVGART, empasiprubart, and our pipeline of immunology solutions. It is time to raise the bar for patients on what a treatment can offer and we are more inspired than ever in our pursuit to do so," said Tim Van Hauwermeiren, Chief Executive Officer of argenx.
VYVGART is a first-in-class antibody fragment targeting the neonatal Fc receptor (FcRn) and is now approved globally in six countries or regions (U.S., Japan, EU, UK, Israel, China) for generalized myasthenia gravis (gMG). VYVGART Hytrulo was approved by the U.S. Food and Drug Administration (FDA) on June 20, 2023, and is the first subcutaneous (SC) injectable for gMG. argenx is planning for multi-dimensional expansion to reach more patients with VYVGART through additional global regulatory approvals.
argenx is solidifying its leadership in immunology innovation by expanding the scope of IgG-mediated autoimmune diseases in development and further demonstrating the potential of FcRn blockade in ongoing clinical trials. By the end of 2023, efgartigimod is expected to be approved, in regulatory review or in development in 13 severe autoimmune diseases.
argenx is advancing a robust portfolio of innovative clinical programs, including empasiprubart (C2 inhibitor) and ARGX-119 (muscle-specific kinase (MuSK) agonist). Both programs have the potential to be first-in-class opportunities for multiple severe indications.
argenx continues to invest in its discovery engine, the Immunology Innovation Program, to foster a robust innovation ecosystem and drive early-stage pipeline growth. argenx expects to nominate one new pipeline candidate in 2023.
Total operating income year-to-date in 2023 was \$510.9 million, compared to \$116.7 million for the same period in 2022, and mainly consists of:
Total operating expenses year-to-date in 2023 was \$716.8 million, compared to \$513.9 million for the same period in 2022, and mainly consists of:
Financial income year-to-date in 2023 was \$37.0 million, compared to \$5.7 million for the same period in 2022. The increase in financial income is mainly due to an increase in interest income on current financial assets and cash and cash equivalents attributable to higher interest rates.
Exchange gains/losses year-to-date in 2023 was \$9.2 million of exchange gains, compared to \$53.4 million of exchange losses for the same period in 2022. Exchange gains/losses are mainly attributable to unrealized exchange rate gains or losses on the cash, cash equivalents and current financial assets position in Euro.
Income tax year-to-date in 2023 was \$36.8 million of tax benefit, compared to \$11.1 million of tax benefit for the same period in 2022.
Net loss for the six month period ended June 30, 2023, was \$123.2 million, compared to \$435.9 million over the prior year period. On a per weighted average share basis, the net loss was \$2.21 and \$8.16 for the six months ended June 30, 2023 and 2022, respectively.
Cash, cash equivalents and current financial assets totalled \$2.0 billion as of June 30, 2023, compared to \$2.2 billion as of December 31, 2022. Cash and cash equivalents and current financial assets decreased primarily as a result of net cash flows used in operating activities. The cash position as of June 30, 2023, excludes the \$1.3 billion in estimated gross proceeds from the global equity offering, which closed on July 24, 2023.
We refer to the description of risk factors in the 2022 annual report, pp. 108-155 as supplemented by the description of risk factors in our annual report on Form 20-F filed with the U.S. Securities and Exchange Commission, pp. 1-36. In summary, the principal risks and uncertainties faced by us relate to: our financial position and need for additional capital, commercialization of our products and product candidates, including new indications, government regulations, development and clinical testing of our products and product candidates, dependence on third parties, business and industry, intellectual property, our organization and operations.
We also refer to the description of our financial risk management given in the 2022 annual report, pp. F48-F51, which remains valid.
The contents of this announcement include statements that are, or may be deemed to be, "forward-looking statements." These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes," "hope," "estimates," "anticipates," "expects," "intends," "may," "will," or "should" and include statements argenx makes regarding its plans for its global commercial expansion of VYVGART to reach more patients; continued investment in its Immunology Innovation Program to foster a robust innovation ecosystem and drive early-stage pipeline growth; the therapeutic potential of its product candidates; the intended results of its strategy and its collaboration partners', including ongoing studies through its collaboration with Zai Lab; advancement of, and anticipated clinical development, data readouts and regulatory milestones and plans, including the (1) expected topline data from registrational ADDRESS and ADVANCE-SC studies in 2023, (2) expected GO/NO GO decisions from its BALLAD and ALKIVIA trials in 2024, (3) expected topline data from its ALPHA and RHO trials in 2024, (4) timeline of registrational and proof-of-concept studies in ANCA-associated vasculitis and antibody mediated rejection in kidney transplant, (5) potential of empasiprubart and ARGX-119 to be first-in-class opportunities for multiple serious indications and timeline of studies and results thereof and (6) planned nomination of a new product development candidate in 2023; the timing and outcome of regulatory filings and regulatory approvals, including the anticipated regulatory approvals of VYVGART in Canada and Japan and approvals of SC efgartigimod in Europe, Japan and China, and the number of autoimmune diseases for which efgartigimod is expected to be approved, in regulatory review or in development by end of 2023; and 2023 business and financial outlook and related plans, including the anticipated release of updated cash burn expectations and the timeline of future releases of financial results and business updates. By their nature, forward-looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance. argenx's actual results may differ materially from those predicted by the forward-looking statements as a result of various important factors, including inflation and deflation and the corresponding fluctuations in interest rate; regional instability and conflicts, such as the conflict between Russia and Ukraine, argenx's expectations regarding the inherent uncertainties associated with competitive developments, preclinical and clinical trial and product development activities and regulatory approval requirements; argenx's reliance on collaborations with third parties; estimating the commercial potential of argenx's product candidates; argenx's ability to obtain and maintain protection of intellectual property for its technologies and drugs; argenx's limited operating history; and argenx's ability to obtain additional funding for operations and to complete the development and commercialization of its product candidates. A further list and description of these risks, uncertainties and other risks can be found in argenx's U.S. Securities and Exchange Commission (SEC) filings and reports, including in argenx's most recent annual report on Form 20-F filed with the SEC as well as subsequent filings and reports filed by argenx with the SEC. Given these uncertainties, the reader is advised not to place any undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date of publication of this document. argenx undertakes no obligation to publicly update or revise the information in this press release, including any forward-looking statements, except as may be required by law
We hereby certify that, to the best of our knowledge, the unaudited condensed consolidated interim financial statements of argenx SE as of and for the six months ended June 30, 2023, prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and total comprehensive income of the Company and the undertakings included in the consolidation as a whole, and that the management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a decription of the principal risks and uncertainties that they face.
On behalf of the Board of Directors
Tim van Hauwermeiren, CEO
| As of | |||||||
|---|---|---|---|---|---|---|---|
| June 30, | December 31, | ||||||
| (in thousands of \$) | Note | 2023 | 2022 | ||||
| ASSETS | |||||||
| Non‑current assets | |||||||
| Property, plant and equipment | \$ 14,676 |
\$ | 16,234 | ||||
| Intangible assets | 189,857 | 174,901 | |||||
| Deferred tax asset | 138,767 | 79,222 | |||||
| Other non-current assets | 4 | 39,232 | 40,894 | ||||
| Research and development incentive receivables | 59,976 | 47,488 | |||||
| Investment in joint venture | 12,443 | 1,323 | |||||
| Prepaid expenses | 5 | 47,327 | — | ||||
| Total non‑current assets | \$ 502,277 |
\$ | 360,064 | ||||
| Current assets | |||||||
| Inventories | 6 | \$ 201,112 |
\$ | 228,353 | |||
| Prepaid expenses | 138,825 | 76,022 | |||||
| Trade and other receivables | 7 | 353,232 | 275,697 | ||||
| Research and development incentive receivables | 1,377 | 1,578 | |||||
| Financial assets | 8, 18 | 886,401 | 1,391,808 | ||||
| Cash and cash equivalents | 9, 18 | 1,110,567 | 800,740 | ||||
| Total current assets | \$ 2,691,514 |
\$ | 2,774,197 | ||||
| TOTAL ASSETS | \$ 3,193,791 |
\$ | 3,134,261 |
| As of | ||||||
|---|---|---|---|---|---|---|
| June 30, | December 31, | |||||
| (in thousands of \$) | Note | 2023 | 2022 | |||
| EQUITY AND LIABILITIES | ||||||
| Equity | ||||||
| Equity attributable to owners of the parent | 10 | |||||
| Share capital | \$ | 6,698 | \$ | 6,640 | ||
| Share premium | 4,374,291 | 4,309,880 | ||||
| Translation Differences | 130,042 | 129,280 | ||||
| Accumulated losses | (2,233,029) | (2,109,791) | ||||
| Other reserves | 580,049 | 477,691 | ||||
| Total equity | \$ | 2,858,051 | \$ | 2,813,699 | ||
| Non-current liabilities | ||||||
| Provisions for employee benefits | \$ | 1,011 | \$ | 870 | ||
| Lease liabilities | 8,044 | 9,009 | ||||
| Deferred tax liabilities | 8,894 | 8,406 | ||||
| Total non-current liabilities | \$ | 17,949 | \$ | 18,285 | ||
| Current liabilities | ||||||
| Lease liabilities | \$ | 3,198 | \$ | 3,417 | ||
| Trade and other payables | 12 | 309,985 | 295,679 | |||
| Tax liabilities | 4,608 | 3,181 | ||||
| Total current liabilities | \$ | 317,791 | \$ | 302,277 | ||
| Total liabilities | \$ | 335,740 | \$ | 320,562 | ||
| TOTAL EQUITY AND LIABILITIES | \$ | 3,193,791 | \$ | 3,134,261 |
| Six Months Ended June 30, |
|||||||
|---|---|---|---|---|---|---|---|
| (in thousands of \$ except for shares and EPS) | Note | 2023 | 2022 | ||||
| Product net sales | 13,14 | \$ | 487,335 | \$ | 95,996 | ||
| Collaboration revenue | 2,355 | 2,610 | |||||
| Other operating income | 21,225 | 18,057 | |||||
| Total operating income | 510,915 | 116,663 | |||||
| Cost of sales | (42,359) | (6,382) | |||||
| Research and development expenses | 15 | (361,364) | (278,887) | ||||
| Selling, general and administrative expenses | 16 | (311,149) | (228,664) | ||||
| Loss from investment in joint venture | (1,880) | — | |||||
| Total operating expenses | (716,752) | (513,933) | |||||
| Operating loss | \$ | (205,837) | \$ | (397,270) | |||
| Financial income | 37,029 | 5,733 | |||||
| Financial expense | (395) | (2,131) | |||||
| Exchange gains/(losses) | 9,164 | (53,382) | |||||
| Loss for the period before taxes | \$ | (160,039) | \$ | (447,050) | |||
| Income tax benefit | 17 | \$ | 36,800 | \$ | 11,114 | ||
| Loss for the period | \$ | (123,239) | \$ | (435,936) | |||
| Loss for the period attributable to: | |||||||
| Owners of the parent | (123,239) | (435,936) | |||||
| Weighted average number of shares outstanding | 55,690,873 | 53,449,915 | |||||
| Basic and diluted loss per share (in \$) | (2.21) | (8.16) |
| Six Months Ended June 30, |
|||||
|---|---|---|---|---|---|
| (in thousands of \$ except for shares) Loss for the period |
Note | 2023 | 2022 | ||
| \$ | (123,239) | \$ | (435,936) | ||
| Items that may be reclassified subsequently to profit or loss, net of tax | |||||
| Currency translation differences, arisen from translating foreign activities |
762 | (2,993) | |||
| Items that will not be reclassified to profit or loss, net of tax | |||||
| Fair value gain/(loss) on investments in equity instruments designated as at FVTOCI |
18 | (1,688) | (16,006) | ||
| Other comprehensive loss, net of income tax | \$ | (926) | \$ | (18,999) | |
| Total comprehensive loss attributable to: | \$ | (124,165) | \$ | (454,935) | |
| Owners of the parent | (124,165) | (454,935) |
| Six Months Ended June 30, |
|||||
|---|---|---|---|---|---|
| (in thousands of \$) | Note | 2023 | 2022 | ||
| Operating loss | \$ | (205,837) | \$ | (397,270) | |
| Adjustments for non-cash items | |||||
| Amortization of intangible assets | 43 | 389 | |||
| Depreciation of property, plant and equipment | 2,661 | 2,671 | |||
| Provisions for employee benefits | 138 | 137 | |||
| Expense recognized in respect of share-based payments | 11 | 102,083 | 76,634 | ||
| Fair value gains on financial assets at fair value through profit or loss | — | (4,256) | |||
| Loss from investment in joint venture | 1,880 | — | |||
| \$ | (99,032) | \$ | (321,695) | ||
| Movements in current assets/liabilities | |||||
| (Increase)/decrease in trade and other receivables | (68,057) | (71,152) | |||
| (Increase)/decrease in inventories | 6 | 27,240 | (26,636) | ||
| (Increase)/decrease in other current assets | (62,500) | (25,119) | |||
| Increase/(decrease) in trade and other payables | (616) | (33,251) | |||
| Movements in non-current assets/liabilities | |||||
| (Increase)/decrease in non‑current prepaid expenses | (47,327) | — | |||
| (Increase)/decrease in other non‑current assets | (11,603) | (7,244) | |||
| Cash flows used in operating activities | \$ | (261,894) | \$ | (485,097) | |
| Interest paid | (78) | (505) | |||
| Income taxes paid | (23,465) | (8,911) | |||
| Net cash flows used in operating activities | \$ | (285,436) | \$ | (494,513) | |
| Purchase of property, plant and equipment | (479) | (183) | |||
| (Increase)/decrease in current financial assets | 8 | — | (234,244) | ||
| Purchase of current financial investments (1) | (267,196) | — | |||
| Sale of current financial investments (1) | 780,331 | — | |||
| Interest received | 27,361 | 2,082 | |||
| Investment in joint venture | (13,000) | — | |||
| Net cash flows (used in) / from investing activities | \$ | 527,017 | \$ | (232,345) | |
| Principal elements of lease payments | (2,182) | (2,224) | |||
| Proceeds from issue of new shares, gross amount | 10 | — | 760,954 | ||
| Issue costs paid | — | (843) | |||
| Exchange gain from currency conversion on proceeds from issue of new shares | 10 | — | 410 | ||
| Payment on employee withholding taxes related to restricted stock unit awards | (604) | — | |||
| Proceeds from exercise of stock options | 10 | 65,074 | 49,979 | ||
| Net cash flows from financing activities | \$ | 62,288 | \$ | 808,276 | |
| Increase/(decrease) in cash and cash equivalents | \$ | 303,868 | \$ | 81,418 | |
| Cash and cash equivalents at the beginning of the period | \$ | 800,740 | \$ | 1,334,676 | |
| Exchange gains/(losses) on cash & cash equivalents | \$ | 5,960 | \$ | (48,806) | |
| Cash and cash equivalents at the end of the period | \$ | 1,110,567 | \$ | 1,367,288 |
(1) Due to the change in the maturity of the current financial assets during current year, the presentation has been changed from net basis to gross basis
| Attributable to Owners of the Parent | ||||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands of \$) | Share Capital |
Share Premium |
Accumulated Losses |
Translation Difference |
Share-based payment and income tax deduction on share-based payments |
Other comprehensive income |
Total Equity Attributable to Owners of the Parent |
Total Equity |
| Balance year ended December 31, 2021 |
\$ 6,233 | \$ 3,462,775 | \$ (1,400,197) | \$ 131,684 |
\$ 373,019 |
\$ (39,290) |
\$ 2,534,224 | \$ 2,534,224 |
| Loss for the period | \$ | \$ | \$ (435,936) |
\$ | \$ | \$ | \$ (435,936) |
\$ (435,936) |
| Other comprehensive income / (loss) |
(2,993) | (16,006) | (18,999) | (18,999) | ||||
| Total comprehensive | ||||||||
| income/(loss) for the period | — | — | (435,936) | (2,993) | — | (16,006) | (454,935) | (454,935) |
| Income tax benefit from excess tax deductions related |
||||||||
| to share-based payments | 3,957 | 3,957 | 3,957 | |||||
| Share-based payment | 76,935 | 76,935 | 76,935 | |||||
| Issue of share capital | 294 | 760,659 | 760,953 | 760,953 | ||||
| Transaction costs for equity issue |
(781) | (781) | (781) | |||||
| Exercise of stock options | 76 | 49,842 | 49,919 | 49,919 | ||||
| Balance period ended June 30, 2022 |
\$ 6,603 | \$ 4,272,495 | \$ (1,836,133) | \$ 128,691 | \$ 453,911 | \$ (55,296) |
\$ 2,970,271 | \$ 2,970,271 |
| Balance year ended December 31, 2022 |
\$ 6,640 | \$ 4,309,880 | \$ (2,109,791) | \$ 129,280 |
\$ 535,247 |
\$ (57,557) |
\$ 2,813,699 | \$ 2,813,699 |
| Total loss of the period Other comprehensive income |
\$ | \$ | \$ (123,239) |
\$ | \$ | \$ | \$ (123,239) |
\$ (123,239) |
| / (loss) Total comprehensive |
762 | (1,688) | (926) | (926) | ||||
| income/(loss) for the period | — | — | (123,239) | 762 | — | (1,688) | (124,165) | (124,165) |
| Income tax benefit from | ||||||||
| excess tax deductions related | ||||||||
| to share-based payments | 1,396 | 1,396 | 1,396 | |||||
| Share-based payment | 102,651 | 102,651 | 102,651 | |||||
| Exercise of stock options | 58 | 65,016 | 65,074 | 65,074 | ||||
| Ordinary shares withheld for | ||||||||
| payment of employees' | ||||||||
| withholding tax liability | (604) | (604) | (604) | |||||
| Balance period ended June 30, 2023 |
\$ 6,698 | \$ 4,374,291 | \$ (2,233,029) | \$ 130,042 | \$ 639,294 |
\$ (59,245) |
\$ 2,858,051 | \$ 2,858,051 |
Please refer to note 10 for more information on the share capital.
argenx SE is a Dutch European public company with limited liability incorporated under the laws of the Netherlands. The Company (COC 24435214) has its official seat in Rotterdam, the Netherlands, and its registered office is at Laarderhoogteweg 25, 1101 EB Amsterdam, the Netherlands.
argenx SE is a publicly traded company with ordinary shares listed on Euronext Brussels under the symbol "ARGX" since July 2014 and with American Depositary Shares listed on Nasdaq under the symbol "ARGX" since May 2017.
The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2023 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the IASB and as adopted by the European Union. The unaudited condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2022.
All amounts herein are presented in thousands of \$, unless otherwise indicated, rounded to the nearest \$ '000.
The unaudited condensed consolidated financial statements have been approved for issue by the Company's Board of Directors (the "Board") on July 25, 2023.
There were no significant changes in accounting policies, critical accounting judgements and key sources of estimation uncertainty applied by us in these unaudited condensed consolidated interim financial statements compared to those used in the annual consolidated financial statements as of December 31, 2022.
| As of | |||||
|---|---|---|---|---|---|
| June 30, | December 31, | ||||
| (in thousands of \$) | 2023 | 2022 | |||
| Non-current restricted cash | \$ | 1,762 | \$ | 1,736 | |
| Non-current financial assets held at fair value through profit or loss | 21,715 | 21,715 | |||
| Non-current financial assets held at fair value through OCI | 15,756 | 17,443 | |||
| Total other non-current assets | \$ | 39,232 | \$ | 40,894 |
Please also refer to note 18 for more information on the financial instruments.
Non-current prepaid expense is related to prepaid inventory. Please also refer to note 6 for more information on inventory.
| As of | ||||
|---|---|---|---|---|
| June 30, | December 31, | |||
| (in thousands of \$) | 2023 | 2022 | ||
| Raw materials and consumables | \$ 113,128 |
\$ | 126,046 | |
| Inventories in process | 58,806 | 65,016 | ||
| Finished goods | 29,178 | 37,291 | ||
| Total inventories | \$ 201,112 |
\$ | 228,353 |
The cost of inventories, which is recognized as an expense and included in the "cost of sales" on the unaudited condensed consolidated statements of profit or loss, amounted to \$42.4 million for the six months ended June 30, 2023 (compared to \$6.4 million for the six months ended June 30, 2022).
As a result of the detection of a latent defect in the second quarter of 2023 in drug substance batches produced in 2022 at one of the facilities awaiting approval, the Company has decreased inventory with an amount of \$47.3 million. The discovered latent defect comprises an error in the concentration of an excipient in the final formulation, which disqualifies the material for commercial use and causes the Company to write-down its value. The Company has obtained the commitment from the supplier to replace the drug substance from these batches in the coming years, which is reflected in the recognition of a non-current prepaid expense amounting to \$47.3 million.
Included in inventory are products which could be used either for commercial activities, or for in-house preclinical and clinical programs, non-reimbursed pre-approval programs and clinical programs carried out by Zai Lab.
Trade and other receivables are composed of receivables which are detailed below:
| As of | ||
|---|---|---|
| June 30, | December 31, | |
| 2023 | 2022 | |
| 304,229 | 241,228 | |
| 29,557 | 12,918 | |
| 19,446 | 21,551 | |
| \$ 353,232 |
\$ 275,697 |
|
The carrying amounts of trade and other receivables approximate their respective fair values. On June 30, 2023 and December 31, 2022, the company did not have any provision for expected credit losses.
These current financial assets relate to term accounts with an initial maturity longer than 3 months but less than 12 months and money market funds which do not qualify as cash equivalents.
| As of | |||
|---|---|---|---|
| June 30, | December 31, | ||
| (in thousands of \$) | 2023 | 2022 | |
| Money market funds | \$ 113,215 |
\$ | 46,162 |
| Term accounts | 773,186 | 1,345,646 | |
| Total Current Financial Assets | \$ 886,401 |
\$ | 1,391,808 |
Please also refer to note 18 for more information on the financial instruments.
| As of June 30, |
December 31, | ||||
|---|---|---|---|---|---|
| (in thousands of \$) | 2023 | 2022 | |||
| Money market funds | \$ | 845,573 | \$ | 669,147 | |
| Term accounts | 210,000 | 54,116 | |||
| Cash and bank balances | 54,994 | 77,477 | |||
| Total cash and cash equivalents | \$ | 1,110,567 | \$ | 800,740 |
On June 30, 2023, cash and cash equivalents amounted to \$1,110.6 million, compared to \$800.7 million on December 31, 2022 and included money market funds that are readily convertible to cash and subject to an insignificant risk of changes in value, term accounts with an initial maturity not exceeding 3 months and cash and bank balances held at various financial institutions.
Please also refer to note 18 for more information on the financial instruments.
On June 30, 2023, the Company's share capital was represented by 55,955,544 shares. All shares were issued, fully paid up and of the same class. The table below summarizes our capital increases, as a result of the exercise of stock options and vesting of RSUs under the argenx Employee Stock Option Plan, for the period ended June 30, 2023.
| Number of shares outstanding on December 31, 2022 | 55,395,856 |
|---|---|
| Exercise of stock options | 533,478 |
| Vesting of RSUs | 26,210 |
| Number of shares outstanding on June 30, 2023 | 55,955,544 |
The Company has an equity incentive plan for the employees, key consultants, board members, senior managers and key outside advisors ("key persons") of the Company and its subsidiaries. In accordance with the term of the plan, as approved by shareholders, employees may be granted stock options and/or restricted stock units.
On April 3, 2023, the Company granted a total of 61,056 stock options to certain of its employees and consultants. Below is an overview of the parameters used in relation to the new grant during 2023:
| Stock options granted in | Apr-23 | |
|---|---|---|
| Number of options granted | 61,056 | |
| Fair value of options (in USD) (*) | \$ | 158.21 - 196.18 |
| Share price (in USD) (*) | \$ | 361.64 - 401.21 |
| Exercise price (in USD) (*) | \$ | 370.34 |
| Expected volatility | % | 41.00 - 42.18 |
| Expected option life (in years) | 4.0 - 6.5 |
|
| Risk‑free interest rate | % | 2.96 - 3.14 |
| Expected dividends | — |
(*) amounts have been converted to US dollar at the closing rate of grant date
The stock options are granted to key persons of the Company and its subsidiaries. The stock options may be granted to purchase ordinary shares at an exercise price. The stock options have been granted free of charge. Each employee's stock option converts into one ordinary share of the Company upon exercise. 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 granted vest, in principle, as follows:
Upon leave of the employee, consultant or director, stock options must be exercised before the later of (i) 90 days after the last working day at argenx, or (ii) March 31 of the 4th year following the date of grant of those stock options, and in any case no later than the expiration date of the option.
The total share-based payment expense related to stock options recognized in the unaudited condensed consolidated statement of income or loss totaled \$72.0 million for the six months ended June 30, 2023 compared to \$60.4 million for the six months ended June 30, 2022.
The RSUs are granted to key persons of the Company and its subsidiaries. The RSUs have been granted free of charge. Each employee's RSUs converts into one ordinary share of the Company upon vesting. The RSUs carry neither rights to dividends nor voting rights. RSUs once converted into ordinary shares, may be sold at any time from the date of vesting, have no expiry date and may be held by the participant without limitation. The fair value of RSUs is based on the closing sale price of our common stock on the day prior to the date of issuance. RSUs vest over a period of 4 years with 1/4th of the total grant vesting at each anniversary of the date of grant.
The total share-based payment expense related to RSUs recognized in the unaudited condensed consolidated interim statements of profit or loss totaled \$30.1 million for the six months ended June 30, 2023 compared to \$16.2 million for six months ended June 30, 2022.
| As of | ||||
|---|---|---|---|---|
| June 30, | December 31, | |||
| (in thousands of \$) | 2023 | 2022 | ||
| Trade payables | \$ | 195,268 | \$ | 188,721 |
| Short term employee benefits | 70,217 | 84,337 | ||
| Gross-to-net accruals | 39,153 | 19,478 | ||
| Other | 5,347 | 3,142 | ||
| Total trade and other payables | \$ | 309,985 | \$ | 295,679 |
The carrying amounts of trade and other payables approximate their respective fair values.
Trade payables correspond primarily to clinical and manufacturing activities and include accrued expenses related to these activities.
Short term employee benefits include payables and accruals for salaries and bonuses to be paid to the employees of the Company.
The movement in gross-to-net accruals as of June 30, 2023 and as of June 30, 2022 was as follows:
| Distribution | ||||||
|---|---|---|---|---|---|---|
| Rebates and | fees, product | |||||
| charge backs | returns and | Total | ||||
| (in thousands of \$) | other | |||||
| Balance at January 01, 2022 | \$ | — | \$ | — | \$ | — |
| Current estimate related to the sales made in current year | 10,078 | 3,270 | 13,348 | |||
| (Credits or payments related to sales made during the year) | (5,592) | (2,312) | (7,904) | |||
| Balance at June 30, 2022 | \$ | 4,485 | \$ | 958 | \$ | 5,443 |
| Balance at January 01, 2023 | \$ | 15,399 | \$ | 4,079 | \$ | 19,478 |
| Current estimate related to the sales made in current year | 56,801 | 11,339 | 68,140 | |||
| Adjustments for prior year sales | 632 | (883) | (251) | |||
| (Credits or payments related to sales made during the year) | (29,711) | (7,474) | (37,185) | |||
| (Credits or payments related to sales made during the prior year) | (8,260) | (2,769) | (11,029) | |||
| Balance at June 30, 2023 | \$ | 34,861 | \$ | 4,292 | \$ | 39,153 |
For the six months ended June 30, 2023, the product gross sales was fully related to sales of VYVGART and amounts to \$555.7 million and the gross to net adjustment for six months ended June 30, 2023 was \$68.4 million, resulting in \$487.3 million of product net sales for six months ended June 30, 2023.
For the six months ended June 30, 2022, the product gross sales was fully related to sales of VYVGART and amounts to \$109.4 million and the gross to net adjustment for six months ended June 30, 2022 was \$13.4 million, resulting in \$96.0 million of product net sales for six months ended June 30, 2022.
Refer to note 14 for the breakdown of product net sales by regions for six month ended June 30, 2023.
The following table summarizes our product net sales by territory of sales based on the country of the entity that recognizes product net sales:
| Six Months Ended June 30, |
|||||
|---|---|---|---|---|---|
| (in thousands of \$) | 2023 | ||||
| Product net sales | \$ | \$ | |||
| United States | 440,853 | 94,349 | |||
| Japan | 23,645 | 1,514 | |||
| EMEA | 22,836 | 133 | |||
| Total | \$ 487,335 |
\$ | 95,996 |
We sell our products through a limited number of distributors and wholesalers. Four U.S. customers represent approximately 88% of our product net sales in the U.S. during six months ended June 30, 2023 (compared to 92% for the same period in 2022). The non-current assets of the Company, with the exception of the deferred tax assets, are geographically located as shown in the table below:
| As of | ||||||
|---|---|---|---|---|---|---|
| June 30, | December 31, | |||||
| (in thousands of \$) | 2023 | 2022 | ||||
| Belgium | \$ | 359,122 | \$ | 275,620 | ||
| United States | 1,893 | 2,325 | ||||
| Japan | 2,332 | 2,763 | ||||
| Germany | 149 | 130 | ||||
| France | 7 | 4 | ||||
| Italy | 7 | — | ||||
| Total | \$ | 363,510 | \$ | 280,841 |
| (in thousands of \$) | 2023 | 2022 | |||
|---|---|---|---|---|---|
| Personnel expense | \$ | 99,482 | \$ | 79,497 | |
| External research and development expenses | 233,868 | 185,453 | |||
| Materials and consumables | 2,044 | 1,407 | |||
| Depreciation and amortization | 3,498 | 1,842 | |||
| Other expenses | 22,472 | 10,688 | |||
| Total research and development expenses | \$ | 361,364 | \$ | 278,887 |
| Six Months Ended June 30, |
||||||
|---|---|---|---|---|---|---|
| (in thousands of \$) | 2023 | 2022 | ||||
| Personnel expense | \$ | 134,862 | \$ | 115,397 | ||
| Professional and marketing fees | 133,232 | 78,018 | ||||
| Supervisory board | 3,978 | 4,107 | ||||
| Depreciation and amortization | 1,083 | 1,217 | ||||
| IT expenses | 5,496 | 8,075 | ||||
| Other expenses | 32,499 | 21,849 | ||||
| Total selling, general and administrative expenses | \$ | 311,149 | \$ | 228,664 |
The Company recorded an income tax benefit of \$36.8 million (compared to \$11.1 million for the same period in 2022) in relation to a pretax loss of \$160.0 million for the six months ended June 30, 2023 (compared to \$447.1 million for the same period in 2022). The effective tax rate for the six months ended June 30, 2023 and June 30, 2022 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) certain deferred tax assets not recognized due to the history of losses and forecasted losses, and (iii) a \$44.1 million deferred tax impact of intra-group inventory transfers (compared to \$13.2 million for the same period in 2022).
The Company carried the following assets at fair value on June 30, 2023 and December 31, 2022, respectively:
| At June 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| (in thousands of \$) | Level 1 | Level 2 | Level 3 | |||
| Non-current financial assets | \$ | 15,756 | \$ | — | \$ | 21,715 |
| Current financial assets | 113,215 | — | — | |||
| Cash equivalents | 845,573 | — | — | |||
| Assets carried at fair value | \$ | 974,543 | \$ | — | \$ | 21,715 |
| At December 31, 2022 | ||||||
| (in thousands of \$) | Level 1 | Level 2 | Level 3 | |||
| Non-current financial assets | \$ | 17,443 | \$ | — | \$ | 21,715 |
Current financial assets 46,162 — — Cash equivalents 669,147 — — Assets carried at fair value \$ 732,752 \$ — \$ 21,715
In March 2019, the Company entered into a license agreement with AgomAb Therapeutics NV for the use of HGF-mimetic SIMPLE Antibodies™, developed under the Company's Immunology Innovative Program. In exchange for granting this license, the Company received a profit share in AgomAb Therapeutics NV.
In March 2021, AgomAb Therapeutics NV secured \$74 million in Series B financing by issuing 286,705 of Preferred B Shares. The Company used the post-money valuation of 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 \$11.2 million non-current assets being recorded through profit or loss. Since AgomAb Therapeutics NV is a private company, the valuation of the profit share is based on level 3 assumptions.
In June 2022, AgomAb Therapeutics NV secured €38.4 million as a result of the extension of Series B. The Company 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 for the year ended December 31, 2022.
As part of the license agreement for the development and commercialization for efgartigimod in Greater China, the Company obtained, amongst others, 568,182 newly issued Zai Lab shares calculated at a price of \$132 per share. The fair value of the equity instrument at period-end is determined by reference to the closing price of such securities at each reporting date (classified as level 1 in the fair value hierarchy), resulting in a change in fair value. The Company made the irrevocable election to recognize subsequent changes in fair value through OCI.
The company has a joint venture agreement with the University of Colorado Anschutz Medical Campus and UCHealth resulting in a separate legal entity, OncoVerity, Inc. During the first six months of 2023, the Company contributed \$13 million towards the joint venture to fund its operations.
The Company's manufacturing commitments with Lonza, its drug substance manufacturing contractor, relate to the ongoing execution of the biologic license application (BLA) services for efgartigimod and its manufacturing activities related to the commercialization or potential future commercialization. In December 2018, the Company signed its first commercial supply agreement with Lonza related to the reservation of commercial drug substance supply capacity for efgartigimod. In the
aggregate, as of June 30, 2023, the Company has outstanding commitments for efgartigimod under the first commercial supply agreement of \$379.2 million.
During 2022, the Company signed an agreement with Fujifilm, for activities relating to the large-scale manufacturing of efgartigimod drug substance. In the aggregate, as of June 30, 2023, the Company has outstanding commitments for efgartigimod under the commercial supply agreement of \$2.3 million.
On July 17, 2023, the Company offered 2,244,899 of its ordinary shares through a global offering which consisted of 1,580,981 ADSs in the U.S. at a price of \$490.0 per ADS, before underwriting discounts and commissions and offering expenses; and 663,918 ordinary shares in the European Economic Area at a price of €436.37 per share, before underwriting discounts and commissions and offering expenses. On July 19, 2023, the underwriters of the offering exercised their over-allotment option to purchase 336,734 additional ADSs in full. As a result, the Company received \$1.27 billion in gross proceeds from this offering.
The Company generated its first commercial sale of Vyvgart Hytrulo in the United States during July 2023, which trigged a milestone payment of \$18 million by the Company towards Halozyme Inc.
No other events have occurred after the balance sheet date that could have a material impact on the unaudited condensed consolidated financial statements.
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