Pharming Group (PHGUF) Risk Factors

RUCONEST is approved by the FDA, the European Commission and certain other regulatory authorities for the treatment of HAE attacks, but is not currently approved for the treatment of other indications. Regulatory authorities strictly regulate the promotional claims that may be made about prescription products, and RUCONEST may not be promoted for uses that are not approved, as reflected in its approved labeling. If we are not able to obtain regulatory approval for any desired future indications for our products and product candidates, our ability to effectively market and sell our products may be reduced and our business may be adversely affected. While physicians may choose, in their independent medical judgment, to prescribe products for uses that are not described in the product's labeling and for uses that differ from those tested in clinical trials and approved by the regulatory authorities, we are prohibited from marketing and promoting the products for indications that are not specifically approved by the regulatory authorities. These "off-label" uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the United States and in other jurisdictions generally do not restrict or regulate the behavior of physicians in their choice of treatment within the practice of medicine. Regulatory authorities do, however, restrict communications by biotechnology or pharmaceutical companies on off-label use. If the FDA or another regulator determines that our promotional activities constitute promotion of an off-label use, it could request that we modify our promotional materials and subject us to regulatory or enforcement actions as well as actions by other agencies, including issuance of warning letters or untitled letters, suspension or withdrawal of an approved product from the market, mandatory or voluntary recalls, and could result in the imposition of significant criminal, civil, and administrative penalties such as civil fines, disgorgement of money, imprisonment, exclusion from participation in federal health care programs (e.g. Medicare and Medicaid), operating restrictions, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement, injunctions or criminal prosecution, any of which could significantly harm our business.

We are subject to tax rules in the jurisdictions in which we operate. Changes in tax rates, tax relief and tax laws, changes in practice or interpretation of the law by the relevant tax authorities, increasing challenges by relevant tax authorities or any failure to manage tax risks adequately could result in increased charges, financial loss, penalties and reputational damage. Tax authorities may pursue additional taxes based on retroactive changes to tax laws which could result in a material restatement to our tax position. Any of these factors could have a negative impact on our business, financial condition, results of operations and prospects.

We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business, including recently enacted laws in many jurisdictions where we operate. The collection and use of personal data (including health data) in the EU is governed by the provisions of the GDPR. This regulation, which is wide-ranging in scope and includes extraterritoriality provisions that apply to certain entities located outside of the EU, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of personal data breaches to the competent national data protection authorities and the security and confidentiality of the personal data, and substantial fines for breaches of the data protection rules. The GDPR also imposes strict rules on the transfer of personal data out of the EU to other countries (including the United States). Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States and the United Kingdom may result in large fines and other administrative penalties: a failure to comply could result in fines up to the greater of 4% of annual worldwide turnover for the preceding financial year or €20 million, with infringements being grouped into tiers which trigger different maximum fine levels. Turnover in this context may include not only the entity in breach but also other group entities. Recent enforcement actions against multinational companies have resulted in significant fines. Following the United Kingdom's formal departure from the EU on January 31, 2020, the United Kingdom adapted and implemented the GDPR into its national law, as a result of the United Kingdom's Data Protection Act 2018, or DPA. The DPA supplements the GDPR, and in particular sets out specific requirements related to the processing of ''special categories of personal data'', including personal data related to health, genetic information and personal data related to criminal offenses or convictions. The DPA also creates a number of criminal offenses (punishable by uncapped fines) for organizations and in certain cases their directors and officers. Since the United Kingdom left the EU and the transition period has expired, the United Kingdom became a "third country" for the purposes of EU data protection law. A "third country" is a country other than the EU Member States and the three additional European Economic Area countries (Norway, Iceland and Liechtenstein) that have adopted a national law implementing the GDPR. Under the GDPR, personal data can only be transferred to third countries in compliance with specific conditions for cross-border data transfers. Unless an exemption applies, appropriate safeguards are required to enable transfers of personal data from the EU and EEA Member States. However, on June 28, 2021, the European Commission adopted an adequacy decision in relation to the United Kingdom. With this decision, the European Commission considers that personal data benefits from an essentially equivalent level of protection under UK law to that guaranteed under EU law, and thus allows personal data to flow freely from the EEA to the United Kingdom. This adequacy decision is however limited in time, and its renewal will depend on whether the United Kingdom continues to ensure an adequate level of data protection. As the United Kingdom is currently looking to reform its data protection regime, there is uncertainty as to whether the United Kingdom will be able to maintain its adequacy status in the future. Similarly, the European Commission adopted its adequacy decision for the EU-U.S. Data Privacy Framework on July 10, 2023, allowing the transfer of personal data from the EEA to U.S. companies participating in the EU-U.S. Data Privacy Framework. Under the GDPR regulations, we are considered a controller of data processing and are subject to several legal obligations. In particular, we are obligated to place importance on collection and processing of special categories of personal data which, for our purposes, is data that reveals genetic data or data concerning health. While we have taken steps to comply with the GDPR and the DPA, we cannot assure you that our efforts to achieve and remain in compliance have been or will continue to be fully successful. The GDPR regulations and the DPA may impose additional responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with these or new data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations and prospects. In addition, we obtain patient health information from most healthcare providers that prescribe our products and research institutions with which we collaborate, and they are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in the United States. Although we are not directly subject to HIPAA other than with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. There are also state laws on patient health information, such as the California Confidentiality of Medical Information Act, which we are more directly subject to. As more states consider implementing such laws, we may face an ever-expanding patchwork of data privacy regulations. Failure to comply with healthcare laws and laws and regulations covering data privacy and the protection of health-related and other personal information could result in government enforcement actions, which could include civil or criminal penalties, private litigation and adverse publicity and could negatively affect our business, financial condition, results of operations and prospects.

Joenja was granted approval by the FDA in late March 2023. In the United States, Joenja will now be used by larger numbers of patients, potentially for longer periods of time, and we and others (including regulatory agencies and private payors) will collect extensive information on the efficacy and safety of Joenja by monitoring its use in the marketplace. New safety or efficacy data from market surveillance may result in negative consequences including the following: - Modification to product labeling or promotional statements, such as additional boxed or other warnings or contraindications, or the issuance of additional "Dear Doctor Letters" or similar communications to healthcare professionals;- Required changes in the administration of Joenja;- Imposition of additional post-marketing surveillance, post-marketing clinical trial requirements, distribution restrictions or other risk management measures, such as a risk evaluation and mitigation strategy;- Suspension or withdrawal of regulatory approval or delays or declination of regulatory approval outside of the United States;- Suspension of, or imposition of restrictions on, our operations, including costly new manufacturing requirements with respect to Joenja; and - Voluntary or mandatory product recalls or withdrawals from the market and costly product liability claims. Any of these circumstances could reduce Joenja's market acceptance and would be likely to materially adversely affect our business.

Our future success depends on our ability to attract and retain key management personnel and scientific and technical personnel. Experienced employees in the biopharmaceutical and biotechnology industries are in high demand and competition for their talents can be intense, especially in The Netherlands, where we maintain our principal operations. We have entered into employment agreements with executive officers and other key employees, but any employee may terminate his or her employment at any time or may be unable to continue in his or her role. The loss of any executive or key employee, or an inability to recruit desirable candidates or find adequate third parties to perform such services on reasonable terms and on a timely basis, could have a material adverse effect on our business, financial condition, results of operations and prospects. If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that could significantly impede our ability to achieve our development and commercial objectives, our ability to raise additional capital and our ability to implement our business strategy.

We have entered into (downstream) manufacturing and supply agreements for Joenja and RUCONEST with, among others, Sanofi S.A., or Sanofi, and BioConnection Investments B.V. (formerly BioConnection B.V.), or BioConnection, since we do not have a GMP-certified lab capable of performing the quality control procedures necessary for the release of product. A failure of these suppliers to supply our needs would be difficult to overcome as contracting additional manufacturing capacity on a timely basis could be difficult or impossible and have significant adverse effect on our business.

New product development and indication expansions of existing products is very expensive and involves a high degree of uncertainty and risk. Only a small number of research and development programs result in the commercialization of a new product. Furthermore, the development of novel approaches for the treatment of diseases, including development efforts in new and innovative modalities present additional challenges and risks. Clinical trial data and results are subject to differing interpretations by regulatory authorities. We may view data as sufficient to support the safety, effectiveness, or approval of an investigational therapy, while regulatory authorities may disagree and may require additional data, may limit the scope of an approval or may deny approval altogether. There can be difficulty in predicting the time and cost of product development of novel approaches for the treatment of diseases across regulatory approval authorities. Success in preclinical work or early-stage clinical trials does not ensure that later stage or larger scale clinical trials will be successful. The results of clinical trials may indicate that our product candidates lack efficacy, have harmful side effects, result in unexpected adverse events or raise other concerns that may significantly reduce the likelihood of regulatory approval. This may result in terminated programs, significant restrictions on use and safety warnings in an approved label, adverse placement within the treatment paradigm or significant reduction in the commercial potential of the product candidate. Even if we could successfully develop new products or indications, we may make a strategic decision to discontinue development of a product candidate or indication if, for example, we believe commercialization will be difficult relative to the standard of care or other opportunities in our pipeline.

Other than Joenja, which was approved by the FDA on March 24, 2023, our product pipeline candidates are all in the early stages of clinical and preclinical development. For example, our gene therapy product candidate is in preclinical development. Our spending on current and future research and development programs may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaborations, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate.

We rely, and will continue to rely, on a combination of patents, trademarks and confidentiality agreements with employees, consultants, collaborators, advisors and other third parties to protect the intellectual property related to our current and future product candidates. We use patents and licensing to protect our products and technology. We try to be careful to develop products that don't infringe on the proprietary rights of third parties. Currently, we have several patent applications granted and pending in countries including the U.S., Europe and Japan. The patent positions of pharmaceutical companies can be uncertain and may involve complex legal and factual questions. The patents that we own and have license rights to now or the patents and patent applications that we may own or in-license in the future may not have patentable claims that protect our current and future product candidates in the relevant jurisdictions where we intend to commercialize such products. There is no assurance that we are aware of all potentially relevant prior art relating to current patents or current or future patent applications. As such, patent examiners may find prior art that can prevent a patent from issuing from a pending patent application. During the patent examination process, we may be required to narrow the pending claims to overcome prior art, a process that may limit the scope of patent protection. Even if patents do successfully issue based on our future patent applications, and even if the issued patents cover our current and future product candidates, including their compositions, formulation, method of manufacture, and method of use, third parties may challenge our issued patents' validity, enforceability or scope, which may result in such patents being narrowed so that they no longer cover competitors' products that are considered to infringe, invalidated or held unenforceable. Any successful opposition to these patents or any other patents owned by or licensed to us in the future could deprive us of rights necessary for the successful commercialization of any of our current or future product candidates, if approved. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be further reduced. If the patent applications we may own or in-license with respect to our current and future product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for any of our current or future product candidates, it could dissuade other companies from collaborating with us to develop future product candidates, and threaten our ability to commercialize our current and future product candidates. Notably, pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Any such outcome could have an adverse effect on our business. Moreover, our technologies and products may infringe on third-party intellectual property rights. As a result, we may face litigation or other legal proceedings concerning such intellectual property. These processes can be time-consuming and costly. In the event of an unfavorable ruling in patent or intellectual property litigation, we could be subject to significant liabilities to third parties, or be required to cease developing, manufacturing or selling the affected products or technology. Each of these outcomes may adversely affect our financial position. We may also be confronted with claims which are raised with the main aim of exploiting the nuisance value of publicly raised claims. In order to prevent the infringement of third-party intellectual property rights, we may need to acquire licenses for patents held by third parties to re-establish or maintain freedom to operate for our products, possibly on unfavorable terms. A failure to obtain licenses for patents held by third parties, or failure to obtain them on favorable terms, may have a material adverse effect on our financial and operational position. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Furthermore, publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, if the breadth or strength of protection provided by our patents and patent applications, whether owned or in-licensed now or in the future, is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our licensed patents may be challenged in the courts or patent offices in the United States. Such challenges may result in loss of exclusivity or in patent claims being narrowed so that they no longer cover competitors' products that are considered to infringe, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or unduly limit the duration of the patent protection of our technology and products. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after the filing of the earliest non-provisional application to which the patent claims priority. Various extensions may be available; however, the exclusivity and protection afforded by a patent is limited. We may be required to disclaim a portion of patent term in order to overcome double patenting rejections from the patent office, thus potentially shortening our exclusivity period. Without patent protection for our current or future product candidates, we may be open to competition from generic versions of such products. 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 licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

The development and commercialization of pharmaceuticals and biologics is highly competitive. In particular, RUCONEST faces intense competition from other products used to treat HAE. We face the risk that RUCONEST may no longer be competitive and accepted by physicians, patients, payors and others in the medical community within acute HAE market. Prophylactic therapies are increasingly used, which may result in HAE patients requiring less acute rescue medicine. RUCONEST is not approved for prophylactic use. Several products have been approved in the U.S. and Europe for the treatment of HAE attacks, including human blood plasma derived C1INH products. Oral products for the prevention of HAE attacks are also being developed. Orladeyo (berotralstat) is an oral prophylactic product which was approved in the fourth quarter of 2020. In the acute market, we face pricing competition as a result of the 2019 market entry of generic equivalents to the acute treatment: Firayzr (icatibant injection). Consequently, we may not obtain sufficient market penetration with RUCONEST or a sufficient level of sales of the product to allow it to remain profitable. New technologies from competitors may make RUCONEST obsolete. Our competitors include major international pharmaceutical companies as well as smaller or regional specialty pharmaceutical and biotechnology companies. Many of our competitors are larger and have greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, prosecuting intellectual property rights and marketing approved products than we do. Such competitors may be better equipped to withstand changes in economic and industry conditions. Smaller or early stage companies may also be significant competitors, particularly through collaborative arrangements with large, established companies. Key competitive factors affecting the commercial success of our products and any other products that we develop or acquire are likely to be safety, efficacy, tolerability profile, reliability, convenience of dosing, price and reimbursement. We may also face future competition from companies selling generic alternatives to RUCONEST in countries where we do not have patent coverage, orphan drug status or another form of data or marketing exclusivity or where patent coverage or data or marketing exclusivity has expired, is not enforced, or may, in the future, be challenged.

Two U.S. customers (namely specialty pharmacies) accounted for $204.3 million, or 83%, of our revenues for the year ended December 31, 2023 and $173.6 million, or 84%, of our revenues for the year ended December 31, 2022. Inherent risks exist when a large percentage of total revenues is concentrated with a limited number of specialty pharmacies. With specialty products, the pharmacies provide patient support services that are more than are provided by retail pharmacies, and effective communication and relations between our hub and these pharmacies are important in maintaining timely and consistent filling of prescriptions for RUCONEST. It is not possible for us to predict the future level of demand for our products that will be handled by these specialty pharmacies or the level of service they will provide to patients and healthcare practitioners. In addition, revenues from these large customers may fluctuate from time to time based on market demand for our products among prescribing physicians, patients and payors, the level which may be affected by market conditions or other factors, some of which may be outside of our control. Further, our contracts with these large specialty pharmacies do not contain purchase commitments or otherwise obligate them to buy a minimum or fixed volume of products from us (and allow these specialty pharmacies to return product to us for a variety of reasons). If either of our major customers experience declining or delayed sales of our products to consumers due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our products, reduce the volume of products we supply to such customers, we could lose the customer or have a substantial amount of product returned to us. Additionally, although historically, our reserves for doubtful accounts have not been material, if either of our large customers were to suffer financial instability, they could refuse or delay payment of outstanding receivables. Any such development may have a material adverse effect on our business, results of operations and financial condition.

The commercial success of our approved products depends, and of our product candidates will depend, in part, on the medical community, patients, and payors accepting them as effective, safe and cost-effective. If our product candidates do not achieve an adequate level of acceptance, we may struggle to continue to generate significant product revenues and may not in the future generate any profits from operations. The degree of market acceptance of our approved products, in particular Joenja, or our product candidates, if approved for commercial sale, will depend on a number of factors, including: - the potential efficacy and potential advantages over alternative treatments;- the frequency and severity of any side effects, including any limitations or warnings contained in a product's approved labeling;- the frequency and severity of any side effects resulting from the conditioning regimen or follow-up requirements for the administration of our product candidates;- the relative convenience and ease of administration;- the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;- the strength of marketing and distribution support and timing of market introduction of competitive products;- publicity concerning our products or competing products and treatments;- continued demand from two U.S. specialty wholesale companies that in 2023 represented 83% of our revenues; and - sufficient third-party insurance coverage or reimbursement. Even if a product candidate displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product, if approved for commercial sale, will not be known until after it is launched. Our efforts to educate the medical community and payors on the benefits of our products, particularly Joenja given its recent approval, and product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors.

While we are headquartered in The Netherlands, we source materials, products and services from several countries outside the EU that are paid in local currencies. As a result of the commercialization of Joenja in the United States and RUCONEST in the United States and in other countries outside the EU, we will also receive payments and generate costs in U.S. dollars and other currencies. As a result, our business may be affected by fluctuations in foreign exchange rates between the Euro and the U.S. dollar, as well as other currencies. Since the majority of our sales are invoiced and paid in U.S. dollars, and the majority of our costs and liabilities are valued in Euros, any change in the relevant exchange rate means a corresponding change in the Euro value of sales and a corresponding change in the loan balance in Euros. While we maintain U.S. dollar cash deposits, the functional currency of the Dutch Pharming entities is the Euro, so any change in the U.S. dollar-Euro exchange rate means a corresponding change in the Euro value of U.S. dollar cash deposits.