Risks related to the development of new drugs
The future success of ALK-Abelló depends on the company’s ability to successfully identify, develop and market new, innovative drugs, and this involves significant risks. Before a pharmaceutical drug can be approved for marketing, it must be subjected to very comprehensive and lengthy clinical trials in order to document aspects such as safety and effect. In the course of the development process, the outcome of the clinical trials is subject to significant risk. Even though substantial resources are invested in the development process, the trials may produce negative results. Delays in obtaining regulatory approvals – or failure to obtain such approvals – may also have a major impact on the ability of ALK-Abelló to achieve its long-term goals.

ALK-Abelló makes thorough risk assessments of its research and development programs in a continuing process before they are moved forward in the development process and into the final registration process. This is done to optimize the probability that the products reach the market.

Risks relating to regulation and price control
ALK-Abelló’s products are subject to a large number of statutory and regulatory requirements with respect to issues such as safety, effect and production. In many cases, the national authorities also fix or restrict the product price through reimbursements. In most of the countries in which ALK-Abelló operates, prescription drugs are subject to reimbursements from and price control by the national authorities. This often results in major price differences in the individual markets. Regulatory intervention and price control may therefore have a significant impact on the company’s earnings capacity. As an example, in 2004 the German authorities dictated a temporary increase in the mandatory price reduction on drugs from 6% to 16%. The price reduction was subsequently lowered to 6% in January 2005.

Risks relating to competition
ALK-Abelló operates in markets characterized by intense competition. If, for instance, a competitor launches a new and more efficient treatment of allergy, it may have a material impact on ALK-Abelló’s sales. A competitive market may also lead to market-driven price reductions or price reductions dictated by the regulatory authorities.

Both competition and price are risks that may have a material impact on ALK-Abelló’s ability to achieve its long-term goals. ALK-Abelló therefore closely monitors the economic developments, competitive situation and initiatives on all important markets. 

Risks relating to patents and intellectual property rights
Patents and other intellectual property rights are important to developing and retaining ALK-Abelló’s competitive strength. The risk that ALK-Abelló infringes patents or trade mark rights held by other companies and the risk that other companies may attempt to infringe the patents and trade mark rights of ALK-Abelló is carefully monitored and, if necessary, suitable measures are taken.

Risks relating to production and quality
ALK-Abelló has concentrated most of its production capacity at factories in Denmark, France, Spain and the USA. Although the factories are located in areas that have not historically been hit by natural disasters, this requires geographical diversification and calls for risk planning in order to avoid emergency situations such as lack of or poor access to raw materials, e.g. pollen. This planning includes the prevention of unwanted events and preventive inventory management such as the build-up of contingency inventories in order to ensure an unbroken chain of production.

Production and the manufacturing processes are also subjected to periodic and routine inspections by the regulatory authorities as a regular part of their monitoring process in order to ensure that all manufacturers observe the prescribed requirements and standards.

Meeting these quality standards is a prerequisite for the company’s competitive strength. ALK-Abelló’s production processes and quality standards have been developed and optimized over many years. Regular inspections by the regulatory authorities at ALK-Abelló did not give rise to any material comments in the past year.

Risks relating to key employees
ALK-Abelló is dependent on being able to attract and retain employees in key positions. A loss of key employees may have a material impact on the company’s market and research efforts. ALK-Abelló is managing this risk, among other things, by continuously offering its staff professional development opportunities and fair compensation.