Risk management
ALK’s Executive Leadership Team is responsible for the ongoing management of risks throughout the value chain, including risk identification, the assessment of probabilities and potential consequences, and the introduction of risk-reducing measures.
The Executive Leadership Team has a Risk Committee to assist in meeting its overall responsibility for risk management. The Risk Committee comprises representatives from each functional area relevant to ALK’s risk profile. The Risk Committee meets twice a year or more, as and when required, to perform its tasks. Risks are systematically assessed according to a two-dimensional matrix, rating the potential impact and probability of each risk. A risk management report with key enterprise risks and recommended mitigation plans is presented to the Executive Leadership Team before it is submitted to the Board of Directors each year for their review and approval.
The following is a description of ALK’s key enterprise risks and the main initiatives taken to mitigate these risks. The risk movements compared to the previous year are indicated.
Commercial risks impacting revenue growth
Description
The degree of market approval and acceptance for a new product, or a new indication for an existing product, depends on several factors, including the demonstration of clinical efficacy and safety, cost-effectiveness, reimbursement/market access, convenience and ease of administration, potential advantages over alternative treatment methods, competition, and marketing and distribution support. If ALK’s products, primarily tablets and anaphylaxis products, fail to achieve acceptance in major markets, this could have a significant impact on the company’s ability to generate revenue.
ALK’s strategic commercial partnerships and collaboration agreements expose the company to risks related to partner performance, alignment of strategic objectives and execution capabilities. Partnerships for co-promotion, development, or regional commercialisation may fail to deliver expected results due to operational challenges, insufficient market performance or collaboration issues. Failure of key partners to meet contractual obligations could adversely affect revenues, market presence, and strategic growth plans.
Price pressures mandated by authorities can have a significant impact on the company’s earning capacity. In most of the countries in which ALK operates, prescription drugs are subject to reimbursement from, and price controls by national authorities and healthcare providers. This often results in significant price differences between individual markets. Exceptionally, governments and national authorities may introduce permanent or temporary economic measures that also affect the pricing and reimbursement of medicines, for example, because of a major economic downturn.
Fluctuations in geo-political stability, trade relations, or regulatory environments in key regions may disrupt business operations, and market access, leading to potential financial losses and reputational damage for ALK.
Risk mitigation
ALK closely monitors economic, market and regulatory developments as they relate to product pricing, along with the competitive situation and initiatives in all important markets. ALK regularly conducts surveys of market conditions and commits significant resources to providing information on allergy treatment to doctors and patients. ALK continues its focus on market access strategies, especially in the USA, Spain, Canada, and UK.
ALK mitigates commercial partnership risks through structured governance frameworks, including Joint Steering Committees, regular performance and milestone reviews, and escalation mechanisms to address underperformance. Additional mitigating actions include proactive monitoring of sales trends, implementation of corrective commercial measures, enhanced clinical execution and regulatory engagement.
ALK actively engages in dialogue with authorities with the aim of securing fair pricing and reimbursement agreements and maintains a strong focus on its market access strategy. ALK is strongly committed to evidence-based medicine, based on strong clinical and health economic evidence as the basis for pricing and reimbursement.
ALK consistently monitors the geo-political landscape and proactively implements mitigating measures in pertinent regions as needed.
2025 movement
The impact of the risk has increased compared to the year before
Severe IT security breaches
Description
The threat of cyber attacks continues to intensify globally and ALK is no exception. Disruption to IT systems, such as severe breaches of data security, may occur across the global value chain, where well-functioning IT systems and infrastructure are critical for the company’s ability to operate effectively.
Risk mitigation
ALK has an IT and cybersecurity strategy in place to prevent intruders from causing damage to systems or gaining access to critical data and systems. ALK continuously invests in upgrading IT security. Awareness campaigns, access controls, intrusion detection, prevention systems, and IT disaster recovery plans have all been implemented. Further initiatives are planned, and systems are regularly upgraded to increase network security.
2025 movement
The impact of the risk has not changed compared to the year before
Production and quality issues impacting product supply and patient safety
Description
ALK’s products are subject to many statutory and regulatory requirements with respect to issues such as safety, efficacy, and quality. The products may be associated with side-effects such as allergic reactions of varying extent, duration, and severity. Meeting pharmaceutical quality standards is a prerequisite for the company’s ability to supply products and hence its competitive strength, and for the company’s earnings and sales.
As ALK continues to rationalise its product portfolio, there may be risks associated with the discontinuation of its products. Among others, these may include potential production interruptions at manufacturing sites during decommissioning and change-over work, loss of sales from products for which no suitable ALK substitute product exists, or inability to meet sudden spikes in demand for other products due to patients switching from discontinued products.
As part of its supply chain, ALK is dependent on selected key third parties for key production processes and supplies, which poses a risk for ALK’s ability to deliver products, especially tablets, to the markets.
Risk mitigation
ALK stringently monitors product and manufacturing quality compliance and safety via quality assurance, pharmacovigilance and sales and marketing activities. If, despite the high levels of quality and safety, a situation should occur in which it is necessary to recall a product, ALK has procedures in place to ensure that this can be managed swiftly and effectively and in accordance with regulatory requirements. Production and manufacturing processes are subject to periodic and routine inspections by regulatory authorities as a regular part of their monitoring to ensure that ALK observes the prescribed requirements and standards.
ALK has invested significantly in recent years to increase the robustness and compliance of the legacy business by reducing manufacturing complexity, and all possible steps are taken during portfolio rationalisation work to mitigate any potential impact on other areas of manufacturing or the wider business. ALK conducts risk planning including the prevention of unwanted events, and preventive inventory management.
ALK manages key third-party dependency risks through long-term contracts, diligent production forecasting, monitoring, and joint steering committees. ALK continuously monitors its dependencies on key third parties and considers relevant risk mitigation measures including alternative supply setups.
2025 movement
The impact of the risk has not changed compared to the year before
Talent retention and attraction
Description
ALK is dependent on being able to attract and retain employees across all key functions and markets to deliver on its strategy. Failure to attract, develop and retain the right talents may have a material impact on the company’s market and research efforts.
Risk mitigation
Among other things, ALK manages this risk by fostering an inclusive culture, continuously monitoring and improving employee engagement, offering its staff opportunities to develop their professional competencies, and by continuously monitoring the total reward packages against the market. ALK is also focusing increasingly on how to position itself as an attractive employer, and how best to identify, attract and recruit future global and local talents with the skills and capabilities that will be required in the future.
2025 movement
The impact of the risk is decreasing compared to the year before
Breaches of legal or ethical standards
Description
Compliance requirements are generally increasing in many areas, and as ALK expands into more markets, the company is exposed to more complex compliance requirements. Non-compliance with applicable regulations and legislation, or ALK’s Code of Conduct, could negatively impact the company’s good reputation which is essential to operating within the pharmaceutical industry. Patents and other intellectual property rights are important for developing and retaining ALK’s competitive strength.
Risk mitigation
ALK strives to act professionally and with high integrity throughout the company in its dealings with stakeholders. ALK’s Code of Conduct defines the company’s high standards of ethical behaviour in relation to customers, employees, shareholders, society, suppliers, and partners. A few years ago, ALK established a Compliance Committee to oversee this work and development. Each year, all employees are asked to sign and confirm their knowledge of the Code of Conduct and to take an online test. ALK has established a whistleblower scheme which allows for confidential and anonymous internal and external reporting of potential or suspected wrongdoing. Immediate action is taken on substantiated non-compliance.
Internal controls and policies are in place to safeguard ALK’s intellectual property rights. The risk that ALK might infringe patents or trademark rights held by other companies, along with the risk that other companies might attempt to infringe ALK’s own patents and/or trademark rights, are monitored and, if necessary, suitable measures are taken.
2025 movement
The impact of the risk has not changed compared to the year before
Failures or delays in product development
Description
The future success of ALK depends on the company’s ability to maintain current products and to successfully identify, develop and market new, innovative drugs.
A pharmaceutical product must be subjected to extensive and lengthy clinical trials to document qualities such as safety and efficacy before it can be approved for marketing. During the development process, the outcomes of these trials are subject to significant risks. Even though substantial resources are invested in the development process, the trials may produce negative results. The risk fluctuates over time in line with the extent and nature of ALK’s product development activities.
Failures or delays in the development process, or in obtaining regulatory approvals, may have a major impact on patients who are not able to benefit from the products, and on ALK’s ability to achieve its long-term goals.
Risk mitigation
ALK and its collaboration partners carry out thorough risk assessments of their research and development programmes throughout the development and registration processes, in the interests of risk mitigation to maximise the likelihood of the products reaching the market. ALK’s Scientific Committee is responsible for other patient/product-related innovation activities. The committee provides instrumental strategic sparring on matters relating to R&D activities and other patient/product-related innovation, including reviewing R&D programmes and the overall R&D pipeline.
2025 movement
The impact of the risk has increased compared to the year before