Corporate Governance

Herantis Pharma Plc. is a public Finnish limited liability company, which complies with the Finnish Companies Act, Securities Market Act, Accounting Act, the rules of NASDAQ OMX Helsinki First North, and the Company’s Articles of Association.

Annual General Meeting

The Annual General Meeting is Herantis Pharma’s highest decision-making body. The Company’s Board of Directors invites the Annual General Meeting within six months after the end of the financial year. The Annual General Meeting decides on the financial statements and on distribution of the result shown in the balance sheet, grants the discharge of the Board of Directors and the Managing Director from liability, decides the number of the members of the Board of Directors, and the remuneration of the Board of Directors and the auditors. The Annual General Meeting also elects Board members and auditors, as well as deals with any other matters on the agenda.

Board of Directors

The Board of Directors is responsible for the administration of the company and the appropriate organisation of its operations. According to the Articles of Association the Board of Directors consists of six ordinary members. The term of a member of the Board will continue until further notice. The Board elects a chairperson from among its members.

CEO

CEO manages the day-to-day operations in accordance with guidelines and rules set out by the Board of Directors and actively looks after the interests of the company. CEO is appointed and removed from office by the Board of Directors, to whom he re- ports e.g. on the company’s financial position, business environment, and other significant issues. CEO guides and supervises the company and its businesses, is responsible for the daily operational management of the company as well as strategy implementation. CEO also prepares any items for the agenda of the Board of Directors and is responsible for their implementation.

Risk management

Internal controls and risk management

The risks of Herantis Pharma are mainly drug development related, such as clinical, technical, biological, regulatory, and strategic decision making risks, and financial, such as budgeting, accounting, and other financial control risks.

With its internal control policies and practices Herantis Pharma aims to ensure that appropriate financial information is available timely and accurately for any decision making and other needs, and that its financial reports are reliable, complete, and timely. Further, they aim to ensure that the company’s operations are efficient and implement the strategy of the company. Also, they aim to ensure that the company is in compliance with all applicable laws and regulations.

Certified Advisor

The shares of Herantis Pharma Plc are listed for trading on Nasdaq Helsinki First North Finland, which requires the nominating of a Certified Advisor. The Certified Advisor is responsible for ensuring that the company complies with the rules and regulations of First North.

UB Securities Ltd, a company residing at Aleksanterinkatu 21A, FI-00100 Helsinki, Finland, is the Certified Advisor to Herantis Pharma Plc. UB Securities’ phone number is +358 9 25 380 246.

Remuneration

This remuneration statement of Herantis Pharma Plc. is the statement meant by recommendation 47 of the Finnish Corporate Governance Code for listed companies, which was issued by the Securities Market Association on 15 June 2010.

Remuneration of the directors

Herantis Board members were paid in total EUR 72,000 as remuneration during fiscal year 1 Jan 2015 – 31 Dec 2015. During the same period the board members of Laurantis Pharma were not paid any remuneration.

On 11 April 2016 the General Meeting of Herantis resolved that the remuneration payable to the members of the Board of Directors shall be EUR 1,000 per month except for the Chairman of the Board who shall be paid EUR 2,000 monthly. The board members shall also be eligible to subscribe 1200 stock options (Chairman of the Board: 1800 stock options) for each full calendar year as a Board member of Herantis.

None of the members of the Board of Directors are in an employment relationship or have service contracts with the Company.

Remuneration of the management team members

The Board of Directors is responsible for appointing the CEO, and for preparing and approving the remuneration of the CEO and other management team members. The Board of Directors considers the interests of shareholders when deciding on the remu- neration. The remuneration of the CEO and other management team members comprises fixed basic salary, fringe benefits (such as company phone), a performance based bonus, and a stock option plan. The bonus payments are assessed and decided upon annually by the Board of Directors. The maximum bonus for the CEO is 35% of fixed annual compensation. For 2015, the current CEO of Herantis Pharma was paid a performance based bonus of EUR 9,450.00.

The CEO contract may be terminated by the Company or by the CEO with a three-month notice period.

The CEO does not have any voluntary pension or other insurance policy from the company.

Stock option program 2010

Extraordinary shareholder’s meeting issued on 26 August 2010 total 400 new stock options and authorized the Board of directors to issue a further at most total 100 new stock options to 1-2 persons with a key role in achieving the targets of the company. Total 460 stock options were subscribed according to this program. The remaining 40 stock options have been voided. One stock option entitles to subscribing 200 new shares of the company after the undirected share issue without payment (split) decided on 29 April 2014. 152 stock options have been used during fiscal year, 20 options during fiscal year 2014, and 40 options during fiscal year 2015 to subscribe shares in the company. 60 stock options have been returned to the company and voided. Thus 188 stock options remain.

Subscription price per share after the undirected share issue without payment (split) decided on 29 April 2014 is 0.00005 euro per share. According to the terms of the stock option program the share subscription period is based on reaching defined milestones related to releasing the first clinical production batch of CDNF, completing a clinical study in amblyopia, closing an agreement related to funding of the company, passing an audit of a third party, and a commercial partnering agreement. The Board of Directors will inform the option holders of reaching of each milestone. Three of the milestones have been reached. The share subscription period ends on 30 June 2024.

Stock option program 2014 I

Extraordinary shareholder’s meeting decided on 20 March 2014 to issue 213 new stock options to the Managing Director of the company, Pekka Simula, and to authorise the Board of Directors to issue at most 117 new stock options to members of the Board of Directors of the company. Thus the total amount of stock options is at most 330. Board members can be given six (chairman of board: nine) stock options according to this stock option program for each full calendar year as a member of the board starting 2014 on the condition that the board members return such options of the stock option program 2010 they hold for which the share subscription period has not begun.

Pekka Simula has subscribed 213 options and Board members a total of 33 options based on this stock option program. 84 options remain to be given to board members. The options are given for free and each option entitles its holder to subscribe 200 new shares of the company after the undirected share issue without payment (split) decided on 29 April 2014.

Subscription price per share after the undirected share issue without payment (split) decided on 29 April 2014 is 0.00005 euro per share. According to the terms of the stock option program the share subscription period is based on reaching three defined milestones related to securing funding for the first clinical study with CDNF, first patient treatment in the first clinical study with CDNF, and database lock in the first clinical study with CDNF. The Board of Directors will inform the option holders of reaching of each milestone. The first milestone has been reached so far. The share subscription period ends on 1 January 2024.

Stock option program 2014 II

Extraordinary shareholder’s meeting decided on 29 April 2014 in relation to the Share Exchange Agreement with shareholders of Laurantis Pharma Ltd to issue 76,741 new stock options to the option holders of Laurantis Pharma Ltd. in return of their existing 3,111 options of Laurantis Pharma Ltd.

These stock options consist of 24,027 A-options, 3,190 B-options, 580 C-options, 22,349 D-options, 16,342 E-options, and 10,253 kappaleesta F-options. Each option entitles its holder to subscribe one new share with subscription price defined as follows: With A-option the share subscription price is 7.32 euro, with B-options 20.73 euro, with C-options 0.02 euro, with D-options 8.78 euro, and with E- and F-options 10.00 euro. The options were subscribed on 29 April 2014.

The options entitle to subscribing shares of the company if their respective subscription period has started and the option holder remains under his or her employment or other relevant position with the company. The subscription periods begin as follows:

  • A-options: Share subscription period has started and ends on 31 December 2016, however subscribing of shares is only possible after the First North listing has been completed
  • B- and C-options: Share subscription period has started, and ended on 1 December 2014, however subscribing of shares is only possible after the First North listing has been completed
  • D-, E-, and F-options: Share subscription period has started and ends on 31 December 2016, however subscribing of shares is only possible after the First North listing has been completed

Stock option program 2014 III

Extraordinary shareholder’s meeting decided on 29 April 2014 in relation to the Share Exchange Agreement with shareholders of Laurantis Pharma Ltd to issue 20,464 new stock options to Burkhard Blank. These stock options consist of 10,232 G-options and 10,232 H-options. Each option entitles its holder to subscribe one new share with subscription price 10.00 euro. The options were subscribed on 29 April 2014. The share subscription period begins on 7 June 2014 and ends on 31 December 2016 for G-options, and begins on 7 June 2015 and ends on 31 December 2016 for H-options. However subscribing of shares is only possible after the First North listing has been completed.

Stock option program 2016 I

The Board of Directors of the Company decided based on the authorization by the Annual General Meeting of Herantis on 9 April 2015 to issue 70,000 new stock options to be offered to senior employees of the Company. Each option entitles its holder to subscribe one new share with subscription price 2.92 euro. The share subscription period begins monthly over a three year period and ends latest by 31 December 2020.

Public insiders

Upon implementing the Market Abuse Regulation (596/2014/EU) the Company has decided to continue maintaining a voluntary, public list of its top managers, as well as a list showing changes that have occurred in their own security holdings as well as in the holdings of their family relationships and influence-over organisations. These lists are provided below.

The Board of the Directors of the company has approved an Insider Policy, which ensures compliance with Finnish law, EU regulations and directives, and the rules and guidelines of Nasdaq Helsinki Ltd.

Top managers and their holdings

Trading by top managers and their family relationships and influence-over organisations on the company’s securities has been compliant with the Insider Policy of the company. Top managers’ holdings in the company are as of 1 Jul 2016:

  • Chairman of the Board Pekka Mattila: 20,150 shares*
  • Board member James Phillips: 2,906 shares
  • Board member Aki Prihti: 0 shares
  • Board member Timo Veromaa: 2,000 shares
  • Board member Frans Wuite: 580 shares
  • CEO Pekka Simula: 27,730 shares**
  • Director of Clinical Development Sigrid Booms: 2,400 shares
  • Chief Scientific Officer Henri Huttunen: 74,050 shares
  • Project Manager Katarina Jääskeläinen: 0 shares
  • Project Manager Jani Koskinen: 0 shares
  • Chief Pharmaceutical Officer Jutta Poutanen: 0 shares

*Whereof 17,650 shares through controlled company Musta Aukko Oy
**Whereof 6,627 shares through controlled company Meles Consulting Oy

Top manager transaction history

Date Top manager Transaction Change +/-
26 Jan 2015 Pekka Simula Trade +700
27 Jan 2015 Pekka Mattila Trade +300
30 Jan 2015 Pekka Simula Trade +300
28 May 2015 Pekka Mattila Subscription by options +600
28 May 2015 James Phillips Subscription by options +400
28 May 2015 Pekka Simula Subscription by options +2000
28 May 2015 Timo Veromaa Subscription by options +2000
28 May 2015 Frans Wuite Subscription by options +580
4 Jun 2015 Henri Huttunen Trade +50
25 Sep 2015 Pekka Simula Subscription by options +12200
25 Sep 2015 Pekka Simula Trade +1152
25 Sep 2015 Pekka Mattila Trade +700
21 Oct 2015 Pekka Mattila Trade +950
19 May 2016 Pekka Simula* Trade +1200
25 May 2016 Pekka Mattila Trade +2500
30 May 2016 Pekka Simula Trade +2200
1 Jul 2016 Pekka Simula* Trade +4427
12 Dec 2016 Pekka Simula Trade +2500
30 Dec 2016 Pekka Simula* Trade +1000

*through controlled company

Auditing

The external audit is to verify that the financial statements give a true and fair view of the company’s financial performance and financial position for the fiscal year. The company’s auditor gives the company’s shareholders the statutory auditor’s report on the annual financial statements. The audit performed during the financial period is reported to the Board of Directors. The auditor and the Board of Directors will meet at least once a year.The Annual General Meeting elects the auditor. The auditor’s term of office includes the current financial year and ends at the end of the following Annual General Meeting.

Herantis Pharma’s auditor is authorised public accountants Pricewaterhouse-Coopers Oy (Business ID 0486406-8), principal auditor is Martin Grandell, APA.

Public disclosure and Disclosure policy

Herantis complies with the disclosure obligations as defined in the Market Abuse Regulation ((EU) No 596/2014) and in the First North Nordic Rulebook. Herantis Pharma Plc (“Herantis Pharma” or “company”) discloses information to the public in a timely and consistent manner.

Herantis Pharma publishes its company announcements both in Finnish, which is the official reporting language, and in English. Amendments to previously published information are made in the same manner as has been used to publish the original information.

Disclosure channels
In addition to company announcements the most important disclosure channel for information related to the company’s activities and financial situation is the company’s website www.herantis.com.

Herantis Pharma publishes its company announcements through Nasdaq Helsinki Ltd and in the most relevant public media. All company announcements are also published simultaneously on the company’s website in both English and Finnish.

Herantis Pharma publishes any essential materials presented in possible public events, such as result presentations and analyst meetings, on its website as simultaneously as possible.

Disclosure principles
The information made public by the company shall be accurate and complete and give a true and fair picture of the company’s operations. The information is disclosed as soon as possible as set forth in the applicable regulations.

The company announcements are issued to give information on matters that would be likely to have a significant effect on the prices of the company’s financial instruments. The timing of their publishing shall be defined based on applicable regulations or when otherwise deemed relevant by the company.

Considering at the current stage of the company’s development projects e.g. the following matters are, based on a case-by-case assessment, considered as inside information to be disclosed:

  • any significant activities related to clinical development projects, such as their launch, completion, and end results;
  • information related to new collaboration agreements with pharmaceutical companies;
  • significant decisions made by regulatory or other relevant authorities relevant to the company’s clinical development projects;
  • information on significant financing transactions;
  • if e.g. the status of the company’s clinical research project changes significantly compared to previously disclosed information or otherwise announced expectations the company will inform of deviations; and
  • if the company’s financial performance or liquid cash position significantly deviates from what can be justifiably concluded on the basis of the information previously reported by the company, the company shall issue a profit warning.

The company assesses the potential effect of the various facts on the prices of its financial instruments. The assessment shall be made from the point of view whether a reasonable investor would be likely to use the information as part of the basis of his/her investment decisions.

The company adheres to a thirty (30) calendar days silent period prior to publication of its half-yearly reports and other financial results. During the silent period, the company does not organize or attend private meetings with the media, analysts or investors. The company may, however, during the silent period, answer questions in relation to its business operations.

As a general policy, the company does not comment on market rumors, stock price trends, actions of competitors or customers, analyst estimates, or confidential and unfinished business unless the company deems it relevant to correct clearly incorrect information. If inside information regarding the company has leaked to public the company shall issue a related company announcement.

Spokespersons
The designated authorized persons to make public statements on behalf of Herantis Pharma are its Managing Director (CEO) and Chairman of the Board. The Managing Director (CEO) is responsible for the company’s communications.

Approval of the disclosure policy
The Board of Directors of Herantis Pharma has approved this disclosure policy on 1 July 2016.

Articles of Association

For the sake of clarity the board of directors notes that only the Finnish language text is registered in the Trade Register of Finland.

1 § Business name

The business name of the company is Herantis Pharma Oyj, in English Herantis Pharma Plc.

2 § Domicile

The company is domiciled in Helsinki.

3 § Line of business

The line of business of the company shall be research and product development activities relating to biotechnology and medicine as well as production, sale and marketing of products and services relating to biotechnology and medicine in Finland and abroad. The Company may own and posses real property and securities as well as trade with them. The company may conduct its business directly on its own or through subsidiaries or associated companies.

4 § Board of directors

The board of directors of the company shall consist of four (4) to six (6) ordinary members. The term of office of the members of the board of directors shall continue for the time being. A deputy member may be elected for each member of the board of directors personally.

5 § Annual general meeting

The Annual General Meeting of Shareholders shall be held annually within six months of the end of the financial period on a date set by the Board of Directors in the domicile of the Company.

At the Annual General Meeting of Shareholders, the following shall be decided on:

  • the adoption of the financial statements and, if the Company is a parent company, also the adoption of the consolidated financial statements;
  • the use of the profit shown on the balance sheet;
  • the discharge of the members of the Board of Directors and the possible CEO from liability;
  • the number of members of the Board of Directors and possible deputy members of the Board of Directors, if necessary;
  • the remuneration of the members of the Board of Directors and the auditors and reimbursement of travel expenses;

the following shall be appointed:

  • the members of the Board of Directors and possible deputy members of the Board of Directors, if necessary;
  • the auditor;

the following shall be dealt with:

  • any other issues referred to in the notice to the General Meeting of Shareholders.

6 § Notice to the general meeting and notice of participation

The notice to the General Meeting of Shareholders shall be delivered to each shareholder to the address or email address notified to the Company by the shareholder, published on the Company’s website, or published in a newspaper determined by the Board of Directors, at the earliest, three (3) months before the meeting and however no later than nine (9) days before the record date for the General Meeting of Shareholders.

In order to attend the General Meeting of Shareholders the shareholder shall give advance notice of participation to the Company no later than the stated date in the notice to the General Meeting of Shareholders, which may at earliest be ten (10) days before the meeting.

7 § Representation of the company

The company is represented not only by the board of directors, but also by the chairman of the board and the managing director, each severally as well as two members of the board jointly. In addition, the board of directors may give a desig- nated person a procuram or a right to represent the company.

8 § Auditor

An authorised auditing firm approved by the Central Chamber of Commerce shall be elected as auditor for the Company. The term of office of the auditor expires at the end of the annual general meeting following its election.

9 § Book-entry system

The shares in the company shall be held in the book-entry system.