Risk management 

The primary responsibility for the Company’s risk management and internal controls in relation to the financial reporting process rests with the Board of Directors and the Executive Management. The Company’s policy is to identify and mitigate risks deriving from the Company’s operations and to establish appropriate level of internal controls and reporting processes, and when considered relevant, sufficient insurance coverage will be sought.

The Company’s control and risk management systems may provide reasonable, but not absolute, assurance that misappropriation of assets, losses and/or significant errors and omissions in the financial reporting are avoided.

The Board of Directors is responsible for the risk management strategy and the overall risk management framework and policies. The Board, advised by the Audit Committee as appropriate, manages risks and reviews the effectiveness of the risk management and internal control and financial reporting systems and processes. Management believes that all significant elements of risk have been identified and addressed.

 

Risk Factors 

The risks and uncertainties discussed below are those that the Pharma Equity Group Management currently views as material in terms of Pharma Equity Group.

Risks relating to the acquisition and integration of Reponex Pharmaceuticals:

• Risks related to due diligence investigations on Reponex Pharmaceuticals not having revealed all risks, which, if materialized, may impact the factors considered in contributing value to Pharma Equity Group or result in unforeseen difficulties or costs of integrating Reponex Pharmaceuticals into the Pharma Equity Group.

Risks relating to the business and industries in which Pharma Equity Group and it’s subsidiary company Reponex operate: 

• Risks related to clinical trials if results from the early clinical trials are not repeated in more extensive clinical trials, if Reponex’ current and future clinical trials will not prove a risk benefit ratio or sufficient clinical benefit for Reponex Pharmaceuticals to be able to subsequently sell its products to partners or customers or obtain regulatory approvals or if, clinical trial results may prove inadequate to draw any conclusions and may have to be repeated.
• Risks related to increased development costs as a consequence of either delays or unsatisfactory results from clinical trials, which may lead to increased cash burn for Reponex and Pharma Equity Group compared to estimates.
• Repositioning Risks related to repositioning of established clinically proven active pharmaceutical ingredients if Reponex Pharmaceuticals never succeeds with any particular product candidate and as a result, never succeeds in creating a marketable product,
• Risks related to the projection of the addressable market and the commercial potential of the product candidates which may reduce their commercial value if Reponex Pharmaceuticals’ projection of the addressable market and commercial potential for its product candidates are not accurate.
• Risks related to the repayment of the Portinho S.A receivable, which if not paid in full or in time may force Pharma Equity Group to use a large part of the current cash and credit facilities available on the day-to-day operations of the Group and for settlement of existing creditors, including banks and other financial lenders, if other cash or financing resources are not available.

Risks relating to the financial position of Pharma Equity Group and Reponex Pharmaceuticals: 

• Risks related to financing needs and capital for Reponex Pharmaceuticals if delays in clinical trials or product development results in delayed revenues and increased costs, negatively affecting future expected cash flows.
• Risks related to the financial situation of Pharma Equity Group if the Portinho S.A receivable is not paid in full or on time.
• Risks related to the current Pharma Equity Group Management as the chief executive officer and one member of the Pharma Equity Group Board of Directors have been appointed recently and have had limited time to gain in-depth knowledge of Pharma Equity Group’s business, to implement their visions for Pharma Equity Group and have only received limited hand-over from previous executive management of Pharma Equity Group.
• If Pharma Equity Group fails to raise capital in due time, if and when needed, it will limit the further product development.

 

Internal controls 

The Board of Directors and the Executive Management of Pharma Equity Group are responsible for the Company’s internal controls and risk management in connection with the financial reporting process, including compliance with rules and regulations that are relevant for the financial reporting for a listed company.

Executive Management has implemented approval and authorization rules, and segregation of duties have been implemented as much as possible with due regard to the Company’s current size and organizational structure, to avoid that unauthorized transactions can take place, or remain undetected for an unacceptable period.

From 2023, the Board of Directors has established an Audit Committee that reviews and discusses the accounting and audit practices with the Company’s independent auditors and Executive Management in accordance with the Rules of Procedures of the Audit Committee.

The annual audit and financial reporting process include detailed planning of individual tasks and planning between the Company’s finance function and the independent external auditors. The audit performed by the independent auditors is based on an audit strategy developed by the auditors and reviewed and discussed with the Audit Committee.

At least annually, the Audit Committee evaluates the risks connected with the financial reporting process, including the presence of internal controls and standard operating procedures. The Audit Committee assesses the Company’s legal and organizational structure, including the risk of fraud and the measures to be taken to reduce and/or eliminate such risk. In that regard, any incentive or motivation of Executive Management to manipulate earnings or perform any other fraudulent action is reviewed and discussed.

The Company’s internal controls and standard operating procedures provide a reasonable but not an absolute certainty that unlawful use of assets, loss and/or significant errors or deficiencies in relation to the financial reporting process can be avoided.

The Company’s finance function provides regular detailed internal interim financial reporting to Executive Management as part of Executive Management’s financial controlling and oversight role. Monthly financial reporting is provided to the Board of Directors as part of their oversight role.

The Board of Directors has discussed the need for an internal audit function and has found that, with the current risk profile and organizational structure, the Company does not need such a function.

Pharma Equity Group is considering the establishment of a whistleblower scheme, which gives employees and other stakeholders the opportunity to report serious wrongdoing or suspicions thereof in an appropriate and confidential manner, and with a secure procedure for handling any whistleblower cases.

Updated 31-03-23