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Company Description Panion Animal Health AB (publ) July 2017


Table of contents Important information 3 Risk factors 4 Background and purpose 7 Comments by the CEO 9 Description of operations 10 History 14 Board of Directors, senior executives and auditors 15 Financial information in summary 21 Comments on the Company’s financial development 27 Capitalization, debt and other financial information 28 Share capital and ownership 30 Articles of Association 32 Legal issues and other information 33 Glossary 35 Addresses 36

Definitions Unless otherwise stated, the following definitions shall apply in this document. “Company Description” refers to this Company Description, including appended documents. “Panion” or “The Company” refers to Panion Animal Health AB (publ), corporate identity number 559018-4171. “Euroclear” refers to Euroclear Sweden AB, corporate identity number 556112-8074.

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IMPORTANT INFORMATION CONCERNIG THIS COMPANY DESCRIPTION OF PANION ANIMAL HEALTH AB (PUBL)

General

Information about AktieTorget

This is an unofficial translation of the Company Description of Panion Animal Health AB. If there are any discrepancies between this translation and the Swedish version, the Swedish version shall prevail. This Company Description does not constitute a prospectus and has thus not been prepared in accordance with the Swedish Financial Instruments Trading Act (1991:980), Directive 2003/71/EC of the European Parliament and Commission Regulation (EC) No 809/2004. This Company Description has not been approved by or registered with Finansinspektionen (Sweden’s financial supervisory authority) in accordance with the Financial Instruments Trading Act (SFS 1991:980).

AktieTorget is a secondary name for of ATS Finans AB, a securities company under the supervision of the Swedish Financial Supervisory Authority. AktieTorget operates a so-called multilateral trading facility (MTF). Companies that are listed on AktieTorget have undertaken to comply with AktieTorget’s exchange listing agreement and rules which are designed to ensure that shareholders and other stakeholder in the marked receive accurate, immediate and simultaneous information about all circumstances which could affect the Company’s share price.

This document has been approved by AktieTorget in accordance with AktieTorget’s listing agreement. Approval implies no assurance from AktieTorget that information in the Company Description is correct or complete. Companies whose shares are traded on AktieTorget are not subject to all legislation applicable to a company listed on a so-called regulated market. AktieTorget has, via its listing agreement, chosen to apply the majority of these regulations. Investors should, however, be aware that trade in shares that are not listed on a so-called regulated market may entail greater risk. An investment in securities is associated with certain risks and investors are advised to particularly read the section “Risk factors”. In making investment decisions investors must rely on their own assessment of Panion and this Company Description, including prevailing conditions and risks. When investors make an investment decision, they must rely on their own professional advisers and carefully evaluate and consider the investment decision. This Company Description and related documents shall be governed and construed according to Swedish substantive law exclusively. Disputes arising from this Company Description and related legal relationships shall be settled according to Swedish substantive law and by Swedish courts exclusively, and Stockholm District Court shall be the court of first instance.

AktieTorget provides an efficient trading system that is available to all banks and brokers that are connected to NASDAQ Stockholm AB. This means that anyone who wants to buy or sell shares listed on AktieTorget can use their usual bank or stockbroker to do so. The listing agreement and share prices are published on AktieTorget’s website www. aktietorget.se.

Forward-looking statements This Company Description contains forward-looking statements that reflect the Company’s current view of future events, as well as financial and operational developments. Words such as “considers”, “judges”, “expects”, “may”, “plans”, “estimates” and other expressions that involve indications or predictions of future developments or trends, and that are not grounded on historical facts, represent future-oriented information. The Company believes that the expectations suggested by such forecast statements are reasonable and made in accordance with the Company’s current knowledge. Future-oriented information represents no guarantee with regard to future results or developments and actual outcomes may be considerably different from what has been expressed in the form of future-oriented information. Future-oriented information is always associated with uncertainty factors, since it depends on circumstances which are within and beyond the Company’s direct and indirect control. Prospective investors are therefore encouraged to assess the information given in this Company

Description while considering that future results and developments may deviate significantly from the Board’s expectations. The Company draws attention to readers that forecast statements do not provide guarantees, either explicitly or implicitly, for future circumstances or results. The Company does not make any commitment to publicly update and/or revise forecast statements as a result of new information, future events or otherwise, other than what is required by law, marketplace regulations or other provisions.

Information from third-party sources The Company Description contains certain market and industry information that has been obtained from third parties. This includes statistics and estimates obtained from trade reports and studies, market surveys, commercial publications and publicly available information. Such statements are identified by reference to source. Although the information has been accurately reproduced, and the Company believes that the sources are reliable, the Company has not independently verified the information; therefore the accuracy and completeness of the information cannot be guaranteed. To the best of the Company’s knowledge and as far as the Company can ascertain by comparing other information that has been published by these sources, no information has been omitted in such a way that would render the reproduced information inaccurate or misleading.

Availability of the Company Description The company Description is available on the Company’s website, www.panion-animalhealth.com.

Applicable legislation This Company Description and related documents shall be governed and construed according to Swedish substantive law exclusively. Disputes arising from this Company Description and related legal relationships shall be settled according to Swedish substantive law and by Swedish courts exclusively.

Panion Animal Health AB [559018-4171]  3


Risk factors Investments in securities are associated with risk taking. Below, a number of risks which may have a bearing on Panion’s operations and future development are outlined. The risks described below are not ranked in any particular order of probability, significance or potential impact on share prices and the Company’s operations, results or financial position. The presentation below does not claim to be comprehensive, and for natural reasons, all risk factors cannot be predicted or described in detail. Consequently, further risk factors that are not presently known of or are not at present considered to be significant might also affect the Company’s activities, results or financial position. The value of an investment in Panion might be significantly affected if any of the risk factors stated below should be realized. Investors are therefore encouraged to make their own assessment of the significance of the risk factors below and potential other risk factors for the Company’s activities and future development. The risk factors should be considered together with all other information given in this Company description.

Risks related to business operations The method used for injecting a drug directly into the brain (intracerebral injection) entails risk. Injection directly into the brain must be performed under sterile surgical conditions and by persons with specialist competency, for example, by veterinary surgeons with specialist knowledge of cancer treatment. In most cases, the method cannot therefore be applied at smaller general veterinary clinics, but must be performed at veterinary hospitals. There will also be dog owners who do not consider intracerebral injection an acceptable form of treatment, even though there are no other means of treating the animal for epilepsy. This may mean that Panion’s sales do not develop as planned, or that the treatment method is not approved.

Market and competition Developing an innovation into a finished treatment method takes a long time. No one can know with certainty that there will be a market for Panion’s treatment method once it is fully developed, how large the market will be if there is, in fact, a market, or which competitors the Company will face. The Company’s possibilities for market establishment also depend on its ability to replace existing treatment methods to some degree. In the event that any of the above-described risks materialize, the company’s operations, financial position and financial outcome could be impacted negatively. Another risk is that Panion’s competitors, who in many cases have greater resources than the Company, develop alternative products that are more effective, safer or cheaper than Panion’s products. This may mean that the 4  Panion Animal Health AB [559018-4171]

Company’s treatment method does not generate revenues as estimated, which may impact the Company’s financial outcomes negatively.

Clinical testing and regulatory approval Before Panion’s treatment method can be launched it must be approved by regulatory authorities; in the USA, by the Food and Drug Administration (FDA) an in the EU by the European Medicines Agency (EMA). Prior to approval for market introduction, the treatment method must undergo a series of clinical tests. There is a risk that Panion may not achieve the requisite result in these tests and that, consequently, approval may not be forthcoming. There may be requirements for further studies or testing in order to achieve approval, which may delay development of the Company’s treatment method and result in increased costs. Even if the requisite permits are granted, the Company and its treatment method will remain under observation by regulatory authorities in countries in which the treatment method is marketed. If previously unknown problems arise, application of the treatment method may be restricted or approval may be revoked. Problems with obtaining or retaining approval may have a significant impact on Panion’s operations, results and financial position, depending on collaboration partners and suppliers.

Collaboration partners Panion has established close collaboration with CombiGene concerning the Company’s epilepsy project. Panion is actively seeking other pharmaceutical projects in veterinary medicine, of which the goal is inlicensing of other candidate drugs and development of new veterinary medicines in close collaboration with other pharmaceutical companies and institutes. Should any of these partners be placed in a position such they encounter problems or delays in meeting their commitments with respect to collaboration or business relations, there is a risk that the Company’s operations may be impacted negatively.

Financing needs and capital Panion’s operations are costly, while at the same time the Company has not yet generated any revenue. This means that Panion needs access to external financing. There is always a risk that Panion will not be able to secure this financing, or that financing can only be secured under terms that are unacceptable to the Company. Panion’s failure to secure future financing can have a negative impact on the Company’s development, operations and financial position. Furthermore, since Panion’s resources are limited, it is essential that these resources are applied as effectively as possible by the Company. If the Company fails to channel these resources appropriately, there is a risk that the Company may experience financial difficulties.


Intellectual property rights The Company currently holds none of its own patents. More information about IPR and patents associated with CombiGene is given under the section “Legal issues and other information”. Panion’s value is largely dependent on the ability to obtain and defend patents and on the ability to defend specific, proprietary knowledge. Patent protection may be uncertain and subject to extensive and legal and technical complications. There is a risk that patents may not be granted on inventions for which patent application has been made, that patents are not sufficiently protected, that there is an infringement of patent right or that patents are declared void. Processes concerning patent validity are normally associated with considerable expense. Competitors with access to more capital may be better placed than Panion to deal with such expenses. In certain legal systems, these costs may affect Panion, even when the Company’s financial outcomes are otherwise positive. If the Company is unable to secure or defend patent protection for its innovations, competitors may take advantage of these innovations freely, which would thereby have a negative impact on the Company’s ability to commercialize its innovations. This could also impair the Company’s ability to establish collaboration agreements. It cannot be discounted that future patents may be granted to Panion’s competitors, thereby restricting the Company’s ability to commercialize its intangible assets, which would impact the Company’s business operations, outcomes and financial position negatively. There is a risk that Panion may infringe on others’ IPR and, consequently, be forced to pay damages. The Company may in such cases be penalized for continuing to do so.

Licensing agreement with CombiGene There is another risk factor associated with the agreement with CombiGene. If the agreement is terminated as a result of events affecting CombiGene, a termination clause will be activated entitling Panion to compensation according to the terms of the licensing agreement and in line with current market practice.(see Legal issues and other information/Licensing agreement). If development has not progressed sufficiently, there is a risk that this amount will not cover Panion’s overall development costs. In addition, Panion is required to pay royalties based on the Company’s sales of anti-epilepsy drugs for dogs and cats, which will affect the Company’s financial results.

Credit and counterparty risk Credit risk refers to the risk of loss if a counterparty fails to fulfil its obligation to make payments to Panion. Currently, Panion sees one counterparty risk associated with the licensing agreement with CombiGene, whereby CombiGene will, under certain circumstances, pay MUSD 2 (see Legal issues and other information/Licensing agreement). If the counterparty fails to meet its obligations to Panion, the Company’s financial results and position may be impacted negatively.

Key individuals Panion’s future development is dependent, to a high degree, on the knowledge, experience and commitment of senior executives and other key individuals. Panion has signed an employment contract with its CEO and consultancy agreements with other key individuals on terms which the Company considers to be in line with current market practice. Panion regards its entire staff as a valuable asset and therefore works continuously to maintain a good personnel policy. Despite this, there is no guaranty that the Company will be able to retain these key individuals or recruit new, qualified personnel.

Dependence on collaboration Panion intends to collaborate with providers of services for preclinical and clinical studies. The Company is, to varying degrees, dependent on such collaboration functioning effectively in order to be able to develop its treatment method and to ensure that the treatment method is assessed in a way that is most appropriate for the specific purpose. The Company also intends to collaborate with other companies, in order to share costs and risks arising in the development process. Panion’s failure to such partners can have a negative impact on the Company’s development, operations and financial position.

Confidentiality The Company is dependent on ensuring that trade secrets which are not covered by patents or other intellectual property rights can also be protected, including, among other things, information regarding inventions for which patent applications have not yet been filed. The employees of the Panion and its cooperating partners are normally subject to confidentiality undertakings but there is always a risk that someone who has access to information of great value to Panion disseminates or uses the information in a way which can otherwise damage the Company, which may have a negative effect on the Company’s business and financial position.

Legislation Panion’s operations are subject to many regulatory requirements. Thoroughgoing amendments to legislation and regulatory frameworks with respect to the Company’s operations, both in Europe and other regions of the world, may entail increased costs, which in turn could have a negative impact on Panion’s business, financial position and outcomes.

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Share price development Investment in Panion is associated with risk. There is no guaranty of positive share price development. The stockmarket can develop negatively, for various reasons, such as interest rate increases, political uncertainty, changes in currency exchange rates and downturns in the business cycle. The stockmarket is also largely influenced by psychological factors. As with all other shares, the price of the Company’s share can be influenced by these factors, which can be problematic for shareholders to foresee and safeguard against. There is a risk that Panion’s share price may fluctuate dramatically as a result of, among other things, variations in quarterly earnings, general economic conditions and changes in the capital market’s interest in the Company. In addition, the stockmarket may react with extreme fluctuations in volumes and prices which are not always related to, or proportional to, the operative outcome of an individual company.

Shareholders with significant influence Panion’s ownership is largely dominated by a few principal shareholders. Consequently, these shareholders, individually or collectively, have the possibility to exercise considerable influence over all matters that are subject to the approval of general meetings of shareholders; this may include election of board members, possible proposals for fusion, consolidation or sale of all or virtually all of the Company’s assets, and other types of transactions. This ownership concentration may be detrimental to other shareholders who may have interests other than majority shareholders. In addition, this ownership concentration may influence the share price negatively, since some investors see disadvantages in owning shares in companies with a strong ownership concentration.

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Dilution in connection with future share issues In the future, Panion may carry out new issues of shares and share-related instruments to raise capital. All such issues may reduce the proportional ownership and voting rights, as well as earnings per share for holders of shares in the Company, in cases where existing shareholders either cannot, or do not wish to, exercise their preferential right, or when an issue is directed to one or several external investors. In addition, any new issues may have a negative effect on the shares’ market price.

Dividends During the period covering the financial history outlined in this Company Description, no dividend has been paid and no decision has been made to a pay a dividend in Panion. Depending on the Company’s results and needs with respect to, among other things, future investments, clinical studies, patents, product development and sales, there is a risk that the Company will not decide to pay a dividend.

Illiquidity Future interest in the Panion share cannot be foreseen. Even if the Company’s shares are traded publicly, the degree of liquidity in the Company’s shares may vary and may not always be satisfactory. If active and liquid trading does not develop, there may be difficulty in selling larger blocks of the share within a short time period without impacting the share price negatively.


Background and purpose Panion Animal Health AB was established in late 2015 as a wholly owned subsidiary of CombiGene AB. CombiGene’s origins can be traced back to 1999, when researchers Merab Kokaia from Sweden and David Woldbye from Denmark met at a banquet in conjunction with an international epilepsy conference in the Cayman Islands. The two researchers were united in their mutual objective of developing new forms of treating humans who suffer from epilepsy. Close collaboration was then formed in the following years in the Öresund region. Much of the research concerned neuropeptide Y (NPY), a neurotransmitter that is widely distributed in the central nervous systems of animals and humans. Several studies had indicated that production of NPY in key regions of the brain, for example, in the hippocampus, increases after an epileptic seizure. Kokaia and Woldbye assumed that the increased production of NPY was the body’s way of defending itself against another epileptic seizure. However, it was apparent that the natural increase in NPY was not sufficient to prevent seizures in an individual who had already developed epilepsy. All the while the general hypothesis has been, by means of gene therapy, to increase the concentration of NPY in the area of the brain where the epileptic seizure is initiated, often the hippocampus, and in so doing strengthen the body’s natural defence against seizures. Y2 receptors, which “receive” the transmitter NPY, are largely responsible for NPY’s anti-seizure effect. Woldbye and Kokaia succeeded in demonstrating that a more pronounced anti-seizure effect is achieved if an increased level of NPY is combined with an increased level of the receptor Y2 than if the two are over-represented separately. For several years it seemed virtually impossible that new medicines could be developed based on the researchers’ major discovery. However, advances in gene therapy made this possible and a new method was developed, whereby, with the aid of gene therapy, NPY and Y2 receptors could be introduced directly into the brain cells. Subsequ-

ently, based on the research findings, CombiGene was established in 2007 and patent applications for the new treatment method were prepared and submitted to authorities in the USA and Europe. By implementing modern gene-therapy technology, a treatment method has been developed, whereby genes are injected directly into the affected area of the brain with the aid of viral vectors. A viral vector, more precisely, a recombinant adeno-associated viral vector, is a harmless virus that has been programmed with genetic code. With the help of the viral vector, this code can be introduced into the cells and, for example, it will instruct the cells to produce an excess of NPY and Y2. CombiGene’s treatment method has thus far shown promising results in trials with epilepsy models in animals (in vivo). The company has also shown in trials with tissue from human epilepsy patients (in vitro) that NPY can reduce inflammatory response in nerve cells, indicating that the treatment can potentially prevent epileptic seizures in both humans and animals. Panion was spun off to create a separate company with a product portfolio for veterinary medicine. Development and commercialization of gene-therapy treatments for use in human and veterinary medicine differ, which is why CombiGene decided to form Panion as a separate company. By spinning Panion off from CombiGene and appointing a new board and management with expertise in veterinary medicine, conditions for becoming a leading manufacturer of veterinary drugs based on

gene therapy have been created. Panion is now in a very interesting phase in which the next step is to conduct clinical studies. The board of Panion regards listing of the Company’s share on AktieTorget as an important step towards realization of the Company’s business plan and established objectives. Listing gives existing shareholders the opportunity to take part in well-organized and transparent trade in the Company’s share, while the Company at the same time gains access to the capital market. Listing in a marketplace with a well-functioning regulatory framework and monitoring gives the Company a mark of quality assurance in the eyes of customers, collaboration partners, authorities, capital market participants and the Company’s future partners. The board of Panion is responsible for the information in this Company Description, which has been prepared in conjunction with the application for listing on AktieTorget. The Board of Directors hereby gives assurance that all reasonable precautionary measures have been taken to ensure that, as far as the Board of Directors is aware, the information contained in the Company Description corresponds to the actual facts and that nothing has been omitted which might affect the interpretation of the Company Description. Hässleholm, 3 July 2017 Board of Directors

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“Preclinical animal trials have shown that CombiGene’s treatment method can prevent epileptic seizures, is safe and appears to show no noticeable side-effects.”   Anja Holm   CEO, Panion Animal Health AB

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Comments by the CEO In October 2016 the wholly owned sub-

Panion estimates the total development

sidiary Panion Animal Health AB was

time for a complete treatment method

distributed to CombiGene’s sharehol-

from inlicensing to be about 3-4

ders. The background is the hypothesis

years. Panion’s first inlicensing, from

that CombiGene’s treatment method for

CombiGene, is for treatment of canine

epilepsy in humans can also be used to

epilepsy. By combining modern neuro-

treat dogs.

science with recent advances in gene delivery, CombiGene has developed an

Panion works with gene therapy to

initial method, shown to suppress epi-

improve the quality of life for animals

leptic seizures in experimental trials in

with difficult-to-treat diseases. Our

preclinical studies with rats.

goal is inlicensing of projects with innovative ideas of which the scientific

Panion estimates that potential total sa-

basis concerns treatment of diseases in

les of its treatment amount to between

humans, but which also have unreali-

25 and 50 million dollars per year. The

zed potential in veterinary medicine.

greatest potential is seen on the US

In summary, the treatment method

Often, these projects are developed and

market.

which Panion is now developing can be

tested in animal models, which means

described as the injection of a combi-

that the values can be transferred and

Epilepsy and epileptic seizures are a

nation of therapeutic genes into the

utilized for developing treatments for

serious problem that affects some 60

affected area of the brain.

animal patients with similar diseases.

million people worldwide. Even dogs

The objective is to eventually have a

and other animals suffer from epilepsy

To commence clinical studies of the tre-

development and product portfolio

and some studies indicate that the

atment method and to create conditions

with three to five ongoing projects that

disease is more common in dogs than

for inlicensing of more projects for

match each other in terms of when they

in humans. The prevalence among dogs

the product portfolio we implemented

can reach the market.

is 1%, although it varies considerably

a new share issue in May that raised

from breed to breed and can be as much

about 7.5 million kronor, before issuing

as 5-10%.

expenses. Panion has also applied

Although there are many similarities between developing treatment methods

for listing of the company’s share for

for pets and for humans, there are also

Epilepsy is currently treated with

trading on Aktietorget. The first day of

considerable dissimilarities. Above all,

drugs and, in some cases, surgery.

trade is expected to be 6 July 2017.

it is less expensive to conduct studies

However, among many of those who are

on animals and it is possible to advance

treated with medicines, perhaps 30%,

more quickly, since development of

there is no satisfactory effect. This figu-

animal drugs is subject to less stringent

re applies to both humans and animals.

regulatory requirements.

Consequently, there is a very great need

Anja Holm, CEO, Panion Health AB

for developing treatment methods for A faster development process at lower

epilepsy.

cost also entails somewhat lower risk.

Panion Animal Health AB [559018-4171]  9


Description of operations The object of Panion’s business is to commercialize gene therapy for treating neurological and other chronic diseases in animals. By applying CombiGene’s innovation in neuroscience and modern gene therapy to animal diseases we will develop a platform for treating brain diseases and other neurological disorders. CombiGene’s initial treatment method has been shown to suppress epileptic seizures in experimental trials in preclinical studies with rats. It is the board’s assessment that gene therapy has development potential as a means of treating other neurological disorders. Business concept Panion will develop and commercialize gene therapeutic treatment of epileptictype disorders in dogs and other animals, and develop and commercialize other veterinary medicinal products and new forms of treatment that can give sick animals a better life.

Epilepsy Epilepsy is defined as a central nervous system disorder (neurological disorder) which is characterized by recurrent, spontaneous seizures. These seizures are caused by abnormal electrical activity in the brain cells. An epileptic seizure is characterized by stereotypical, involuntary spasms and cramps in parts or all of the body. Epilepsy is the most common neurological disorder in dogs. As in humans, the disorder may have different causes. The diagnostics generally follow the same pattern in humans and the initial treatment is often an oral drug, but there are fewer approved drugs for dogs than for humans. Furthermore, there are dissimilarities with regard to absorption, metabolism and elimination, which means that many drugs never reach the veterinary market. Unfortunately, for many dogs with epilepsy, euthanasia is an alternative to ineffective drugs – a difficult situation for dog owners. The prevalence of epilepsy (and symptoms thereof) varies from breed to breed, but is in the interval of 1–5 percent for all dogs 6. For certain breeds, such as Belgian Shepherd and Petit Basset Grif-

fon Vendeen, prevalence may be as much as 10 percent 7. This indicates a genetic predisposition for epilepsy 8. Researchers are of the opinion that epidemiological knowledge about canine epilepsy is still incomplete. For example, a study conducted in the UK showed that the prevalence of epilepsy was 0.62 percent but that there was considerable variation in relation to age, gender and breed 9. Other studies have shown that the prevalence of canine epilepsy is as high as an estimated 7 percent 10. Panion’s own, limited study indicates that the prevalence is about 2 percent (Panion, internal data, 2016). In humans the prevalence of epilepsy is also estimated in a broad interval 11. In its estimates, the Company will assume a prevalence of 1 percent, even though the actual prevalence in dogs may be shown to be much higher. The proportion of epileptic dogs in which seizures cannot be suppressed at a satisfactory level with medicinal treatment is about 30 percent 12. Dogs who cannot be helped sufficiently with currently available drugs, or who suffer serious side effects from them, constitute Panion’s target group for the veterinary product.

Gene therapy in brief Gene therapy, in the treatment of neurological disorders in general and epilepsy in particular, is in the early stages of development. The technique involves delivery of new genetic material into the nerve cells of the brain via modified

and non-pathogenic viral vectors. The virus’s own genes are replaced with new genes, which are carried by the virus and transferred to the nerve cells. The virus can no longer reproduce and is therefore harmless.

Treatment method and development phase Dogs with epilepsy initially undergo medicinal treatment by a veterinarian. In about 70 percent of cases where drugs are used, the number of seizures can be maintained at an acceptable level, but in 30 percent of cases there is no satisfactory response 13. After examination by a veterinarian, scanning and exclusion of other factors such as brain tumours, these dogs can be referred for gene therapy treatment. Normally, an epileptic seizure begins in one area of the brain and then spreads to other parts of the brain. Specialist knowledge, for example, oncological training, is required in order to inject directly into the brain and precisely target the location where gene therapy gives the best possible effect. Panion believes a single injection during the life of the animal will suffice, but this will be investigated further. The product will be a sterile solution of vector particles encoding human NPY and human Y2. This is the same active substance as in CombiGene’s product for humans, but there will probably be differences in the composition, dose

6 Charalambous, M., et al. 2014. “Treatment in canine epilepsy - a systematic review.” BMC Veterinary Research 10: 257-281. 7 Weissl, J., et al. 2012. “Disease progression and treatment response of idiopathic epilepsy in Australian Shepherd dogs.” Vet Intern Med 26: 116-125. 8 Gullov, CH, et al. 2011. “Epilepsy in the Petit Bsset Griffon Vendeen: prevalence, semiology, and clinical phenotype.” Vet Intern Med 25: 1372-1378. 9 Kearsley-Fleet, L., et al. 2013. ”Prevalence and risk factors for canine epilepsy of unknown origin in the UK. .” Vet Rec 172: 338. 10 Koestner, A. 1989. ”Neuropathology of Canine Epilepsy.” Problems in Veterinary Medicine 1: 516-534. 11 Patterson, EE. 2014. “Canine Epilepsy: An Underutilized Model.” ILAR J 55: 182-186. 12 Volk, H., et al. 2014. “Update on canine epilepsy: treatment advances.” VetTimes. June 30. 13 Volk, 2014, (Vettimes.co.uk) and “Canine and Feline Epilepsy. Diagnosis and management” Luisa De Risio and Simon Platt, 2014

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and packaging material. NPY and Y2 protein sequences are more or less identical in humans, rats and dogs, and the AAV-vector mediated expression of these these has been demonstrated in both rats and dogs. CombiGene and associated researchers have conducted studiers on the safety of injections of gene therapy vectors into the brains of experimental animal subjects (rats and dogs), and the results have indicated no significant side effects or adverse effects in either rats or dogs, or their brain function (own studies). These studies provide a good foundation for further development of the technique. Panion will conduct a clinical study with a small number of dogs with refractory epilepsy to assess the effectiveness and safety of the treatment. The first study is planned to be conducted at a veterinary hospital or clinic in the USA and is expected to begin during the second half of 2017. It is expected that it will take nine months from the initial recruitment of potential candidates until a final report can be published. Panion will assess the total cost to run the study with respect to time, examinations, product deliveries and monitoring. The result may vary, depending on how successfully candidates for the study can be recruited. Subsequently, a multi-centre study will be done with dogs suffering from medically refractory epilepsy and, possibly, a comparison will be made with either an existing drug or a placebo product. The number of candidates is calculated statistically depending on the expected effect, but an approximate timeframe is 12 months. If a goof effect is achieved in the first study, the protocol and procedure can also be used in the multi-centre study. These trials and the development of the product will be conducted under the supervision of the FDA. Depending on the progression of the study and any possible supplementary requirements from regulatory authorities, the development time is estimated at about 4–5 years. Following

14 15

this, the Company foresees approval of the epilepsy drug for sale for use in canine patients in the USA.

Business model Panion’s goal is inlicensing of projects with innovative ideas of which the scientific basis concerns treatment of diseases in humans, but which also have unrealized potential in veterinary medicine. Often, these projects are developed and tested in animal models, which means that the values can be transferred and utilized for developing treatments for animal patients with similar diseases. Depending on the outcome of the project, we will collaborate on product development, marketing, distribution and other aspects of business operations with other companies.

Objective Panion’s objective is to eventually have a development and product portfolio with three to five ongoing projects that match each other in terms of when they can reach the market. Focus will be placed on gene therapy for animal diseases, such as diseases affecting the eyes, joints and metabolism. By working with a board and management comprising individuals with considerable expertise and experience in relevant areas of veterinary product development, business development and marketing, Panion can utilize knowledge and guide development of the Company’s products much more effectively. Prior to inlicensing of gene therapy treatment of canine epilepsy Panion has defined several goals in the coming years: 2017 MUMS (Minor Use Minor Species) application Initiate contact with FDA for an Investigational New Animal Drug (INAD) application and subsequent pilot study. Write protocol for pilot study Start pilot study for dogs in the USA, based on non-GMP-classified material.

2018 Begin a so-called Target Animal Safety (TAS) study in collaboration with a commercial laboratory, a CRO (Contract Research Organisation). Request a socalled Innovation Task Force meeting with the European Medicines Agency.

Market In May 2016 Panion conducted an early market survey (not statistically verified) based on a questionnaire distributed to 101 dog owners in the USA to ascertain their attitudes to treatment of canine epilepsy. The questionnaire described treatment in broad terms and did not disclose the fact that it was a matter of gene therapy. Of the dog owners, 11 had dogs with epilepsy and 2 had dogs that had been diagnosed with epilepsy within the previous year. Six of nine dog owners were prepared to spend 500 dollars or more on a treatment involving injection directly into the brain of the dog, especially if it would reduce the number of seizures and the quantity of medicines. Several thought the treatment sounded “dangerous”, an attitude that can be changed by providing information and training for veterinarians and dog owners. With an estimated prevalence of epilepsy of 1 percent, of which 30 percent of cases are medically refractory epilepsy 14, the Company has estimated the number of potential candidates. Initially, the Company is targeting the American market, since there are many dogs, there is often a very strong bond between dog and owner, and there is a greater desire to spend a lot of money on the family pet, as compared to other countries. In the USA there are 78 million dogs 15. The above estimates (1% x 30% = 0.3%) imply that the potential patient base for Panion’s epilepsy treatment within the population is 233,400 dogs in the USA. If the estimated prevalence of epilepsy is increased to 2 percent, the patient base is about 500,000 dogs in

Volk, 2014, (Vettimes.co.uk) and “Canine and Feline Epilepsy. Diagnosis and management” Luisa De Risio and Simon Platt Statista.com. January 1. Data from 31 March, 2016. http://www.statista.com/statistics/198100/dogs-in-the-united-states-since-2000/.

Panion Animal Health AB [559018-4171]  11


the USA alone. Europe is, of course, also an interesting market for Panion’s drug. In France, Germany, Italy, the UK and Spain there are 35 million dogs 16, which would mean a potential 105,000 candidates. In addition, in Europe, a high proportion of dogs are covered by animal insurance (Sweden 40%, UK 25%, Norway 14% 17.). The annual cost of medicines and tests for dogs with epilepsy varies between USD 500 and 5,000, depending on the complexity of the disease 18. Pet owners are accustomed to high costs for various forms of veterinary care. For example, the high costs for treating lymphoma (cancer) in dogs vary between USD 1,000 and USD 10,000 19. To establish a pricing model the board of Panion has assumed a sale price to clinics of USD 2,000 and a treatment cost to the animal owner of USD 4,000. Panion’s treatment cost is a one-off cost, as compared to the above annual cost for medicines and tests amounting to USD 500 - 5,000. This implies a cost of USD 2,000 to the clinic for diagnosis, treatment, follow-up and miscellaneous costs. If the production cost per dose is USD 300, Panion’s margin per candidate would be USD 1,700, which should also cover costs for sales and marketing, taxes and other expenses

and fees. The estimated production cost is a very rough estimate, since we are in the very early stages of the process; Panion lacks information about, for example, prices for GMP production. GMP, Good Manufacturing Practice, is a quality standard which regulates registration and validation of processes and procedures in the production and control of pharmaceuticals. Model estimates based on the above figures suggest that annual sales of between 25 million and 50 million dollars are not unrealistic. For example, Panion can reach a turnover of USD 23 million with 10% market penetration, based on a price of USD 1,000 per treatment. Panion has made in-house estimates of costs that will arise before sales can commence. These expenses are mainly associated with clinical studies in dogs, establishment and realization of treatment development programs and application for approval with the FDA. At present, the Company has estimated these expenses as follows: USD 700,000 for clinical testing, USD 400,000 for product-specific development (chemistry, manufacturing, and control, CMC) and USD 500,000 for other expenses, including USD 200,000 for an FDA application. The total estimated cost is therefore MUSD 1.6.

The European Pet Food Industry. 2014. Facts and Figures, 2014. Report, Brussels: FEDIAF PWC. 2015. Animal Health: Strategy Playbook for an Evolving Industry. Report, New York: PriceWaterhouseCoopers. Khuly, Oct 2012 (www.embracepetinsurance.com/health/epilepsy-seizures) 19 CanineLymphoma.com. January 1. Data from 20 April, 2016. http://www.caninelymphoma.com/canine-lymphoma-treatment-cost/. 16 17

18

12  Panion Animal Health AB [559018-4171]


Panion Animal Health AB [559018-4171]  13


History

Panion, which is a newly established pharmaceutical company, shares a common history with CombiGene AB. CombiGene’s shares have been listed on Aktietorget since 25 May 2015.

1999 – 2005: • Merab Kokaia and David Woldbye initiated collaborative research to develop new forms of treating humans who suffer from epilepsy. • The research upon which CombiGene’s business is based is largely the result of an academic research project that was conducted at Lund University and the University of Copenhagen. • Research on NPY is based on the observation made in several studies that the body increases production of NPY in key regions of the brain after an epileptic seizure. • The general hypothesis behind the research has been that it may be possible, by means of gene therapy, to increase the concentration of NPY in the area of the brain where the epileptic seizure is initiated and in so doing strengthen the body’s natural defence against seizures.

2005: • Woldbye and Kokaia succeed in demonstrating that a more pronounced anti-seizure effect is achieved if an increased level of NPY is combined with an increased level of the receptor Y2.

2007: • CombiGene is founded on the basis of Kokaia and Woldbye’s research after advances in gene therapy development make it possible to develop a method whereby, with the aid of gene therapy, NPY and Y2 receptors can be introduced directly into the brain cells. • Patent applications for CombiGene’s treatment method are prepared and submitted to authorities in the USA and Europe.

2014: • CombiGene conducts preclinical animal trials, whereby CombiGene’s gene-therapy-based technique is tested with respect to toxicity. Results indicate that the treatment is safe and gives no noticeable side effects. • CombiGene carries out a share issue directed to several investors. The issue raises 7 million kronor in issue capital before issuing expenses.

14  Panion Animal Health AB [559018-4171]

• CombiGene becomes a public limited company. In connection with this, extensive changes are made in the Company’s management. Besides Lars Thunberg, who remains a board member, Arne Ferstad is elected chairman and Per Ericsson is elected as a board member. • The Company secures patents in the USA and Europe.

2015: • CombiGene forms a wholly owned subsidiary, Panion Animal Health AB, with the aim of further developing the methods for application in veterinary medicine.

2016: • Selection of a candidate vector, named CG01, based on the results from two earlier studies and two new studies. • The annual general meeting of CombiGene AB of 4 April 2016 resolves to distribute Panion Animal Health AB to CombiGene AB’s shareholders. The record date is set for 30 September 2016. • Panion appoints a new CEO and management, and elects a new board, Oct-Nov. • A licensing agreement between Panion and CombiGene is signed in December.

2017: • A Service and Supply agreement between Panion and CombiGene is signed in February. • A directed share issue raising MSEK 1 for Panion is carried out. • Panion signs a letter of intent to acquire a license and develop a veterinary medical treatment based on GeneQuine’s gene therapy treatment of equine osteoarthritis. • Via a preferential rights issue, Panion raises about MSEK 7.5 before issuing expenses.


Board of Directors, senior executives and auditors Board of directors According to Panion’s Articles of Association, the board shall consist of at least three and at most eight board members, and at most five deputies. The board of directors of Panion currently consists of four board members, including the chairman, all of whom are elected until the next annual general meeting. The Company’s registered office is in the City of Lund in the County of Skåne. Information about the current board of directors is given below.

Independent in relation to: Name

Position

Member since

Lars Thunberg

chairman

2015

The Company and senior executives yes

Principal shareholders no

Elizabeth Willis

board member

2016

yes

yes

Nerry Kamstrup

board member

2016

yes

yes

Lars Friis Mikkelsen

board member

2016

yes

yes

Lars Thunberg, b. 1966 Lars Thunberg, born 1966, is a co-founder of CombiGene and chaired its board during the period Aug. 2013 to Oct. 2014. He holds an MSc in Business Administration and Economics from Stockholm University and Lund University. Lars Thunberg is chairman of the boards of several companies, among others, VA Automotive AB (publ), which is listed on NASDAQ First North. Lars Thunberg holds 2,900,000 shares in the Company. Education: MSc in Business Administration and Economics Function

Company name

Period

Chairman

VA Components i Hässleholm AB

2012-06-26 –

Chairman

Lidhs Verktygsindustri Aktiebolag

2012-04-17 –

Board member

CombiGene AB

2006-04-28 -

Chairman

Moderna Verktyg i Söderköping AB The bankruptcy was concluded on 25/06/2013.

2009-03-26 -2013-06-25

Board member

Högskolan Kristianstad Holding AB

2012-06-18 –

Board member

VA Engineering i Hässleholm AB

2013-11-14 –

Chairman

VA Automotive i Hässleholm AB

2008-10-22 –

Lars Thunberg, Chairman +46 70-143 30 40

Board member

VA Automation i Hässleholm AB Dissolved via fusion 15/12/2015

2010-12-17 – 2015-12-15

lars.thunberg@panion-animalhealth.com

Board member

SwePart verktyg i Tyringe AB

2011-06-01 –

Board member

VA International AB Dissolved via fusion 30/12/2014

2011-12-29 – 2014-12-30

Board member

M & L Industriförvaltning AB

2012-05-23 –

Chairman

Camito Sweden AB

2015-10-26 –

Deputy board member

Hardmesch AB

2014-08-22 –

Chairman

Panion Animal Health AB

2016-08-30 –

Board member

CombiGene Personal AB

2016-03-19 –

Chairman

aximed AB

2010-11-08 – 2015-12-11

Chairman

axichem AB

2010-11-08 – 2015-04-24

Chairman

Viscosens AB

2011-03-09 – 2012-11-27

Chairman

Veal Fastigheter AB

2011-12-05 – 2012-08-30

Board member

Stockaby Affärsutveckling AB

2013-07-09 – 2015-12-15

For information, please contact:

Shareholding in other companies, exceeding 10 percent of voting rights or capital: M & L Industriförvaltning AB and CombiGene AB Panion Animal Health AB [559018-4171]  15


Elizabeth Willis, b. 1961 Elizabeth Willis has more than 30 years of experience of starting and developing companies. She has expertise in strategic planning, acquisition, negotiation, product development, FDA and CE labelling processes for pharmaceuticals, sales and marketing. Earlier in her career Elizabeth Willis worked in the Hoechst Group (now Sanofi, Celanese and DuPont), where she worked with several newly started companies in the USA and Germany. Her last position with the Hoechst Group was President and CEO of a large subsidiary. She has managed the development and launch of multiple products, including medical devices and veterinary diagnostics. She was co-founder, COO and board member of Boulder Diagnostics Inc, whose technology was acquired by Oxford Immunotec. She was responsible for the development and launch of veterinary diagnostic products for Lyme disease and parasite detection. Elizabeth Willis holds a B.Sc. in chemical engineering from Clemson University and an MBA from the University of Houston. Elizabeth Willis owns no shares in the Company. Education: BSc Chemical Engineering, MBA Function

Company name

Period

CEO, board member

Orbit Genomics Inc.

2016-06-30 –

Board member

Boulder Diagnostics, Inc.

2009-07-24 – 2013-07-29

Shareholding in other companies, exceeding 10 percent of voting rights or capital: Boulder Diagnostics, Inc.

Nerry Kamstrup, b. 1965 Nerry Kamstrup, who holds a Doctor of Veterinary Medicine (DVM) degree from the Royal Veterinary and Agricultural University, Copenhagen, is an experienced veterinary practitioner and has extensive expertise from animal clinics in Faxe, Vordingborg and Husum. She has worked in several countries, e.g., in Maryland, USA, where she served as specialist in ophthalmology (eye diseases) at an animal eye care centre. Nerry is authorized by the Danish veterinary eye-disease panel (2006) and has a great passion for treatment and surgery of eye diseases. She is also certified by The European College of Veterinary Ophthalmologists (ECVO), which requires that she participates in many courses and congresses within the field of eye diseases. Nerry Kamstrup owns no shares in the Company. Education: Veterinarian No other current board engagements

16  Panion Animal Health AB [559018-4171]


Lars Friis Mikkelsen, b. 1968 Lars Friis Mikkelsen is CEO of Ellegaard Göttingen Minipigs, which produces pigs for research purposes. He is also the founder of LarSolution, which advises on pharmacology and business development in the pharmaceutical field. Lars worked with pharmacology and experimental animals, including animal protection and welfare, for many years in Novo Nordisk and MSD/Merck, most recently as Head of in-vivo pharmacology. Lars holds a Doctor of Veterinary Medicine degree (DVM) from Copenhagen, 1994. Early in his career he worked as a veterinary practitioner in Rønde, Denmark. He is a board member of the European Animal Research Association (EARA) and Chairman of the Large Animals Topic Group, European Federation of Pharmaceutical Industries and Associations (EFPIA). Lars Friis Mikkelsen owns no shares in the Company. Education: Veterinarian, MBA, MLAS No other current board engagements

Senior executives Anja Holm, b. 1965 CEO, DVM Anja Holm has many years of experience in European regulation of veterinary medicines, including clinical trials, authorization procedures and legislation, and in international negotiation. Anja worked in the Committee for Veterinary Medicines (CVMP) under the European Medicines Agency for 12 years, including 6 years as Chairperson, with innovative veterinary medicines, gene technology and vaccines. At the Danish Medicines Agency she was senior scientific officer in veterinary medicine for 18 years and, most recently, was Head of unit for clinical trials. Early in her career she practised as a veterinarian for four years and participated in a DNA-vaccine research project at the Danish Virus Institute. Anja holds a Doctor of Veterinary Medicine (DVM) degree from Copenhagen (1994). Anja Holm owns no shares in the Company. Education: Veterinarian, Business Pract. (NLP), Management training   Function

Company name

Period

CEO/owner

Central VetPharma Consultancy

2016-06-15 –

For information, please contact:

Anja Holm, CEO, DVM +45 22 94 6 600 anja.holm@panion-animalhealth.com

Shareholding in other companies, exceeding 10 percent of voting rights or capital: None

Panion Animal Health AB [559018-4171]  17


Anni Acs, b. 1972 CFO, BSc Anni Acs has longstanding experience of accounting and financial control. Anni Acs is currently CFO of VA Automotive AB, which is listed on First North. She has previously served as CFO of FAAC Nordic AB and as Controller at Investment AB Seven Summits and Atos Medical AB. Anni Acs holds a BSc in Business Administration from Halmstad University. Anni Acs owns no shares in the Company. Education: BSc in Business Administration No other current board engagements

Niels-Erik Manniche, b. 1960 Director Regulatory Affairs, DVM Niels-Erik Manniche has been a practising veterinarian but has spent the last 25 years in the animal health pharmaceutical industry, including positions within Regulatory Affairs, Clinical trials and Pharmacovigilance. He has previously worked for MSD Animal Health, Leo Pharmaceuticals Animal Health, Schering-Plough Animal Health, Intervet Danmark AS and Pharmacia Denmark Animal Health. Niels-Erik holds a Doctor of Veterinary Medicine (DVM) degree from the Royal Veterinary and Agricultural University, Copenhagen. Niels-Erik Manniche owns no shares in the Company. Education: Veterinarian No other current board engagements

Carlos N. Velez, b. 1967 Director Business Development, PhD, MBA Carlos Velez has direct experience in the sourcing, evaluation and licensing of novel products, including animal health assets. He was previously the Chief Business Officer (CBO) of Lantix Therapeutics UK and has been Director of Business Development at Penwest Pharmaceuticals, where he was responsible for the outlicensing of 505(b)(2) programs as well as the scouting and analysis of neurology inlicensing opportunities. Other previous employers include Forest Labs, Frankel Group (now Huron Consulting) and Genencor International. Carlos holds a BSc in Pharmacy from the Albany College of Pharmacy, a PhD in Pharmacy from the University of North Carolina at Chapel Hill, and an MBA in Finance from the Rochester Institute of Technology. Carlos N. Velez owns no shares in the Company. Education: PhD in Pharmacology, Master of Business Administration (MBA) No other current board engagements

18  Panion Animal Health AB [559018-4171]


BOARD OF DIRECTORS, SENIOR EXECUTIVES AND AUDITORS (CONT.)

Shareholding and engagement in other companies The stated holdings of board members and senior executives of Panion of securities in the Company refer to both private holdings and holdings via closely related parties or companies controlled by the individual in question. The statement of board members’ engagement in other companies includes directorships that are either current or have been concluded within the past five years, as per the excerpt from Swedish Companies Registration Office’s registry of enterprises, dated 5 April 2017, and information concerning shareholding in other companies exceeding 10 percent, which has been stated for the respective board member or senior executive. The current or most recently held positions/directorships are described first. Temporary absence from board membership in a certain company may have occurred.

Corporate Governance The Board is elected by the Annual General Meeting. All board members are elected until the next Annual General Meeting. A board member is entitled to resign from the Board at any time. An authorized public accountant or a registered public accounting firm may be elected by an Annual General Meeting. Auditors are normally appointed for more than one year.

The Company does not appoint a nomination committee. Individual shareholders present proposals to board members or other elected board representatives prior to announcement of the Notice of the Annual General Meeting. The CEO is appointed by the Board and has principal responsibility for the ongoing management and daily operation of the Company. Distribution of work between the Board and CEO is stipulated in the formal work plan of the Board and instructions to the CEO. The CEO is also responsible for the preparation of reports and the compilation of information from management prior to Board Meetings and presents the material at Board Meetings. The Company is not required to comply with the Swedish Corporate Governance Code and has not opted to voluntarily comply with it. The Company appoints no audit committee or remuneration committee.

Other information concerning board members and senior executives

been involved in fraud-related legal proceedings in the past five years. No board member or senior executive has been involved in any legal processes related to bankruptcy. None of the Company’s board members or senior executives have been subject to charges or sanctions by statutory or regulatory authorities, or prohibited by the court from being a member of an issuer’s management or control body or from having senior or executive functions with an issuer in the past five years. Board members Elizabeth Willis, Nerry Kamstrup and Lars Friis Mikkelsen are independent in relation to the Company and the Company’s senior executives and the Company’s principal shareholders.

Auditors Panion’s chief auditor since 27 April 2017 is Anders O Persson of Mazars in Landskrona. Address: Lilla Strandgatan 19, 261 22 Landskrona, Sweden.

None of the above board members or senior executives have any family ties to another board member or senior executive. Lars Thunberg was chairman of Moderna Verktyg i Söderköping AB, which entered into bankruptcy on 16 March 2012. The bankruptcy was concluded on 25 June 2013. No other board members or senior executives have been involved in bankruptcy, liquidation or similar events. No other board members or senior executives have

Panion Animal Health AB [559018-4171]  19


Remuneration Fees and other remuneration to the chairman and board members are determined by the general meeting. Board members receive a fixed cash amount (basic amount) and the chairman receives remuneration amounting to twice the basic amount. In addition, any expenses in connection with board trips or costs for services rendered for Panion are reimbursed as per account rendered. The CEO, Anja Holm, is as of 15 January 2017 employed 60% of full time at a cost corresponding to 54,000 kronor per month excluding social security contributions and pension contributions, plus the possibility of a bonus of up to 25% of one year’s salary, provided that milestones are reached (as determined by the board). There is no pension agreement or agreed severance pay. Panion and the CEO can terminate the employment relationship giving 6 months’ notice. The board is of the opinion that the CEO’s part-time employment is sufficient for the CEO to execute all duties associated with the role of CEO. If necessary, the time commitment of employment may be extended upon agreement between the board and the CEO.

Person

Role

Remuneration/salary

Benefits

Pension

Total

Lars Thunberg

chairman

88,6

0

0

88,6

Elizabeth Willis

board member

44,3

0

0

44,3

Nerry Kamstrup

board member

44,3

0

0

44,3

Lars Friis Mikkelsen

board member

44,3

0

0

44,3

Anja Holm

CEO

1 020

0

0

1 020

The above table refers to annual remuneration and benefits for the board and senior executives. Board fees apply as of the annual general meeting of 27 April 2017. Salary expenses for Anja Holm include social security contributions and pension contributions. No remuneration was paid to the board members during 2016.

Other information All board members and senior executives may be contacted via Panion’s head office (see information under Addresses on page 36).

20  Panion Animal Health AB [559018-4171]


Financial information in summary Full year 2016 and Quarter 1 2017 The selected financial information given below is excerpted from Panion’s audited annual report for the financial year ending 31 June 2015 and the audited annual report for the financial year ending 31 December 2016. The selected financial information referring to quarter 1 of 2017 is excerpted from the unaudited interim report for quarter 1 of 2017. The information given below should be read in conjunction with the section “Comments on the Company’s financial

development”, including the subsection “Significant events after 31 December 2016” and Panion’s audited annual reports for the financial years 2015 and 2016 with accompanying notes, which are incorporated by reference.

in accordance with the Swedish Annual Accounts Act (1995:1554) and 2008:1 (K2) Annual Accounts and Consolidated Accounts. The change in accounting principles has not resulted in any change in comparative figures.

As of 1 January 2016 Panion prepares its financial reports in accordance with the Swedish Annual Accounts Act (1995:1554) and BFNAR 2012:1 (K3) Annual Accounts and Consolidated Accounts. The Company prepared its financial reports for the previous year

Income Statement Figures in KSEK Net sales

2016 Jan - Dec

2015 June* - Dec

0

0

-692

-217

0

0

-692

-217

Operating expenses Other external expenses Personnel expenses  Operating profit/loss  Net financial income/expense 

0

0

-692

-217

-

-

Net profit/loss for the period

-692

-217

Earnings per share, before dilution, SEK

-0.06

-4.34

Profit/loss after financial items Tax 

Earnings per share, after dilution, SEK Average number of shares before dilution  Average number of shares after dilution  Total number of shares, at the close of the period 

-0.06

-4.34

7 525 319

50 000

7 525 319

50 000

11 801 593

50 000

* The company was established in June 2015.

Panion Animal Health AB [559018-4171]  21


Balance sheet Figures in KSEK

2016 31 Dec

2015 31 Dec

793

0

ASSETS Current assets Current receivables

306

84

Total current assets

Cash and bank balances

1 099

84

TOTAL ASSETS

1 099

84

550

50

41

33

591

83

Current liabilities

508

1

Total liabilities

508

1

1 099

84

SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity

Restricted equity Share capital

Non-restricted equity Accumulated profit/loss Total shareholders’ equity  Liabilities

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES

Change in shareholders’ equity

Figures in KSEK The company is established

Share capital

Accumulated profit/loss

50

Total share­ holders’ contribution 50

Shareholders’ contributio

250

250

Net profit/loss for the period

-217

-217

33

83

Closing balance 2015-12-31 New share issue

50 500

500

Shareholders’ contribution

700

700

Net profit/loss for the period

-692

-692

41

591

Closing balance 2016-12-31

22  Panion Animal Health AB [559018-4171]

550


Cash flow statement 2016 Jan - Dec

2015 June*-Dec

Cash flow from operating activities

-276

-216

Cash flow from investing activities

0

0

Cash flow from financing activities

500

300

Cash flow for the period

222

84

84

0

306

84

Figures in KSEK

Liquid assets at the start of the reporting period Liquid assets at the end of the reporting period

* The company was established in June 2015.

Key terms 2016 Jan - Dec

2015 Jan-Dec

Earnings per share, before dilution, SEK

-0.06

-4.34

Earnings per share, after dilution, SEK

-0.06

-4.34

Figures in KSEK Financial key ratios

Shareholders’ equity per share, SEK

0.05

1.66

Equity/assets ratio (%)

53.78

98.80

Average number of shares before dilution

7 525 319

50 000

Average number of shares after dilution

7 525 319

50 000

11 801 593

50 000

Total number of shares, at the close of the period

Panion Animal Health AB [559018-4171]  23


Financial information in summary Quarter 1 2017 Income Statement

Figures in KSEK Net sales

2017 3 months Jan-March

2016 3 months Jan-March

2016 12 months Jan-Dec

0

0

0

-1 267

0

-692

Operating expenses Other external expenses Personnel expenses 

0

0

0

Total operating expenses

-1 267

0

-692

Operating profit/loss

-1 267

0

-692

0

0

0

-1 267

0

-692

Net financial income/expense Profit/loss after financial items  Tax  Income for the period 

0

0

0

-1 267

0

-692

2017 3 months Jan-March

2016 3 months Jan-March

2016 12 months Jan-Dec

Key terms

Figures in KSEK Financial key ratios Equity

13.70%

14.10%

53.80%

Earnings per share, SEK (average)

-0.11

0

-0.17

Shareholders’ equity per share, SEK

0.07

1.64

0.05

0

0

0

Total number of shares at the close of the period

12 516 593

50 000

11 801 593

Average number of shares during the period

11 817 482

50 000

7 525 319

Dividend per share, SEK

24  Panion Animal Health AB [559018-4171]


Cash flow

Figures in KSEK Cash flow from operating activities Cash flow from investing activities  Cash flow from financing activities 

2017 3 months Jan-March

2016 3 months Jan-March

2016 12 months Jan-Dec

2 596

-3

-278

-3 000

0

0

200

500

500

-204

497

222

Liquid assets at the start of the period

306

84

84

Liquid assets at the end of the period

102

582

306

Cash flow for the period

Change in shareholders’ equity 31/03/2017 Figures in KSEK Balance brought forward

Share capital

Other capital contribution

Other assets

550

-

733

33

968

Distribution of profit New issue (not yet paid in) 

-

-

692

Total shareholders’ equity

692

591

692

1 001

Shareholders’ contribution

600

Net profit/loss for the period Closing balance 

Net profit/loss for the period

583

968

41

600 -

1 267

-

1 267

-

1 267

925

Net profit/loss for the period

Total shareholders’ equity

Change in shareholders’ equity 31 March 2016 Figures in KSEK Balance brought forward

Share capital

Other capital contribution

Other assets

50

-

250

Distribution of profit New issue 

-

217

217

83

217

-

-

-

Shareholders’ contribution

700

Net profit/loss for the period Closing balance 

-

50

-

733

700 -

692

-

692

-

692 91

Panion Animal Health AB [559018-4171]  25


Balance sheet - Assets 2017 31 March

2016 31 March

2016 31 Dec

Intangible assets

3 000

0

0

Total fixed assets

3 000

0

0

Figures in KSEK

Fixed assets

Current assets Current receivables

3 177

0

793

Prepaid expenses and accrued income

493

0

0

Cash and bank balances

102

582

306

Total current assets

3 773

582

1 100

TOTAL ASSETS

6 773

582

1 100

2017 31 March

2016 31 March

2016 31 Dec

Share capital

583

50

550

Share premium reserve

968

0

0

Other reserves

641

32

733

-1 267

0

-692

925

82

591

Current liabilities

900

0

0

Accounts payable

4 656

0

466

0

500

0

292

0

43

Total liabilities

5 847

500

508

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES

6 773

582

1 100

Balance sheet – Shareholders’ equity and liabilities Figures in KSEK

Shareholders’ equity

Income for the period Total shareholders’ equity  Liabilities

Other liabilities Accrued expenses and prepaid income 

26  Panion Animal Health AB [559018-4171]


Comments on the Company’s financial development Period January to December 2015

Balance sheet

Income and profit/loss

As of 31 March 2017 the closing balance amounted to SEK 6,773 thousand.

Panion was established 26 June 2015 and generated no income during 2015. Panion’s expenses for 2015 amounted to SEK 217 thousand. Expenses are mainly attributable to auditing services, consultancy expenses and remuneration to the board and CEO.

Balance sheet Panion’s assets as of 31 December 2015 consisted of cash and bank balances amounting to SEK 84 thousand.

Financial resources As of 31 December 2015, Panion’s balance sheet total amounted to SEK 84 thousand and shareholders’ equity amounted to SEK 83 thousand. The Company was financed with share capital amounting to SEK 50 when it was established and via a shareholders’ contribution of SEK 250 thousand.

Period January to December 2016 Income and profit/loss Panion was still on the early stages of development during 2016 and therefore generated no revenue. Nets sales amounted during the period to zero (0) kronor. Panion’s expenses for the period amounted to SEK 692 thousand. Expenses are mainly attributable to consultancy expenses and remuneration to the board and CEO.

Balance sheet Panion’s assets as of 31 December 2016 consisted of cash and bank balances amounting to SEK 306 thousand.

Financial resources As of 31 December 2016, Panion’s balance sheet total amounted to SEK 1,099 thousand and shareholders’ equity amounted to SEK 509 thousand. The Company was financed via a new share issue amounting to SEK 500 thousand from its owner at the time, CombiGene AB, and via shareholder contribution of SEK 700 thousand from the principal shareholder, Lars Thunberg.

Period January to March 2017 Income and profit/loss Panion had no income during the period January – March. Expenses amounted during the period to SEK 1,267 thousand. These expenses are mainly attributable to remuneration for the CEO and board members, as well as consultancy fees.

Cash flow and financial resources Cash flow for the period amounted to SEK - 204 (497) thousand. Liquid assets at the end of the reporting period amounted to SEK 102 (582) thousand.

Trends There are currently no known trends, uncertainty factors, potential receivables or other claims, commitments or events that might be expected to have a significant impact on Panion’s business prospects in the coming financial year.

Significant events during 2017 • The Company carries out a share issue amounting to MSEK 1 directed to Dividend Sweden and Capensor at the end of March. The issue price of the share was SEK 1.4. • Panion’s principal shareholder loaned the Company MSEK1.3 at a per annum rate of 3%. • Panion signed a letter of intent with GeneQuine Biotherapeutics GmbH to acquire a license and develop a veterinary medical treatment based their therapy treatment of equine osteoarthritis. • In May 2017 the Company implemented a preferential rights issue that raised about MSEK 7.4 before issuing expenses for Panion. • The issue price per share was SEK 2. The share price was determined by the board of Panion, taking into consideration the prevailing market situation, assessment of business potential and future outlook, and a comparative evaluation based on similar listed companies on the Swedish market. After the issue the total number of shares in Panion amounted to16,206,593. • The Company intends to apply the equity, in order of priority and expressed as percentages, as follows. Continued development and commencement of clinical studies for the epilepsy drug for dogs in the USA. About 70%. Evaluation and, if possible, inlicensing of the gene therapy drug from GeneQuine. About 15%. Other ongoing discussions with respect to other possible inlicensing projects. About 15%. • Panion had as of 17 February 2017 taken up a bridge loan amounting to MSEK 6 from several Swedish professional investors. Panion has subsequently, without cost to the Company, settled MSEK 5.1 of the bridge loan. An additional MSEK 0.2 was settled against shares in the issue implemented by Panion in June. The balance of the bridge loan is therefore MSEK 0.7. The per annum rate for the loan is 18%.

Panion Animal Health AB [559018-4171]  27


Capitalization, debt and other financial information The tables in this section describe the Company’s capitalization and debt as of 5 June 2017. See the section entitled “Share capital and ownership” for further information about the Company’s share capital and shares. The tables in this section should be read in conjunction with the section entitled “Comments on the Company’s financial development”, including the accompanying notes, which are incorporated by reference.

SHAREHOLDERS’ EQUITY AND LIABILITIES TSEK Total current interest-bearing liabilities Guaranteed  Secured  Unguaranteed/ Unsecured  Total long-term interest-bearing liabilities  Guaranteed  Secured  Unguaranteed/ Unsecured  Shareholders’ equity (excl. loss brought forward)  Share capital  Statutory reserve  Other reserves  Total debt and shareholders’ equity  NET DEBT TSEK

5/06/2017 900 900 7 381 583 968 5  830 8 281 5/06/2017

A. Cash

6 222

B. Other liquid assets C. Readily disposable securities  D. Total liquid assets (A+B+C) 

6 222

E. Current financial receivables K. Short-term bank loans  G. Current share of long-term liabilities  H. Other current liabilities  I. Total current liabilities (F+G+H) 

900 900

J. Net current liabilities (I-E-D)

-5 322

K. Long-term bank loans L. Outstanding bond loan M. Other long-term loans  N. Total long-term liabilities  O. Net debt (J+N)

-5 322

28  Panion Animal Health AB [559018-4171]


Operating capital The Company is of the opinion that its operating capital, as at the date of this Company Description, is sufficient for its requirements over the coming 12-month period.

Investments The Company has made no investments during the financial periods 2015 and 2016.

Current and planned investments The Company has as of 1 February 2017 entered a licensing agreement with CombiGene for a one-off sum of MSEK 3. Under the terms of the license agreement the Company has the right to utilize certain of CombiGene AB’s intellectual property rights and know-how for the purpose of, among other things, research, development, manufacturing, marketing and sales of a drug for treatment of of epileptic-type disorders in dogs and cats. Besides this, there are no specific current investments and no decisions have been taken for such investments.

Employees As at the date of this Company Description, Panion had only one employee, the CEO, Anja Holm. Other persons involved in the Company are hired on a consultancy basis.

Panion Animal Health AB [559018-4171]  29


Share capital and ownership Share information Shares in Panion have been issued in accordance with Swedish legislation and are denominated in Swedish kronor (SEK). According to the Company’s Articles of Association, only ordinary shares, each carrying one vote, can be issued. Share capital in Panion amounts to SEK 895,088 SEK, distributed over 16,206,593 shares.

All shares are fully paid. Panion’s Articles of Association stipulate that share capital shall amount to at least SEK 550,000 and at most SEK 2,200,000, and that the number of shares shall amount to at least 11,801,593 and at most 47,206,372. The table below shows changes in share capital from the date of the Company’s registration up to and including 14 June 2017

Share capital development Year

Event

2015

Company registration

Total shareholders’ equity (SEK)

Change (SEK)

Total number of shares

Change in number of shares

Quotient value (SEK)

Subscription price (SEK)

50 000

50 000

50 000

50 000

1

-

2016

New issue

550 000

500 000

550 000

500 000

1

1

2016

Consolidation

550 000

0

1

-549 999

550 000.00

-

2016

Share split

550 000

0

11 801 593

11 801 592

0.05

-

2017

New issue

583 322

33 322

12 516 593

715 000

715 000

1.4

2017

New issue

895 088

171 954

16 206 593

3 690 000

0.0466

2

Rights associated with the Company’s shares Each shareholder votes in proportion to the number of shares held depending on the class of share. In accordance with the Swedish Companies Act, shareholders normally have preferential right to subscribe for new shares, warrants and convertible bonds, provided that the annual general meeting or the board, supported by a decision by the annual general meeting authorizing the board, does not decide to waive the shareholders’ preferential rights. Each share entitles the holder to an equal claim on the Company’s assets and profit. In the event of the liquidation of the Company, each shareholder, in proportion to the number of shares held, is entitled to a portion of the proceeds of the liquidation. There are no restrictions on transfer of shares, other than as specified in the lock-up agreement described below. Panion’s shares are not subject to any offer made as a result of a mandatory offer, redemption right, or right of sell-out. No public takeover bid has been submitted for the Company’s shares during the current or previous financial year.

Lock-up agreement The principal shareholder, Lars Thunberg, has agreed not to dispose of any shares held by him in the Company, without the expressed written consent of AktieTorget, for period of twelve months from the first day of trading in the Company’s shares on AktieTorget. In addition, Capensor, Dividend Sweden and Magnus Olsson have entered into lock-up agreements covering 90% of their respective holdings for the first six months following the first day of trading on Aktietorget. In total, 5,433,073 shares are subject to these agreements, 30  Panion Animal Health AB [559018-4171]

which corresponds to 34 percent of the total number of outstanding shares. Notwithstanding the above, shares may be sold or otherwise disposed of pursuant to the terms and conditions of a takeover bid; and allotted subscription rights and redemption rights may be sold or otherwise disposed of. Shares may be transferred subject to the shares remaining under lock-up.

Central Securities Depository and ISIN number The issued shares in Panion are registered in electronic form according to the record day provision of the Swedish Companies Act. No share certificates have been issued for the Company’s shares. The Company’s share register is maintained by Euroclear Sweden AB. Shareholders receive no share certificates. All transactions with the Company’s shares are handled electronically through banks or other financial institutions. Newly issued shares are registered, in the name of the holder, in electronic format. The share’s ISIN code is SE0008963151.

Dividend policy The Company has not established a dividend policy. Dividends are decided by the annual general meeting on the basis of a proposal made by the board. The right to receive dividend payment belongs to the person who is registered as a holder of shares in share register kept by Euroclear on the dividend record day as determined by the General Meeting. All of the Company’s shares carry the right to a dividend. Unpaid dividends do not accumulate over time. The right to receive dividend payment belongs to the person who is registered as a shareholder in the Company on the dividend record day. Disbursement of dividends will be handled by


Euroclear or, in the event that the shareholding is registered with a nominee, according to the respective nominee’s procedures. If shareholders cannot be reached for receipt of dividend payments, the shareholder’s claim on the Company for the dividend amount will remain in force and will only be limited in time by the general rules governing limitation. In the event of limitation, the full dividend amount will revert to the Company. The Company does not apply any restrictions or special procedures regarding dividends to shareholders resident outside Sweden. The Company has thus far not paid a dividend. There is no guarantee that for, a given year, a dividend in the Company will be proposed or resolved.

Restrictions with respect to dividends There are no restrictions with respect to dividends other than what is stipulated in legislation and accounting regulations.

eral meeting, resolve to issue shares, warrants, or convertibles, with or without deviation from the preferential rights of the shareholders. The number of shares, warrants, or convertibles to be issued pursuant to the authorization shall not be limited in any way other than what follows by the limits on share capital and number of shares in the Articles of Association at any given time. Payment may be made by cash, by offset or in kind.

Trade in the Company’s shares Trading in the Company’s share on AktieTorget will take place from 6 July 2017. The symbol is PANION.

Shareholder agreements The board is not aware of any agreements between shareholders that would influence control over the Company.

Subscription warrants The Company has not issued any subscription warrants.

Convertible loans The Company has not taken up any convertible loans.

Authorization The annual general meeting of 27 April 2017 resolved to authorize the Board to, on one or more occasions for the period until the next annual gen-

Principal shareholders as of 2017-06-14 Shareholder Lars Thunberg

Shares

Holding

2 900  000

17.9%

Dividend Sweden

1 549  763

9.6%

Skandia Försäkringsbolag

1 271  750

7.8%

Patrik Kazimiersky

944 723

5.8%

Capensor Capital AB

904 858

5.6%

651 723

4.0%

432 000

2.7%

Nordnet Pensionsförsäkring Merab Kokaia Avanza Pension

430 163

2.7%

Christer Atterklev

381 356

2.4%

Magnus Olsson Other shareholders (1,236) Total shareholders (1,246)

359 905

2.2%

6 380  352

39.4%

16 206  593

100.0% Panion Animal Health AB [559018-4171]  31


Articles of Association 1 § The Company The Company’s name is Panion Animal Health AB. The Company is a public company (publ).

2 § Registered office The Company’s registered office shall be in Lund, County of Skåne.

3 § Nature of the Company’s business The object of the Company’s business is to combine gene therapy for treatment of neurological disorders. This will include research consultation and outsourcing of various activities within neurology research and the Company carry out other activities compatible therewith.

the company by no later than the day stated in the Notice of Meeting. The said day shall not be a Sunday or a public holiday, a Saturday, Midsummer Eve, Christmas Eve or New Year’s Eve, nor shall it be earlier than the fifth weekday before the Meeting. A shareholder may be accompanied by one or two persons, provided that the shareholder has notified the company to this effect.

9 § Annual General Meeting The Annual General Meeting is held within 6 months of the close of the financial year. The Annual General Meeting shall have the following agenda: 1. Election of person to chair the Meeting; 2. Preparation and approval of voting list; 3. Approval of agenda;

4 § Share capital The share capital shall be not less than SEK 550,000 and not more than SEK 2,200,000.

5 § Number of shares The minimum number of shares shall be 11,801,593 and the maximum number shall be 47,206,372.

6 § Board The board shall consist of three to eight (3-8) members and no more than five (5) deputy members. The Board is elected annually by the Annual General Meeting and will serve until the conclusion of the next Annual General Meeting.

7 § Auditors The company shall have two auditors and up to two deputy auditors. As auditor and, when applicable, deputy auditor, an authorized public accountant or a registered public accounting firm shall be appointed.

8 § Notice of the Annual General Meeting Notice of the Annual General Meeting shall be announced in Post- och Inrikes Tidningar (Swedish Official Gazette) and the notice shall be made available on the company’s website. While the notice is made, an announcement with information that the notice has been issued shall be published in Dagens Industri. Shareholders who wish to participate shall be listed in a transcript or other presentation of the entire share register, as stipulated in Chapter 7, Section 28, third paragraph of the Swedish Companies Act (2005:551), and shall also notify

32  Panion Animal Health AB [559018-4171]

4. Election of one or two persons to check and approve the minutes of the Meeting; 5. Resolution concerning the due convening of the Meeting; 6. Presentation of the annual report and audit report and, where relevant, of the consolidated financial statements and the audit report thereon; 7. Decisions: a) on the adoption of the income statement and balance sheet and, in relevant cases, of the consolidated income statement and the consolidated balance sheet; b) on the treatment of the company’s unappropriated earnings or accumulated loss as stated in the adopted balance sheet; c) on the discharge of the members of the Board and the CEO from liability; 8. Decision on remuneration to the auditors and Board; 9. Decision on the number of Board members and deputy members, if any, and the number of auditors and deputies, if any, to be elected by the Meeting; 10. Election of Board members and deputy members, if any, and auditors and deputies, if any; 11. Any other business that is incumbent on the Meeting pursuant to the Swedish Companies Act (2005:551) or the company’s articles of association.

10 § Financial year The company’s financial year shall be the calendar year.

11 § Record day provision The Company’s shares shall be registered in a VPC register according to the Financial Instruments Accounts Act (1998:1479).


Legal issues and other information General company information The Company is a limited liability company, established and registered in accordance with Swedish law. The company name is Panion Animal Health AB (publ) and the registered head office is in Lund in the County of Skåne. The Company’s form of association is regulated by, and it shares have been issued in accordance with, the Swedish Companies Act (2005:551). The Company was registered with Bolagsverket (the Swedish Companies Registration Office) as of 26 June 2015. The Company’s corporate identity number is 559018-4171. Panion’s LEI code is 5493002S8BCWRTPAB555. The Company will develop and commercialize gene therapeutic treatment of epileptic-type disorders in dogs and other animals, develop and commercialize other veterinary medicinal products and treatments, and carry out other activities compatible therewith, as described in paragraph 3 of the Articles of Association, above.

Conflicts of interest and transactions with related parties The principal shareholder and chairman of the board, Lars Thunberg, has loaned the Company MSEK1.3 at a per annum rate of 3%. Lars Thunberg has entered into a consultancy agreement with Panion which covers his services in addition to his chairmanship of the board, with a mutual notice of termination of three months. This work may consist of duties delegated to him by the CEO, for example, work concerning business strategy and business development. This work must be of such a nature that Panion would otherwise have to purchase the services externally. Remuneration is EUR 150 per hour or EU 1,000 EUR per day. To the best of the Company’s knowledge, there are no conflicts of interest or potential conflicts of interest between the board members’ and senior executives’ commitments to the Company, with the exception of what is

stated above. Other than what is stated above, there are no other commitments or related-party transactions. The Board considers the remuneration that has been paid to be in line with current market practice.

Significant agreements Consultancy agreements Director Regulatory Affairs and Director Business Development have entered into a consultancy agreement with Panion, with a mutual notice of termination of two months.

Bridge loan Panion has a bridge loan of SEK 700 thousand at a per annum interest rate of 18%. The loan will be settled as of February 2018 at the latest.

Current employment agreement for the CEO Current remuneration levels and other terms of employment for the CEO have been determined by the board. Panion and the CEO can terminate the employment relationship giving 6 months’ notice. The CEO receives no severance pay, but has the possibility of a bonus amounting to at most 25% of one year’s salary.

Licensing agreement The Company has entered into a licensing agreement with CombiGene AB, effective 1 February 2017. CombiGene AB is developing a gene therapeutic treatment for epilepsy that cannot otherwise be treated with drugs. Under the terms of the license agreement the Company has the right to utilize certain of CombiGene AB’s intellectual property rights and knowhow for the purpose of, among other things, research, development, manufacturing, marketing and sales of a drug for treatment of of epileptic-type disorders in dogs and cats. The license is restricted by geographically and to a certain field of use. As of 1 February 2017, the license covers operations in the EEA, Switzerland and the USA. The

approved field of use covers treatment of seizures, epilepsy or epileptic-type disorders in dogs and cats via intracranial injection of adeno-associated viral vectors. The licensing fee consists of a one-off payment of MSEK 3, of which 1.5 MSEK is payable by 1 August 2017 and the outstanding MSEK 1.5 by 1 February 2018, and of a royalty. A royalty of 3.5 % on income attributable to the Company’s sales of products manufactured under the license, sand of 20% on revenue attributable to the Company’s sublicense agreements. The license agreement is for an initial agreement term of 20 years, with the possibility of renewal. The license is exclusive for the first ten years from the date of the agreement and is thereafter non-exclusive. In addition to termination provisions in the event of bankruptcy, etc., CombiGene AB also has the right to terminate the agreement: 1) in the event of so-called change of control in either CombiGene or Panion, and 2) if CombiGene enters into an agreement with a third party for sale of the epilepsy project and if the license agreement with Panion is thereby considered to have a significant impact on CombiGene’s operation and the possibility to enter into an agreement with a third party is thereby significantly impeded, and 3) if Panion does not adhere to the agreed-upon development plan which specifies milestones and if Panion does not remedy the deficiencies within 90 days after written notification of such deficiencies from CombiGene. The development plan stipulates, above all, that Panion shall adhere to the agreedupon milestones and will annually prepare an updated development plan including, among other things, a report over the year’s activities. The milestones which Panion expects to reach in the coming year are described in detail on page 11.

Panion Animal Health AB [559018-4171]  33


LEGAL ISSUES AND OTHER INFORMATION, CONT. In the event that CombiGene terminates the agreement according to point 1 or 2 above, CombiGene shall compensate Panion. Compensation shall be paid as follows: 1) As long as Panion’s only business is linked to the license agreement with CombiGene, compensation will be calculated on the basis of the market value of Panion measured as the average purchase price of Panion’s share over the most recent 30 days of trade preceding termination of the agreement, or 2) In the event that Panion has signed a further license agreement with a third party and the business has thereby broadened, CombiGene shall pay Panion MUSD 2 plus accrued development costs associated with the license multiplied by a factor of 1.5.

CombiGene’s IPR CombiGene’s platform CombiGene’s patented platform is based on the use of gene therapy vectors that deliver a combination of transgenes which encode two or more of NPY, NPY receptors, galanin, galanin receptors, somotostatin and/or somotostatin receptors for treatment of neurological or psychiatric disorders in humans and animals. CombiGene has initially chosen the AAV vector as a starting point and will enlist the services of reputable GMP and non-GMP manufacturers to manufacture CombiGene’s special variants of vectors.

IPR CombiGene is dependent on securing protection for its intangible assets. CombiGene has a patent portfolio, the contents of which are described in the table below. CombiGene’s patents refer to use of encoded viral vectors as a means of introducing a combination of genes, for example, for NPY and Y2 receptors, into nerve cells in connection with treatment of the affected area of the brain.

Insurance The board is of the opinion that the Company’s current insurance protection is sufficient in relation to the nature and extent of operations. The Company has Directors and Officers Liability Insurance which is adapted for the Company’s current business operations.

Disputes The Company is not, and has not been during the past 12 months, a party to any legal proceedings or arbitration proceedings which have recently had, or might have, significant effects on the Company’s financial position or profitability. Nor is Board of Directors aware of any circumstances which might lead to any such legal proceedings or arbitration proceedings.

Documents incorporated by reference This Company Description should be read in conjunction with statements of profit and loss, balance sheets with accompanying notes, statements and, in certain cases, audit reports from financial reports previously submitted by the Company, which are incorporated by reference. The documents which are incorporated by reference are the audited annual reports for 2015 and 2016. Documents available at http:// panion-animalhealth.com.

Auditing The Company’s auditor has audited the financial information for the full years 2015 and 2016. An unmodified audit report has been submitted for the annual reports for the years 2015 and 2016. The auditor has reviewed the financial information for Q1 2017.

Tax issues Transactions in Panion’s securities may, for the holder, entail consequences with respect to taxation. Shareholders in the Company should consult with a tax advisor concerning the tax consequences that may arise. For natural persons with unlimited tax liability in Sweden, withholding tax is normally withheld on dividends in the amount of 30%. Withholding tax is deducted by Euroclear, or by the Swedish nominee when the shares are registered with a nominee. Panion is not responsible for tax deduction at source.

Area

Resp. No.

Patent No.

Appl. date

Expiry date

EPO

07769040.2

2046394

2007-07-04

2027-07-04

USA

12/308,959

8,901,094

2007-07-04

2027-07-04

CombiGene’s patent, which Panion is entitled to use according to the licensing agreement.

34  Panion Animal Health AB [559018-4171]


Glossary AED Anti Epileptic Drug.

Epidemic The spread of an infectious disease to a given population.

Genetic predisposition A genetic predisposition (sometimes also called genetic susceptibility) is an increased likelihood of developing a particular disease based on an individual’s genetic make-up.

GMP A Good Manufacturing Practice (GMP) is a system for ensuring that pharmaceutical products are consistently produced and controlled according to quality standards.

Clinical phase II Phase II trials refer to a pharmaceutical product under development that is administered, for the first time, to patients to study the safety, dosage and efficacy of an as yet non-approved treatment form.

Clinical phase III Phase-III studies include many patients and are often conducted over a longer period. The intention is to survey the effects and the side-effects of the drug under ordinary, yet controlled, conditions.

MLAS Master’s Degree in Laboratory Animal Science.

Hippocampus

Neuropeptide

Part of the limbic system of the brain. It is involved in memory formation and spatial orientation, and receiving sensory impulses.

A peptide that acts as a signalling molecule for communication between neurons.

In vitro A term used in biomedical science to describe a biological process made to occur in a laboratory vessel or other controlled experimental environment rather than within a living organism.

In vivo A term used in biomedical science to describe an experimental biological process, and observations thereof, made to occur within a living organism.

NPY Neuropeptide Y, a neurotransmitter that is widely distributed in the central nervous systems of animals and humans.

Proof of concept Documented evidence that a potential product or method has the intended effect.

Refractory epilepsy Drug-resistant epilepsy.

Clinical studies

Viral vector

Research studies that explore whether a new, as yet nonapproved, drug, medical strategy, treatment, or device is safe and effective for humans.

A viral vector, more precisely, a recombinant adeno-associated viral vector, is a harmless virus that has been programmed with genetic code.

Clinical phase I

Y2

Phase I refers to the first instance of testing of a candidate drug on humans. Phase I trials are often conducted with a small group of healthy volunteer trial subjects to determine the safety and dosage of an as yet non-approved treatment method.

The receptor for the signal substance NPY, and a part of the drug/patent.

Panion Animal Health AB [559018-4171]  35


linkedin.com/company/panion-animalhealth twitter.com/panionanihealth panion-animalhealth.com/newsletter/

Panion Animal Health AB Frykholmsgatan 11 281 31 Hässleholm, Sweden + 45-22 94 66 00 info@panion-animalhealth.com

panion-animalhealth.com

Company Description Panion Animal Health AB (publ) July 2017  

Company Description Panion Animal Health AB (publ) July 2017

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