Corporate governance

The Board of Directors of Nykode Therapeutics is committed to maintaining good corporate governance standards. Nykode’s shares are traded on the main list of the Oslo Stock Exchange (Oslo Børs) and the Company seeks direction from the guidelines and procedures stipulated in the Norwegian Code of Practice for Corporate Governance (issued October 14, 2021 (NCPCG)).

This corporate governance section includes the measures implemented for the efficient management and control of Nykode’s operations. The Board and the Executive Management of Nykode are committed to complying with the demands of shareholders and other stakeholders for efficient business operations, while at the same time being committed to running the Company independently.

Business

Nykode is a clinical-stage biopharmaceutical company dedicated to the discovery and development of novel immunotherapies with a focus on the treatment of cancer and autoimmune diseases.

The Company has established a set of guidelines that lay down the ethical standards for behavior towards colleagues, suppliers, patients, business partners and other relevant stakeholders. The Company has developed anti-corruption guidelines and instructions regarding the handling of waste materials that may impact the environment.

General meetings

The Company’s general meetings are open to all shareholders. The chair of the meeting is elected by the shareholders. This is considered sufficient to ensure the independence of the meeting chair. The Company’s independent auditors will attend the meeting if deemed necessary for the consideration of items on the agenda.

The Nomination Committee is appointed at the Company’s general meeting pursuant to Article 8 of the Company’s Articles of Association. The Nomination Committee is responsible for recommending candidates to the Board and the remuneration of the board members in accordance with the instructions for the Nomination Committee issued by the Board and sanctioned by the shareholders in general meeting.

The Company established its first Nomination Committee at the Annual General Meeting held on April 10, 2018. The current Nomination Committee consists of three members:

• Lars Lund-Roland (Chair) is a business and management consultant with background in pharmaceutical marketing and business, including managerial and marketing positions with Merck & Co. Inc., MSD Norway and Bringwell AB. He served on the Board of Nykode from 2014 to 2022.
• Lars Erik Larsson is employed with RASMUSSENGRUPPEN AS, the Company’s second-largest shareholder.
• Jan Fikkan has international senior management experience from GE Healthcare and Amersham Health, among others.

Lars Lund-Roland was elected at the Annual General Meeting held on May 11, 2023, while Jan Fikkan and Lars Erik Larsson were elected at the Annual General Meeting held on May 12, 2022. Members are elected for two years at a time, unless otherwise has been resolved by the general meeting. The committee members are considered to be independent of the Board of Directors and the Executive Management.

Board of Directors, composition and independence

Pursuant to Article 7 of the Articles of Association, the Board shall consist of from two to eight members. The current Board consists of eight members, three of whom are female while five are male.

The composition of the Board is compliant with the NCPCG, as the majority of its members are independent of the Executive Management and material business contacts, more than two members are independent of the main shareholders, and none of the Company’s executive managers serve on the Board.

The work of the Board of Directors

The Board is responsible for providing strategic guidance to the Company and for monitoring the business operations of the Executive Management. At board meetings, which are held every two months, the CEO updates the Board on the operational and financial developments of the Company.

Discussions of matters of material importance in which the Chair of the Board has been personally involved are chaired by another member of the Board.

The Board reviews and evaluates its work annually.

Audit Committee

The Company has established an Audit Committee. Its main duties as per the charter, is to:

• prepare the Board’s supervision of the Company’s financial reporting process
• monitor the systems for internal control and risk management
• have continuous contact with the Company’s auditors regarding the audit of the annual accounts
• review and monitor the independence of the Company’s auditors
• pre-approve all audit-related and other significant services provided by the Company’s auditors

The Committee shall consist of at least two members of the Board. The committee is chaired by Anders Tuv, and its other members are Martin Nicklasson and Christian Åbyholm.

Remuneration Committee

The Board has appointed a Remuneration Committee, which determines the remuneration policy and general guidelines for incentive remuneration for the Executive Management, as well as proposals on the targets for company-operated performance-related incentive programs. The Remuneration Committee is chaired by Martin Nicklasson and other members are Anders Tuv, Anne Whitaker and Harald Arnet.

Research and Development Committee

The Company has established a Research and Development Committee. The purpose of the committee is as per the charter to oversee matters relating to the Company’s scientific and technological capabilities and development programs and report to the Board regarding such matters to help facilitate Board oversight of:

• the Company’s investment in research and development, product improvements and technology • the Company’s strategy and processes regarding engagement of the scientific community, support of research and clinical studies and development of scientific data generated by the Company’s product candidates

The committee also monitors and evaluates significant emerging trends and issues in science and technology relevant to the Company and assists the Board and management in implementing appropriate advisory and thought-leader interactions.

The committee consists of at least two members of the Board. The committee is chaired by Elaine Sullivan, and other members are Bernd Seizinger, Birgitte Volck and Anne Whitaker. Committee meetings are held at regular intervals, mainly in connection with the board meetings.

Risk management and internal controls

Nykode Therapeutics is continuously focusing on developing and strengthening its internal routines and monitoring the company’s compliance with relevant legislation. These include financial controls, quality assurance guidelines relating to clinical trials, IT operations, storage of data and HR.

The Executive Management reports to the Board and the relevant sub-committees on an ongoing basis, ensuring that the Board is consistently updated on important risks and developments related to clinical studies, the financial situation and the Company’s strategy.

Remuneration of the Board

The remuneration of the Board consists of an annual fee, based on a recommendation from the Nomination Committee.

The Company has chosen to deviate from the recommendations of the NCPCG regarding warrants and options to the Board because the Company is at the development stage, and due to international industry practice.

Remuneration of the Executive Management

The Company recognizes the importance of attracting and retaining key employees and executive managers, and the compensation package is regarded as an important tool in this respect. The Company has adopted a share option scheme which aims to align the long-term interests of the Executive Management with those of the shareholders. Under the terms of the share option scheme, options may be granted annually or on an ad-hoc basis, including onboarding grants. Options typically vest over a period of four years and expire after five years. Reference is made to note 4.8 to the financial statements. The remuneration of the Executive Management is based on a recommendation from the Remuneration Committee.

Auditors

The Company’s auditors, Deloitte AS, are considered to be independent of Nykode Therapeutics. The auditors provide a statement each year confirming their independence.

The auditors attend the board meeting at which the Board discusses the annual financial statements, accounting principles and other relevant matters. At each year’s Annual General Meeting, the Board discloses the fees paid to the auditors.

Risk Management

Research and development Developing novel pharmaceutical products inherently involves high risk. In research and development, such risks include patent protection, clinical trials and regulatory approvals. Nykode Therapeutics seeks to mitigate risk through appropriate measures. The Company focuses on ensuring sufficient patent protection and works closely with external patent counsels to minimize the risk of patent infringement claims as well as to prepare any patent defense should this be necessary. Nykode’s medical department works closely with external regulatory consultants and regulatory agents to develop regulatory strategies and frequently interacts with regulatory agencies. The Company carefully selects its clinical candidates and has a pipeline of candidates and clinical studies in various indications. It designs its clinical studies according to best practice and in compliance with international regulations to minimize risk. Specialized Clinical Research Organizations (CRO) are contracted to help in these efforts. The clinical studies are carried out in collaboration with world-class international partners with solid experience in conducting such studies and are conducted according to all applicable quality standards.

Commercial risk

Commercial risks include the time and costs involved in developing products, market competition, and the ability to attract partners. Nykode has successfully formed partnerships with leading companies in its field including Genentech, Adaptive Biotechnologies and most recently Regeneron with which a worldwide multitarget license and collaboration agreement was undertaken in late 2021. These partners contribute both financially and with R&D expertise, thereby helping to reduce risk.

Market risk

The long-term financial success of the Company requires obtaining marketing authorizations and achieving acceptable reimbursement for its drugs. There can be no assurance that the Company’s drugs will obtain cost-effective selling prices or reimbursement rates. The Company’s products are subject to approvals from the U.S. Food and Drug Administration (FDA) to market its products in the U.S., and from the European Medicines Agency (EMA) to market its products in Europe, as well as equivalent regulatory authorities in other jurisdictions worldwide to commercialize products in those regions. The Company relies for its future earnings on the timely marketing authorization of its drugs for various indications.

Financial risk

Nykode is exposed to financial risk factors, including risks associated with cash management, the short-term liquidity profile of development programs, liquidity from partnerships and the ability to attract capital from financial markets. The Company has not entered into any hedging agreements to reduce financial risk as of December 31, 2021.

The expected main sources of capital to secure future funding are the capital markets, the license and collaboration agreements with Genentech and Regeneron, potential new collaboration agreements with partners and potential soft funding from grant applications.

The Company is exposed to currency risk as employee expenses are primarily in Norwegian Kroner (NOK) and Danish Kroner (DKK), and much of its operating expenses for the clinical trials are paid in foreign currency, primarily in Euro (EUR). The Company keeps bank deposits in NOK, DKK, GBP, EUR and USD for operational purposes, and to reduce its currency risk. The Company regularly considers its current risk management of foreign exchange rates and will adjust it if deemed appropriate.

Nykode has purchased and maintains a directors and officers liability insurance on behalf of the members of the Board of Directors and the CEO. The insurance also covers any employee acting in a managerial capacity, including controlled subsidiaries.

Human resources

As a highly specialized and scientifically focused company, Nykode relies on its ability to attract and retain talent and expertise. The Company strives to be an attractive employer by offering an inspirational and flexible working environment.

IT-related risk

Nykode uses external assistance from qualified vendors to provide advice on cybersecurity and systems security where relevant. Its IT systems use authentication systems to reduce the risk of unauthorized access into its systems. The Company has appropriate protection from viruses and malware. Nykode has implemented procedures for IT security and data management via its IT vendors. Server back-ups are run automatically at regular intervals.