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Governance

The Directors recognise the importance of good corporate governance and, as an AIM-listed Company, Evgen has adopted as far as possible the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”).  The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term shareholder value.

The sections below set out the ways in which the Group applies the ten principles of the QCA Code in support of the Group’s medium to long-term success.

1. Establish a strategy and business model which promote long-term value for shareholders

The strategy and business operations of the Group are set out in the Strategic Report on pages 2 to 5 of the Group’s 2018 Annual Report.

The Group’s strategy and business model is developed by the Chief Executive Officer and his senior management team, and approved by the Board.  The strategy is formally and fully reviewed at least once each year by the Board to ensure its ability to deliver long-term shareholder value.  The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.

The Group’s overall strategic objective is to be the world leader in sulforaphane and sulforaphane-like compounds, establishing a leading position in this new class of pharmaceuticals.

The Group aims to achieve this objective through demonstrating the potential breadth of application of its proprietary sulforaphane product (SFX-01) initially in cancer and neurology, through Evgen sponsored clinical trials, and in other indications through investigator sponsored trials.  With the former, the Group deploys its financial and other resources in well-designed clinical trials in well-regulated territories, whilst the latter leverages the Group’s technology to achieve clinical validation in trials substantially funded by 3rd parties.  Ultimately, the Directors believe that this approach will deliver significant long-term value for shareholders if the resulting clinical trial data are compelling.

At the appropriate stage of development, the Group may choose to realise monetary value in a therapeutic programme via high-value out-licensing deals with pharmaceutical or biotechnology companies with interests in the relevant therapeutic field and/or geographical territories.  Alternatively, and if resources permit, the Group may choose to advance a therapeutic candidate through late-stage clinical development un-partnered in order to retain the full value of the programme within the Group.

The Group seeks to diversify the risk of clinical failure by deploying SFX-01 in clinical indications where differing mechanisms of action are hypothesised based on pre-clinical data. Ultimately, differing formulations of SFX-01 and potential follow-on sulforaphane analogues will be developed to provide differentiation across therapeutic areas.  The Directors believe that this approach helps to mitigate the risk of failure in any one particular programme.

In executing the Group’s strategy and operational plans, management will typically confront a range of day-to-day challenges associated with these key risks and uncertainties, and will seek to deploy the identified mitigation steps to manage these risks as they manifest themselves.

2. Seek to understand and meet shareholder needs and expectations

The Board recognises the importance of communication with its shareholders to ensure that its strategy and performance is understood and that it remains accountable to shareholders.  Our website has a section dedicated to investor matters and provides useful information for the Company’s owners.  The Board as a whole is responsible for ensuring that a satisfactory dialogue with shareholders takes place, while the Chairman and CEO ensure that the views of the shareholders are communicated to the Board.  Shareholders are welcome to attend the Group’s Annual General Meeting (“AGM”), where they will have the opportunity to meet the Board.  All shareholders will have at least 21 days’ notice of the AGM at which the Directors will be available to discuss aspects of the Group’s performance and to answer questions.

Beyond the AGM, the Group seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate the Group’s strategy and progress, and to understand the needs and expectations of shareholders.  The Chairman, Chief Executive Officer, Chief Financial Officer and, where appropriate, other members of the senior management team, meet regularly with investors and analysts to provide them with updates on the Group’s business and to obtain feedback regarding the market’s expectations of the Group.

The Group’s investor relations activities encompass dialogue with both institutional and private investors.  The Company is a regular presenter at private investor events, providing an opportunity for those investors to meet with representatives from the Group in a more informal setting.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Board recognises the importance of social, environmental and ethical matters and it endeavours to take into account the interests of the Group’s wider stakeholders, including its investors, employees, partners, suppliers, regulatory authorities and the patients involved in the Group’s clinical development activities.  The Group endeavours to take into account the feedback received from stakeholders and make amendments to working arrangements and operational plans, where appropriate, and where such arrangements are inconsistent with the Group’s longer-term strategy.

The Group takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness.  The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss.  Through the activities of the Audit Committee, the effectiveness of these internal controls is reviewed annually.

The Group operates in an inherently high risk and heavily regulated sector and this is reflected in the principal risks and uncertainties set out on page 5 of the Group’s 2018 Annual Report.

The Group maintains a risk register to monitor the various operating, financial, commercial and strategic risks faced by the business.  This is reviewed and discussed at each monthly Board meeting.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board.  The Group’s results, compared with the budget, are reported to the Board at each monthly Board meeting.

The Group maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Group.  The insured values and type of cover are comprehensively reviewed on a periodic basis.

The senior management team meet weekly to monitor clinical progress and to consider new risks and opportunities presented to the Group, communicating and advising the Board as appropriate.

5. Maintain the Board as a well-functioning, balanced team led by the Chairman

Evgen’s Board currently comprises four Non-executive Directors and two Executive Directors.

All of the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and continue to seek re-election at least once every three years.

Directors’ biographies are set out at http://evgen.com/about/management

The Board is responsible to the shareholders for the proper management of the Group and meets at least ten times a year to set the overall direction and strategy of the Group, to review scientific, operational and financial performance and to advise on management appointments.  All key operational and investment decisions are subject to Board approval.  All Directors receive regular and timely information on the Group’s operational and financial performance.  Relevant information is circulated to the Directors in advance of Board and Board Committee meetings.

The Board considers itself to be sufficiently independent.  The QCA Code suggests that a board should have at least two independent Non-executive Directors.   The Non-executive Directors who currently sit on the Board of the Company are regarded as independent under the QCA Code’s guidance for determining such independence.

The Group has effective procedures in place to monitor conflicts of interest.  In particular it maintains a register of Directors’ interests which is reviewed twice a year by the Board.  Changes to these interests are reported on a timely basis to, and where appropriate agreed with, the rest of the Board.

The Group has both an Audit and a Remuneration Committee with formally delegated duties and responsibilities (see Principle 9).

6. Ensure that between them, the Directors have the necessary up-to-date experience, skills and capabilities

The Board considers that all of the Non-executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities, and bring considerable experience in scientific, operational and financial development of biopharmaceutical companies.

The Directors regularly review the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group.

Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, and corporate governance matters, through updates from the Executive Directors and various external advisers.

Directors’ service contracts or appointment letters make provision for a Director to seek personal advice in furtherance of his or her duties and responsibilities.

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

The Board is in the process of engaging an independent third party organisation to manage a process for evaluation of its own performance, that of its committees and individual Directors, including the Chairman.  The results of the evaluation process will be analysed and reported back to the Board for subsequent follow-up.

The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning.

Appraisals are carried out annually with all Executive Directors.

8. Promote a corporate culture that is based on ethical values and behaviours

The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Group’s operations.  These values are enshrined in the working practices adopted by all employees in the Group.  The small number of staff within the Group allows for an open culture to be maintained with weekly communication to staff regarding progress, and staff feedback is regularly sought.

The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility in this area. Health and Safety is a standing agenda item at all Board meetings with any incidents reported at these meetings.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board has overall responsibility for promoting the success of the Group.  The Executive Directors have day-to-day responsibility for the operational management of the Group’s activities. The Non-executive Directors are responsible for bringing independent and objective judgment to Board decisions.

There is a clear separation of the roles of Chief Executive Officer and Non-executive Chairman.  The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-executive Directors are properly briefed on matters.  The Chairman has overall responsibility for corporate governance matters in the Group.  The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group.

The Board has established Audit and Remuneration Committee with formally delegated duties and responsibilities.  Dr Sue Foden chairs the Remuneration Committee and Barry Clare the Audit Committee.

Due to the size of the Group, the Directors have decided that issues concerning the nomination of directors will be dealt with by the Board rather than a committee but will regularly reconsider whether a nominations committee is required.

The Audit Committee normally meets at least three times a year and has responsibility for, amongst other things, planning and reviewing the annual report and accounts and interim statements involving, where appropriate, the external auditors.  The Committee also approves external auditors’ fees and ensures the auditors’ independence as well as focusing on compliance with legal requirements and accounting standards.  It is also responsible for ensuring that an effective system of internal control is maintained.  The ultimate responsibility for reviewing and approving the annual financial statements and interim statements remains with the Board.

The Remuneration Committee, which meets as required, but at least once a year, has responsibility for making recommendations to the Board on the compensation of senior executives and determining, within agreed terms of reference, the specific remuneration packages for each of the Executive Directors.  It also supervises the Company’s share incentive schemes and sets performance conditions for share options granted under the schemes.

The Directors believe that the above disclosures constitute sufficient disclosure to meet the QCA Code’s requirement for a Remuneration Committee Report. Consequently, a separate Remuneration Committee Report is not presented in the Group’s Annual Report.

10. Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Group places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group’s activities are clear, fair and accurate. All RNS announcements are reviewed by the Board and signed off by two directors. Presentations to 3rd parties are also reviewed by the Board. Queries from shareholders are responded to as quickly as possible.  The Group’s website is regularly updated and includes recent corporate presentations.

The Board recognises the AGM as an important opportunity to meet private shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM.