Risk factors

All business activities and all share ownership are associated with risk. A number of risk factors that can affect the Company's future development are presented below. These are neither ranked nor claim to be comprehensive. Risk factors that have not currently been identified nor been assessed as significant may still affect the Company's future development. A potential investor should make an overall assessment of all the information in this Company Description as well as a general assessment of the business environment.

Risks related to the business and the sector

Klaria's business concept is based on combining the Company's patented drug delivery technology with clinically proven and ­marketed substances in the therapeutic fields of migraine and cancer-related pain. The Company's products require continued research and development, as well as official permits, before they can generate income. As a result the level of risk is high, and there is no guarantee that the Company's product development will be successful, that potential products will be safe and effective, that it will be possible to obtain the required permits or that the medications that are launched on the market will be well-received.

In order to obtain sales permits, the Company has to show that these product candidates are safe and effective through adequate, properly controlled clinical studies. The Company cannot predict with any degree of certainty when these studies will be completed or even implemented. This type of development is time-consuming and affected by a great many factors, including some that are outside of the Company's control. During the development work, it may become evident that the Company's product candidates do not have the anticipated effect or that they prove to have unforeseen and unwanted side-effects or other properties that can delay or halt the ongoing development work, and limit or prevent the commercial application of the product candidates. Unforeseen study results can lead to concepts and development programmes having to be reassessed, which means that further studies may be required at a significant cost, or to development programmes being shut down. This can result in delayed launches or in the Company's product candidates not being registered, which would have a negative impact on the Company's results and financial position.

Regulatory risks

The development, marketing and sale of pharmaceuticals are subject to extensive regulation and legislation. The Company cannot predict with any certainty whether, where, when and how these regulations will be amended and whether such changes will have an adverse impact on the Company. In order for the Company to be able to sell medications in the long term, market approval has to be obtained for each geographic market. The Company cannot predict with any certainty which supplementary clinical studies will have to be carried out for different markets, that the manufacturing process will be approved, how long it will take to achieve market approval, and that market approval will definitely be achieved on the markets that the Company wants. In this respect, Klaria, like other companies in the pharmaceutical sector, is dependent on assessments and decisions by affected authorities, such as the Medical Products Agency in Sweden, the Food and Drug Administration (FDA) in the USA or the European Medications Agency (EMA) in the EU. Such assessments include permits to carry out clinical trials and permits to market and sell medications.

An application for market approval of the Company's products as medications requires extensive documentation regarding e.g. clinical results, quality assurance and the fact that production complies with applicable regulations. Even if the Company assembles a large proportion of this documentation in parallel with the clinical studies, there is still the possibility of unforeseen circumstances causing delays, which would result in applications for market approval being submitted later than anticipated. Authorities may request supplementary details or have different opinions about the Company's applications, with the result that the timing of a possible market approval is uncertain. It is also possible that the Company may need to provide supplements to applications, which can be time-consuming and entail unforeseen costs.

Side-effects

The Company's main business area lies in the development and sale of medical products, which entails risks that people who either consume or take part in clinical studies with the Company's products, or who otherwise come into contact with the Company's products, may suffer side-effects. On different markets, the consequences of such potential side-effects can delay or halt the ongoing process of obtaining market permits, result in sales being stopped and consequently affect the Company's turnover, profit and financial position. It is also possible the Company could be sued by people who suffer side-effects, which could result in the Company becoming liable to pay damages.

Competition

The Company operates in a sector that is characterised by robust competition, and there is no guarantee that the Company's products will be preferred over competing companies' existing or future products on the market. It is also possible that competing companies may develop equivalent or better products. Future products being developed by other companies may entail increased competition and impaired opportunities for the Company's products as regards market share and price. These uncertainties entail risks that can have a negative impact on the Company's anticipated sales, profit and financial position.

Business partners and distribution channels

The Company's growth is considered to be largely dependent on the establishment of collaborations with distributors, retailers and other distribution channels. The Company cannot guarantee that agreements can be entered into on beneficial terms, or that agreements that have been entered into will be observed by the counterparts. If important collaborations cannot be entered into, are terminated or work unsatisfactorily, this can have a negative impact on the Company's continued development, growth and financial position. The Company can also be adversely affected if business-critical systems go down or break.

Product liability and insurance

The Company's operations entail risks regarding product liability. The Company will maintain product liability insurance for products where this is deemed important. However, any claims for damages that may be lodged against the company in the event of injuries caused by the Company's products or product candidates could exceed the amounts that are paid by the Company's insurance policies. It is also possible that the Company's product liability insurance will not cover a possible claim for damages. If the Company is liable to pay damages in excess of that covered by the Company's insurance, this can have a negative impact on the Company's profits and financial position.

Patents, trademarks and expertise

In the type of business that Klaria conducts, there is always the risk that the Company's patents, licensed patent rights or other intellectual property rights will not provide sufficient protection for the Company, or that the Company's rights cannot be upheld. Patent infringements may also occur, which can lead to costly disputes. The outcome of such disputes cannot be guaranteed in advance. For the losing party, negative outcomes of disputes regarding intellectual property rights can lead to lost protection, a ban on continuing to use the right in question or an obligation to pay damages.

The Company has licensed a patent by Uppsalagruppen Medical AB (the Film patent, see page 17). This patent has not yet been approved in all the countries where applications have been submitted, and there is no guarantee that it will be. Even if the Company uses confidentiality agreements and strives internally to retain knowledge about and control over the most sensitive components in the production of the Company's products, there is no guarantee that uncontrolled distribution and copying of the Company's production methods will not take place. Such uncontrolled distribution and copying could harm the Company if they are used for the production of competing products or if they are otherwise utilised commercially without financial compensation being paid to Klaria.

Klaria is to a great extent dependent on the Company's senior executives and other key individuals. If the Company should lose any of its key employees, this could have an adverse effect on the Company's expansion and growth.

Growth and the need to recruit

The Company intends to expand its operation in coming years, and there will then be a need to recruit within all company functions. An expansion will also place demands on the Company's existing control, steering, reporting and information systems. If the Company cannot control or provide for growth effectively, this could have a negative impact on the Company's operations, profit and financial position.

Legal risks

In the long term, Klaria's operations will be conducted in a number of countries and will thereby be affected by the legislation in each individual country in which operations are being conducted. It is possible that the legislation regarding e.g. taxation, customs and permits will be amended, potentially with retroactive effect, in such a way that could have a negative impact on the Company's operations, profits and financial position.

Financial risks

Operating capital

It is possible that the Company may need to seek financing, included borrowed capital or shareholders' equity, in order to cover a future unforeseen capital requirement. There is also no guarantee that such additional financing can be procured from one time to another, or that the conditions for such additional financing will be acceptable to the Company and its shareholders. For example, a new issue of shares in the Company may result in a dilution for existing shareholders.

Currency exposure

Currency exposure is the risk that exchange rate fluctuations will adversely affect the Company's profits, financial position and/or cash flows. Currency exposure exists in the form of both transaction and translation risks. The Company currently has relatively limited currency exposure, but as future sales will primarily take place in foreign currencies, the Company's currency exposure will gradually rise.

Risks related to the Company's shares

Stock market risk

A potential investor should be aware that an investment in the Company's shares is associated with a high degree of risk. In addition to the Company's profits, the price of the shares is also dependent on a number of factors over which the Company has no control. Such factors include the economic climate, market interest rates, capital flows, political uncertainty as well as market and behavioural psychology. Even if the Company's activities develop positively, it is possible that an investor will make a loss when selling the Company's shares.

Liquidity in the share

There has not been any trading in the Company's shares prior to the listing on Nasdaq Stockholm First North. It is not possible to predict the extent to which active and liquid trading in the shares will develop. If active and liquid trading does not develop, or if it is not lasting, this can entail difficulties for shareholders when it comes to selling their shares without affecting the market price negatively, or at all.

Future dividends

As Klaria will be undergoing an expansive development phase over the next few years, the Board of Directors does not intend to tie itself to a fixed dividend share. If the cash flows from current operations exceed the Company's capital requirement, the Board intends to propose that the AGM should opt for a dividend. No guarantees can be given, however, either that future cash flows will exceed the Company's capital requirement or that the AGM will decide on future dividends.

Shareholders with significant influence

At the time of the listing on Nasdaq Stockholm First North, share ownership in Klaria is distributed in such a way that no single shareholder controls the Company. However, it is possible that owners or groups of owners may acquire a controlling influence at the AGM in the future, for example regarding the appointment of the Board of Directors.