Risk factors

Any investment in the shares of Camurus AB (“Camurus” or the “Company”) involves risks. The following risks are those that Camurus believes are most relevant to an investment in the shares, in no particular order of importance. Risks exist relating both to circumstances attributable to Camurus or to its sector more broadly, as well as those of a more general nature, and risks associated with the shares. Many of these risks are beyond Camurus’ control. The following risks and the risks discussed in the Company’s financial reports should be carefully considered before making any investment in any of the shares. The presentation below does not claim to be exhaustive. Additional risks currently unknown to the Company, or currently believed to be immaterial, could also have an adverse effect on the Company. If any of these risks were to materialise, the Company’s business, results of operations and financial condition could be materially and adversely affected.

Risks related to the industry and operations

Pharmaceutical development and projects in early stages of development
Camurus currently has, either itself or together with partners, nine projects that are in the clinical development phase and a number of projects in pre-clinical trials. These projects require continued research and development, which is subject to standard risks that product development will be delayed and that costs will be higher than expected or that Camurus' product candidates will ultimately prove to be insufficiently effective or safe at any stage of their development. Any negative, unclear or insufficient results will increase the risk of Camurus not obtaining the necessary regulatory approvals and, if approved, may also make it more difficult for the Company to sell the products in the market, or make it more difficult for the Company to enter into partnerships for the continued development, sale or distribution of its product candidates or products. Accordingly, it may be difficult to evaluate and predict the time and cost aspects, and future sales potential, of any of the Company's product candidates. The level of risk in the development of pharmaceuticals is generally high and a setback in any individual project could have a material adverse effect on Camurus’ operations and future revenue and thus Camurus’ financial position and earnings.

Technology platform with limited regulatory validation
Most of the pharmaceutical product candidates being developed by Camurus, whether on a proprietary basis or in partnership with international pharmaceutical companies, are based on the Company’s lipid-based technology platform FluidCrystal® Injection depot, which can be used, for example, to extend the duration and release of pharmaceutical substances in the body. No pharmaceutical product candidate based on Camurus’ FluidCrystal® Injection depot has yet achieved market approval. There is a risk that product candidates based on the Company’s Injection depot or its other technology platforms will be delayed to market or never reach it, and that in the future problems may be identified that make it more difficult for the Company to identify, produce or enter into partnerships for additional product candidates with future commercial potential and value.
The long duration that characterises pharmaceutical product candidates based on Camurus’ Injection depot can potentially increase the risk of adverse events and other complications compared to if the drug compound were to be released immediately and work for a short time. If product candidates based on Camurus’ technology were to display shortcomings in safety or efficacy in ongoing or future clinical trials or in the market, there is a risk that Camurus or its partners could decide, or could be forced, to discontinue further development and commercialisation of one or more product candidates based on this technology. This could have a material adverse effect on Camurus’ operations and ability to generate revenue and thus weaken Camurus’ financial position and future earnings.

Clinical trials
Prior to launching a product candidate in the market, Camurus or its partner must carry out pre-clinical and clinical trials to document and prove that the product candidate has significant efficacy and an acceptable safety profile. The process usually requires extensive, costly and time-consuming pre-clinical and clinical trials. Positive results in previously completed pre-clinical and clinical trials do not guarantee positive results in later stages of development and subsequent clinical trials. Camurus is also unable to predict with any certainty when planned clinical trials can be started or when ongoing trials can be completed since there are numerous factors outside Camurus’ direct control that may impact this including, for example, the need for and timing of regulatory approvals and research ethics committee reviews, access to patients and clinical trial units, performing the clinical trial at the trial unit and the considerations of Camurus’ partners. It is also difficult to accurately predict the costs associated with clinical trials. Actual costs for carrying out any trial may significantly exceed estimated and budgeted costs. Clinical trials may also give rise to results that do not confirm the intended treatment efficacy or an acceptable safety profile due to undesirable side effects or an unfavorable risk-benefit assessment of the product candidate. This could lead to clinical trials being discontinued or cancelled, or the product not being granted the necessary regulatory approval for further clinical trials or sale in the market. In certain cases, the development program of the product candidate in question may need to be expanded with additional pre-clinical and/or clinical trials to enable market registration. In summary, clinical product development can be affected by unforeseen delays, increased costs, unforeseen suspensions and unfavorable results, which could have a material adverse effect on Camurus’ operations and ability to generate revenue from its projects and thus weaken Camurus’ financial position and future earnings.

Heavily dependent on the furthest advanced products candidates
To date, Camurus has invested a significant portion of its human and financial resources in research and development of its product candidates that are the furthest advanced in their development to market, in particular CAM2038 and CAM2029. Camurus is thus highly dependent on the continued success of these product candidates and on negative results not arising or negative decisions not being made on the continuation of product development. Examples of events that could have serious adverse consequences for the Company are rejected applications for clinical trials or market approval for Camurus’ and its partners’ products, or assessments that the product candidates cannot be successfully commercialised due to other reasons. The Company’s partner, Braeburn Pharmaceuticals Inc. (“Braeburn”), has submitted a New Drug Application (NDA) to the US Food and Drug Administration (FDA) for CAM2038 for opioid use disorder, which the FDA has accepted for priority review. In January 2018, the FDA issued a complete response letter to Braeburn in respect of the CAM2038 NDA, requesting additional information to complete their review. Simultaneously, Camurus has submitted Marketing Authorisation Applications (MAA) for CAM2038 for opioid use disorder with the European Medicines Agency (EMA) and the Therapeutic Goods Administration (TGA) in Australia. Camurus and Braeburn are planning for the receipt of approvals of CAM2038 for opioid use disorder in the US and Europe during the second half of 2018. Even though the marketing approval activities and clinical trials for CAM2038 are being carried out and paid for by Braeburn, the risks described above in respect of the need for successful development and commercialisation of its product candidates are nevertheless applicable to CAM2038 and thus relevant for Camurus.
Camurus’ ability to finance its operations by receiving milestone payments and generating revenue from product sales is also dependent to a significant extent on the continuation of successful clinical development, grant of market authorisation approvals and commercialisation of these furthest advanced products. Delays to or suspensions of these programmes can be expected to significantly reduce Camurus’ future revenue opportunities and thus also have a material adverse effect on Camurus’ operations, financial position and earnings. Many of the risks associated with the continued development and commercialisation of the Company’s product candidates are also outside Camurus’ control (including, in addition to the need for successful clinical trials, receipt of required regulatory approvals and successful commercialisation, other factors such as the absence of the launch of competing products).

Dependence on suppliers
Camurus and its partners engage and enter into agreements with external parties for parts of their product development activities including, for example, the production of pharmaceutical substances, performance of clinical trials and certain laboratory services. There is always the risk that such external parties do not perform their services satisfactorily, that delays occur or that a pharmaceutical substance does not meet quantitative or quality requirements. Other risks include the risk that a production partner fails to pass inspections from governmental authorities and loses its GMP licence, or that a partner or an external party’s financial condition deteriorates. If this were to occur, continued product development could become more expensive, be delayed or be hampered, which could have an adverse effect on Camurus’ operations, financial position and earnings.
The clinical trials being carried out on the Company’s product candidates require, and future sales of those product candidates will require, the production of active ingredients and other pharmaceutical ingredients in both sufficient quantities and of the requisite quality. There is a risk that these requirements will not be met at a reasonable cost or at the planned point in time. The production processes are often complex and are also vulnerable to contamination, which can make the continued development of a product more expensive, and could delay or hamper such development. In certain cases, only one or a small number of established manufacturers/suppliers of specialist ingredients included in the products based on Camurus’ drug delivery technology are available. Camurus may be dependent on such manufacturers, to the extent that their manufacturing processes conducted for the Company are complex and time-consuming and thus difficult to transfer to another manufacturer. Although the Company believes that it could obtain alternative sources of supply for all of its specialist ingredients, it could be costly and time-consuming if the need to change a manufacturer were to arise, and this could thus have a material adverse effect on Camurus’ operations, financial position and earnings. For future commercial requirements, the Company’s aim is that its critical ingredients and product manufacturing are to be provided by at least two manufacturers. There is a risk that it will not be possible to achieve this goal for all ingredients and products or that, even if two alternative sources are identified and engaged, that this still would not sufficiently reduce Camurus’ dependence on individual manufacturers to the extent desired.

Product and technology collaborations with other pharmaceutical companies
Product and technology collaborations are a key component of Camurus’ strategy for increasing its development capacity and commercial penetration, and for achieving profitability. An example of this is the Company's agreement with Braeburn for the development and commercialization of CAM2038 in North America. Camurus is therefore to a significant degree dependent on its collaboration agreements with Braeburn and other companies regarding the development and commercialisation of the products under these agreements. There is a risk that one or more of the Company's existing agreements will be terminated or that Camurus will be unsuccessful in entering into other such agreements in the future. Camurus’ ability to realise the value of its product candidates could be delayed or hindered by the absence of such partnership agreements. There is also the risk that differences of opinion will arise between Camurus and its partners or that such partners do not meet their contractual commitments. Furthermore, projects and collaborations can suffer delays for various reasons, something that is a common occurrence in pharmaceutical development since the schedules prepared when partnerships are entered into are indicative in nature. In addition, there is a risk that Camurus’ collaboration partners and licensees may prioritise the development of alternative products and product candidates that might also compete with the products and product candidates featured in their collaborations with Camurus. If this were to occur, it could reduce the ability and/or willingness of the Company’s collaboration partner or licensee to fulfil its obligations regarding the development and commercialisation of the products and/or product candidates included in their collaborations with Camurus.
A licensing agreement typically provides that the partner takes over the main responsibility for the further development and commercialisation of a product in a defined market. This is the case for CAM2038 in North America and certain other selected markets, which means that Camurus may have limited ability to exercise influence over its licensee’s or collaboration partner’s future development and commercialisation activities. The risks associated with out-licensing to other companies could delay, hinder or make the continued development or commercialisation of the Company’s products more difficult, which could adversely affect future revenue opportunities and thus have a material adverse effect on Camurus’ operations, financial position and earnings.

Regulatory review and registration of new pharmaceuticals
A licence or approval must be obtained from the relevant authorities in each country or region in order to commence and carry out clinical trials for or to market and sell a pharmaceutical product. Various licences and approvals are also required for the manufacture and distribution of a drug. Obtaining licences and approvals can be time-consuming and can further delay, hinder or make the development and commercialisation of a product more expensive, for example, due to differing opinions on which clinical trials are required for registration, including between the authorities of different countries, or manufacturing not being deemed to meet the applicable requirements. Authorities may request additional information or make different assessments compared with Camurus and Camurus’ partners, e.g. regarding the interpretation of data from trials or the quality of data. In January 2018, the FDA issued a complete response letter to Camurus’ partner Braeburn for its new drug application for CAM2038 for opioid use disorder, requesting additional information to complete the review. Changes in authorities’ practices or procedures, as well as new or changed rules, may require additional work or ultimately result in the necessary licence not being obtained or withdrawn. In the US, part of the strategy for obtaining market approval for the Company’s product candidates is to apply to the FDA for approval via a simplified drug approval pathway known as 505(b)(2), which is based on utilising existing and available data for the safety and efficacy of the active substance established for a reference product. A similar approval pathway, called a hybrid application, is also applied by the EMA in the EU. The application of these simplified approval pathways, which are being applied in the case in the on-going CAM2038 approval processes in the US and EU, also has the potential to result in the scope of the pre-clinical and clinical registration programme being reduced for the Company’s other product candidates that are based on active substances where pre-existing data is available, as reference may be made to such data. However, if the authorities do not believe that the Company’s product candidates qualify for this procedure, additional clinical trials may need to be carried out to meet the requirements for market approval. This could mean that the development time is extended, that development costs significantly more and that development risk increases.
If the necessary licence or registration is not obtained or is associated with unexpected conditions, it will have an adverse impact on the ability to commence sales of the product, which in turn could have a material adverse effect on Camurus’ ability to generate revenue and on Camurus’ financial position.
Camurus and its partners will be liable to meet certain regulatory requirements even after a product has been approved for marketing, including requirements for safety reporting and supervision of the marketing of the products. There is a risk of product side effects being manifested which have not been identified to the same extent in the earlier clinical trials. Furthermore, the Company’s manufacturer will be responsible for continuing to follow the rules that apply to the various stages of manufacturing, testing, quality control and documentation of the product in question. Production facilities will be regularly inspected by regulatory bodies, which could lead to observations and new production requirements. If Camurus or its partners, including external manufacturers, do not meet the applicable regulatory requirements, Camurus may be subject to fines, withdrawal of regulatory approval, recalls or seizure of products, other operational restrictions and criminal sanctions that could have a material adverse effect on Camurus’ operations, financial position and earnings.

Handling narcotic substances
The CAM2038 pharmaceutical candidate contains narcotics that are classified as “controlled substances” and therefore are subject to special regulatory rules, for example, regarding their production, handling, import and export. Failure on the part of Camurus, its collaboration partners, contract manufacturers or distributors to comply with these rules could result in administrative, civil or criminal sanctions that could have a material adverse effect on Camurus’ operations, financial position and earnings. Furthermore, it may also be difficult to find alternative manufacturers since the number of potential manufacturers holding the necessary regulatory licences for producing these controlled substances may be limited.

Commercialisation, market acceptance and dependence on reimbursement systems
If a pharmaceutical product obtains market approval, the risk remains that sales, regionally or globally, may not meet expectations and that the product will not be commercially successful. The degree of market acceptance and sales of a drug depend on a number of factors, including product properties, clinical documentation and results, competing products, distribution channels, availability, price, reimbursement, sales and marketing efforts, prescribing physician awareness and clinical benefit outweighing side effects and other impacts of treatment, among other factors.
Sales of prescription drugs are influenced by the price set and obtained from the responsible authorities (such as the Dental and Pharmaceutical Benefits Agency in Sweden), from reimbursement payers and by healthcare payors, including insurance companies, hospitals and regionally responsible authorities. The reimbursement rate that, from time to time, applies for a pharmaceutical product often depends on the value that the product is deemed to add for the patient and the healthcare system. There is a risk that the products do not qualify for subsidies from privately and publicly financed healthcare programmes or that reimbursement is lower than expected, which among other things may affect the market acceptance of the product or the operating margin. Reimbursement systems may also change from time to time, making it more difficult to predict the benefit and reimbursement that a prescription product may obtain. Various initiatives are in place in many countries to curb rising pharmaceutical costs, which could affect future sales margins and product sales for Camurus and its partners. Such measures are expected to continue and could result in fewer reimbursement possibilities and lower reimbursement levels in certain markets.
Realisation of any of the risks related to the commercialisation and sales of products and reimbursement systems, most of which are beyond the Company's control, could lead to an adverse effect on Camurus’ future revenues, operations, financial position and earnings.

Competition
The pharmaceutical industry is highly competitive and is characterised by rapid and significant innovation. Camurus’ competitors and potential competitors range from large multinational pharmaceutical companies, established biotech companies, specialist pharmaceutical companies and generic companies, to universities and other research institutions. Some of Camurus’ competitors have significantly greater financial, technical and staffing resources, including research and development organisations, and more established manufacturing, distribution, sales and marketing organisations. As a result, these companies can often allocate more resources to carrying out clinical trials, obtaining market approval and launching, retailing and marketing their products. Furthermore, competition regarding individual products can be significant and competitors may develop and market drugs with higher efficacy, that are safer and/or less expensive than Camurus and its partners’ products, which could have an adverse effect on the competitive position of Camurus and its partners.
Several other companies have developed or are also developing drug delivery technology for simplified pharmaceutical administration or for extended release of active drug compounds in the body that compete with or may compete with Camurus’ various technology platforms, such as the FluidCrystal® Injection depot. Camurus’ current and any future partners and customers may be evaluating and potentially develop such technologies themselves. Rapid technological advancement could lead to competition heightening and intensifying, and to new drug delivery technologies with enhanced properties replacing or competing with Camurus’ technology as regards one or more pharmaceutical products in the market or product candidates under development, which could have an adverse effect on Camurus’ operations, financial position and earnings.

Revenues from partners and licensees
As significant portion of Camurus’ revenues are expected to comprise revenues from partners and licensees. These revenues may comprise milestone payments, which are dependent on the further development of product candidates and future product sales, and sales-based royalties. All such revenues are dependent on the successful development of the Company's product candidates and the achievement of agreed development and regulatory milestones, and the subsequent product launch and sales in the market. The level of future sales of Camurus’ and its partners’ products, if any, is uncertain and will ultimately depend on a wide variety of factors, such as clinical results and marketing success. If a licensee were to decide to discontinue the development of a product or end sales of a product – a decision over which Camurus can be expected to have no control – Camurus’ revenues and financial position could be materially adversely affected.

Dependence on key personnel and qualified employees
Camurus is dependent on its qualified personnel in general and a number of key individuals including all members of its management team. Although the Company does not believe that any of these key individuals are irreplaceable, if a key individual were to leave the Company, this could have a short or long-term adverse effect on the Company’s projects and thus its operations, financial position and earnings. Camurus does not maintain any "key person" insurance in respect of any member of its senior management team. Camurus’ ability to retain and recruit qualified employees is of great importance to Camurus’ future success and growth potential and there is significant competition from, for example, other industry companies, universities and other institutions. Any inability of Camurus to recruit or retain the qualified employees that it needs to conduct its operations could have an adverse effect on the Company’s projects and thus its operations, financial position and earnings.

Ability to manage growth and own commercialisation
In its collaboration with Braeburn on CAM2038, Camurus has decided to retain all development and commercialisation rights in all markets apart from North America, China, Japan, Taiwan and Korea. If and when the products secure market approval, Camurus intends to pursue commercialisation of the products in selected markets in Europe and the rest of the world by itself. For this purpose, the Company has begun to establish a an in-house sales and marketing organisation in certain selected markets in Europe and Australia, and Camurus’ organisation has grown significantly since the Company was listed in 2015. Camurus has not previously pursued development of a similar commercial establishment or expansion of a marketing and sales organisation inside or outside Europe.
There is a risk that the process of establishing a proprietary marketing and sales organisation will be more time-consuming and costly than the Company has estimated and that expected sales fail to materialise, completely or in part. In addition to company-specific and geographic risks (such as exposure to different and potentially overlapping legal systems and costs for compliance with such systems), the establishment and expansion of a new marketing and sales organisation may impose increased demands on the Company's management and on its operational and financial infrastructure. Camurus’ existing management resources, internal controls, governance structures, and accounting and information systems may prove to be insufficient for pursuing continued growth and additional investments in these areas may therefore be necessary. If Camurus proves to be unable to efficiently control or provide for continued growth, it could have an adverse impact on Camurus’ operations, financial position and earnings.

Product liability and insurance
Camurus’ operations are subject to the risks of liability that are inherent for operations that carry out the research development, manufacturing and sale of pharmaceutical products and medical devices. These include the risk of product liability claims that may arise in connection with the manufacturing, clinical trials and marketing and sale of pharmaceutical products and medical devices including, for example, clinical volunteers and patients suffering from side effects or being injured.
Although Camurus normally tries to transfer a portion of its product liability risk to its partners and licensees, and takes out insurance to the extent that is commercially reasonable to cover risk of its own liability, the amount and the scope of insurance coverage available on commercially reasonable terms is limited. There is a risk that the Company's applicable insurance policies will not provide sufficient coverage in the event of a potential claim for damages, which could have an adverse effect on Camurus’ operations, financial position and earnings.

IT risks
Camurus’ ability to effectively and securely manage and store project-related information, results and reports from its clinical trials, and other business-critical activities is dependent on its IT systems and related processes working efficiently and without interruption. Such systems can be disrupted by, for example, software and hardware problems, computer viruses, data intrusion, sabotage and physical damage. There is a risk that IT failure or other problems with IT systems, depending on their length, scope and severity, could adversely affect Camurus’ operations, financial position and earnings.

Legal risks

Patents and other intellectual property rights
Camurus has an active intellectual property rights strategy, whereby the Company endeavours to protect its platform technologies and products in important global markets. There is a risk that existing and future patents, trademarks and other intellectual property rights held by Camurus will not provide full commercial protection from infringement and competition. The patent position of pharmaceutical companies is generally uncertain and comprises complex technical, medical and patent-law assessments. The pharmaceutical industry is also characterised by rapid technological advances and a high level of innovation. Accordingly, there is always the risk that new technologies and products are developed that could result in Camurus’ current and future intellectual property rights for technologies and products being circumvented or replaced. Patents are, by their nature, limited in time. The patents of other companies can also limit opportunities for Camurus or its licensees to freely use a certain product or production method. Since patent applications are confidential until they are published, there is the risk that Camurus’ patent applications may not be prioritised in relation to previously unknown patent applications and patents. Furthermore, it is not certain that Camurus’ patent applications will result in patents being granted or that any patent protection granted will have the same scope as was stated in the original application. There is a risk that granted patents will be declared null and void, for example, as a result of a dispute with a third party. Under the Company’s licensing agreements, Camurus’ partners may be granted certain rights to Camurus' patents that encompass the products included in the agreement and Camurus may be granted certain rights in patents granted to Camurus’ partners. As a result, these patents are not always or fully under Camurus’ direct control. Future sales of, for example, CAM2038 are partly dependent on Braeburn’s ability to renew and maintain the patents it has licensed from Camurus. If Camurus’ partners fail in this respect, it could have a material adverse effect on Camurus’ ability to generate revenue.
Despite Camurus investing significant resources in protecting its patents, trademarks and other intellectual property rights and taking legal action when deemed appropriate, there is a risk that the measures taken will not be successful or sufficient. There is also the risk that competitors and others may, intentionally or unintentionally, infringe Camurus’ patents, trademarks or other intellectual property rights. Laws and practice regarding the protection of intellectual property rights vary extensively between countries and Camurus’ rights may thus be more vulnerable in some countries than in others. If Camurus is forced to defend its patents, trademarks and other intellectual property rights, this could entail significant costs and delays to product development. There is also the risk that Camurus could unintentionally infringe another party’s intellectual property rights and thus become involved in court cases for alleged infringement of such other parties’ rights. Companies may also be subjected to baseless lawsuits regarding patent infringement. Infringement disputes can, similar to other types of disputes, be costly and time-consuming and thus could have an adverse effect on Camurus’ operations, earnings and financial position.

Know-how and trade secrets
Camurus is dependent on know-how and trade secrets, which are not protected by registration in the same way as other intellectual property. To protect its know-how, Camurus uses, for example, confidentiality agreements, but unauthorised disclosure or unauthorised use of Company information – by competitors, business partners, consultants or employees, among others – could still occur. There is also a risk that competitors and others could independently develop similar know-how, which could be detrimental to Camurus’ operations.

Share dealing investigation
On 1 June 2018, Nasdaq Stockholm contacted the Company in connection with press speculation of improper behaviour by the Company’s chairman relating to his share purchase in the Company’s capital one day prior to a release by the Company of positive topline Phase 1 results for a long-acting treprostinil under assessment for the treatment of pulmonary arterial hypertension. Subsequently, the Swedish Economic Crime Authority has formally initiated a preliminary investigation into these allegations. Whilst the Company does not consider results of Phase 1 studies to be material non-public information for the Company and the chairman’s purchase of shares was performed in accordance with the Company’s internal procedures and relevant policies, including approval by management, the outcome of the ongoing and any potential investigations by Nasdaq Stockholm, the Swedish Economic Crime Authority and/or the Swedish Financial Supervisory Authority are not certain. Furthermore, there can be no assurances that Nasdaq Stockholm or the Swedish Financial Supervisory Authority, will not take any further action against the Company, including civil, administrative or other proceedings resulting in financial or other sanctions. Any such proceedings can be time consuming and require significant time and attention by the management and the Company’s chairman. In addition, the Company could suffer reputational damage as a result of these allegations and investigations. All of these factors could have a material impact on the Company’s operations, financial position and earnings.

Disputes and legal proceedings
Camurus may from time to time be the subject of legal proceedings related to its operating activities. Such legal proceedings, in addition to the disputes referred to above regarding intellectual property infringement and validity of certain patents, may also include commercial disputes. Disputes and claims can be time-consuming, disrupt operations, involve considerable sums or principally important issues and entail significant costs, and thus adversely affect the Company’s operations, earnings and financial position.

Tax risks
Camurus’ conducts operations involving several countries, including in Sweden, where it is headquartered and in Germany, the UK, France, Norway and Finland, where Camurus is establishing local commercial organisations in anticipation of the potential product launch of CAM2038. As far as Camurus is aware, it conducts its operations in compliance with applicable tax laws in Sweden as well as abroad, including its intra-group transactions. There is, however, a risk that Camurus’ interpretation of these tax rules may be incorrect or that the laws may change, possibly with retroactive effect. As a result of decisions by Swedish and foreign tax authorities, Camurus’ previous or current tax situation could therefore change, which could have a negative impact on Camurus’ operations, earnings and financial position.
Furthermore, as a result of the collaboration and licensing agreements that Camurus has entered into, the Company must make complicated assessments relating, inter alia, to revenue recognition. Important assessments include whether an agreement should be divided into different sub-transactions, how to allocate the price of these transactions, how the timing of the transactions should be reported and in what way (on one occasion or over time). Camurus must also determine whether a collaboration and license agreement should be recognised as revenue upon delivery, or if the agreement involves a lease agreement to be recognised as revenue over time.
Further, Camurus’ management makes judgments and estimates regarding the possibility of utilizing incurred losses and temporary differences that form the basis for the Company’s reported tax receivable. If future earnings or earnings expectations do not materialise in line with the Company’s current expectations, Camurus will not be able to fully offset incurred losses against anticipated earnings as estimated, which may result in an increased tax burden for the Company. Correspondingly, changes in applicable tax rates, or other governmental tax policy decisions, may adversely affect the Company’s tax position, an example of which is the upcoming reduction of the income tax rate for companies which will negatively affect the value of the Company’s tax loss carried forward.

Corporate governance and CSR risks
Camurus is subject to the risk that executives may make decisions that are not consistent with Camurus’ strategies, internal guidelines and policy documents, a risk which may increase as the Company continues its geographical and organisational expansion. Furthermore, employees within Camurus and other persons related to Camurus, as well as its partners, may perform acts that are considered unethical, are criminal (e.g. violation of applicable bribery and anti-corruption legislation) or otherwise contrary to applicable laws and regulations or Camurus’ internal guidelines and policy documents. If Camurus’ internal controls and other measures to ensure compliance with laws, regulations, internal guidelines and policy documents prove to be insufficient, Camurus’ reputation may be tarnished or the Company may be affected by public law sanctions, which could result in an adverse effect on its operations, financial position and earnings.

Financial risks

Operating losses and additional financing needs
With the exception of the 2012-2014 financial years, Camurus has reported operating losses since the Company’s operations started, and cash flow is expected to remain neutral or negative until such time as Camurus can generate annual revenues from products in the market. Going forward, Camurus will continue to require significant capital for continuing research and development of potential products. Both the extent and timing of Camurus’ future capital requirements will depend on a number of factors, such as costs for its operations and its on-going geographical and organisational expansion as it develops the internal resources for the commercialisation of CAM2038, the potential success of its research and development projects and opportunities for entering into partnership and licensing agreements, the timing for the receipt and amount of milestone payments and royalties, and the market reception of potential products. Access to and the terms and conditions for additional financing are influenced by several factors, such as market conditions, the general availability of equity and debt financing and Camurus’ attractiveness as an investment and/or credit rating and credit capacity. Turmoil and uncertainty in the credit and capital markets can also limit access to additional financing. If the Company chooses to obtain additional financing by issuing shares or share-based instruments, the Company’s shareholders who do not or may not participate will have their holdings diluted, while debt financing, if available to the Company, may contain terms and conditions that restrict the Company’s operational and financial flexibility. There is a risk that new capital cannot be obtained when needs arise, that capital cannot be obtained on favourable terms or that no capital at all can be raised. If Camurus is unable to obtain financing as required, the Company may be required to significantly curtail one or more of its research or development programmes or ultimately discontinue operations.

Exchange rate risk
Camurus is exposed to foreign exchange risk in the form of transaction exposure. Camurus is based in Sweden and reports its financial position and results in SEK. Transaction exposure arises from the purchase and sale of goods and services in currencies other than SEK. A large portion of Camurus’ revenues and expenses are, and are expected in the future to remain, denominated in foreign currencies, principally EUR, USD and GBP. Camurus’ finance policy allows hedging instruments to be used, but if Camurus’ measures to address the impact of exchange rate fluctuations do not prove to be sufficiently effective, Camurus’ financial position and earnings could be adversely affected. Currently, no hedging instruments are being used by Camurus.

Credit risk
Credit risk refers to the risk that Camurus’ counterparties cannot meet their payment obligations and thereby create a loss for Camurus. For example, there is a risk that Camurus’ licensees are not able to satisfy their payment obligations for milestones and potential future royalties as they fall due, or that potential future customers (such as wholesalers and pharmacies) are not able pay for their purchases on time or at all. If Camurus’ measures to manage credit risk are inadequate, this may adversely affect Camurus’ financial position and earnings.

Risks related to the shares

Share-related risk
Risks and risk-taking are inevitable aspects of owning shares. Since a share investment can both rise and fall in value, there is a risk that an investor will not recover the capital invested. The share price for listed companies can be very volatile and its development is dependent on a number of factors, some of which are company-specific while others are tied to the stock market as a whole. It is impossible for an individual company to control all of the factors that may affect its share price, and consequently any investment in shares should be preceded by a careful analysis.
There is a risk that the liquidity and price of the shares are subject to large fluctuations in response to general economic conditions or fluctuations in the stock market in general. Such fluctuations can occur regardless of how Camurus actually performs or the conditions in its main markets and may adversely affect the liquidity and price of the shares. Further, the trading market for the shares in Camurus will be influenced by the research and reports that securities or industry analysts publish about the Company (if any). If one or more of the analysts who cover the Company, or the industry in which it operates, downgrades the Company’s shares, the market price of the shares may decline. If one or more of these analysts ceases coverage of the Company or fails to regularly publish reports on the Company, the Company could lose visibility in the financial and share markets, which could cause the market price or trading volume of the Company’s shares to decline.

Future dividends
Historically, no dividend has been paid by Camurus and the intention is to not propose dividends to the shareholders unless and until Camurus achieves long-term profitability. Hence, there is a risk that no dividends will ever be paid in the future. The size of future dividends, if any, will depend on Camurus’ future earnings, financial position, cash flows, working capital requirements and other factors.

Significant influence for majority shareholder
Camurus largest shareholder Sandberg Development holds 53.7 percent of the shares and votes in the Company. This means that Sandberg Development has a significant influence over Camurus and most resolutions that are subject to voting at the general meeting. Such matters include the election of board members, the issuance of additional shares and share-related securities that could entail dilution for existing shareholders and resolutions on dividends, if any. There is a risk that Sandberg Development’s interests may differ or be contrary to the interests of other shareholders.

Future sales of large shareholdings and new share issues
Substantial sales of shares by major shareholders, including Sandberg Development, as well as a general market expectation that additional sales of shares may or will be made, may affect Camurus’ share price negatively. Moreover, new share issues would lead to a dilution of the ownership of shareholders who for some reason are unable to participate in such a new issue or do not choose to exercise their right to subscribe for shares. The same risk of dilution applies in the event that new shares are issued in an offering directed at other than existing shareholders.

Specific risks for foreign shareholders
Camurus’ shares will only be quoted in SEK and any dividends will be paid in SEK. This means that shareholders outside Sweden may be negatively impacted on the value of their holdings of shares and dividends, if any, when these are translated into other currencies if the SEK decreases in value against the currency concerned.
If, in the future, Camurus issues new shares with preferential subscription rights for existing shareholders, shareholders in certain countries may be subject to limitations preventing them from participating in such new share issues or otherwise impeding or limiting their participation. For example, shareholders in the United States may be prevented from exercising such preferential subscription rights unless an exemption from the registration requirements of the Securities Act is applicable. Shareholders in other jurisdictions outside Sweden may also be affected in a similar manner depending on local legal requirements. To the extent that shareholders in jurisdictions other than Sweden are unable to subscribe for new shares in any rights issues, their proportionate ownership in Camurus will decrease.