Cantargia

Annual Report • Apr 27, 2023

Untitled Annual Report 2022 Cantargia AB (publ.) 556791-6019 INTRODUCTION 3 Cantargia in brief 4 Vision, business model and strategy 5 2022 - A summary of the year and next steps 7 Chief executive’s review 10 Background to Cantargia’s projects 11 Nadunolimab – Cantargia’s most advanced project 13 CAN10 – Cantargia’s project in autoimmunity and inflammation 14 CANxx – Cantargia’s IL1RAP-based platform 15 Cantargia’s clinical program 18 TRIFOUR – Cantargia’s first controlled clinical trial 20 Clinical strategy 21 Patent protection MARKET OVERVIEW 23 Cantargia’s market focus 23 Cancer – A global challenge 25 The market for pancreatic cancer treatment 25 The market for lung cancer treatment 26 The market for breast cancer treatment 26 The market for treatment of myocarditis and systemic sclerosis 28 Drug development – From discovery to launch DIRECTORS’ REPORT 31 Operations 31 Five-year comparison 32 Significant events during the financial year 32 Significant events after the end of the financial year 33 Revenues 33 Operating expenses and operating profit or loss 33 Net financial income/expense 33 Earnings 33 Financial position 33 Cash flow and investments 33 Share-based incentive schemes 33 Risks and risk management 35 Employees 35 Research and development 35 Environmental impact 35 Guidelines for remuneration and other terms of employment for senior executives 2021 37 Outlook for 2023 37 Appropriation of retained earnings SHAREHOLDER INFORMATION 39 Shareholder information FINANCIAL STATEMENTS 42 Statement of comprehensive income 43 Statement of financial position 44 Statement of changes in equity 45 Statement of cash flows 46 Notes 64 Signatures AUDITOR’S REPORT 65 Report on the annual accounts 67 Report on other legal and regulatory requirements CORPORATE GOVERNANCE 70 Corporate governance report 75 The auditors’ examination of the corporate governance report 77 Board of directors, senior executives and auditors 82 Annual general meeting and financial calendar TABLE OF CONTENTS 3 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 INTRODUCTION Cantargia was founded in 2009-2010 based on research at Lund University that showed that the molecule IL1RAP is present on cancer cells from a large number of tumor types. IL1RAP is therefore a suitable target for potential cancer therapies. Cantargia’s main project nadunolimab (CAN04) is an antibody that can bind IL1RAP and has reached clinical development stage. The clinical development of nadunolimab focuses on pancreatic cancer, triple-negative breast cancer and non- small cell lung cancer. For these and many other cancers, chemotherapy is an established standard treatment. Na- dunolimab is mainly evaluated in combination with che- motherapy as its mechanism of action enables synergy with other cancer therapies. This is because IL1RAP may affect various resistance mechanisms that tumors can develop to these therapies. In addition to cancer, IL1RAP has a central role in auto- immune and inflammatory diseases. In parallel with na- dunolimab, Cantargia is for this reason developing an- other IL1RAP-binding antibody, CAN10, with a focus on myocarditis and systemic sclerosis. Cantargia’s goal is for CAN10 to reach clinical development stage in mid-2023. Cantargia in brief Cantargia is a Swedish biotech company that develops targeted antibody-based drugs for cancer as well as autoimmune and inflammatory diseases. Cantargia’s drug candidates have the potential to pro- vide strong efficacy with fewer side effects and can serve as a complement to established treatments. A prerequisite for a tumor to grow is that it evades our immune system. For such a tumor, immunotherapy is the primary treatment option, and in cases where immunotherapy is not sufficient to kill or slow down the tumor, chemotherapy or targeted agents are administered. These therapies can be counteracted by the tumor through various resistance mechanisms where IL1RAP plays a central role. For this reason, IL1RAP constitutes an attractive target for cancer therapies. I M M U N E S U P P R E S S I V E T U M O R IMMUNOTHERAPY CHEMOTHERAPY TARGETED AGENTS S�mulate T cells to eradicate tumor cells EFFECT OF TREATMENT RESISTANCE MECHANISM Kill cancer cells Blocks central mechanism for tumor growth Regulatory immune suppressive cells such as MDSC Danger signals such as IL-1α Alterna�ve signaling pathways I N V O L V E D I N R E S I S T A N C E I L 1 R A P 4 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 WE CONTRIBUTE TO THE DEVELOPMENT OF SAFER AND MORE EFFECTIVE TREATMENTS FOR LIFE- THREATENING DISEASES Our vision, business model and strategy Cantargia’s vision is to develop a new generation of targeted antibody-based treatments for IL1RAP with the potential to become an important part of future, more effective and safe treatments for life-threatening diseases. Cantargia’s business model is based on partnerships and long-term collabora- tions. Cantargia has therefore signed agreements with several different compa- nies, hospitals and academic research groups. Currently, about 50 international and local organizations are working on research and development of Cantargia’s main project nadunolimab, as well as the development project CAN10. Cantargia’s strategy is based on advancing the development of each drug can- didate in-house until the stage where a development or commercialization agreement is reached. 5 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 In 2022, additional strong clinical efficacy data were presented for nadunolimab and a rights issue of SEK 250 million was completed to enable future investments in the most promising indications. In addition, the CAN10 project made progress towards a first clinical trial. INTRODUCTION 2022 – A summary of the year and next steps • Promising clinical results for nadunolimab For pancreatic cancer and non-small cell lung cancer, updated interim data from over 100 patients from the CANFOUR clinical trial were presented in 2022 at the ASCO congress, one of the world’s largest in oncology. The results showed stronger efficacy of nadunolimab in combination with chemotherapy compared to historical data for chemotherapy alone. The promising results were further strengthened by new efficacy data presented at the AACR congress in 2023 which showed that pancreatic cancer patients with high tumor levels of IL1RAP, the target of nadunolimab, have the best response to treatment with nadunolimab and chemotherapy. • Focus on randomized clinical trials As a next step in pancreatic cancer, Cantargia initiat- ed a collaboration with the US organization PanCAN in early 2022 to include nadunolimab in PanCAN’s adaptive phase II/III clinical trial Precision Promise SM , a potentially pivotal randomized trial. In early 2023, the TRIFOUR clinical trial which evalu- ates treatment of triple-negative breast cancer, was expanded to a second, randomized phase. Preliminary results from the first phase of the trial showed good safety as well as promising signal of efficacy of nadu- nolimab in combination with chemotherapy. To enable financing for these randomized studies, a significantly oversubscribed rights issue of SEK 250 million was carried out during the summer of 2022. • Prioritizing the most promising opportu- nities Additional non-small cell lung cancer patients with the non-squamous subtype were recruited to the CANFOUR trial during 2022 and early 2023, and pa- tient enrollment ended in April 2023. To guide further clinical development steps, a biomarker strategy will be implemented to identify best responders among the total lung cancer patients treated with combina- tion therapy. The clinical trials CAPAFOUR and CESTAFOUR reached an important milestone during the year when a total of over 50 cancer patients had been treated. Although preliminary data showed good safety of the evaluated combinations, the decision was made not to advance any of the activities evaluated in these trials now, but instead focus on the aforementioned indications. Also for CIRIFOUR, which evaluates combination between nadunolimab and the checkpoint inhibitor Keytruda®, the decision was made not to expand the trial. Interim results presented at the ASCO congress showed good safety of the combination and signs of disease control in a patient subgroup. • Preclinical data provide insight into the mechanism of action During the year, preclinical results that provided in- depth understanding of the synergy between nadu- nolimab and chemotherapy were published in the journal Cancer Immunology, Immunotherapy. 6 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Furthermore, several presentations of preclinical re- sults were made at various international congresses. These showed that nadunolimab has an effect on the so-called stromal cells that constitute an important component of pancreatic cancer. This can affect the recruitment of immunosuppressive cells to the tu- mor as well as tumor growth. Results demonstrating the anti-metastatic effect of nadunolimab were also presented. • CAN10 well on its way towards clinical trial Promising preclinical efficacy data were also presented for CAN10 during the year, including an oral presenta- tion at the ACR Convergence conference in November 2022, focusing on CAN10’s effect in three different models for systemic sclerosis. During the year, the ef- fect of CAN10 was also reported in models for myocar- ditis and atherosclerosis. In 2022, CAN10 completed GLP toxicity studies, which showed good safety of both intravenous and subcu- taneous administration. CAN10 is thus approaching clinical development stage: During the second quarter of 2023, an application was submitted to start a first clinical trial and the ambition is that treatment in the trial can start shortly after the application is approved. Another important success for CAN10 was that a first composition of matter patent was granted in the US. • Strengthening of the organization During the year, Cantargia’s organization was strengthened by two recruitments to the manage- ment team. In the summer of 2022, Dr. Dominique Tersago was appointed as new Chief Medical Officer (CMO) and Cantargia also hired a new Chief Financial Officer (CFO), Patrik Renblad, who will replace the current CFO, Bengt Jöndell, in 2023. INTRODUCTION “Our projects continue to generate strong results, which in the long run is what secures the compa- ny’s value.” 7 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Without a doubt, 2022 was a challenging year caused by great uncertainty in the world. Pandemic, war in Europe and high inflation left their marks. Despite these challenges, Cantargia made signifi- cant progress during the year and I have rarely been as enthusiastic about the future as I am now. In this year’s CEO review, I will focus on how Cantargia has advanced its positions in this turbu- lent environment. Our projects continue to generate strong results, which in the long run is what strengthens the company’s value. Chief executive’s review Let me start with our main project, nadunolimab, which focuses on the treatment of cancer. In 2021, we were able to present the first robust results in combination with chemotherapy. We saw early encouraging indica- tions that nadunolimab enhances the effect of chemo- therapy commonly used in the treatment of patients with pancreatic cancer and non-small cell lung cancer. As a result of these data, we were contacted by the US organization PanCAN regarding participation in a poten- tially pivotal trial conducted under their sponsorship, with the goal of developing new treatments for pancre- atic cancer. This is an important strategic collaboration that provides an external validation of our results, but also attracts attention in the US, the largest pharma- ceutical market. In 2022, we therefore began prepara- tions to include nadunolimab in PanCAN’s clinical trial, and at the ASCO congress in June 2022, we presented new results in an even larger number of pancreatic can- cer and lung cancer patients. The results generated great interest and we are very now motivated to move forward with PanCAN’s trial. During the year, the US Food and Drug Administration (FDA) introduced new guidelines for clinical development in oncology. Although this has prolonged the discussions around the upcoming trial de- sign, it also means that the trial will be adapted to the new regulations, which provides long-term benefits. In 2023, we have also presented updated efficacy data in pancreatic cancer and a new important finding, namely that patients with the highest levels of the target of na- dunolimab, IL1RAP, on their cancer cells, respond best to the combination treatment. It is a logical observation that clearly indicates that nadunolimab makes a differ- ence. This opens up a large number of opportunities for future development. In patients with non-small cell lung cancer, we have also documented a signal of efficacy for nadunolimab with chemotherapy, and new results, which also received significant attention, were presented at the ASCO con- gress. The lung cancer market is segmented and highly competitive. For this reason, we are holding off on the next step until we have a better understanding of rele- vant biomarkers in the patients we have treated to date. Our ambition is to identify subgroups with the strongest responses to treatment, in analogy with our progress in pancreatic cancer. There are many opportunities within lung cancer, and it is important to choose the path with the greatest likelihood of success. In parallel with the development in pancreatic cancer and non-small cell lung cancer, we have also investigated na- dunolimab in combination with additional cancer thera- pies or in other types of cancer. The challenging market conditions of 2022 required a balancing act between focusing on the most important opportunities without terminating promising activities prematurely. After the summer, we decided to end several studies with new combination therapies in pancreatic cancer and lung cancer, as well as in colon cancer and bile duct cancer, while continuing our studies in triple-negative breast cancer. At present, I am very pleased with that decision as we recently revealed the first promising clinical re- sults in triple-negative breast cancer and took the next step towards a randomized trial where we are now as- sessing combination therapy in these patients compared to a control group. We plan to present additional results for this indication in the second half of the year, including more detailed data from the first group of 15 patients, as well as the first interim analysis in the randomized trial. We are very pleased with the collaboration we have established with the specialist group GEICAM in this trial, and in parallel studies, with the goal of gaining a deeper understanding of how nadunolimab can provide benefit to patients. Collectively, these results form a solid foun- dation for further progress. In three different cancers, which have the common de- nominator that independent studies have established that the diseases are largely driven by systems where IL1RAP plays a key role, nadunolimab shows a clear sig- nal of activity in combination with certain types of che- motherapy. We have thus identified an area where we will be placing a great deal of focus in the coming years. The priorities we made among our clinical programs in INTRODUCTION 8 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 ”With a solid cash position, strong long-term owners, highly competent and reputable part- ners, and an experienced team, I feel confident that Cantargia, based on the promising results reported, has an excellent prospect of further strengthening its position.” Göran Forsberg INTRODUCTION 9 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Göran Forsberg Lund, April 2023 2022 have freed up the necessary resources and enable us to continue creating value in this area. We have a lot of work ahead of us, but if all goes according to plan, the commercial potential is huge. Similar to nadunolimab, our second development project, CAN10, also targets IL1RAP. However, there are major differ- ences in the design of the two molecules, and CAN10 is opti- mized for treatment of autoimmune or inflammatory diseases. In 2022, we presented new strong data for CAN10 in models of various disorders, including myocarditis and systemic sclerosis, the two diseases that the project is focusing on. At the end of the year, an important safety study, the so-called GLP toxicity study, was completed without any safety signals for CAN10 being documented. We are planning the start of a clinical phase I trial in healthy volunteers during the middle of 2023. Once the study protocol has been approved and recruitment has started, I expect that we will be able to provide more detailed informa- tion about timelines and milestones. Drug development is costly, and we have been able to main- tain our strong position, despite the very challenging market, through the addition of SEK 250 million we received from our shareholders in connection with a new share issue in 2022. This has enabled us to continue creating value in our projects while focusing on the most promising opportunities based on our results. We currently have a solid cash position that will last at least until mid-2024. We have also built an organization with great expertise. In 2022, we hired Dominique Tersago as CMO and in early 2023, Patrik Renblad was hired as CFO. Both have solid experience that will serve the company well in the com- ing years. With a solid cash position, strong long-term owners, highly competent and reputable partners, and an experienced team, I feel confident that Cantargia, based on the promising results reported, has an excellent prospect of further strength- ening its position. I therefore want to take the opportunity to thank our shareholders for their support, and I would like to emphasize that although Cantargia has already experienced an exciting and successful journey, there is every possibility that the next few years could be even more rewarding. INTRODUCTION INTRODUCTION Clinical phase III Clinical phase II Clinical phase I Preclinical phase Discovery phase Type of treatment DiseaseProject 1 st line PDAC Nadunolimab 1 st /2 nd line TNBC 1 st /2 nd line NSCLC/ non-squamous NSCLC Myocarditis, Systemic sclerosis CAN10 New opportunities within IL1RAP platform CANxx Gemcitabine/nab-paclitaxel Planum doublets Carboplan/gemcitabine PDAC – pancreatic cancer; TNBC – triple-negative breast cancer; NSCLC – non-small cell lung cancer NaduNolimab (CaN04) Cantargia’s main project nadunolimab is an IL1RAP-binding antibody that has shown promising clinical and preclinical results in the treatment of various types of cancer. In addition to locating cancer cells and stimulating our natu- ral immune system to kill these cells, nadunolimab can also block signals that favor the development and growth of the tumor. In a large number of cancer types, tumor growth is promoted by the so-called interleukin-1 system, which contributes to an environment favorable for tumors. The interleukin-1 system is dependent on IL1RAP for transfer- ring signals to cells, and blocking IL1RAP with nadunolimab prevents this signaling. The clinical development of nadunolimab focuses primarily on pancreatic cancer, triple-negative breast cancer and non- small cell lung cancer. In recent years, positive interim results have been presented from patients treated with a combina- tion of nadunolimab and chemotherapy that indicates a high- er efficacy than expected with chemotherapy alone. In parallel with the clinical development, studies are also being conducted on different types of biomarkers to obtain more information regarding which patients respond best to treatment and how nadunolimab can be combined with ad- ditional established cancer therapies for optimal effect. CAN10 IL1RAP is also a suitable target in diseases outside the field of cancer. In the CAN10 project, Cantargia is developing a new antibody against IL1RAP that has a unique ability to prevent signaling not only via interleukin-1, but also inter- leukin-33 and interleukin-36. Blocking of these three sig- naling molecules has great potential in the treatment of, for example, myocarditis and systemic sclerosis, where CAN10 has shown strong preclinical data. CAN10 is currently in late preclinical development phase, and the goal is to start a first clinical trial in mid-2023. CANxx In the CANxx project, Cantargia is expanding its knowledge of IL1RAP and develops new antibodies that complement nadunolimab and CAN10. The goal is to identify new anti- body-based IL1RAP-targeting drugs with properties that differ from those of nadunolimab and CAN10 and are thus specifically designed for the treatment of new diseases. Background to Cantargia’s projects Modern drug development is based on identifying unique molecules against which new potential drug substances can be targeted. Cantargia’s research has shown that IL1RAP is a promising target for treatment of cancer as well as autoimmune and inflammatory diseases. 10 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 11 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 macrophage endothelial cell blood vessel solid tumor pro-inflammatory cytokines monocyte tumor cell neutrophil fibroblast Augmented ADCC Reduced angiogenesis Reduced ac�va�on and infiltra�on of tumor-suppor�ng cells NK cell myeloid cell fibroblast blood vessel Nadunolimab Nadunolimab – Cantargia’s main project Cantargia has performed extensive research on IL1RAP and results have shown that this molecule is present on tumor cells from a large number of tumors. Antibodies targeting IL1RAP thus have the potential to treat several different types of cancer. Nadunolimab stimulates so-called NK cells to kill cancer cells, an effect known as ADCC, and blocks signals that promote tumor development and survival. This signal blockade leads to, for example, reduced blood vessel formation and re- duced accumulation of immunosuppressive cells in the tumor. INTRODUCTION IL1RAP is present not only on cancer cells, but also on other cell types in the tumor that contribute to its growth. IL1RAP con- veys signals between these cells from the two forms of the molecule interleukin-1, alpha and beta, that provide support to the tumor in its development and survival. These signals can, for example, strengthen the tumor’s defenses against various im- mune cells capable of killing the tumor, but also stimulate blood vessel formation in the tumor. Nadunolimab blocks the sig- naling of both interleukin-1 alpha and beta and can thus impact the development and growth of the tumor. A tumor consists of cancer cells and a variety of tumor-stimulating cells that communicate with each other via different signaling molecules, so-called cyto- kines, including interleukin-1. NADUNOLIMAB’S DUAL MECH- ANISM OF ACTION Nadunolimab is unique in that it has a dual mechanism of action. Nadunolimab can ef- fectively kill cancer cells as well as block sig- nals that favor the development and growth of the tumor. In the human body, nadunolimab acts as a guided missile that seeks out and binds its target IL1RAP, which is highly present on cancer cells. By binding IL1RAP, naduno- limab stimulates the body’s killer cells, the so-called Natural Killer cells, to seek out and eradicate the cancer cells. Nadunolimab has also been optimized to possess an improved ability to stimulate these killer cells. 12 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 IL-1β Chemotherapy Macrophage IL-1α Macrophage CAF Neutrophils IL1R1 IL1RAP IL1R1 IL1RAP Tumor cells Endothelial cells IL1R1 IL1RAP Nadunolimab NADUNOLIMAB SYNERGIZES WITH CHEMOTHERAPY Another important function of nadunolimab is its ability to enhance the effect of chemo- therapy drugs which are established stan- dard treatments in a number of cancers. Cantargia has in preclinical studies shown that nadunolimab has a potent antitumor effect in combination with chemotherapy. When nadunolimab was combined with so-called platinum-based chemotherapy, antitumor effects were achieved that were much stronger than the effect of the indi- vidual treatments. Preliminary clinical data point to similar effects in cancer patients. Chemotherapy triggers the release of interleukin-1 alpha in the tumor, which in turn stimulates the release of interleukin-1 beta. These mole- cules contribute to the tumor’s resistance to chemotherapy. Nadunoli- mab blocks signaling of both forms of interleukin-1 and can thus break this chemoresistance. chemo- therapy resistant tumor durable response Nadunolimab + Nadunolimab has the potential to enhance the effect of chemot- herapy, which are established standard treatments for different types of cancer. Previous research as well as Cantargia’s own studies have shown that treating cancer cells with chemotherapy trig- gers them to release the alpha form of interleukin-1. This in turn stimulates the release of the beta form of interleu- kin-1 from surrounding cells in the tumor. The presence of both alpha and beta forms of interleukin-1 in the tumor contributes to development of chemotherapy resistance. Since nadunolimab blocks signaling of both forms of in- terleukin-1, it is very well-suited for combination with chemotherapy. When nadunolimab was combined with the chemother- apy docetaxel in preclinical studies, a stronger antitu- mor effect was achieved compared to docetaxel alone, or docetaxel in combination with an antibody that only blocks the beta form of interleukin-1. This shows that na- dunolimab’s interaction with IL1RAP produces a broader effect on the interleukin-1 system compared to block- ade of only one form of interleukin-1, and is necessary to counteract the tumor’s resistance to chemotherapy. NADUNOLIMAB EXCELS AGAINST OTHER CONCEPTS FOR BLOCKING THE INTER- LEUKIN-1 SYSTEM Various types of treatments based on blockade of the interleukin-1 system are currently being investigated in clinical trials. These treatments are either developed to block signaling of the alpha or beta form of interleukin-1 alone, or completely lack the ability to stimulate killer cells to eradicate cancer cells. Cantargia’s nadunolimab stands out from these by being the only treatment targeting IL1RAP. The major advan- tage of this is that nadunolimab thereby has a broader mechanism of action that is likely to contribute to a stron- ger antitumor effect and synergy with chemotherapy. INTRODUCTION 13 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 The CAN10 project was initiated with the goal of developing an anti-IL1RAP antibody for the treatment of autoimmune or inflammatory diseases. CAN10 thus covers a disease segment that complements nadunolimab and diversifies Cantargia’s project portfolio. PROMISING PRECLINICAL DATA IL1RAP conveys signals from the molecule interleukin-1, but also interleukin-33 and interleukin-36. These three signal- ing molecules are pro-inflammatory and play a central role in several severe diseases. Cantargia has developed the an- tibody CAN10 which, by binding IL1RAP, can block all these signaling pathways simultaneously. After extensive review of a large number of diseases, Cantargia decided to focus CAN10 on myocarditis and systemic sclerosis. CAN10 – Cantargia’s project in autoimmunity and inflammation Myocarditis is a life-threatening disease characterized by impaired heart function. The disease can be caused by autoimmunity, but even more commonly by viral in- fections, and the incidence of this disease has increased during the COVID-19 pandemic. Cantargia has shown that a surrogate antibody for CAN10 reduces the disease burden in models of both autoimmune and viral myocar- ditis. This effect was stronger compared to blockade of interleukin-1 signaling alone. In the CAN10 project, an antibody is being developed that blocks interleukin-1, -33 and -36, all of which are pro- inflammatory molecules. IL-33 CAN10 CAN10 CAN10 INFLAMMATION ASTHMA/ALLERGY SKIN DISEASES IL1RAP IL1RAP IL1R1IL1RAP IL-1α IL-1β IL-36α IL-36β IL-36γ ST2 ILRrp2 IL-1 receptor complex IL-33 receptor complex IL-36 receptor complex In a myocarditis model caused by viral infection, CAN10 was shown to reduce disease burden. This effect was stronger com- pared to an IL-1 receptor antagonist, IL1RA, which only blocks interleukin-1 signaling. 0 1 2 3 CAN10 IL1RA Control Viral myocarditis Disease score * INTRODUCTION 14 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Cantargia was the first company to develop drugs targeting IL1RAP and has built up a knowledge and technology plat- form in this field. Within CANxx, Cantargia has generated over one hundred unique antibodies that bind to IL1RAP and possess different properties. CANxx enables Cantargia to rapidly develop new antibodies, with unique properties, that can be used for treatment of various types of diseases. The development of novel drugs also depends on analyses and diagnostics, and CANxx is a valuable source of antibodies for these purposes as well. CANxx is a technology platform that takes advantage of Cantargia’s extensive knowledge of IL1RAP as a drug target. Within CANxx, a large library of antibodies has been produced which can be used for the development of new drugs, or for other purposes such as diagnostics or various analyses. CANxx is a source of new antibodies and consolidates Cantargia’s strong position for the future. CANxx – Cantargia’s IL1RAP- based platform Systemic sclerosis is a serious disease that leads to fibrosis of the skin and internal organs. Strong effects have also been demonstrated in three different models of systemic sclero- sis where the surrogate antibody for CAN10 reduced skin and pulmonary fibrosis and normalized the levels of several disease-related biomarkers in skin biopsies. In addition to these disease models, the CAN10 surrogate antibody has also shown effects in models for psoriasis, ath- erosclerosis, and peritonitis. COMPLETED GLP TOXICITY STUDY At the end of 2022, a GLP toxicity study for CAN10 was com- pleted. This showed that CAN10 is well-tolerated when ad- ministered intravenously for six weeks at dose levels up to 50 mg/kg. Subcutaneous administration also demonstrated a good safety profile. An application to start the first clini- cal trial for CAN10 has been submitted. The goal is to start treatment of healthy volunteers in the trial in mid-2023. INTRODUCTION 15 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Cantargia’s clinical program Advances have been made in the clinical development of nadunolimab, above all in pancreatic cancer, triple-negative breast cancer and non-small cell lung cancer, where promising safety and efficacy have been reported for combination treatment with chemotherapy. Cantargia is now turning its focus to randomized trials. CANFOUR Cantargia’s first clinical trial, CANFOUR, is a phase I/IIa trial focusing on pancreatic cancer and non-small cell lung cancer. In the phase I part, the safety and dosage of nadu- nolimab were primarily evaluated. The results were very encouraging and indicated good safety as well as effects on important biomarkers. Based on the positive outcome in phase I, CANFOUR pro- gressed to the phase IIa part, which evaluates nadunolim- ab in combination with chemotherapy. In this phase, nadu- nolimab is combined with gemcitabine and nab-paclitaxel in first-line treatment of pancreatic cancer, or with cispla- tin and gemcitabine in first- or second-line treatment of non-small cell lung cancer. Positive interim results from the phase IIa part show clear signals of efficacy for both combination therapies as stronger effects are observed compared to what is expected for chemotherapy alone. In a total of 73 patients with pancreatic cancer, median progression-free survival of 7.2 months and median over- all survival of 12.9 months were reported. This is an im- provement over historical control data for gemcitabine and nab-paclitaxel alone, which show median progression-free survival of 5.5 months and median overall survival of 8.5 months. Even stronger efficacy was observed in patients with high tumor levels of IL1RAP, the target of nadunolimab, including significantly prolonged median overall survival compared to patients with low IL1RAP levels (14.2 vs 10.6 months; p=0.017). 53% -100% -50% 0% 50% Best change in tumor size Partial response Stable disease Unconfirmed progressive disease Confirmed progressive disease Nadunolimab in combination with chemotherapy shows promising responses in pancreatic cancer patients. INTRODUCTION 12.9 16 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 To date, over one hundred patients have been treated in the phase IIa stage of CANFOUR. En- rollment to this trial was ended in April 2023, following treatment of ten additional non-squa- mous non-small cell lung cancer patients with nadunolimab and the chemotherapies carbopla- tin and pemetrexed. Continued development in non-small cell lung cancer will further focus on patient subgroups by implementation of a bio- marker strategy to identify best responders. In addition, the next step in the late clinical develop- ment in pancreatic cancer is being prepared, where nadunolimab will be included in the potentially pivotal clinical phase II/III trial Precision Promise SM conducted by the US organization PanCAN. In 30 patients with non-small cell lung cancer, a 53 per cent response rate was achieved re- sulting in median progression-free survival of 6.8 months. This is an improvement over his- torical controls, which show a 22-28 per cent response rate and median progression-free survival of 5.1 months. Moreover, an even higher response was achieved in a subgroup of patients with non-squamous non-small cell lung cancer. In non-small cell lung cancer (NSCLC), high responses were observed particularly in patients with the non- squamous subtype. INTRODUCTION -100% -50% 0% 50% Squamous NSCLC Best change in tumor size Stable disease Complete response Partial response Progressive disease -100% -50% 0% 50% Non-squamous NSCLC Best change in tumor size 17 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 CIRIFOUR In the phase Ib trial CIRIFOUR, nadunolimab is evaluated in combination with the checkpoint inhibitor pembrolizumab (Keytruda®) where the main objective concerns safety. For CIRIFOUR, patient recruitment ended in October 2022 and a total of 16 patients with non-small cell lung cancer, head and neck cancer, or malignant melanoma have been treated. Interim results show that nadunolimab in combination with pembrolizumab is well-tolerated and that disease control for at least 30 weeks (up to 58 weeks) is achieved in 6 out of 15 evaluated patients, which includes a partial response. CAPAFOUR, CESTAFOUR AND TRIFOUR Nadunolimab is investigated in three additional clinical tri- als. In the phase Ib trial CAPAFOUR, patients with pancre- atic cancer are treated with nadunolimab in combination with the chemotherapy regimen FOLFIRINOX, and in the phase I/II trial CESTAFOUR, nadunolimab is evaluated in combination with chemotherapy for the treatment of three types of solid cancers. In October 2022, patient recruit- ment to both CAPAFOUR and CESTAFOUR was ended. Pre- liminary results showed an acceptable safety profile for the combinations as well as signs of efficacy in patients with non-small cell lung cancer treated with nadunolimab and cisplatin/gemcitabine in CESTAFOUR, in line with the ob- servations in CANFOUR. More mature safety and efficacy from the two trials is planned to be presented during the second half of 2023. In the clinical phase Ib/II trial TRIFOUR, patients with tri- ple-negative breast cancer are treated with nadunolimab in combination with the chemotherapy carboplatin/gem- citabine. This trial advanced to the randomized phase II stage in early 2023 after initial results from phase I showed promising safety and efficacy. NCT-nummerStatusAntal patienterKombinationsterapiSjukdomStudie NCT03267316 Aktiv, rekryterar ej 76Gemcitabin/nab-paclitaxelPDAC CANFOUR Aktiv, rekryterar ej 33 + 10Platinadubbletter NSCLC/ icke-skivepitel NSCLC NCT04452214 Aktiv, rekryterar ej 16PembrolizumabSolida tumörer CIRIFOUR NCT04990037 Aktiv, rekryterar ej 18FOLFIRINOXPDAC CAPAFOUR NCT05116891 Aktiv, rekryterar ej 36 Docetaxel, cisplatin/ gemcitabin eller FOLFOX Solida tumörer CESTAFOUR NCT05181462RekryterarUpp till 113Carboplatin/gemcitabinTNBC TRIFOUR NCT04229004 Rekryterar ännu ej Upp till 350Gemcitabin/nab-paclitaxelPDAC Precision Promise℠ PDAC – bukspottkörtelcancer; TNBC – trippelnegativ bröstcancer; NSCLC – icke-småcellig lungcancer INTRODUCTION 18 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 TRIFOUR – Cantargia’s first controlled clinical trial In 2021, Cantargia initiated the clinical trial TRIFOUR, which evaluates nadunolimab with che- motherapy in patients with triple-negative breast cancer. TRIFOUR is conducted at around 20 hospitals in Spain in a joint effort with the Spanish breast cancer group, GEICAM, and was recently expanded to a randomized stage after promising early safety and efficacy data were presented for the first phase of the trial. Dr. Dominique Tersago, CMO at Cantargia, and Dr. Eva Carrasco, CEO of GEICAM, comment on the treatment options for triple-negative breast cancer, the TRIFOUR trial, and the collaboration behind the trial. Triple-negative breast cancer is an aggressive and diffi- cult-to-treat form of breast cancer with about 200,000 cases reported globally each year. It accounts for 10-15% of all breast cancer cases and is more common in people under the age of 50. Eva Carrasco explains why triple-negative breast cancer is so difficult to treat: ”Unlike other forms of breast cancer, triple-negative breast cancer lacks the hormone receptors for estrogen and progesterone, as well as the growth factor receptor HER2, which limits the benefit of various targeted treatments.” She continues: “It is a biologically aggressive cancer, with highly proliferative cells, which, together with limited treatment options, leads to the poorest prognosis among all breast cancer subtypes.” In the phase Ib/II trial TRIFOUR, patients with advanced triple-negative breast cancer in the first or second line of treatment are given Cantargia’s nadunolimab together with a chemotherapy doublet, carboplatin and gemcitabine. “Current guidelines recommend the use of chemotherapy as the first treatment option for patients with metastatic triple-nega- tive breast cancer. Other options have recently emerged, includ- ing targeted inhibitors, checkpoint inhibitors, and antibody-drug conjugates. Still, the medical need for triple-negative breast cancer remains high,” comments Eva Carrasco. An application to initiate TRIFOUR was submitted to the Spanish regulatory authority and ethics committee in July 2021 and approval to start the trial was obtained in Sep- tember the same year. Treatment of patients in the phase I part began in early 2022. This part of the trial constitutes a dose escalation phase where different dose levels of na- dunolimab are evaluated together with standard doses of the chemotherapy doublet. The primary objective here is to evaluate the safety of the combination, and antitumor activity is evaluated as a secondary objective. Dominique Tersago comments why nadunolimab has the potential to contribute to great benefit for these patients: ”In our previous clinical and preclinical studies, we have seen clear indications that nadunolimab can enhance the effect of chemotherapy. In addition, IL1RAP, the target of nadunolimab, is present on a large number of solid tumors, including breast cancer, and has particularly high levels in triple-negative breast cancer.” INTRODUCTION 19 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 The dose escalation phase of TRIFOUR, where a total of 15 patients were treated, was finalized in February 2023. An early evaluation of the results showed favorable safety of the combination. To prevent the treatment to cause neutropenia, i.e. a low concentration of neutrophil granulocytes in the blood, the patients were treated prophy- lactically with G-CSF, a granulocyte growth factor. An early assessment of the treatment effect was also made based on 12 patients who had participated long enough in the trial. This assessment showed signs of efficacy and a preliminary response rate of 50 per cent was observed. ”The results from the first part of the TRIFOUR trial are very promising. We could see higher responses in patients treated with nadunolimab in addition to chemotherapy, than is ex- pected with chemotherapy alone. Also, the combination was well-tolerated, and the side effects were manageable,” says Dominique Tersago. She continues: ”Confirmation of these results in the second part of the trial would give us the op- portunity to further develop nadunolimab for the treatment of advanced triple-negative breast cancer and ultimately lead to a clear improvement in patients’ lives.” Based on these results, the TRIFOUR trial progressed to the phase II part, which is a randomized stage including a control group, where up to 98 additional patients can be recruited. In the phase II part, patients are randomized in a 1:1 ratio to either a control arm where only chemo- therapy is given, or an experimental therapy arm where nadunolimab is also administered, with the objective to investigate antitumor activity. ”We will also analyze bio- markers that are linked to better response to treatment, es- pecially markers involved in the IL-1 signaling pathway in the tumor and blood, so that in future studies we can identify the patients who would benefit most from our treatment,” com- ments Dominique Tersago. In March 2023, the first patient was treated in the phase II part of the trial and additional patients are now continu- ously being enrolled. A first indication of how the trial is pro- gressing is expected to be given during the fourth quarter of 2023 when an interim futility analysis is expected to be performed. In such an analysis, a preliminary assessment is made of the probability that the combination therapy will produce a stronger efficacy than the control treatment. Both Dominique Tersago and Eva Carrasco highlight the ongoing collaboration between Cantargia and GEICAM as a great success. ”The partnership between GEICAM and Cantargia in the TRIFOUR trial is highly constructive with very good communication and interactions,” comments Eva Carrasco. Dominique Tersago adds: ”The collaboration with GEICAM has been very important for the successful manage- ment of the trial. The study teams and other staff in GEICAM’s network are extremely motivated and receive strong support from GEICAM. They are all very committed to improving the treatment of patients with breast cancer.” GEICAM is a non-profit organization founded in 1995 with the aim of being a driving force in the development of breast cancer research in Spain. Today, GEICAM consists of more than 900 experts in over 200 hospitals in Spain. GEICAM has conducted more than 100 studies in which over 66,000 women and men have participated. Early signs of efficacy have been observed in the first 12 patients in the TRIFOUR trial, including one complete re- sponse and five partial responses. -100 % -50 % 0 % 50 % 100 % Best change in tumor size Partial response Stable disease Progressive disease Complete response INTRODUCTION 20 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 INTRODUCTION Clinical strategy Cantargia’s objective for nadunolimab is to confirm the promising phase I/II results in randomized trials. An additional goal is to advance CAN10 towards clinical stage and thus have a second project in clinical development. This progress will broaden the company’s activities, but will also provide an op- portunity to focus on diseases with the best potential for success, based on clinical results. During 2022, the clinical development of nadunolimab was focused on ran- domized trials. A first such trial with a control group, TRIFOUR, has already started to recruit patients with triple-negative breast cancer. Cantargia is also planning for recruitment in a controlled trial in pancreatic cancer in 2023. A further objective is to build on the promising results that show that pancreatic cancer patients with high levels of IL1RAP respond best to treat- ment with nadunolimab and chemotherapy. In the short term, this observa- tion strengthens previous signs of clinical efficacy of nadunolimab, but in the longer term it also provides an opportunity to select for patients who have the best chance of responding to treatment. The CAN10 project is planned to begin its first clinical phase I trial in healthy volunteers in mid-2023. Initially, the trial will focus on single dosing to evaluate safety and pharmacokinetics, however, additional analyses of immunological biomarkers will also be performed. The subsequent part of the trial will focus on repeated dosing and is planned in patients with psoriasis to obtain an initial indication of effects on disease-related biomarkers. However, the goal is to start phase II trials in myocarditis and systemic sclerosis as soon as possible after the completion of the phase I trial. 20 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 21 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 INTRODUCTION Patent protection Cantargia’s strategy is to obtain broad patent protection for its current and future product candi- dates in markets deemed to be of clinical and commercial relevance to its projects. Cantargia’s patent protection can be divided into two layers. The first layer consists of patents whose primary purpose is to protect Cantargia’s drug candidates, nadunolimab and CAN10. The second layer consists of patents that mainly serve to extend Cantargia’s protection to anti-IL1RAP an- tibodies with broader functional or structural properties, or for the treatment or diagnosis of a particular type of disease. One purpose of this second layer of protection is to limit the ability of potential competitors to develop drug candidates targeting IL1RAP. PATENT FAMILY PATENT APPLICATION APPROVED PATENTS VALIDITY Nadunolimab (Product) Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, Singapore, South Africa, South Korea, US Australia, China, Europe (Austria, Belgium, Czech Republic, Denmark, Estonia, France, Germany, Ireland, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, UK), Israel, Japan, Mexico, Singapore, South Africa, US 2035 CAN10 (Product) PCT, US US 2041 Leukemias (Treatment) Europe, US Europe (France, Germany, UK), US 2029 Hematological cancers (Treatment/Diagnosis) Australia, Canada, China, Europe, Israel, Japan, Mexico, South Africa, US Australia, Canada, China, Europe (France, Germany, Italy, Netherlands, Spain, Swit- zerland, UK), Israel, Japan, Mexico, South Africa, US 2030 Solid tumors (Treatment/ Diagnosis) Australia, Brazil, Canada, China, Eu- rope, Japan, Mexico, South Korea, US Australia, Canada, China, Europe (Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Poland, Spain, Sweden, Switzerland, UK), Japan, Mexico, South Korea, US 2032 CAN03 (Product) China, Europe, Japan, US China, Europe (France, Germany, UK) Japan, US 2035 Anti-IL1RAP antibodies (Product) China, Europe, India, Japan, US Japan, US 2037 Biepitopic antibody (Product) China, Europe, Japan, US 2039 21 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 MARKET OVERVIEW 23 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Cantargia’s market focus Since IL1RAP, the target of nadunolimab, is present on a large number of solid tumors, there is potential to utilize Cantargia’s immuno-oncology platform for treatment of several additional forms of cancer. Cantargia is focusing the development of nadunolimab on pancreatic cancer, triple-negative breast cancer and non- small cell lung cancer. Pancreatic cancer is very difficult to treat, and few effective therapies have been developed to date. Triple-negative breast cancer is a very aggressive type of breast cancer with limited therapeutic options. Lung can- cer is the form of cancer that causes the greatest number of deaths and non-small cell lung cancer is the most common form of the disease. Cantargia has focused on the non-squa- mous subtype, which is the largest subgroup of non-small cell lung cancer. In parallel with nadunolimab, Cantargia is also developing the project CAN10 which is aimed at harnessing the full potential of IL1RAP as a molecular target. In CAN10, the objective is to develop a novel antibody for treatment of myocarditis and systemic sclerosis. The medical need for both diseases is high, with few approved drugs currently available. CaNCer – a global ChalleNge Cancer is one of the leading causes of death in the world, ac- counting for about 20 percent of deaths in the Western world. Globally, more than 18 million people are diagnosed with can- cer annually and nearly 10 million die of cancer-related diseas- es 1 . Despite significant advances in treatment and diagnostics, there is a great need for new therapies. There are approximately 200 different types of cancer, all of which have in common that cells begin to divide and grow uncontrollably somewhere in the human body. Research sug- gests that two independent events are required for cancer to develop: damaging of normal cells resulting in rapid and un- controlled cell growth, and location of these cells in a micro- environment that provides the right conditions to grow and protects against attacks from the immune system. The chart below shows the distribution of cancer incidence and mortality in the world by type of cancer and major region in 2020. 1 Globocan 2020 Source: WHO, The Global Cancer Observatory 2023 MARKET OVERVIEW 49% 23% 13% 8% 6% 1% Incidence Mortality 58% 20% 7% 1% 7% 7% Asia Europe North America Latin America & the Caribbean Africa Oceania 24 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 2 Globocan 2020 3 Globocan 2020 4 Iqvia Institute, Global Oncology Trends 2022, Outlook to 2026 5 RTTNews, Top 10 Blockbuster Drugs In 2021 6 Iqvia Institute, Global Oncology Trends 2022, Outlook to 2026 7 Iqvia Institute, Global Oncology Trends 2022, Outlook to 2026 The number of cancer cases is expected to increase con- tinuously, and the forecast by the WHO is that, by 2040, over 29 million new cases will be diagnosed annually 2 . A significant factor behind the growing incidence of cancer is the aging population. By 2040, people above the age of 60 are expected to account for more than 75 per cent of all cancer cases 3 . Our Western lifestyle is considered another contributing factor as smoking, alcohol consumption, un- healthy diets, low physical activity, obesity and unhealthy sun habits become more widespread. As more people are diagnosed with cancer and as additional new drugs are approved, the total costs of cancer drugs have risen significantly, reaching USD 196 billion by 2022 4 . An im- portant factor behind the rising costs is that more innovative, and thus costly, treatments are made available, with a larger number of patients having access to these treatments. In ad- dition, there is a strong focus on early diagnosing and thus treating patients at earlier stages. Half of the ten best-selling drugs globally in 2021 were drugs for treatment of cancer, ac- counting for about half of the total turnover for the ten best- selling pharmaceuticals 5 . Source: Iqvia Institute, Global Oncology Trends 2022, Outlook to 2026 The cost of cancer drugs 2018 - 2026 0 20 40 60 80 2000 2008 1995 2003 2011 1993 2001 2009 1997 2005 2013 1994 2002 2010 1998 2006 2014 1996 2004 2012 1999 2007 2015 2016 2017 2018 100 120 140 Pancreatic cancer Lung cancer Breast cancer Source: SEER Cancer Statistics Review Number of new cancer cases in the US per 100,000 inhabitants Since the number of cancer cases is expected to increase considerably, a rapid growth of the market is anticipated. Globally, the cost of cancer therapies is expected to in- crease to approximately USD 300 billion by 2026, corre- sponding to an annual growth rate of approximately 11 percent 6 . In the coming years, over one hundred new can- cer therapies are expected to become approved 7 . It is also estimated that the development of precision medicines and biomarker treatments will accelerate. Billions of USD EU5 (France, Germany, Italy, Spain, UK). Pharmerging (China, Brazil, India, Russia, Poland, Argentina, Turkey, Mexico, Venezuela, Romania, Saudi Arabia, Colombia, Vietnam, South Africa, Algeria, Thailand, Indonesia, Egypt, Pakistan, Nigeria, Ukraine). USA EU5 Japan Pharmerging The rest of the world 0 50 100 150 200 250 2018 2022 2026 129 196 307 300 MARKET OVERVIEW 25 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 8 SEER Cancer Stat Facts 9 SEER Cancer Stat Facts 10 Reportlinker.com, Pancreatic Cancer Treatment Market Research Report - Global Forecast to 2026 11 Globocan 2020 12 Globocan 2020 13 American Cancer Society 14 Paz-Ares et al, N Engl J Med 2018; 379:2040-2051 15 Reportlinker, Global Non-Small Cell Lung Cancer (NSCLC) Therapeutics Industry THE MARKET FOR PANCREATIC CANCER TREATMENT Globally, approximately 495,000 new cases of pancreatic cancer were diagnosed in 2020. In the same year, 466,000 people died from the disease 8 . In the US, the number of people diagnosed with the disease has increased by nearly 13 per cent over the last 20 years and pancreatic cancer is today the third most common cause of cancer-related deaths in the US 9 . Since pancreatic cancer is difficult to diagnose, it is also difficult to treat as it is often well-advanced at the time of diagnosis. Pancreatic cancer treatment was valued at approximately USD 2.4 billion in the eight largest markets in 2021 and is expected to grow to approximately USD 4.2 billion by 2026 10 . This corresponds to an annual growth rate of just over 8 per cent during these years. The growth in this market is mainly due to an increasing number of cancer cases. The number of people diagnosed with pancreatic cancer is estimated to increase by 60 per cent by 2040 11 . The increase in the num- ber of cases is in turn caused by an aging population and an increasing incidence of diabetes, which are both risk factors for developing pancreatic cancer. Improved diagnostics also contribute to the expected market growth as they increase the likelihood of discovering pancreatic cancer at an earlier stage, thus enabling treatment. THE MARKET FOR LUNG CANCER TREATMENT In 2020, approximately 2.3 million cases of lung cancer were diagnosed globally and more than 1.8 million people died from the disease 12 . Around 85 per cent of all lung cancers are non-small cell lung cancer 13 , which is subdivided into the squamous and non-squamous subgroups, where the latter is the largest and corresponds to 70-80 per cent of all cases 14 . In the US, the number of people diagnosed with lung cancer has decreased by approximately 27 per cent over the last 20 years, while the number of people diagnosed with this dis- ease is increasing in countries such as China and India, and in European countries such as Hungary, Denmark and Serbia. Sales of drugs for non-small cell lung cancer totaled USD 20 billion in 2020 and are projected to increase to USD 45 bil- lion by 2027 15 . Sales are mainly driven by increasing use of various antibody-based immunotherapies. Another impor- tant factor contributing to the growth of the global market is the increasing incidence of lung cancer in many countries, as mentioned above. Incidence 46% 3% 5% 6% 7% 10% 12% 11% Mortality 40% 5% 5% 8% 8% 9% 7% 18% Non-Small Cell Lung Cancer Pancreatic cancer Annual global incidences Fraction of cancer incidence Annual global mortalities Fraction of cancer mortality 2.3m 11% 1.8m 18% Five-year survival sate 19% Annual global incidences Fraction of cancer incidence Annual global mortali�es Fraction of cancer mortality 0.5m 3% 0.5m 5% Five-year survival sate 9% Lung Breast Bowel Stomach Liver Esophagus Pancreas Other Lung Breast Bowel Prostate Stomach Liver Cervix Other Treatment: Surgery, Radiaon, Chemotherapy, Immunotherapy Treatment: Surgery, Radiaon, Chemotherapy Source: WHO, The Global Cancer Observatory 2020, Cancer.gov (National Cancer Institute, Sep-20), American Cancer Society, Nov-17 MARKET OVERVIEW 26 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 16 Globocan 2020 17 American Cancer Society 18 Pfeiffer RM, Webb-Vargas Y, Wheeler W, Gail MH. Proportion of U.S. Trends in Breast Cancer Incidence Attributable to Long-term Changes in Risk Factor Distributions. Cancer Epidemiol Biomarkers Prev. 2018;1:1 19 Research and Markets, Breast Cancer Drugs Global Market Report 2021 20 American Cancer Society 21 FutureWise, Triple Negative Breast Cancer Treatment Market By Drug Type, 2020-2027 22 J Am Coll Cardiol. 2016 Nov 29;68(21):2348-2364 23 Lancet. 2018;392:1736-88 24 Bairkdar, Rossides, Westerlind, Hesselstrand, Arkema, Holmqvist, Incidence and prevalence of systemic sclerosis globally: A comprehensive systematic review and meta-analysis, Rheumatology 2021:7 25 GlobalData, Systemic Sclerosis: Global Drug Forecast and Market Analysis to 2030 THE MARKET FOR BREAST CANCER TREATMENT Breast cancer is currently the most common form of can- cer. In 2020, approximately 2.3 million new cases were re- ported, and approximately 685,000 women died from the disease. In 2040, around 3 million women are expected to be diagnosed with the disease and just over one million will die as a consequence of the disease 16 . The risk of develop- ing breast cancer increases with age up to the age of 70. In the US, the median age for developing breast cancer is 62 years 17 . According to a study conducted on American wom- en, increases in BMI and the fact that women on average give birth to fewer children, likely contribute to the increase in cases in the US between 1980 and 2018 18 . The global market for breast cancer treatment amounted to approximately USD 17.9 billion in 2021 and is expected to increase to USD 20 billion by 2025, corresponding to an an- nual growth rate of approximately 13 per cent 19 . The mar- ket growth is primarily caused by an increased incidence of the disease, but also the need for preventive measures and early treatment. The market growth is also expected to be driven by the launch of new therapies. Triple-negative breast cancer tends to be more common in women under the age of 40, African-American women and women with a BRCA1 mutation. Approximately 10-15 per cent of breast cancer cases are triple-negative breast cancer 20 . The market for the treatment of triple-negative breast cancer is expected to be worth over USD 820 million by 2027 following an annual growth rate of approximately 4.5 per cent between 2020 and 2027 21 . THE MARKET FOR MYOCARDITIS AND SYSTEMIC SCLEROSIS TREATMENT Myocarditis is characterized by inflammation of the mus- cular tissues of the heart (myocardium) arising from, for example, autoimmunity or various types of infections. Re- gardless of its etiology, myocarditis is characterized by ini- tial acute inflammation that can progress to subacute and chronic stages, resulting in tissue remodeling, fibrosis, and loss of contractile function. The incidence of myocarditis is approximately 22 per 100,000 (1.7 million) 22 , and globally the disease accounts for about 0.6 deaths per 100,000 (46,400) annually 23 . The medical need is high for subgroups of patients with fulmi- nant myocarditis (acute disease) and dilated cardiomyopa- thy (chronic disease), where mortality is very high in certain subtypes. For these patients, heart transplantation is cur- rently the only definitive treatment. Systemic sclerosis is a chronic autoimmune disease that is mainly characterized by inflammation and fibrosis of the skin and subcutaneous tissue, as well as blood vessels and internal organs such as the lungs, heart, and kidneys. Sys- temic sclerosis is a complex, heterogeneous disease that can occur with a variety of clinical manifestations ranging from minor to life-threatening. The estimated annual incidence of systemic sclerosis is ap- proximately 1.4 per 100,000 24 . The main cause of death in patients with systemic sclerosis is interstitial lung disease and the medical need is particularly high in these patients. The worth of the pharmaceutical market for systemic scle- rosis was estimated to approximately USD 500 million in 2020 and is expected to grow to USD 1.8 billion by 2030 in the seven major markets 25 . This corresponds to an average annual growth rate of 14 per cent. MARKET OVERVIEW 27 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 28 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Drug development – From discovery to launch PRECLINICAL PHASE The preclinical phase is characterized by activities con- ducted by chemists, biologists and pharmacologists who study and develop various substances in laboratories. With the help of effective disease models, researchers can study how various pharmaceutical substances behave and inter- act. Individual substances are then selected for further stud- ies in the laboratory and in animal models. Some questions that are commonly addressed include: “Does the substance have any treatment efficacy?”, “What dose of the substance is appropriate?” and “Does the substance cause serious side effects?” The purpose of the preclinical phase is to select a candidate drug (CD) for which an application for clinical trials in humans is submitted. Before a candidate drug is allowed for testing in humans, a large amount of work is required to ensure that the candi- date drug is sufficiently safe and stable, and to establish how it behaves in and how it leaves the human body. An appli- cation to conduct clinical studies in humans is submitted to the relevant drug regulator, which in Sweden is the Medical Products Agency. In the United States, the clinical trial ap- plication is called Investigational New Drug (IND) Application and in the EU, Clinical Trial Application (CTA). Applications are filed in countries where the clinical trial will be conducted and are then evaluated by independent medical experts who assess whether the trial can be initiated or whether further documentation is required. Apart from obtaining permission from the drug regulators, the company must also apply for and receive permission from each country’s local and/or na- tional ethics committee. The approval of an application is fol- lowed by a long and complex process involving several years of clinical studies before the company can apply to have the product approved for general use. CLINICAL PHASE In the clinical phase, studies in humans are performed. These studies are normally conducted at hospitals or health centers and are formally divided into four phases – phase I, II, III and IV – although the differences between the phases are not always obvious in practice. To ensure that the studies can be interpreted objectively, endpoints for the evaluation of the studies are defined in advance. The design of the study program for a particular drug should be continually evaluated and regulatory approval is required for each sub-study. Phase I Phase I is the first stage where a new substance is admin- istered to a human. The trial subjects are normally healthy volunteers and are subject to constant medical monitoring. In clinical studies in cancer, however, it is common for pa- tients to be included already at this stage. Phase I studies normally involve 20-100 individuals. The purpose of the trial is to determine whether the trial subjects tolerate the drug and whether its behavior in the body is the same as in- dicated in the earlier animal studies and other research. The purpose is also to identify safe dose levels and any potential side effects. The initial dose is kept as low as possible but should be sufficiently high to provide answers to the ques- tions that the trial is designed to answer. If the procedure progresses as planned, the dose can then gradually be in- creased to the clinical use level. Phase I studies normally take six months to a year to complete. Phase II Phase II is normally the first stage at which the new sub- stance is administered to patients with the relevant disease. At this stage, the test group is also larger and normally con- sists of 100-500 subjects. The objective of this phase is to show ‘proof of concept’, i.e., that the drug actually achieves a treatment effect. Other objectives include studying how the drug affects the disease or its symptoms and determin- ing the dose to be used in large-scale trials. Phase II studies can take between six months and two years to complete. Phase III Phase III is initiated only if the results from phase II are suf- ficiently encouraging to justify further studies. In this phase, the candidate drug is given to even larger groups, often 1,000-5,000 subjects. The new substance is tested against an ineffective placebo or against another already approved drug for the same disease condition. Patients are distributed randomly between treatment groups and neither the physi- cian nor the patients are informed of which substance has been administered. This type of trial is known as a ‘double- blind and randomized’ trial and is considered to be the method that produces the best and most objective evaluation. Once the trial has been completed, the treatment of each patient is revealed. It is then possible to determine and evaluate what effect the candidate drug had compared to the placebo. The studies provide a statistical basis, which means that the difference between the two products must be statistically MARKET OVERVIEW 29 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 significant. Phase III studies can take between one to four years to complete depending on the disease, the length of time during which the patients are studied, and the number of patients included. Phase IV In phase IV, the therapeutic use of the drug is studied. After the phase I-III studies have been completed and the drug has been approved by the drug regulator and received market au- thorization, further clinical studies are often conducted in the area of use for which the product has already been approved. These are known as phase IV studies and are aimed at study- ing and monitoring the dose and effect relation, the impact on additional simultaneous drug treatments, and any side effects which may occur after the market launch. The overall objective is to optimize the use of the drug. REGISTRATION PHASE If the drug appears to be promising and is well-tolerated by patients, further trials are conducted to verify the results. An application for approval is subsequently filed with the rel- evant drug control authorities, which in Europe is the Euro- pean Medicines Agency (EMA). The application must include all documentation describing the quality, safety and effect of the drug and is generally very extensive. Examination of an application takes one year on average. The examination can result in the drug being approved or rejected, or the regulator may demand that further studies be conducted. An approval can also involve the regulator approving a more limited indi- cation than was originally intended. Once regulatory approval has been obtained, the drug can be marketed. Research and development costs for drug development are high, in the range of billions of SEK, and mainly comprise costs for research, development, production and clinical studies of a drug. Of 10-15 products that are studied in phase I, on av- erage, only one will normally advance to regulatory approval. Approximately 35 new medical products are introduced on the Swedish market every year. MARKET OVERVIEW DIRECTOR’S REPORT 31 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 The Board of Directors and Chief Executive Officer of Cantargia AB (publ), corporate ID no. 556791-6019, here- by present the annual report for the financial year 1 January 2022 – 31 December 2022. The company has its registered office in Lund, Sweden. Amounts in the annual report are expressed in thousands of Swedish kronor (kSEK) unless otherwise indicated. OPERATIONS Cantargia is a biotechnology company that develops anti- body-based treatments for life-threatening diseases and has established a platform based on the protein IL1RAP, involved in a number of cancer forms and inflammatory diseases. The lead project, the antibody nadunolimab (CAN04), is studied clinically primarily in combination with chemotherapy, focusing on pancreatic cancer, triple- negative breast cancer and non-small cell lung cancer. Positive interim data from the combination with chemo- therapy indicate stronger efficacy than would be expected from chemotherapy alone. Cantargia’s second develop- ment project, the antibody CAN10, blocks signaling via IL1RAP in a different manner than nadunolimab and ad- dresses treatment of serious autoimmune/inflammatory diseases, with initial focus on myocarditis and systemic sclerosis. 1 See also Note 24 2 See also Note 19 3 Cantargia has and had potential ordinary shares in the form of warrants during the period. These do not have a dilutive effect, however, as a conversion of warrants into ordinary shares would result in a lower loss. Amounts in mSEK 2022 2021 2020 2019 2018 Net sales - - - - - Loss after net financial income/expense -371.8 -366.5 -173.1 -110.8 -91.2 Cash and bank balances and liquid investments 189.6 247.3 693.4 39.9 76.5 Short-term investments 237.1 312.1 210.0 110.0 90.3 Equity 389.7 532.7 891.9 142.3 155.0 Total assets 474.8 600.2 925.5 166.1 171.4 Equity/assets ratio (%) 82% 89% 96% 86% 90% Quick ratio (%) 543% 887% 2996% 669% 1027% R&D costs -364.7 -352.7 -158.4 -97.5 -77.0 Project costs 1 -306.7 -304.2 -121.9 -81.1 -66.2 Total operating expenses -381.5 -370.3 -173.9 -111.6 -93.3 R&D costs as a percentage of total operating expenses 96% 95% 91% 87% 82% Project costs as a percentage of total operating expenses 80% 82% 70% 73% 71% Number of outstanding shares at 31 Dec 166,987,895 100,192,737 100,192,737 72,804,392 66,185,811 Number of outstanding warrants at 31 Dec - - - 85,000 85,000 Number of outstanding employee options at 31 Dec 2 3,069,333 3,170,333 1,740,000 - - Earnings per share before and after dilution (SEK) 3 -2.90 -3.66 -1.94 -1.56 -1.36 Equity per share (SEK) 2.33 5.32 8.90 1.95 2.34 Dividend (SEK) - - - - - FIVE-YEAR COMPARISON DIRECTOR’S REPORT DEFINITIONS Cash and bank balances and liquid investments - Cash and available deposits with banks and other credit institutions Equity/assets ratio - Adjusted equity as a percentage of total assets Quick ratio - Current assets as a percentage of current liabilities R&D costs - Total project costs plus allocated portion of personnel expenses and other external expenses Project costs - The sum of external costs in Preclinical, Clinical, CMC, Regulatory and Patents Earnings per share - Profit for the year divided by number of outstanding shares at end of period Equity per share - Equity divided by number of shares at end of period 32 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR The following is a summary of events that took place in the company during the year. Nadunolimab Cantargia has ongoing clinical studies that primarily inves- tigate nadunolimab in combination with chemotherapy or with checkpoint inhibitor. CLINICAL Pancreatic cancer • In January, it was reported that Cantargia would advance nadunolimab in pancreatic cancer in PanCAN’s phase II/III clinical trial Precision Promise SM . • In May, new robust data were presented at ASCO 2022 confirming the promising efficacy of nadunolimab in the treatment of pancreatic cancer. Triple-negative breast cancer • In January, Cantargia reported on treatment of the first patient with triple-negative breast cancer in the TRI- FOUR trial. Non-small cell lung cancer • In February, Cantargia reported on treatment of the first patient with non-squamous non-small cell lung cancer in a new arm of the CANFOUR trial. • In May, data from the CANFOUR trial were presented at ASCO 2022 confirming the positive phase IIa interim re- sults for nadunolimab in NSCLC. Combination with checkpoint inhibitor • In February, positive safety data from the clinical trial CIRIFOUR with nadunolimab in combination with Keytruda® were reported. • In May, interim clinical data were presented at ASCO 2022 showing the potential of nadunolimab in combi- nation with Keytruda®. • In September, it was announced that the first patient with non-squamous NSCLC had been treated with na- dunolimab, Keytruda® and chemotherapy. Other • In September, it was announced that Cantargia had reached a milestone in patient recruitment in the CAPAFOUR and CESTAFOUR trials as over 50 patients had been treated, and that the development of nadu- nolimab would be focused on future randomized trials. PRECLINICAL • In August, preclinical data were published showing a strong antitumor effect for nadunolimab in combination with chemotherapy. • In September, preclinical data were presented showing unique treatment effects of nadunolimab on stromal cells in pancreatic cancer. • In November, new data were presented at SITC 2022 supporting nadunolimab’s promising clinical antitumor effects. CAN10 • In February, new promising toxicology results were re- ported for CAN10 and the phase I trial was scheduled for 2023. • In March, positive preclinical efficacy data were reported for CAN10 showing anti-fibrotic and anti-inflammatory effects in systemic sclerosis. • In May, positive preclinical effects in atherosclerosis were reported, demonstrating the potential of CAN10 in cardiovascular diseases. • In July, new preclinical efficacy data were reported for CAN10 supporting development in myocarditis. • In November, positive effects of CAN10 in models of systemic sclerosis were presented at ACR Convergence 2022. IP • In January, a third-party appealed against the EPO’s previous decision in favor of Cantargia’s patent. • In July, a Notice of Allowance was received from the USPTO for Cantargia’s product patent for the CAN10 antibody. Organization • In March, Dr. Roger Belusa was appointed as Interim Chief Medical Officer (CMO) and the former CMO, Dr. Ig- nacio Garcia-Ribas, took up a new position at Cantargia to focus on ongoing early-phase clinical trials. In July, Dr. Dominique Tersago was appointed as CMO. Financing • In June, it was decided to raise approximately SEK 250 million through a fully underwritten rights issue. An ex- traordinary general meeting was held in June and in July the terms of the fully underwritten rights issue and the prospectus containing new financial information were published. The final outcome was announced in August, including the new number of shares and votes in the company. SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR • In January, Cantargia successfully completed a GLP toxicity study for the CAN10 antibody. • In January, it was announced that Cantargia had recruit- ed Patrik Renblad as Chief Financial Officer. • In February, it was reported that Cantargia would be starting the randomized part of the TRIFOUR trial based on promising early safety and efficacy data with nadu- nolimab in triple-negative breast cancer. In March, the first patient with triple-negative breast cancer was treated in the randomized part of TRIFOUR. • In April, Cantargia presented new clinical data at AACR DIRECTOR’S REPORT 33 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 2023 strongly supporting nadunolimab development in pancreatic cancer. Cantargia also presented anti-meta- static effects of nadunolimab in cancer models. • In April, a phase I clinical trial application was submitted for CAN10. • In April, favorable safety was reported for a new nadu- nolimab combination therapy and enrollment of non- small cell lung cancer patients in the CANFOUR trial was completed. REVENUES Cantargia’s net sales in 2022 were SEK 0 (0) million. OPERATING EXPENSES AND OPERATING PROFIT OR LOSS Research and development costs totaled SEK 364.7 (352.7) million. The essentially unchanged cost level compared to the previous year is mainly a result of the focus of the clini- cal program that has occurred during the year. The majority of the costs are, as in previous years, related to the main project, nadunolimab, with clinical trials and CMC as the primary cost drivers. Administrative expenses totaled SEK 15.0 (15.3) million for the year. The unchanged level reflects the development of R&D costs and the fact that administrative costs are largely fixed in nature. Other operating expenses, which comprise foreign exchange differences on trade payables, amounted to SEK 1.9 (2.2) million. Other operating expenses is mainly related to the change in the value of the Swedish krona against the Euro. The operating loss amounted to SEK -381.5 (-370.3) million for the year. NET FINANCIAL INCOME/EXPENSE Net financial income/expense consists substantially of for- eign exchange differences on the company’s EUR- and USD account. Net financial income amounted to SEK 9.7 (3.8) mil- lion for the year. EARNINGS Cantargia’s loss before tax, which is the same as the loss for the year, was SEK -371.8 (-366.5) million. FINANCIAL POSITION Cantargia’s equity/assets ratio at 31 December 2022 was 82 (89) percent and equity was SEK 389.7 (532.7) million. The company’s cash and cash equivalents, which consist of cash and demand deposits with banks and other credit institutions, were SEK 189.6 (247.3) million at the balance sheet date. In addition to cash and cash equivalents, the company has short-term investments with banks and in fixed income funds of SEK 237.1 (312.1) million. The company’s liquidity (including short-term investments) decreased by SEK -132.7 million in 2022. At the end of the period, total assets totaled SEK 474.8 (600.2) million. CASH FLOW AND INVESTMENTS Cash flow from operating activities for the full year was SEK -358.9 (-346.5) million. As part of cash flow from operating activities, changes in working capital were SEK 14.6 (14.4) million. Cash flow from investing activities totaled SEK 67.9 (-102.4) million. For the full year 2022 as well as for the previous year, changes in short-term investments accounted for the ma- jority of cash flow from investing activities. Cash flow from financing activities was SEK 223.9 (0.0) mil- lion. The outcome in 2022 is related to a rights issue that was completed during the year. The total change in cash and cash equivalents, including for- eign exchange difference in cash and cash equivalents, was SEK -67.1 (-448.9) million. SHARE-BASED INCENTIVE SCHEMES The purpose of share-based incentive schemes is to promote the company’s long-term interests by motivating and reward- ing the company’s senior executives and other employees. At the Ordinary General Meeting in May 2020, it was decided to introduce Employee Stock Option Scheme 2020/2023, which is one of the company’s active share- based incentive schemes. At the Ordinary General Meeting in May 2021, it was decided to introduce another Employee Stock Option Scheme 2021/2024. For information on the schemes, see Note 19. In 2022, 260,000 employee stock options were granted, and 361 000 stock options were recalled. The options granted as of 31 December 2022 represent rights to pur- chase 3,683,200 shares. Recalculation of the Employee Stock Option Programs after the rights issue in 2022 means that each option entitles to 1.2 shares. The cost of the share-based incentive schemes was SEK 4.0 (5.1) million, of which SEK -0.9 (2.2) million refers to provisions for social security contributions and SEK 4.8 (7.3) million to costs for share-based payments. The cost has not affected cash flow. The company has issued war- rants to enable it to deliver shares in a simple and cost- effective manner upon exercise of the issued employee stock options. DIRECTOR’S REPORT 34 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 RISKS AND RISK MANAGEMENT Several risk factors can have a negative impact on the op- erations of Cantargia. It is therefore very important to take account of relevant risks in addition to assessing the com- pany’s growth prospects. A description of risk factors, not in order of importance and not exhaustive, is given below. For natural reasons it is not possible to assess all risk fac- tors without making a general assessment of the com- pany’s operations and external factors. See also Note 3, Financial risk management. Research and development and dependence on one candidate drug The development of nadunolimab is associated with sig- nificant risks of failure and/or that the results will be such that continued research and development will be required. These risks include that the company’s drug will prove to be ineffective, dangerous, toxic, or otherwise fail to meet the applicable requirements or that the candidate drug will prove to be difficult to develop into a commercially viable product that generates revenue for the company. There is also a risk that delays and unexpected difficulties in the development (for example, production or clinical studies) could incur additional costs for the company. If the devel- opment of nadunolimab fails, this would have a significant adverse impact on Cantargia’s operations, financial position and results, and there is a risk that Cantargia would not be able to continue its operations in the current form. Implementation of preclinical and clinical studies Results from early clinical studies are not always consis- tent with the results of more comprehensive clinical stud- ies. There is a risk that the planned studies will not indicate levels of safety and efficacy that are sufficient to obtain the required regulatory permits or to enable the company to li- cense, establish partnerships for or sell its potential product. Regulatory permits and registrations To obtain the right to market and sell a drug, all candidate drugs under development need to go through a comprehen- sive registration process and be approved by the relevant regulator in an individual market. There is also a risk that the rules which currently apply for registration, or interpretations of these rules, will be amend- ed in a way that is to the disadvantage of Cantargia. In the event that Cantargia does not obtain the required product approvals or in the event that any future approvals are with- drawn or limited, this could have significant negative effects on Cantargia’s operations, financial position and results. Changes in economic activity and the pricing of drugs The pricing and demand for pharmaceutical drugs could be adversely affected by a general economic decline in major pharmaceuticals markets. In certain countries, the pricing of drugs is determined at the regulatory level and, in case of the launch of drugs, the pricing could thus be regulated by authorities in several countries. A deterioration in gen- eral economic conditions and/or regulatory decisions could therefore result in a lower pricing of the drug projects than expected by Cantargia, which could have a significant nega- tive impact on the company’s operations, financial position, and results. Partnerships, licensing and marketing Cantargia is and will in future be dependent on partnerships in connection with the development of candidate drugs, pre- clinical and clinical studies, and licensing/partnerships for any future sale of drugs. In the event that these or future partnerships were to be terminated, there is a risk that the company would be unable, on short notice, to conclude con- tracts with suitable new business partners, which could have a significant negative impact on the company’s operations, financial position and results. In the future, Cantargia could also be dependent on external parties for marketing and sales. If the company is not suc- cessful in its attempts to conclude future or maintain exist- ing partnership agreements for its product candidate, this could have a significant negative impact on Cantargia’s op- erations, financial position, and results. Financing and capital requirements Since starting its operations, Cantargia has been reporting an operating loss and cash flow is expected to remain mainly negative until Cantargia succeeds in generating revenue from a launched product. Cantargia will also continue to need sig- nificant capital for research and development in order to conduct preclinical and clinical studies. If Cantargia, wholly or partly, were to fail to acquire sufficient capital, or succeed in doing so only on unfavourable terms, this could have a signifi- cant negative impact on the company’s operations, financial position and results. Competition If a competitor succeeds in developing and launching an ef- fective cancer drug, this could have a negative impact on the company’s ability to generate revenue. Furthermore, technology that is controlled by outside parties and that could be of use for the company’s operations could be ac- quired or licensed by Cantargia’s competitors, and thereby prevent Cantargia from obtaining such technology on com- mercially acceptable terms, or at all. Competitors with greater resources could also successfully market a similar or even an inferior drug and obtain wider recognition in healthcare in general for such a drug, which could have a negative impact on the company’s operations, financial po- sition, and results. DIRECTOR’S REPORT 35 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Dependence on key individuals and employees Cantargia is dependent on a number of key individuals for the continued development of the company’s operations and preclinical and clinical projects. There is, however, a risk that one or several of the company’s employees will terminate their employment with the company or that the company will fail to recruit new individuals with relevant knowledge, which could delay the company’s development and commercialization of its candidate drug. Patents and other intellectual property rights There is a risk that it will not be possible to obtain patent protection for drugs and production methods developed by Cantargia, that Cantargia will be unable to register and complete all necessary or desirable patent applications at a reasonable cost or that a future patent portfolio and other intellectual property rights held by the company will not provide adequate commercial protection. There is also a risk that a patent will not create a competitive advantage for the company’s drugs and/or methods or that competi- tors will succeed in circumventing the company’s patents. If Cantargia is forced to defend its patent rights against a competitor, this could entail significant costs, especially in any disputes with competitors with significantly greater re- sources than Cantargia. If Cantargia in its own operations uses or is alleged to be using products or methods which are protected by patents or will be patented by another party, the holder of these patents could accuse Cantargia of patent infringement. The failure to maintain its own, and/or any infringement of other parties’, intellectual property rights could have a sig- nificant negative impact on Cantargia’s operations, finan- cial position and results. Product liability Cantargia’s operations are subject to various liability risks that are common for companies engaged in drug re- search and development. This includes the risk of prod- uct liability that can arise in connection with production and clinical studies where the participating patients can experience side effects or fall ill during treatment. There is a risk that product liability claims could have a signifi- cant negative impact on Cantargia’s operations, financial position, and results. Insurance cover Cantargia believes that the insurance cover for its current operations is appropriate. There is, however, a risk that such cover will prove insufficient for claims that could arise in relation to product liability and other damage. There is therefore a risk that insufficient or excessively expensive insurance cover could have a significant negative impact on the company’s operations, financial position, and results. Currency risk Assets, liabilities, income and expenses in foreign currency give rise to currency exposures. A weakening of the Swed- ish krona (SEK) against other currencies increases the rec- ognised amounts of Cantargia’s assets, liabilities, income and earnings while a strengthening of the SEK against other currencies decreases these items. The company is exposed to such changes, as some the company’s costs are paid in EUR, USD and other international currencies and because a part of the company’s future sales revenue may be received in international currencies. A material change in such exchange rates could have a negative impact on the company’s financial statements, which in turn could have negative effects on Cantargia’s financial position and re- sults. See also Note 3 for information about how Cantargia handles this risk. EMPLOYEES One of Cantargia’s key success factors is the company’s employees. The average number of employees of the com- pany during the year was 27 (22), of whom 17 (13) are women. The number of employees at year-end was 26 (26) fulltime equivalents, of whom 16 (15) are women. The level of education among the employees is generally high. Nearly all employees hold a PhD in medicine or natural sciences or have higher university degrees. In addition to its employees, Cantargia engages a number of consultants who are tied to the business on a continu- ous basis. The large network with which Cantargia works ensures access to top-level expertise, flexibility, and cost effectiveness. RESEARCH AND DEVELOPMENT The majority of the company’s resources, 96 (95) percent, are used for research and development. ENVIRONMENTAL IMPACT Cantargia AB does not engage in activities requiring a per- mit under the Swedish Environmental Code, as the compa- ny does not engage in the production of pharmaceuticals or pharmaceutical substances and does not handle solvents and chemicals. GUIDELINES FOR REMUNERATION AND OTHER TERMS OF EMPLOYMENT FOR SE- NIOR EXECUTIVES 2022 Under the Swedish Companies Act, guidelines for remu- neration of the CEO and other senior executives must be adopted by the shareholders’ meeting. A set of guidelines were adopted at the Annual General Meeting on 27 May 2020. No deviations from these guidelines have been made. The Board has not proposed that any changes be made DIRECTOR’S REPORT 36 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 to the remuneration guidelines at the 2023 AGM and the guidelines will therefore continue to apply in accordance with the resolution of the 2020 AGM. The guidelines do not cover remuneration or share-based incentive schemes adopted or approved by the sharehold- ers’ meeting. The guidelines applying for 2023 are presented below. For remuneration in 2022, see Note 18. How the guidelines promote Cantargia’s business strategy, long-term interests and sustainability Cantargia’s business model and scientific strategy are based on partnerships, and Cantargia has entered agree- ments with a number of companies, hospitals and aca- demic groups. A large number of international and local organizations are currently engaged in research and devel- opment related to Cantargia’s nadunolimab and the CAN10 antibody. The strategy is to advance the development of these drug candidates in-house until the stage where a development or commercialization agreement is reached with companies within Cantargia’s business area. For fur- ther information about Cantargia’s business strategy, see www.cantargia.com. To successfully implement its business strategy and safe- guard its long-term interests, including its sustainability, it is essential that Cantargia is able to recruit and retain com- petent employees who work to achieve maximum share- holder and customer value. To do so, Cantargia must be able to offer competitive remuneration. These guidelines enable senior executives to be offered competitive total remuneration. Long-term incentive schemes have been established in Cantargia. The schemes have been approved by the share- holders’ meeting and are therefore not covered by these guidelines. For the same reason, the share-based incentive scheme and employee stock option scheme approved by the 2020, 2021 and 2022 AGMs are also not covered. Forms of remuneration, etc. The remuneration paid to senior executives shall be mar- ket-based and may consist of the following components: a fixed cash salary, variable cash remuneration, pension ben- efits and other benefits. The total remuneration paid to se- nior executives shall comprise a balanced mix of the above components. The Board shall annually evaluate whether long-term incentive schemes should be proposed to the shareholders’ meeting. The fixed cash salary shall be individual and based on the senior executive’s areas of responsibility, role, competence and position. For the CEO, the variable cash remuneration shall not ex- ceed 30 percent of the fixed annual cash salary. For other senior executives, the corresponding remuneration shall not exceed 20 percent of the executive’s fixed annual cash salary. Variable cash remuneration can be pensionable if this is provided for under mandatory provisions of a collec- tive bargaining agreement. Pension benefits shall be defined contribution benefits un- less the executive is covered by a defined benefit plan un- der mandatory provisions of a collective bargaining agree- ment. Pension premiums for defined contribution pensions shall not exceed 35 percent of the fixed annual cash salary. Notwithstanding the above, the Board shall have the right to instead offer other solutions that are equivalent from a cost perspective for the company. Other benefits may include benefits such as health insur- ance and occupational health care. Such benefits must be of limited value in relation to other remuneration and be consistent with normal market practice in each geographi- cal market. The combined value of other benefits shall not exceed 10 percent of the fixed annual cash salary. With regard to employment relationships that are subject to other rules than Swedish rules, appropriate adjustments may be made in respect of pension benefits and other benefits in order to comply with mandatory rules or estab- lished local practice, in which case the general purpose of these guidelines shall be adhered to as far as possible. Termination of employment If employment is terminated by Cantargia, the notice period shall not exceed six months. If employment is terminated by the executive, the notice period shall not exceed six months for the CEO and three months for other senior executives. For the CEO, severance pay of up to twelve months’ fixed cash salary and employment benefits may be paid, in ad- dition to a fixed basic salary during the notice period. For other senior executives, the sum of the fixed basic salary during the notice period and severance pay shall not exceed the amount of the executive’s annual fixed cash salary. Criteria for payment of variable cash remuneration, etc. Variable cash remuneration must be linked to predeter- mined and measurable criteria, which may be financial or non-financial and must be designed to promote the com- pany’s long-term value creation. The criteria must relate to development activities in the development projects in which the company is engaged and the partnerships the company enters into to accelerate the clinical development process and advance towards commercialization as well as the remuneration resulting therefrom (e.g. one-time pay- ments at the time of entering into agreements, milestone DIRECTOR’S REPORT 37 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 compensation or royalties). The criteria must also be de- signed to promote Cantargia’s business strategy and long- term interests, including its sustainability. Fulfilment of criteria for payment of variable cash remu- neration shall be measured over a period of one year. When the measurement period for meeting the criteria for pay- ment of variable cash remuneration has ended, it shall be determined to what extent the criteria have been met. The assessment regarding variable cash remuneration of se- nior executives shall be made by the Remuneration Com- mittee. With regard to financial targets, the assessment shall be based on the company’s most recently published financial information. Salary and terms of employment for employees In preparing these proposed remuneration guidelines, the Board has taken account of salaries and employment terms for the company’s employees by including information on employees’ total remuneration, the components of the remuneration and the increase and rate of increase of the remuneration over time in the decision basis used by the Board to assess the reasonableness of the guidelines and the limitations arising therefrom. The decision-making process for determining, reviewing and implementing the guidelines The Board has established a Remuneration Committee. The committee’s duties include preparing the Board’s resolution on the proposed guidelines for remuneration of senior ex- ecutives. The Board shall prepare proposed new guidelines at least every fourth year and submit its proposal for adop- tion by the AGM. The guidelines shall apply until new guide- lines have been adopted by the shareholders’ meeting. The Remuneration Committee shall also monitor and evaluate programmes for variable remuneration for management, the application of guidelines for remuneration of senior ex- ecutives, and applicable remuneration structures and remu- neration levels in the company. The members of the Remu- neration Committee are independent of the company and management. During the Board’s deliberations and when resolutions on remuneration-related matters are made, the CEO or other members of management shall not be present, insofar as they are affected by the matters concerned. Deviation from the guidelines The Board may decide temporarily to deviate, wholly or partially, from the guidelines if in an individual case there are special reasons therefor and such deviation is neces- sary to safeguard Cantargia’s long-term interests, includ- ing its sustainability, or to ensure Cantargia’s financial viability. As stated above, it is part of the duties of the Re- muneration Committee to prepare the Board’s resolutions on remuneration matters, which includes resolutions on deviations from the guidelines. OUTLOOK FOR 2023 Cantargia’s goal is to develop drug candidates for treat- ment of life-threatening diseases with a focus on cancer as well as autoimmune and inflammatory diseases. The strategy is to advance the development of these drug can- didates in-house until the stage where a development or commercialization agreement is reached with companies within Cantargia’s business area. For Cantargia’s main project, nadunolimab, the goal is to confirm the promising phase I/II results in randomized tri- als. One such trial, TRIFOUR, has already been initiated for triple-negative breast cancer and in 2023, Cantargia also plans to recruit for a randomized trial in pancreatic can- cer. Another ambition is to build on the promising results showing that pancreatic cancer patients with high levels of IL1RAP respond best to treatment with nadunolimab and chemotherapy. Additionally, the goal is to advance CAN10 into clinical phase and thereby have a second project in clinical development. APPROPRIATION OF RETAINED EARNINGS Proposed appropriation of retained earnings (see also Note 21). The Annual General Meeting is asked to decide on the appropriation of the following: The Board of Directors proposes that: SEK 376,325,002 be carried forward. For more information on the company’s results and financial position, see the following income statement and balance sheet and the additional disclosures. Share premium account 1,623,184,970 Loss brought forward - 875,045,855 Loss for the year - 371,814,113 376,325,002 DIRECTOR’S REPORT 38 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 SHAREHOLDER INFORMATION 39 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION As of 25 September 2018, Cantargia’s shares have been listed on the main list of Nasdaq Stockholm, under the stock symbol “CANTA”. At 31 December 2022, the num- ber of shares was 166,987,895 (100,192,737). At the balance sheet date, the total outstanding option scheme including not assigned options comprised 4,475,333 employee stock options, entitling the holders to sub- scribe for 5,370,400 shares, which would have a dilutive effect of approximately 3.1 per cent and increase the share capital by SEK 429,632. Share price performance 5 10 15 Jan-22 Feb-22 Mar-22 May-22 Jun-22 Jul-22Apr-22 Aug-22 Sep22 Oct-22 Nov-22 Dec-22 SHARE PRICE (SEK) 20 25 30 Owner Number of shares Capital/Votes (%) Fjärde AP-fonden 14,743,911 8.8% Alecta Tjänstepension, Ömsesidigt 12,240,992 7.3% Försäkringsaktiebolaget, Avanza Pension 11,216,197 6.7% Första AP-fonden 10,540,406 6.3% Swedbank Robur Fonder 8,102,958 4.9% Six Sis AG 7,895,983 4.7% Handelsbanken fonder 7,148,994 4.3% Goldman Sachs International 5,399,573 3.2% Nordnet Pensionsförsäkring 2,396,835 1.4% Brushamn Invest Aktiebolag 1,979,470 1.2% Other 85,322,576 51.1% Total 166,987,895 100,0% OWNERSHIP DISTRIBUTION Cantargia’s ten largest owners as of December 31, 2022 40 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 SHAREHOLDER INFORMATION Holding Number of shareholders Number of shares Capital/Votes (%) Market Cap (kSEK) 1 - 500 6,189 935,052 0.6% 2,880 501 - 1 000 1,468 1,151,931 0.7% 3,548 1 001 - 5 000 2,964 7,539,688 4.5% 23,222 5 001 - 10 000 827 6,137,569 3.7% 18,904 10 001 - 15 000 317 3,942,775 2.4% 12,144 15 001 - 20 000 218 3,856,486 2.3% 11,878 20 001 - 671 143,424,394 85.9% 441,747 Total 12,654 166,987,895 100.0% 514,323 OWNERSHIP DISTRIBUTION SIZE CLASSES AS OF DECEMBER 31, 2022 SHARE CAPITAL HISTORY Year Event Quotient value Increase in no. of shares Increase in share capital Total no. of shares Total share capital 2009 Incorporation 1,00 100,000 100,000.00 100,000 100,000.00 2010 Issue of new shares 1,00 10,870 10,870.00 110,870 110,870.00 2011 Issue of new shares 1,00 14,130 14,130.00 125,000 125,000.00 2012 Issue of new shares 1,00 3,571 3,571.00 128,571 128,571.00 2012 Issue of new shares 1,00 7,143 7,143.00 135,714 135,714.00 2012 Issue of new shares 1,00 7,143 7,143.00 142,857 142,857.00 2013 Issue of new shares 1,00 3,572 3,572.00 146,429 146,429.00 2013 Issue of new shares 1,00 25,001 25,001.00 171,430 171,430.00 2014 Issue of new shares 1,00 12,500 12,500.00 183,930 183,930.00 2014 Bonus issue 2,96 - 360,502.80 183,930 544,432.80 2014 37:1 share split 0,08 6,621,480 - 6,805,410 544,432.80 2014 Debt-for-equity swap 0,08 789,464 63,157.12 7,594,874 607,589.92 2015 Issue 0,08 5,800,000 464,000.00 13,394,874 1,071,589.92 2015 Issue of new shares TO 2010:1 0,08 111,000 8,880.00 13,505,874 1,080,469.92 2016 Issue of new shares TO1/TO3 0,08 4,127,260 330,180.80 17,633,134 1,410,650.72 2016 Issue of new shares 2011/2016 0,08 46,250 3,700.00 17,679,384 1,414,350.72 2016 Issue of new shares TO2/TO4 0,08 3,237,816 259,025.28 20,917,200 1,673,376.00 2017 Issue of new shares 0,08 11,158,308 892,664.64 32,075,508 2,566,040.64 2017 Issue of new shares 0,08 14,865,000 1,189,200.00 46,940,508 3,755,240.64 2018 Issue of new shares 0,08 19,245,303 1,539,624.24 66,185,811 5,294,864.88 2019 Issue of new shares 0,08 6,618,581 529,486.48 72,804,392 5,824,351.36 2020 Issue of new shares 0,08 18,201,097 1,456,087.76 91,005,489 7,280,439.12 2020 Issue of new shares TO 2017/2020 0,08 86,700 6,936.00 91,092,189 7,287,375.12 2020 Issue of new shares 0,08 9,100,548 728,043.84 100,192,737 8,015,418.96 2022 Issue of new shares 0,08 66,795,158 5,343,612.64 166,987,895 13,359,031.60 41 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 FINANCIAL STATEMENTS 42 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 STATEMENT OF COMPREHENSIVE INCOME 1 Jan 2022 1 Jan 2021 SEK thousand Note -31 Dec 2022 -31 Dec 2021 Operating income Net sales - - Other operating income - - Operating expenses 24 Research and development costs 7, 18 -364,686 -352,709 Administrative costs 6, 7, 18 -14,964 -15,309 Other operating expenses 9 -1,899 -2,249 -381,549 -370,267 Operating profit -381,549 -370,267 Financial income and expense Interest income and similar items 10, 12 9,740 3,766 Interest expense and similar items 10, 12 -4 -3 9,736 3,763 Profit before taxes -371,814 -366,504 Tax for the period 11 - - Loss for the period ) -371,814 -366,504 Earnings per share before and after dilution (SEK) based on average number of shares -2.90 -3.66 ) No items are reported in other comprehensive income, meaning total comprehensive income is consistent with the loss for the period. FINANCIAL STATEMENTS 43 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 STATEMENT OF FINANCIAL POSITION SEK thousand Note 31 Dec 2022 31 Dec 2021 ASSETS Intangible assets Patent 5,558 6,459 27 5,558 6,459 Tangible assets Machinery and equipment 7,395 3,097 26 7,395 3,097 Total fixed assets 12,953 9,556 Current assets Other receivables 2,462 4,588 Prepaid expenses and accrued income 32,714 26,713 35,176 31,301 Short-term investments Other short-term investments 14 237,095 312,064 237,095 312,064 Cash and bank balances Cash and bank balances 15 189,573 247,322 189,573 247,322 Total current assets 461,845 590,688 TOTAL ASSETS 474,798 600,244 EQUITY AND LIABILITIES Equity Restricted equity Share capital 16 13,359 8,015 13,359 8,015 Non-restricted equity Share premium account 1,623,185 1,404,595 Retained earnings -875,046 -513,362 Loss for the year -371,814 -366,504 21 376,325 524,729 Total equity 389,684 532,745 Long-term liabilities Provision for social security contributions, incentive program 13 24 892 24 892 Short-term liabilities Trade payables 37,910 34,512 Tax liabilities 342 570 Other liabilities 1,025 1,105 Accrued expenses and deferred income 17 45,813 30,420 85,090 66,607 TOTAL EQUITY AND LIABILITIES 474,798 600,244 FINANCIAL STATEMENTS 44 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 STATEMENT OF CHANGES IN EQUITY SEK thousand Restricted equity Non-restricted equity Total 1 Jan 2022 - 31 Dec 2022 Note Share capital Share premium account Ret earnings incl profit/loss for year Total equity Opening balance, 1 January 2022 8,015 1,404,595 -879,866 532,745 Loss for the period - - -371,814 -371,814 Transactions with shareholders Issue of new shares for the year 5,344 245,138 - 250,482 Capital acquisition cost - -26,548 - -26,548 Employee stock option program 19 - - 4,819 4,819 5,344 281,590 4,819 228,753 Closing balance, 31 December 2022 13,359 1,623,185 -1,246,860 389,684 1 Jan 2021 - 31 Dec 2021 Opening balance, 1 January2021 8,015 1,404,595 -520,676 891,935 Loss for the period - - -366,504 -366,504 Transactions with shareholders Employee stock option program 19 - - 7,314 7,314 - - 7,314 7,314 Closing balance, 31 December 2021 8,015 1,404,595 -879,866 532,745 FINANCIAL STATEMENTS 45 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 STATEMENT OF CASH FLOWS 1 Jan 2022 1 Jan 2021 SEK thousand Note -31 Dec 2022 -31 Dec 2021 Cash flow from operating activities Operating loss -381,549 -370,267 Adjustments for non-cash items 23 7,643 8,541 Interest received etc. 10 388 927 Interest paid etc. 10 -4 -3 Cash flow from operating activities before changes in working capital -373,523 -360,802 Changes in working capital Change in receivables -3,876 -21,782 Change in trade payables 3,398 23,834 Changes in other current liabilities 15,085 12,304 14,607 14 357 Cash flow from operating activities -358,915 -346,445 Investing activities Acquisition of tangible assets 26 -7,089 -383 Increase in other short-term investments 14 -31 -177,046 Decrease in other short-term investments 14 75,000 75,000 67,880 -102,429 Financing activities Issue of new shares for the year 250,482 - Capital acquisition cost -26,548 - 223,934 - Change in cash and cash equivalents -67,101 -448,873 Cash and cash equivalents at beginning of period 247,322 693,354 Exchange rate difference in cash equivalents 10 9,352 2,839 Cash and cash equivalents at end of period ) 15 189,573 247,322 ) The company’s cash and cash equivalents consist of cash and disposable balances with banks and other credit institutions. FINANCIAL STATEMENTS 46 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Notes NOTE 1 General information Cantargia AB (publ), reg. no. 556791-6019, is a biotech- nology company that develops antibody-based treatments for life-threatening diseases and has established a platform based on the protein IL1RAP, involved in a number of can- cer forms and inflammatory diseases. The lead project, the antibody nadunolimab (CAN04), is studied clinically primarily in combination with chemotherapy, focusing on pancreatic cancer, triple-negative breast cancer and non-small cell lung cancer. Positive interim data from the combination with che- motherapy indicate stronger efficacy than would be expected from chemotherapy alone. Cantargia’s second development project, the antibody CAN10, blocks signaling via IL1RAP in a different manner than nadunolimab and addresses treat- ment of serious autoimmune/inflammatory diseases, with initial focus on myocarditis and systemic sclerosis. Cantargia consists of one legal entity, Cantargia AB, corporate ID number 556791-6019. Cantargia is listed on Nasdaq Stockholm (ticker: CANTA) since September 2018. NOTE 2 Accounting policies and valuation principles Significant accounting policies applied in preparing this an- nual report are described in the following. Unless otherwise stated, these policies have been applied consistently for all the annual periods presented. This annual report was adopt- ed by the Board of Directors on 27 April 2023. 2.1 Basis of preparation of financial statements Cantargia AB has prepared its annual accounts in accor- dance with the Swedish Annual Accounts Act and Recom- mendation RFR 2 Financial Reporting for Legal Entities of the Swedish Financial Reporting Board (RFR 2). RFR 2 states that a legal entity is required to apply the Interna- tional Financial Reporting Standards (IFRS), as adopted by the EU, insofar as this is possible under the Swedish Annual Accounts Act and Pension Obligations Vesting Act and with regard to the relationship between accounting and taxation. The recommendation specifies the exemptions from and the additional disclosures that are required in relation to IFRS. The preparation of financial statements in compliance with the applied regulations requires the use of critical ac- counting estimates. Management is also required to make certain judgements in applying the company’s accounting policies. Areas which involve a high degree of judgement, are complex or where assumptions and estimates have a material impact are described in Note 4. 2.1.1 Changes to accounting policies and dis- closures Standards, amendments, and interpretations of existing stan- dards that have entered into force during the financial year. No IFRS or IFRIC interpretations that have not yet become ef- fective are expected to have a material impact on Cantargia. 2.1.2 Formats The format prescribed in the Swedish Annual Accounts Act is used for the income statement and balance sheet. The state- ment of changes in equity is presented in the format pre- scribed in IAS 1 Presentation of Financial Statements but must contain the columns indicated in the Annual Accounts Act. 2.2 Segment reporting Cantargia’s chief operating decision maker is the company’s Chief Executive Officer (CEO), as it is primarily he who is re- sponsible for the allocation of resources and evaluation of results. The CEO receives reports containing financial infor- mation for Cantargia as a whole. Cantargia has not yet com- mercialized any part of the development projects in which it is engaged and therefore is not yet generating any income. All activities of Cantargia are considered to constitute a single operating segment. 2.3 Intangible assets (i) Research and development costs Cantargia is a research-based biotech company that is en- gaged in research and development of antibody-based ther- apy for severe diseases. All expenditure directly attributable to the development and testing of identifiable and unique products which are controlled by Cantargia is accounted for as an intangible asset when the following criteria are met: • it is technically feasible to complete the product so that it will be available for use, • Cantargia intends to complete the product for use or sale, • there is reason to expect that the company will be able to use or sell the product, • it can be shown that the product will generate probable future economic benefits, • adequate technical, economic and other resources are available to complete the development of and use or sell the product, and • the costs attributable to the product during its develop- ment can be reliably measured. FINANCIAL STATEMENTS 47 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 The overall risk in ongoing development projects is high. The risk includes safety and efficacy risks that can arise in clinical studies, regulatory risks related to applications and approval for clinical studies and marketing authorization, as well as IP risks related to approval of patent applications and the maintenance of patents. All development work is therefore deemed to be research, as the work does not meet the cri- teria listed below. As of 31 December 2022 no development costs had been recognized as intangible assets in the balance sheet, as it was not considered that all of the above criteria for capitalization had been met for any of the development projects in which the company is engaged. Research expenditure is expensed as incurred. Capitalized development costs are recognized as intangible assets and amortized from the date when the asset is ready for use. (ii) Patents, licenses, and similar assets Intangible assets also include patents, licenses, and other similar rights. Acquired such assets are reported at acquisi- tion value and amortized on a straight-line basis over the expected period of utilization, which normally coincides with, for example, the patent’s validity period. 2.4 Impairment of intangible assets Intangible assets which are not ready for use (capitalized de- velopment costs) are not amortized but are tested annually for impairment. However, no capitalized development costs are currently recognized in Cantargia’s balance sheet. 2.5 Leases Cantargia is a lessee only under operating leases, of which rental of office premises is the most significant. Leases in which a significant share of the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments made during the lease term (after deducting for any incentives from the lessor) are recognized as an expense in the statement of comprehensive income on a straight-line basis over the lease term. 2.6 Foreign currency Transactions in foreign currency are translated to the func- tional currency at the exchange rates applying at the transac- tion date or the date when the items were restated. Foreign exchange gains and losses are recognized in the statement of comprehensive income in other operating expenses (foreign ex- change differences trade payables) and in net financial income/ expense (foreign exchange differences currency accounts). 2.7 Financial assets and liabilities Recognition and derecognition in the balance sheet A financial asset or financial liability is recognized in the bal- ance sheet when the company becomes a party to the con- tractual terms and conditions of the instrument. A financial as- set is derecognized in the balance sheet when the contractual right to the cash flow from the asset expires or is settled. The same applies when the risks and benefits of ownership of the asset have essentially been transferred to another party and the company no longer has control over the financial asset. A financial liability is derecognized in the balance sheet when the contractual obligation is fulfilled or extinguished. Measurement of financial instruments Cantargia applies the exemption in RFR 2 under which IFRS 9 Financial Instruments is not applied. Instead, cost is applied in accordance with the Annual Accounts Act. Financial assets are initially measured at cost including any transaction costs directly attributable to the acquisition of the asset. After initial recognition, current financial assets are measured at the lower of cost and net realizable value at the balance sheet date. Trade receivables and other receivables classified as current assets are measured individually at the amounts expected to be paid. Interest-bearing financial assets are measured at amortized cost using the effective interest method. Measurement of financial liabilities Short-term trade payables are recognized at cost. 2.8 Employee benefits Retirement benefit obligations Cantargia has both defined contribution and defined benefit pension plans. Defined contribution pension plans are post- employment benefit plans under which the company pays fixed contributions into a separate legal entity. Cantargia has no legal or constructive obligations to pay further con- tributions if this legal entity does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The contributions are recog- nized as personnel expenses when they fall due. Cantargia’s defined benefit pension plans consist of the ITP 2 plan’s defined benefit pension obligations. The ITP 2 plan’s defined benefit pension obligations for retirement and fam- ily pensions are secured through an insurance policy with Alecta. According to a statement from the Swedish Finan- cial Reporting Board, UFR 10 Recognition of the ITP 2 Plan that is funded through an insurance policy with Alecta, this is a defined benefit plan covering several employers. For the financial year 2020, Cantargia has not had access to infor- mation that would enable it to account for its proportionate share of the plan’s obligations, assets, and expenses. It has therefore not been possible to recognize the plan as a de- fined benefit plan. The ITP 2 pension plan secured through an insurance policy with Alecta is therefore accounted for as a defined contribution plan. The contribution for defined benefit retirement and family pensions is calculated indi- vidually and depends on factors such as salary, previously earned pension and expected remaining period of service. The collective funding ratio is defined as the market value of Alecta’s assets as a percentage of its commitments to poli- FINANCIAL STATEMENTS 48 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 cyholders calculated using Alecta’s actuarial methods and assumptions, which do not comply with IAS 19. The col- lective funding ratio should normally be permitted to vary within a range of 125 and 175 per cent. If Alecta’s collec- tive funding ratio were to fall below 125 per cent or exceed 175 per cent, it would be necessary to take measures that will enable the ratio return to the normal range. In case of a low funding ratio, one measure that can be taken is to raise the agreed price for new policies and the expansion of existing benefits. If the funding ratio is high, contribu- tions can be reduced. At the end of the financial year 2022, Alecta’s surplus, as defined by the collective funding ratio, was 172 per cent (2021: 172 per cent). Short-term benefits Short-term benefits are employee benefits which are payable within twelve months of the balance sheet date in the year in which the employee earned the benefit, with the exception of post-employment benefits and termination benefits. Short-term benefits include 1. salaries, social security contributions and other payroll costs, 2. paid short-term leave such as paid holiday and paid sick leave, 3. bonuses, and 4. non-monetary benefits such as health care for current em- ployees. Accounting treatment – paid short-term leave Short-term benefits for paid leave that can be saved should be accounted for as an expense and current liability when the employees have performed the services which entitle them to future paid leave. Short-term benefits for paid leave that are not saved should be recognized as an ex- pense when the leave is taken. Accounting treatment – bonus plans The expected expense for profit sharing and bonuses should be recognized only if 1. the company has a legal or constructive obligation as a result of past events, and 2. the amount of the obligation can be reliably estimated. Termination benefits Termination benefits are paid when an employee’s employ- ment has been terminated by the company before the normal time of retirement or when an employee accepts voluntary redundancy in exchange for such compensation. Cantargia recognizes termination benefits at the earliest of the follow- ing: (a) when the company can no longer withdraw the offer of such benefits; and (b) when the company recognizes re- structuring costs provided for under IAS 37 which involve the payment of severance pay. If the company has made an of- fer to encourage voluntary redundancy, termination benefits are calculated based on the number of employees that are expected to accept the offer. Benefits expiring more than 12 months after the end of the reporting period are discounted to present value. 2.9 Tax The tax on the profit for the year in the income statement con- sists of current tax and deferred tax. Current tax is calculated on the taxable profit for the period at the applicable tax rate. The actual tax expense is calculated based on the tax rules that have been enacted or substantively enacted by the bal- ance sheet date. Deferred tax liabilities are recognized for all taxable temporary differences. However, deferred tax attributable to untaxed re- serves is accounted for separately, as untaxed reserves are recognized as a separate item in the balance sheet. Deferred tax liabilities are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be wholly or partially offset. Deferred tax is calculated using tax rates (and laws) which have been adopted or announced at the balance sheet date and are expected to apply when the deferred tax asset is real- ized or the deferred tax liability is settled. As the company is not generating any profit, the deferred tax asset on tax losses arising from tax losses presented in Note 11 has not been assigned any value. 2.10 Revenue Interest income Interest income is recognized using the effective interest method. 2.11 Cash and cash equivalents and statement of cash flows The statement of cash flows is prepared using the indirect method. The reported cash flow only includes transactions involving incoming or outgoing payments. The company clas- sifies cash, available deposits with banks and other credit in- stitutions as cash and cash equivalents. 2.12 Share capital Ordinary shares are classified as equity. Transaction costs which are directly attributable to the issu- ance of new shares or options are recognized, net of tax, in equity less a deduction from the proceeds of the issue. 2.13 Earnings per share (i) Earnings before dilution Earnings per share before dilution are calculated by dividing: • Profit/loss for the year • with a weighted average number of outstanding ordinary shares during the period (ii) Earnings per share after dilution To calculate earnings per share after dilution, the amounts used in calculating earnings per share before dilution are adjusted by taking into account: FINANCIAL STATEMENTS 49 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 • the weighted average of those additional ordinary shares that would have been outstanding on the conversion of all potential ordinary shares. 2.14 Tangible Assets Tangible assets consist of furniture, work machinery and production equipment. These are reported at historical cost minus cumulative depreciation and any impairments. The historical cost includes the purchase price and any expenses directly attributable to the asset for putting it in place and making it fit for its intended purpose. Depreciation of tangible assets is posted to expenses in such a way that the value of the asset minus its estimated residual value at the end of its service life is written down on a linear basis over its expected service life, estimated at: • Machinery and other technical facilities, 3-5 years • Fixtures, tools and installations, 3-5 years Estimated service lives, residual values and depreciation methods are reviewed at least at the end of each account- ing period, and the effects of any changes in estimates are reported in advance. The reported value of a tangible asset is removed from the statement of financial position when it is scrapped or sold, or when no future economic benefits are expected from using or scrapping/disposing of the asset. The gain or loss made from scrapping or disposing of the asset is the difference be- tween any net income from the disposal and its reported val- ue, posted to the income statement in the period in which the asset is removed from the statement of financial position. 2.15 Employee stock option program The fair value of the service entitling an employee to an allotment of options under Cantargia’s employee stock option scheme is recognized as a personnel expense with a corresponding increase in equity. The total amount ex- pensed is based on the fair value of the allocated options: • including all market-related terms (e.g., target share price), • excluding any effect of service and non-market vesting conditions (e.g., profitability and that the employee re- main an employee of the company for a specified pe- riod), • including the effect of non-vesting conditions (e.g., a re- quirement that the employee save or hold the shares for a specified period). The total expense is recognized over the vesting period, which is the period during which all of the specified vesting conditions are to be satisfied. At the end of each report- ing period, the company reviews its assessments of how many shares are expected to be vested based on the non- market vesting conditions and service vesting conditions. Any deviations from the original assessments resulting from the review are recognized in the income statement with corresponding adjustments in equity. As a basis for provisions for social security contributions, the fair value of vested employee stock options is remea- sured at the end of each reporting period. Social security contributions are accounted for as personnel expenses and a corresponding provision is made in non-current or current liabilities depending on the remaining term of each scheme. NOTE 3 Financial risk management Through its activities, Cantargia is exposed to a wide range of financial risks: market risk (mainly currency risk), credit risk and liquidity risk. Cantargia’s overall risk management pol- icy focuses on the unpredictability of financial markets and strives to minimize potential adverse effects on Cantargia’s financial results. (a) Market risk (i) Currency risk Cantargia is primarily exposed to EUR and USD currency risk. Currency risks arise when future business transactions or recognized assets or liabilities are expressed in a currency that is not the functional currency of the unit. In Cantargia, these transactions mainly comprise purchases and trade payables in EUR and USD. Cantargia’s policy is to hedge 50% of the anticipated cash flow in EUR and USD. At the end of the reporting period, Cantargia had an exposure to EUR of kEUR 2,470 (396) and kUSD 131 (22) in the form of outstanding trade payables. In addition to trade payables in EUR and USD, the company has a EUR and USD currency accounts which on 31 December 2022 had a balance of kEUR 7,156 (18,523) and kUSD 2,790 (1,244). If the Swedish krona had weakened/strengthened by 10 per cent against the EUR and USD with all other variables held constant, the effect on profit/loss for the year and equity on 31 December 2022 would have been approximately SEK -22.9 million and SEK 22.9 million (-24,5 and 24.5, respectively) lower/ higher. The corresponding effect in respect of the com- pany’s EUR and USD currency accounts on 31 December 2022 would have been approximately SEK -10.4 million and SEK 10.4 million (-19.9 and 19.9 respectively) lower/higher. (ii) Cash flow interest rate risk and fair value The interest rate risk is considered to be limited as there is no borrowing and the interest-bearing investments only include low-risk funds. kSEK 237,095 (237,064) refers to invest- ments in fixed income funds, where the return is dependent on short-term interest rates. (iii) Price risk Cantargia is not exposed to any significant price risk. FINANCIAL STATEMENTS 50 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 (b) Credit risk Credit risk in Cantargia arises through deposits and invest- ments with banks and financial institutions. All bank deposits and investments are held with counterparties with low credit risk. Cantargia is not exposed to any significant credit risk, as all counterparties are large, well-known banks. (c) Liquidity risk Since starting its operations, Cantargia has been reporting an operating loss and cash flow is expected to remain mainly negative until Cantargia succeeds in generating revenue from a launched product. The company’s planned preclini- cal and clinical studies will require significant costs and the company’s development of its product candidate could prove more time- and cost-consuming than planned. Cantargia will also continue to need significant capital for research and de- velopment in order to conduct preclinical and clinical studies with nadunolimab and for its continued research and devel- opment of CAN10 and CANxx. Access to and the terms and conditions for further financing are affected by several fac- tors, such as the possibility of concluding partnership agree- ments and general access to risk capital. If Cantargia, wholly or partly, were to fail to acquire sufficient capital, or succeed in doing so only on unfavorable terms, this could have a sig- nificant negative impact on the company’s operations, finan- cial position and results. Cantargia uses rolling forecasts to ensure that the company has sufficient cash assets to meet its operational require- ments. This monitoring takes the form of reporting to the Board, whereby outcomes and forecasts are compared with the three-year business plan that is produced and approved by the Board each year. Surplus liquidity in Cantargia, in excess of what is required to manage working capital requirements, is invested in in- terest-bearing current accounts. At the balance sheet date, Cantargia had short-term investments in twelve month fixed-rate accounts of kSEK 0 (kSEK 75,000) and kSEK 237,095 (kSEK 237,064) invested in a short-term fixed in- come fund. In addition to this, Cantargia had bank deposits of kSEK 189,573 (kSEK 247,322) at the balance sheet date. The following table shows an analysis of Cantargia’s fi- nancial liabilities by remaining maturity from the balance sheet date. The amounts indicated in the table are the contractual, undiscounted cash flows. (d) Management of capital To maintain or adjust its capital structure, Cantargia can choose to return capital to the shareholders, issue new shares or sell assets to reduce its liabilities. In 2022, Cantargia’s strategy, which remained unchanged from 2021, was to secure the company’s ability to con- tinue as a going concern by running the company’s re- search projects in an optimal manner and thereby gen- erate returns for its shareholders and benefits for other stakeholders. Cantargia also aims to maintain an optimal capital structure in order to keep its capital costs down with a low to minimal risk. Cantargia is mainly engaged in research and development. Prior to the listing of the com- pany’s shares on the main list of Nasdaq Stockholm on 25 September 2018, the company’s activities were financed through a number of share offerings. Equity is therefore regarded as the company’s capital. Less than 2 months More than 2 months Total 31 December 2022 Trade payables 37,910 - 37,910 Other liabilities 1,025 - 1,025 Total 38,935 - 38,935 Less than 2 months More than 2 months Total 31 December 2021 Trade payables 34,512 - 34,512 Other liabilities 1,105 - 1,105 Total 35,617 - 35,617 FINANCIAL STATEMENTS 51 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 NOTE 4 Critical accounting estimates and judgements The preparation of financial statements and application of ac- counting policies are often based on judgements, estimates and assumptions made by management that are deemed rea- sonable at the time when they are made. The estimates and assumptions applied are based on historical experience and other factors which are deemed reasonable under current cir- cumstances. The results of these are then used to determine carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual outcomes may differ from these estimates and assessments. Estimates and assumptions are reviewed regularly. Any changes are recognized in the period in which the change is made if the change affects only that period, or in the period in which the change is made and future periods if the change affects both the current and future periods. Capitalization of development costs The most critical judgement in Cantargia’s financial report- ing refers to the date of capitalization of development costs. Based on the accounting policies that are presented in Note 2, all development activities in which Cantargia is engaged are currently classified as research, for which costs should not be capitalized. The achievement of positive results in phase III clinical trials is the earliest point at which the crite- ria for capitalization can be considered to be met. Tax losses There is no expiration date which limits the use of the com- pany’s tax losses. It is, however, uncertain at what point in time it will be possible to use these tax losses to offset tax- able profits, as the company has not yet generated any prof- its. The deferred tax asset arising from the tax loss has there- fore not been assigned any value. Changes in ownership and historical and potential future capital acquisitions may limit the amount of tax losses that can be used in future. Incentive program (employee stock option program) The company has an incentive program in the form of an employee stock option program. The accounting principles for this are described in Note 2. The cost of remuneration reported in a period depends on the original valuation made at the time of the agreement with the option holder, the number of months the participant must serve to be entitled to his options (accrual over this time), the number of op- tions expected to be earned by the participants according to the terms of the plans and a continuous revaluation of the value of the tax benefit for the participants in the plans (as a basis for allocation for social costs). The estimates that affect the cost in a period and the corresponding increase in equity are primarily input data in the valuations of the options. The models used for this purpose are the so-called Black & Scholes model and Monte Carlo simulation. Impor- tant assumptions in these valuations are set out in Note 19. In addition to the valuations, the cost is affected for a period by an estimate of the number of people who are expected to earn their options. Through mainly the history of staff turnover, the company management has a very good basis for estimating the number of participants who will com- plete the program. The Invasion of Ukraine The invasion of Ukraine has negatively affected large parts of our world, both from a humanitarian and a business per- spective. However, Cantargia does not have any operation in Russia or Ukraine, and therefore the invasion has not had any impact on our financial reporting. NOTE 5 Segment information Cantargia’s chief operating decision maker is the company’s Chief Executive Officer (CEO), as it is primarily he who is re- sponsible for the allocation of resources and the evaluation of results. The CEO receives reports containing financial in- formation for Cantargia as a whole. Cantargia has not yet commercialised any part of the development projects in which it is engaged and therefore is not yet generating any income. All activities of Cantargia are considered to consti- tute a single operating segment. FINANCIAL STATEMENTS 52 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 2022 Salaries and other benefits (of which bonuses) Retirement benefit costs Directors, CEO and other senior executives 19,891 3,375 Other employees 14,454 3,350 Total 34,345 6,725 (2,818) NOTE 7 Employee benefits, etc. Salaries and other benefits and social security contributions (for employees) 2022 2021 Salaries and other benefits ) 31,300 29,608 Social security contributions ) 5,095 2,531 Retirement benefit costs, defined contribution 6,425 5,554 Other personnel expenses 498 270 Total employee benefits 43,317 37,964 ) Whereof share-based incentives 7,314 (4,233) ) Whereof share-based incentives -2,219 (3,111) 2021 Salaries and other benefits (of which bonuses) Retirement benefit costs Directors, CEO and other senior executives 21,225 3,774 Other employees 11,427 1,781 Total 32,652 5,554 (2,641) 2022 2021 PwC Audit engagement 270 339 Audit services in addition to audit engagement 60 - Tax advisory services 30 167 Other services 127 58 Total 487 564 * Audit engagement refers to fees for the statutory audit, i.e. work that has been necessary to produce the auditor’s report. NOTE 6 Auditors’ fees and expenses Expensed audit fees for the financial year and expensed fees for other services provided by the company’s auditors are presented in the following. FINANCIAL STATEMENTS 53 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Average number of employees 2022 2021 Number of employees Of which men Number of employees Of which men Sweden 27 11 22 9 Total 27 11 22 9 Gender distribution for Directors and other senior executives 2022 2021 Number at balance sheet day Of which men Number at balance sheet day Of which men Directors 8 5 8 5 CEO and other senior executives 8 5 9 7 Total 16 10 17 12 The contract between the company and CEO is subject to six months’ notice by either party. Disclosures on benefits for the CEO, Directors and other senior executives are presented in Note 18. NOTE 8 Operating leases 2022 2021 Lease payments expensed during the financial year 2,035 1,513 The distribution of the nominal value of future minimum lease payments under non-cancellable leases is as follows: 2022 2021 Due within one year 2,130 2,039 Due after more than one year but within five years 4,494 6,563 Due after more than five years - - Total 6,624 8,602 Lease expenses refer to rent for premises and office equipment. NOTE 9 Other operating expenses 2022 2021 Foreign exchange losses, trade payable -1,899 -2,249 Total -1,899 -2,249 FINANCIAL STATEMENTS 54 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 NOTE 10 Financial income and expense 2022 2021 Interest income and similar income Interest income 388 927 Foreign exchange gains, currency accounts 9,352 2,839 Total 9,740 3,766 NOTE 11 Income tax 2022 2021 Current tax Current tax on profit for the year - - Adjustments relating to prior years - - Total current tax/income tax - - The difference between the reported tax expense and the applicable tax rate is explained by the following table. 2022 2021 Reconciliation of reported tax for the year Loss before tax -371,814 -366,504 Reported tax for the year Tax at applicable tax rate 20,6% 76,594 75,500 Tax effect of non-deductible expenses -171 -154 Tax effect of non-taxable income - - Tax effect of deductible expenses recognised directly in equity 5,469 - Tax losses for which no deferred tax asset has been recognised -81,892 -75,346 Reported tax for the year 0 0 2022 2021 Tax losses Unused tax losses for which no deferred tax asset has been recognised 1,353,719 982,734 Potential tax benefit, 20,6% 278,866 202,443 There is no expiration date which limits the use of the tax losses. It is, however, uncertain at what point in time it will be possible to use these tax losses to offset taxable profits. The deferred tax asset arising from the tax loss has therefore not been assigned any value. 2022 2021 Interest expense and similar charges Other interest expense -4 -3 Total -4 -3 FINANCIAL STATEMENTS 55 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 NOTE 12 Net foreign exchange difference Foreign exchange differences have been recognised in the statement of comprehensive income as follows: 2022 2021 Other operating expenses (Note 9) -1,899 -2,249 Interest expense and similar charges (Note 10) 9,352 2,839 Total 7,453 590 NOTE 14 Short-term investments 31 Dec 2022 31 Dec 2021 Fixed-rate account, Sparbanken Skåne - 75,000 Liquidity funds, Sparbanken Skåne 237,095 237,064 Total 237,095 312,064 Fixed-rate account, Sparbanken Skåne, 31 Dec 2021, 75 MSEK fixed 12 months, 0.30% interest. Liquidity funds, Sparbanken Skåne, low risk category 2. NOTE 15 Cash and cash equivalents Cash and cash equivalents in the statement of cash flows include the following: 31 Dec 2022 31 Dec 2021 Available bank deposits SEK 80,116 45,149 EUR 79,656 189,477 USD 29,122 11,254 GBP 445 571 CHF 34 458 NOK 200 413 Total 189,573 247,322 NOTE 13 Long-term liabilities 31 Dec 2022 31 Dec 2021 Provision for social security contributions, incentive program 24 892 Total 24 892 FINANCIAL STATEMENTS 56 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Remuneration of senior executives 2022 2021 Salaries and other short-term benefits ) 16,846 18,180 Post-employment benefits 3,375 3,774 Other long-term benefits - - Termination benefits - - Total 20,222 21,954 ) Whereof share-based incentives 2,575 (4,562) NOTE 16 Share capital Ordinary shares Number of shares (thousands) Share capital 1 January 2021 100,193 8,015 Issue of new shares - - 31 December 2021 100,193 8,015 1 January 2022 100,193 8,015 Issue of new shares 66,795 5,344 31 December 2022 166,988 13,359 At 31 December 2022, the share capital consisted of 166,987,895 shares with a quotient value of SEK 0.08 per share. Each share carries one vote. At 31 December 2021, the share capital consisted of 100,192,737 shares with a quotient value of SEK 0.08 per share. Each share carries one vote. All shares issued by the parent company are fully paid up. NOTE 17 Accrued expenses and deferred income 31 Dec 2022 31 Dec 2021 Accrued salaries and social security contributions 2,011 1,926 Project expenses 38,204 23,358 Other accrued expenses 5,598 5,135 Total 45,813 30,420 NOTE 18 Remuneration to senior executives and other related party disclosure Guidelines for executive remuneration Fees are paid to the Chairman and members of the Board of Directors in accordance with the resolution of the Annual General Meeting. A separate fee is paid for committee work. In essence, the guidelines for remuneration and other terms of employment for management, which are adopted by the shareholders’ meeting, stipulate that the company shall offer its senior executives a normal market remuneration, that resolutions on remuneration shall be prepared by a special Remuneration Committee of the Board and that the applicable criteria shall comprise the senior executive’s responsibilities, role, expertise and position. Deci- sions on remuneration of senior executives are made by the Board excluding any Directors who are in a dependent position in relation to the company and management. The guidelines must be applied to new contracts, or to changes to existing contracts that are entered into with senior executives after the adoption of the guidelines and until new or revised guidelines are adopted. Complete guidelines for 2022 and the ones proposed for 2023 are described in the Director’s report. FINANCIAL STATEMENTS 57 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Salaries and remuneration for the year Salaries, remuneration, social security contributions and retirement benefit costs have been paid in the following amounts. Please note that under the heading ”Variable remuneration” are in addition to variable remuneration, incentive programs decided by the Annual General Meeting also included (see Note 19). The outcome for AGM-decided incentive programs regarding the CEO and senior execu- tives for the year 2022 amounted to SEK 762 (925) thousand. 2022 Fee Basic salary Variable remuneration Retirement benefit cost Other benefits Share-based incentives Social sec contribu- tions) Total Magnus Persson, Chairman 620 - - - - - 195 815 Thoas Fioretos, Director 270 - - - - - 85 355 Karin Leandersson, Director 290 - - - - - 91 381 Patricia Delaite, Director 340 - - - - - 47 387 Anders Martin-Löf, Director 345 - - - - - 108 453 Flavia Borellini, Director 520 - - - - - - 520 Damian Marron, Director 330 - - - - - - 330 Magnus Nilsson, Director 330 - - - - - - 330 Göran Forsberg, CEO - 2,285 645 932 23 1,008 175 5,069 Total, Board and CEO 3,045 2,285 645 932 23 1,008 702 8,640 Other senior executives (7 persons) ) - 10,037 1,305 2,444 122 1,566 908 16,382 Total 3,045 12,321 1,950 3,375 145 2,575 1,610 25,022 ) Social security contributions for the CEO and other senior executives has been affected positivly in 2022 as the reserve for social secutiry contribution related to the employee option program has decreased under 2022, due to a falling share price. The positive effect amounts to SEK 171 thousand for the CEO and SEK 468 thousand for other senior executives. ) Contains invoiced compensation for a senior executive. FINANCIAL STATEMENTS 2021 Fee Basic salary Variable remuneration Retirement benefit cost Other benefits Share-based incentives Social sec contribu- tions ) Total Magnus Persson, Chairman 620 - - - - - 195 815 Thoas Fioretos, Director 270 - - - - - 85 355 Karin Leandersson, Director 290 - - - - - 91 381 Patricia Delaite, Director 340 - - - - - 47 387 Anders Martin-Löf, Director 345 - - - - - 108 453 Flavia Borellini, Director 520 - - - - - - 520 Damian Marron, Director 330 - - - - - - 330 Magnus Nilsson, Director 330 - - - - - - 330 Göran Forsberg, CEO - 2,236 737 927 38 1,219 -102 5,056 Total, Board and CEO 3,045 2,236 737 927 38 1,219 424 8,627 Other senior executives (8 persons) - 8,946 1,699 2,846 81 3,343 373 17,288 Total 3,045 11,182 2,436 3,774 119 4,562 797 25,915 ) Social security contributions for the CEO and other senior executives has been affected positivly in 2021 as the reserve for social secutiry contribution related to the employee option program has decreasd under 2021, due to a falling share price. The positive effect amounts to SEK 453 thousand for the CEO and SEK 1,228 thousand for other senior executives. 58 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Pensions The retirement age for the CEO is 65 years. The pension contribution for the CEO is 35 per cent of the pensionable salary. Pensionable salary refers to the fixed monthly salary multiplied by 12.2. For other employed senior executives, the retirement age is currently 65 years, in accordance with the applicable ITP Agreement. The pension contribution is calculated in accordance with Section 2 of the ITP Agreement and its contribution tariffs, which are determined by Alecta. Term of notice and severance pay The term of notice in case of termination by Cantargia shall be no more than six months for the Chief Executive Officer and no more than six months for other senior executives. The term of notice in case of termination by the employee shall be at least six months for the CEO and at least three months for other senior executives. In addition to the term of notice, severance pay may be paid to the CEO up to a maximum of twelve months’ salary and employment benefits. Directors’ fees The Directors’ fees approved at the Annual General Meeting on 23 May 2022 are SEK 550,000 to the Chairman of the Board and SEK 250,000 to each of the other Directors. For the Remuneration Committee, a fee of SEK 40,000 is paid to the commit- tee chairman and SEK 20,000 to each of the other members, for the Audit Committee SEK 95,000 is paid to the committee chairman and SEK 40,000 to each of the other members and for the Drug Development Committee SEK 230,000 is paid to the committee chairman and SEK 50,000 to each of the other members. It was also resolved that, for each physical Board meeting (up to a maximum of six meetings) that is held in Sweden and attended by the Director, a meeting fee of SEK 20,000 be paid to each Director living outside the Nordic region. The full amount of Directors’ fees has been charged to earnings in 2022. Related party disclosures Related parties comprise senior executives of the company, i.e. the Board of Directors and management team and their family members. Cantargia has entered a research agreement with Lund University, with Gunilla Westergren-Thorsson, Professor of Lung Biology. Under the agreement, Gunilla Westergren-Thorsson, who is a related party of an insider at Cantargia, will con- duct a project aimed at expanding knowledge about IL1RAP as part of her employment at Lund University. Under the agreement, Cantargia has the right to use and, if applicable, take ownership of all research results from the projects free of charge. Cantargia is co-financing a postdoctoral position as part of Lund University’s CANFASTER programme where Professor Karin Leandersson is Head of Research. Under the agreement, Karin Leandersson is conducting research aimed at expanding the knowledge about IL1RAP’s function in tumors. Cantargia owns the right to research results and IP arising from the project. Karin Leandersson is a member of Cantargia’s Board of Directors and is also an insider at Cantargia. The CANFASTER pro- gramme centres on collaborations between industry and universities and is funded in equal parts by both parties. The company considers that the above agreements have been concluded on market terms. NOTE 19 Share-based incentive programs Cantargia’s incentive program aims to create a long-term commitment to the company, create opportunities to attract and retain expertise and deliver long-term shareholder value. FINANCIAL STATEMENTS Sale of services 2022 2021 Lunds Universitet (Gunilla Westergren-Thorsson) 650 650 Lunds Universitet (Karin Leandersson) 651 0 Total 1,301 650 The following transactions have been made with related parties: 59 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Summary of total cost for incentive programs 2022 2021 Share-based remuneration -4,819 -7,314 Provision for social security contributions, incentive programs 868 2,219 Total -3,951 -5,095 Summary of provisions for social security contributions for share-based remuneration ) Long-term liabilities 2022 2021 Amount at the start of the year 892 3,110 Provisions for the year -868 -2,219 Total long-term liabilities 24 892 ) All provisions have a term of more than 1 year, which is why all provisions are long-term. Incentive scheme At the Annual General Meeting of the Company on May 23, 2022, the shareholders decided to introduce a variable sha- re-based incentive scheme for 2022 to senior executives and key employees of the Company. The scheme is based on the incentive scheme adopted at the 2019 Annual General Meeting which has been designed to promote investment in and ownership of the Company’s shares. The scheme is designed as a variable long-term remuneration scheme un- der which participants commit to use distributed variable cash remuneration to acquire shares of the Company. The sche- me is based on that or those annual bonus targets which are defined by the board for the Company and which refer to the Company’s activities, financial key performance indicators and internal processes. Target achievement will be assessed by the Company’s board of directors in connection with the adoption of the annual report for each year. When the target ac- hievement has been determined by the Company’s board of directors, the amount due to each participant in the scheme is distributed, whereupon acquisition of shares by the participants should be made as soon as possible. Participants are re- quired to use their whole remuneration under the scheme, net of tax, to acquire shares of Cantargia on the stock market. The maximum payout to each participant in the scheme for 2022 is capped at 10 per cent of his or her fixed annual salary. The total size of the scheme for 2022 is capped at SEK 2,300,000 excluding social security contributions. In case of partial target achievement, a portion of the maximum payout will be distributed. The outcome for incentive programs decided by the AGM regarding the CEO and senior executives for the year 2022 amounted to SEK 762 (925) thousand and the total outcome for all employees amounted to SEK 1,481 (1,462) thousand. Employee Stock Option Scheme 2020/2023 At the Annual General Meeting on 27 May 2020, the shareholders approved the introduction of Employee Stock Option Scheme 2020/2023. The options will be offered to employees of or consultants to the company and will be allocated to the participants free of charge. The options have a three-year vesting period (1/3 per year) from the date of allocation, provided, with the usual exceptions, that the participant remains an employee of or continues to provide services to Cantargia. Once vested, the options can be exercised during a two-year period. Each vested option gives the holder the right to purchase 1.2 shares of the company at a pre-defined price. The price per share will be determined as 150 percent of the volume weighted average price of the company’s shares traded on Nasdaq Stockholm during the ten trading days preceding the allocation date. If fully exercised, the warrants would dilute the Company’s share capital and voting rights by approximately 1.2 per cent. Employee Stock Option Scheme 2021/2024 At the Annual General Meeting on 26 May 2021, the shareholders approved the introduction of Employee Stock Option Scheme 2021/2024. The options will be offered to employees of or consultants to the company and will be allocated to the participants free of charge. The options have a three-year vesting period from the date of allocation, provided, with the usual exceptions, that the participant remains an employee of or continues to provide services to Cantargia. Once vested, the options can be exercised during a two-year period. Each vested option gives the holder the right to purchase 1.2 shares of the company at a pre-defined price. The price per share will be determined as 150 percent of the volume weighted average price of the company’s shares traded on Nasdaq Stockholm during the ten trading days preceding the allocation date. If fully exercised, the warrants would dilute the Company’s share capital and voting rights by approximately 1.9 per cent. FINANCIAL STATEMENTS 60 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Changes in existing incentive programs (number of options) 2022 2021 1 January 3,170,333 1,740,000 Granted instruments Employee stock option program 2021/2024 260,000 1,334,000 Employee stock option program 2020/2023 - 147,000 Lapsed instruments Employee stock option program 2021/2024 -251,000 -24,000 Employee stock option program 2020/2023 -110,000 -26,667 Total change -101,000 1,430,333 31 December 3,069,333 3,170,333 Number of shares granted instruments may entitle to) 2022-12-31 2021-12-31 Employee stock option program 2021/2024 1,582,800 1,310,000 Employee stock option program 2020/2023 2,100,400 1,860,333 Number of shares granted instruments may entitle to 3,683,200 3,170,333 ) Recalculation of employee stock option programs after the rights issue in 2022 means that each option entitles to 1.2 shares. In 2021, each option entitled to 1 share. Calculation of fair value of employee option programs The fair value on the allotment date was calculated using an adapted version of the Black & Scholes valuation model, which takes into consideration the exercise price, the term of the options, share price on the allotment date and expected volatility in the share price, and risk-free interest for the term of the options. Employee option Allotment/ start date Maturity date Fair value upon issue of the option program, SEK Exercise price, SEK) Volatility Number of options ) Vested 2020/2023:1 2020-06-09 2025-06-09 7.15 26.48 50% 1,583,333 96% 2020/2023:2 2020-07-10 2025-07-10 7.44 27.68 50% 60,000 94% 2020/2023:3 2021-02-04 2026-02-04 16.55 73.12 49% 80,333 88% 2020/2023:4 2021-02-24 2026-02-24 15.57 70.99 49% 26,667 96% 2021/2024:1 2021-09-17 2026-09-17 7.28 30.62 53% 1,029,000 43% 2021/2024:2 2021-11-10 2026-11-10 5.48 20.44 55% 70,000 38% 2021/2024:3 2022-02-09 2027-02-09 7.57 22.52 55% 70,000 30% 2021/2024:4 2022-08-29 2027-08-29 1.63 7.20 63% 150,000 11% ) Refers to the number of outstanding options net after deduction of revoked options. *) Recalculation of employee stock option programs after the rights issue in 2022 resulted in updated exercise prices and that each option entitles to 1.2 shares. FINANCIAL STATEMENTS 61 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 NOTE 20 Earnings per share Earnings per share are calculated by dividing the profit/loss for the year by a weighted average number of outstanding ordinary shares during the period. Cantargia has potential ordinary shares in the form of warrants. These do not have a dilutive effect for 2022 or 2021, as a conversion of warrants into ordinary shares would result in a lower loss per share. 2022 2021 Profit/loss for the period attributable to parent company shareholders -371,814 -366,504 Total -371,814 -366,504 Weighted average number of outstanding ordinary shares (thousands) 128,024 100,193 Earnings per ordinary share, SEK -2.90 -3.66 NOTE 21 Appropriation of retained earnings The Annual General Meeting is asked to decide on the appropriation of the fol- lowing earnings (SEK). Loss brought forward -875,045,855 Share premium account 1,623,184,970 Loss for the year -371,814,113 The Board of Directors proposes that the following sum be carried forward: 376,325,002 The Board of Directors proposes that no dividend be paid for the financial year 2022. NOTE 22 Events after the end of the reporting period • In January, Cantargia successfully concluded a GLP toxicity study for the CAN10 antibody. • In January, the appointment of Patrik Renblad as new CFO was announced. • In February, Cantargia announced that the TRIFOUR trial would advance to the randomized stage following promising early safety and efficacy of nadunolimab in triple-negative breast cancer. The first patient in the randomized phase was treated in March. • In April, Cantargia presented new clinical data at AACR 2023 strongly supporting nadunolimab development in pancreatic cancer. Cantargia also presented anti-metastatic effects of nadunolimab in cancer models. • In April, a phase I clinical trial application was submitted for CAN10. • In April, favorable safety was reported for a new nadunolimab combination therapy and enrollment of non- small cell lung cancer patients in the CANFOUR trial was completed. NOTE 23 Adjustments for non-cash items 2022 2021 Depreciation -3,692 -3,446 Employee option program -3,951 -5,095 Total -7,643 -8,541 FINANCIAL STATEMENTS 62 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 NOTE 24 Costs by nature of expense 2022 2021 Project costs -306,691 -304,229 Other external expenses -25,951 -22,378 Personnel expenses -43,317 -37,966 Other operating expenses -1,899 -2,249 Depreciation -3,692 -3,446 Total -381,549 -370,267 As of the year-end report 2018, operating expenses are presented based on a classification into the functions “Research and development costs, “Administrative expenses” and “Other operating expenses”. On a “by nature” basis, the sum of expenses by function is distributed as follows. NOTE 25 Agreements for cooperation Patheon Biologics B.V. (part of ThermoFischer Scientific) In May 2019, Cantargia signed an agreement with Patheon Biologics B.V. (”Patheon”) on future production of the antibody CAN04 (nadunolimab). This agreement complements the earlier agreement with Celonic AG (previous Glycotope Biotech- nology GmbH). This agreement secures Cantargia’s additional production capacity for future clinical trials. In preparation for later phases of clinical development, an increase in production capacity is part of the development plan. Patheon has manufacturing facilities in both Europe and the US, and during 2021 Patheon scaled up the process to 2,000 liters. Patheon is under the agreement entitled to compensation for ongoing work, but no part of future sales revenue for nadunolimab. Allucent (Formerly: Specialized Medical Services-oncology BV) In May 2016, Cantargia entered into a framework agreement with Allucent on the execution of clinical studies as a so- called CRO. The parties have subsequently agreed under the framework agreement that Allucent should act as CRO for the company’s first clinical phase I/IIa trial with nadunolimab. BioWa Inc. Cantargia signed a licensing agreement with BioWa Inc. (”BioWa”) in 2015. Under the agreement, Cantargia is granted a non- exclusive license to use the technology platform POTELLIGENT® for the manufacture of the drug candidate nadunolimab. For the license, Cantargia pays an annual fixed fee and step-by-step sales-based royalties. In addition, BioWa also has the right to so-called “milestone payments” when fulfilling certain clinical, regulatory, and commercial targets. PanCAN Cantargia has initiated a collaboration with Pancreatic Cancer Action Network (PanCAN) to include nadunolimab in combi- nation with chemotherapy as first-line experimental therapy in metastatic pancreatic cancer (PDAC), in the clinical phase II/III trial Precision Promise SM . The trial utilizes a Bayesian platform designed by PanCAN in collaboration with the US Food and Drug Administration (FDA) to provide a basis for marketing approval of therapies in PDAC. FINANCIAL STATEMENTS 63 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 2022 2021 Ingoing accumulated acquisition value 7,070 7,070 Investments 7,072 - Outgoing accumulated acquisition value 14,143 7,070 Ingoing accumulated depreciation -4,714 -2,357 Depreciation -2,553 -2,357 Outgoing accumulated depreciation -7,269 -4,714 Closing balance 6,874 2,356 Tangible assets Machinery and other technical facilities NOTE 26 2022 2021 Ingoing accumulated acquisition value 1,084 701 Investments 17 383 Outgoing accumulated acquisition value 1,101 1,084 Ingoing accumulated depreciation -342 -152 Depreciation -238 -190 Outgoing accumulated depreciation -580 -342 Closing balance 521 742 Fixtures, tools and installations Patent 2022 2021 Ingoing accumulated acquisition value 8,111 8,111 Investments - - Outgoing accumulated acquisition value 8,111 8,111 Ingoing accumulated depreciation -1,652 -751 Depreciation -901 -901 Outgoing accumulated depreciation -2,553 -1,652 Closing balance 5,558 6,459 Intangible assets NOTE 27 FINANCIAL STATEMENTS 64 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Signatures The annual accounts have been prepared in accordance with generally accepted accounting standards and provide a true and fair view of the company’s financial position and results. The Directors’ Report for the company gives a true and fair overview of the performance, financial position and earnings of the company, and describes significant risks and uncertainties faced by the company. The income statement and balance sheet will be presented for adoption at the Annual General Meeting on 23 May 2023. We presented our auditor´s report on 27 April 2023. Öhrlings PricewaterhouseCoopers AB Mikael Nilsson Authorised Public Accountant Magnus Persson Chairman Karin LeanderssonMagnus Nilsson Anders Martin-Löf Thoas Fioretos Patricia Delaite Lund, 27 April 2023 Damian Marron Flavia Borellini Göran Forsberg Chief Executive Officer FINANCIAL STATEMENTS 65 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Report on the annual accounts Opinions We have audited the annual accounts of Cantargia AB (publ) for the year 2022. The annual accounts of the company are included on pages 30-64 in this document. In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent com- pany and the group as of 31 December 2022 and their finan- cial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The statutory ad- ministration report is consistent with the other parts of the annual accounts. We therefore recommend that the general meeting of share- holders adopts the income statement and balance sheet for the parent company and the group. Basis for Opinions We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted audit- ing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsi- bilities section. We are independent of the parent company and the group in accordance with professional ethics for ac- countants in Sweden and have otherwise fulfilled our ethi- cal responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suf- ficient and appropriate to provide a basis for our opinions. Our audit approach Audit scope We designed our audit by determining materiality and as- sessing the risks of material misstatement in the financial statements. In particular, we considered where manage- ment made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inhe- rently uncertain. As in all of our audits, we also addres- sed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of ma- terial misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assu- rance whether the financial statements are free from ma- terial misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in ag- gregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the finan- cial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall To the general meeting of the shareholders of Cantargia AB (publ), corporate identity number 556791-6019 AUDITOR’S REPORT 66 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 AUDITOR’S REPORT group materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our au- dit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individu- ally and in aggregate on the financial statements as a whole. Key audit matters Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts as a whole, but we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the Key audit matter Research and development expenses- cut-off and completeness The expenses for the company´s research and development activities during the financial year 2022 totaled approxima- tely SEK 365 million, which corresponds to approximately 96% of the company´s total. The expenses consist of mainly personnel related expenses and external expenses for the clinical work that is being conducted. In our audit we have focused on these expenses since they are material amounts and that there is a risk regarding the completeness, the cut-off and the accuracy in the expenses. Our audit of the expenses of research and development has included, but is not limited to, the following measures: • Obtained an understanding of the company´s routi- nes, business monitoring and internal control. • Testing of internal controls for approval of payment of invoices and salaries. • Checked and performed detail testing against invoi- ces and other supporting financial documentation. • Based on samples requested and received external confirmations from suppliers of the year´s purcha- ses and size of outgoing accounts payable as per 31 December 2022. • Performed detailed testing of salaries. Analyzed costs based on our knowledge of the business and follow up of the company´s internal reports. Other Information than the annual accounts This document also contains other information than the annual accounts and is found on pages 1-29 and 69-81. The other information also consists of the Remuneration Report that we obtained prior to the date of this auditor’s report. The Board of Directors and the Managing Director are responsible for this other information. Our opinion on the annual accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information. In connection with our audit of the annual accounts, our re- sponsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. If we, based on the work performed concerning this infor- mation, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Director’s and the Managing Director The Board of Directors and the Managing Director are re- sponsible for the preparation of the annual accounts and that they give a fair presentation in accordance with the Annual Accounts Act. The Board of Directors and the Managing Di- rector are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error. In preparing the annual accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to go- ing concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realis- tic alternative but to do so. 67 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Auditor’s responsibility Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole are free from mate- rial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and gener- ally accepted auditing standards in Sweden will always de- tect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be ex- pected to influence the economic decisions of users taken on the basis of these annual accounts. A further description of our responsibility for the audit of the annual accounts is available on Revisorsinspektionen’s web- site: www.revisorsinspektionen.se/revisornsansvar. This de- scription is part of the auditor´s report. Report on other legal and regulatory re- quirements Opinions In addition to our audit of the annual accounts, we have also audited the administration of the Board of Director’s and the Managing Director of Cantargia AB (publ) for the year 2022 and the proposed appropriations of the company’s profit or loss. We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Director’s and the Managing Director be dis- charged from liability for the financial year. Basis for Opinions We conducted the audit in accordance with generally accept- ed auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Respon- sibilities section. We are independent of the parent company and the group in accordance with professional ethics for ac- countants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suf- ficient and appropriate to provide a basis for our opinions. Responsibilities of the Board of Director’s and the Managing Director The Board of Directors is responsible for the proposal for ap- propriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’ equity, liquidity and position in general. The Board of Directors is responsible for the company’s orga- nization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company´s organization is designed so that the ac- counting, management of assets and the company’s finan- cial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing adminis- tration according to the Board of Directors’ guidelines and in- structions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reas- suring manner. Auditor’s responsibility Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assur- ance whether any member of the Board of Directors or the Managing Director in any material respect: • has undertaken any action or been guilty of any omis- sion which can give rise to liability to the company, or • in any other way has acted in contravention of the Com- panies Act, the Annual Accounts Act or the Articles of Association. Our objective concerning the audit of the proposed appro- priations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Com- panies Act. A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen’s web- site: www.revisorsinspektionen.se/revisornsansvar. This de- scription is part of the auditor’s report. The auditor’s examination of the ESEF report Opinion In addition to our audit of the annual accounts, we have also examined that the Board of Directors and the Managing Di- rector have prepared the annual accounts in a format that enables uniform electronic reporting (the Esef report) pursu- ant to Chapter 16, Section 4 a of the Swedish Securities Mar- ket Act (2007:528) for Cantargia AB (publ) for the financial year 2022. AUDITOR’S REPORT 68 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Our examination and our opinion relate only to the statutory requirements. In our opinion, the Esef report has been prepared in a format that, in all material respects, enables uniform electronic re- porting. Basis for Opinion We have performed the examination in accordance with FAR’s recommendation RevR 18 Examination of the Esef report. Our responsibility under this recommendation is described in more detail in the Auditors’ responsibility sec- tion. We are independent of Cantargia AB (publ) in accor- dance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Director’s and the Managing Director The Board of Directors and the Managing Director are re- sponsible for the preparation of the Esef report in accordan- ce with the Chapter 16, Section 4(a) of the Swedish Securi- ties Market Act (2007:528), and for such internal control that the Board of Directors and the Managing Director determine is necessary to prepare the Esef report without material misstatements, whether due to fraud or error. Auditor’s responsibility Our responsibility is to obtain reasonable assurance whether the Esef report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), based on the procedures performed. RevR 18 requires us to plan and execute procedures to ac- hieve reasonable assurance that the Esef report is prepared in a format that meets these requirements. Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out according to RevR 18 and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Esef report. The audit firm applies ISQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements and ac- cordingly maintains a comprehensive system of quality con- trol, including documented policies and procedures regarding compliance with professional ethical requirements, profes- sional standards and legal and regulatory requirements. The examination involves obtaining evidence, through vari- ous procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the report, whether due to fraud or error. In carrying out this risk assessment, and in order to design procedures that are appropriate in the circumstan- ces, the auditor considers those elements of internal control that are relevant to the preparation of the Esef report by the Board of Directors and the Managing Director, but not for the purpose of expressing an opinion on the effectiveness of those internal controls. The examination also includes an evaluation of the appropriateness and reasonableness of assumptions made by the Board of Directors and the Ma- naging Director. The procedures mainly include a validation that the Esef re- port has been prepared in a valid XHTML format and a recon- ciliation of the Esef report with the audited annual accounts. Öhrlings PricewaterhouseCoopers AB, 113 97 Stockholm, was appointed auditor of Cantargia AB (publ) by the general meeting of the shareholders on the 23 May 2022 and has been the company’s auditor since the 13 January 2010. Malmö, April 27 2023 Öhrlings PricewaterhouseCoopers AB Mikael Nilsson Authorized Public Accountant AUDITOR’S REPORT CORPORATE GOVERNANCE 70 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Corporate governance report CANTARGIA AB (publ) (“Cantargia” or “the Company”) is a Swedish public limited company listed on Nasdaq Stockholm. Cantargia’s corporate governance is based on Swedish law, Nasdaq Stockholm’s rules for issuers and internal rules and regulations. The Company also applies the Swedish Corpo- rate Governance Code (“the Code”). The Code is available at www.bolagsstyrning.se. APPLICATION OF THE CODE The Code applies to all Swedish companies whose shares are listed on a regulated market in Sweden. The Company is not required to comply with all rules in the Code, as the Code it- self allows for deviations from the rules, provided that any such deviations, and the chosen solution, are described and the reasons for the deviation are explained in the corporate governance report (in accordance with the ‘comply or explain’ principle). The Company has currently not identified any de- viations from the Code. SHAREHOLDERS Cantargia’s shares have been listed for trading on Nasdaq Stock- holm since 25 September 2018 (Small Cap). At 31 December 2022, the total number of shares and voting rights in the Com- pany was 166,987,895, represented by 12,654 shareholders. For further information on the Company’s ownership structure and major shareholders, see page 70-71 of the annual report. SHAREHOLDERS’ MEETINGS In accordance with the Swedish Companies Act, the share- holders’ meeting is the Company’s highest decision-making body. At a shareholders’ meeting, the shareholders exercise their voting rights on key issues, such as the adoption of in- come statements and balance sheets, the appropriation of the Company’s earnings, release from liability for the mem- bers of the Board and the Chief Executive Officer, the elec- tion of Directors and auditors, and remuneration of Directors and auditors’ fees. Under Cantargia’s Articles of Association, notice of a shareholders’ meeting is given by advertisement in Post- och Inrikes Tidningar and through publication of the notice on the Company’s website. When notice is given, this must be advertised simultaneously in Svenska Dagbladet. Shareholders who wish to participate in the negotiations at a shareholders’ meeting must be registered in the share reg- ister maintained by Euroclear Sweden AB six business days before the meeting and register to attend the sharehold- ers’ meeting with the Company by the date indicated in the notice of the meeting. Shareholders can attend the meeting personally or by proxy and can be assisted by up to two per- sons. A shareholder has the right to vote all shares held. Each share in Cantargia entitles the holder to one vote. Sharehold- ers who wish to request that a particular issue be addressed at a shareholders’ meeting must submit a written request to the Board of Directors. NOMINATION COMMITTEE Under a resolution of the Annual General Meeting of Cantargia on 23 May 2022, the Chairman of the Board is required, prior to the Annual General Meeting 2023, to convene a Nomina- tion Committee consisting of one representative for each of the three largest shareholders of the Company as well as the Chairman of the Board. In accordance with these principles, the following Directors have been appointed: • Jan Särlvik, appointed by Fjärde AP-fonden • Mikael Wiberg, appointed by Alecta Pensionsförsäkring Ömsesidigt • Mats Larsson, appointed by Första AP-fonden • Magnus Persson, Chairman of the Board The Nomination Committee has appointed Jan Särlvik as its chairman. The Nomination Committee is required to perform the duties assigned to it under the Code and held 4 meetings prior to the Annual General Meeting 2023. The Nomination Commit- tee’s complete proposals for the 2023 AGM will be published in connection with the notice of AGM. CORPORATE GOVERNANCE 71 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Responsibilities and work of the Board Under the Companies Act, the Board of Directors is responsi- ble for the Company’s administration and organisation, which means that it is responsible for adopting goals and strate- gies, ensuring that procedures and systems for evaluating adopted goals are put in place, monitoring the Company’s results and financial position, and evaluating its operational management. Under the Code, the Chairman of the Board shall be elected by the AGM and hold a special responsibility for leading the work of the Board and ensuring that the Board operates in an organised and effective manner. The Board of Directors operates in accordance with written rules of procedure which are reviewed and adopted annually at the inaugural Board meeting. The rules of procedure regu- late Board practices, functions, and the division of responsi- bilities between the Board and CEO, and between the Board and its committees. In connection with the inaugural Board meeting after each Annual General Meeting, the Board also adopts the terms of reference for the Chief Executive Officer, which include instructions for financial reporting. The Board convenes in accordance with a schedule that is defined an- nually. In addition to these Board meetings, further meetings can be convened to address issues which cannot be deferred to the next regular meeting. In 2022, the Board convened on 15 occasions, including through 14 Teams meetings or meetings by correspondence. The Directors’ attendance is shown in the table above. The activities of the Board in 2022 were dominated by discus- sions and strategic decisions on matters relating to the Company’s product development, in particular its main proj- ect nadunolimab and the development projects CAN10 and CANxx. The Board also adopted resolutions regarding the rights issue that was completed in 2022, the business plan with financial targets, risk management, dividend policy and financial reports. Independence of Attendance Total Director´s fee 2022, TSEK Name Position Member since The Company and management Major share- holders Board meetings Audit Committee meetings Remu- neration Committee meetings Drug de- velopment Committee meetings Magnus Persson Chariman 2016 Yes Yes 15/15 - 2/2 3/3 620 Patricia Delaite Director 2017 Yes Yes 14/15 - 1/1 3/3 340 Thoas Fioretos Director 2010 Yes Yes 14/15 - 1/1 - 270 Karin Leandersson Director 2016 Yes Yes 14/15 5/5 - - 290 Anders Martin-Löf Director 2018 Yes Yes 15/15 5/5 - - 345 Flavia Borellini Director 2020 Yes Yes 12/15 - - 3/3 520 Damian Marron Director 2021 Yes Yes 13/15 - 1/1 - 330 Magnus Nilsson Director 2021 Yes Yes 12/15 5/5 - - 330 BOARD OF DIRECTORS Under Cantargia’s Articles of Association, the Board of Di- rectors shall, insofar as it is elected by the shareholders’ meeting, consist of not less than three and not more than eight Directors, with no deputies. Currently, the Company’s Board of Directors consists of eight ordinary Directors, in- cluding the Chairman, who have been elected by the share- CORPORATE GOVERNANCE holders’ meeting until the period of the end of the 2023 AGM. The composition of Cantargia’s Board of Directors is considered to meet the requirements of the Code in respect of independence from the Company and from the Compa- ny’s major shareholders. For a detailed presentation of the Directors, see page 77 of the annual report. 72 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Board committees The Board has established an Audit Committee, a Remuner- ation Committee, and a Drug Development committee. The members of the committees are appointed at the inaugural Board meeting and the committees’ activities and author- ity are regulated in the committees’ terms of reference. The matters addressed at the meetings of the committees are minuted and a report is presented at the following meeting of the Board. Audit Committee The Company’s Audit Committee consists of three members: Anders Martin-Löf (Chairman), Magnus Nilsson, and Karin Leandersson. The Audit Committee shall, without prejudice to other responsibilities and duties of the Board, monitor the Company’s financial reporting, monitor the effectiveness of the Company’s internal control, internal auditing and risk management, keep itself informed on the audit of the an- nual accounts and consolidated financial statements, and on the conclusions presented in the quality control report of the Swedish Inspectorate of Auditors, assess and moni- tor the impartiality and independence of the auditor, paying particular attention to whether the auditor provides other services than auditing to the Company, and assist in drafting proposed resolutions on the choice of auditors for adoption by the shareholders’ meeting. Remuneration Committee The Company’s Remuneration Committee consists of three members: Damian Marron (Chairman), Magnus Persson and Thoas Fioretos. The Remuneration Committee is tasked with preparing proposals for remuneration principles, and remu- neration and other terms of employment for the CEO and other senior executives. Drug development Committee The Board has established a Drug Development Committee consisting of three members: Flavia Borellini (chairman), Magnus Persson and Patricia Delaite. The Drug Develop- ment Committee shall act as an advisor and discussion partner for the company management in scientific and strategic issues concerning the development of the com- pany’s project portfolio. Remuneration Fees and other remuneration of Directors, including the Chairman, are determined by the shareholders’ meeting. At the Annual General Meeting on 23 May 2022, it was resolved that Directors’ fees of SEK 550,000 to the Chairman of the Board and SEK 250,000 to each of the other ordinary Direc- tors be paid for the period until the end of the Annual General Meeting 2023. It was also resolved that the Chairman of the Audit Committee should receive SEK 95,000 and the other members of the Audit Committee SEK 40,000 each, and that the Chairman of the Remuneration Committee receive SEK 40,000 and the other members of the Remuneration Committee SEK 20,000 each and that the Chairman of the Drug development Committee should receive SEK 230, 000 and the other members of the Drug development Commit- tee SEK 50 000 each. It was further resolved that, for each physical Board meeting (up to a maximum of six meetings) that is held in Sweden and attended by the Director, a meet- ing fee of SEK 20,000 be paid to each Director living outside the Nordic region. Evaluation The Chairman of the Board ensures that an annual evalua- tion of the work of the Board is carried out in which the Direc- tors are given an opportunity to present their views on Board practices, Board meeting materials, their own and other Di- rectors’ contributions as well as the scope of the duties. The results of the evaluation have been discussed by the Board and presented by the Chairman of the Board to the Nomina- tion Committee. It is considered that the combined expertise of the Board is appropriate for the Company’s activities and goals. The Board is considered to function very well, with all members making constructive contributions to discussions on strategy as well as the governance of the Company. The dialogue between the Board and management is also con- sidered to be good. The Board continually evaluates the work of the Chief Executive Officer by monitoring the Company’s progress towards the defined goals. CHIEF EXECUTIVE OFFICER AND MANAGEMENT The Chief Executive Officer reports to the Board of Direc- tors and is responsible for the Company’s day-to-day man- agement and the operations of the group. The division of responsibilities between the Board and CEO is defined in the rules of procedure for the Board and the terms of reference for the CEO. Under the instructions for financial reporting, the CEO is responsible for financial reporting in the Company and is therefore required to ensure that the Board receives suf- ficient information to enable it continuously to evaluate the Company’s financial position. The CEO shall keep the Board continuously informed about the development of the Company’s business, its sales perfor- mance, earnings and financial position, its liquidity and credit situation, significant business events and any other event, and any other event, circumstance or relationship that may be of material importance to the Company’s shareholders. To assist him in his activities, the CEO has appointed a management team. For a more detailed presentation of the CEO and other members of the management team, see page 79-80. Remuneration At the Annual General Meeting on 27 May 2020, it was re- solved to adopt guidelines for remuneration of the CEO and other senior executives in accordance with what is stated on page 35 of the annual report. For information on the remuneration paid to the CEO and other senior executives in the financial year 2022, see Note 18 on page 56 of the annual report. CORPORATE GOVERNANCE 73 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 AUDITOR The auditor is tasked with examining the Company’s annual report and accounts as well as the Board of Directors’ and CEO’s management of the Company. Under the Company’s Articles of Association, the Company may have up to two au- ditors with or without deputy auditors. The Company’s au- ditors are Öhrlings PricewaterhouseCoopers AB with Mikael Nilsson as auditor-in-charge. For information on the remuneration paid to the auditor in the financial year 2022, see Note 6 on page 52 of the annual report. AUTHORISATION TO ISSUE SHARES At the Annual General Meeting of the Company on 23 May 2022, it was resolved to authorise the Board, during the pe- riod until the next AGM, on or one or several occasions and with or without pre-emption rights for existing shareholders, to decide to issue new shares, provided that such issuance not comprise more than ten per cent of the number of out- standing shares of the Company on the day of the AGM. It shall also be possible to stipulate that such new shares be issued for non-cash consideration or paid for by means of set-off or subject to other terms and conditions. SHARE-BASED INCENTIVE SCHEMES At the end of 2022, Cantargia had three incentive schemes for senior executives and key personnel of the Company. The incentive schemes have been introduced to provide longer- term incentives for the Company’s management and em- ployees and to promote investments in and ownership of the Company’s shares. Incentive scheme At the Annual General Meeting of the Company on 23 May 2022, it was decided to introduce a variable share-based in- centive scheme for 2022, aimed at senior executives and key personnel of the Company, based on the incentive scheme adopted at the 2020 AGM. The scheme is designed to offer the participants variable long-term remuneration in the form of a group bonus that must be used to acquire shares of the Company. The scheme is based on that or those annual bonus targets which are defined by the Board for the Company, and which refer to the Company’s activities, financial key performance indica- tors and internal processes. Target achievement will be assessed by the Company’s Board of Directors in connec- tion with the adoption of the annual report for each year. When the target achievement has been determined by the Board of Directors, the amount due to each participant in the scheme will be paid out, and the participant will then be required to acquire shares as soon as possible. Participants must use the full amount of remuneration received under the scheme to acquire shares of the Company in the stock market. It is the intention of the Board that the scheme be a recurring annual scheme. For further information about the scheme, see Note 19 on page 58 of the annual report. Employee Stock Option Scheme 2020/2023 At the Annual General Meeting on 27 May 2020, it was resolved to introduce Employee Stock Option Scheme 2020/2023 for employees of the Company, comprising not more than 1,900,000 employee stock options. The purpose of the scheme is to enable the Company to retain skilled per- sonnel through a long-term incentive scheme. The employee stock options will be offered to employees of or consultants to the Company and will be granted to the participants free of charge. The employee stock options have a three-year vesting period (1/3 per year) calculated from the grant date, provided, with the usual exceptions, that the participant is still employed by or otherwise engaged in the Company and that the participant has not terminated his or her employment or engagement in the Company as at the vesting date. Once vested, the employee stock options can be exercised over a two-year period. Each vested employee stock option entitles the holder the right to purchase one share of the Company at a predeter- mined price. The price per share is determined as 150 per cent of the weighted average price of the Company’s shares traded on Nasdaq Stockholm during the ten trading days preceding the grant date. For further information about the scheme, see Note 19 on page 58 of the annual report. Employee Stock Option Scheme 2021/2024 At the Annual General Meeting on 26 May 2021, the share- holders approved the introduction of Employee Stock Option Scheme 2021/2024, compromising not more than 3,000,000 employee stock options. The purpose of the scheme is to en- able the company to retain skilled personnel through a long- term incentive scheme. The options will be offered to employees of or consultants to the company and will be allocated to the participants free of charge. The options have a three-year vesting period from the date of allocation, provided, with the usual exceptions, that the participant remains an employee of or continues to provide services to Cantargia. Once vested, the options can be exercised during a two-year period. Each vested option gives the holder the right to purchase one share of the company at a pre-defined price. The price per share will be determined as 150 percent of the volume weighted average price of the company’s shares traded on Nasdaq Stockholm during the ten trading days preceding the allocation date. For further information about the scheme, see Note 19 on page 58 of the annual report. CORPORATE GOVERNANCE 74 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Dilution To enable the Company to deliver shares to participants in Employee Stock Option Scheme 2020/2023 as well as 2021/2024 in a simple and cost-effective manner, the AGM resolved to approve a directed issue of 4,900,000 warrants to the Company (i.e. Cantargia AB (publ)). If fully exercised, the warrants would dilute the Company’s share capital and voting rights by approximately 3.1 per cent. INTERNAL CONTROL IN RESPECT OF FINANCIAL REPORTING The Board of Directors is responsible for ensuring that Cantargia has good internal control and adequate, for- malised procedures for ensuring compliance with adopted principles for financial reporting. The general purpose of the internal control system is to obtain reasonable assurance that the Company’s operational strategies and goals are monitored and that the owners’ investments are protected. The internal control system should also ensure with a rea- sonable degree of certainty that the Company’s external financial reports are reliable and correct and have been pre- pared in accordance with generally accepted accounting poli- cies, applicable laws, and regulations as well as other require- ments applying to companies listed on Nasdaq Stockholm. The Company monitors, follows and manages any risks in accordance with a risk management and corporate gov- ernance policy that is evaluated on an ongoing basis and adopted annually by the Board of Directors. Cantargia has decided to adopt the COSO 1 framework, which is the most widely accepted internal control framework for financial re- porting. The framework consists of five components: control environment, risk assessment, control activities, information and communication, and monitoring. Control environment and risk assessment The Board of Directors has adopted several policies, govern- ing documents, and instructions with the aim of creating and maintaining a functioning control environment. This is achieved mainly through the rules of procedure for the Board of Directors, the terms of reference for the Chief Executive Officer, the rules of procedure for the Audit Committee, the instructions for financial reporting, the Company’s account- ing manual and the authorisation manual. The Company’s policies and governing documents are evaluated on an on- going basis and adopted annually by the Board of Directors. The Board has also established an Audit Committee, which, among other duties, is tasked with monitoring the Compa- ny’s financial position and the effectiveness of the internal control as well as internal auditing and risk management. Responsibility for the day-to-day internal control activities in respect of financial reporting has been delegated to the Company’s Chief Executive Officer. Cantargia’s Board of Directors is also required to carry out an annual risk assessment in respect of strategic, operational, legal, and financial risks to identify potential issues and as- sess the Company’s risk exposure. The Audit Committee is responsible for evaluating the Company’s risk situation on an ongoing basis and shall assist the Board by submitting pro- posals for the management of the Company’s financial risk exposure and risk management. Information and communication, and control activities The Company’s information and communication paths are aimed at ensuring the accuracy of financial reporting and enabling reporting and feedback from the business to the Board and management, for example be ensuring that gov- erning documents in the form of internal policies, guide- lines and instructions for financial reporting are made avail- able to and are known by the employees concerned. With regard to external communications, guidelines have been prepared to ensure that the Company meets the relevant disclosure requirements. The CEO is responsible for exter- nal communications. The Board is responsible for control and monitoring of the CEO’s risk management activities. This is done through re- views and monitoring of the Company’s governing docu- ments related to risk management and, for example, through reviews and assessments by the Board of adopt- ed decisions. The effectiveness of the control activities is evaluated annually, and the results of these evaluations are reported to the Board and Audit Committee. Monitoring The CEO ensures that the Board receives regular reports on the results of the risk assessment, identified financial risks and processes, and the development of the Company’s business. The Board also follows up the assessment of the internal control system, partly through contacts with the Company’s auditor. 1 Committee of Sponsoring Organizations of the Threadway Commission. CORPORATE GOVERNANCE 75 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Auditor’s report on the Corporate Governance Statement To the general meeting of the shareholders in Cantargia AB (publ), corporate identity number 556791-6019 Engagement and responsibility It is the board of directors who is responsible for the corporate governance statement for the year 2022 (the financial year) on pages 69-74 and that it has been prepared in accordance with the Annual Accounts Act. The scope of the audit Our examination has been conducted in accordance with FAR’s auditing standard RevR 16 The auditor’s examination of the corporate governance statement. This means that our examination of the corporate governance statement is dif- ferent and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions. Opinions A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second para- graph points 2-6 the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the annual accounts and the consolidated accounts and are in accordance with the Annual Accounts Act. Malmö 27 april 2023 Öhrlings PricewaterhouseCoopers AB Mikael Nilsson Authorized Public Accountant CORPORATE GOVERNANCE 76 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 77 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Board of Directors, senior executives, and auditors Magnus Persson Chairman of the Board since 2016, born 1960. Member of the Remu- neration Committee and the Drug Development Committee. Number of shares: 190,154 Magnus Persson is MD and associate professor in physiology at the Karolinska Institute in Stockholm. Persson has extensive experience of financing within the fields of medicine, life sciences and biotech. Persson has previously led develop- ment teams in clinical phase II and phase III programmes in the pharmaceutical in- dustry and has founded and led private as well as public biotech and medtech com- panies, either as Chairman or Member of the Board, in Europe and the US. Persson has also been involved in multiple IPOs. Persson is Chairman of the Board of Attgeno AB, Initiator Pharma AS, Eir Ventures Partners AB and associated companies and Board Member of Avalo Inc. Independent in relation to the Company and its management and the Company’s major shareholders. Karin Leandersson Board member since 2016, born 1972. Member of the Audit Committee. Number of shares: 2,500 Karin Leandersson is professor in Tumour Immunology at the Medical Faculty of Lund University. Leandersson has gained a wide range of cancer research ex- perience in the fields of tumour immunology and tumour inflammation in solid tumours, mainly in breast cancer. Leandersson has also authored around 50 scientific publications in international journals. Independent in relation to the Company and its management and the Company’s major shareholders. Thoas Fioretos Board member since 2010, born 1962. Member of the Remuneration Committee. Number of shares: 575,600 Thoas Fioretos is professor and physician at the Department of Clinical Genetics at Lund University. Fioretos research focuses on molecular and functional studies of genetic changes in leukaemia and how such changes can be used for diagnostic and therapeutic purposes. Fioretos has authored over 140 scientific publications and is one of the founders of Cantargia AB and the bio-IT company Qlucore AB. Fioretos is Board Member in Qlucore AB and alternate Board Member in Neodos AB. Independent in relation to the Company and its management and the Company’s major shareholders. CORPORATE GOVERNANCE BOARD OF DIRECTORS Under Cantargia’s Articles of Association, the Board of Directors shall consist of at least three and no more than eight Directors. At the Annual General Meeting on 23 May, 2022, it was resolved that the Board should consist of eight ordinary Directors with no deputies. The board members are elected for the period until the end of the 2022 Annual General Meeting. 78 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Patricia Delaite Board member since 2017, born 1963. Member of the Drug Development Committee. Number of shares: 0 Patricia Delaite holds an MD/MBA from University of Geneva and Lausanne. Delaite has had leading positions at Nouscom, AMAL Therapeutics, Incytes In- ternational Biosciences, ARIAD Pharmaceuticals, Novartis, and Eli Lilly. Delaite also has 10 years of experience in clinical management from the University Hospital in Geneva. Independent in relation to the Company and its management and the Company’s major shareholders. Flavia Borellini Board Member since 2020, born 1959. Member of the Drug Development Committee. Number of shares: 0 Flavia Borellini holds a PhD in Pharmaceutical Chemistry and Technology from the University of Modena in Italy. Borellini has broad experience in oncology and other therapeutic areas and has held senior positions at Astra Zeneca (Global Franchise Head, Hematology and Vice President, Global Product and Portfolio Strategy), Acerta Pharma (CEO), ONYX Pharmaceuticals (Vice President, Pro- gram Leadership), and Roche/Genetech (Lifecycle Leader). Borellini serves as a Member of the Board of Directors of Kartos Therapeutics, Revolution Medicines and Viracta. Independent in relation to the Company and its management and the Company’s major shareholders. Anders Martin-Löf Board member since 2018, born 1971. Chairman of the Audit Committee. Number of shares: 50,000 Anders Martin-Löf is the incoming CFO of BioArctic AB and Board Member of Affibody Medical AB. He has extensive experience as CFO for companies listed on the Stockholm stock exchange and has served as CFO for A3P Biomedical AB, Oncopeptides AB, Wilson Therapeutics AB and RaySearch Laboratories AB. Martin-Löf has also held the position of Head of Investor Relations and different positions within business development at Swedish Orphan Biovitrum. Martin-Löf holds an MSc in Engineering Physics from the Royal Institute of Technology and a BSc in Business Administration and Economics from Stockholm University. Independent in relation to the Company and its management and the Company’s major shareholders. Magnus Nilsson Board member since 2021, born 1956. Member of the Audit Committee. Number of shares: 100,000 Magnus Nilsson is founder, previously President and CEO, and since 2020 Se- nior Advisor at XVIVO Perfusion. Nilsson has also been President and CEO of Vitrolife and held prior to that various positions as Project Manager for drug development projects at Pharmacia & Upjohn, Pharmacia, and Karo Bio. Nilsson serves as a Member of the Board of Directors of Corline Biomedical. Nilsson is Doctor of Medicine (Med Dr Sc) from Uppsala University and has published over twenty scientific articles. Independent in relation to the Company and its management and the Company’s major shareholders. CORPORATE GOVERNANCE 79 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Damian Marron Board member since 2021, born 1962. Chairman of the Remuneration Committee. Number of shares: 0 Damian Marron has extensive experience as a Board Member and CEO within the life science industry, with a successful track record of leadership and value creation in public and private biotechnology companies. Marron has held posi- tions as CEO and Executive Vice President in several biotech companies. He is currently Chairman of the Board of Targovax ASA, Imophoron Ltd, CytoseeK Ltd and Board Member of Resolys Bio, and Head of Biopharma at Treehill Partners. Marron holds a BSc degree in Pharmacology from the University of Liverpool. Independent in relation to the Company and its management and the Company’s major shareholders. MANAGEMENT Lars Thorsson VP Clinical Development employed since 2015, born 1961. Holdings: 131,036 shares and 205,000 options Lars Thorsson graduated with a PhD in clinical pharmacology in 1998 and has extensive experience from the pharmaceutical industry, including leading roles in clinical studies and project management in a large number of development phases at AstraZeneca and Novo Nordisk A/S. Thorsson has been responsible for evalua- tion and documentation of new substances and has the experience of regulatory activities and interactions with health authorities. Liselotte Larsson COO employed since 2014, born 1963. Holdings: 58,166 shares and 205,000 options Liselotte Larsson has a PhD in biotechnology and has over 25 years of experience in various management positions in pharmaceutical and biotechnology com- panies including BioGaia Fermentation, Novozymes Biopharma and Camurus. Larsson’s main fields of expertise are business development, marketing & sales/out licensing, ISO certification, good manufacturing practice (GMP) and overall project management. Göran Forsberg CEO employed since 2014, born 1963. Holdings: 246,412 shares and 575,000 options Göran Forsberg has a PhD in biochemistry and is associate professor and au- thor of over 40 scientific publications. For over 30 years he has had leading positions in research and development, business development and investor relations at pharmaceutical and biotechnology companies, including KabiGen, Pharmacia, Active Biotech and the University of Adelaide, Australia. Forsberg has extensive experience in leading drug development and clinical trials, with a special focus on oncology. Forsberg is a board member of Guard Therapeutics International AB (publ). CORPORATE GOVERNANCE 80 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 David Liberg VP Research employed since 2015, born 1969. Holdings: 15,044 shares and 205,000 options David Liberg graduated with a PhD in 2001 and has over twenty years of re- search experience within immunology and tumor biology. Liberg has worked within the pharmaceutical industry for the last fifteen years, with responsi- bility for early research projects and activities in tumor immunology. He has extensive experience of pre-clinical phase cancer projects. His most recent position was at Active Biotech AB, where he worked as Project Manager Drug Development as well as Head of Cell Biology and Biochemistry. Liberg has also carried out research at Imperial College in the UK and at Lund University. Bengt Jöndell CFO employed since 2017, born 1960. Holdings: 196,499 shares and 205,000 options Bengt Jöndell has a BSc in Business Administration and a MSc in Chemical Engineering. Jöndell has extensive experience in various executive financial functions such as CFO and Administrative Manager at BTJ Group AB, Senior Financial Advisor for BoneSupport, CFO/Administrative Manager at Inpac, Business Controller at Pharmacia & Upjohn Consumer Healthcare, Pharmacia, Pharmacia Consumer Pharma and Pharmacia Nicorette. Jöndell’s most recent position was CFO for Enzymatica AB. Nedjad Losic VP Biometrics employed since 2021, born 1969. Holdings: 17,250 shares and 100,000 options Nedjad Losic holds an MSc in Mathematics and a diploma in Management of Medi- cal Product Innovation (SIMI). Losic has over 25 years of experience in providing biostatistics expertise in clinical drug development, mostly in antibody develop- ment and oncology. Losic has been directly involved in the planning and obtaining market approvals for several biological drugs at Genmab and Y-mAbs Therapeu- tics. He has previously held managerial positions and worked for Ferring, Spadille, Genmab and Y-mAbs. Domenique Thersago CFO employed since 2022, born 1962. Holdings: 0 shares and 150,000 options Dominique Tersago is MD and has over 25 years of experience in the bio- tech/pharmaceutical industry in early and late-stage clinical development, regulatory strategy and interactions. In biotech as of 2011, Tersago in the position of Chief Medical Officer has led the clinical development of various biologics and supported the transition and growth of the companies Ablynx, Bioncotech (now Highlight Therapeutics) and Exevir. Her experience covers the therapeutic areas of immune oncology, virology, auto-immune disease, and hematology. Pharmaceutical industry positions were with Bristol-Myers Squibb and Janssen Pharmaceutical. CORPORATE GOVERNANCE 81 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 Other disclosures on Directors and senior executives There are no family connections among any Directors or senior executives. There are no conflicts of interest or po- tential conflicts of interest between the Directors’ and senior executives’ undertakings to the Company and their private interests and/or other undertakings. As shown above, some Directors and senior executives have financial interests in the Company in the form of shareholdings. None of the Directors or senior executives has in the last five years par- ticipated or been involved in any bankruptcy, liquidation or administration proceedings in the capacity of Director or se- nior executive of a company. None of the Directors or senior executives has in the last five years been accused of and/or been subject to any sanction from a public authority, profes- sional association or similar body, been disqualified from en- gaging in business activities or otherwise been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of or from acting in the management or conduct of the affairs any company. There exist no special agreements on post-employment benefits for the current Directors or senior executives. All Directors and senior executives can be contacted at the Company’s address: Scheelevägen 27, SE-223 63 Lund, Sweden. Auditors At the Annual General Meeting on 23 May 2022, Öhrlings PricewaterhouseCoopers AB were re-ap- pointed as auditors for the Company for the period until the end of the Annual General Meeting 2023. Mi- kael Nilsson (born 1981) is auditor-in-charge. He is an Authorised Public Accountant and a member of FAR, the professional institute for accountants in Sweden. 82 CANTARGIA AB (PUBL) 556791-6019 • ANNUAL REPORT 2022 ANNUAL GENERAL MEETING AND FINANCIAL CALENDAR Cantargia’s Annual General Meeting will be held on Tuesday 23 May 2023. Shareholders who wish to participate in the Annual General Meeting must be registered in the share register maintained by Euroclear Sweden AB as of Friday 12 May 2023 and register with the company no later than Tues- day 16 May 2023, in writing to Cantargia AB, Scheelevägen 27, SE-223 63 Lund. Shareholders can also register by telephone on +46 (0)46-27 56 260 or by e-mail at info@cantargia.com. Shareholders whose shareholding is registered with a nominee must, to be entitled to participate in the AGM, ensure that their shareholding is temporarily re-registered in their own name with Euroclear Sweden AB so that the shareholder is registered in the share register as of 12 May 2023. Such registration may be temporary (registration of voting rights) and must be requested from the nominee in accordance with the nominee’s procedures by the deadline specified by the nominee. Voting rights registered no later than the second business day after 12 May 2023 will be entered in the share register. 23 May 2023 Interim report January – March 2023 23 May 2023 Annual General Meeting 22 Aug 2023 Half-year report April – June 2023 10 Nov 2023 Interim report July – September 2023 22 Feb 2024 Year-end report for 2024 CORPORATE GOVERNANCE www.cantargia.com