Corporate Governance

As an AIM Company, Destiny Pharma has adopted as far as possible the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”). The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term shareholder value, encompassing and efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust.

The sections below set out the ways in which Destiny Pharma applies the ten principles of the QCA Code in support of its medium to long-term success.

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

The strategy and business operations of Destiny Pharma are set out in the Strategic Report in the 2017 Annual Report.

Destiny Pharma’s strategy and business model are developed by the Chief Executive Officer and the executive team, and approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.

Destiny Pharma’s overall strategic objective is the discovery, development and commercialisation of new anti-infectives to improve outcomes for patients and provide more effective medical care.

Destiny Pharma has a platform of anti-infective drug candidates, from which it has selected a lead candidate, exeporfinium chloride (XF-73), and a lead programme, the prevention of post-surgical staphylococcal infections. It also has earlier stage programmes and research programmes. Destiny Pharma deploys its financial and other resources towards progressing all programmes, as appropriate, towards clinical validation. The Directors believe that this approach will deliver significant long-term value for shareholders if the resulting clinical trial data are compelling.

At an appropriate stage of development of a clinical programme, Destiny Pharma may seek to realise monetary value via licensing or partnering deals with pharmaceutical or biotechnology companies. Alternatively, if resources are able to be secured, Destiny Pharma may choose to take a programme through late-stage clinical development to approval in order to retain the full value of the programme.

Although Destiny Pharma has multiple drug candidates and programmes, these come from a single technology platform. The Board believes that the therapeutic area in which it operates is substantially less risky than other areas, due to highly predictable transferability of in vitro efficacy data to the clinic, and that the risk of dependence on a single technology platform is therefore partially mitigated. However, it will consider in-licensing new technologies or assets to further mitigate this risk.

Destiny Pharma operates in an inherently high risk and heavily regulated sector and this is reflected in the principal risks and uncertainties set out in the 2017 Annual Report and Admission Document.

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

2. Seek to understand and meet shareholder needs and expectations

Destiny Pharma seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate its strategy and progress and to understand the needs and expectations of shareholders.

Members of the executive team meet regularly with investors and analysts to provide them with updates on the business and to obtain feedback regarding the market’s expectations of Destiny Pharma.

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

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

Destiny Pharma is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include Destiny Pharma’s shareholders, employees, partners, suppliers, regulatory authorities, and the volunteers and patients involved in Destiny Pharma’s clinical development activities.

Destiny Pharma’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of Destiny Pharma for the benefit of its members as a whole. Destiny Pharma endeavours to take account of feedback received from stakeholders, with the assistance of the Company’s advisers, making amendments to working arrangements and operational plans where appropriate and where such amendments are consistent with Destiny Pharma’s longer term strategy.

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

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

A summary of the principal risks and uncertainties facing Destiny Pharma, as well as mitigating actions, are set out in Destiny Pharma’s Annual Report.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. Destiny Pharma’s results, compared with the budget, are reported to the Board on a monthly basis.

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

The executive team meets weekly to consider new risks and opportunities presented to Destiny Pharma, making any recommendations to the Audit Committee, which may escalate these to the Board if appropriate.

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

The Board consists of eight directors, five of whom are non-executive directors, of whom all are considered by the Board to exercise independent judgement.

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

Dr Huaizheng Peng is an appointee of CMS, a shareholder and strategic partner of the Company, and therefore he cannot be regarded as an independent director.

Of the other non-executive directors, Sir Nigel Rudd, Joe Eagle and Peter Morgan hold shares and options in the Company, and Joe Eagle and Peter Morgan have served on the Board for in excess of 9 years. Notwithstanding these factors, the Board considers that, due to their personal qualities, each of Sir Nigel Rudd, Joe Eagle and Peter Morgan exercises independent judgement and is independent.

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

Further details on each director can be found here.

The Board is responsible to the shareholders for the proper management of Destiny Pharma and meets at least six times a year to set the overall direction and strategy of Destiny Pharma, to review scientific, operational and financial performance and to advise on management appointments. All key operational and investment decisions are subject to Board approval.

Non-executive Directors receive their fees in the form of a basic cash fee. Certain of the Non-executive Directors have share options in Destiny Pharma from their historic involvement with the Company. The options concerned are not deemed to be significant, either for any individual Non-executive Director or in aggregate. The current remuneration structure for the Board’s Non-executive Directors is deemed to be proportionate and was subject to a market benchmarking process prior to its implementation.

The Company is committed to a culture of equal opportunities for all employees regardless of gender. All current directors are male. In any future Board recruitment, efforts will be made to improve the diversity of the Board.

A record of the attendance of each eligible Director at meetings of the Board and its committees will be include in the 2018 Annual Report.

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

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

The biographies of each of the Directors are set out here.

The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of Destiny Pharma.

The Chief Executive Officer, in conjunction with the executive team, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to Destiny Pharma, its operational environment and to the Directors’ responsibilities as members of the Board. During the course of the year, Directors received updates from the Company Secretary and various external advisers on a number of corporate governance matters.

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

The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.

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

The Board has a process for self-evaluation of its performance, that of its committees and individual Directors, including the Chairman. This process is conducted informally on an ongoing basis. It is intended that the Board will create a more formal process which will focus more closely on objectives and targets for improving performance. Details of the process will be set out in the 2018 Annual Report.

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

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

The Board seeks to maintain the highest standards of integrity and probity in the conduct of Destiny Pharma’s operations. These values are enshrined in the written policies and working practices adopted by all employees in Destiny Pharma. An open culture is encouraged within Destiny Pharma, with regular communications to staff regarding progress and staff feedback regularly sought. The executive team regularly monitors Destiny Pharma’s cultural environment and seeks to address any concerns than may arise, escalating these to Board level as necessary.

Destiny Pharma is committed to providing a safe environment for its staff and all other parties for which Destiny Pharma has a legal or moral responsibility in this area. Destiny Pharma is a virtual company, and its employees are office based, rather than being involved directly in any laboratory or clinical work, which is outsourced to contractors. Criteria for selection of such contractors are set out in the quality and operating procedures that govern the activities of the Company.

The Company has an Anti-Bribery and Corruption policy, as well as a Share Dealing Code.

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

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

There is a clear separation of the roles of Chief Executive Officer and Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-executive Directors are properly briefed on matters. The Chairman has overall responsibility for corporate governance matters in Destiny Pharma and chairs the Nominations Committee. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of Destiny Pharma. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.

The Board has established an Audit Committee, Remuneration Committee and Nominations Committee with formally delegated duties and responsibilities. Peter Morgan chairs the Audit Committee, Joe Eagle chairs the Remuneration Committee and Sir Nigel Rudd chairs the Nominations Committee.

The Audit Committee, which meets at least twice a year, is responsible for keeping under review the scope and results of the audit, its cost effectiveness and the independence of the auditor. Due to the size of the company there is currently no internal audit function, although the Audit Committee has oversight responsibility for public reporting, overall good governance and the company’s internal controls.

The Remuneration Committee, which meets at least twice a year, is responsible for considering the remuneration packages for Executive Directors and the bonus and share option strategy for the Company and making recommendations as appropriate. The Remuneration Committee works within the framework of an approved compensation policy approved by the Board.

The Remuneration Committee is also responsible for reviewing the performance of the Executive Directors and ensuring that they are fairly and responsibly rewarded for their individual contributions to the company’s overall performance. The Committee’s scope extends to the remuneration of Directors including bonus and share options.

The Directors’ Remuneration Report is set out in the Annual Report.

The Nominations Committee, which meets at least twice a year, is responsible for considering the composition and efficacy of the Board as a whole and for making recommendations as appropriate.

The terms of reference of the above Committees are available here.

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

Destiny Pharma places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning Destiny Pharma’s activities are clear, fair and accurate. Destiny Pharma’s website is regularly updated.

Destiny Pharma’s financial reports can be found here.

Notices of General Meetings of the Company can be found here.

The results of voting on all resolutions in future general meetings will be posted to Destiny Pharma’s website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent shareholders.

 

Last updated: 27 September 2018