Risk factors

All business activities and all ownership of shares is associated with risks. Below is an account of a number of risk factors that may affect the Company's future development. These are not ranked and do not either claim to be comprehensive. Risk factors that have not yet been identified, or have not been assessed as significant, may still come to have an impact on the Company's future development. Any potential investor should make his/her own overall assessment of all the information in this Company Description as well a general assessment of the business environment.

Risks related to the business and the industry

Karessa's business concept is to combine the company's patented drug delivery technology with proven substances in the therapeutic area of erectile dysfunction. The Company's products require continued research and development, as well as regulatory approvals, before they can generate revenue. The level of risk is therefore high, and there is no guarantee that the Company's product development will be successful, that potential products will be safe and effective, that it will be possible to obtain the necessary authorisations, or that the medicinal products to be launched on the market will be well received.

In order to obtain a marketing authorisation, the Company must show that these product candidates are safe and effective by means of adequate and well-controlled clinical studies. The Company cannot predict with certainty when these studies will be completed or even conducted. This type of development is time-consuming and is affected by a variety of factors, including those which are outside the control of the Company.

During the development process, it may become apparent that the Company's product candidates do not have the anticipated effect, or that they turn out to have unforeseen and undesirable side effects or other characteristics which may delay or stop the product development and restrict or prevent the commercial use of the product candidates. Unanticipated study results can lead to the need to review the concept and development programmes, which means that further studies may be required at significant cost, or that development programmes are shut down. This can result in delayed product launches or non-registration of the Company's product candidates which, in such a case, would have a negative impact on the Company's earnings and financial position.

Regulatory risks

The development, marketing and sale of medicinal products are subject to extensive regulation and legislation. The Company cannot predict with certainty whether, where, when and how these rules will be changed, and if such changes might affect the Company negatively.

For the Company to be able to sell medicinal products in the long term, marketing authorisation must be obtained for each geographical market. The Company cannot predict with certainty what additional clinical studies must be carried out for different markets, that the manufacturing process will be approved, the time it takes to obtain marketing authorisation, or that marketing authorisation will be obtained for the markets that the Company wants to sell to. In this respect, Karessa, like other companies in the pharmaceutical industries, is dependent on the assessments and decisions of the relevant authorities, such as the Medical Products Agency of Sweden, the Food and Drug Administration (FDA) in the USA, or the European Medicines Agency (EMA) in the EU. Such assessments include authorisation to carry out clinical trials and authorisation to market and sell the medicinal products.

An application for marketing authorisation of the Company's products as medicinal products require extensive documentation of clinical results, quality assurance and that the production complies with the applicable national and international requirements among other things. Even if the Company prepares large parts of this documentation in parallel with the clinical studies, it cannot be ruled out that unforeseen circumstances will lead to delays, which could result in the applications for marketing authorisation being submitted later than anticipated. The authorities may request supplementary information or have other comments on the Company's applications, which means that the time for a possible market authorisation is subject to uncertainty. It cannot be ruled out that the Company may need to supplement its applications, which can be time-consuming and entail unforeseen costs.

Side effects

The Company's main area of activity lies in the development and sale of medicinal products, which entails risks to persons who either consume or participate in clinical studies with the Company's products or otherwise come into contact with the Company's products being affected by side effects. The consequences of such potential side effects in the various markets may delay or stop the process of obtaining marketing authorisation or mean the suspension of sales and thus impact the Company's sales, earnings and financial position. It cannot be ruled out that the Company may be sued by people who are affected by side effects, which may lead to the Company being obliged to pay damages.


The Company operates in an industry that is characterised by intense competition and it cannot be guaranteed that the Company's products will be preferred over competing companies' existing or future products on the market. It cannot either be ruled out that competing companies may develop equivalent or better products. Future products under development by other companies can result in increased competition and poorer prospects for the Company's products with respect to market share and price. The said uncertainties entail risks that can have a negative impact on the Company's anticipated sales, earnings and financial position.

Partners in cooperation and distribution channels

The Company's growth is expected to be largely dependent on the establishment of partnerships with distributors, retailers and other distribution channels. The Company cannot guarantee that contracts can be concluded with favourable terms, or that contracts entered into are not breached by the other parties. If key partnerships cannot be entered into, are terminated or do not function satisfactorily, this can adversely affect the Company's continued development, growth and financial position. The Company might also be adversely affected by stoppages or failures of business-critical systems.

Product liability and insurance

The Company's business operations carry risks of product liability. The Company will obtain and maintain product liability insurance for products where this is judged to be important. However, any claims for damages against the Company in the event of damage caused by the Company's products or product candidates may come to exceed the amount paid out by the Company's insurance policies. Furthermore, it is not possible to rule out that the Company's product liability insurance will not cover a claim for damages. If the Company is liable for damages in excess of what is covered by the Company's insurance policies, this can adversely affect the Company's earnings and financial position.

Patents, trademarks and know-how

In the type of activity in which Karessa is engaged, there is always a risk that the Company's patents, licensed patent rights or other intellectual property rights do not provide sufficient protection for the Company, or that the Company's rights cannot be upheld. Furthermore, patent infringements may occur, which can lead to costly litigation. The outcome of such disputes cannot be guaranteed in advance. Negative outcomes of disputes concerning intellectual property rights, can lead to loss of protection for the losing party, as well as a ban on continuing utilise the current right or an obligation to pay damages.

The Company has licensed a patent owned by Uppsalagruppen Medical AB (the delivery film patent, see page 26). This patent has not yet been approved in all countries where an application has been made, and it cannot be guaranteed that this will be the case. Even if the Company uses non-disclosure agreements, and strives to keep its know-how within the Company and to maintain control over the most sensitive components involved in the production of the Company's products, there are no guarantees that uncontrolled proliferation and copying of the Company's production methods will not occur. Such uncontrolled proliferation and copying could damage the Company if it is used for the production of competing products, or if it otherwise exploited commercially without financial compensation to Karessa.

Karessa is highly dependent on the Company's senior executives and other key people. If the Company were to lose any of its key employees it could come to have a negative impact on the Company's expansion and growth.

Growth and recruitment needs

The Company intends to expand its operations in the coming years and there will be a need for recruitment within all of the Company's functions. This expansion will also make demands on the Company's existing management, control, accounting and information systems. If the Company is unable to control or provide for growth in an effective way, this could come to have a negative impact on the Company's operations, earnings and financial position.

Legal risks

In the long term, Karessa will operate in several countries and thus be affected by the legislation in each individual country in which its activities are carried on. It cannot be ruled out that legislation related to taxation, customs duties and authorisations will change, potentially with retroactive effect, in a way that may have a negative impact on the Company's operations, earnings and financial position.

Financial risks

Working capital

It cannot be ruled out that the Company will need to seek financing, including loans or equity, to cover future unforeseen capital requirements. There are no guarantees either that such other financing can be obtained from one time to another, or that the conditions for such other financing will be acceptable to the Company and its shareholders. For example, a new issue of shares in the Company could lead to a dilution for the existing shareholders.

Currency risk

Currency risk is the risk of exchange rate fluctuations negatively affecting the Company's earnings, financial position and/or cash flow. Foreign-exchange risks can exist in the form of both transaction risks and translation exposure. The Company currently has a relatively limited currency exposure but since future sales will be mainly in foreign currencies, the Company's currency exposure will gradually increase.

Risks related to the Company's shares

Stock market risk

A potential investor should be aware that an investment in the Company's shares are associated with a high degree of risk. Along with the Company's earnings, the share price is dependent on a number of factors that the Company cannot influence. Such factors include, for example, the economic climate, market interest rates, capital flows, political uncertainty and market and behavioural psychology. Even if the Company's operations develop in a positive direction, the possibility that an investor makes a loss on the disposal of his/her shares in the Company cannot be ruled out.

Share liquidity

No trade in the Company's shares has occurred before its listing on Nasdaq Stockholm First North. It is not possible to predict the extent to which active and liquid trading in the shares will develop. If an active and liquid trading does not develop, or is not sustained, it would mean difficulties for shareholders to sell their shares without affecting the market price negatively, or to sell them at all.

Future dividends

Since in the coming years Karessa will be in an expansive phase of development, the Board does not intend to commit itself to a fixed dividend payout ratio. If cash flows from operating activities exceed the Company's capital requirements, the Board intends to recommend that the Annual General Meeting (AGM) decides on dividends. No guarantees can be provided, however, as to whether future cash flows will exceed the Company's capital requirements or that the AGM will decide to pay out dividends in the future.

Shareholders with significant influence

At the time of listing on Nasdaq Stockholm First North, share ownership in Karessa is spread in such a way that no single shareholder controls the Company. However, it cannot be ruled out that in the future there will be shareholders or groups of shareholders that acquire a controlling influence at the AGM, for example in the case of election of the Board of Directors.