Risk management

Bactiguard’s operations and profits are affected by several external factors. The company continually engages in a continual process at all levels of the organisation to identify risks that may arise and assessing how each of these risks should be managed.

Bactiguard is primarily exposed to financial risks, market risks and operational risks. The risks and how they are managed is addressed below.

This section can also be found in the Annual & Sustainability Report 2024

Financial risk management and financial instruments

Through its activities, the Group is exposed to various types of risk, which are managed in the company’s risk management program that concentrates on minimizing potential unfavorable effects on financial results. The company’s Board of Directors is ultimately responsible for risk exposure, management, and follow-up of the Group’s financial risks. The frameworks that apply are set by the Board of Directors and revised annually. The Board of Directors has delegated responsibility for daily risk management to the company’s CEO, who in turn has delegated this to the company’s CFO. The Board of Directors can decide on temporary departures from these established frameworks.

Financial risks are described in Note 4 of the Annual & Sustainability Report 2024

Liquidity risk

The liquidity risk involves the risk of not being able to meet short-term payment obligations due to insufficient liquidity. On 31 December 2024 cash and cash equivalents amounted to SEK 116 (123) million and the Executive Management makes the assessment that current liquidity levels will be sufficient to manage the company’s commitments for the coming year. At the end of the year Bactiguard Holding AB had a bank loan of SEK 171 million with maturity according to agreement until May 2025. At the beginning of February 2025, the company amortized SEK 51 million of the SEK 171 million financing with SEB, while securing SEK 120 million in new financing on better terms. The liquidity risk is monitored monthly through rolling 12-month forecasts to evaluate the liquidity situation and continuously assess alternative financing solutions. The forecast forms the base of taking relevant financial or operational measures.

Macroeconomic risk

Weak macroeconomics and high national debt in a country may affect both public and private customers’ budgets and consequently demand. This might also have a negative impact on a country’s ability and political willingness to invest in and allocate public resources to healthcare. Bactiguard is present in geographic markets where the medical need and interest for infection prevention is significant. By offering the company’s technology in multiple markets, the country-specific portion of the consolidated macroeconomic risk is minimized. On 2 April, 2025, the United States government announced a new tariff regime introducing a 10 percent baseline tariff on all imported goods, with higher rates (up to 46 percent) applied to selected countries, including EU countries. These tariffs are scheduled to take effect in phases beginning 5 April, 2025. This policy change may directly or indirectly impact the cost and flow of goods, potentially affecting pricing, margins, and future demand. Due to the license business model, Bactiguard expects to have limited or no direct export of goods into the US, resulting in a direct impact from the tariffs. Bactiguard is actively monitoring the situation and assessing potential levers to mitigate any adverse effects.

Currency risk – transactions

The currency risk relates to the risk that fair value or future cash flow fluctuate due to changes in currency rates. The major curren cy risk exposure is transaction exposure or payment flows in foreign currencies. The company has a large exposure to the USD and other currencies, in relation to its partners and own geographic footprint. These exposures are monitored on a regular basis and are managed according to the Group’s currency policy.

^{For further information, see Note 4 of the Annual & Sustainability Report 2024}

Interest rate risk

The interest rate risk is defined as the impact changes in interest rates will have on Bactiguard’s net interest items. Increased interest rates could affect the company’s interest costs but given the company’s current debt situation it is estimated that increased rates will have limited impact.

^{For further information, see Note 4 of the Annual & Sustainability Report 2024}

Organizational risk

Bactiguard is a specialist and knowledge-based organization, where the ability to retain and attract qualified employees is crucial for its future success. It is an integrated part of the strategy to secure that the company is attractive as an employer and offer competitive working conditions and opportunities to develop. Bactiguard highly values equality and offer a safe work environment. For further information, see the Sustainability Report on page 32–38.

Regulatory risk

As a manufacturer of medical devices, Bactiguard’s operations are subject to requirements and standards that are determined by regulatory authorities for each of the markets where Bactiguard and the license partners operate and sell products. Regulatory processes in various countries may cause a risk of delays in the launching process of products in these countries. Bactiguard works in close collaboration with license partners and their regulatory advisors to minimize these risks. The company strives to communicate the different phases of partnerships in a clear and transparent manner to manage expectations on when a license partner will have products in the markets and generate revenues for Bactiguard.

Technology risk

The patent portfolio focuses on the coating, although the coating process is also covered. Regulations for medical devices are getting stricter, which means that Bactiguard’s strong clinical evidence will become an even more important competitive advantage. Bactiguard’s technology has been tried and tested for many different applications. New competitors and technologies must invest in clinical evidence to be approved, which takes a long time and requires significant financial investment. The combination of extensive protection of intellectual property and Bactiguard’s specialized knowledge related to both manufacturing and coating processes prevent replication of the unique technology. The company continuously monitors and finetunes the intellectual property portfolio to keep the highest protection standards. During 2023, Bactiguard strengthened the intellectual property portfolio as the European Patent Office granted protection until 2039, which marked the third generation of patents. In the US, Bactiguard’s current patent is maintained until 2040.

Cyber security risk

In an increasingly connected digital landscape, Bactiguard considers cybersecurity and information technology risks integral to our risk management framework. The medical device industry faces growing challenges, such as data breaches and ransomware, which jeopardize operational continuity and the security of sensitive information. To counter these threats, we are dedicating greater resources to strengthen our cybersecurity measures, including advanced encryption, thorough risk assessments, and comprehensive employee training programs. In 2025, we will continue our efforts to ensure compliance with the new NIS2 regulation, reinforcing our digital infra – structure with improved incident response protocols and enhanced network security measures. These initiatives aim to safeguard our intellectual property, maintain operational reliability, and uphold stakeholder confidence in an increasingly complex threat environment, positioning Bactiguard as a leader in secure and innovative medical technology.

Production risk

Bactiguard primarily licenses its coating technology to partners, while having its own production capabilities in Sweden. The company’s Wound Management products are produced in facilities in Malaysia. The company currently has single-site production for each of the major products and is actively investing in a second facility for the most important production.

Geopolitical risk

Changes in the geopolitical environment is affecting Bactiguard. The global economy is affected by the war situations in Europe and Middle East, and the development is monitored closely. The operational and financial effects are evaluated continuously as the global situation may rapidly change and affect the company’s financial position.

Climate risks

Bactiguard has identified a few company- specific risks related to climate change. The Group has a negative impact on the climate through, among other things, transports of products and raw material. Bactiguard always strives to optimize transport to reduce the negative environmental impact. Bactiguard’s internal travel policy is that employees should always choose a more environmentally friendly alternative and, if possible, replace travelling with digital meetings.