Corporate Governance Report

Group structure and shareholdership

Please refer to note 1 of the consolidated annual financial statements. In addition hereto, we wish to advise that the Board of Directors is not aware of any cross-holdings with other companies exceeding a limit of 5% in terms of capital or the number of votes. Information on key stockholders is listed in note 17 to the consolidated annual financial statements. The notifications which have been notified to the Company and the disclosure office of the SIX Swiss Exchange AG during the fiscal year pursuant to article 20 of the Federal Act on Stock Exchanges and Securities Trading and which have been published on the latter’s electronic publication platform may be viewed via the search function on SIX Swiss exchange.

Capital structure as at December 31, 2017

The share capital of the Company consists of 55.4 mn fully paid registered shares with a par value of CHF 0.20 each (2016: 55.4 mn registered shares with a par value of CHF 0.20 each / 2015: 11.85 mn registered shares with a par value of CHF 1 each). At the General Shareholders’ Meeting held March 17, 2016, a five-for-one share split was approved. The split was effective as of March 29, 2016. T

he change in equity is disclosed in the consolidated financial statement of changes in equity on page 48.

Board of Directors

Members, nationality, and stock holdings

  • Dr. Erich Hunziker, Chairman, Switzerland, 1 457 884 registered shares (2016: 1 451 255 registered shares, share-split adjusted)
  • Dr. Clive Meanwell, Vice-Chairman, USA, 5 163 registered shares (2016: none)
  • Prof. Dr. Dr. Klaus Strein, Germany, 88 168 registered shares (2016: 13 000 registered shares)

The members of the Board of Directors have no executive functions, neither today nor in the last three years. Moreover, no business relations are in place between the Board members and BB Biotech AG.

Detailed résumés are available on our website www.bbbiotech.com.

Further mandates of the members of the Board of Directors

  • Dr. Erich Hunziker is a member of the Board of Directors of AB2Bio AG and a member of the Board of Directors of LamKap Bio AG.
  • Dr. Clive Meanwell is a member of the Board of Directors and CEO of The Medicines Company.
  • Prof. Dr. Dr. Klaus Strein is Chairman of the Board of LamKap Bio AG a member of the Board of Directors of NovImmune SA.

Number of permissible external mandates

The rule with respect to the number of permissible external mandates of members of the Board of Directors can be found in article 23 of the articles of incorporation of the company.

Election and term of office

The Board of Directors is elected by a simple quorum for a term of office of one year. There are no limitations on its tenure. The members of the Board of Directors have first been elected at the following General Meetings:

  • Dr. Erich Hunziker: 2011 (Chairman since 2013)
  • Dr. Clive Meanwell: 2004 (Vice-Chairman since 2011)
  • Prof. Dr. Dr. Klaus Strein: 2013

Internal organization

The Board of Directors consists of a Chairman, Vice-Chairman and a member. In addition, the members of the Board of Directors are appointed in the following committees:

  • Dr. Erich Hunziker, Chairman: Chairman of the Audit Committee
  • Dr. Clive Meanwell, Vice-Chairman: Member of the Audit Committee and Chairman of the Remuneration and Nomination Committee
  • Prof. Dr. Dr. Klaus Strein, Member: Member of the Remuneration and Nomination Committee

The Board of Directors generally meets once per month via video or telephone conference. In addition, two three-day strategy meetings take place each year. These meetings are attended by representatives of the asset manager commissioned. No ordinary board meetings are held in the months of the strategy meetings. In these meetings, the Board of Directors regularly examines the compliance with the investment guidelines. In addition, the representatives entrusted with the asset management present the respective investment and divestiture proposals before their implementation to the Board of Directors. The latter examines the individual investment proposals with respect to the compliance with the investment strategy as well as the investment process. During the fiscal year 2017, eight ordinary board meetings and two strategy meetings took place.

The members of the Audit Committee hold quarterly meetings, the Remuneration and Nomination Committee holds at least one meeting a year. During 2017, four ordinary meetings of the Audit Committee and one ordinary meeting of the Remuneration and Nomination Committee took place.

Director’s dealing

BB Biotech AG publishes each purchase/sale of BB Biotech AG stocks by members of the Board of Directors as well as by first-degree relatives of such persons within three trading days. This information is made available for 30 days on the website.

Asset Management

BB Biotech AG as an investment company listed on a stock exchange does not have a management of its own within the meaning of article 716b CO, respectively the Ordinance Against Excessive Compensation in Public Corporations. The Board of Directors of BB Biotech AG has – as it is customary for investment companies – outsourced the asset management based on the management contract to a specialized third company, namely to Bellevue Asset Management Group. The supervision of Bellevue Asset Management Group acting as external asset manager and the taking of core decisions relating to the investment policy remain with the Board of Directors of BB Biotech AG as a non-transferable duty. The management contract is valid for an indefinite period and can be terminated by either party with a notice period of twelve months with effect as per the end of the following calendar year. Detailed information on this mandate and the members of the investment manager involved is available on the website. Since January 1, 2014, the remuneration paid to the asset manager has been based upon a 1.1% p.a. all-in fee on the average market capitalization without any additional fixed or performance- based elements of compensation, which is paid on a monthly basis.

Remuneration

See notes 8 and 16 of the consolidated financial statements as well as the remuneration report hereinafter for details relating to the remuneration of the Board of Directors and the process of determining its remuneration.

The rules governing the approval by the General Meeting of the remuneration of the members of the Board of Directors as well as the principles governing the remuneration of the members of the Board of Directors can be found in articles 19 – 21 of the articles of incorporation of the company. The articles of incorporation do not contain any provision with respect to loans, credits and pension benefits to the members of the Board of Directors. 

Remuneration report

Stockholder's rights of cooperation

Limitations to voting rights; voting by proxy

There are no limitations to voting rights and no internal rules at variance from the statutory provisions concerning attendance of a General Meeting. The articles of incorporation do not contain any provision with respect to the issuance of directives to the independent voting rights representative or to the electronic participation at a General Meeting.

General Meeting

There are no statutory rules relating to the presence of a majority quorum which differ from the statutory provisions. The convening of a General Meeting as well as the request that items be included in the agenda are governed by article 7 of the articles of incorporation of the company as well as the statutory provisions of law.

Dividend policy

At present, the company is pursuing a structured distribution policy. The objective of the Board of Directors is to achieve an annual return of 10% for shareholders via dividends combined with continued share buy-backs. The Board of Directors suggests distributing an annual dividend equivalent to approximately 5% of the average share price in December as well as seeking shareholder authorization for further share buy-backs of approximately 5% p.a.

Change-of-control and defensive measures

Obligatory offer for sale

An opting-out rule is in place.

Change-of-control clauses

No change-of-control clauses are in place in favor of the Board of Directors.

Audits

Duration of mandate and term of office of the lead auditor

Since the fiscal year 1994, PricewaterhouseCoopers AG has been the official auditor and group auditor of BB Biotech AG. The lead auditor, Daniel Pajer, has been responsible for auditing the company’s books since the fiscal year 2017.

Fees

The following fees for professional services in the fiscal year ended December 31, 2017, were agreed:

  • Audit fees (including interim audit): CHF 122 000
  • Fees for audit-related services: CHF 2400

Instruments of information of the external audit

The asset manager and the auditors are continually in contact with each other. The auditor is consulted by the Board of Directors where necessary. The auditors attend at least two audit committee meetings per year.

Trading of own shares

BB Biotech operates, in line with legal and internal regulations, as an active purchaser/seller of own stocks itself on the market, securing additional liquidity in the process.

All data as at December 31, 2017.