Corporate Governance

The Group's Directors recognise the importance of sound corporate governance. As a company whose shares are traded on AIM, the Board has concluded that it will adopt the Quoted Alliance's Corporate Governance Code ("the QCA Code"). In addition, the directors have adopted a code of conduct for dealings in the shares of the Group by directors and employees and are committed to maintaining the highest standards of corporate governance.

The Board as a whole, led by the Chairman Jonathan Allis, is responsible for ensuring that the Group has appropriate corporate governance standards in place and that these requirements are followed and applied within the Group as a whole. The corporate governance arrangements that the Board has adopted are designed to ensure that the Group delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Group in a manner that encourages open dialogue with the Board.

The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group as a whole and that this will impact the performance of the Group. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Group as a whole and the way that employees behave. A large part of the Group's activities are centred upon open and respectful dialogue with its stakeholders including Clinical Research Organisations, Universities and key suppliers. Therefore the importance of sound ethical values and behaviours is crucial to the ability of the Group to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Group does.

The Board members recognise their collective responsibility and legal obligation to promote the interests of the Company, and are collectively responsible for defining the Company's corporate governance arrangements. The Board currently consists of six directors, of which two are executive and four are non-executive. The Board has a Chairman with the CEO being excluded from taking on this role.

Application of the QCA Code

The QCA Code sets out 10 principles which should be applied. These are listed below together with a short explanation of how the Group applies each of the principles. Where the Group does not fully apply each principle an explanation as to why has also been provided:

Principle One: Business Model and Strategy

The Board has adopted a strategy for the Group's development which is summarised below.


The Group comprises medical drug-device combination companies operating in the high-resolution medical imaging market. The Group develops equipment that enables existing MRI systems to achieve an improved level of pulmonary functional imaging and specialises in the use of polarised Xenon gas (129Xe) as an imaging agent to visualise ventilation (the ability of air to reach the alveoli) and gas exchange (the ability of oxygen to diffuse through the alveolar membrane into the pulmonary vasculature) regionally down to the smallest airways of the lungs, the tissue barrier between the lung and the bloodstream and in the pulmonary vasculature; a novel diagnostic approach. The Group also develops and manufactures the high performance MRI radiofrequency (RF) coils which are a required component for imaging 129Xe in the MRI system. The development of these coils by the Group facilitates the adoption of the Xenon technology by providing application-specific RF coils which optimise the imaging of 129Xe in MRI equipment.

Investment Case

Pulmonary disease currently affects hundreds of millions of people globally, including approximately 174 million people who suffer from Chronic Obstructive Pulmonary Disease (COPD), which is responsible for approximately 6% of all such deaths globally each year. In the US more than 30 million people suffer from a chronic lung disease such as COPD, which includes emphysema, chronic bronchitis and asthma. In addition to its significant human toll, pulmonary disease also represents an economic burden in excess of US$150 billion annually in the US alone.

Every type of pulmonary disease involves some combination of ventilation and/or gas exchange impairment, yet the successful and cost-effective treatment of lung disease is hampered by sub-optimal methods for quantifying pulmonary ventilation and gas exchange. Current diagnostic techniques are either imprecise (such as spirometry) and/or expose the patient to potentially dangerous radiation (such as x-rays, CT scans and nuclear scintigraphy). While spirometry has benefits as a screening tool, none of these current methods can visualise ventilation or gas exchange regionally in the smallest airways, where lung disease typically begins and where improvements from new pharmaceutical therapies can first be detected.

As such, the Group operates in an area of significant unmet medical need. In January 2020, the Company achieved one of its most important milestones to date, the positive readout from the Phase III Clinical Trials. In December 2020, the Company received notification of acceptance of its NDA by the FDA.  The FDA confirmed that the review will follow the standard review time frame with a target Prescription Drug User Fee Act (PDUFA) action date of 5 October 2021. The Directors anticipate receiving a broad indication for use from the FDA following the FDA's review period. In the meantime, the Company intends to make preparations for commercialisation and launch of its technology.

The Group's technology overcomes important limitations of current lung diagnostic methods, providing the ability to visualise, quantify and monitor both the structure and function of the smallest airways and alveolar spaces with enhanced sensitivity and without harmful radiation. This provides a unique, valuable and more precise tool to help diagnose disease earlier, identify the type of intervention likely to benefit a patient, monitor the efficacy of treatment and facilitate developing new therapies for pulmonary diseases. The installation of new polarisers continues and users of the Company’s systems are publishing research at an increased rate, expanding and deepening the knowledge base of the use of hyperpolarised 129Xe in pulmonary medicine, while further validating Polarean’s technology.

Future Growth Strategy


The Group estimates that in the short term it will generate additional revenue from the sale of hyperpolarisers to global research institutions and the Directors believe that the market for polarisers will grow as the technology gains wider acceptance as a tool for studying lung disease and for monitoring the effectiveness of therapeutics. At present, a number of major pharmaceutical companies are working with universities that are well known to the Group, regarding the use of HPX MRI technology to help guide clinical trials of developmental pharmaceutical products which is raising awareness of the Group's technology and product range.

Upon any FDA approval, the Group will adopt a traditional market entry strategy of building market awareness for its technology through key opinion leaders and a direct sales force to reach the key decision makers within its initial target market of large academic medical centres. In implementing this strategy, the Group benefits from more than 400 journal articles on the use of hyperpolarised gas MRI that are currently published in peer-reviewed journals. Over time, as more research centres purchase the Group's equipment and begin clinical studies, an increasing number of peer reviewed scientific articles are likely to be published, further enhancing the Group's credibility and raising awareness of the Group's technology. The Group also intends to continue patenting and in-licensing hyperpolarised gas technology IP to protect its current position.

Upon receipt of any FDA clearance to market the technology, the Group's initial sales targets will be the radiology and pulmonary medicine departments of top academic hospital organisations in the US, who are opinion leaders in the use of new diagnostic technologies and their application in a clinical setting.

Subsequently, the Group will seek to expand its sales and marketing teams. Because of the specialty nature of the Group's products in the pulmonary specialist market, which is concentrated in approximately 1,000 medical centres, the Directors believe that a small specialty sales force can be deployed effectively at reasonable cost. The Group may also choose to partner with companies that offer complementary products.

Furthermore, the Directors believe that the Group's products will benefit a number of clinical applications. These applications could include, but are not limited to, the following:

  • the monitoring of COPD therapy, especially for the most severe cases;
  • the management of cystic fibrosis exacerbations;
  • a more efficient diagnosis of dyspnoea and the chronic cough;
  • providing guidance for radiation therapy planning of lung cancer treatment;
  • providing guidance for interventional pulmonology procedures including ablation and the placement of valves and stents;
  • surgical procedure planning for lung transplant and volume reduction surgery;
  • diagnosis of IPF and monitoring of IPF therapy; and
  • diagnosis of pulmonary vascular disease including PAH and monitoring of therapy.

The Directors will also seek to develop relationships with a range of strategic partners and will evaluate opportunities which will enable the Group to address its target markets globally, either alone or in collaboration with a partner.

Principle Two: Understanding Shareholder needs and Expectations


The Board is committed to maintaining good communication and investor relations and having a constructive dialogue with its shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company's Annual General Meeting and any other General Meetings which are held throughout the year.

The Board uses the Company's website to communicate with shareholders and investors also have access to current information about the Group on the Company's website.

Principle Three: Stakeholder Responsibilities

The Board recognises that the long term success of the Group is reliant upon the efforts of the employees of the Group and its customers, stakeholders, suppliers and regulators. The Board has put in place a range of processes and systems to ensure that there is close Board oversight and contact with its key resources and relationships and seeks feedback from all applicable stakeholder groups whenever possible.

Annual Assessment Process

All employees of the Group participate in a structured Group-wide annual assessment process which is designed to ensure that there is an open and confidential dialogue with each person in the Group to help ensure successful two way communication with agreement on goals, targets and aspirations of the employee and the Group. These feedback processes help to ensure that the Group can respond to new issues and opportunities that arise to further the success of employees and the Group. In addition the Board ensures that all key relationships with, for example, customers and suppliers are the responsibility of, or are closely supervised by, one of the directors or the financial controller.

Principle Four: Risk Management

In addition to its other roles and responsibilities the Audit and Compliance Committee is responsible to the Board for ensuring that procedures are in place, and are being effectively implemented to identify, evaluate and manage the significant risks faced by the Group. The Audit Committee reviews the risks on a regular basis and presents them in the Annual Report each year. The following principal risks have been identified:

Early stage of operations

The Group's operations are at an early stage of development and there can be no guarantee that the Group will be able to, or that it will be commercially advantageous for the Group to, develop its proprietary technology. Further, the Group currently has no positive operating cash flow and its ultimate success will depend on the Directors' ability to implement the Group's strategy, generate cash flow and access capital markets.

Regulatory approvals and compliance

The Group will need to obtain various regulatory approvals (including FDA and EMA approvals) and otherwise comply with extensive regulations regarding safety, quality and efficacy standards in order to market its future products. These regulations, including the time required for regulatory review, vary from country to country and can be lengthy, expensive and uncertain.

Future funding requirements

The Group will need to raise additional funding or enter into a strategic partnership with industry partners to undertake work beyond that being funded by its April 2020 Placing and Subscription. There is no certainty that this will be possible at all or on acceptable terms.

Dependence on key personnel

The success of the Group, in common with other businesses of a similar size, will be highly dependent on the expertise and experience of the Directors and key employees. However, the retention of such key personnel cannot be guaranteed. Should key personnel leave the Group's business, prospects, financial condition or results of operations may be materially adversely affected.

Intellectual property and proprietary technology

No assurance can be given that any current or future patent applications will result in granted patents, that the scope of any patent protection will exclude competitors or provide competitive advantages to the Group, that any of the Group's patents will be held valid if challenged or that third parties will not claim rights in or ownership of the patents and other proprietary rights held by the Group.

Technology and products

The Group is a manufacturer and service provider for noble gas polariser devices and ancillary instruments with a special focus on pulmonary imaging. The development and commercialisation of its proprietary technology and future products, which are in early stages of development, will require multiple series of clinical trials and there is a risk that safety and efficacy issues may arise when the products are tested. There is also a risk that there will be delays to the development of the products or that unforeseen technical problems arise as the Group's technology becomes increasingly automated. These risks are common to all new medical products and there is also a risk that the clinical trials may not be successful.

Research and development risk

The Group will be operating in the life sciences and medical device development sector and will look to exploit opportunities within that sector. The Group will therefore be involved in complex scientific research and industry experience indicates that there may be a very high incidence of delay or failure to produce results. The Group may not be able to develop new products or to identify specific market needs that can be addressed by technology solutions developed by the Group.

Reliance on third parties

The business model for the Group anticipates that it will have limited internal resources over the next few years and that it will use third party providers wherever possible to conduct the research, development, registration, manufacture, marketing and sales of its proposed products. The commercial success of the Group's products will depend upon the performance of these third parties.


There can be no assurance that the Group's proposed products will be capable of being manufactured in commercial quantities, in compliance with regulatory requirements and at an acceptable cost. The Group intends to outsource the manufacture of the raw materials and finished products required in connection with the research, development and commercial manufacture of its proposed products and, as such, will be wholly dependent upon third parties for the provision of adequate facilities and raw material supplies. 129Xe, the specific isotope of Xenon which is the active ingredient in the Group's drug-device product, is available from a limited number of suppliers and there can be no assurance that adequate supplies of this material at acceptable cost can be obtained. In addition, where the Group is dependent upon third parties for manufacture, its ability to procure the manufacture of the drug-device in a manner which complies with regulatory requirements may be constrained, and its ability to develop and deliver such products on a timely and competitive basis may be adversely affected.

Product development timelines

Product development timelines are at risk of delay, particularly since it is not always possible to predict the rate of patient recruitment into clinical trials. There is a risk therefore that product development could take longer than presently expected by the Directors. If such delays occur the Group may require further working capital. The Directors shall seek to minimise the risk of delays by careful management of projects.

General legal and regulatory issues

The Group's operations are subject to laws, regulatory restrictions and certain governmental directives, recommendations and guidelines relating to, amongst other things, occupational safety, laboratory practice, the use and handling of hazardous materials, prevention of illness and injury, environmental protection and animal and human testing. There can be no assurance that future legislation will not impose further government regulation, which may adversely affect the business or financial condition of the Group. Furthermore, as the Group already has some exposure to the UK market, there is a risk that possible changes resulting from the Brexit negotiations could lead to additional barriers to trade and regulatory divergence which could adversely affect the Group

Healthcare pricing environment

In common with other healthcare products companies, the ability of the Group and any of its licensees or collaborators to market its products successfully depends in part on the extent to which reimbursement for the cost of such products and related treatment will be available from government health administration authorities, private health coverage insurers and other organisations

The Directors have established procedures for the purpose of providing a system of internal control. In addition there are a range of Group policies that are reviewed at least annually by the Board and a programme of training and then confirmation of understanding that all employees of the Group are required to undertake each year. These group policies cover matters such as share dealing and insider legislation and expenses.

Internal Audit

The Board currently takes the view that an internal audit function is not considered necessary or practical due to the size of the Group and the close day to day control exercised by the executive directors. However, the Board will continue to monitor the need for an internal audit function.

Principle Five: A Well-Functioning Board of Directors

The Board is currently comprised of the Non-Executive Chairman, Jonathan Allis, Richard Hullihen (CEO), Chuck Osborne (CFO), Bastiaan Driehuys (CTO) and three other NEDs, Juergen Laucht, Cyrille Petit and Kenneth West. The time commitment formally required by the Group is an overriding principal that each director will devote as much time as is required to carry out the roles and responsibilities that the director has agreed to take on. Biographical details of the current directors are set out under 'Board of Directors' on the Investor relations page of the group's website.

Executive and Non-Executive Directors are subject to re-election intervals as prescribed in the Company's Articles of Association. At each Annual General Meeting one-third of the Directors, who are subject to retirement by rotation shall retire from office. They can then offer themselves for re-election. The letters of appointment of all directors are available for inspection at the Company's registered office during normal business hours. The Executive Directors are employed under service contracts requiring six months' notice by either party. Non-Executive Directors and the Chairman receive payments under appointment letters which are terminable by three months' notice by either party.

The Group has also entered into a consultancy agreement with Bastiaan Driehuys pursuant to which the Company has engaged Mr Driehuys as an independent contractor to provide general consultancy services relating to the Company's technology. The Group has acknowledged in the agreement that any services provided to the Company by Mr Driehuys under this agreement shall not affect the obligations Mr Driehuys owes to Duke University under his engagement as a Professor at the institution.

The consultancy agreement, which is governed by the laws of North Carolina, can be terminated upon 30 days' written notice by either the Group or Mr Driehuys.

The Non-Executive Directors receive a fee for their services as a director which is approved by the Board, being mindful of the time commitment and responsibilities of their roles and of current market rates for comparable organisations and appointments. In addition, Non-Executive Directors are also reimbursed for travelling and other incidental expenses incurred on Group business.

The Board encourages the ownership of shares in the Company by Executive and Non-Executive Directors alike and in normal circumstances does not expect Directors to undertake dealings of a short-term nature. The Board will periodically review the shareholdings of the Non-Executive Directors and will seek guidance from its advisors if, at any time, it is concerned that the shareholding of any Non-Executive Director may, or could appear to, conflict with their duties as an independent Non-Executive Director of the Company or their independence itself.

The Board has a formal schedule of matters reserved to it and is supported by the Audit and Remuneration Committees.

The Board has established an Audit Committee and a Remuneration Committee and has agreed that appointments to the Board are made by the Board as a whole and so has not created a Nominations Committee. The Board retains full control of the Group with day-to-day operational control delegated to Executive Directors. The full Board intends to meet formally every other month and on any other occasions it considers necessary.

Principle Six: Appropriate Skills and Experience of the Directors

The Board currently consists of seven directors and, in addition, a Company Secretary, Stephen Austin. The Group has one independent Non-Executive Director in Jonathan Allis. The Company acknowledges that the guidance in the QCA Code is for a company to have at least two independent non-executive directors. However, the Directors are currently satisfied that the Group's board composition is appropriate at this current time. The Directors shall keep the position under regular review and to the extent additional independence is felt to be required on the Board, it shall be sought.

The Board has the appropriate balance of sector, financial, and public markets skills and experience and bring a range of skills and capabilities to the Company.  The Board members are kept up-to-date on a regular basis on key issues and developments pertaining to the Group as well as their responsibilities as members of the Board.

Principle Seven: Evaluation of Board Performance

Internal evaluation of the Board, its Committees and individual directors is seen as an important next step in the development of the board. This will be undertaken on annual basis in the form of peer appraisal, questionnaires and discussions to determine the effectiveness and performance in various areas as well as the directors' continued independence. The criteria against which effectiveness is considered will be aligned to the strategy of the Group and management forecasts and budgets that are already in place.

The strategy and budgets that are set out for the Group provide a forecast of the board and senior management requirements and allow for the recruitment forecasts to be continually updated. In addition, succession planning for the Board and senior management is undertaken by the board as a whole.

Principle Eight: Corporate Culture

The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group as a whole and that this will impact the performance of the Group. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Group as a whole and the way that employees behave. A large part of the Group's activities are centred upon addressing customer and market needs. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Group to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Group does. The Board assessment of the culture within the Group at the present time is one where there is respect for all individuals, there is open dialogue within the Group and there is a commitment to provide the best service possible to all the Group's key customers.

In addition, the Group takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all business dealings and relationships wherever they occur. The Group implements effective systems to counter bribery and corruption and as part of this it has adopted an anti-bribery and anti-corruption policy. The policy provides guidance to those working for the Group on how to recognise and deal with bribery and corruption issues and the potential consequences and applies to all persons working for the Group or on its behalf in any capacity, including employees at all levels, directors, officers, consultants and agents.

Furthermore, the Directors believe that serving the Group's target market of high end academic research Universities and their hospitals, brings with it a level of public scrutiny in procurement that is transparent and easily accessible to the Board and external advisers that oversee the Group's activities.

Principle Nine: Maintenance of Governance Structures and Processes

Ultimate authority for all aspects of the Group's activities rests with the Board with the respective responsibilities of the Chairman and Chief Executive Officer arising as a consequence of delegation by the Board. The Board has adopted two statements; the first sets out matters which are reserved to the Board and the second establishes the division of responsibilities between the Chairman and the Chief Executive Officer. The Chairman is responsible for the effectiveness of the Board, while management of the Group's business and primary contact with shareholders has been delegated by the Board to the Chief Executive Officer.

Audit Committee

The Audit Committee currently comprises Juergen Laucht and Cyrille Petit. It is the Board’s intention to recruit an additional Non-Executive Director who will have a robust level of financial competency and chair the Audit Committee in due course. It meets as required and specifically to review the Interim Report and Annual Report, and to consider the suitability and monitor the effectiveness of internal control processes. Following changes to the Board in 2020, the role of the Audit Committee was fulfilled by the Board as a whole pending the appointment of a new member. The Board took the view at that time that an internal audit function was not necessary or practical due to the size of the Group, its business and assets, and the close day to day control exercised by the executive directors. The Audit Committee’s responsibilities were re-delegated upon the appointment of Cyrille Petit to the Committee. The Audit Committee also reviews the findings of the external auditor and reviews accounting policies and material accounting judgements. The independence and effectiveness of the external auditor is reviewed annually. The possibility of undertaking an audit tender process is considered on a regular basis. In addition the Audit Committee meets at least once year with the auditor to discuss their independence and objectivity, the Annual Report, any audit issues arising, internal control processes, appointment and fee levels and any other appropriate matters.

Remuneration Committee

The remuneration committee will comprise Bastiaan Driehuys and Juergen Laucht and will be chaired by Jonathan Allis. The purpose of the Remuneration Committee is to ensure that the Executive Directors and other employees are fairly rewarded for their individual contribution to the overall performance of the Group. The Committee considers and recommends to the Board the remuneration of the Executive Directors and is kept informed of the remuneration packages of senior staff and invited to comment on these. There was one meeting during 2020. The Board retains responsibility for overall remuneration policy. Executive remuneration packages are designed to attract and retain executives of the necessary skill and calibre to run the Group. The Remuneration Committee recommends to the Board the remuneration packages by reference to individual performance and uses the knowledge and experience of the Committee members, published surveys relating to AIM companies, the lighting industry and market changes generally. The Remuneration Committee has responsibility for recommending any long-term incentive schemes.

The Remuneration of Executive Directors and Employees is via three categories:

  1. Basic salaries and benefits in kind: Basic salaries are recommended to the Board by the Remuneration Committee, taking into account the performance of the individual and the rates for similar positions in comparable companies. Certain benefits in kind are available to certain senior staff and Executive Directors.
  2. Share options: The Company operates approved and unapproved share option schemes for Executive Directors and other employees to motivate those individuals through equity participation. Exercise of share options under the schemes is subject to specified exercise periods and compliance with the AIM Rules. The schemes are overseen by the Remuneration Committee which recommends to the Board all grants of share options based on the Remuneration Committee's assessment of personal performance and specifying the terms under which eligible individuals may be invited to participate.
  3. Bonus Scheme: The Group has a discretionary bonus scheme for staff and Executive Directors which is specific to each individual and the role performed by that individual within the Group. Reviews are held periodically by the Remuneration Committee and any awards will be based upon the recommendation of the Remuneration Committee at its absolute discretion.

Non-executive Directors: The Board has adopted guidelines for the appointment of non-executive directors which have been in place since the Group's admission to trading on AIM in March 2018. These provide for the orderly and constructive succession and rotation of the Chairman and Non-Executive Directors insofar as both the Chairman and Non-Executive Directors will be appointed for an initial term of three years and may, at the Board's discretion believing it to be in the best interests of the Company, be appointed for subsequent terms. In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or arrangement.

Nomination Committee

The Company does not have a Nomination Committee as the Board does not consider it appropriate to establish such a committee at this stage of the Company's development. Decisions which would usually be taken by the Nomination Committee will be taken by the Board as a whole. The Board as a whole will also be responsible for AIM compliance.

Principle Ten: Shareholder Communication

The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.

As such, Polarean takes a proactive approach to Investor Relations initiatives with ongoing support from Walbrook PR Limited, the Group's Financial PR Advisers. These investor relations initiatives include (but aren't limited to):

    • shareholder events in London and elsewhere, such as the annual Investor Symposium the Company hosts;
    • the use of Social Media, in accordance with the Group's Social Media Policy; and
    • interviews with platforms such as Proactive Investors around key developments.

Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company's Annual General Meeting or any other General Meetings which are held throughout the year.

Page last updated: 9 April 2021

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