The Board of Directors is the highest governance unit at PharmaEssentia and adopts a single-track model with each term lasting for 3 years. Board directors are nominated and elected in accordance with the Regulations Governing Director Elections, which incorporate shareholder interests, diversity, independence, and director management capabilities. Current Board directors were elected at the shareholders general meeting held on May 27, 2024. Following the election, the number of independent directors was increased from 3 to 4, including one female independent director. The number of independent directors exceeded one-third of all directors on the Board, and consecutive terms of office should not exceed 3 terms. The election was conducted in accordance with Financial Supervisory Commission requirements to strengthen Board function and independence. The Board was maintained at 11 directors, and the number of female directors increased from 2 to 3. The current Board will remain in office from May 27, 2024 to May 26, 2027. Board responsibilities include formulating corporate sustainability strategies, supervising managers, and playing an important role in responding to company and shareholder needs.

Diversity of Board Members

PharmaEssentia currently has 11 directors (7 directors and 4 independent directors), aged between 50-83 years old. We have 3 female directors and 3 directors who are concurrently serving as company employees. The average tenure of our directors is 7.91 years. Board members possess rich expertise and professional knowledge in biotechnology, finance, education, and other industries, and possess the knowledge, skills, and literacy required to carry out their duties. One of our directors is a representative of the National Development Fund and works to enhance industrial growth momentum. Of our 4 independent directors, 1 has served for more than 5 years; has experience encompassing industry, government, and academia fields; and has global biotechnology production and manufacturing expertise. We therefore continue to rely on their professional expertise, board supervision capabilities, and professional opinions. Additionally, 1 independent director (Jeffrey R. Williams) is from the US, and specializes in finance and education, so is able to guide the business operations of our US subsidiary. In the future, PharmaEssentia plans to ensure that directors of each gender exceed one-third of total directors for continued achievement of board diversity.

Highest Governance Unit and Remuneration Policies for Senior Executives

Director remuneration adheres to our Articles of Incorporation. If the Company’s income before tax for the current year has a balance after the deduction of the amount for compensating accumulated deficits and before the deduction of employee and director compensation, the Company shall allocate no more than 5% for director compensation. Direction remuneration is submitted to the Board for approval following determination by the Remuneration Committee based on director participation and contribution to corporate operations and referencing domestic and foreign industry standards. To achieve sustainable governance, we linked performance indicators for our chairperson, CEO, and general manager with sustainable development; key performance indicators encompass R&D for innovative new drugs, critical global clinical trials, drug permit applications, global business operations, commercialization and mass production, process efficiency, global supply chains and logistical efficiency, and digital operational systems.

Annual Total Compensation Ratio for 2024

Annual total compensation includes salaries, bonuses, and stock awards. The remuneration for the highest-paid individual (CEO) at PharmaEssentia (Taiwan) and all other employees increased compared to the previous year.

Evaluations of Board Performance

PharmaEssentia has established the “Rules for Performance Evaluations of the Board of Directors” and “Regulations for the Self-Appraisal or Peer Appraisal of the Board of Directors” to regulate board performance evaluation targets and appraisal systems. We conduct at least 1 internal board performance evaluation each year, and commission external professional institutes to conduct annual board performance evaluations once every 3 years.

Strengthen Board Knowledge

PharmaEssentia offers directors diverse educational courses to strengthen board functions and provides written information and oral reports on related businesses and operations to new directors. In 2024, the training hours for all 11 directors complied with regulations. There were a total of 4 training sessions and the total training time was 132 person-hours. The courses included:

Participation in Public Associations

PharmaEssentia has joined external institutions associated with the biopharmaceutical industry and is a fee-paying member of all these associations. We hope to promote industrial information exchanges and grasp industry dynamics in real time so we can jointly exert our influence and boost industrial development. Additionally, we also joined external institutions associated with corporate governance to strengthen governance effectiveness and enhance competitiveness.

Public Policy Contributions

Public Policy Influence Expenditure

Public Issue

Management and Communication of Tax Policies

PharmaEssentia has established a Tax Policy that strictly adheres to domestic and overseas tax regulations. We ensure information transparency in accordance with regulations to strengthen corporate tax compliance and commitments, and the finance and accounting departments at our headquarters serve as the responsible units for tax management, working with the finance and accounting departments of our subsidiaries to coordinate, plan, and file taxes in accordance with law. Additionally, we actively participate in external engagement involving tax issues to communicate changes in international tax systems and important domestic tax issues through meetings with tax consultants and tax authorities so we can jointly create a sound tax environment.

Note1: Average Effective Tax Rate of Pharmaceuticals, Biotechnology & Life Sciences is 7.89%; Average Cash Tax Rate of Pharmaceuticals, Biotechnology & Life Sciences is 9.97%.

Note2: Given that the recognition of income tax income from loss carryforwards in 2023 affected the company’s effective tax rate and cash tax rate, the two-year average figures are not directly comparable to industry benchmarks.

• Rules of Procedure for Board of Directors’ Meetings
• Election of Directors
• The Rules for Performance Evaluations of the Board of Directors
• Performance Evaluations of the Board and Directors by internal self-evaluation
• Board Member Diversity Policy
• Communication Between the Independent Directors, Internal Audit Executive, and Accountant
• External performance appraisal results of the Board of Directors
• Tax Policy and Commitments

Functional Committees

Two functional committees, the Audit Committee and the Numeration Committee, have been established under the Board, and these committees are all composed of independent directors. To improve Board functions and strengthen management mechanisms, the Numeration Committee hired an external expert (Professor MingChuan Hsieh) to serve as a committee member.

Internal Controls and Internal Audits

We have established an auditing department under the Board to implement ethical management, fulfill supervisory responsibilities, and further optimize internal control and audit processes. The auditing department is headed by a chief auditor who supervises 1 to 2 auditors. The appointment and dismissal of the chief auditor must be approved by the Audit Committee and passed by the Board. The auditing department formulates annual audit plans each year based on current or potential corporate risk issues, and conducts internal audits through general audits, project audits, and subsidiary supervision operations. The chief auditor reports on audit implementations to the Audit Committee and the Board every quarter and organizes regular independent communication between internal auditors and independent directors to strengthen director supervisor of corporate audits. We also continue to track and re-examine all deficiencies discovered during audits to confirm that related units have adopted timely and appropriate improvement measures. In 2024, the auditing department completed a total of 56 audit reports and discovered no major deficiencies.

Ethical Management and Business Codes of Conduct

• PharmaEssentia established the Principles of Ethical Corporate Management, Procedures for Ethical Management and Guidelines for Conduct, Codes of Ethical Conduct, and other regulations. These regulations took effect following board approval, and we require the Board and all employees to abide by these rules and regulations to ensure that no unethical incidents occur during operations.
• All employees are required to comply with our 7 major business conduct and ethics’ rules, which stipulate that our personnel should uphold principles of fairness and justice when carrying out their duties, and shall not profit from their positions, or manipulate or misuse information obtained through their roles. Our human resource department has also formulated specific measures for reporting illegal conduct (including corruption) of internal and external personnel. New employees receive training on professional ethics as soon as they join the company. In 2024, PharmaEssentia was not involved in any incidents associated with ethical management and corporate code of conduct violations, and we did not receive any associated grievance reports.

Legal Compliance

The biopharmaceutical industry is a highly regulated industry. To ensure that PharmaEssentia adheres to global regulations at all stages of drug lifecycles, we referenced domestic and overseas policy and regulation trends to formulate legal compliance strategies and management regulations for global operations. We established a total of 40 regulations, including the “Corporate Governance Code,” “Principles of Ethical Corporate Management,” “Codes of Ethical Conduct,” “Procedures for Ethical Management and Guidelines for Conduct,” “Sustainable Development Best Practice Principles,” “Operating Procedures for Handling Material Nonpublic Information and Preventing Insider Trading,” “Regulations Governing Management and Utilization of Intellectual Property Rights,” and “Regulations Governing Management of Litigation Cases/Major Disputes.” PharmaEssentia has established a regulatory affairs department, auditing department, corporate governance officer, legal department, human resources department, and other functional departments. We require our colleagues in all associated departments and our suppliers to abide by the aforementioned regulations.

MLR (Medical, Legal, and Regulatory) Committee

MLR is an interdepartmental committee composed of members from the medical affairs, legal, regulatory, and business departments. The MLR Committee is responsible for reviewing and approving all external promotions and communication documents that may be considered drug promotions or product labels by the US FDA, to ensure that the information is scientifically accurate, not misleading, and complies with all internal policies and applicable regulations.

Legal Compliance and Specific Actions in Product Lifecycles

Risk Governance Unit

The board of directors is the highest supervision and decision-making unit for risk management and is responsible for approving risk management targets and policies, and for ensuring effective operations of management mechanisms. The Audit Committee, auditing department, and corporate governance officer have been established under the Board to assist supervision of current and potential risk issues, strengthening internal monitoring mechanisms while reducing negative impacts and financial losses.

Risk Management Guidelines and Implementations

We have established internal risk management policies, procedures, and internal control systems for appropriate management of risk issues, impacts, and corresponding material topics in accordance with related regulations. Every year, the board approves corporate risk management targets and policies and also assigns senior managers to oversee promotion and execution of various issues, and ensure that risk management mechanisms are operating effectively through regular monitoring.

Risk Issues and Responses

PharmaEssentia referenced the 2018 COSO Enterprise Risk Management guidelines and biopharmaceutical industrial characteristics and requirements to classify risks into 9 categories and adopted response measures for different risks to reduce corporate impacts.

Countermeasures for Risks and Impacts

PharmaEssentia responds to negative impacts from risks using three steps: prevention, grievance reporting, and review and improvement. We established complete remedial processes for negative impacts to effectively respond to potential or emergency impacts.

In accordance with the 'Guidelines for Information Security Governance for TWSE/TPEx-Listed Companies,' the Company has established an enterprise risk management mechanism and procedures for handling information security incidents. These include clearly defined reporting processes, the assignment of dedicated personnel to handle major incidents, assessment of potential losses and impacts, and the formulation of corresponding response measures. Additionally, the Company strengthens employees’ awareness of information security and integrates it into daily operations. Through a feedback mechanism, we ensure the comprehensive implementation of information security responsibilities.

Information Security Management System

To enhance information security defenses and management mechanisms, PharmaEssentia continually amends information and communication security policies and regulations in accordance with amendments made to the “Regulations Governing Establishment of Internal Control Systems by Public Companies” and “Information and Communication Security Management Guidelines for TWSE/TPEX List-ed Companies.” In 2022, we announced on our official website that our Board had approved the establishment of the “Information Security Management Procedures” and an information security promotion team responsible for forming information and communication security promotion organizations, formulating information security policies, organizing personnel training, identifying core businesses, surveying and developing information and communication systems, conducting information security risk assessments, implementing information and communication security protection and control measures, reporting and responding to information and communication security incidents, and continuing to improve information and communication security management. The information security officer reports annually to the Board; the latest information and communication security report was presented in February 2025 and explained recent information security management implementations and corrective actions.

PharmaEssentia headquarters introduced the ISO 27001:2022 Information Security Management System in October 2023, passed audit inspections in April 2024, and received official certification on July 9.

Information Security Training

To enhance employee information security awareness, we hosted 2 information security training sessions and 2 ISO27001 training sessions in 2024 which were attended by 289 participants. Total training hours amounted to 334 hours. We also cultivated 9 employees who participated in ISO/IEC 27001:2022 lead auditor courses. All these employees underwent 6 hours of training and have received lead auditor certificates.

• Corporation Privacy Policy

Patent Positioning and Strategies

PharmaEssentia established the “Intellectual Property Management and Utilization Procedures” to regulate the acquisition, protection, maintenance, and utilization of corporate intellectual property rights. Implementations for the 2024 intellectual property management plan and the new intellectual property management plan for 2025 were reported to the Board on February 25, 2025. The Board helped to enhance corporate intellectual property strategies and protections, and effectively supervised protection measures for corporate intellectual property rights protections.

PharmaEssentia Intellectual Property Rights Strategies

Specific Global Intellectual Property Protection Actions

Employee intellectual property education and training sessions conducted in 2024 were as follows:

Patents and Trademarks

PharmaEssentia strengthens supply chain management through three aspects, working with suppliers/contractors to embody and practice sustainability principles, thereby creating long-term and stable value for the pharmaceutical industry and patients.

Supply Chain Management Strategies

• PharmaEssentia formulated the “Group Supplier Code of Conduct,” which focuses on labor rights, workplace safety and health, environmental sustainability, and business ethics. The Group Supplier Code of Conduct was signed by our chairperson and published on our website, and we hope it can serve as an industry benchmark. Additionally, in order to make strides toward our paper-free goals, we actively introduced digital systems in 2024 for routine business requisition, procurement, and verification procedures that require large amounts of paper. PharmaEssentia also launched a globally synchronized digital procurement platform. As introducing digital systems requires large amounts of manpower and time as well as rebuilding of operational processes, we postponed our “supplier code of conduct signing procedures” to prevent this from becoming a mere formality, and we plan to require our suppliers to sign the Supplier Code of Conduct in future to strengthen management of supplier responsibilities
• The quality assurance department formulated the “Outsourcing Activities Policy” and “Supplier Management Procedures” to serve as standard procedures and processes for approving suppliers and outsourcing service contractors, enabling strict monitoring of raw materials, production supplies, device/equipment supplier screening, assessment, and approval, ensuring that raw materials and equipment provided by suppliers comply with our quality, delivery time, and GMP requirements. The “Supplier Management Procedures” were amended twice in 2024 to add regulations and details on supplier categories, optimizing our management strategies.

• Supply Chain Resilience

  PharmaEssentia strives to strengthen supply chain management and response capabilities, balance cost considerations and supply stability over the long term and reduce negative supply chain impacts from emergency incidents. In 2024, we investigated inventory conditions of 4 significant high risk suppliers, requiring them to fill out shipment delivery forms to reduce supply shortage risks.

  We implement the following management measures to effectively enhance supply chain resilience:

  

• Supply Chain Management Practices

  Supplier Management by Category to enhance supplier management efficiency, PharmaEssentia headquarters, Panco, and PharmaEssentia Japan categorized suppliers involved in direct transactions with PharmaEssentia as Tier 1 suppliers based on risks and procurement amounts. GMP suppliers that cannot be easily replaced are defined as significant suppliers. Suppliers are managed based on these two categories. PharmaEssentia headquarters worked with 362 suppliers in 2024, including 47 significant Tier 1 suppliers with procurement amounts making up 63.4% of total procurement in 2024.

  

  In 2024, PharmaEssentia USA had 7 Tier 1 suppliers who all complied with GMP standards for significant Tier 1 suppliers. All suppliers have passed US and Taiwan quality inspections.

  

• Number of Suppliers Included in PharmaEssentia Internal Reviews and On-Site Audits in 2024

  • Supplier Assessment
  • 2024
  • Target for 2024

  • Total number of suppliers assessed via desk assessments/ on-site assessments
  • 190
  • % of significant suppliers: 100

  • % of unique significant suppliers assessed
  • 13.7%

  • Number of suppliers assessed with substantial actual/ potential negative impacts
  • 1

  • % of suppliers with substantial actual/potential negative impacts with agreed corrective action/improvement plan
  • 100%

  • Number of suppliers with substantial actual/potential negative impacts that were terminated
  • 0

  Corrective Action Plan for Suppliers

  • Corrective Action Plan Support
  • 2024
  • Target for 2024

  • Total number of suppliers supported in corrective action plan implementation
  • 1
  • % of significant suppliers: 100

  • ％ of suppliers assessed with substantial actual/potential negative impacts supported in corrective action plan implementation
  • 100

  Capacity Building Programs for Suppliers

  • Capacity Building Programs
  • 2024
  • Target for 2024

  • Total number of suppliers supported in corrective action plan implementation
  • 0
  • % of significant suppliers: 100

  • ％ of suppliers assessed with substantial actual/potential negative impacts supported in corrective action plan implementation
  • n/a

  In 2024, our Taiwan headquarters evaluated 362 suppliers; 9% were considered high risk, 28% were considered low risk, and 63% were considered moderate risk. The number of low risk suppliers decreased by 46% and the number of moderate risk suppliers rose by 41%, mainly as production demand increased significantly in 2024, affecting factory production processes and material needs while also posing significant challenges to delivery times compared to previous years. Therefore, we raised risk levels for associated suppliers to moderate risk to strengthen control measures.

  

• Management Mechanisms by Risk Level

  PharmaEssentia adopts the following management strategies for vendors/suppliers based on different risk levels:

  

• Response Actions Adopted for Supplier Deficiencies at Different Risk Levels

  PharmaEssentia adopted the following response actions for supplier/product deficiencies at different risk levels:

  

• Screening of New Suppliers/Contractors

  PharmaEssentia emphasizes supply chain environmental and social impacts. Our screening criteria for suppliers/contractors include 3 major indicators (quality systems, technical capabilities, and services and supporting capabilities). We have also incorporated environmental and social indicators in supplier screening mechanisms. In 2024, our Taiwan headquarters added 148 new suppliers and contractors, including 99 local suppliers.

  

• Implementations in 2024

  In 2024, PharmaEssentia headquarters conducted online sustainability self-assessment surveys on 43 priority suppliers who complied with GMP requirements and supplied services/products closely linked to environmental protection issues:

  

• Enhancing Sustainability Awareness in Procurement Personnel

  To strengthen procurement personnel knowledge of sustainable supply chains, we organized diverse ESG competency training, including:

  • Annual ESG training and consultant guidance: Collaborated with professional ESG consultants and hosted annual training encompassing sustainability governance, carbon management, supply chain risk controls, and other themes, assisting our colleagues to keep informed of the latest sustainable development trends and practical applications
  • Internal training and interdepartmental discussions on ESG topics: Discussions on supplier sustainability risk assessment methods and meetings to compile data on supply chain carbon emissions
  • Industrial ESG experience sharing and exchanges: We invited industry experts to share practical ESG experiences such as corporate promotion of internal carbon pricing, supply chain carbon inventories, and sustainability management strategies and achievements to promote internal learning and external exchanges, and to enhance overall sustainable development performance
  • External organization lectures, courses, and seminars: Non-periodic participation in external activities (such as the "Viewing sustainable investment from supply chain management" seminar and the "EcoVadis global supply chain sustainability evaluation courses") to obtain the latest ESG knowledge and international regulations

• Supplier Code of Conduct