ANNUAL
REPORT
2015
b
Company Overview
2
4 Business Snapshot
Chairman’s Address
6
7
CEO and Managing Director’s Report
9 Operating Review
16 Board of Directors & Senior Management
18 Corporate Governance Statement
24 Directors’ Report
30 Remuneration Report (Audited)
35 Auditor’s Independence Declaration
36
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
37
38
39
Independent Auditor’s Report
40 Notes to the Financial Statements
62 Directors’ Declaration
63
65 Shareholder Information
68 Glossary
69 Corporate Directory
ACRUX (ASX: ACR) IS AN AUSTRALIAN DRUG
DELIVERY COMPANY, DEVELOPING AND
COMMERCIALISING A RANGE OF PATIENT-
PREFERRED PHARMACEUTICAL PRODUCTS
FOR GLOBAL MARKETS. USING INNOVATIVE
TECHNOLOGY, OUR DRUGS CAN BE
ADMINISTERED THROUGH THE SKIN OR NAILS,
BOTH TOPICALLY AND TRANSDERMALLY.
1
ANNUAL REPORT 2015 COMPANY OVERVIEW
COMPANY
PROFILE
ACRUX (ASX: ACR) IS AN AUSTRALIAN DRUG DELIVERY COMPANY, DEVELOPING AND COMMERCIALISING A RANGE
OF PATIENT-PREFERRED PHARMACEUTICAL PRODUCTS FOR GLOBAL MARKETS. USING INNOVATIVE TECHNOLOGY,
OUR DRUGS CAN BE ADMINISTERED THROUGH THE SKIN OR NAILS, BOTH TOPICALLY AND TRANSDERMALLY.
Acrux has three products marketed by licensees within major markets around the world, as well as additional
products at earlier stages of development. Our unique technology, used in marketed products such as
Axiron®, Evamist® and Lenzetto®, are based on fast-drying, low volume, accurately-dosed solutions containing
penetration enhancers, that when applied topically, deposit the drugs through the skin with long-lasting effects.
We are currently developing a range of generic and patent-preferred products. Acrux has on-site laboratories,
a Good Manufacturing Practice (GMP) manufacturing suite, clinical and the commercial experience to facilitate
these development projects.
GROWTH STRATEGY
Pipeline projects
Improved chemical entity portfolio
Pipeline projects
Generic portfolio
Existing portfolio
Wave 3: Improved chemical entity portfolio
Proprietary product portfolio with intellectual
property protection
Reformulation with superior product profiles
for unmet patient needs
Wave 2: Generic portfolio
Product candidates identified
Abbreviated regulatory and clinical pathways
Wave 1: Extend products from our existing portfolio
Estradiol launch outside the United States
New distributor (Perrigo) for Estradiol within
the United States
Continued growth of Axiron sales outside the
United States
Improved product life cycle management
2011
Timing of development
2025
Acrux is building a diversified portfolio, maximising its existing assets and
developing both proprietary and generic projects for longer term growth. Each
growth wave provides a different investment profile, formulation development
cycle and clinical and regulatory program. Acrux will continue to commercialise its
products with corporate partners. The timing of partnerships will be assessed to
accommodate investment requirements and capital returns to shareholders.
2
BUSINESS
MILESTONES
$11.1M
ACRUX RECORDS ITS
6TH CONSECUTIVE
PROFITABLE YEAR: NPAT
OF $11.1 MILLION FOR THE
YEAR ENDED 30 JUNE 2015
$23.1M
STRONG bALANCE SHEET
CASH RESERVES OF
$23.1 MILLION AT
30 JUNE 2015
ESTRADIOL SPRAY
LENZETTO REGULATORY
APPROVAL GRANTED
IN EUROPE
GENERIC PORTFOLIO
TOPICAL AND
TRANSDERMAL GENERICS
PORTFOLIO IDENTIFIED
AND DEVELOPMENT
INITIATED
NSAID
NON-STEROIDAL ANTI-
INFLAMMATORY DRUG
PROPRIETARY PORTFOLIO:
SUPERIOR FORMULATIONS
DEVELOPED
$1.02
TOTAL CAPITAL RETURNED
TO SHAREHOLDERS VIA
DIVIDEND OVER THE LAST
5 YEARS: $1.02/SHARE
3
ANNUAL REPORT 2015 bUSINESS SNAPSHOT
BUSINESS
SNAPSHOT
FINANCIAL METRICS
2014/15
2013/14
2012/13
2011/12
6 cents
8 cents
8 cents
8 cents
–
12 cents
–
–
6.7 cents
16.8 cents
4.2 cents
4.4 cents
$23.1
$11.1
$25.4
$25.8
$28.0
$53.9
$22.8
$6.9
$16.7
$30.0
$7.4
$10.7
Final dividend per share
Special dividend per share
Earnings per share
Cash (million)
Net profit after tax (million)
Revenue (million)
BUSINESS HIGHLIGHTS
Earnings per share 6.7 cents, facilitating a final dividend payment of 6 cents per share, fully-franked
Board-endorsed strategy with a clear focus on diversifying our product pipeline and creating future
growth opportunities utilising the Acrux technology platform
Good progress on our onychomycosis program, targeting a once daily treatment with a superior
drug permeation profile
Topical and transdermal generics pipeline identified and development initiated
Superior permeation profiles demonstrated with formulation of non-steroidal anti-inflammatory
drugs (NSAID), compared to market leaders
Acrux net profit after tax (NPAT) of $11.1 million (2014: $28.0 million). Profit in the prior year was
higher as milestone payments were received in 2014
Royalty income of $24.6 million (2014: $24.7 million). Declines in the sales volumes of Axiron were
largely offset by improvements in the AUD$:USD$ exchange rate
Cash reserves: $23.1 million (2014: $25.8 million) after payment of dividends in the current and
prior financial years. Acrux does not have any debt facilities
Regulatory approval for Lenzetto (estradiol spray) granted in Europe
BUSINESS OUTLOOK FOR 2015/16
Launch of Lenzetto in Europe, Acrux’s unique estradiol spray for treating post-menopausal
symptoms which is licensed exclusively in Europe to Gedeon Richter
2016 National Formulary status for Axiron has been secured at two of the largest commercial
prescription benefit managers (PBMs)
Axiron anticipated to maintain market share during the 2016 financial year, with stabilisation
of prescription volumes over the first half 2015 calendar year
Progression of development programs for multiple product candidates with no material change
to ongoing cash operating cost needs (until one or more projects enters into clinical trials)
4
UNITED STATES TESTOSTERONE MARKET SHARE
US TESTOSTERONE MARKET SHARE
US TESTOSTERONE MARKET SHARE
FY2014
FY2015
Androderm
Axiron
Androgel
Combined Generics
Fortesta
Testim
AXIRON HAS
HELD STEADY
MARKET SHARE
NSAID PRODUCT DEVELOPMENT
IN-USE DOSE
In vitro permeation of diclofenac formulations
)
2
m
c
/
g
u
(
Approved Comparator Gel
Approved Comparator Spray
Acrux Formulation
)
d
e
d
n
i
l
b
l
e
a
c
s
(
*
M
E
S
-
/
+
d
e
t
a
e
m
r
e
p
C
D
e
v
i
t
a
u
m
u
c
I
l
DAILY DOSE OF ACRUX
DICLOFENAC FORMULATION
HAS ACHIEVED A SIMILAR
PERMEATION PROFILE
WITH A 34-FOLD LOWER
REQUIRED DOSE COMPARED
TO AN APPROVED
COMPARATOR SPRAY
n
a
e
M
0
8
16
*: Standard Error of the Mean (SEM)
24
Time (h)
32
40
48
Approved European Gel
Acrux Formulation A
Acrux Formulation B
Acrux Formulation C
i
n
k
s
n
a
m
u
h
s
s
o
r
c
a
n
e
f
o
r
p
u
b
I
f
o
t
n
u
o
m
a
l
e
v
i
t
a
u
m
u
C
)
d
e
d
n
i
l
b
l
e
a
c
s
(
0
6
0
12
24
36
Time (h)
48
60
72
ACRUX IBUPROFEN PRODUCT FORMULATIONS
DEMONSTRATE FASTER UPTAKE THROUGH HUMAN SKIN
COMPARED TO AN EXISTING MARKET COMPETITOR
5
ANNUAL REPORT 2015
CHAIRMAN’S ADDRESS
CHAIRMAN’S
ADDRESS
ON BEHALF OF THE BOARD, I WOULD LIKE TO PRESENT
TO YOU THE 2015 ANNUAL REPORT FOR ACRUX LIMITED.
We continue to have a strong
cash position and were pleased
to have announced a 6 cent fully-
franked dividend for the year ended
30 June 2015.
Your Board has endorsed a business
strategy which will result in the
Company having a more balanced
asset portfolio. Our portfolio includes
development programs which are
expected to generate new intellectual
property, as well as programs which
will be able to achieve product
commercialisation through generic
regulatory pathways. This revised
portfolio will enable us to diversify
our earnings base in the future and
broaden our future income streams.
The market for Axiron appears to
have stabilised since the publication
of the Drug Safety Communication
by the Food and Drug Administration
(FDA) in the United States in March
2015. Since then, labelling changes
have been implemented for all
testosterone products. Sponsors of
marketed testosterone products are
in dialogue with the FDA over a long
term safety trial. The stabilisation of
the testosterone market and resulting
royalty revenue stream for Axiron will
be able to fund further development
work on our product pipeline.
Since our last Annual Report, Perrigo
Company plc has been appointed
as the distributor for Evamist in the
US, resulting in a more effective
distribution franchise for the product.
In Europe, Gedeon Richter has
received a number of regulatory
approvals for Lenzetto. Evamist and
Lenzetto are the US and European
trademarks respectively for our
proprietary estradiol spray.
We continue to progress development
of an antifungal therapeutic for
onychomycosis. Subject to the results
of work currently being undertaken as
part of the development program, new
intellectual property is expected to be
generated. In a separate initiative, we
have made significant progress with
superior formulations of two non-
steroidal anti-inflammatory drugs.
As evidenced by this list of
developments since our last annual
report, Michael Kotsanis and the
senior management team have had
a very active year since Michael’s
appointment as CEO. Acrux is well
positioned for continued regeneration
following the disruption of the US
testosterone replacement therapy
market.
Ross Dobinson
Chairman
Ross Dobinson
THE STABILISATION OF
THE TESTOSTERONE
MARKET AND RESULTING
ROYALTY REVENUE STREAM
FOR AXIRON WILL BE
ABLE TO FUND FURTHER
DEVELOPMENT WORK ON
OUR PRODUCT PIPELINE.
6
CEO AND MANAGING DIRECTOR’S REPORT
CEO AND
MANAGING
DIRECTOR’S
REPORT
It is my pleasure to summarise the
status of our key activities through
my Chief Executive Officer’s Review
for the first time since joining Acrux
in November 2014. Since my
appointment to Acrux the senior
management team has invested
significant time reviewing the
Company’s corporate strategy and
related activities, our development
pipeline and organisational structure.
We have implemented significant
changes throughout the Company,
including in our pipeline focus, our
organisational structure and our
strategy. We have been mindful of
the need to balance our development
spend on commercially attractive
development projects with a return to
shareholders through the payment of
a fully-franked dividend of 6 cents for
the 2015 financial year.
Product development
pipeline
It is incumbent upon us to diversify
our business and offset our reliance
on Axiron as a key value driver within
the Company. Our strategy has been
refined and will continue to evolve.
A key element has been to re-focus
our development efforts. We have
evaluated the use of our transdermal
technology on a substantial number
of development opportunities and to
date have identified a commercially
attractive portfolio of projects.
We continue to focus on key pipeline
assets including the development of a
product for onychomycosis, for which
we are leveraging our existing internal
skills, technology and laboratory
facilities. Our focus on this project
has been to develop formulations
that have enhanced nail penetration
and we have assessed a number of
different antifungals for that purpose,
with successful nail permeation seen
with several of these antifungals.
However, our goal is not just improved
permeation of the antifungal to
the site of the nail infection, but a
superior delivery profile, which will
allow us to predict clinical success
with a greater order of precision.
Our work here continues. We have
also commenced work on a number
of generic transdermal and topical
product development opportunities.
These opportunities represent exciting
additions to the pipeline, with lower
development risks that have shorter
development timelines and lower
development costs than those needed
for novel drugs.
The development progress we made
throughout the year on our two NSAID
projects has yielded very encouraging
skin permeation results, with superior
permeation profiles to the leading
products that are commercially
available in major markets. This
is another demonstration of our
capabilities in the transdermal
drug delivery field.
Michael Kotsanis
Transdermal capabilities
Acrux is one of the few Australian
biotech companies to have
commercialised human prescription
pharmaceutical products. This
gives us the confidence to develop
additional products utilising our
proven capabilities to drive further
shareholder value for the Company.
We continue to evaluate additional
projects for our transdermal
technology. The quality of these
opportunities and the due diligence
we conduct in understanding
and evaluating the technical
and commercial feasibility is
paramount prior to embarking on
any development work. We will
continue to evaluate new product
concepts carefully.
Axiron
Our attention within our
commercialised portfolio is naturally
focused on Axiron (our testosterone
replacement therapy), which
currently provides the bulk of our
royalty income. Whilst there have
been regulatory assessments in a
number of markets where Axiron is
sold, the most impactful assessment
has been by the FDA in the United
States, which is where over 90% of
our sales occur. The FDA published
a Drug Safety Communication in
March 2015.
7
ANNUAL REPORT 2015 CEO AND MANAGING DIRECTOR’S REPORT
CEO AND MANAGING
DIRECTOR’S REPORT
CONTINUED
Safety concerns over the testosterone
drug class impacted sales volumes of
the testosterone replacement therapy
market (including Axiron) in 2014.
However, Axiron volume trends to date
in calendar year 2015 appear to have
stabilised. We have been pleased with
the continued growth of Axiron sales
in Canada, Brazil, Germany, Australia
and South Korea. Our royalty stream
for Axiron is paid in US dollars and
the Australian dollar exchange rate
has helped our year on year royalties
to remain relatively stable.
Estradiol Spray
European Launch
We look forward to the launch of our
estradiol product in Europe later in the
2016 financial year and were excited
to achieve the first of the country
regulatory approvals in Europe in
recent weeks. This generated an
important financial milestone and
we believe our partner (Gedeon
Richter, which has a strong women’s
health franchise) is well positioned
to execute its sales and marketing
strategy. Subsequent sales will
generate royalties for Acrux.
We look forward to communicating
news of the various country launches
of our estradiol product over coming
months, as well as reporting on
meaningful progress with our
development projects.
Changes to the
Management Team
We have made some important
additions and changes in our
management team during the year:
Sharon Papworth commenced
with Acrux as CFO and Company
Secretary in September 2014.
Having previously held senior
finance roles at ASX and US
listed organisations, Sharon's
experience spans industries
including pharmaceuticals, media,
fast-moving consumer goods and
professional services.
Felicia Colagrande was promoted
to Product Development and
Technical Affairs Director
in February 2015. Felicia
has a broad background in
pharmaceutical operations,
dermal drug development, quality
control, analytical development
and production. She has 25 years’
experience in the pharmaceutical/
biotech industry and joined Acrux
in 2001.
Charles O’Sullivan was appointed
as Portfolio Director in July
2015. He is an experienced
healthcare executive, with a strong
background in the pharmaceutical
industry, gained over 20 years in
both senior executive and clinical
roles with large multinational
pharma businesses.
In summary, I am excited by the
opportunities we are pursuing
and see significant upside for the
Company in the coming years.
Michael Kotsanis
CEO and Managing Director
ACRUX IS ONE OF
THE FEW AUSTRALIAN
BIOTECH COMPANIES TO
HAVE COMMERCIALISED
HUMAN PRESCRIPTION
PHARMACEUTICAL
PRODUCTS. THIS GIVES
US THE CONFIDENCE
TO DEVELOP ADDITIONAL
PRODUCTS UTILISING OUR
PROVEN CAPABILITIES
TO DRIVE FURTHER
SHAREHOLDER VALUE
FOR THE COMPANY.
8
OPERATING REVIEW
OPERATING
REVIEW
Acrux Pipeline
Formulation
Design
Pre-clinical
Development
Phase I
Phase II
Phase III
Registration
Commercial
Marketed Products
Indication(s)
Product name
Hypogonadism
Axiron®
Menopausal
symptoms
Estradiol MDTS®
(USA) – Evamist®
Post-operative
pain in dogs
Recuvyra®
Product Pipeline
Indication(s)
Product name
Menopausal
symptoms
Estradiol MDTS®*
(Europe) – Lenzetto®
Antifungal
(Onychomycosis)
ACR-065
Pain and
inflamation
(Diclofenac)
Pain and
inflamation
(Ibuprofen)
ACR-046
ACR-048
Identified multiple
generics
Various
Initial generic
portfolio
Undisclosed
Companion
animal health
Undisclosed
*Ex-US licensees for Estradiol include Gedeon Richter, Aspen, Dream Pharma, Vifor. Trademarks vary by country/region.
Onychomycosis
Acrux continues to develop a topical antifungal product for the treatment of onychomycosis (fungal infection in fingernails and
toenails). It is anticipated that the product will be a once daily application that provides better efficacy than the current lead
comparator product. In parallel with ongoing preclinical studies, the clinical trial design and regulatory pathway for the product
are being planned.
Dispute with Hexima
Our dispute with Hexima over the antifungal collaboration agreement remains formally unresolved. This does not affect our
current onychomycosis program.
9
ANNUAL REPORT 2015 OPERATING REVIEW
OPERATING REVIEW
CONTINUED
ACRUX IS BUILDING A
DIVERSIFIED PRODUCT
PORTFOLIO BASED ON
MAKING CAPITAL RETURNS,
MAINTAINING SUSTAINABLE
MARKET ADVANTAGES AND
PROVIDING CLEAR BENEFITS
TO PATIENTS, PHYSICIANS
AND HEALTHCARE PAYERS.
Pain
Acrux’s proprietary topical NSAID
products for pain have completed
formulation design.
Diclofenac
Based on preclinical studies, the
daily dose of Acrux Diclofenac
formulation has achieved a similar
permeation profile with a 34-fold
lower dose requirement compared
to an approved comparator spray.
In addition, the permeation profile
is such that the dose would support
a once daily application. Current
competitors’ products require at
least a twice daily application to
maintain the drug delivery profile.
This differential feature provides
a significant improvement over
existing products.
Ibuprofen
Early studies indicate that Acrux’s
ibuprofen product formulations
demonstrate a significantly faster
uptake through human skin relative
to existing competitors, which would
result in a much faster onset of pain
relief. Our product delivery profile also
supports a once daily application,
providing a significant improvement
over currently approved products.
With both of these NSAID
opportunities, Acrux intends to work
closely with prospective corporate
partners that are both capable and
committed to further development
and marketing in key territories.
10
OPERATING REVIEW
Generics
The first wave of topical and transdermal generic product opportunities has been identified and product development has
been initiated. The local market value of the initial 12 products identified has market sales of US$2.4 billion in countries
we are targeting. For competitive reasons the pipeline remains undisclosed.
Axiron
IMS market share for lead testosterone products
60 .00 %
50 .00 %
40 .00 %
30 .00 %
20 .00 %
10 .00 %
0.00%
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15 Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
AndroGel 1%
Generic 1%
Androgel 1.62%
AXIRON
Axiron TRx (prescription volume) for financial year 2014/15
Axiron Prescription Volumes (TRx)
July – December 2014
Axiron Prescription Volumes (TRx)
January – June 2015
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Jan-15 Feb-15 Mar-15 Apr-15 May-15 June-15
Source: IMS data
Source: IMS data
Axiron’s net sales for the 2014/15
financial year totaled US$155.4
million compared to US$181.1 million
in the prior year. Our royalty stream
for Axiron is paid in US dollars and
the Australian/US dollar exchange rate
has helped our year on year-royalties
to remain stable. Royalty receipts from
Axiron were $24.3 million, compared
to $24.5 million in the prior year.
Axiron’s sales volumes have remained
relatively steady throughout the 2015
calendar year. Axrion’s market share
for both new prescriptions and total
prescriptions for the last financial
quarter was consistent with the prior
quarter. The introduction of 1%
generics of competitors’ formulations
through FY2015 has had no impact
on Axiron’s market share.
11
ANNUAL REPORT 2015 OPERATING REVIEW
OPERATING REVIEW
CONTINUED
Axiron FDA Update
In March 2015, the Food and
Drug Administration released a
Communication regarding the use of
Testosterone Replacement Therapy
in the US, titled “FDA Cautions About
Using Testosterone Products for Low
Testosterone Due to Aging; Requires
Labeling Change to Inform of Possible
Increased Risk of Heart Attack And
Stroke”. These class labelling changes
were implemented for all testosterone
products in June 2015. Sponsors
of marketed testosterone products
in the United States are in dialogue
with the FDA over a long term safety
trial. The protocols for this are being
planned with finalisation expected in
mid-2016.
Axiron EMA Update
In November 2014, the European
Medicines Agency (EMA) released
a statement regarding the use of
Testosterone Replacement Therapy
in Europe, titled: “No consistent
evidence of an increased risk of
heart problems with testosterone
medicines”. The committee
considered that the benefits of
testosterone continue to outweigh
its risks but recommended that
testosterone-containing medicine
should only be used where lack of
testosterone has been confirmed
by signs and symptoms as well as
laboratory tests. Labelling changes
were not required for Axiron
in Europe.
THE 2016 NATIONAL
FORMULARY STATUS
FOR AXIRON HAS BEEN
SECURED AT TWO OF THE
LARGEST COMMERCIAL
PRESCRIPTION BENEFIT
MANAGERS (PBM).
12
OPERATING REVIEW
Axiron Litigation
The Acrux patent concerning
the underarm administration of
testosterone formulations was granted
by the United States Patent and
Trademark Office (USPTO) in May
2013. In the United States, Axiron is
now protected by a number of patents
which have expiry dates of 2030,
2027, 2026 and 2017. The patents
cover 3 different aspects of the
product, including the formulation and
delivery method, administration to the
underarm and the physical applicator.
In May 2013, November 2013,
December 2014 and July 2015,
Acrux DDS Pty Ltd (a wholly-owned
subsidiary of Acrux Ltd.) together
with Eli Lilly and Company (“Lilly”)
filed lawsuits in the United States
District Court for the Southern
District of Indiana against 1) Perrigo
Israel Pharmaceuticals Limited, 2)
Watson Laboratories Inc. (“Activis”),
3) Amneal Pharmaceuticals LLC
and 4) Lupin Pharmaceuticals Inc.,
respectively for infringement of issued
patents covering Axiron. In each
instance, the patents are owned
by Acrux DDS and are exclusively
licensed to Lilly. The lawsuits were
filed in response to notice letters
sent by each company regarding its
filing with the United States Food
and Drug Administration of an
Abbreviated New Drug Application
(ANDA) for a Testosterone Metered
Dose Transdermal Solution.
The letters each stated that the
respective ANDAs contain Paragraph
IV certifications with respect to
United States patents that include
claims relating to the application
of testosterone formulations to the
underarm and to the applicator
used to apply Axiron. Activis further
includes paragraph IV certifications
with respect to United States patents
that include claims relating to the
quick-drying formulation. A Paragraph
IV certification alleges invalidity,
unenforceability and/or non-
infringement of a patent.
Throughout 2014, a number of
pending product liability lawsuits were
filed against Acrux and Lilly in the
United States District Court for the
Northern District of Illinois, including
claims that assert injury caused by
testosterone replacement therapy.
These cases, brought by private
plaintiffs, were consolidated for pre-
trial purposes in the United States
District Court for the Northern District
of Illinois under the Multi-District
Litigation Rules as Testosterone
Replacement Therapy Products
Liability Litigation, MDL No. 2545.
Estradiol Spray
The first product developed by Acrux
was an estradiol spray for women to
treat the symptoms of menopause.
The spray was approved by the
FDA in 2007 and launched into
the US market in 2008. Branded
Evamist, the spray is now distributed
in the United States by Perrigo
Company plc. Evamist US net
sales are currently approximately
US$10 million per annum.
In June 2013, Acrux appointed
Gedeon Richter to commercialise
the product in certain ex-US markets
and received US$1 million upon
signing the agreement. In September
2015, Gedeon Richter and Acrux
announced that the product, named
Lenzetto, received multiple regulatory
approvals in European territories,
triggering milestone payments totaling
US$2 million. These approvals of
Lenzetto were granted after the
European decentralised procedure
(DCP) was completed with the
first country approval triggering a
milestone payment of US$ 1 million
and the second and third approvals
triggering milestone payments of
US$ 0.5 million each. Initial launches
are planned for the first half of
calendar year 2016 following pricing
and reimbursement approvals.
Finance
30 June 2015
$m
30 June 2014
$m
30 June 2013
$m
30 June 2012
$m
Product agreement revenue
Interest, grant and other income
Total revenue
Royalties payable
Capitalised development amortisation
Other expenditure
Total expenditure
Profit before tax
Income tax (expense)/benefit
Profit after tax
Earnings per share
Net cash inflow/(outflow)
Dividend paid
Net cash
24.6
0.8
25.4
(0.9)
(1.3)
(6.4)
(8.6)
16.8
(5.7)
11.1
53.4
0.5
53.9
(1.8)
(1.3)
(6.9)
(10.0)
43.9
(15.9)
28.0
15.5
1.2
16.7
(0.5)
(1.3)
(4.8)
(6.6)
10.0
(3.1)
6.9
9.0
1.7
10.7
(0.3)
(0.2)
(5.3)
(5.8)
4.9
2.5
7.4
6.7 cents
16.8 cents
4.2 cents
4.4 cents
10.5
(13.3)
23.1
36.3
(33.3)
25.8
6.3
(13.4)
22.8
(2.5)
(0.6)
30.0
13
ANNUAL REPORT 2015 OPERATING REVIEW
OPERATING REVIEW
CONTINUED
ACRUX GENERATES
INCOME FROM
COMMERCIALISED
PRODUCTS, IS
CASHFLOW POSITIVE
AND MAINTAINS
A LOW OPERATING
COST BASE.
14
Revenue
Total revenue for the financial
year was $25.4 million (2014:
$53.9 million). Revenue from product
agreements was $24.6 million (2014:
$53.4 million). No milestones were
recognised during the year (2014:
$28.7 million). The prior year revenue
included two one-off milestones
- firstly, $28.0 million (US$25
million) from Lilly for Axiron sales
exceeding US$100 million during the
2014 calendar year and secondly,
a $0.7 million (US$0.6 million)
milestone from Gedeon Richter
following the first European regulatory
filing for Acrux’s estradiol spray in
Europe. Interest income contributed
$0.6 million (2014: $0.5 million).
Expenses
Operating expenditure decreased
to $8.6 million (2014: $10.0 million).
Royalty payments due to Monash
Investment Trust decreased to
$0.9 million (2014: $1.8 million), in
line with decreased product income.
The continued strength of the US
dollar against the Australian dollar
resulted in a favourable conversion
of product income, which is received
in US dollars. No foreign exchange
losses were recorded during the
financial year (2014: $1.2 million).
Directors’ fees decreased to
$0.4 million (2014: $0.6 million) while
employee benefits expense increased
to $2.7 million (2014: $2.3 million).
Professional fees increased to
$0.7 million (2014: $0.3 million) as
a result of investment in strategic
advice, coupled with legal costs
incurred in the dispute with Hexima.
OPERATING REVIEW
Milestones
Under our agreements, Acrux may
also be eligible to receive milestones
for defined product achievements.
During the quarter ended September
2015, Acrux announced that a
US$2 million milestone was earned
upon receipt of regulatory approvals
for Lenzetto in Europe. Sales of
Axiron are not anticipated to trigger
a sales based milestone during 2016,
however a revenue based milestone
payment of US$50 million is payable
upon Axiron achieving an undisclosed
global sales hurdle. Acrux may be
eligible for further milestone payments
totaling US$120 million over the four
financial years commencing 2018/19.
Risk and uncertainty
Forward-looking statements are
subject to risks and uncertainties
and have been made throughout
this report. Such statements
involve known and unknown
risks and important factors that
may cause the actual results,
performance or achievements of
Acrux to be materially different from
statements made in this report.
A non-cash expense of $0.8 million
(2014: $0.6 million) was recorded
for employee share options granted
during the reporting period, as
required by accounting standard
AASB 2.
Income tax expense for the
financial year was $5.7 million
(2014: $15.9 million) representing
approximately 33.8% of profit before
income tax. Acrux Limited is a
Pooled Development Fund (PDF).
The income tax expense recorded is
the result of the tax effect particular
to a PDF. PDFs are taxed at 15% on
operating income. Subsidiaries of a
PDF are taxed at 30% on operating
income. Groups containing a PDF
are not permitted to consolidate for
tax purposes. Further information
regarding income tax expense is
provided at Note 1(j) of the notes to
the financial statements following.
Cash flow
Cash reserves at the end of the
financial year were $23.1 million
(2014: $25.8 million). Net cash
outflow over the period totaled
$2.9 million (2014: a net cash inflow
of $3.0 million was recorded).
The outflow of cash recorded for
financing activities represents
the payment of $13.3 million
(2014: $33.3 million) of dividends
to shareholders, representing
the 8 cent final dividend for
the 2013/14 financial year.
Cash receipts from product
agreements decreased to
$25.2 million (2014: $53.4 million)
with no milestones received. Interest
receipts added $0.6 million (2014:
$0.5 million). Payments to suppliers
and employees decreased to
$6.5 million (2014: $6.7 million).
Income taxes paid decreased to
$8.9 million (2014: $10.8 million).
Outlook
Acrux generates income from
commercialised products, is
cashflow positive and maintains
a low operating cost base.
Operating cost base
Acrux will continue to progress its
product pipeline. The annual cash
operating expenditure to execute
our preclinical program is expected
to remain consistent with the 2015
financial year, being $5.5 million.
This excludes Monash royalty
payments and non-cash items. This
expenditure covers maintenance of
the Company’s operations, research
and development, and intellectual
property expenses. Royalty payments
due to Monash Investment Trust
cease in February 2017. The
expenditure profile of the business
will naturally increase as projects
enter into clinical trials. Acrux will
update the market accordingly
prior to this occurring.
Royalties
In the short term, Acrux will derive the
majority of its revenue under its global
license agreement with Lilly for the
marketing and distribution of Axiron.
Royalty income will increase from
our estradiol products. In the US,
Perrigo has been appointed as the
distributor through Perrigo’s women’s
health franchise. As noted previously,
Acrux announced the approval of
Lenzetto, Acrux’s estradiol spray for
the relief of menopausal symptoms
for women, licensed exclusively to
Gedeon Richter in Europe. Launch
in Europe is expected in the first
half of calendar 2016.
15
ANNUAL REPORT 2015 bOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS
& SENIOR MANAGEMENT
Ross Dobinson
BBus
Non-Executive Chairman
Bruce Parncutt
BSc, MBA
Non-Executive Director
Tim Oldham
BSc.Hons, LLB Hons, PhD
Non-Executive Director
Ross has been a Director
since 1998 and was
appointed Chairman in
January 2006 and then
Executive Chairman from
1 July 2012 to October
2014. He is a founder
and former CEO of Acrux.
Ross has a background
in investment banking
and stockbroking. He
is currently Managing
Director of TSL Group
Ltd, a corporate advisory
company specialising in
establishing and advising
life sciences companies.
He was a founding Director
of Starpharma Holdings
Limited (ASX: SPL) since
May 1997, former Executive
Chairman of Hexima Limited
which was listed on the
ASX from July 2010 to June
2011, former Chairman of
TPI Enterprises Limited
(ASX:TPE), a former
Director of Roc Oil Company
Limited (ASX: ROC) and a
former Director of Racing
Victoria Limited.
16
Bruce joined the board
on 30 April 2012. His
career spans over 40
years’ in investment
management, investment
banking and stockbroking
including seven years as
Chief Executive of listed
securities firm Mclntosh
Securities (1990-1996)
and three years as Senior
Vice President of Merrill
Lynch (1997-1999). His
experience includes
extensive involvement
in financial analysis,
merger and acquisition
transactions, capital-
raisings, and investment
in companies across a
broad spectrum from early
stage to mature public
companies. He holds a
Bachelor of Science, an
MBA, and is a Member
of the Financial Services
Institute of Australasia.
Bruce is Chairman of the
investment and corporate
advisory firm Lion Capital.
He is President of The
National Gallery of Victoria
and a Board Member of the
NGV Foundation and the
Australian Ballet Company.
He was previously a
Director of ASX listed
Stuart Petroleum Limited
(from Aug 2010 to May
2011) and was Director of
Mclntosh Securities Limited,
Australian Stock Exchange
Ltd and Vision Systems Ltd
for varying periods prior to
1 July 2010.
Tim joined the board in
October 2013. He has
more than a decade of
life sciences business
development, alliance
management and sales
and marketing experience
in Europe, Asia and
Australia. He is CEO and
Managing Director of Cell
Therapies Pty Ltd, a leading
Asia Pacific provider of
collection, manufacturing,
delivery and distribution
capabilities for stem cell
therapies and regenerative
medicine and was President
of Asia Pacific for Hospira
Inc. (2007 to 2012),
having held a variety
of senior management
roles with Mayne Pharma
(2002 to 2007) prior to
its acquisition by Hospira.
These roles encompassed
the development and
commercialisation of
pharmaceuticals, devices,
biologics and cellular
therapies. Prior to this,
Dr. Oldham was an
engagement manager with
McKinsey & Co (1997
to 2001). Tim has been
chairman of the European
Generic Medicines
Association Biosimilars and
Biotechnology Committee,
a Director of the Generic
Medicines Industry
Association and a member
of the Pharmaceutical
Industry Strategy Group.
He is also a Director of
iSonea Ltd (ASX: ISN).
Michael Kotsanis
BSc, MBus
Managing Director and
Chief Executive Officer
Michael commenced as
CEO and Managing Director
of Acrux in November,
2014. He has over 25
years’ of experience in the
pharmaceutical industry
and has significant senior
Ieadership experience
across the global
pharmaceutical markets.
Michael was formerly the
Chief Commercial Officer
for Synthon Holding BV, a
specialty pharmaceutical
company based in The
Netherlands, a position
he held from mid-2010.
Prior to Synthon, he served
as President, Europe,
Middle East and Africa,
for Hospira, the global
leader in generic injectable
pharmaceuticals. Michael
joined Hospira following
its acquisition of Mayne
Pharma in 2007, where
he served as President
Asia Pacific from 2002.
He joined Mayne following
their acquisition of Faulding
Pharmaceuticals in 2001,
where he held responsibility
for commercial activities in
Australia and New Zealand.
Prior to Faulding, Michael
held a variety of sales and
marketing positions with
Boehringer Ingelheim
over an 11 year period.
Michael earned a bachelor’s
degree in science from
Monash University, and a
master’s degree in business
from the University of
Technology, Sydney.
Sharon Papworth
B.Com, CA
Chief Financial Officer
and Company Secretary
Sharon commenced with
Acrux as CFO and Company
Secretary in September
2014. She has 18 years’
of finance experience,
leading both commercial
and technical functions.
Having previously held
senior finance roles at ASX
and US listed organisations,
Sharon’s experience spans
across industries including
Pharmaceuticals, Media,
Fast Moving Consumer
Goods and professional
services. Prior to joining
Acrux, Sharon was General
Manager Finance at Salmat
Limited (2010-2014)
and Regional Financial
Controller for Australia and
New Zealand at Hospira
(2004-2010), initially joining
Mayne Pharma prior to
its acquisition by Hospira.
These roles supported
business growth strategies,
providing financial advisory
and leadership. Sharon
commenced her career at
KPMG in the audit division
and worked with a broad
range of clients including
ASX listed entities. Sharon
is a Chartered Accountant
who also holds a Bachelor
of Commerce with majors in
Accounting and Marketing.
Nina Webster
Ph.D., M.IP.Law, MBA
Commercial Director
Nina has over twenty years
in the pharmaceutical
industry, with leadership
roles in business
development, project
management, intellectual
property portfolio
management, research
and development and
general management.
Most recently, Nina spent
two years with lmmuron
Limited where, as Director
of Commercialisation
and Intellectual Property,
she was responsible for
the intellectual property
portfolio and research &
development. Prior to this,
Nina spent ten years with
Acrux Limited as Director
of Business Development,
responsible for the strategic
identification, development
and maintenance of
commercial partnerships
globally, and six years in
research and development
at Wyeth in the UK, gaining
experience from formulation
development through to
pharmaceutical scale-up
and technology transfer.
Nina holds a Ph.D in
Pharmaceutics from Cardiff
University, a Bachelor
degree in Pharmacology,
a Masters degree in
Intellectual Property Law
from Melbourne University
and an MBA from RMIT.
Felicia Colagrande
BSc(Hons)
Product Development and
Technical Affairs Director
Felicia was appointed
Product Development and
Technical Affairs Director
in February 2015. Felicia
has a broad background in
pharmaceutical operations,
dermal drug development,
quality control, analytical
development and
production. Felicia leads
and facilitates all technical
aspects of pharmaceutical
product development
including R&D, analytical
development, clinical
development, project
management and CMC
development, with a focus
on exploiting and optimizing
the company’s drug
delivery technology. She
has 25 years’ experience
in the pharmaceutical/
biotech industry and joined
Acrux in 2001. She has
previously held positions at
Faulding Pharmaceuticals,
the Department of
Clinical Pharmacology
and Therapeutics at the
Austin Hospital, Silliker-
Microtech Laboratories
and was an Adjunct
Appointee Lecturer with the
Faculty of Pharmacy and
Pharmaceutical Sciences
atMonash University. Felicia
has a Bachelor of Science
degree (with Honours) from
La Trobe University.
17
ANNUAL REPORT 2015
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE
STATEMENT
This statement summarises the corporate governance
policies and procedures adopted by the Board and discloses
the extent to which the Company has followed the Australian
Securities Exchange (ASX) Corporate Governance Council’s
Corporate Governance Principles and Recommendations
(“ASX Principles”) during and since the reporting period.
The Company’s corporate governance principles, details of
which can be found on the Company’s website (www.acrux.
com.au), comprise:
statement of corporate governance principles
code of conduct
Board Charter
Audit and Risk Committee Charter
Human Capital and Nomination Committee Charter
continuous disclosure and shareholder reporting policy
share trading policy
whistle-blower policy
diversity policy
1. The Board of Directors
1.1 Board Role and Charter
The Board has the primary responsibility for guiding and
monitoring the business and affairs of the Company,
including compliance with the Company’s corporate
governance objectives. The Board’s role is set out in the
Board Charter, which establishes the relationship between
the Board and Management and describes their respective
functions and responsibilities. The Board is responsible for
the oversight and performance of the Company, including
matters such as:
a. evaluating, approving and monitoring the strategic
and financial plans and performance objectives of the
Company;
b. evaluating, approving and monitoring the annual budgets
and business plans;
c. evaluating, approving and monitoring major capital
expenditure, capital management and all major
corporate transactions including the issue of any
securities of the Company;
d. monitoring and approving all financial reports and all
other reporting and external communications by the
Company;
e. evaluating Board and individual Director performance;
f. appointing, removing and managing the performance
of, and the succession planning for, a Chief Executive
Officer or an Executive Director;
g. overseeing and ratifying the terms of appointment
including remuneration and, where appropriate, ratifying
removal of Senior Management;
h. monitoring Senior Management performance and their
implementation of strategy and ensuring appropriate
resources are available;
18
i. monitoring the Company’s performance in relation
to maintaining appropriate standards of corporate
governance;
j. approving and monitoring the Company’s risk
management strategy including internal controls,
accountability systems and their effectiveness.
The Board has delegated the day to day management of
the Company to the Chief Executive Officer who, in turn,
may delegate to Senior Management. The delegations to the
Executive Director include:
a. developing business plans, budgets and Company
strategy for consideration by the Board and, to the extent
approved by the Board, implementing those plans,
budgets and strategy;
b. operating the business of the Company within the
parameters determined by the Board and keeping the
Board promptly informed of all developments material to
the Company and its business;
c. identifying and managing operational risks and
formulating strategies for managing those risks for
consideration by the Board;
d. managing the Company’s financial and other reporting
mechanisms and control and monitoring systems to
ensure that they capture all relevant material information
on a timely basis and are functioning effectively.
1.2 Board Composition
The Board seeks to achieve a mix of skills and diversity that
enables it to most effectively carry out the functions and
responsibilities set out in the Board Charter. This includes:
commercial and technical expertise and experience
gained in the pharmaceutical industry;
expertise and experience in business management
and financial markets; and
relevant relationships in the pharmaceutical industry
and in the business community.
The current Board is made up of a Chairman (Ross
Dobinson), two non-executive Directors (Bruce Parncutt
and Timothy Oldham) and an Executive Director (Michael
Kotsanis). Ross Dobinson was a founding Director of Acrux
and he has been intimately involved with the development
and implementation of the Company’s strategy since the
Company was founded. Timothy Oldham has extensive
technical development and commercialisation skills in the
life sciences sector. Bruce Parncutt has comprehensive
commercial skills from his 40 years in investment
management, investment banking and stockbroking.
Michael Kotsanis is the Managing Director and has extensive
global pharmaceutical industry experience.
The names of the Directors, the dates of their appointments,
their non-executive, executive or independent status and
whether they will seek election at the 2015 Annual General
Meeting are set out in the table below. The details of their
background, skills and experience are set out on page 26
of this report.
Name
Appointed / Retired
Non-Executive
Executive
Independent
Ross Dobinson
Appointed 1998
Bruce Parncutt
Appointed 30 April 2012
Timothy Oldham
Appointed 1 October 2013
Michael Kotsanis
Appointed 1 November 2014
No(1)
Yes
Yes
No
Yes(1)
No
No
Yes
No
Yes
Yes
No
Seeking
election at
2015 AGM
No(2)
Yes(3)
No(2)
No(4)
(1) Ross Dobinson held the position of Executive Chairman from 1 July 2012 until Michael Kotsanis was appointed as Chief Executive Officer
on 1 November 2014
(2) Ross Dobinson was re-elected and Timothy Oldham was elected on 21 November 2013
(3) Bruce Parncutt was elected on 22 November 2012
(4) Michael Kotsanis is the Managing Director
1.3 Director Independence
Pursuant to the recommendations of ASX Principle 2,
the Board Charter ideally requires the Board to include
a majority of non-executive independent Directors,
have a non-executive independent Chairman and to
have different persons filling the roles of Chairman and
Chief Executive Officer.
The Board appointed Ross Dobinson as Executive Chairman
following the departure of the former Chief Executive Officer
and Managing Director at the end of the 2012 financial year.
Notwithstanding the Board Charter, the Board determined
that with his extensive experience, the current needs of
the Company were best served by appointing Ross into
an executive role. Michael Kotsanis was subsequently
appointed as Chief Executive Officer on 1 November 2015.
Ross Dobinson has simultaneously ceased his executive
responsibilities with the Company. In accordance with
the recommendation of ASX Principle 2.5 and since
the appointment of Michael Kotsanis, the roles of Chair
and Chief Executive Officer were not exercised by the
same individual.
The Chair is responsible for the leadership of the Board,
for ensuring that the Board functions effectively and, where
appropriate, communicating the views of the Board to the
public. The Chair sets the agendas for Board meetings
and manages the conduct of meetings by facilitating open
discussion between Board members, between the Board
and Management and with the public.
1.4 Terms of Director Appointment
The non-executive Directors do not have formal letters
of appointment. The Chairman and Managing Director
have formal letters of appointment. Remuneration of
the non-executive Directors, Managing Director and the
terms of appointment of the Chairman are disclosed in
the Remuneration Report.
1.5 Access to Information and Independent Advice
All Directors have unrestricted access to employees of the
Company and, subject to the law, access to all Company
records and information held by the Company, its employees
and advisors. The Board receives an agenda, detailed
financial and operational reports and, where relevant,
reports of the Board Committees for each Board meeting.
Each Director is entitled to obtain independent professional
advice at the Company’s expense for the purpose of
assisting them in performing their duties. A Director who
wishes to obtain such advice must first obtain the approval
of the Chair (which approval must not be unreasonably
withheld) and must provide the Chair with the reason for
seeking such advice, the identity of the person from whom
the advice will be sought and the likely cost of obtaining
such advice. Except in certain circumstances detailed in
the Board Charter, advice obtained in this manner is made
available to the Board as a whole.
1.6 Human Capital and Nomination Committee
The current members of the Human Capital and Nomination
Committee of the Board are Timothy Oldham (Chair), Bruce
Parncutt and Ross Dobinson. Ross Barrow held the position
of Chair until he resigned on 25 February 2015. Ross
Dobinson joined the Committee on 6 July 2015.
Since our last Annual Report, the Committee met once
on 6 July on 2015, with all members attending. Members
of the Committee are chosen having regard to their skills
and experience in relation to the matters for which the
Committee is responsible. Members of the Committee have
unrestricted access to company records, Management and
advisers and the external auditors.
19
ANNUAL REPORT 2015 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE
STATEMENT
CONTINUED
The Committee’s role, which is set out in its Charter,
in general terms is to:
a. establish a formal and transparent procedure for
the selection and appointment of new Directors to
the Board;
b. identify suitable candidates to fill Board vacancies
as and when they arise and nominating candidates
for the approval of the Board;
c. consider processes for the orientation and education
of new Directors and developing ongoing policies to
facilitate continuing education and development of
Directors;
d. periodically assess the skills required for each Director
to discharge competently the Director’s duties;
e. regularly review the structure, size and composition of
the Board and the effectiveness of the Board as a whole;
f. establish and conduct an appropriate evaluation of the
Board’s process and of existing Directors, including an
evaluation of whether each Director is contributing the
time required of him or her for Board duties;
g. recommend to the Board a policy and framework for
Senior Management’s remuneration;
h. review and monitor the implementation of the human
i.
resources plan of the Company and succession planning
for Senior Management; and
review and recommend to the Board the total individual
remuneration package of each member of Senior
Management, including any bonuses, incentive
payments, and participation in any share or share option
plans in accordance with the policy and framework for
Senior Management’s remuneration.
In accordance with the recommendations of ASX Principle
2.4, the Committee’s Charter further provides that, where
practical, a majority of the Committee must be independent
non-executive Directors and the Chair must be a non-
executive Director who is not the Chair of the Company.
Executive Directors may not be members of the Committee.
A further recommendation of ASX Principle 2.1 is that the
Committee have at least 3 members. During the period
26 February to 5 July 2015, the Committee was made up
of 2 members. On 6 July 2015 the Company appointed
Ross Dobinson as a third member of the Human Capital
and Nomination Committee. Mr. Dobinson relinquished
executive responsibilities effective 1 November 2014.
The Company’s Code of Conduct, which has been in place
since 2005, contains a principle of equal opportunity to
be applied in all human resource decisions and in the
workplace environment. The Committee has supplemented
the Code of Conduct principle by adopting a formal diversity
policy. However, the Committee has not yet set measurable
objectives for gender diversity. The workforce at Acrux
is small and the majority of positions require specialist
qualifications and experience. The Committee believes
specific diversity objectives are impractical at this time.
20
At the date of this report, Acrux’s workforce numbered
twenty four people, fifteen (63%) of whom were female.
The Senior Management team consists of three female and
one male members, while the four current Board members
are male. The Committee and the Board will review the
potential need for formal diversity objectives in future as
the Company evolves.
1.7 Audit and Risk Committee
The current members of the Audit and Risk Committee
are Bruce Parncutt (Chair), Timothy Oldham and Ross
Dobinson. Bruce and Tim held these positions during the
financial year while Ross Dobinson joined the Audit and Risk
Committee on 12 August 2015 to ensure the Committee
contained at least 3 members. Ross Barrow was a member
of the Audit and Risk Committee until he resigned on
25 February 2015. Members are chosen having regard
to their skills and experience in relation to the matters
for which the Committee is responsible. Members of the
Committee have unrestricted access to company records,
Senior Management, advisers and the external auditors.
The Committee’s role, as set out in its Charter, in general
terms is:
a. overseeing the Company’s system of financial reporting
for the purpose of safeguarding its integrity, including
viewing all regular financial reports and other formal
announcements relating to the Company’s financial
performance prepared for release to the ASX,
regulators and the public before making appropriate
recommendations to the Board;
b. determining the extent of internal audit activities required
and monitor the effectiveness of those activities (note
that the Committee has determined that the Company,
due to its size, does not presently warrant establishing
a separate internal audit function);
c. monitoring the performance and activities of the external
auditor including:
overseeing the process for the appointment,
reappointment and removal of the external auditors
(including audit engagement letters), overseeing the
rotation of the principal audit partner and reviewing
the level of the external auditors’ fees;
assessing the performance and independence of the
external auditors and the quality of the audit work
performed;
requiring, reviewing and monitoring compliance with
the audit plan of the external auditors, including
the scope of the plan and the levels of financial
statement materiality;
reviewing reports from the external auditors and
meeting with the external auditors at least once
annually in the absence of Management and also
meeting with the external auditors as requested by
the Board, the Committee or the external auditors;
and
receiving, reviewing, developing and implementing
policy on the engaging of the external auditors to
supply non-audit services.
d. overseeing and reviewing the Company’s financial
and risk Management compliance and internal control
framework including:
–
overseeing the creation, implementation and
maintenance of the risk management system of
the Company and its controlled entities and their
internal control framework, including information
systems;
–
–
–
–
–
–
reviewing the effectiveness of the Company’s
implementation of its risk management systems
and internal controls on an ongoing basis and
reviewing the outcome of any non-financial audits;
requiring Management to report to the Board at
least annually on whether the Company’s material
business risks are being managed effectively;
developing an understanding of the overall
business environment, relevant laws and codes
of importance to the Company and the programs
that the Company has in place to provide
reasonable assurance of compliance;
reviewing the Company’s occupational health and
safety policies and ensuring regular reporting to
the Committee on issues related to occupational
health and safety;
reviewing insurance coverage and claims trends;
ensuring that the Chief Executive Officer and the
Chief Financial Officer state in writing to the Board
annually that:
i.
the Company’s financial reports present a true
and fair view, in all material respects, of the
Company’s financial condition and operational
results and are in accordance with the relevant
accounting standards;
the statement in (i) above is founded on a sound
system of risk management and control which
implements the policies adopted by the Board;
and
ii.
iii. the Company’s risk management and internal
compliance and control systems are operating
efficiently and effectively in all material respects.
The Board has received the report from Management
referred to above, advising whether the Company’s material
business risks are being managed effectively. The Board
received the statement in writing referred to above from the
Chief Executive Officer and the Chief Financial Officer on
12 August 2015.
In accordance with the recommendations of ASX Principle
4.1, the Committee’s Charter provides that the Committee
have at least three members, Executive Directors may
not be members of the Committee, a majority of the
Committee must be independent Directors and the Chair
must not be the Chair of the Company. During the period
26 February to 11 August 2015, the Committee was made
up of 2 members. On 12 August 2015 the Company
appointed Ross Dobinson as a third member of the Audit
and Risk Committee. Mr. Dobinson relinquished executive
responsibilities effective 1 November 2014.
1.8 Director and Senior Management
Remuneration and Performance
The remuneration structure for Senior Management and
Directors and the amounts paid to each during the year are
set out in the Remuneration Report section of the Directors’
Report on page 30.
Non-executive Directors are remunerated by way of fees
only and do not participate in executive remuneration
schemes, nor do they receive options, bonus
payments or retirement benefits (other than statutory
superannuation payments).
At the end of each financial year, the performance of Senior
Executives against their personal goals is assessed and
personal goals and development plans for the next financial
year are set, to be aligned with the Company’s objectives.
The review of Senior Management team members is carried
out by the Chief Executive Officer and the results are subject
to further review and approval by the Human Capital and
Nomination Committee. The review of the Chief Executive
Officer’s performance is carried out by the Human
Capital and Nomination Committee and the Committee’s
remuneration recommendations are then approved by
the Board. A performance evaluation in accordance with
this process was undertaken in respect of the year ended
30 June 2015. A formal review of the performance of the
Board and its Committees was not undertaken during the
year ended 30 June 2015.
21
ANNUAL REPORT 2015 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE
STATEMENT
CONTINUED
2. Disclosure and Communication
2.1 Continuous Disclosure
The Board has approved a written continuous disclosure
policy to ensure compliance with the ASX Listing Rules
continuous disclosure requirements. This policy:
a. gives guidance as to the information that may need to
be disclosed;
b. gives guidance for dealing with market analysts and the
media;
c. establishes regular reminders to Directors and Senior
Management to actively consider whether there is any
price sensitive information which needs disclosure;
d. allocates responsibility for approving public disclosures
and shareholder communications.
2.2 Communications with Shareholders
The Board has approved, as part of the continuous
disclosure policy, the Company’s policy to promote effective
communication with its shareholders. In addition to its
disclosure obligations under the ASX Listing Rules, the
Company communicates with its shareholders through a
number of channels including:
a. annual and half-yearly reports;
b. regular shareholder updates conducted by
teleconference;
c. media releases, public announcements and investor
briefings; and
d. annual general meetings.
All the above communications are posted on the Company’s
website (www.acrux.com.au). Shareholders are encouraged
to receive shareholder materials electronically and can
do so by visiting our investor centre, located on the
Company’s website.
In addition the Company is committed to using general
meetings of the Company to effectively communicate
with shareholders and to allow reasonable opportunities
for informed shareholder participation at these meetings.
Where possible the Company will comply with the ASX
Best Practice Guidelines for the content of notices of
meeting. Further, the external auditor is requested to attend
the annual general meeting and be available to answer
shareholder questions about the conduct of the audit of the
Company and the preparation and content of the auditor’s
report. The Company is committed to further developing
its communications strategies to optimise shareholder
communication.
22
3. Share Trading
Under the Company’s share trading policy all employees
and Directors of the Company and its related companies
are prohibited from trading in the Company’s shares if they
are in possession of inside information. In addition, the
Directors, Senior Executives and all other employees are
prohibited from trading in the Company’s shares during the
period from the end of the financial year to the release of
financial results to the market.
The Directors, the Company Secretary, persons reporting
directly to the Chief Executive Officer (and their associated
persons) and all other employees may not trade in shares
in the Company without the approval of the Company
Secretary (or the Chair in the case of the Company
Secretary) and only if they have first given a statement
that they are not in possession of material non-public
information. Such approval expires after five business days.
4. Conduct and Ethics
The Directors and Management of the Company and
its controlled entities are committed to observing high
standards of ethics and behaviour in all of the Company’s
activities, including the Company’s interaction with its
shareholders, employees, business partners, customers,
suppliers, the community and the environment in which the
Company operates.
The Company has adopted a Code of Conduct which
provides the ethical and legal framework for how the
Company will conduct its business and how the Company
will relate to shareholders, employees, business partners,
customers, suppliers, the community and the environment
in which the Company operates. Issues covered by the Code
of Conduct are:
values
compliance with laws
fair dealing
confidentiality and protection of Company assets
conflicts of interest
shareholders and the financial community
trading in Company securities
equal opportunity
health, safety and environment
reporting non-compliance and grievances
compliance with taxation laws
bribes and financial inducements
political donations
In addition the Company has adopted a whistleblower policy.
The purpose of this policy is to encourage the reporting of
conduct by employees of the Company and other persons
with whom the Company deals closely where the interests of
others, including the public, or of the Company itself are at
risk. The conduct covered by the policy is conduct that is:
a. illegal, dishonest, fraudulent or corrupt;
b. in breach of Commonwealth or state legislation or local
authority by-laws;
c. in breach of applicable industry practices, such as Good
Laboratory Practice, Good Clinical Practice or Good
Manufacturing Practice;
d. unethical (being either a breach of the Company’s Code
of Conduct or generally);
e. gross mismanagement;
f. a serious or substantial waste of resources;
g. an unsafe work practice;
h. failure to comply with agreements with the Company’s
commercial partners;
i. a breach of proper environmental practice;
j. other serious improper conduct;
k. any other conduct that may cause financial or
non-financial loss to the Company or otherwise be
detrimental to the interests of the Company
23
ANNUAL REPORT 2015 DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2015
The Directors present their report together with the financial
report of the consolidated entity, consisting of Acrux Limited
and the entities it controlled for the financial year ended
30 June 2015 and the independent auditor’s report thereon.
This financial report has been prepared in accordance with
Australian Accounting Standards.
Principal Activities
The principal activities of the consolidated entity during the
financial year were the development and commercialisation
of healthcare products. There has been no significant
change in the nature of these activities during the
financial year.
Operating Results
The consolidated profit, after income tax, attributable to
the members of Acrux Limited was $11.1 million (2014:
$28.0 million). Diluted earnings per share were 6.7 cents
(2014: 16.8 cents).
Review of Operations
A review of the operations of the consolidated entity during
the financial year and the results of those operations are
as follows:
Vision
Acrux is an innovative Australian drug delivery business
developing and commercialising a range of patient-preferred
products for global markets, using unique proprietary
technology to administer drugs.
Business Strategy
Acrux’s strategy is to create new human pharmaceutical
products by combining proven drugs and new chemical
entities with innovative delivery technologies. Using proven
drugs means that the development time is usually shorter
and the risk and expenditure lower than is typical for
new drug development. Intellectual property (IP) remains
an important cornerstone of our product development
strategy both in terms of creating new IP (where relevant),
and ensuring freedom to operate in the fields in which
we develop products.
Acrux’s development skills are used to progress a range
of products through clinical and regulatory milestones,
before commercialising them in global markets through
selected commercial partners, who provide expertise
in the particular market. The value of each product is
shared with the partner.
Operating Results
The consolidated profit before tax was $16.8 million
(2014: $43.9 million). The consolidated profit after
tax was $11.1 million (2014: $28.0 million).
24
Revenue
Total revenue for the financial year was $25.4 million
(2014: $53.9 million). Revenue from product agreements
was $24.6 million (2014: $53.4 million) and comprises
royalty revenue of $24.6 million (2014: $24.7 million)
and milestones. No milestones were received during the
financial year (2014: $28.7 million). Further milestones
may be generated from meeting contractual milestones
in future years. Interest income contributed $0.6 million
(2014: $0.5 million). Royalty revenue from Axiron® was
$24.3 million (2014: $24.5 million).
Operating Expenditure
Operating expenditure totalled $8.6 million (2014:
$10.0 million). Royalty payments due to Monash Investment
Trust decreased to $0.9 million (2014: $1.8 million), in line
with the reduction in product income. Employee benefits
expense increased to $2.7 million (2014: $2.3 million), the
result of a general increase in staff salaries in line with CPI
and the recruitment of the new Chief Executive Officer.
Directors’ fees decreased to $0.4 million (2014: $0.6 million)
due to the Chairman relinquishing his Executive capacity
and the resignation of one Non-Executive Director during
the year. Professional fees increased to $0.7 million (2014:
$0.3 million), the result of investment in the consolidated
entities strategy coupled with legal costs incurred in the
dispute with Hexima. A non-cash expense of $0.8 million
(2014: $0.6 million) was recorded for employee share
options granted during the reporting period, as required
by accounting standard AASB 2. The continued strength
of the US dollar against the Australian dollar resulted in a
favourable conversion of product income, which is received
in US dollars. No foreign exchange losses were recorded
during the financial year (2014: $1.2 million). Foreign
exchange gains totalled $0.2 million (2014: $nil).
Income tax expense for the financial year was $5.7 million
(2014 $15.9 million), in line with the reduction in
consolidated profit before income tax. Further details of
the income tax expense are provided at Note 1(j) of the
financial report which follows the Director’s Report.
Cash Flow
Net cash provided by operating activities totalled
$10.5 million (2014: $36.4 million). Net cash outflow for
the financial year was $2.9 million (2014: a net cash inflow
of $3.0 million was recorded). Cash reserves at 30 June
2015 were $23.1 million (30 June 2014: $25.8 million).
Receipts from product agreements totalled $25.2 million
(2014: $53.4 million) comprising royalty income
$24.4 million (2014: $24.7 million) with no milestones
received (2014: $28.7 million). Interest receipts added
$0.6 million (2014: $0.5 million). Payments to suppliers and
employees decreased to $6.5 million (2014: $6.7 million).
Income taxes paid decreased to $8.9 million from the
$10.8 million recorded in the 2014 financial year.
FINANCIAL REPORT The outflow of cash recorded for financing activities
represents the payment of $13.3 million (2014:
$33.3 million) of dividends to shareholders, comprising
the 8 cent final dividend for the 2013/14 financial year.
Contributed Equity
There were no changes to contributed equity during the
financial year.
The number of outstanding employee share options on
issue at the end of the reporting period was 3,380,000
(30 June 2014: 1,855,000), representing 2.0% of the issued
share capital. These options are exercisable under two
schemes, 1,380,000 at $4.30 per share and 2,000,000
at $1.32 per share.
Key Events During the Year
In addition to preclinical work on project in development,
Acrux explored opportunities on a series of generic
projects utilising Acrux’s proven transdermal and topical
technology.
Evamist technology transfer has been completed with
Gedeon Richter likely to receive national approvals and
launch during the quarter ended March 2016.
Axiron’s net sales for the 2014/15 financial year totalled
US$155.4 million, down from US$181.1 million in the
prior year.
The Food and Drug Administration (FDA) released
a statement regarding the use of Testosterone
Replacement Therapy in the US, titled “FDA Cautions
About Using Testosterone Products for Low Testosterone
Due to Aging; Requires Labeling Change to Inform of
Possible Increased Risk of Heart Attack And Stroke.”
Acrux and Eli Lilly filed a lawsuit in the United
States against Amneal Pharmaceuticals LLC., Lupin
Pharmaceuticals Inc. for infringement of issued US
patents covering Axiron.
Significant Changes in the State of Affairs
There have been no significant changes in the state
of affairs of the consolidated entity during the year.
After Balance Date Events
The Board resolved to issue 1,000,000 Options to the
Chief Executive Officer, Mr. Kotsanis on 22 July 2015 at an
exercise price of $1.11 per share. The Options comprise the
long term incentive component of the remuneration package
for the Chief Executive Officer and were issued pursuant to
the terms of the Chief Executive Officer Share Option Plan,
which was approved at the Acrux Limited Extraordinary
General Meeting on 3 February 2015. Shares allocated
on exercise of the Options will rank equally from the date
of exercise.
No other matters or circumstances have arisen since the
end of the financial year that have significantly affected or
may significantly affect the operations of the consolidated
entity, the results of those operations, or the state of affairs
of the consolidated entity in future financial years.
Likely Developments
For the foreseeable future, the consolidated entity’s
financial results will be materially influenced by the
sales performance of Axiron in the United States and/or
development of the consolidated entity’s product pipeline,
involving transition of pipeline products from preclinical
activities to clinical trial initiation.
Under a license agreement with Eli Lilly, the consolidated
entity receives royalties on worldwide sales of Axiron by
Eli Lilly and it is eligible to receive potential sales milestone
payments of up to US$170 million.
Development of the consolidated entity’s pipeline
is progressing, the key focus being development of
formulations for world wide commercialsiation of high
value therapies. Details will released as and when projects
in the consolidated entity’s pipeline progress through the
development life cycle.
Environmental Regulation
The consolidated entity’s operations are subject to
certain environmental regulations under the laws of the
Commonwealth and of the State. Details of the consolidated
entity’s performance in relation to such environmental
regulations are as follows:
Laboratory Waste
In order to ensure compliance with the Environment
Protection Act 1970, the consolidated entity engages an
external waste management consultant. This consultant has
ISO 14001:2004 Certified Environmental Management to
ensure compliance with the legislative requirements. The
consultant issues an EPA Transport Certificate at every
collection of waste to ensure safe collection, transport,
delivery and disposal/recycling procedures.
Trade Water Waste
An agreement exists with City West Water to ensure
compliance under the Water Industry Act 1994 and Water
Industry Regulations 1995. This agreement ensures that
the acceptance of trade waste into the sewage network
is managed effectively and that City West Water is aware
of the type and quantities of waste disposed of by the
consolidated entity.
The Directors are not aware of any breaches during the
period covered by this report.
25
ANNUAL REPORT 2015 Proceedings on Behalf
of the Consolidated Entity
In May 2013, November 2013, December 2014 and
July 2015, Acrux DDS Pty Ltd together with Eli Lilly and
Company filed lawsuits in the United States District Court
for the Southern District of Indiana against 1) Perrigo Israel
Pharmaceuticals Limited (“Perrigo”), 2) Watson Laboratories
Inc. (“Actavis”), 3) Amneal Pharmaceuticals LLC (“Amneal”)
and 4) Lupin Pharmaceuticals Inc. (“Lupin”), respectively
for infringement of issued patents covering Axiron. In each
instance, the patents are owned by Acrux DDS, a wholly-
owned subsidiary of Acrux Limited and exclusively licensed
to Lilly. The lawsuits were filed in response to notice letters
sent by each company regarding its filing with the US Food
and Drug Administration of an Abbreviated New Drug
Application (“ANDA”) for a Testosterone Metered Dose
Transdermal Solution. The letters each stated that the
respective ANDAs contain Paragraph IV certifications with
respect to US Patent’s that include claims relating to the
application of testosterone formulations to the underarm
and to the applicator used to apply Axiron. Actavis further
includes paragraph IV certifications with respect to US
patents that include claims relating to the quick-drying
formulation. A Paragraph IV certification alleges invalidity,
unenforceability and/or non-infringement of a patent.
Through 2014, a number of pending product liability
lawsuits were filed against Acrux and Eli Lilly in the United
States District Court for the Northern District of Illinois,
including claims that assert injury caused by testosterone
replacement therapy. These cases, brought by private
plaintiffs, were consolidated for pre-trial purposes in
the United States District Court for the Northern District
of Illinois under the Multi-District Litigation Rules as
Testosterone Replacement Therapy Products Liability
Litigation, MDL No. 2545.
Information on Directors
and Company Secretary
The qualifications, experience and special responsibilities of
each person who has been a Director of Acrux Limited at any
time during or since 1 July 2014 is provided below, together
with details of the company secretary as at the year end. The
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
DIRECTORS’ REPORT
CONTINUED
Dividend Paid, Recommended and Declared
A final fully-franked dividend for the 2013/14 financial
year of 8 cents per share, totaling $13.3 million, was paid
during the reporting period. On 12 August 2015, the
Directors resolved to declare a final dividend to shareholders
of 6 cents per share, fully-franked. The total amount of
the dividend, based on the number of shares on issue at
30 June 2015 and at the date of this report, is $10.0 million.
Share Options
Unissued ordinary shares of Acrux Limited under option at
the date of this report are as follows:
Number of
unissued
ordinary
shares under
option
Date options
granted
Issue
price of
shares
Expiry
date
of the
options
31 July 2013
780,000
$4.30
July 2016
21 November
2013
3 February
2015
600,000
$4.30
July 2016
2,000,000
$1.32 February 2018
3,380,000
No option holder has any right under the options to
participate in any other share issue of the Company.
A total of 2,000,000 options over unissued ordinary shares
were granted to the CEO during the financial year.
Shares Issued on Exercise of Options
There were no shares issued during the financial year
from the exercise of share options.
Indemnification and Insurance
of Directors and Officers
During the financial year, the consolidated entity has paid
premiums in respect of an insurance contract to indemnify
officers against liabilities that may arise from their position
as officers of the Company and its controlled entities.
Officers indemnified include the company secretary, all
Directors and all executive officers participating in the
management of the Company and its controlled entities.
Further disclosure required under section 300(9) of the
Corporations Act 2001 is prohibited under the terms of
the insurance contract.
26
FINANCIAL REPORT R Dobinson
(Director since March 1998)
T Oldham
(Director since October 2013)
Responsibilities
From November 2014, Non-Executive Chairman; 1 July
2012, Executive Chairman; prior to 1 July 2012,
Non-Executive Chairman.
Responsibilities
Non-Executive Director, member of the Audit and Risk
Committee and Chair of the Human Capital and Nomination
Committee (commencing July 2015).
Qualifications
BBus
Qualifications
BSc.Hons, LLB Hons, PhD
Experience
Ross has been a Director since 1998 and was appointed
Chairman in January 2006 and then Executive Chairman
from 1 July 2012 to October 2014. He is a founder and
former CEO of Acrux. Ross has a background in investment
banking and stockbroking. He is currently Managing Director
of TSL Group Ltd, a corporate advisory company specialising
in establishing and advising life sciences companies. He
was a founding Director of Starpharma Holdings Limited
(ASX: SPL) since May 1997, former Executive Chairman of
Hexima Limited which was listed on the ASX from July 2010
to June 2011, former Chairman of TPI Enterprises Limited
(ASX:TPE), a former Director of Roc Oil Company Limited
(ASX: ROC) and a former Director of Racing Victoria Limited.
B Parncutt
(Director since April 2012)
Responsibilities
Non-Executive Director, member of the Human Capital and
Nomination Committee and Chair of the Audit and Risk
Committee with financial qualification.
Qualifications
BSc, MBA
Experience
Bruce joined the board on 30 April 2012. His career spans
over 40 years’ in investment management, investment
banking and stockbroking including seven years as Chief
Executive of listed securities firm Mclntosh Securities
(1990-1996) and three years as Senior Vice President
of Merrill Lynch (1997-1999). His experience includes
extensive involvement in financial analysis, merger and
acquisition transactions, capital-raisings, and investment
in companies across a broad spectrum from early stage to
mature public companies. He holds a Bachelor of Science,
an MBA, and is a Member of the Financial Services Institute
of Australasia. Bruce is Chairman of the investment and
corporate advisory firm Lion Capital. He is President of The
National Gallery of Victoria and a Board Member of the NGV
Foundation and the Australian Ballet Company. He was
previously a Director of ASX listed Stuart Petroleum Limited
(from Aug 2010 to May 2011) and was Director of Mclntosh
Securities Limited, Australian Stock Exchange Ltd and Vision
Systems Ltd for varying periods prior to 1 July 2010.
Experience
Tim joined the board in October 2013. He has more than
a decade of life sciences business development, alliance
management and sales and marketing experience in
Europe, Asia and Australia. He is CEO and Managing
Director of Cell Therapies Pty Ltd, a leading Asia Pacific
provider of collection, manufacturing, delivery and
distribution capabilities for stem cell therapies and
regenerative medicine and was President of Asia Pacific
for Hospira Inc. (2007 to 2012), having held a variety
of senior management roles with Mayne Pharma (2002
to 2007) prior to its acquisition by Hospira. These roles
encompassed the development and commercialisation of
pharmaceuticals, devices, biologics and cellular therapies.
Prior to this, Dr. Oldham was an engagement manager with
McKinsey & Co (1997 to 2001). Tim has been chairman of
the European Generic Medicines Association Biosimilars
and Biotechnology Committee, a Director of the Generic
Medicines Industry Association and a member of the
Pharmaceutical Industry Strategy Group. He is also a
Director of iSonea Ltd (ASX: ISN).
R Barrow
(Director from April 2012 to February 2015)
Responsibilities
Non-Executive Director, Chair of the Human Capital and
Nomination Committee and member of the Audit and Risk
Committee.
Qualifications
BSc.Hons, MBA
Experience
Ross joined the board on 1 April 2012. He has extensive
experience in the life sciences sector. Ross was Chief
Operating Officer and a director of Vision BioSystems
Limited during the period when the company became
a leader in the global histopathology market. Following
acquisition by Danaher Corporation, Ross played a pivotal
role overseeing the global integration of the company with
Danaher’s subsidiary, Leica Microsystems GmbH. Ross
is currently the Chief Executive Officer and a director of
Paranta Biosciences Limited.
27
ANNUAL REPORT 2015 DIRECTORS’ REPORT
CONTINUED
M Kotsanis
(Managing Director from 1 November 2014)
Responsibilities
Managing Director and Chief Executive Officer.
S Papworth
(Company Secretary from 29 September 2014)
Responsibilities
Chief Financial Officer and Company Secretary.
Qualifications
BSc.MBus
Qualifications
B.Com, CA.
Experience
Michael commenced as CEO and Managing Director
of Acrux in November, 2014. He has over 25 years’
of experience in the pharmaceutical industry and has
significant senior Ieadership experience across the global
pharmaceutical markets. Michael was formerly the Chief
Commercial Officer for Synthon Holding BV, a specialty
pharmaceutical company based in The Netherlands, a
position he held from mid-2010. Prior to Synthon, he served
as President, Europe, Middle East and Africa, for Hospira,
the global leader in generic injectable pharmaceuticals.
Michael joined Hospira following its acquisition of Mayne
Pharma in 2007, where he served as President Asia Pacific
from 2002. He joined Mayne following their acquisition
of Faulding Pharmaceuticals in 2001, where he held
responsibility for commercial activities in Australia and New
Zealand. Prior to Faulding, Michael held a variety of sales
and marketing positions with Boehringer Ingelheim over
an 11 year period. Michael earned a bachelor’s degree in
science from Monash University, and a master’s degree in
business from the University of Technology, Sydney.
Experience
Sharon commenced with Acrux as CFO and Company
Secretary in September 2014. She has 18 years’ of finance
experience, leading both commercial and technical
functions. Having previously held senior finance roles at
ASX and US listed organisations, Sharon’s experience spans
across industries including Pharmaceuticals, Media, Fast
Moving Consumer Goods and professional services. Prior
to joining Acrux, Sharon was General Manager Finance
at Salmat Limited (2010-2014) and Regional Financial
Controller for Australia and New Zealand at Hospira
(2004-2010), initially joining Mayne Pharma prior to its
acquisition by Hospira. These roles supported business
growth strategies, providing financial advisory and
leadership. Sharon commenced her career at KPMG
in the audit division and worked with a broad range of
clients including ASX listed entities. Sharon is a Chartered
Accountant who also holds a Bachelor of Commerce with
majors in Accounting and Marketing.
Directors’ Meetings
The number of meetings of the Board of Directors and of each Board Committee held during the financial year and the
numbers of meetings attended by each Director were as follows:
Committee Meetings
Directors’ Meetings
Audit & Risk
Human Capital
& Nomination**
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
5
5
4
5
3
5
5
4
5
3
–
2
2
2
–
2*
2
2
2
1*
–
–
–
–
–
–
–
–
–
–
Directors
R Dobinson
B Parncutt
R Barrow1
T Oldham
M Kotsanis2
1 Resigned 25 February 2015.
2 Appointed Managing Director 1 November 2014.
* Attended by invitation.
** The Human Capital and Nomination Committee met on 6 July 2015. During the year the Committee discussed the appointment of the
Chief Executive Officer including setting of remuneration and performance metrics.
28
FINANCIAL REPORT
Non-Audit Services
Non-audit services are approved by resolution of the Audit
Committee and approval is provided in writing to the Board
of Directors. Non-audit services provided by the auditors
of the consolidated entity during the year, Pitcher Partners
(Melbourne) and network firms of Pitcher Partners are
detailed below.
2015
$
2014
$
Amounts paid or payable to
Pitcher Partners (Melbourne)
for non-audit services:
Amounts paid or payable
to network firms of Pitcher
Partners for non-audit
services:
Amounts paid or payable to
non-related auditors of group
entities for non-audit services:
Total auditors’ remuneration
for non-audit services
12,500
Nil
Nil
12,500
Nil
Nil
Nil
Nil
Directors’ and Executives’ Interests
in Shares and Options
Directors’ and Executives’ relevant interests in shares of
Acrux Limited and options over shares in the Company as
at 30 June 2015 are detailed below:
Directors
R Dobinson
B Parncutt
R Barrow
T Oldham
M Kotsanis
Executives
N Webster
F Colagrande
Total
Total No. of
Shares
Total No. of
Options
1,372,593
600,000
718,137
17,375
15,750
–
–
–
–
2,000,000
6,100
1,500
175,000
140,000
2,131,455
2,915,000
Directors’ Interests in Contracts
Directors’ interests in contracts are disclosed in Note 23 to
the financial statements.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act 2001
in relation to the audit for the financial year is provided with
this report.
29
ANNUAL REPORT 2015 REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2015
Remuneration Structure
The remuneration of employees is structured in two parts:
Fixed Remuneration, which comprises salary,
superannuation and other benefits in lieu of salary; and
Variable Remuneration, which may comprise a short
term incentive in the form of cash and a long term
incentive in the form of options under the employee
share option plan (ESOP). All permanent staff are eligible
to participate in the short term incentive plan and the
ESOP. However the level of participation varies according
to the level of seniority and the ability to influence the
performance of the business.
The Company aims to set the level of fixed remuneration
at market levels for comparable jobs in the industry in
which the Company operates, based on market sources.
The Company then aims to set the short and long term
incentives to provide for top performers to be remunerated
at the upper end of the market, subject to the overall
performance of the Company measured against the
goals set by the Board.
The aim of both the short term and long term incentive
plans is to drive performance to successfully implement
annual business plans and to increase shareholder
value. No advice from a remuneration consultant was
sought during the financial year for the Company’s
remuneration structure.
Short Term Incentive Plan
The purpose of the short term incentive plan is to reward
achievement of business objectives on a year by year
basis. Each financial year the Board, in conjunction with
senior management, sets the business objectives aimed to
be achieved during the year to implement the Company’s
business plan.
The business objectives are clearly defined outcomes in
product development and commercialisation, achievement
of which can be readily and objectively measured at the
end of the financial year. Measurement of achievement of
the business objectives does not involve comparison with
factors external to the Company.
Achievement of each objective is expected to create
immediate value for shareholders, or secure a material
step towards value that will crystallise in a future period.
Shareholder returns in the form of tax-free dividends are
shown in the table below. Comparison of the achievement
of objectives and shareholder returns for an individual year
is not meaningful, because the value may crystallise in a
future year.
The Directors present the consolidated entity’s 2015
remuneration report which details the remuneration
information for Acrux Limited’s Non-Executive
Chairman, Non-Executive Directors and other key
management personnel.
Human Capital and Nomination Committee
The Human Capital and Nomination Committee carries out
the following functions in relation to the remuneration of
senior management:
a. recommending to the Board a policy and framework for
senior employees’ remuneration which should aim to set
remuneration which:
i.
is competitive, fair and designed to attract employees
of high quality, experience and integrity;
ii. motivates senior employees to pursue the long term
growth and success of the Company within the
appropriate control framework; and
iii. establishes a clear relationship between the
performance of senior management and their
remuneration;
b. reviewing and recommending to the Board the total
individual remuneration package of each member of
senior management (including an executive Director),
including any bonuses, incentive payments, and
participation (including the level of participation)
in any share or share option plans in accordance
with the policy and framework for senior employees’
remuneration;
c. reviewing benchmarks against which salary reviews are
made;
d. reviewing and recommending the establishment and
terms of any employee share or share option plan or
other incentive plan and recommending any changes
to the Board;
e. reviewing and recommending on the superannuation
arrangements of the Company and its controlled entities;
and
f. ensuring that equity-based senior management
remuneration is made in accordance with thresholds
set in plans approved by shareholders.
Remuneration Policy
The main principles of the Company’s remuneration policy
are:
remuneration is set at levels intended to attract and
retain good performers and to motivate and reward them
to continually advance the business of the Company;
remuneration is structured to reward employees both
for superior performance and for increasing long term
shareholder value; and
rewards are linked to the achievement of business
objectives as set by the Board.
30
FINANCIAL REPORT Closing
share price
($)
Share price
increase/
(decrease)
($)
Dividend
($ per share)
1.22
1.13
1.81
3.39
4.25
3.51
1.01
0.85
(0.09)
0.68
1.58
0.86
(0.74)
(2.50)
(0.16)
–
–
0.60
0.08
0.08
0.20
0.06
Financial year
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
There are different levels of the short term incentive plan,
with senior executives, other than the Chief Executive
Officer, able to achieve annual incentives of up to 24% of
fixed remuneration.
The key principles of the plan are:
Payments under the short term incentive plan are at the
discretion of the Board.
The amount of at-risk remuneration payable under the
short term incentive plan is dependent upon the overall
level of achievement of the year’s business objectives.
The Board assesses the level of achievement of the
business objectives at the end of the year.
For staff other than senior executives, achievement of
personal objectives set for the financial year may also
form part of their assessment for short term incentive
plan payments.
Long Term Incentive Plans
The purpose of the long term incentive plan is to align the
interests of senior executives and other employees more
closely with those of the shareholders towards long term
sustained superior performance. Long term incentive plan
instruments are designed to meet the requirements of
ASX Listing Rules and the Company’s status as a Pooled
Development Fund. There are two long term incentive plans,
comprising options to acquire ordinary shares.
The employee share option plan is subject to the following
terms:
The options expire three years after grant;
The options lapse on termination of employment, other
than through death or redundancy; and
The exercise price was set at a 25% premium to the
volume weighted average market price of the Company’s
shares 5 days prior to 31 July 2013.
The Chief Executive Officer share option plan is subject to
the following terms:
The options expire three years after grant;
The options lapse on termination of employment, other
than through death or redundancy; and
The exercise price is set at a 25% premium to the
volume weighted average market price of the Company’s
shares 5 days prior to grant and comprise 3 tranches.
Tranche 1 was granted on 3 February 2015;
Tranche 2 was granted on 22 July 2015; and
Tranche 3 eligibility will be assessed by the Board
on or after 22 July 2016.
The Board evaluates the effectiveness of existing and
potential long term incentive plans as the business
environment changes.
Remuneration and Termination Entitlements
of Senior Management
Senior executives have no fixed term of employment and
either party may terminate the employment contract on
periods of written notice of three months. The employment
contracts contain no other entitlement to termination
benefits in addition to statutory entitlements.
Names and positions held by executives of the consolidated
entity in office at any time during the financial year are:
Executives
Position
M Kotsanis
S Papworth
N Webster
Chief Executive Officer – Commenced 3
November 2014
Chief Financial Officer and Company
Secretary – Commenced 29 September 2014
Commercial Director – Commenced 1 July
2013
F Colagrande Product Development and Technical Affairs
Director – Commenced 15 February 2015
C Blower
T Di Pietro
Chief Operating Officer – Resigned 15
August 2014
Chief Financial Officer and Company
Secretary – Resigned 31 October 2014
Share Options
(a) Compensation Options: Granted and vested
during the year
A total of 2,000,000 share options were issued by Acrux
Limited to the Chief Executive Officer, Mr. Kotsanis, on
3 February 2015, following shareholder approval at the
Extraordinary General Meeting held on the same date.
(b) Shares issued on exercise of compensation
options
No ordinary shares were issued to Directors or Executives
on exercise of compensation options during or since the
end of the financial year.
31
ANNUAL REPORT 2015 REMUNERATION REPORT (AUDITED)
CONTINUED
Details of the remuneration of the Executives are set out in the following table:
Post
Employment
Termination
Benefits
Primary
Salary
$
Bonus*
$
Super
$
2015
M Kotsanis1
S Papworth2
254,150
68,668
12,522
158,304
27,874
14,174
16,356
11,956
F Colagrande3
158,837
28,031
N Webster4
114,324
20,030
2014
J Pilcher5
C Blower6
T Di Pietro7
N Webster4
685,615
144,603
55,008
61,033
253,112
179,354
111,253
–
25,736
18,622
11,533
4,444
17,775
17,431
11,387
604,752
55,891
51,037
Equity
Options
$
Equity
as %
of Total
Bonus
as %
of Total
Total
$
%
%
760,000
1,095,340
–
200,352
203,224
146,310
69%
0%
0%
0%
760,000 1,645,226
46%
–
65,477
107,500
404,123
75,250
290,657
75,250
209,423
258,000
969,680
0%
27%
26%
36%
27%
6%
14%
14%
14%
9%
0%
6%
6%
6%
6%
$
–
–
–
–
–
–
–
–
–
–
*
Bonus relates to the achievement of objectives for the financial year. The amount of bonus earned was 100% of the maximum amount
payable for the 2014/15 financial year and 40% for the 2013/14 financial year.
1 Appointed Chief Executive Officer and Managing Director 1 November 2014.
2 Appointed Chief Financial Officer and Company Secretary 29 September 2014.
3 Appointed Product Development and Technical Affairs Director 15 February 2015.
4 Appointed Commercial Director 1 July 2013.
5 Resigned as Chief Financial Officer and Company Secretary 16 August 2013.
6 Resigned as Chief Operating Officer 15 August 2014.
7 Resigned as Chief Financial Officer and Company Secretary 31 October 2014.
Remuneration of Directors
The Human Capital and Nomination Committee considers the level of remuneration necessary to attract and retain Directors
with the skills and experience required by the Company at its stage of development. The Committee makes recommendations
to the Board, for approval by the shareholders, at the following Annual General Meeting.
The director and management services of the Non-Executive Chairman Ross Dobinson are provided by Espasia Pty Ltd.
The contract for services can be terminated by either party by giving three months’ notice in writing. For the 2014/15 financial
year the contract provided for fees of $118,000 per annum in respect of director services, $200,000 per annum in respect
of executive services performed 1 July 2014 to 31 October 2014 and an additional payment of up to 60% of the executive
services, dependent on the achievement of objectives, set by the Board. The Board has absolute discretion over the amount
of the additional payment.
For the 2014/15 financial year Non-Executive Directors’ fees were $76,650 per annum, including superannuation, for each
Non-Executive Director. At the 2004 Annual General Meeting shareholders set the maximum aggregate amount of Non-
Executive Directors’ fees at $450,000. In addition Non-Executive Directors are entitled to reimbursement of reasonable
expenses incurred by them on Company business.
No retirement allowances are paid to Non-Executive Directors. No equity based remuneration is paid to Non-Executive
Directors. Non-Executive Directors do not receive any additional remuneration for being members of Board Committees.
32
FINANCIAL REPORT The remuneration of each person who held the position of Director at any time during the financial year is set out in the
following table:
Post
Employment
Termination
Benefits
Primary
Fees
$
Bonus*
$
Super
$
2015
R Dobinson1
B Parncutt
R Barrow
T Oldham2
2014
R Dobinson1
B Parncutt
R Barrow
T Oldham2
232,667
70,000
46,667
70,000
32,000
–
–
–
–
6,650
4,433
6,650
419,334
32,000
17,733
318,000
70,000
70,000
52,500
48,000
–
–
–
–
6,475
6,475
4,856
510,500
48,000
17,806
Equity
Options
$
Equity
as %
of Total
Bonus
as %
of Total
Total
$
%
%
–
–
–
–
–
264,667
76,650
51,100
76,650
469,067
98,463
–
–
–
464,463
76,475
76,475
57,356
98,463
674,769
0%
0%
0%
0%
0%
21%
0%
0%
0%
15%
12%
0%
0%
0%
7%
10%
0%
0%
0%
7%
$
–
–
–
–
–
–
–
–
–
–
*
1
Bonus relates to the achievement of objectives for the financial year. The amount of bonus earned was 100% of the maximum amount
payable for the 2014/15 financial year and 40% for the 2013/14 financial year.
Appointed Non-Executive Chairman post appointment of the Chief Executive Officer, November 2014. Previously Executive Chairman from
1 July 2012.
2 Appointed Non-Executive Director 1 October 2013.
Mr. Kotsanis was appointed Chief Executive Officer and Managing Director, November 2014. The remuneration details of
Mr. Kotsanis have been disclosed in the executive remuneration table.
Number of Shares held by Key Management Personnel
Directors and Executives
Balance
7/1/2014
Granted as
Remuneration
Options
Exercised
Net Change
Other
Balance
6/30/2015
Directors
R Dobinson1
B Parncutt
R Barrow
T Oldham
Executives
C Blower2
T Di Pietro3
N Webster4
F Colagrande5
Total
1,372,593
718,137
17,375
15,750
33,000
10,290
6,100
1,500
2,174,745
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,372,593
718,137
17,375
15,750
(33,000)
(10,290)
–
–
–
6,100
1,500
–
(43,290)
2,131,455
1
2
3
4
5
Appointed Non-Executive Chairman post appointment of the Chief Executive Officer, November 2014. Previously Executive Chairman from
1 July 2012.
Appointed Chief Operating Officer 16 August 2013 and resigned as Chief Operating Officer 15 August 2014.
Resigned as Chief Financial Officer and Company Secretary 31 October 2014.
Appointed Commercial Director 1 July 2013.
Appointed Product Development and Technical Affairs Director 15 February 2015.
33
ANNUAL REPORT 2015 REMUNERATION REPORT (AUDITED)
CONTINUED
Number of Employee Share Options held by Key Management Personnel
Directors and Executives
Balance
7/1/2014
Granted as
Remuneration
Options
Exercised
Net Change
Other
Balance
6/30/2015
Directors
R Dobinson1
B Parncutt
R Barrow
T Oldham
Executives
M Kotsanis2
S Papworth3
N Webster
F Colagrande4
C Blower5
T Di Pietro6
Total
600,000
–
–
–
–
–
175,000
140,000
250,000
175,000
–
–
–
–
2,000,000
–
–
–
–
–
1,340,000
2,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(250,000)
(175,000)
600,000
–
–
–
2,000,000
–
175,000
140,000
–
–
(425,000)
2,915,000
1
Appointed Non-Executive Chairman post appointment of the Chief Executive Officer on 1 November 2014. Previously Executive Chairman
from 1 July 2012.
Appointed Chief Executive Officer November 2014.
2
3 Resigned as Chief Financial Officer and Company Secretary 29 September 2014.
4 Product Development and Technical Affairs Director 15 February 2015.
5 Appointed Chief Operating Officer 16 August 2013 and resigned as Chief Operating Officer 15 August 2014.
6 Resigned as Chief Financial Officer and Company Secretary 31 October 2014.
Voting and Comments made at the Company’s 2014 Annual General Meeting (AGM)
At the Company’s most recent AGM, a resolution to adopt the prior year remuneration report was put to the vote and at
least 75% of ‘yes’ votes were cast for adoption of that report. No comments were made on the remuneration report that was
considered at the AGM.
The company held an EGM during the year, at which a resolution to adopt the CEO Share Option Plan was put to a vote and
at least 75% of ‘yes’ votes were cast for adoption of the Plan.
This is the end of the audited remuneration report.
Rounding of Amounts
The amounts contained in the report and in the financial report have been rounded to the nearest $1,000 (where rounding is
applicable) under the option available to the company under ASIC Class Order 98/0100. The Company is an entity to which
the Class Order applies.
Signed in accordance with a resolution of the Directors.
R Dobinson
Non-Executive Chairman
Melbourne
Dated this 12th day of August 2015
B Parncutt
Director
Melbourne
Dated this 12th day of August 2015
34
FINANCIAL REPORT
AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2015
ACRUX LIMITED AND CONTROLLED ENTITIES
ABN 72 082 001 152
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF ACRUX LIMITED AND CONTROLLED ENTITIES
In relation to the independent audit for the year ended 30 June 2015, to the best of my knowledge
and belief there have been:
(i)
No contraventions of the auditor independence requirements of the Corporations Act 2001;
and
(ii)
No contraventions of any applicable code of professional conduct.
S SCHONBERG
Partner
Date 13 August 2015
PITCHER PARTNERS
Melbourne
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
‐19‐
35
ANNUAL REPORT 2015
Notes
4
5
5
5
6
17
18
8
8
2015
$’000
25,368
(2,686)
(760)
(705)
(431)
(716)
(859)
(412)
(1,425)
–
(568)
(8,562)
16,806
(5,676)
11,130
11,130
2014
$’000
53,859
(2,346)
(638)
(756)
(576)
(324)
(1,827)
(414)
(1,413)
(1,239)
(469)
(10,002)
43,857
(15,887)
27,970
27,970
11,130
27,970
–
–
11,130
27,970
6.70
6.70
16.80
16.80
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2015
Revenue
Employee benefits expense
Share options expense
External research and development expenses
Directors' fees
Professional fees
Royalty expense
Occupancy expenses
Depreciation and amortisation expenses
Foreign exchange loss
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Total comprehensive income for the year
Total comprehensive income attributable to:
Members of the parent
Non-controlling interest
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form part of these financial statements.
36
FINANCIAL REPORT CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 30 JUNE 2015
Current Assets
Cash and cash equivalents
Receivables
Total Current Assets
Non-Current Assets
Plant and equipment
Intangible assets
Total Non-Current Assets
Total Assets
Current Liabilities
Current tax payable
Payables
Short term provisions
Total Current Liabilities
Non-Current Liabilities
Deferred tax liabilities
Long term provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accummulated Losses
Equity attributable to the owners of Acrux Limited
Non-controlling interests
Total Equity
The accompanying notes form part of these financial statements.
Notes
2015
$’000
2014
$’000
9
10
11
12
6
13
14
6
14
23,068
4,943
28,011
25,775
5,604
31,379
92
20,392
20,484
48,495
1,764
1,150
288
3,202
4,649
19
4,668
7,870
78
21,764
21,842
53,221
4,526
1,129
401
6,056
5,097
11
5,108
11,164
40,625
42,057
15
17(a)
17(b)
18
95,873
1,194
(56,442)
40,625
–
95,873
638
(54,454)
42,057
–
40,625
42,057
37
ANNUAL REPORT 2015 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2015
Balance as at 1 July 2013
Profit for the period
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions
Employee Share Options Expense
Dividends Paid
Total transactions with owners in their capacity as
owners
Balance as at 30 June 2014
Balance as at 1 July 2014
Profit for the period
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions
Employee Share Options Expense
Vested Employee Share Options that lapsed during
the period
Dividends Paid
Total transactions with owners in their capacity
as owners
Notes
15(b)
17(a)
7
15(b)
17(a)
17
7
Contributed
Equity
$’000
95,873
–
–
–
–
–
–
95,873
95,873
–
–
–
–
–
–
–
Reserves
$’000
Accumulated
Losses
$’000
–
–
–
(49,120)
27,970
27,970
Total
Equity
$’000
46,753
27,970
27,970
–
638
–
638
638
638
–
–
–
760
(204)
–
–
–
–
638
(33,304)
(33,304)
(33,304)
(54,454)
(54,454)
11,130
11,130
(32,666)
42,057
42,057
11,130
11,130
–
–
204
–
760
–
(13,322)
(13,322)
556
(13,118)
(12,562)
Balance as at 30 June 2015
95,873
1,194
(56,442)
40,625
The accompanying notes form part of these financial statements.
38
FINANCIAL REPORT CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2015
Cash Flows from Operating Activities
Receipts from product agreements
Payments to suppliers and employees
Interest received
Grant income received
Taxes paid
Consolidated Entity
2015
$’000
2014
$’000
Notes
25,203
(6,460)
639
23
53,425
(6,737)
450
21
(8,886)
(10,788)
Net Cash Flows provided by Operating Activities
19(a)
10,519
36,371
Cash Flows from Investing Activities
Purchase of plant and equipment
Net Cash Flows used in Investing Activities
Cash Flows from Financing Activities
Net proceeds from issues of ordinary shares
Dividends paid
Net Cash Flows used in Financing Activities
Net Increase/(Decrease) in Cash Held
Foreign exchange differences on cash holdings
Add cash at the beginning of the year
Cash at end of Year
The accompanying notes form part of these financial statements.
(66)
(66)
(39)
(39)
–
(13,322)
(13,322)
(2,869)
162
25,775
23,068
–
(33,346)
(33,346)
2,986
(51)
22,840
25,775
19(b)
39
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 1: Statement of Significant
Accounting Policies
The following is a summary of significant accounting policies
adopted by the consolidated entity in the preparation and
presentation of the financial report. The accounting policies
have been consistently applied, unless otherwise stated.
(a) Basis of presentation of the financial report
This financial report is a general purpose financial report
that has been prepared in accordance with Australian
Accounting Standards, Interpretations and other
authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
The financial report covers Acrux Limited and its controlled
entities as a consolidated entity. Acrux Limited is a company
limited by shares, incorporated and domiciled in Australia.
Acrux Limited is a for-profit entity for the purpose of
preparing the financial statements.
The financial report was authorised for issue by the
Directors as at the date of the Directors’ report.
Compliance with IFRS
The consolidated financial statements of Acrux Limited also
comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards
Board (IASB).
Historical Cost Convention
The financial report has been prepared under the
historical cost convention, as modified by revaluations to
fair value for certain classes of assets as described in the
accounting policies.
Critical Accounting Estimates
The preparation of the financial report requires the use of
certain estimates and judgements in applying the entity’s
accounting policies. Those estimates and judgements
significant to the financial report are disclosed in Note 2.
(b) Going concern
The financial report has been prepared on a going
concern basis.
During the year ended 30 June 2015 the consolidated
entity reported an operating profit after tax of $11.1 million
(2014: $28.0 million) and at the reporting date total
assets exceeded total liabilities by $40.6 million
(2014: $42.1 million).
(c) Principles of consolidation
The consolidated financial statements are those of the
consolidated entity, comprising the financial statements
of the parent entity and of all entities, which the parent
controls. The group controls an entity where it is exposed,
or has rights, to variable returns from its involvement
with the entity and has the ability to effect those returns
through its power over the entity.
40
The financial statements of subsidiaries are prepared for the
same reporting period as the parent entity, using consistent
accounting policies. Adjustments are made to bring into
line any dissimilar accounting policies, which may exist.
All inter-company balances and transactions, including
any unrealised profits or losses have been eliminated on
consolidation. Subsidiaries are consolidated from the date
on which control is established and are derecognised from
the date that control ceases.
Non-controlling interests in the results of the subsidiaries
are shown separately in the consolidated statement of
comprehensive income and consolidated statement
of financial position respectively.
(d) Revenue
Revenue from product agreements is made up of milestone
payments and revenue relating to product sales. Revenue
from milestone payments is recognised upon completion
of the milestone, which is the trigger point for the right to
receive the revenue. Revenue relating to product sales, such
as royalties and distribution fees, is recognised in the period
in which the sales occur.
Interest revenue is recognised when it becomes receivable
on a proportional basis taking into account the interest rate
applicable to the financial assets.
Revenue from rendering of services to customers is
recognised in the period in which the service was performed
for the customer.
Government grants are recognised at fair value where there
is a reasonable assurance that the grant will be received and
all grant conditions will be met. Revenue from the receipt
of contracted grants is recognised in the period the monies
associated with the grants are expensed.
Other revenue is recognised as received or over the time
period to which it relates.
All revenue is stated net of the amount of goods and
services tax (GST).
(e) Cash and cash equivalents
Cash and cash equivalents include cash on hand and at
banks, short term deposits with an original maturity of three
months or less, held at call with financial institutions.
(f) Plant and equipment
Cost and Valuation
Each class of plant and equipment is carried at cost less,
where applicable, any accumulated depreciation and any
accumulated impairment losses. At each balance date
the carrying amount of each asset is reviewed to ensure
that it does not differ materially from the asset’s fair value
at reporting date. Where necessary, the asset is revalued
to reflect its fair value.
FINANCIAL REPORT Depreciation
The depreciable amount of all fixed assets are calculated on a
straight line basis over their estimated useful lives to the entity
commencing from the time the asset is held ready for use.
Leasehold improvements are depreciated over the shorter
of either the unexpired period of the lease or the estimated
useful lives of the improvements.
The useful lives for each class of assets are:
Leasehold improvements:
Plant and equipment:
2015
2014
5 to
20 years
2.5 to
14 years
Not
Applicable
2.5 to
14 years
(g) Leases
Leases are classified at their inception as either operating
or finance leases based on the economic substance of the
agreement so as to reflect the risks and rewards incidental
to ownership.
Operating Leases
Lease payments for operating leases are recognised as an
expense on a straight-line basis over the term of the lease.
(h) Intangibles
The intangible assets are recognised at cost at the date of
acquisition. The balances are reviewed annually and any
balances representing probable future benefits that are
no longer anticipated are written off.
Intellectual Property
Acquired intellectual property is initially recorded at cost.
Intellectual property with a finite life is carried at cost less
any accumulated amortisation and any impairment losses.
The intellectual property is amortised over the useful life
of the relevant patents. Amortisation expense is included in
‘Depreciation and amortisation expenses’ of the Statement
of Comprehensive Income.
Research and Development
Expenditure during the research phase of a project
is recognised as an expense when incurred. Product
development costs are capitalised only when each of the
following specific criteria has been satisfied:
1. Technical feasibility of completing development of the
product and obtaining approval by regulatory authorities.
2. Ability to secure a commercial partner for the product.
3. Availability of adequate technical, financial and other
resources to complete development of the product,
obtain regulatory approval and secure a commercial
partner.
4. Reliable measurement of expenditure attributable to
the product during its development.
5. High probability of the product entering a major
pharmaceutical market.
Capitalised development costs have a finite life and are
amortised on a systematic basis over the period from when
the product becomes available for use and cease at the
earlier of the date that the asset is classified as held for sale
(or included in a disposal group that is classified as held for
sale) in accordance with AASB 5 Non-current assets held for
sale and discontinued operations and the date that the asset
is derecognised.
The estimated useful life and total economic benefit for
each asset are reviewed at least annually. The useful life
of capitalised development costs for Axiron, for which
amortisation has commenced, is approximately 18
years. Amortisation expense is included in ‘Depreciation
and amortisation expenses’ of the Statement of
Comprehensive Income.
(i) Impairment of non-financial assets
Assets with an indefinite useful life are not amortised but
are tested annually for impairment in accordance with
AASB 136 Impairment of assets. Assets subject to annual
depreciation or amortisation are reviewed for impairment
whenever events or circumstances arise that indicate that
the carrying amount of the asset may be impaired.
An impairment loss is recognised where the carrying
amount of the asset exceeds its recoverable amount. The
recoverable amount of an asset is defined as the higher of
its fair value less costs to dispose and its value in use.
(j) Income tax
Current income tax expense or revenue is the tax payable on
the current period’s taxable income based on the applicable
income tax rate adjusted by changes in deferred tax assets
and liabilities.
Deferred tax assets and liabilities are recognised for
temporary differences at the applicable tax rates when the
assets are expected to be recovered or liabilities are settled.
No deferred tax asset or liability is recognised in relation
to temporary differences if they arose in a transaction,
other than a business combination, that at the time of the
transaction did not affect either accounting profit or taxable
profit or loss.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only when it is probable
that future taxable amounts will be available to utilise those
temporary differences and losses.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly
in equity.
The parent entity, Acrux Limited is a Pooled Development
Fund (PDF):
PDFs are taxed at 15% on income and gains from
investments in small to medium enterprises;
PDFs are taxed at 25% on other income; and
PDFs are not permitted to consolidate for tax purposes.
41
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 1: Statement of Significant
Accounting Policies (continued)
The subsidiary companies of Acrux Limited are subject to
the general corporate company tax rate of 30%. At 30 June
2014 Acrux Limited’s tax paying subsidiaries had utilised all
accumulated tax losses. The majority of the consolidated
entity’s taxable income is earned by these subsidiary
companies.
Income tax expense for the financial year was $5.7 million
(2014: $15.9 million) representing approximately 33.8% of
profit before income tax. The parent entity, Acrux Limited,
received franked dividends totaling $19.0 million from
subsidiary companies. The parent entity’s tax rate payable
on this income is 15% however the franked dividends
include an imputed tax credit of 30%. The excess franking
credits convert to tax losses that can be used in future
periods to offset taxable income. For accounting purposes
the entity has not recognised a tax asset for these carried
forward tax losses as the current operating structure of the
entity is unlikely to produce the quantum of future taxable
income to enable Acrux Limited to utilise these carried
forward losses.
(k) Provisions
Provisions are recognised when the consolidated entity has
a legal or constructive obligation, as a result of past events,
for which it is probable that an outflow of economic benefits
will result and that outflow can be reliably measured.
(l) Employee benefits
Provision is made for employee benefits accumulated as a
result of employees rendering services up to the reporting
date. These benefits include wages and salaries, annual
leave and long service leave.
Liabilities arising in respect of wages and salaries, annual
leave and any other employee benefits expected to be
settled within twelve months of the reporting date are
measured at their nominal amounts based on remuneration
rates which are expected to be paid when the liability is
settled. All other employee benefit liabilities are measured
at the present value of the estimated future cash outflow to
be made in respect of services provided by employees up
to the reporting date.
Contributions are made by the consolidated entity to
employee superannuation funds and are charged as
expenses when the obligation to pay them arises.
Bonus
The consolidated entity recognises a provision when
a bonus is payable in accordance with the employee’s
contract of employment, and the amount can be
reliably measured.
42
Share-based Payments
The consolidated entity operates an employee share option
plan. The fair value of the options is recognised as an expense
in the Statement of Comprehensive Income in the period(s)
during which the employee becomes entitled to exercise the
options. The fair value of options at grant date is determined
using a Binomial option pricing model, and is recognised
as an employee expense over the period during which the
employees become entitled to the option (the vesting period).
Termination Benefits
Termination benefits are payable when employment of an
employee is terminated before the normal retirement date.
The consolidated entity recognises a provision for
termination benefits when entitlement to contractual
benefits arises or when the entity can no longer withdraw
the offer of non-contractual benefits.
(m) Comparatives
Where necessary, comparative information has been
reclassified and repositioned for consistency with current
year disclosures.
(n) Financial instruments
Non-derivative Financial Instruments
Financial Assets
Non-derivative financial assets consist of trade and other
receivables and cash and cash equivalents. Financial
assets are tested for impairment at each financial year end
to establish whether there is any objective evidence for
impairment. Trade receivables are carried at full amounts
due less any provision for impairment. A provision for
impairment is recognised when collection of the full amount
is no longer probable. Amounts receivable from other
debtors are carried at full amounts due. Other debtors are
normally settled 30 days from month end unless there is
a specific contract, which specifies an alternative date.
Amounts receivable from related parties are carried at
full amounts due.
Non-listed investments in controlled entities, for which fair
value cannot be reliably measured, are carried at cost and
tested for impairment.
Financial Liabilities
Non-derivative financial liabilities include trade payables,
other creditors and inter-company balances.
Liabilities are recognised for amounts to be paid in the
future for goods and services received, whether or not
billed to the consolidated entity. Trade liabilities are
normally settled 30 days from month end.
Derivative Financial Instruments
The consolidated entity has used and could continue to use
derivative financial instruments to hedge its risk exposures
from foreign currency exchange rate movements.
Such derivatives are measured at fair value and changes
in value are recognised immediately in profit or loss.
FINANCIAL REPORT (o) Foreign currency translations and balances
Functional and Presentation Currency
The financial statements of each of the consolidated entity’s
subsidiaries are measured using the currency of the primary
economic environment in which that entity operates (the
functional currency). The consolidated financial statements
are presented in Australian dollars, which is the consolidated
entity’s functional and presentation currency.
Transactions and Balances
Transactions in foreign currencies of entities within the
consolidated group are translated into functional currency
at the rate of exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at
the reporting date (other than monetary items arising under
foreign currency contracts where the exchange rate for that
monetary item is fixed in the contract) are translated using
the spot rate at the end of the financial year. Except for
certain currency hedges, all resulting exchange differences
arising on settlement or re-statement are recognised as
revenues and expenses for the financial year.
(p) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these
circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of expense.
Receivables and payables in the balance sheet are shown
inclusive of GST.
Cash flows are presented in the statement of cash flows
on a gross basis.
(q) Rounding amounts
The parent entity and the consolidated entity have applied
the relief available under ASIC Class Order CO 98/0100
and accordingly, amounts in the consolidated financial
statements and Directors’ report have been rounded off
to the nearest thousand dollars, or in certain cases, to
the nearest dollar.
(r) Accounting standards issued but not yet effective
at 30 June 2015
AASB 15 Revenue from contracts with customers
AASB 15 introduces a five step process for revenue
recognition with the core principle being for entities to
recognise revenue to depict the transfer of goods or services
to customers in amounts that reflect the consideration
(that is, payment) to which the entity expects to be entitled
in exchange for those goods or services. The five step
approach is as follows:
Step 1: Identify the contracts with the customer;
Step 2: Identify the separate performance obligations;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price; and
Step 5: Recognise revenue when a performance
obligation is satisfied.
AASB 15 will also result in enhanced disclosures about
revenue, provide guidance for transactions that were not
previously addressed comprehensively (for example, service
revenue and contract modifications) and improve guidance
for multiple-element arrangements.
The effective date is annual reporting periods beginning on
or after 1 January 2017.
The changes in revenue recognition requirements in
AASB 15 may cause changes to the timing and amount
of revenue recorded in the financial statements as well as
additional disclosures. The impact of AASB 15 has not yet
been quantified.
AASB 9 Financial Instruments
Significant revisions to the classification and measurement
of financial assets, reducing the number of categories and
simplifying the measurement choices, including the removal
of impairment testing of assets measured at fair value. The
amortised cost model is available for debt assets meeting
both business model and cash flow characteristics tests. All
investments in equity instruments using AASB 9 are to be
measured at fair value.
AASB 9 amends measurement rules for financial liabilities
that the entity elects to measure at fair value through
profit or loss. Changes in fair value attributable to changes
in the entity’s own credit risk are presented in other
comprehensive income.
Chapter 6 Hedge Accounting supersedes the general
hedge accounting requirements in AASB 139 Financial
Instruments: Recognition and Measurement, which many
consider to be too rules-based and arbitrary. Chapter 6
requirements include a new approach to hedge accounting
that is intended to more closely align hedge accounting with
risk management activities undertaken by entities when
hedging financial and non-financial risks. Some of the key
changes from AASB 139 are as follows:
to allow hedge accounting of risk components of non-
financial items that are identifiable and measurable
(many of which were prohibited from being designated
as hedged items under AASB 139);
changes in the accounting for the time value of
options, the forward element of a forward contract and
foreign-currency basis spreads designated as hedging
instruments; and
modification of the requirements for effectiveness testing
(including removal of the ‘brightline’ effectiveness test
that offset for hedging must be in the range 80-125%).
Revised disclosures about an entity’s hedge accounting
have also been added to AASB 7 Financial Instruments:
Disclosures.
43
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 1: Statement of Significant
Accounting Policies (continued)
Impairment of assets is now based on expected losses
in AASB 9 which requires entities to measure:
the 12-month expected credit losses (expected credit
losses that result from those default events on the
financial instrument that are possible within 12 months
after the reporting date); or
full lifetime expected credit losses (expected credit
losses that result from all possible default events over
the life of the financial instrument.
The effective date is annual reporting periods beginning
on or after 1 January 2018.
The available-for-sale investments held will be classified as
fair value through other comprehensive income and will no
longer be subject to impairment testing. The impairment
loss recognised in the current year financial statements in
relation to these statements was nil. Hedge accounting is
likely to be applied to more of the entity’s transactions in
future transactions – the impact on the reported financial
position and performance is dependent on the volume
and value of future derivatives. Other impacts on the
reported financial position and performance have not
yet been determined.
Note 2: Critical Accounting Estimates
and Judgements
Certain accounting estimates and assumptions concerning
the future, which, by definition, will seldom represent actual
results. Estimates and assumptions based on future events
have a significant inherent risk, and where future events are
not as anticipated there could be a material impact on the
carrying amount of assets and liabilities, discussed below:
(a) Income tax
Income tax benefits are based on the assumption that no
adverse change will occur in the income tax legislation and
the anticipation that the group will derive sufficient future
assessable income to enable the benefit to be realised
and that it will comply with the conditions of deductibility
imposed by the law.
Deferred tax assets are recognised for deductable temporary
differences as management considers that it is probable
that future tax profits will be available to utilise those
temporary differences.
(b) Impairment testing
The Company uses discounted cash flow models to
determine that the parent entity’s investments in and loans
to its subsidiaries, and the capitalised development costs in
the consolidated entity, are not being carried at a value that
is materially in excess of recoverable value.
The models value each product or potential product
by estimating future cash flows and discounting the
future net cash flows for the probability of successful
commercialisation, as well as for the time value of money
using a discount rate of 12%. Revenue from a product is
estimated using current market data and projections of
market growth and potential market share.
(c) Employee benefits
Calculation of long term employment benefits requires
estimation of the retention of staff, future remuneration
levels and timing of the settlement of the benefits.
These estimates are based on historical trends.
(d) Share based payments
The group operates an employee share option plan.
The bonus element over the exercise price for the grant
of options is recognised as an expense in the Statement
of Comprehensive Income in the period(s) when the benefit
is earned. The value of the bonus element is calculated
using a Binomial option pricing model. This model requires
the input of a number of variables including an estimate
of future volatility and a risk free interest rate. Volatility
is estimated based on the historical movements in the
Company’s share price since listing on the Australian Stock
Exchange. The risk free interest rate is the Reserve Bank
of Australia’s cash rate at the options grant date.
Note 3: Financial Instruments
and Financial Risks
The consolidated entity is exposed to a variety of financial
risks comprising:
(a) Interest rate risk
(b) Currency risk
(c) Credit risk
(d) Liquidity risk
(e) Fair Values
The Board of Directors have overall responsibility for
identifying and managing operational and financial risks.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate as a result of
changes in market interest rates.
The consolidated entity’s exposure to interest rate risks and
the effective interest rates of financial assets and financial
liabilities at 30 June 2015 are shown in the table on the
following page. Cash is the only financial asset or liability
that is exposed to interest rate risk. A change in the average
effective interest rate of 1% would change the net profit
and equity of the consolidated entity by approximately
$0.2 million (2014: $0.2 million).
44
FINANCIAL REPORT At 30 June 2015, the consolidated entity had financial instruments with carrying amounts as shown in the following table:
Floating interest
rate
Fixed interest rate
maturing in:
1 year or less
Non interest
bearing
Total carrying
amount as per the
Balance Sheet
Weighted
average effective
interest rate*
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
%
2014
%
19,067
2,774
4,000 23,000
1
1 23,068 25,775
2.9
2.2
–
–
–
–
4,943
5,604
4,943
5,604
Financial Instruments
(i) Financial assets
Cash
Receivables
Total financial assets
19,067 2,774 4,000 23,000 4,944 5,605 28,011 31,379
(ii) Financial liabilities
Trade creditors
Sundry creditors and accruals
Total financial liabilities
–
–
–
–
–
–
–
–
–
–
–
106
1,044
217
912
106
1,044
217
912
– 1,150 1,129 1,150 1,129
* The weighted average interest rate is calculated by dividing interest income for year over the average cash balance held.
(b) Currency risk
Currency risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of
changes in foreign exchange rates.
The consolidated entity is exposed to material currency
risks due to revenue denominated in US dollars. Currency
risk management strategies are regularly reviewed.
Bank accounts denominated in US dollars are maintained
in order to facilitate receipts and payments. Cash reserves
at 30 June 2015 included $0.2 million (2014: $0.2 million)
denominated in US dollars. A change of 10% in the
AUD/USD exchange rate at 30 June 2015 would have
immaterial impact on the net profit and equity of the
consolidated entity.
The balance of receivables at 30 June 2015 includes the
right to receive US$3.6 million (2014: US$5.2 million)
of Axiron royalties for the fourth quarter of the 2014/15
financial year. A change of 10% in the AUD/USD exchange
rate at 30 June 2015 would change the consolidated net
profit and equity by approximately $0.4 million (2014:
$0.6 million).
During the reporting period, exchange rate risk was
managed by eliminating US dollar revenue in excess of
US dollar expenditure through spot and short-term forward
sales of US dollars. The consolidated entity does not enter
into forward exchange contracts. At balance date, there
were nil (2014: nil) forward exchange contracts.
The accounting policy for forward exchange contracts
is detailed in Note 1(n).
In future periods, material amounts of revenue are expected
to be received in US dollars as royalties and potential
sales milestone payments under the Axiron agreement
are payable in US dollars.
(c) Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing
to discharge an obligation. The maximum exposure to
credit risk of recognised financial assets at balance date,
excluding the value of any collateral or other security, is the
carrying amount of those assets, net of any provisions for
impairment of those assets, as disclosed in consolidated
statement of financial position and notes to the consolidated
financial statements.
Cash reserves form the majority of the consolidated entity’s
financial assets at 30 June 2015. Acrux Limited is a Pooled
Development Fund. The Pooled Development Fund Act
restricts the investment of cash reserves to deposits with an
Australian bank licensed to take deposits. This policy is also
followed for all cash held by the other companies within the
consolidated entity.
At 30 June 2015 the consolidated entity had a material
credit risk exposure to Eli Lilly and Company and
its subsidiaries. The receivables recorded on the
consolidated entity’s balance sheet contains an amount
of AUD$4.7 million due from Eli Lilly under the license
agreement for the commercialisation of Axiron. During
future reporting periods, the consolidated entity is expected
to continue to have a material credit exposure to Eli Lilly
and Company and its subsidiaries, due to the royalties
and milestone payments expected. At 30 June 2015, Eli
Lilly’s credit ratings were AA- (S&P) and A2 (Moodys). The
credit rating and financial health of Eli Lilly are monitored
regularly. The grant of the license under the license
agreement is subject to payment by Eli Lilly of the amounts
in accordance with the agreement.
45
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 3: Financial Instruments
and Financial Risks (continued)
(d) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty
in meeting obligations associated with financial liabilities.
The financial liabilities of the consolidated entity at the
balance date are all expected to mature within three months
of the balance date. The consolidated entity has sufficient
cash reserves, $23.1 million (2014: $25.7 million) to settle
these liabilities and to fund operating expenditure for the
foreseeable future. The consolidated entity does not have
an overdraft or loan facility. The maturity profile of the
consolidated entity’s cash term deposits is actively managed
and compared with forecast liabilities to ensure that
sufficient cash is available to settle liabilities as they fall due.
(e) Fair values
The fair value of financial assets and financial liabilities
approximates their carrying amounts as disclosed in the
consolidated statement of financial position and notes to
the consolidated financial statements.
Financial asset and liabilities measured and recognised at
fair value have been determined by the following fair value
measurement hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: Input other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Inputs for the asset or liability that are not based
on observable market data
Forward exchange contracts are level 2 on the fair value
hierarchy.
Note 4: Revenue
Revenues from operating activities
Revenue from product agreements
Grant revenue
Total revenues from operating activities
Other revenues
Interest
Foreign exchange gain
Total revenues from non-operating activities
Total revenues from continuing operations
2015
$’000
2014
$’000
24,616
53,368
23
21
24,639
53,389
564
165
729
470
–
470
25,368
53,859
46
FINANCIAL REPORT Note 5: Profit from Continuing Operations
Profit from continuing operations before income tax has been determined after the
following specific expenses:
Notes
2015
$’000
2014
$’000
Employee benefits expense
Wages and salaries
Workers’ compensation costs
Superannuation costs
Payroll taxes
Training expenses
Total employee benefits expense
Depreciation of non-current assets
Plant and equipment
Total depreciation of non-current assets
Amortisation of non-current assets
Intellectual property
Research and development
Total amortisation of non-current assets
Total depreciation and amortisation expenses
Rental expense on operating leases
External research and development expenses
2,329
2,050
8
181
109
59
6
172
92
26
2,686
2,346
52
52
40
40
95
1,278
1,373
1,425
294
705
95
1,278
1,373
1,413
282
756
47
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 6: Income Tax
(a) Income tax recognised in profit or loss:
Current tax
Deferred tax
(Over)/under provision in prior years
Income tax expense/(credit) attributable to profit
(b) Reconciliation of income tax expense
The prima facie tax payable on profit before income tax is reconciled to the income tax expense
as follows:
Profit before tax from continuing operations
Prima facie income tax payable on profit before income tax at 30.0% (2014: 30.0%)
Add/(subtract) tax effect:
Parent entity 15% tax rate1
Parent entity tax on unfranked dividend income
Parent entity net adjustment on franked dividend income
Non deductible expenses
Research and development tax incentive
Foreign tax credits written off
Over provision in prior years
Tax losses and temporary differences not brought to account
Income tax expense attributable to profit
(c) Current tax
Opening balance
(Over)/under provision in prior years
Provision for current year
Tax losses transferred from deferred tax
Tax payments
Current tax liability
1 The parent entity, Acrux Limited is a Pooled Development Fund (PDF):
– PDF’s are taxed at 15% on income and gains from investments in small to medium enterprises;
– PDF’s are taxed at 25% on other income; and
– PDFs are not permitted to consolidate for tax purposes.
2015
$’000
2014
$’000
5,949
13,749
(448)
175
2,237
(99)
5,676
15,887
16,806
5,042
43,857
13,157
208
–
(2,092)
270
(59)
–
175
233
2,925
(3,000)
128
(52)
(10)
(22)
2,132
634
2,518
2,720
5,676
15,877
4,526
175
5,949
0
(8,886)
1,764
1,675
(110)
13,870
(121)
(10,788)
4,526
48
FINANCIAL REPORT
(d) Deferred tax
Deferred tax relates to the following:
Deferred tax assets
The balance comprises:
Accruals and provisions
Leasehold improvements
Patent expenses
Exchange differences
Share issue expenses
Tax losses
Deferred tax liabilities
The balance comprises:
Exchange differences
Intangible assets
Accrued interest
Prepayments
Net deferred tax assets/(liabilities)
(e) Deferred tax assets not brought to account
Temporary differences
Tax losses
Note 7: Dividends
(a) Dividends paid
2015
$’000
2014
$’000
90
183
799
–
–
92
145
195
711
15
1
–
1,164
1,067
35
5,749
8
21
5,813
(4,649)
2
10,443
10,445
–
6,133
31
–
6,164
(5,097)
10
8,311
8,321
Dividends paid at 8 cents per share, franked (2014: 20 cents per share, unfranked)
13,322
33,304
Balance of franking account on a tax paid basis at financial year-end adjusted for franking
credits arising from payment of provision for income tax and dividends recognised as
receivables, franking debits arising from payment of proposed dividends and any credits that
may be prevented from distribution in subsequent years:
42,188
33,337
49
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 8: Earnings Per Share
Profit from continuing operations
Profit used in calculating basic and diluted earnings per share
2015
$’000
11,130
11,130
2014
$’000
27,970
27,970
No. of shares No. of shares
Weighted average number of ordinary shares used in calculating basic earnings per share
166,521,711 166,521,711
Effect of dilutive securities:
Employee Share Options
Adjusted weighted average number of ordinary shares used in calculating diluted earnings
per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Note 9: Cash and Cash Equivalent
Cash at bank
Deposits at call
Note 10: Receivables
CURRENT
Trade receivables
Other receivables
Prepayments
–
–
166,521,711 166,521,711
6.70
6.70
16.80
16.80
2015
$’000
19,068
4,000
23,068
2014
$’000
2,775
23,000
25,775
2015
$’000
2014
$’000
4,760
5,347
66
117
141
116
4,943
5,604
(a) Provision for impairment
No trade receivables are past due and all trade receivables are non interest bearing with 30 or 60 day terms. An impairment
loss is recognised when there is objective evidence that an individual trade receivable is impaired. No impairment losses have
been recognised for reported periods. All trade receivables are expected to be received within trading terms.
50
FINANCIAL REPORT Note 11: Plant and Equipment
Leasehold Improvements
At cost
Accumulated amortisation
Total leasehold improvements
Plant and Equipment
At cost
Accumulated depreciation
Total plant and equipment
Total plant and equipment
Notes
2015
$’000
2014
$’000
11(a)
11(a)
1,119
(1,115)
4
213
(125)
88
92
1,115
(1,115)
–
166
(88)
78
78
(a) Reconciliations
Reconciliations of the carrying amounts of plant and equipment at the beginning and end of the current financial year:
2015
$’000
2014
$’000
Leasehold improvements
Carrying amount at beginning
Additions
Amortisation expense
Plant and equipment
Carrying amount at beginning
Additions
Disposals
Depreciation expense
–
4
–
4
78
62
–
(52)
88
–
–
–
–
93
25
–
(40)
78
51
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 12: Intangible Assets
Intellectual Property
At cost
Accumulated amortisation
Capitalised Development
Ellavie™
External research and development expenses
Employee benefits capitalised
Other capitalised amounts
Axiron™
External research and development expenses
Employee benefits capitalised
Other capitalised amounts
Accumulated amortisation
Net carrying amount
Total intangible assets
Notes
2015
$’000
2014
$’000
1,200
(1,044)
156
1,200
(949)
251
12(a)
766
169
136
766
169
136
12(a)
1,071
1,071
17,415
3,353
2,403
(4,006)
19,165
20,236
20,392
17,415
3,353
2,403
(2,729)
20,442
21,513
21,764
12(a)
(a) Reconciliations
Reconciliations of the carrying amounts of intellectual property and capitalised development at the beginning and end of the
current financial year.
Intellectual Property
Carrying amount at beginning
Amortisation expense
Capitalised Development
EllavieTM
Carrying amount at beginning
Additions
AxironTM
Carrying amount at beginning
Additions
Amortisation
The remaining useful life of Axiron Capitalised Development is approximately 15 years.
52
2015
$’000
2014
$’000
251
(95)
156
346
(95)
251
1,071
–
1,071
20,442
–
(1,277)
19,165
1,071
–
1,071
21,720
–
(1,278)
20,442
FINANCIAL REPORT Note 13: Payables
Current
Trade creditors
Sundry creditors and accruals
Note 14: Provisions
Current
Employee entitlements
Non-Current
Employee entitlements
Aggregate employee entitlements liability
Note 15: Contributed Equity
(a) Issued and paid up capital
Ordinary shares fully paid
(b) Movements in shares on issue
Beginning of the financial year
Issued during the year:
- Employee share option plans
Less Capital Raising Expenses
Fair value of shares issued on exercise of employee share options
Contributions from share issues
At reporting date
(c) Share Options
2015
$’000
2014
$’000
106
1,044
1,150
217
912
1,129
2015
$’000
2014
$’000
288
401
19
307
11
412
2015
2014
No. of Shares
$’000 No. of Shares
$’000
166,521,711
95,873 166,521,711
95,873
166,521,711
95,873 166,521,711
95,873
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
166,521,711
95,873 166,521,711
95,873
Employee Share Option Plan
The consolidated entity operates an employee share option plan. During the financial year no options were exercised (2014 Nil),
2,000,000 new options were issued under the plan during the financial year (2014: 1,855,000). Options hold no participation
rights, but shares issued on exercise of options rank equally with existing shares. At 30 June 2015 2,915,000 options were held
by key management personnel (2014: 1,340,000).
53
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 15: Contributed Equity (continued)
The closing market value of an ordinary Acrux Limited share on the Australian Stock Exchange at 30 June 2015 was $0.85.
(i) Movement in the number of share options held under Employee Share Option Plan
are as follows:
Opening balance
Granted during the year
Exercised during the year
Lapsed during the year
Closing balance
(ii) Details of share options exercised during the year:
Proceeds from shares issued
Fair value as at issue date of shares issued during the year
(iii) Details of lapsed options
Key Management Personnel
Employee
Lapsed during the year
2015
No.
2014
No.
1,855,000
–
2,000,000
1,855,000
–
(475,000)
–
–
3,380,000
1,855,000
$’000
$’000
–
–
–
–
2015
No.
2014
No.
425,000
50,000
475,000
–
–
–
(d) Capital management
When managing capital, the Directors’ objective is to ensure the entity continues as a going concern as well as to maintain
optimal returns to shareholders and benefits for other stakeholders.
During 2015, the Board paid dividends of $13.3 million (2014: $33.3 million). The amounts and ratio of future dividends have
not been determined.
Note 16: Share Based Payments
(a) Employee share option plan
Details of the options granted are provided below:
Balance
at the
beginning of
the year
Exercise
price
$4.30
1,255,000
600,000
$4.30
$1.32
Granted
during the
year
Exercised
during the
year
Expired
during the
year
Balance at
the end of
the year
Exercisable
at the end of
the year
–
–
– 2,000,000
2,000,000
–
–
–
–
(475,000)
780,000
780,000
–
600,000
600,000
– 2,000,000 2,000,000
(475,000) 3,380,000 3,380,000
2014
Grant date
Expiry date
7/31/2013
11/21/2013
2/3/2015
7/31/2016
7/31/2016
2/3/2018
54
FINANCIAL REPORT
The weighted average remaining contractual life for share options outstanding at the end of the period was 1.98 years.
The fair value of the options granted on 3 February 2015 was 38 cents per option at the date of grant. Fair value was
determined using the binomial option pricing model. The following inputs were utilised:
Exercise price: $1.32
Grant date: 3 February 2015
Expiry date: 3 February 2018
Share price at grant date: $1.45
Expected price volatility of the company’s shares: 57%
Expected dividend yield: 8.99%
The fair value of the options granted on 31 July 2013 was 43 cents per option. Fair value was determined using the binomial
option pricing model. The following inputs were utilised:
Exercise price: $4.30
Grant date: 31 July 2013
Expiry date: 31 July 2016
Share price at grant date: $3.35
Expected price volatility of the company’s shares: 38%
Expected dividend yield: 5%
Risk-free interest rate: 2.52%
The fair value of the options granted on 21 November 2013 was 16 cents per option. Fair value was determined using the
binomial option pricing model. The following inputs were utilised:
Exercise price: $4.30
Grant date: 21 November 2013
Expiry date: 31 July 2016
Share price at grant date: $2.56
Expected price volatility of the company’s shares: 37%
Expected dividend yield: 5.0%
Risk-free interest rate: 3.08%
(b) Expenses recognised from share-based payment transactions
The expense recognised in relation to the share-based payment transactions was recorded within share options expense in the
statement of comprehensive income were as follows:
Options issued under the employee share option plan
Total expenses recognised from share based payment transactions
2015
$’000
760
760
2014
$’000
638
638
55
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 17: Reserves and Accumulated Losses
Share based payment reserve
Accumulated losses
(a) Share based payment reserve
(i) Nature and purpose of reserve
This reserve is used to record the value of equity benefit provided to employees
and directors as part of their remuneration. Refer Note 15 for details.
(ii) Movement in reserve
Balance at the beginning of year
Transfer fair value of employee shares options to share capital
Employee share option expense for the period (including adjustment for service
conditions not met)
Vested employee share options previously expensed, that lapsed during the period
Balance at end of year
(b) Accumulated losses
Balance at the beginning of year
Vested employee share options that lapsed during the period
Net profit attributable to members of Acrux Limited
Accumulated losses at reporting date
Dividends paid
Accumulated losses at reporting date
Note 18: Non-Controlling Interests
The consolidated entity holds nil (2014: nil) Non-controlling interests at balance date.
Notes
17(a)
17(b)
2015
$’000
1,194
2014
$’000
638
(56,442)
(54,454)
638
–
760
(204)
1,194
–
–
638
–
638
(54,454)
(49,120)
204
11,130
(43,120)
(13,322)
–
27,970
(21,150)
(33,304)
(56,442)
(54,454)
56
FINANCIAL REPORT
Note 19: Cash Flow Information
(a) Reconciliation of the cash flow from operations with profit after income tax:
Profit from ordinary activities after income tax
11,130
27,970
2015
$’000
2014
$’000
Non-Cash Items
Depreciation and amortisation
Share options expense
Unrealised foreign exchange gains
Changes in assets and liabilities
Increase/(decrease) in tax liabilities
Decrease/(increase) in trade and other receivables
Increase/(decrease) in payables
Increase/(decrease) in employee entitlements
Increase/(decrease) in deferred taxes
1,425
760
(163)
(2,762)
661
21
(105)
(448)
(611)
1,413
638
107
2,851
1,221
(127)
61
2,237
8,401
Net cash (outflows)/inflows from operating activities
10,519
36,371
(b) Reconciliation of cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to
the related items in the statement of financial position is as follows:
- Cash at bank
- At call deposits with financial institutions
Closing cash balance
19,068
4,000
23,068
2,775
23,000
25,775
(c) Credit stand-by arrangement and loan facilities
The consolidated entity has credit card facilities with the National Australia Bank and American Express available to the extent
of $161,000 (2014: $101,000). As at 30 June 2015 the consolidated entity had unused facilities of $147,599 (2014: $93,153).
57
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 20: Commitments
Lease expenditure commitments
Operating leases (non-cancellable)
(i) Non cancellable operating leases contracted for but not capitalised in the accounts:
(ii) Minimum lease payments
- Not later than one year
- Later than one year and not later than five years
Aggregate lease expenditure contracted for at reporting date
2015
$’000
2014
$’000
302
606
908
294
908
1,202
The operating lease relates to office, laboratory and warehouse facilities for which the lease was renewed by Acrux DDS Pty Ltd
for a period of 4 years from 1 June 2014, with an option to extend for a further period of 4 years. The lease contract contains
market review clauses in the event that Acrux DDS Pty Ltd exercises its option to renew. The company does not have an option
to purchase the leased asset at the expiry of the lease period.
Note 21: Key Management Personnel Compensation
Details of Key Management Personnel Compensation are contained within the Remuneration Report section of the Director’s
Report. A breakdown of the aggregate components of Key Management Personnel’s compensation is provided below:
Compensation by category:
Short-term employment benefits
Post-employment benefits
Termination benefits
Equity
2015
$’000
2014
$’000
1,282
1,219
73
–
760
69
–
356
2,115
1,644
Note 22: Loans to Key Management Personnel
There were no loans made to Key Management Personnel during the reporting period.
Note 23: Related Party Disclosures
Wholly-owned group transactions
Loans
Loans were made by Acrux Limited to its subsidiaries under normal terms and conditions. The aggregate amounts receivable
from controlled entities by the parent entity at the end of the reporting period were nil (2014: nil).
Non-interesting bearing loans were made by Acrux Commercial Pty Ltd to its subsidiary, Fempharm Pty Ltd. The aggregate
amount receivable from Fempharm Pty Ltd at the end of the reporting period was $4,895,370 (2014: $4,486,184).
Other transactions with Key Management Personnel and their personally-related entities
Acrux DDS Pty Ltd, a wholly owned subsidiary of Acrux Limited, entered into two research and commercialisation collaboration
agreements with Hexima Limited on 8 October 2013. Ross Dobinson was previously the Executive Chairman of Hexima
Limited. During the reporting period Acrux DDS Pty Ltd received nil (2014: $5,260.37) from Hexima for the reimbursement
of expenses directly related to the collaboration agreements. At the end of the reporting period there were no amounts
outstanding to be paid to or received from Hexima.
Any payments made to Key Management Personnel during the financial year, other than remuneration entitlements,
related to the reimbursement of business expenses incurred on behalf of Acrux Limited and its subsidiaries.
58
FINANCIAL REPORT
Note 24: Auditor’s Remuneration
Amounts paid and payable to Pitcher Partners for:
(i) Audit and other assurance services
- An audit or review of the financial report of the entity and any other entity in the
consolidated entity
- Other assurance services
2015
$’000
2014
$’000
106
13
119
92
–
92
Note 25: Segment Information
The consolidated entity operates as a single operating segment. Internal management reporting systems present financial
information as a single segment. The segment derives its revenue from developing and commercialising products using unique
technology to administer drugs through the skin.
Additional information on revenue:
Product/Service
Axiron
Other revenue
Total revenue
Country of Origin
Australia
Outside Australia:
Switzerland
United States
Other
2015
$’000
2014
$’000
24,255
1,113
52,528
1,331
25,368
53,859
752
491
24,255
52,528
144
217
169
671
25,368
53,859
59
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 26: Parent Entity Details
Summarised presentation of the parent entity, Acrux Limited, financial statements:
(a) Summarised statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Profit reserve
Accumulated losses
Share based payments reserve
Total equity
(b) Summarised statement of comprehensive income
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Parent Entity
2015
$’000
2014
$’000
6,204
19,000
25,204
523
19,000
19,523
924
–
924
296
–
296
24,280
19,227
95,873
4,293
(77,080)
1,194
95,873
–
(77,284)
638
24,280
19,227
17,615
29,530
–
–
17,615
29,530
60
FINANCIAL REPORT
Note 27: Controlled Entities
Parent Entity:
Acrux Limited
Subsidiaries of Acrux Limited
Acrux DDS Pty Ltd
Acrux Pharma Pty Ltd
Acrux Commercial Pty Ltd
Subsidiaries of Acrux Commercial Pty Ltd
Fempharm Pty Ltd
Note 28: Contingencies
There were no contingencies at 30 June 2015 (2014: Nil).
Percentage Owned
Country of
Incorporation
2015
2014
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
Australia
100%
100%
Note 29: Subsequent Events
The Board resolved to issue 1,000,000 Options to the Chief Executive Officer, Mr. Kotsanis on 22 July 2015 at an exercise
price of $1.11 per share. The Options comprise the long term incentive component of the remuneration package for the Chief
Executive Officer and were issued pursuant to the terms of the Chief Executive Officer Share Option Plan, which was approved
at the Acrux Limited Extraordinary General Meeting on 3 February 2015. Shares allocated on exercise of the Options will rank
equally from the date of exercise.
There has been no other matter or circumstance, which has arisen since 30 June 2015 that has significantly affected or may
significantly affect:
(a) the operations, in financial years subsequent to 30 June 2015, of the consolidated entity, or
(b) the results of those operations, or
(c) the state of affairs, in financial years subsequent to 30 June 2015, of the consolidated entity.
Note 30: Company Details
The registered office of the company is:
Acrux Limited
103 – 113 Stanley Street
West Melbourne VIC 3003
61
ANNUAL REPORT 2015 DIRECTORS’ DECLARATION
The Directors declare that the financial statements and notes set out on 24 to 61 in accordance with the Corporations
Act 2001:
(a) Comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory professional reporting
requirements;
(b) As stated in Note 1(a) the consolidated financial statements also comply with International Financial Reporting Standards;
and
(c) Give a true and fair view of the financial position of the consolidated entity as at 30 June 2015 and of its performance for
the year ended on that date.
In the Directors’ opinion there are reasonable grounds to believe that Acrux Limited will be able to pay its debts as and when
they become due and payable.
This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer and Chief
Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ending
30 June 2015.
This declaration is made in accordance with a resolution of the Directors.
R Dobinson
Non-Executive Chairman
Melbourne
B Parncutt
Director
Melbourne
Dated this 12th day of August 2015
Dated this 12th day of August 2015
62
FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT
ACRUX LIMITED
ABN 72 082 001 152
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF
ACRUX LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Acrux Limited and its controlled entities, which
comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement
of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash
flows for the year then ended, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity comprising the company
and the entities it controlled at the year's end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor's judgement, including the assessment of
the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the company’s preparation of the financial
report that gives a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
‐55‐
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
63
ANNUAL REPORT 2015
INDEPENDENT AUDITOR’S REPORT
CONTINUED
ACRUX LIMITED
ABN 72 082 001 152
AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF
ACRUX LIMITED
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Opinion
In our opinion:
(a)
the financial report of Acrux Limited and controlled entities is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2015 and
of its performance and its cash flows for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the consolidated financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 30 to 34 of the directors' report for the year
ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Acrux Limited and controlled entities for the year ended 30 June
2015 complies with section 300A of the Corporations Act 2001.
S SCHONBERG
Partner
13 August 2015
PITCHER PARTNERS
Melbourne
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
‐56‐
64
FINANCIAL REPORT SHAREHOLDER INFORMATION
Additional information required by Australian Securities Exchange Listing Rules and not disclosed elsewhere in this report, as at
11 September 2015:
Shareholders
The Company has 166,521,711 ordinary fully paid shares on issue, held by 8,529 shareholders and 4,380,000 options
outstanding, held by 14 people. The Company does not have any other shares or options or other equity securities on issue.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholders’ meetings. No voting rights attach to the options.
All fully paid ordinary shares are quoted on the Australian Securities Exchange. No other equity securities of the Company
are quoted on the Australian Securities Exchange. The Company has not had, and neither is there currently, any on-market
buy back.
Distribution Schedule
The following is a distribution schedule of the number of holders of fully paid ordinary shares in the Company within the bands
of holding specified by the ASX Listing Rules:
Category
1 to 1,000 shares
1,001 to 5,000 shares
5,001 to 10,000 shares
10,001 to 100,000 shares
100,001 shares and over
Total
Number of
Shareholders
Percentage
Shares
1,771
3,330
1,505
1,782
141
8,529
0.63%
5.78%
7.30%
29.66%
56.63%
1,041,682
9,619,994
12,161,967
49,394,170
94,303,898
100.00%
166,521,711
1,198 shareholders hold less than a marketable parcel of fully paid ordinary shares (being the Company’s main class of
securities), based on the market price at the date set out above.
Substantial Holders
Name
Allan Gray Australia Pty Limited
Number of Equity Securities Held
23,640,122
Under the ASX Listing Rules “Substantial Holder” means, in general terms, a person who either alone or with their associates
has an interest in 5% or more of the voting shares of the Company.
65
ANNUAL REPORT 2015 SHAREHOLDER INFORMATION
CONTINUED
Twenty Largest Holders of Fully Paid Ordinary Shares in Acrux Limited
Shareholder
1
2
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
4 NATIONAL NOMINEES LIMITED
5 BRISPOT NOMINEES PTY LTD
6 MR IAN VICTOR LANCINI & MRS DEBRA ANN LANCINI
7 DURBIN SUPERANNUATION PTY LTD
8 HISHENK PTY LTD
9 DORVELL PTY LTD
10 ASIA UNION INVESTMENTS PTY LIMITED
11 BOND STREET CUSTODIANS LIMITED
12 ASIA UNION INVESTMENTS PTY LTD
13 BNP PARIBAS NOMS PTY LTD
14 BOND STREET CUSTODIANS LIMITED
15 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
16 CS FOURTH NOMINEES PTY LTD
17 C M ABBOTT PTY LIMITED
18 LOREMELL PTY LIMITED
19 MR LOUIS PIERRE LEDGER
20 MR WILLIAM GEORGE JEPHCOTT
Number of Fully Paid
Ordinary Shares
Percentage of
Total Capital
13,874,890
13,841,266
12,840,464
5,115,028
2,183,604
2,045,000
1,895,000
1,655,000
1,513,640
1,500,000
1,257,295
1,200,000
889,267
876,923
850,604
815,104
800,000
764,716
701,500
655,000
8.33%
8.31%
7.71%
3.07%
1.31%
1.23%
1.14%
0.99%
0.91%
0.90%
0.76%
0.72%
0.53%
0.53%
0.51%
0.49%
0.48%
0.46%
0.42%
0.39%
Market Listing
Acrux Limited is quoted on the Australian Securities Exchange (ASX). Share prices can be obtained from most Australian
national newspapers and from the ASX website (www.asx.com.au). The shares of the Company are not quoted on any other
stock exchange. The following are the share prices for the end of each quarter of the financial year ending 30 June 2015:
65,274,301
39.20%
Quarter ended 30 September 2014
Quarter ended 31 December 2014
Quarter ended 31 March 2015
Quarter ended 30 June 2015
The closing share price on 11 September 2015 was 61 cents
$1.54
$1.28
$0.86
$0.85
66
FINANCIAL REPORT Pooled Development Fund
The information set out below is of a general nature only
and may vary from person to person (dependent on their
circumstances). Any shareholder or prospective shareholder
should obtain their own taxation advice, rather than relying
on this summary.
Acrux Limited is a Pooled Development Fund (PDF) that
has been registered under the Pooled Development Fund
Act 1992 (“the PDF Act”) since 7 July 1999. A PDF is a
company that is resident in Australia, and is registered and
regulated by the PDF Registration Board in accordance
with the PDF Act.
Shareholders in the Company will be entitled to
concessionary tax treatment in Australia for income and
capital gains derived in connection with their shareholding.
The concessionary tax treatment should be available to
investors that hold their interests directly and indirectly
through non-corporate trusts and partnerships.
Gains realised by an investor on the disposal of shares in the
Company will not be included in the investor’s assessable
income in Australia. This is because:
Where the gain on sale would be ordinary income of the
investor, the gain will be treated as exempt income; and
Where the gain on sale would be a capital gain it
is specifically excluded from the capital gains tax
provisions of the Tax Act.
Equally, an investor will not be entitled to any deduction
or capital loss on the sale of the Company’s shares.
Shares held in a PDF cannot be held as trading stock.
Accordingly, share traders cannot treat PDF shares as
trading stock.
Unfranked dividends received by an Australian resident
shareholder from the Company will be exempt from tax in
the hands of the shareholder. Franked dividends will also be
exempt from tax unless the shareholder elects to treat the
franked dividend as taxable.
Broadly, Australian resident shareholders who hold the
Company’s shares at risk (in accordance with the Tax Act)
for 45 days or more may elect to treat franked dividends
paid by the Company as assessable income, and claim
the tax offset available in respect of the dividend. The tax
offset will be equal to the franking credit attaching to the
dividend received. Where the tax offset available exceeds
the shareholder’s highest marginal tax rate, the shareholder
may be entitled to receive a refund of tax in respect of the
excess franking credit.
Australian corporate tax entities are entitled to benefit from
the franking credits attaching to the franked portion of the
dividends paid by the Company, irrespective of whether the
corporate tax entity treats the dividend as exempt income
or elects to treat it as assessable income. Accordingly, an
Australian corporate may credit its franking account with
franking credits attaching to a dividend from the Company
regardless of whether or not they have elected to treat the
dividend as exempt or assessable income.
Dividends paid by Acrux to non-residents will not be subject
to withholding tax regardless of whether or not they are
franked or unfranked.
Should the Company cease to be a PDF, each shareholder
will be deemed to have sold their shares immediately before
the Company ceased to be a PDF and to have acquired the
shares at their market value immediately after the Company
ceased to be a PDF. Any gain or loss realised on the sale
after that time, calculated by reference to the deemed
acquisition cost, will be subject to the general provisions
of the Tax Act and any such gain may be included in the
shareholder’s assessable income.
67
ANNUAL REPORT 2015 GLOSSARY
Term
Abbreviation Description
Abbreviated New
Drug Application
ANDA
Axiron®
Decentralised
Procedure
DCP
Diclofenac
Elanco
Eli Lilly and
Company
Lilly
Ellavie®
Estradiol
Estrogen
An Abbreviated New Drug Application (ANDA) contains data which, when submitted to the FDA’s Center for Drug
Evaluation and Research, Office of Generic Drugs, provides for the review and ultimate approval of a generic drug
product. Once approved, an applicant may manufacture and market the generic drug product to provide a safe,
effective, low cost alternative to the branded drugs.
A generic drug product is one that is comparable to an innovator drug product in dosage form, strength, route of
administration, quality, performance characteristics and intended use.
Brand name for Acrux’s unique testosterone replacement therapy solution product licensed globally to Lilly and which
is approved in various countries. The Axiron® trademark is owned Lilly.
A regulatory application in Europe for marketing authorisation is submitted simultaneously to the competent authorities
within the European Union. At the end of the DCP procedure, the draft Assessment Report, labelling and package
leaflet, as proposed by the Reference Member State, may be approved.
Diclofenac is a commonly used nonsteroidal anti-inflammatory drug (NSAID).
Elanco provides products and knowledge services to improve animal health and food animal production in more than
70 countries around the world. The company has nearly 7,000 employees worldwide. Founded in 1954, Elanco is a
division of Eli Lilly and Company. Worldwide headquarters and research facilities are located in Greenfield, Indiana.
Lilly is a global healthcare leader that unites caring with discovery to make life better for people around the world. Lilly
was founded more than a century ago and are committed to creating high-quality medicines that meet real needs.
Across the globe, Lilly employees work to discover and bring life-changing medicines to those who need them, improve
the understanding and management of disease, and give back to communities through philanthropy and volunteerism.
Alternative brand name for Acrux’s estradiol spray product. The Ellavie® trademark is owned by Acrux.
Estradiol is a form of estrogen, a female sex hormone produced by the ovaries. Estrogen is necessary for many
processes in the body.
Generic term for any substance, natural or synthetic, that exerts biologic effects characteristic of estrogenic hormones.
European
Medicines Agency
EMA
European Union agency responsible for the protection of public and animal health through the scientific evaluation and
supervision of medicines.
Evamist®
Food and Drug
Administration
FDA
Gedeon Richter
Generic
Hypogonadism
Ibuprofen
Lenzetto®
Net profit after tax NPAT
Non-steroidal
anti-inflammatory
drug
NSAID
NRx
Onychomycosis
Perrigo
Testosterone
Topical
Transdermal
TRx
68
Brand name for Acrux’s unique estradiol spray product in the United States. The Evamist® trademark is owned by
Lumara Health.
The FDA is responsible for protecting and promoting public health through the regulation and supervision of
prescription, over-the-counter pharmaceutical drugs (medications), vaccines, biopharmaceuticals and veterinary
products in the United States.
Gedeon Richter Plc., headquartered in Budapest/Hungary, is a major pharmaceutical company in Central Eastern
Europe, with an expanding direct presence in Western Europe. Richter’s consolidated sales were approximately EUR
1.1 billion (US$ 1.5 billion), while its market capitalization amounted to EUR 2.1 billion (US$ 2.5 billion) in 2014. The
product portfolio of Richter covers a broad range of therapeutic areas, including gynaecology, central nervous system,
and cardiovascular areas. Richter is a significant player in the female healthcare field worldwide.
A generic medicine is a medicine that provides the same quality, safety and efficacy as the original brand name product
which undergoes strict scrutiny before it is licensed and given market approval by national regulatory authorities.
Hypogonadism occurs when the body’s sex glands produce little or no hormones. In men, these glands (gonads) are the
testes.
Ibuprofen is a commonly used nonsteroidal anti-inflammatory drug (NSAID).
Brand name for Acrux’s unique estradiol spray in the European Union. The Lenzetto® trademark is owned by Gedeon
Richter.
Total amount earned during the financial reporting period after deducting income tax expense. The financial statements
are audited and comply with relevant accounting principles, taxation laws and accounting standards.
All nonsteroidal anti-inflammatory drugs (NSAIDs) differ in structure but they all have similar antipyretic, anti-
inflammatory and analgesic properties. NSAIDs work by blocking the variant forms of the cyclooxygenase (COX) enzyme,
inhibiting production of prostaglandins and thromboxanes, which are produced as part of the body’s inflammatory
response.
New prescriptions over a period of time
Onychomycosis is a fungal infection of the toenails or fingernails that may involve any component of the nail unit,
including the matrix, bed, or plate. Onychomycosis can cause pain, discomfort, and disfigurement and may produce
serious physical and occupational limitations, as well as reducing quality of life.
Perrigo Company Plc., is a top five global over-the-counter (“OTC”) consumer goods and leading specialty
pharmaceutical company. It is one of the world’s largest manufacturers of OTC healthcare products and suppliers
of infant formulas for the store brand market.
Testosterone is a naturally occurring sex hormone that is produced in a man’s testicles.
Topical is a route of administration wherein active pharmaceutical ingredients are applied to, or affect a localised area
of the surface of the body.
Transdermal is a route of administration wherein active pharmaceutical ingredients are delivered across the skin for
systemic distribution. Examples include Axiron, Evamist and Lenzetto.
Total number of prescriptions over a period of time
FINANCIAL REPORT CORPORATE DIRECTORY
Acrux Limited and Subsidiary Companies
103-113 Stanley Street
West Melbourne
Victoria 3003
Australia
T: + 61 3 8379 0100
www.linkedin.com/company/acrux
www.acrux.com.au
Australian Stock Exchange code “ACR”
Information about the Company, including disclosures
to the Australian Stock Exchange, can be found on the
Company’s website. If you require further information
about Acrux, please contact the Chief Financial Officer
& Company Secretary on +61 3 8379 0100.
Share Registry
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333 Collins Street
Melbourne
Victoria 3000
Australia
Locked Bag A14
Sydney South
NSW 1235
Australia
Toll-free: 1300 554 474 (Australia only)
International: +61 1300 554 474
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W: www.linkmarketservices.com.au
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registrars@linkmarketservices.com.au
69
ANNUAL REPORT 2015