A N N U A L
R E P O R T 2 0 1 9
An alternate future
Alterity Therapeutics Limited
(formerly Prana Biotechnology Limited)
ACN 080 699 065
Lodged with the ASX under Listing Rule 4.3A.
This information should be read in conjunction with the Annual report.
Alterity Therapeutics Limited
Appendix 4E - Preliminary Final Report
For the year ended 30 June 2019
Name of entity
ABN or equivalent company reference
Current reporting period
Corresponding reporting period
Alterity Therapeutics Limited
37 080 699 065
30 June 2019
30 June 2018
Results for announcement to the market
$
Revenue for ordinary activities
Net loss after tax (from ordinary activities) for the period attributable to
members
Net loss after tax for the period attributable to members
Down
Up
Up
46.0%
to
49.3%
49.3%
to
to
108,538
12,337,830
12,337,830
Net tangible assets per share
Net tangible asset backing per share (cents)
Explanation of results
30 June 2019 30 June 2018
1.92
3.01
Alterity Therapeutics Limited recorded revenue of $108,538 for the year ended 30 June 2019 (2018: $201,174), which
is interest received on the Group’s bank accounts. Alterity Therapeutics Limited has incurred a loss for the year of
$12,337,830 (2018: $8,265,737). This loss has increased due to the increased research and development expenditure
relating to the Phase 1 clinical trial of the Company's lead product candidate PBT434.
For further details relating to the current period’s results, refer to the Review of operations and activities contained
within this document.
Changes in controlled entities
N/A
Other information required by Listing Rule 4.3A
N/A
Audit
These accounts have been audited. An unmodified audit report is provided with the accompanying financial report.
Contents
Corporate directory
Chairman's letter
Review of operations and activities
Intellectual property report
Directors' report
Auditor's Independence Declaration
Consolidated financial statements
Independent auditor's report to the members
Shareholder information
Page
1
2
3
21
24
43
44
84
90
Directors
Mr. Geoffrey Kempler
Chairman & CEO
Mr. Brian Meltzer
Independent Non-Executive Director
Mr. Peter Marks
Independent Non-Executive Director
Mr. Lawrence Gozlan
Non-Executive Director
Dr. David Sinclair (appointed 8 April 2019)
Non-Executive Director
Mr. Tristan Edwards (appointed 8 April 2019)
Non-Executive Director
Dr. George Mihaly (resigned 8 April 2019)
Independent Non-Executive Director
Dr. Ira Shoulson (resigned 8 April 2019)
Non-Executive Director
Secretary
Mr. Phillip Hains
Principal registered office in Australia
Level 3, 62 Lygon Street
Carlton Victoria 3053, Australia
+61 3 9824 5254
Share register
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
1300 85 05 05 (within Australia) & +61 3 9414 4000 (overseas)
Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank Victoria 3006, Australia
Solicitors
Quinert Rodda & Associates
Level 6/400 Collins St
Melbourne Victoria 3000, Australia
Website
www.alteritytherapeutics.com
Alterity Therapeutics Limited
Corporate directory
1
Alterity Therapeutics Limited
Chairman's letter
Dear shareholders,
The Company has strengthened its position over the past 12 months, and with this new positioning comes our new
identity: Alterity Therapeutics. Alterity means to be in an alternative or different state, and this ties into our science
which is based on the altering of proteins in the brain, and our new development path.
The recent completion and results of the Phase 1 clinical trial for PBT434, our lead drug compound, validates Alterity’s
proposition and is a key milestone in finding unmet clinical needs for treating neurodegenerative Parkinsonian disorders
such as Multiple system atrophy (MSA). PBT434 is an oral drug that inhibits alpha-synuclein protein in the brain, which
is scientifically implicated in diseases such as MSA, and was found to be safe and well-tolerated in both the elderly and
healthy participants in the study. Participants received repeated doses and had adverse event rates comparable to
placebo. Alongside this, the drug crossed the blood-brain barrier. This is very encouraging as it indicates that the drug
has the potential to impact directly those parts of the brain that are affected by disease, and disrupts the brain’s natural
design; keeping anything foreign or external out.
We are now planning to present the full data set to several scientific conferences and finalizing opportunities for
publication in a peer-reviewed scientific publication.
Our reset over this last year was supported through an investment led by the Boston-based company Life Biosciences
LLC with A$11.44M received to date. This commitment serves as both an important validation of our drug, and the
expertise of our drug development and commercialization team led by David Stamler, MD. This team has a
demonstrable track record in successful drug development with three drugs approved by the FDA in the
neurodegenerative space.
Attracting a team of this calibre speaks to the novelty and promise of our approach to treating some of the most
devastating neurodegenerative diseases.
The importance of the completion of the Phase 1 trial to investors is transcended only by the patients that we hope to
one day treat; patients with atypical Parkinsonian diseases who do not respond to existing drugs or have no effective
drug options. With no effective treatments, protein accumulates in their brains and leads to great pain, including slowed
movement, muscle rigidity, bowel and bladder problems, and blood pressure issues.
With no known alternative treatments currently for Parkinsonian diseases such as MSA, the estimate peak size of sales
for PBT434 to treat MSA alone is around US$750 million in the US, this is not to mention the other Parkinsonian
diseases PBT434 could potentially treat and jurisdictions outside of the US.
The sad treatment predicament for patients with MSA is recognized by global regulators and Alterity was granted
Orphan designation by the FDA earlier this year for the treatment of MSA. Orphan Drug designation by the FDA entitles
Alterity to seven years of market exclusivity for the use of PBT434 in the treatment of MSA and qualifies the sponsor
of the drug for various development incentives of the Orphan Drug Act, including tax credits for qualified clinical testing.
Orphan drugs are defined as those intended for the treatment, prevention or diagnosis of a rare disease or condition.
The Company has been strengthening its patent portfolio throughout the year with various potential indications for both
PBT2 and PBT434 granted which may provide development opportunities for Alterity in the coming years. We also
continue to mine our substantial drug discovery library for new compounds within and outside of the neurodegenerative
space.
We recognize that we have much work to do, to re-engage with investors and raise the profile of our strategy and
direction at Alterity. The growing body of evidence in our scientific foundations and PBT434 is not yet reflected in our
current market valuation, and as we continue to progress, we expect that this will also reset.
We would like to thank you all for your investment in Alterity. The team is committed to grow Alterity into a world class
drug company that delivers real value for its investors and we thank them for their tireless and unwavering commitment
to creating a better future for those with neurodegenerative disease.
Yours sincerely,
Mr. Geoffrey Kempler
Chairman & CEO
2
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
Review of operations and activities
This report provides details of activities and progress for Alterity Therapeutics (formerly Prana Biotechnology) for the
year ended 30 June 2019.
Alterity is developing first-in-class therapies to treat neurodegenerative diseases. Its lead drug candidate, PBT434, has
demonstrated pre-clinical evidence as a potential treatment of Parkinsonian disorders and has had encouraging results
in its Phase 1 clinical program, which was completed this year.
The scientific hypothesis of PBT434 is that it prevents brain cells from dying by blocking the formation of toxic alpha-
synuclein fibrils. The accumulation of the alpha-synuclein protein within neurons and glial support cells is a pathological
hallmark of Multiple system atrophy (MSA), a Parkinsonian disorder and Alterity’s first therapeutic target. PBT434 has
previously been shown in animal models of Parkinson’s disease (PD) and MSA to reduce alpha-synuclein aggregation,
preserve neurons and improve motor function.
The Company commenced the year as Prana Biotechnology and following shareholder approval at an Extraordinary
General Meeting on 5 April 2019 changed its name to Alterity Therapeutics. The Company will be referred to as Alterity
throughout this report.
Lead drug compound PBT434 completes phase 1 clinical trial
Just prior to the end of the last reporting year, Alterity received ethics committee approval for a clinical trial evaluating
the safety and pharmacokinetics of PBT434 in healthy volunteers. The Phase 1 study, conducted in Australia, recruited
70 adult volunteers and ten elderly volunteers with the key goals of assessing the safety, tolerability and drug disposition
within the body (pharmacokinetics) of PBT434 after single and multiple oral dose administration.
The volunteers in the single ascending dose phase of the study, made up of four cohorts, received progressively higher
single oral doses of PBT434 followed by blood sampling over the next 72 hours. In the multiple ascending dose phase
of the study, volunteers received eight days dosing with PBT434, administered as three successively higher dose
levels, with intensive blood sampling for pharmacokinetics on days 1 and 8. At the two highest multiple dose levels,
cerebrospinal fluid was collected at steady state to determine drug penetration to the site of action in the brain.
The trial was successfully completed with systemic exposure to the drug comparable between elderly and healthy
volunteers. PBT434 was found to be safe and well tolerated. Adverse event rates were found to be comparable with
placebo and no subject experienced a serious adverse event or an adverse event that led to discontinuation of the
study drug.
Importantly, the results indicated that PBT434 not only crosses the blood brain barrier in humans, confirming previous
observations in animal studies, but that clinically tested doses achieve concentrations in the brain comparable to those
associated with efficacy in animal models of disease.
The interim clinical data were presented at the American Academy of Neurology Annual Meeting in Philadelphia, USA
in May with plans for the full data to be presented at various scientific conferences in the coming months.
The Company has commenced preparations for further clinical studies targeting MSA.
Potential drug targets
Alterity is focusing on the treatment of Parkinsonian disorders, a group of neurological disorders which have
Parkinsonism as a feature. Parkinsonism is a general term for symptoms of slowed of movement, stiffness and tremor,
and occurs in idiopathic Parkinson's disease (PD) and atypical forms such as MSA, progressive supranuclear palsy
(PSP), among others. The atypical forms of Parkinsonism have a limited response to available drugs for treating
symptoms of PD. Alterity is targeting MSA, a highly debilitating disease with no approved treatments.
MSA is a rapidly progressive neurodegenerative disorder leading to severe disability and impairment in quality of life.
It is a sporadic disease (not inherited) and typically presents in the 50s to 60s. It is an Orphan disease with a prevalence
of approximately 5 per 100,000 in the US. In addition to Parkinsonism as described above, affected individuals
experience symptoms of autonomic failure such as orthostatic hypotension, bladder dysfunction, erectile dysfunction
and constipation as well as cerebellar impairments such as impaired gait, lack of coordination or difficulty speaking.
3
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Orphan Drug designation
Alterity applied to the US Food & Drug Administration (FDA) for Orphan Drug designation for the proposed use of
PBT434 for the treatment of MSA and the designation was granted in January 2019. Orphan designation entitles Alterity
to seven years of market exclusivity for the use of PBT434 in the treatment of MSA and qualifies the sponsor of the
drug for various development incentives of the Orphan Drug Act, including tax credits for qualified clinical testing.
Pre-clinical evidence building
Alterity has continued to build on its body of scientific evidence for PBT434 drug, with the presentation of pre-clinical
evidence of PBT434 treatment for MSA at the International Congress of Parkinson’s Disease and Movement Disorders
at Hong Kong in October 2018.
The pre-clinical data demonstrated that PBT434 prevented α-synuclein aggregation, preserved neurons, decreased
the number of glial cell inclusions and reduced motor impairment in an animal model of MSA.
These findings are consistent with previous findings in animal models of Parkinson’s disease, in which PBT434
treatment preserved neurons and improved motor function.
Candidate product discovery and translational biology programs
Important to maintaining a competitive advantage in the biopharmaceutical field is the ability for continuous
improvement and innovation in the discovery of novel product candidates. The Alterity research team is making
significant progress in evaluating new chemical scaffolds that have potential to intercede in various disease processes.
Using structure-activity relationship insights that have been developed over years of testing and validation by Alterity
scientists, innovative patentable chemical compounds are being generated. These compounds are initially screened
for activity in biological systems relevant to candidate diseases we are targeting. New screens are being investigated
that will assess the ability of a compound to intercede in the pathogenic steps thought to underlie the target disease
process, such as protein aggregation and hyperphosphorylation as well as downstream activities such as oxidative
stress and cell death. Promising candidates arising from the Translational Research program will be tested in relevant
animal models of Parkinsonian diseases, other neurodegenerative diseases, and potential applications outside of
neurodegeneration.
Portfolio development
In addition to PBT434, Alterity is continuing to explore clinical development options for PBT2 outside the area of
neurodegenerative diseases.
Results of operations
The Group reported a loss for the year of $12,337,830 (2018: $8,265,737). The loss is after fully expensing all research
and development costs.
Other income
We had other income of $4,951,167 (2018: $3,125,775) relating to a 43.5% tax incentive rebate for eligible research
and development activities.
Research and development expenses
Our research and development expenses consist primarily of expenses for contracted research and development
activities conducted by third parties on our behalf. Research and development expenses also include costs associated
with the acquisition, development of patents, salaries and fees paid to employees and consultants involved in research
and development activities.
Our research and development expenses (including research and development expenses paid to related parties)
increased to $12,983,185 for the year ended 30 June 2019 from $6,698,016 for the year ended 30 June 2018, an
increase of $6,285,169, or 94%. The increase in research and development expenses in the year ended 30 June 2019
is primarily due to the increased research and development activities in relation to the Group’s lead product candidate
PBT434 including the Phase I study.
4
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
We believe that Australian Government tax incentive scheme relating to eligible research and development activities,
introduced on 1 July 2011, will continue to provide us with significant benefits in future years. Such eligible R&D
activities include but are not limited to:
•
Core activities, which are experimental activities whose outcome cannot be known or determined in advance,
but can only be determined by applying a systematic progression of work;
•
Core activities conducted for the purpose of generating new knowledge (including new knowledge in the form
of new or improved processes and materials); or
Supporting activities that are directly related and designed to support the above.
•
Under the research and development incentive scheme, entities with an aggregated turnover for the income year of
less than A$20 million will be entitled to a 43.5% refundable tax offset. In the year ended 30 June 2019, we recorded
$4,825,270 as receivable with respect to funds we will receive in relation to the 2019 financial year under the research
and development incentive scheme.
Financial position and capital resources
As at 30 June 2019, the Group had cash reserves of $14,399,904 (30 June 2018: $15,235,556). For the years ended
30 June 2019 and 30 June 2018, we incurred an operating loss of $12,337,830 and $8,265,737, respectively, and an
operating cash outflow of $13,954,818 and $6,245,188, respectively.
Cash flows
Net cash used in operating activities was $13,954,818 and $6,245,188 during the years ended 30 June 2019 and 30
June 2018, respectively. Our payments to suppliers and employees during the years ended 30 June 2019 and 30 June
2018 were $17,325,579 and $9,466,459, respectively. The $7,709,630 increase in net cash used in operating activities
for the year ended 30 June 2019 compared to the year ended 30 June 2018 reflects increased research and
development activities related to the conduct of the Phase 1 Clinical trial of PBT434 and other research and
development activities. During the years ended 30 June 2019 and 30 June 2018, our payments to suppliers and
employees was partially offset by interest income of $119,089 and $198,598 respectively.
5
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks Related to Our Financial Condition
We have a history of significant operating losses since we began operations, we expect to continue to incur
operating losses for the foreseeable future and may never achieve or maintain profitability.
We have not sufficiently advanced the development of any of our product candidates, to market or generate revenues
from their commercial application. We have incurred losses in every period since we began operations in 1997 and
reported net losses of A$12,337,830, A$8,265,737 and A$7,542,076 during the fiscal years ended June 30, 2019, 2018
and 2017 respectively. As of 30 June 2019, our accumulated deficit was A$141,236,838. We expect to continue to
incur additional operating losses over at least the next several years as we expand our research and development and
pre-clinical activities and commence clinical trials of our product candidates that includes PBT434 for Parkinsonian
diseases, prospectively PBT2 for alternative indications and the development of other compounds.
Our actual cash requirements may vary materially from those now planned and will depend upon numerous factors,
including:
•
•
•
•
•
•
•
If we fail to generate revenue and eventually become and remain profitable, or if we are unable to fund our continuing
losses, our shareholders could lose all or part of their investments.
the continued progress of our research and development programs;
the timing, scope, results and costs of nonclinical studies and clinical trials;
the cost, timing and outcome of regulatory submissions and approvals;
determinations as to the commercial potential of our product candidates;
our ability to successfully expand our contract manufacturing services;
our ability to establish and maintain collaborative arrangements; and
the status and timing of competitive developments.
We will need substantial additional funding to complete our clinical trials and to operate our business; such
funding may not be available or, if it is available, such financing is likely to substantially dilute our existing
shareholders.
We have raised US$1,163,562 from the sale of our ordinary shares pursuant to our at-the-market offering facility in the
year ended June 30, 2019. We will need to secure additional financing in order to continue to meet our longer-term
business objectives, including advancement of our research and development programs and we may also require
additional funds to pursue regulatory clearances, defend our intellectual property rights, establish commercial scale
manufacturing facilities, develop marketing and sales capabilities and fund operating expenses. We intend to seek such
additional funding through public or private financings and/or through licensing of our assets or strategic alliances or
other arrangements with corporate partners.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never
achieve, we expect to finance our cash needs primarily through public or private equity offerings, debt financings or
through strategic alliances.
We cannot be certain that additional funding will be available on acceptable terms or at all. If we are not able to secure
additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our clinical
trials, collaborative research or development programs or future commercialization initiatives. In addition, any additional
funding that we do obtain will dilute the ownership held by our existing security holders. The amount of this dilution may
be substantially increased if the trading price of our shares are lower at the time of any financing. Regardless, the
economic dilution to shareholders will be significant if our stock price does not increase significantly, or if the effective
price of any sale is below the price paid by a particular shareholder. Any debt financing could involve substantial
restrictions on activities and creditors could seek a pledge of some or all of our assets. We have not identified potential
sources for the additional financing that we will require, and we do not have commitments from any third parties to
provide any future financing. If we fail to obtain additional funding as needed, we may be forced to cease or scale back
operations, and our results, financial condition and stock price would be adversely affected.
6
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks Related to Our Financial Condition (continued)
We are a development stage company whose pharmaceutical products are designed to treat degenerative diseases of
the brain. We have not sufficiently advanced the development of any of our candidate products, to market or generate
revenues from their commercial application. Our current or any future product candidates, if successfully developed,
may not generate sufficient or sustainable revenues to enable us to be profitable.
Risks Related to Our Business
We are a development stage company of pharmaceutical products and our success is uncertain.
We are a development stage company whose pharmaceutical products are designed to treat degenerative diseases of
the brain. We have not sufficiently advanced the development of any of our candidate products, to market or generate
revenues from their commercial application. Our current or any future product candidates, if successfully developed,
may not generate sufficient or sustainable revenues to enable us to be profitable.
We are faced with uncertainties related to our research
Our research programs are based on scientific hypotheses and experimental approaches that may not lead to desired
results. In addition, the timeframe for obtaining proof of principle and other results may be considerably longer than
originally anticipated, or may not be possible given time, resource, financial, strategic and collaborator scientific
constraints. Success in one stage of testing is not necessarily an indication that the particular program will succeed in
later stages of testing and development. It is not possible to predict whether any of the candidate products designed
for these programs will prove to be safe, effective, and suitable for human use. Each candidate product will require
additional research and development, scale-up, formulation and extensive clinical testing in humans. Unsatisfactory
results obtained from a particular study relating to a program may cause us to abandon our commitment to that program
or product candidate being tested. The discovery of toxicities, lack of sufficient efficacy, unacceptable pharmacology,
inability to increase scale of manufacture, market attractiveness, regulatory hurdles, competition, as well as other
factors, may make our targets, lead therapies or product candidates unattractive for further development or unsuitable
for human use, and we may abandon our commitment to that program, target, or product candidate.
Clinical trials are expensive and time consuming, and their outcome is uncertain
In order to obtain approvals to market a new drug product, we or our potential partners must demonstrate proof of
safety and efficacy in humans. To meet these requirements, we or our potential partners will have to conduct extensive
non-clinical testing and “adequate and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-
consuming and expensive process. The length of time may vary substantially according to the type, complexity, novelty
and intended use of the product candidate, and often can be several years or more per trial. Even if we obtain positive
results from such non-clinical or initial clinical trials, we may not achieve the same success in future trials. Clinical trials
may not demonstrate adequate safety or sufficient effectiveness to obtain the requisite regulatory approvals for product
candidates employing our technology. The failure of clinical trials to demonstrate safety and efficacy for a particular
desired indication could harm development of that product candidate for other indications as well as other product
candidates.
We expect to commence new clinical trials from time to time as our product development work continues. Any change
in, or termination of, our clinical trials could materially harm our business, financial condition and results of operations.
We may experience delays in our clinical trials that could adversely affect our business and operations
We do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials
on schedule or at all. Our ability to commence and complete clinical trials may be delayed by many factors, including:
•
government or regulatory delays, including delays in obtaining approvals from applicable hospital ethics
committees and internal review boards;
slower than expected patient enrolment;
our inability to manufacture sufficient quantities of our new proprietary compound or our other product
candidates or matching controls;
unforeseen safety issues; or
lack of efficacy or unacceptable toxicity during the clinical trials or non-clinical studies.
7
•
•
•
•
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks related to our business (continued)
Patient enrolment is a function of, among other things, the nature of the clinical trial protocol, the existence of competing
protocols, the size and longevity of the target patient population, and the availability of patients who comply with the
eligibility criteria for the clinical trial. Delays in planned patient enrolment may result in increased costs, delays or
termination of the clinical trials. Moreover, we rely on third parties such as clinical research organizations to assist us
in clinical trial management functions including; clinical trial database management, statistical analyses, site
management and monitoring. Any failure by these third parties to perform under their agreements with us may cause
the trials to be delayed or result in a failure to complete the trials.
If we experience delays in testing or approvals or if we need to perform more, larger or more complex clinical trials than
planned, our product development costs may increase. Significant delays could adversely affect the commercial
prospects of our product candidates and our business, financial condition and results of operations.
We rely on research institutions to conduct our clinical trials and we may not be able to secure and maintain
research institutions to conduct our future trials
We rely on research institutions to conduct our clinical trials. Our reliance upon research institutions, including public
and private hospitals and clinics, provides us with less control over the timing and cost of clinical trials, clinical study
management personnel and the ability to recruit subjects. If we are unable to reach agreements with suitable research
institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to secure, maintain or
quickly replace the research institution with another qualified institution on acceptable terms.
We may not be able to complete the development of our product candidates or develop other pharmaceutical
products
We may not be able to progress with the development of our current or any future pharmaceutical product candidates
to a stage that will attract a suitable collaborative partner for the development of any current or future pharmaceutical
product candidates. The projects initially specified in connection with any such collaboration and any associated funding
may change or be discontinued as a result of changing interests of either the collaborator or us, and any such change
may change the budget for the projects under the collaboration. Additionally, our research may not lead to the discovery
of additional product candidates, and any of our current and future product candidates may not be successfully
developed, prove to be safe and efficacious in clinical trials, meet applicable regulatory standards and receive
regulatory approval, be capable of being produced in commercial quantities at reasonable costs, or be successfully or
profitably marketed, either by us or a collaborative partner. The products we develop may not be able to penetrate the
potential market for a particular therapy or indication or gain market acceptance among health care providers, patients
and third-party payers. We cannot predict if or when the development of our current product candidates or any future
product candidates will be completed or commercialized, whether funded by us, as part of a collaboration or through a
grant.
We may need to prioritize the development of our most promising candidates at the expense of the
development of other products
We may need to prioritize the allocation of development resources and/or funds towards what we believe to be our
most promising candidate product or products. The nature of the drug development process is such that there is a
constant availability of new information and data which could positively or adversely affect a product in development.
We cannot predict how such new information and data may impact in the future the prioritization of the development of
our current or future product candidates or that any of our products, regardless of its development stage or the
investment of time and funds in its development, will continue to be funded or developed.
Our research and development efforts will be seriously jeopardized if we are unable to retain key personnel
and cultivate key academic and scientific collaborations
Our future success depends to a large extent on the continued services of our senior management and key scientific
personnel. We have entered into employment or consultancy agreements with these individuals. The loss of their
services could negatively affect our business. Competition among biotechnology and pharmaceutical companies for
qualified employees is intense, including competition from larger companies with greater resources, and we may not
be able to continue to attract and retain qualified management, technical and scientific personnel critical to our success.
Our success is highly dependent on our ability to develop and maintain important relationships with leading academic
8
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks related to our business (continued)
institutions and scientists who conduct research at our request or assist us in formulating our research and development
strategies. These academic and scientific collaborators are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may limit their availability to us. In addition, these collaborators
may have arrangements with other companies to assist such companies in developing technologies that may prove
competitive to ours.
If we are unable to successfully keep pace with technological change or with the advances of our competitors,
our technology and products may become obsolete or non-competitive
The biotechnology and pharmaceutical industries are subject to rapid and significant technological change. Our
competitors are numerous and include major pharmaceutical companies, biotechnology firms, universities and other
research institutions. These competitors may develop technologies and products that are more effective than any that
we are developing, or which would render our technology and products obsolete or non-competitive. Many of these
competitors have greater financial and technical resources and manufacturing and marketing capabilities than we do.
In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical
trials of new or improved drugs, as well as in obtaining regulatory approvals.
We know that competitors are developing or manufacturing various technologies or products for the treatment of
diseases that we have targeted for product development. Some of these competitive products use therapeutic
approaches that compete directly with our product candidates. Our ability to further develop our products may be
adversely affected if any of our competitors were to succeed in obtaining regulatory approval for their competitive
products sooner than us.
Acceptance of our products in the marketplace is uncertain, and failure to achieve market acceptance will
negatively impact our business and operations
Our current or future candidate products may not achieve market acceptance even if they are approved by regulatory
authorities. The degree of market acceptance of such products will depend on a number of factors, including:
•
•
the receipt and timing of regulatory approvals for the uses that we are studying;
the establishment and demonstration to the medical community of the safety, clinical efficacy or cost-
effectiveness of our product candidates and their potential advantages over existing therapeutics and
technologies; and
the pricing and reimbursement policies of governments and third-party payors.
•
Physicians, patients, payors or the medical community in general may be unwilling to accept, use or recommend any
of our products.
We have limited large-scale manufacturing experience with our product candidates. Delays in manufacturing
sufficient quantities of such materials to the required standards for pre-clinical and clinical trials may
negatively impact our business and operations
We lack the resources to manufacture any of our product candidates on a clinical or commercial scale and do not
currently have, nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical drug
supplies for use in the conduct of our clinical trials. We rely on collaborators and/or third parties for development, scale-
up, formulation, optimization, management of clinical trial and commercial scale manufacturing and commercialization.
There are no assurances we can scale-up, formulate or manufacture any product candidate in sufficient quantities with
acceptable specifications for the conduct of our clinical trials or for the regulatory agencies to grant approval of such
product candidate. We have not yet commercialized any products and have no commercial manufacturing experience.
To be successful, our products must be properly formulated, scalable, stable and safely manufactured in clinical trial
and commercial quantities in compliance with good manufacturing practices (GMP) and other regulatory requirements
and at acceptable costs. Should any of our suppliers or our collaborators be unable to supply or be delayed in supplying
us with sufficient supplies, no assurance can be given that we will be able to find alternative means of supply in a short
period of time. Should such parties’ operations suffer a material adverse event, the manufacturing of our products would
also be adversely affected. Furthermore, key raw materials could become scarce or unavailable. We may not be able
to meet specifications previously established for product candidates during scale-up and manufacturing.
9
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks related to our business (continued)
There may be a limited number of third parties who can manufacture our products. Our reliance on third parties to
manufacture our product candidates will expose us and our partners to risks including the following, any of which could
delay or prevent the commercialization of our products, result in higher costs, or deprive us of potential product revenue:
•
Contract manufacturers can encounter difficulties in achieving the scale-up, optimization, formulation, or
volume production of a compound as well as maintaining quality control with appropriate quality assurance.
They may also experience shortages of qualified personnel. Contract manufacturers are required to undergo
a satisfactory GMP inspection prior to regulatory approval and are obliged to operate in accordance with FDA,
International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for
Human Use ("ICH"), European and other nationally mandated GMP regulations and/or guidelines governing
manufacturing processes, stability testing, record keeping and quality standards. A failure of these contract
manufacturers to follow GMP and to document their adherence to such practices or failure of an inspection by
a regulatory agency may lead to significant delays in the availability of our product candidate materials for
clinical study, leading to delays in our trials.
•
•
For each of our current product candidates we will initially rely on a limited number of contract manufacturers.
Changing these or identifying future manufacturers may be difficult. Changing manufacturers requires re-
validation of the manufacturing processes and procedures in accordance with FDA, ICH, European and other
mandated GMP regulations and/or guidelines. Such re-validation may be costly and time-consuming. It may
be difficult or impossible for us to quickly find replacement manufacturers on acceptable terms, if at all.
Our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing
business for the time required to produce, store and distribute our products successfully.
The failure to establish sales, marketing and distribution capability would materially impair our ability to
successfully market and sell our pharmaceutical products
We currently have no experience in marketing, sales or distribution of pharmaceutical products. If we develop any
commercially marketable pharmaceutical products and decide to perform our own sales and marketing activities, we
will require additional management, will need to hire sales and marketing personnel and will require additional capital.
Qualified personnel may not be available in adequate numbers or at a reasonable cost. Further, our sales staff may
not achieve success in their marketing efforts. Alternatively, we may be required to enter into marketing arrangements
with other parties who have established appropriate marketing, sales and distribution capabilities. We may not be able
to enter into marketing arrangements with any marketing partner, or if such arrangements are established, our
marketing partners may not be able to commercialize our products successfully. Other companies offering similar or
substitute products may have well-established and well-funded marketing and sales operations in place that will allow
them to market their products more successfully. Failure to establish sufficient marketing capabilities would materially
impair our ability to successfully market and sell our pharmaceutical products.
If healthcare insurers and other organizations do not pay for our products, or impose limits on reimbursement,
our future business may suffer
The drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. The continuing
efforts of governments, insurance companies, health maintenance organizations and other payors of healthcare costs
to contain or reduce healthcare costs may affect our future revenues and profitability and those of our potential
customers, suppliers and collaborative partners, as well as the availability of capital. In Australia and certain foreign
markets, the pricing or profitability of prescription pharmaceuticals is already subject to government control. We expect
initiatives for similar government control at both the state and federal level to continue in the United States and
elsewhere. The adoption of any such legislative or regulatory proposals could adversely affect our business and
prospects.
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Risks related to our business (continued)
Our ability to commercially exploit our products successfully will depend in part on the extent to which reimbursement
for the cost of our products and related treatment will be available from government health administration authorities,
private health coverage insurers and other organizations. Third-party payors, such as government and private health
insurers, are increasingly challenging the price of medical products and services. Uncertainty exists as to the
reimbursement status of newly approved health care products and in foreign markets, including the United States. If
third-party coverage is not available to patients for any of the products we develop, alone or with collaborators, the
market acceptance of these products may be reduced, which may adversely affect our future revenues and profitability.
In addition, cost containment legislation and reductions in government insurance programs may result in lower prices
for our products and could materially adversely affect our ability to operate profitably.
We may be exposed to product liability claims, which could harm our business
The testing, marketing and sale of human health care products also entails an inherent risk of product liability. We may
incur substantial liabilities or be required to limit development or commercialization of our candidate products if we
cannot successfully defend ourselves against product liability claims. We have historically obtained no fault
compensation insurance for our clinical trials and intend to obtain similar coverage for future clinical trials. Such
coverage may not be available in the future on acceptable terms, or at all. This may result in our inability to pursue
further clinical trials or to obtain adequate protection in the event of a successful claim. We may not be able to obtain
product liability insurance in the event of the commercialization of a candidate product or such insurance may not be
available on commercially reasonable terms. Even if we have adequate insurance coverage, product liability claims or
recalls could result in negative publicity or force us to devote significant time, attention and financial resources to those
matters.
Breaches of network or information technology security, natural disasters or terrorist attacks could have an
adverse effect on our business
Cyber-attacks or other breaches of network or information technology (IT) security, natural disasters, terrorist acts or
acts of war may cause equipment failures or disrupt our research and development operations. In particular, both
unsuccessful and successful cyber-attacks on companies have increased in frequency, scope and potential harm in
recent years. Such an event may result in our inability, or the inability of our partners, to operate the research and
development facilities, which even if the event is for a limited period of time, may result in significant expenses and/or
significant damage to our experiments and trials. While we maintain insurance coverage for some of these events, the
potential liabilities associated with these events could exceed the insurance coverage we maintain. In addition, a failure
to protect employee confidential data against breaches of network or IT security could result in damage to our
reputation. Any of these occurrences could adversely affect our results of operations and financial condition.
We have been subject, and will likely continue to be subject, to attempts to breach the security of our networks and IT
infrastructure through cyber-attack, malware, computer viruses and other means of unauthorized access. However, to
date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted
in a material impact to our operations or financial condition.
We expect to expand our drug development, regulatory and business development capabilities, and as a result,
we may encounter difficulties in managing our growth, which could disrupt our operations
We expect to experience significant growth in the number of our employees and consultants and the scope of our
operations, particularly in the areas of drug development, regulatory affairs and business development. To manage our
anticipated future growth, we must continue to implement and improve our managerial, operational and financial
systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial
resources and the limited experience of our management team in managing a company with such anticipated growth,
we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified
personnel. The expansion of our operations may lead to significant costs and may divert our management and business
development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our
operations, and have a materially adverse effect on our business.
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Risks related to government regulation
If we do not obtain the necessary governmental approvals, we will be unable to commercialize our
pharmaceutical products
Our ongoing research and development activities are, and the production and marketing of our pharmaceutical product
candidates derived from such activities will be, subject to regulation by numerous international regulatory authorities.
Prior to marketing, any therapeutic product developed must undergo rigorous pre-clinical testing and clinical trials and,
to the extent that any of our pharmaceutical products under development are marketed abroad, by the relevant
international regulatory authorities. For example, in Australia, principally the Therapeutics Goods Administration, or
TGA; the Food and Drug Administration, or FDA, in the United States; the Medicines and Healthcare products
Regulatory Agency, or MHRA, in the United Kingdom; the Medical Products Agency, or MPA, in Sweden; and the
European Medicines Agency, or EMA. These processes can take many years and require the expenditure of substantial
resources. Governmental authorities may not grant regulatory approval due to matters arising from pre-clinical animal
toxicology, safety pharmacology, drug formulation and purity, insufficient efficacy, clinical side effects or patient risk
profiles, or medical contraindications.
Failure or delay in obtaining regulatory approvals would adversely affect the development and commercialization of our
pharmaceutical product candidates. We may not be able to obtain the clearances and approvals necessary for clinical
testing or for manufacturing and marketing our pharmaceutical product candidates.
Even if regulatory authorities approve any of our product candidates, the manufacture, labelling, storage,
recordkeeping, reporting, distribution, advertising, promotion, marketing, sale, import and export of these drugs will be
subject to strict and ongoing regulation. If we, our partners, our product candidates or the manufacturing facilities for
our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may suspend any
ongoing clinical trials; issue warning letters or untitled letters; suspend or withdraw regulatory approval; refuse to
approve pending applications or supplements to applications; suspend or impose restrictions on operations; seize or
detain products, prohibit the export or import of products, or require us to initiate a product recall; seek other monetary
or injunctive remedies; or impose civil or criminal penalties.
We will not be able to commercialize any current or future product candidates if we fail to adequately
demonstrate their safety, efficacy and superiority over existing therapies
Before obtaining regulatory approvals for the commercial sale of any of our pharmaceutical products, we must
demonstrate through pre-clinical testing and clinical studies that our product candidates are safe and effective for use
in humans for each target indication. Results from early clinical trials may not be predictive of results obtained in large-
scale, later-stage clinical testing. Even though a candidate product shows promising results in clinical trials, regulatory
authorities may not grant the necessary approvals without sufficient safety and efficacy data.
We may not be able to undertake further clinical trials of our current and future product candidates as therapies for
Alzheimer’s disease, Huntington disease, Parkinsonian movement disorders or other indications or to demonstrate the
safety and efficacy or superiority of any of these product candidates over existing therapies or other therapies under
development, or enter into any collaborative arrangement to commercialize our current or future product candidates on
terms acceptable to us, or at all. Clinical trial results that show insufficient safety and efficacy could adversely affect our
business, financial condition and results of operations.
Positive results in previous clinical trials of a product candidate may not be predictive of similar results in future clinical
trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical
trials even after achieving promising results in early-stage development. Accordingly, the results from the completed
pre-clinical studies and clinical trials for our product candidates may not be predictive of the results we may obtain in
later stage trials. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators
may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to varying
interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily
in pre-clinical studies and clinical trials have nonetheless failed to obtain FDA or EMA approval for their products.
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Risks related to government regulation (continued)
Even if approved, any product candidates that we or our subsidiaries may develop and market may be later
withdrawn from the market or subject to promotional limitations
We may not be able to obtain the labelling claims necessary or desirable for the promotion of our product candidates if
approved. We may also be required to undertake post-marketing clinical trials. If the results of such post-marketing
studies are not satisfactory or if adverse events or other safety issues arise after approval, the FDA or a comparable
regulatory agency in another country may withdraw marketing authorization or may condition continued marketing on
commitments from us or our subsidiaries that may be expensive or time consuming to complete. In addition, if we or
others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur,
regulatory approval may be withdrawn and reformulation of our or our subsidiaries’ products, additional clinical trials,
changes in labelling of our or our subsidiaries’ products and additional marketing applications may be required. Any
reformulation or labelling changes may limit the marketability of such products if approved.
Healthcare reform measures and other statutory or regulatory changes could adversely affect our business
In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory
proposals to change the healthcare system in ways that could impact our business. For example, the Patient Protection
and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the
“ACA”), enacted in March 2010, substantially changes the way healthcare is financed by both governmental and private
insurers, and significantly impacts the pharmaceutical industry. With regard to pharmaceutical products, among other
things, the ACA is expected to expand and increase industry rebates for drugs covered under Medicaid programs and
make changes to the coverage requirements under the Medicare D program. Legislative and regulatory proposals
impacting upon the healthcare system are submitted regularly and the existing framework in force in various
jurisdictions may not apply in the short to long term.
If we fail to comply with our reporting and payment obligations under the Medicaid program or other governmental
pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines which
could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Pricing and rebate calculations vary among products and programs. The calculations are complex and will often be
subject to interpretation by us, governmental or regulatory agencies and the courts. If we become aware that our
reporting of pricing data for a prior quarter was incorrect, we will be obligated to resubmit the corrected data. For the
Medicaid drug rebate program, corrected data must be submitted for a period not to exceed twelve quarters from the
quarter in which the data originally were due. Such restatements and recalculations increase our costs for complying
with the laws and regulations governing the Medicaid drug rebate program and other governmental pricing programs.
We may be liable for errors associated with our submission of pricing data. If we are found to have knowingly submitted
false pricing data to the Medicaid program, we may be liable for civil monetary penalties in the amount of up to $100,000
per item of false information. Our failure to submit pricing data to the Medicaid program on a timely basis could result
in a civil monetary penalty of $10,000 per day for each day the information is late. Such failure also could be grounds
to terminate our Medicaid drug rebate agreement, which is the agreement under which we might participate in the
Medicaid drug rebate program. In the event that our rebate agreement is terminated, federal payments may not be
available under Medicaid for our covered outpatient drugs. We cannot assure you that our submissions will not be
found to be incomplete or incorrect.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United
States, our operations may be directly or indirectly through our customers, subject to various federal and state fraud
and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and
physician sunshine laws and regulations.
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Risks related to government regulation (continued)
The pharmaceutical and biotechnology industries are subject to extensive regulation, and from time to time legislative
bodies and governmental agencies consider changes to such regulations that could have significant impact on industry
participants. For example, in light of certain highly-publicized safety issues regarding certain drugs that had received
marketing approval, the U.S. Congress has considered various proposals regarding drug safety, including some which
would require additional safety studies and monitoring and could make drug development more costly. The
implementation of cost containment measures or other healthcare system reforms may prevent us from being able to
generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on
anticipated revenues from product candidates that impact we may successfully develop and for which we may obtain
regulatory approval and may affect our overall financial condition and ability to develop product candidates. In addition,
it is possible that there will be further legislation or regulation that could harm our business, financial condition and
several results of operations.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act
Our business operations may be subject to anti-corruption laws and regulations, including restrictions imposed by the
U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA and similar anti-corruption laws in other jurisdictions
generally prohibit companies and their intermediaries from making improper payments to government officials for the
purpose of obtaining or retaining business. We cannot provide assurance that our internal controls and procedures will
always protect us from criminal acts committed by our employees or third parties with whom we work. If we are found
to be liable for violations of the FCPA or similar anti-corruption laws in international jurisdictions, either due to our own
acts or out of inadvertence, or due to the acts or inadvertence of others, we could suffer from criminal or civil penalties
which could have a material and adverse effect on our results of operations, financial condition and cash flows.
Risks related to intellectual property
Our success depends upon our ability to protect our intellectual property and our proprietary technology, to
operate without infringing the proprietary rights of third parties and to obtain marketing exclusivity for our
products and technologies
obtain and maintain patents to protect our own product candidates and technologies;
obtain orphan designation for our product candidates and technologies;
obtain licenses to the patented technologies of third parties;
operate without infringing on the proprietary rights of third parties; and
protect our trade secrets, know-how and other confidential information.
Any future success will depend in large part on whether we can:
•
•
•
•
•
Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the
availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Any of the
pending or future patent applications filed by us or on our behalf may not be approved, we may not develop additional
proprietary products or processes that are patentable, or we may not be able to license any other patentable products
or processes.
Our products may be eligible for orphan designation for particular therapeutic indications that are of relatively low
prevalence and for which there is no effective treatment. Orphan drug designation affords market exclusivity post
marketing authorization for a product for a specified therapeutic utility. The period of orphan protection is dependent on
jurisdiction, for example, seven years in the United States and ten years in Europe. The opportunity to gain orphan
drug designation depends on a variety of requirements specific to each marketing jurisdiction and can include; a
showing of improved benefit relative to marketed products, that the mechanism of action of the product would provide
plausible benefit and the nature of the unmet medical need within a therapeutic indication. It is uncertain if our products
will be able to obtain orphan drug designation for the appropriate indications and in the jurisdictions sought.
There is a risk that the U.S. Congress, for example, could amend laws to significantly shorten the exclusivity period.
Once any regulatory period of exclusivity expires, depending on the status of our patent coverage and the nature of the
product, we may not be able to prevent others from marketing products that are biosimilar to or interchangeable with
our products, which would materially adversely affect us.
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Risks related to intellectual property (continued)
Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a
court determines that we were infringing any third-party patents, we could be required to pay damages, alter our
products or processes, obtain licenses or cease certain activities. Licenses required under patents held by third parties
may not be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses,
we could be foreclosed from the development, export, manufacture or commercialization of the product requiring such
license or encounter delays in product introductions while we attempt to design around such patents, and any of these
circumstances could adversely affect our business, financial condition and results of operations.
We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity
of third-party proprietary rights. We may have to defend the validity of our patents in order to protect or enforce our
rights against a third party. Third parties may in the future assert against us infringement claims or claims that we have
infringed a patent, copyright, trademark or other proprietary right belonging to them. Any infringement claim, even if not
meritorious, could result in the expenditure of significant financial and managerial resources and could negatively affect
our profitability. While defending our patents, the scope of the claim may be reduced in breadth and inventorship of the
claimed subject matter, and proprietary interests in the claimed subject matter may be altered or reduced. Some of our
competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of
their substantially greater financial resources. Any such litigation, regardless of outcome, could be expensive and time
consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or
commercializing our products and could adversely affect our business, financial condition and results of operations.
The patents for our product candidates have varying expiration dates and, if these patents expire, we may be subject
to increased competition and we may not be able to recover our development costs or market any of our approved
products profitably. In some of the larger potential market territories, such as the United States and Europe, patent term
extension or restoration may be available to compensate for time taken during aspects of the product’s development
and regulatory review or by procedural delays before the relevant patent office. However, such an extension may not
be granted, or if granted, the applicable time period or the scope of patent protection afforded during any extension
period may not be sufficient. In addition, even though some regulatory authorities may provide some other exclusivity
for a product under their own laws and regulations, we may not be able to qualify the product or obtain the exclusive
time period. If we are unable to obtain patent term extension/restoration or some other exclusivity, we could be subject
to increased competition and our opportunity to establish or maintain product revenue could be substantially reduced
or eliminated. Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of
our U.S. and non-U.S. patents.
We may face difficulties in certain jurisdictions in protecting our intellectual property rights, which may
diminish the value of our intellectual property rights in those jurisdictions
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United
States and the European Union, and many companies have encountered significant difficulties in protecting and
defending such rights in such jurisdictions. If we or our collaboration partners encounter difficulties in protecting, or are
otherwise precluded from effectively protecting, the intellectual property rights important for our business in such
jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those
jurisdictions.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to
third parties. In addition, many countries limit the enforceability of patents against government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value
of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents
relevant to our business, our competitive position may be impaired and our business, financial condition and results of
operations may be adversely affected.
Intellectual property rights do not address all potential threats to our competitive advantage
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property
rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive
advantage. The following examples are illustrative:
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Risks related to intellectual property (continued)
•
Others may be able to make products that are similar to ours but that are not covered by the claims of the
patents that we own.
•
•
•
•
•
•
•
•
Others may independently develop similar or alternative technologies or otherwise circumvent any of our
technologies without infringing our intellectual property rights.
We or any of our collaboration partners might not have been the first to conceive and reduce to practice the
inventions covered by the patents or patent applications that we own, license or will own or license.
We or any of our collaboration partners might not have been the first to file patent applications covering certain
of the patents or patent applications that we or they own or have obtained a license, or will own or will have
obtained a license.
It is possible that our pending patent applications will not lead to issued patents.
Issued patents that we own may not provide us with any competitive advantage, or may be held invalid or
unenforceable, as a result of legal challenges by our competitors.
Our competitors might conduct research and development activities in countries where we do not have patent
rights, or in countries where research and development safe harbor laws exist, and then use the information
learned from such activities to develop competitive products for sale in our major commercial markets.
The patents of third parties or pending or future applications of third parties, if issued, may have an adverse
effect on our business.
Compulsory licensing provisions of certain governments to patented technologies that are deemed necessary
for the government to access.
Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby
impairing our ability to protect our products or product candidates.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property,
particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and
legal complexity. Therefore, obtaining and enforcing pharmaceutical patents is costly, time-consuming and inherently
uncertain. In addition, the America Invents Act was recently enacted in the United States, resulting in significant
changes to the U.S. patent system. The U.S. Supreme Court has ruled on several patent cases in recent years, either
narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners
in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this
combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on
decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO, the laws
and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new
patents or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and
uncertainty of European patent laws has also increased in recent years. In addition, the European patent system is
relatively stringent with regard to the type of amendments that are allowed during prosecution. These changes could
limit our ability to obtain new patents in the future that may be important for our business.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets
and protect other proprietary information
We consider proprietary trade secrets and/or confidential know-how and unpatented know-how to be important to our
business. We may rely on trade secrets and/or confidential know-how to protect our technology, especially where patent
protection is believed by us to be of limited value. However, trade secrets and/or confidential know-how can be difficult
to maintain as confidential.
To protect this type of information against disclosure or appropriation by competitors, our policy is to require our
employees, consultants, contractors and advisors to enter into confidentiality agreements with us. However, current or
former employees, consultants, contractors and advisers may unintentionally or wilfully disclose our confidential
information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of
unauthorized disclosure of confidential information. Enforcing a claim that a third-party obtained illegally and is using
trade secrets and/or confidential know-how is expensive, time consuming and unpredictable. The enforceability of
confidentiality agreements may vary from jurisdiction to jurisdiction.
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Risks related to intellectual property (continued)
Failure to obtain or maintain trade secrets and/or confidential know-how trade protection could adversely affect our
competitive position. Moreover, our competitors may independently develop substantially equivalent proprietary
information and may even apply for patent protection in respect of the same. If successful in obtaining such patent
protection, our competitors could limit our use of our trade secrets and/or confidential know-how.
Risks related to our securities
Our stock price may be volatile and the U.S. trading market for our ADSs is limited
The market price for our securities, like that of the securities of other pharmaceutical and biotechnology companies,
has fluctuated substantially and may continue to be highly volatile in the future. During the last two fiscal years ended
30 June 2019 and subsequently until 30 August 2019, the market price for our ordinary shares on the ASX has ranged
from as low as A$0.023 to a high of A$0.078 and the market price of our ADSs on the NASDAQ Capital Market has
ranged from as low as U.S.$0.91 to a high of U.S.$3.79. The market price for our securities has been affected by both
broad market developments and announcements relating to actual or potential developments concerning products
under development. We believe that the following factors, in addition to other risk factors described above and
elsewhere in this annual report, will continue to significantly affect the market price of our ordinary shares:
•
•
•
•
•
the results of pre-clinical testing and clinical trials by us and our competitors;
developments concerning research and development, manufacturing, and marketing alliances or
collaborations by us and our competitors;
announcements of technological innovations or new commercial products by us and our competitors;
determinations regarding our patent applications, patents and those of others;
publicity regarding actual or potential results relating to medicinal products under development by us and our
competitors;
litigation;
economic and other external factors; and
period-to-period fluctuations in our operating results.
proposed governmental regulations and developments in Australia, the U.S. and elsewhere;
•
•
•
•
In addition, stock markets have experienced extreme price and volume fluctuations. These fluctuations have especially
affected the stock market price of many high technology and healthcare related companies, including pharmaceutical
and biotechnology companies, and, in many cases, are unrelated to the operating performance of the particular
companies. Market fluctuations, as well as general political and economic conditions, such as a recession, interest rate
or currency rate fluctuations, could adversely affect the market price of our securities.
Ownership interest in our company may be diluted as a result of additional financings
We may seek to raise funds from time to time in public or private issuances of equity, and such financings may take
place in the near future or over the longer term. In May 2011, we registered U.S.$50,000,000 of securities for public
sale pursuant to our registration statement on Form F-3. In July 2011, we issued a prospectus under such registration
statement providing for the sale of up to 50 million ordinary shares represented by 5 million ADSs pursuant to an “At-
The-Market” facility. In August 2013 we issued a prospectus providing for the sale of up to U.S.$47,184,000 of our
ordinary shares under an amended “At-The-Market” facility. On November 26, 2014, we entered into Amendment No.
2 to our At-The-Market Issuance Sales Agreement, to continue the at-the-market equity program under which we may
from time to time sell up to an additional aggregate of $50,000,000 of our ordinary shares represented by ADSs. From
November 26, 2014 until June 30, 2015 we sold A$7.1 million of additional ordinary shares under this program. On
October 13, 2016, we entered into an At-Market Issuance Sales Agreement, for an at-market offering program under
which we may from time to time sell up to an aggregate of U.S.$44,460,787 of our ordinary shares represented by
ADSs. On November 8, 2017 we entered into Amendment No. 1 to our At-Market Issuance Sales Agreement to continue
the at-market offering program which we may from time to time sell up to an aggregate of $50,000,000 of our ordinary
shares represented by ADSs. Since July 1, 2018 and to date, we sold U.S.$1,355,474 of additional ordinary shares
under this program. Since the inception of our At-The-Market” facility in 2011 and to date we sold an aggregate of
208,684,810 ordinary shares under this facility and raised a total of A$48.4 million (U.S.$43.9 million) in gross proceeds.
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Risks related to our securities (continued)
Without shareholder approval, we may not issue more than 25% of our outstanding ordinary shares in any twelve month
period other than by a pro rata rights offering or a share purchase plan offer (of shares with a value at the issue price
of up to A$15,000 per shareholder to a maximum of 30% of our outstanding shares) in each case to the then existing
shareholders in accordance with the listing rules of the ASX. Sales of our ADSs offered through our “At-The-Market”
facility and future equity offerings may result in substantial dilution to the interests of our current shareholders. The sale
of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult for us to sell
equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
There is a substantial risk that we are a passive foreign investment company, or PFIC, to some U.S. investors
which will subject those investors to adverse tax rules
Holders of our ADSs who are U.S. residents face income tax risks. There is a substantial risk that we are a passive
foreign investment company, commonly referred to as a PFIC to some U.S. investors, and a controlled foreign
corporation, or CFC to other U.S. investors. Our treatment as a PFIC could result in a reduction in the after-tax return
to the holders of our ADSs and would likely cause a reduction in the value of such ADSs. For U.S. federal income tax
purposes, we will be classified as a PFIC for any taxable year in which either (i) 75% or more of our gross income is
passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or are held for
the production of passive income. For this purpose, cash is considered to be an asset that produces passive income.
As a result of our substantial cash position and the decline in the value of our stock, we believe that we became a PFIC
during the taxable year ended June 30, 2005, and once again qualified as a PFIC during each of the following fiscal
years. We believe that we once again will be classified as a PFIC for the taxable year ended 30 June 2019 for some
U.S. investors. Highly complex rules will apply to U.S. holders owning ADSs. Accordingly, you are urged to consult your
tax advisors regarding the application of such rules.
We do not anticipate paying dividends on our ordinary shares
We have never declared or paid cash dividends on our ordinary shares and do not expect to do so in the foreseeable
future. The declaration of dividends is subject to the discretion of our Board of Directors and will depend on various
factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by
our board of directors. You should not rely on an investment in our company if you require dividend income from your
investment in our company. The success of your investment will likely depend entirely upon any future appreciation of
the market price of our ordinary shares, which is uncertain and unpredictable. There is no guarantee that our ordinary
shares will appreciate in value or even maintain the price at which you purchased your ordinary shares.
Currency fluctuations may adversely affect the price of our ordinary shares
Our ordinary shares are quoted in Australian dollars on the ASX and our ADSs trade on the NASDAQ Capital Market
in U.S. dollars. Movements in the Australian dollar/U.S. dollar exchange rate may adversely affect the U.S. dollar price
of our ordinary shares. In the past year the Australian dollar has generally depreciated against the U.S. dollar. Any
continuation of this trend may negatively affect the U.S. dollar price of our ordinary shares, even if the price of our
ordinary shares in Australian dollars decreases or remains unchanged. However, this trend may not continue and may
be reversed. If the Australian dollar strengthens against the U.S. dollar, the U.S. dollar price of the ordinary shares
could increase, even if the price of our ordinary shares in Australian dollars decreases or remains unchanged.
Risks related to our compliance with Sarbanes-Oxley
We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, which could adversely affect our operating results, investor confidence in our
reported financial information, and the market price of our ordinary shares and ADSs
The Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. To comply with this
statute, we are required to document and test our internal control over financial reporting. Our efforts to comply with
the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for
financial reporting, have resulted in increased general and administrative expenses and a diversion of management
time and attention, and we expect these efforts to require the continued commitment of significant resources. We may
identify material weaknesses or significant deficiencies in our assessments of our internal control over financial
18
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks related to our compliance with Sarbanes-Oxley (continued)
reporting. Failure to maintain effective internal control over financial reporting could result in investigations or
sanctions by regulatory authorities and could adversely affect our operating results, investor confidence in our
reported financial information, and the market price of our ordinary shares and ADSs.
Material weaknesses in our disclosure controls and procedures could negatively affect shareholder and
customer confidence
Under Sarbanes-Oxley, we are required to assess the effectiveness of our disclosure controls and procedures (as
defined in Sarbanes-Oxley) on an annual basis. If we were to conclude that our disclosure controls and procedures
were ineffective, shareholder and customer confidence could be negatively affected, which could have a material
adverse impact on the market price of our ADSs.
Risks Related to Our Location in Australia
It may be difficult to enforce a judgment in the United States against us and our officers and directors or to
assert U.S. securities laws claims in Australia or serve process on our officers and directors.
We are incorporated in Australia. At least half of our executive officers and directors are non-residents of the United
States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment
based upon the civil liability provisions of the U.S. federal securities laws in an Australian court against us or any of
those persons or to effect service of process upon these persons in the United States. Additionally, it may be difficult
for an investor, or any other person or entity, to enforce civil liabilities under U.S. federal securities laws in original
actions instituted in Australia.
As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we may follow certain
home country corporate governance practices instead of certain NASDAQ requirements
As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we are permitted to follow certain
home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules,
with regard to, among other things, the composition of the board of directors and its committees, director nomination
process, compensation of officers and quorum at shareholders’ meetings. In addition, we may choose to follow
Australian law instead of The NASDAQ Stock Market Rules that require that we obtain shareholder approval for certain
dilutive events, such as for the establishment or amendment of certain equity based compensation plans, an issuance
that will result in a change of control of the company, certain transactions involving issuances of a 20% or more interest
in the company and certain acquisitions of the stock or assets of another company. A foreign private issuer that elects
to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a written
statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not
prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports each such
requirement that it does not follow and describe the home country practice followed by the issuer instead of any such
requirement. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s
corporate governance rules. As of the date of this report, we have elected to follow home country practices instead of
the following NASDAQ requirements:
• the Rule related to Audit Committee Composition rule 5605(c)(2)(A)): we may have an audit committee composed of
two members instead of “at least three members”. We may not follow NASDAQ rules regarding independence of such
members (as long as comply Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, subject to the exemptions
provided in rule 10A-3(c)), and we may not have a financially sophisticated member as defined.
• the Rule requiring maintaining a majority of independent directors (Rule 5605(b)(1))
• the Rule requiring that our independent directors have regularly scheduled meetings at which only independent
directors are present (Rule 56505(b)(2)
• the Rule regarding independent director oversight of director nominations process for directors (Rule 5605(e)
• the Rule regarding independent director oversight of executive officer compensation (Rule 5605(d)
• the requirement to obtain shareholder approval for the establishment or amendment of certain equity based
compensation plans (Rule 5635(c), an issuance that will result in a change of control of the company (Rule 5635(b),
certain transactions other than a public offering involving issuances of a 20% or more interest in the company (Rule
5635(d) and certain acquisitions of the stock or assets of another company (Rule 5635(a)).
19
Alterity Therapeutics Limited
Review of operations and activities
30 June 2019
(continued)
Risks Related to Our Location in Australia (continued)
Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition
of large numbers of our ordinary shares.
We are incorporated in Australia and are subject to the takeovers laws of Australia. Among other things, we are subject
to the Australian Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations
Act prohibits the acquisition of a direct or indirect interest in our issued voting shares if the acquisition of that interest
will lead to a person’s voting power in us increasing from 20% or below to more than 20%, or increasing from a starting
point that is above 20% and below 90%. Australian takeovers laws may discourage takeover offers being made for us
or may discourage the acquisition of large numbers of our ordinary shares. This may have the ancillary effect of
entrenching our board of directors and may deprive or limit our shareholders’ strategic opportunities to sell their ordinary
shares and may restrict the ability of our shareholders to obtain a premium from such transactions.
Our Constitution and other Australian laws and regulations applicable to us may adversely affect our ability to
take actions that could be beneficial to our shareholders.
As an Australian company we are subject to different corporate requirements than a corporation organized under the
laws of the United States. Our Constitution, as well as the Corporations Act, set forth various rights and obligations that
are unique to us as an Australian company. These requirements operate differently than from many U.S. companies
and may limit or otherwise adversely affect our ability to take actions that could be beneficial to our shareholders. For
more information, you should carefully review the summary of these matters set forth under the section entitled, “Item
10.B - Additional Information - Memorandum and Articles of Association” as well as our Constitution.
20
Alterity Therapeutics Limited
Intellectual property report
30 June 2019
Intellectual property report
Since 30 June 2018 Alterity Therapeutics has continued to advance its patents both locally and internationally. Alterity
chemists have invented and synthesized a large number of compounds across different chemical groups. Accordingly,
in March 2019 the company filed a new provisional patent application that exemplifies in excess of 180 novel
compounds.
Alterity Therapeutics is confident of securing patent claims to both the composition of matter of those compounds as
well as to methods of treating diseases with the use of those compounds. New and ongoing biological data will
determine our IP strategy going forward into 2020.
In the past 12 months Alterity Therapeutics has advanced a number of existing patent families, as described below.
First, ‘National Phase’ patent applications have been prosecuted in 12 jurisdictions, including China, Europe, Japan
and the USA for the 4H-Pyrido(1,2-a) Pyrimidin-4-one compounds patent family. The majority of these patent cases
include claims to metal protein attenuating compounds (MPAC) compositions of matter.
Second, Alterity Therapeutics’ patent family entitled “Method of treating immunoglobulin light chain amyloidosis” has
progressed to National Phase in Australia, China, Europe, Japan and the USA. This patent family is directed to the use
of PBT2 for the treatment of Light Chain Amyloidosis, which is not a neurodegenerative disease.
The company’s Granted patent that claims 8-hydroxyquinoline compounds including PBT2, confers additional patent
protection to the PBT2 therapeutic candidate.
Another five cases are maintained, being directed to several ‘Follow Up’ or next generation MPAC chemical classes,
which comprise MPAC scaffolds that are an alternative to the 8-hydroxyquinoline chemical scaffold. Numerous
provisional patents remain filed and are directed to proprietary methods of synthesizing key compounds.
Patent prosecution update
Patent
“8-Hydroxyquinoline
Derivatives”
Filed: July 16, 2003
Applicant: Prana Biotechnology
Limited
“Neurologically-Active
Compounds”
Filed: October 3 , 2003
Applicant: Prana Biotechnology
Limited
Invention
The invention is directed to
chemical scaffolds of the 8-
Hydroxyquinoline MPAC class
and their utility in the treatment of
neurological conditions.
The invention is directed to
alternative MPAC chemical
structures and their utility in the
treatment of neurological
conditions.
Status
Patents in Europe, the USA, New
Zealand, Canada, Japan, Russia,
Singapore, South Korea,
Australia, Israel, China, Mexico
and South Africa have been
Granted. A patent in Hong Kong
has been registered.
Patents in the USA, New
Zealand, Canada, Japan, Mexico,
India, Australia, China, South
Korea, Japan, Israel, South Africa
and Singapore have been
Granted. A case has been
Granted in Europe and has been
validated in separate countries. A
patent in Hong Kong has been
registered.
21
Alterity Therapeutics Limited
Intellectual property report
30 June 2019
(continued)
Patent prosecution update (continued)
Patent
“Neurologically- Active
Compounds”
Filed: April 1, 2005
Applicant: Prana Biotechnology
Limited
“Method of treatment and
prophylaxis and agents useful for
same"
Filed: April 13, 2007
Applicant: Prana Biotechnology
Limited
Status
Patents have been Granted in
Singapore, Japan, Mexico,
Russia, Australia, the USA, China,
Canada, Europe, India, Sth Korea,
Israel, New Zealand and South
Africa. A case has been Granted
in Europe and has been validated
in separate countries. A patent in
Hong Kong has been registered.
Patents have been Granted in
Australia, Singapore, South Africa,
Canada, Japan, Israel, China and
New Zealand and the USA. A
case has been Granted in Europe
and has been validated in
separate countries. An application
is under examination in Brazil.
Invention
The invention is directed to ‘F4’
MPAC chemical structures and
their utility in the treatment of
neurological conditions and
includes Parkinson’s Disease lead
compounds.
This invention was originally filed
to claim the use of MPAC
compounds for the treatment of
Age related Macular
Degeneration.
“A method of prophylaxis or
treatment and agents for same”.
Filed: June 22, 2007
Applicant: Prana Biotechnology
Limited
A patent has been Granted in the
USA, China, Australia, Canada
and Japan. A case has been
Granted in Europe and has been
validated in separate countries.
This invention is directed to novel
MPAC compounds and
compounds for treating certain
brain cancers.
“Quinazolinone compounds”
Filed: 24 December 2008
Applicant: Prana Biotechnology
Limited
Patents have been Granted in
Japan, Australia, Europe and the
USA.
This invention is directed to novel
MPAC compounds and to
selected MPAC’s used in the
treatment of Parkinson’s Disease.
Particularly new 2,3 disubstituted
F4 compounds.
“4H-Pyrido(1,2-a) Pyrimidin-4-one
compounds”
Filed: 2 December 2015
Applicant: Prana Biotechnology
Limited
PCT National phase patent
applications has been filed in
Australia, Brazil, Canada, China,
EA, EU, India, Japan, Malaysia,
NZ, Korea and the USA. A case in
the USA has proceed to Grant.
This invention is directed to novel
MPAC compounds for the
treatment of neurodegenerative
diseases. Particularly new ‘F3’
compounds.
“Method of treating
immunoglobulin light chain
amyloidosis”
Filed: 1 July 2016
Applicant: Prana Biotechnology
Limited
“Compounds for Methods of
Treating Diseases”
Filed 15 March 2019
Applicant: Prana Biotechnology
Limited
A PCT patent application has
entered National Phase and
awaits examination.
This invention is directed to the
treatment of light chain
amyloidosis with a known
compound.
An Australian provisional patent
application has been filed.
This invention is directed to novel
new compounds and for the
treatment of neurodegenerative
diseases.
22
Alterity Therapeutics Limited
Intellectual property report
30 June 2019
(continued)
Patent prosecution update (continued)
Patent
“A method of the production of 2-
substituted-3H-quinazolin-4-ones-
I”
Filed: 12 March 2019
Applicant: Prana Biotechnology
Limited
“A method of the production of 2-
substituted-3H-quinazolin-4-ones-
II”
Filed: 12 March 2019
Applicant: Prana Biotechnology
Limited
“Processes for the preparation of
8-Hydroxyquinoline Derivatives”
Filed: 4 January 2019
Applicant: Prana Biotechnology
Limited
Status
An Australian provisional
application has been refiled.
Invention
This invention is directed to
synthetic routes for quinazolinone
compounds.
An Australian provisional
application has been refiled.
This invention is directed to
synthetic routes for quinazolinone
compounds.
An Australian provisional
application has been refiled.
This invention is directed to
synthetic routes for 8-
Hydroxyquinoline Derivatives.
23
Alterity Therapeutics Limited
Directors' report
30 June 2019
Directors' Report
Your directors present their report on the consolidated entity consisting of Alterity Therapeutics Limited (formerly Prana
Biotechnology Limited) and the entities it controlled at the end of, or during, the year ended 30 June 2019. Throughout
the report, the consolidated entity is also referred to as the group.
Directors and company secretary
The following persons held office as directors of Alterity Therapeutics Limited during the financial year:
Mr. Geoffrey Kempler, Chairman & CEO
Mr. Brian Meltzer, Independent Non-Executive Director
Mr. Peter Marks, Independent Non-Executive Director
Mr. Lawrence Gozlan, Non-Executive Director
Dr. David Sinclair, Non-Executive Director (appointed 8 April 2019)
Mr. Tristan Edwards, Non-Executive Director (appointed 8 April 2019)
Dr. George Mihaly, Independent Non-Executive Director (resigned 8 April 2019)
Dr. Ira Shoulson, Non-Executive Director (resigned 8 April 2019)
Company secretary
Mr. Phillip Hains is a Chartered Accountant operating a specialist public practice, 'The CFO Solution'. The CFO Solution
focuses on providing back office support, financial reporting and compliance systems for listed public companies. A
specialist in the public company environment, Mr. Hains has served the needs of a number of company boards and
their related committees. He has over 25 years' experience in providing businesses with accounting, administration,
compliance and general management services. He holds a Master of Business Administration from RMIT and a Public
Practice Certificate from the Institute of Chartered Accountants.
Principal activities
The Group's principal activities during the course of the year were to commercialise research into Parkinsonian
movement disorders, Alzheimer's disease, Huntington disease and other neurodegenerative disorders. There have
been no significant changes in the nature of those principal activities during the financial year.
Dividends paid or recommended
The Directors did not pay any dividends during the financial year (2018: nil). The Directors do not recommend the
payment of a dividend in respect of the 2019 financial year (2018: nil).
Review and results of operations
The consolidated net loss of the group after providing for income tax amounted to $12,337,830 (2018: $8,265,737). For
further details, refer to the Review of operations and activities set out on pages 3 to 20.
Share options granted to directors and key management personnel
During or since the end of the financial year 1,250,000 share options were granted by Alterity Therapeutics Limited to
the directors or other key management personnel of the Group (2018: 10,000,000).
Loss per share
Basic and diluted loss per share for the year 2019 was 2.00 cents (2018: 1.55 cents).
Corporate structure
Alterity Therapeutics Limited is a company limited by shares that was incorporated in and is domiciled in Australia.
Alterity Therapeutics Limited has 2 wholly owned subsidiaries:
24
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Corporate structure (continued)
•
Alterity Therapeutics Inc. (formerly Prana Biotechnology Inc), a company limited by shares that was
incorporated in and is domiciled in the United States; and
•
Alterity Therapeutics UK Limited (formerly Prana Biotechnology UK Limited), a company limited by shares that
was incorporated in and is domiciled in the United Kingdom.
Employees
The Group had 14 employees (excluding Directors) at 30 June 2019 (30 June 2018: 14 employees).
Significant changes in the state of affairs
Investment by Life Biosciences LLC
In December 2018, Alterity entered into a securities purchase agreement for a lead investment by Boston-based Life
Biosciences LLC. This transaction was approved by shareholders on 5 April 2019 and completed on 8 April 2019.
A$10.52 million has been received from Life Biosciences LLC as part of this investment. An additional A$0.92m was
also raised from unrelated third-party investors at the same time.
Name change to Alterity Therapeutics Limited
Linked to the strategic investment of Life Biosciences the Company changed its name to Alterity Therapeutics Limited
from Prana Biotechnology Limited. Alterity means to be in an alternative or different state, which ties to both the
Company’s science which is based on the altering of proteins in the brain, and to the impact we hope to have on the
patients who will one day have access to our treatments; to alter the course of their disease for the better.
There have been no other significant changes in the state of affairs of the group during the year.
Events since the end of the financial year
Information relating to events since the end of the financial year is set out in note 14 of the consolidated financial
statements.
On 29 July 2019, the Group announced it has successfully completed its Phase 1 study of PBT434, a novel, orally
bioavailable small molecule inhibitor of alpha-synuclein aggregation.
No other matters or circumstances, other than those disclosed in note 14 of the consolidated financial statements, have
arisen since 30 June 2019 that have significantly affected the group's operations, results or state of affairs, or may do
so in future years.
Likely developments and expected results of operations
The likely developments in the Group's operations, to the extent that such matters can be commented upon, are
covered in the Review of operations and activities on pages 3 to 20 of this report.
Environmental regulation
The Group is involved in scientific research and development, and the activities do not create any significant
environmental impact to any material extent. The Group's scientific research activities are in full compliance with all
prescribed environmental regulations.
Information on directors
The names and particulars of Directors of the Group in office as at the date of this report:
25
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Information on directors (continued)
Mr. Geoffrey Kempler Chairman & CEO
Appointed to the Board
Last elected by
shareholders
Qualifications
Experience and
expertise
Other current
directorships
Former directorships in
last 3 years
Committees
Interests in shares and
options
11 November 1997
17 November 2004
B.Sc. Grad. Dip. App. Soc. Psych
Mr Kempler has served as Chairman of our Board of Directors since November 1997,
between November 1997 and August 2004 he served as our Chief Executive Officer,
and in June 2005 he again assumed the position of Chief Executive Officer. Mr Kempler
is one of the founders of the Group. Mr Kempler is a qualified psychologist. Mr Kempler,
who has extensive experience in investment and business development, has been
responsible for the implementation of our strategic plan and the commercialisation of our
technology.
Opthea Limited (appointed 30 November 2015)
Nil
Nil
Ordinary shares
Options over ordinary shares
18,011,000
5,000,000
Mr. Brian Meltzer Independent Non-Executive Director
Appointed to the Board
Last elected by
shareholders
Qualifications
Experience and
expertise
Other current
directorships
Former directorships in
last 3 years
Committees
Interests in shares and
options
9 December 1999
17 November 2016
B. Com., M Ec.
Subsequent to several years as Chief Economist of ICI Australia (now Orica), Mr Meltzer
spent 25 years in investment banking. His breadth of expertise includes major property
transactions, corporate advisory, corporate finance, management buyouts, venture
capital and large scale syndications. He has held a number of Board and Board Advisory
roles for private companies in the human resources, health, aged care, software,
entertainment and finance sectors, including Director of a federal government licensed
Innovation Investment Fund and co-founder of OSA Group, a provider of mental health
services to corporates. Mr Meltzer is also a Director of the Australia-Israel Chamber of
Commerce, Chairman of Independence Australia and Chairman of a privately owned
corporate health business.
Nil
Nil
Chairman of the Audit Committee and member of the Remuneration Committee.
Ordinary shares
Options over ordinary shares
326,666
1,250,000
26
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Information on directors (continued)
Mr. Peter Marks Independent Non-Executive Director
Appointed to the Board
Last elected by
shareholders
Qualifications
Experience and
expertise
Other current
directorships
Former directorships in
last 3 years
Committees
Interests in shares and
options
29 July 2005
17 November 2017
BEc LLB Grad. Dip. Comm. Law MBA
For the period November 21, 2006 to October 20, 2011, Mr. Marks has also served as
Executive Chairman of iSonea Ltd, formerly KarmelSonix Ltd, a medical devices
company listed on the ASX that was focused on developing and commercializing a range
of devices in the respiratory and medicine space. For over 13 years until the end of
August 2014, Mr. Marks was a Director of Peregrine Corporate Ltd, an Australian-based
investment bank. Mr. Marks was until late 2016, a Director of Armadale Capital Plc
(formerly Watermark Global Plc), an AIM listed investment company, focused on natural
resources projects based principally in Africa with its current major investments being a
gold exploration company in DRC and a coal briquetting operation in South Africa. Mr.
Marks is currently a Principal of Henslow Pty Ltd (formerly Halcyon Corporate Pty Ltd), a
corporate and capital markets advisory firm specializing in advising small to mid-cap
companies. Mr. Marks is a non-executive Director of Fluence Corporation Ltd. (formerly
Emefcy Group Limited and prior to that Savcor Group Limited), an ASX listed municipal
& industrial waste water technology business. Mr. Marks is also a non-executive director
of Terragenic International Ltd, (renamed to Electriq~Global Ltd) an unlisted public
company developing a novel hydrogen fuel system. He also currently serves as Director
of ASX listed biotech company, Noxopharm Ltd. which is progressing a clinical program
in using chemical sensitisers to enhance the effectiveness of existing chemotherapy
drugs and radiation therapies and a Director of Noxopharm subsidiary, Nyrada Inc, which
is developing several pre-clinical non-oncology projects. From September 1998 until
March 2001, Mr. Marks was employed by KPMG Corporate Finance Ltd (Australia),
where he rose to Director and was responsible for heading up the equity capital markets
group in Melbourne. From January 1992 until July 1994, Mr. Marks served as Head of
the Melbourne Companies Department at the ASX and was founding Director of
Momentum Funds Management Pty Ltd, an Australian venture capital firm. From
December 1990 until December 1991, Mr. Marks served as Director of Corporate
Finance at Burdett Buckeridge & Young Ltd in their Melbourne offices, from August 1988
until November 1990, he held senior corporate finance position at Barings Securities Ltd,
and from July 1985 until July 1988, he served as an Associate Director of McIntosh
Securities, now Merrill Lynch Australia. In his roles with these various financial
institutions, Mr. Marks was responsible for advising a substantial number of listed and
unlisted companies on issues ranging from corporate and company structure, to
valuation, business strategies, acquisitions and international opportunities. Mr. Marks
holds a Bachelor of Economics degree, a Bachelor of Law degree and Graduate Diploma
in Commercial Law from Monash University in Melbourne, Australia, and an MBA degree
from the Scottish School of Business at the University of Edinburgh.
Fluence Corporation Ltd (appointed March 2015)
Noxopharm Ltd (appointed March 2016)
Nyrada Inc (appointed March 2018)
Armadale Capital Plc
Member of the Audit Committee and Chairman of the Remuneration Committee
Ordinary shares
Options over ordinary shares
43,111
1,250,000
27
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Information on directors (continued)
Mr. Lawrence Gozlan Non-Executive Director
Appointed to the Board
8 August 2011
17 November 2017
Last elected by
shareholders
Qualifications
Experience and expertise Mr. Gozlan, a leading biotechnology investor and advisor, is the Chief Investment Officer
and Founder of Scientia Capital, a specialised global investment fund focused
exclusively in life sciences. Scientia Capital was founded to provide high level expertise
and to manage investments for high net worth individuals, family offices and institutional
investors wanting exposure to the biotechnology industry.
B.Sc.(Hons)
Prior to this, Mr. Gozlan was responsible for the largest biotechnology investment
portfolio in Australia as the institutional biotechnology analyst at QIC (“the Queensland
Investment Corporation”), an investment fund with over A$60 billion under management.
He previously worked as the senior biotechnology analyst in the equities team at Foster
Stockbroking Pty Ltd, and gained senior corporate finance experience advising life
sciences companies at Deloitte.
Mr. Gozlan is currently a Director of a number of private biotechnology companies in the
USA. He holds a Bachelor of Science with Honors in microbiology and immunology from
the University of Melbourne.
Other current
directorships
Former directorships in
last 3 years
Committees
Interests in shares and
options
Nil
Nil
Nil
Ordinary shares
Options over ordinary shares
Nil
1,250,000
28
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Information on directors (continued)
Dr. David Sinclair Non-Executive Director
Appointed to the Board
Last elected by
shareholders
Qualifications
Experience and
expertise
Other current
directorships
Former directorships in
last 3 years
Committees
Interests in shares and
options
8 April 2019
5 April 2019
Ph.D., AO
Dr. Sinclair is the co-founder and chairman of Life Biosciences LLC. He is also a tenured
professor in the Department of Genetics at Harvard Medical School, a co-director of the
Paul F. Glenn Center for the Biology of Aging Research, and serves on the non-profit
boards of the American Federation for Aging Research and the Sanford Lorraine Cross
Award. Dr. Sinclair is regarded as one of the world’s leading researchers on aging and
age-associated diseases, with key contributions to understanding why we age and how
to slow and even reverse the process. He has co-founded multiple biotechnology and
genomics companies working on aging, neurological, metabolic, infectious and rare
diseases. He has received more than 35 awards for his medical research, innovation, and
teaching. In 2014, he was named in TIME Magazine’s “100 Most Influential People in the
World” and in 2018 was named in TIME Magazine’s “50 Most Influential People in Health
Care”.
In 2018 Dr Sinclair was appointed an Officer of the Order of Australia for “distinguished
service to medical research into the biology of aging and lifespan extension, as a
geneticist and academic, to biosecurity initiatives, and as an advocate for the study of
science”.
Nil
Nil
Nil
Ordinary shares
Options over ordinary shares
Nil
Nil
29
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Information on directors (continued)
Mr. Tristan Edwards Non-Executive Director
Appointed to the Board
Last elected by
shareholders
Qualifications
Experience and
expertise
Other current
directorships
Former directorships in
last 3 years
Committees
Interests in shares and
options
8 April 2019
5 April 2019
BCom, CFA, CMT, CPA
following a 16-year
investment career spanning
Mr Edwards is the co-founder and President of Life Biosciences LLC. Tristan has
extensive global financial capital markets, regulatory compliance, and fiduciary oversight
experience,
financial
organizations across Australia, London, HK and Singapore. His professional background
has been in senior investment roles at leading financial groups such as Goldman Sachs,
Brevan Howard, Trafalgar Capital and Mosaic Asset Management. He started his career
as an analyst with the Australian Commonwealth Department of Finance. Tristan has a
degree in Commerce from the University of Tasmania, and held the CFA, CMT and CPA
designations.
Nil
leading
Nil
Nil
Ordinary shares
Options over ordinary shares
Nil
Nil
30
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report
The information provided under sections (a) to (f) includes remuneration disclosures that are required under Accounting
Standard AASB 124 Related Party Disclosures.
The information in this report has been audited as required by section 308(3C) of the Corporations Act 2001.
Directors
The following persons were Directors of the Group during the financial year:
Name
Position
Mr. Geoffrey Kempler
Chairman & CEO
Mr. Brian Meltzer
Dr. George Mihaly
Mr. Peter Marks
Independent Non-Executive Director
Independent Non-Executive Director (resigned 8 April 2019)
Independent Non-Executive Director
Mr. Lawrence Gozlan
Non-Executive Director
Dr. David Sinclair
Non-Executive Director (appointed 8 April 2019)
Mr. Tristan Edwards
Non-Executive Director (appointed 8 April 2019)
Dr. Ira Shoulson
Non-Executive Director (resigned 8 April 2019)
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly during the financial year:
Name
Position
Ms. Kathryn Andrews
Chief Financial Officer
Dr. David Stamler
Chief Medical Officer and Senior Vice President Clinical Development
Mr Kempler, Ms Andrews and Dr Stamler were the only executives of the Group during the financial year ended 30
June 2019.
The remuneration report is set out under the following main headings:
(a)
(b)
(c)
(d)
(e)
(f)
Principles used to determine the nature and amount of remuneration
Details of remuneration
Share-based compensation
Key management personnel disclosure
Employment contracts of Directors and other key management personnel
Additional information
31
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(a) Principles used to determine the nature and amount of remuneration
Remuneration policy versus group financial performance
The Group's remuneration policy is not entirely based on both the Group's performance, rather on industry practice.
The Group's primary focus is research activities with a long-term objective of developing and commercialising its
research and development results.
The tables below set out summary information about the Group’s earnings and movement in shareholder wealth for
the five years to 30 June 2019:
Interest income
Total comprehensive loss for
the year
2019
$
108,538
2018
$
201,174
2017
$
132,396
2016
$
142,657
2015
$
176,842
(12,337,830)
(8,265,737)
(7,542,076)
(7,729,551)
(5,885,069)
No dividends have been paid for the five years to 30 June 2019.
ASX share price at start of
the year
ASX share price at end of
the year
Basic and diluted loss per
share (cents)
2019
$
0.04
0.03
(2.00)
2018
$
0.05
0.04
(1.58)
2017
$
0.10
0.05
(1.41)
2016
$
0.15
0.10
(1.45)
2015
$
0.22
0.15
(1.17)
The Group envisages its performance in terms of earnings will remain negative whilst the Group continues in the
research and/or trial phase. Shareholder wealth reflects this speculative and volatile market sector. This pattern is
indicative of the Group's performance over the past 5 years.
Performance based remuneration
The purpose of a performance bonus is to reward individual performance in line with Group objectives. Consequently,
performance based remuneration is paid to an individual where the individual's performance clearly contributes to a
successful outcome for the Group. This is regularly measured in respect of performance against key performance
indicators ("KPI's").
The Group uses a variety of KPI's to determine achievement, depending on the role of the Executive being assessed.
These include:
•
•
•
For details of performance-based remuneration refer to Employment Contracts of Directors and Key Management
Personnel on pages 39 to 40.
successful contract negotiations;
Group share price reaching a targeted rate on the ASX or applicable market over a period of time; or
achievement of research project milestones within scheduled time and/or budget
32
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(b) Details of remuneration
Details of remuneration for the current year
The remuneration for each Director and each of the other Key Management Personnel of the Group during the year
ended 30 June 2019 was as follows:
Directors
Mr. Geoffrey Kempler (1)
Mr. Brian Meltzer
Dr. George Mihaly (2)
Mr. Peter Marks
Mr. Lawrence Gozlan (3)
Dr. Ira Shoulson (2)
Dr. David Sinclair (2)
Mr. Tristan Edwards (2)
Other key management
personnel
Ms. Kathryn Andrews (1)
Dr. David Stamler (1)
Total
(1)
(2)
(3)
Cash salary
and fees
$
Non-
monetary
benefits
$
Super-
annuation
contribution
$
395,728
80,000
66,667
60,000
580,000
58,314
10,750
10,750
1,262,209
236,665
547,622
784,287
2,046,496
-
-
-
-
-
-
-
-
-
-
-
-
-
20,531
-
-
-
-
-
-
-
20,531
20,531
-
20,531
41,062
Long
service
leave
$
7,794
-
-
-
-
-
-
-
7,794
15,222
-
15,222
23,016
Equity
$
-
-
-
-
-
20,443
-
-
20,443
-
-
-
20,443
Total
$
424,053
80,000
66,667
60,000
580,000
78,757
10,750
10,750
1,310,977
272,418
547,622
820,040
2,131,017
Cash salary and fees includes movements in the annual leave provision relating to Geoffrey Kempler, Kathryn Andrews and
David Stamler.
The remuneration for Dr. George Mihaly and Dr. Ira Shoulson covered the period from 1 July 2018 to 8 April 2019, being the
last day of being the Company's directors. The remuneration for Dr. David Sinclair and Mr. Tristan Edwards covered the
period from 8 April 2019, being the date of their appointment as directors of the Company, to 30 June 2019.
Includes corporate advisory fees paid to an associated entity of Mr. Lawrence Gozlan in the amount of $520,000 for corporate
advisory services including seeking and advancing opportunities to expand the company’s product pipeline and other
sources of funding to commence and continue the company’s clinical trials.
33
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(b) Details of remuneration (continued)
Details of remuneration for the prior year
The remuneration for each Director and each of the other Key Management Personnel of the Group during the year
ended 30 June 2018 was as follows:
Directors
Mr. Geoffrey Kempler (1) (5)
Mr. Brian Meltzer (5)
Dr. George Mihaly (5)
Mr. Peter Marks (5)
Mr. Lawrence Gozlan (5)
Dr. Ira Shoulson (2)
Other key management
personnel
Ms. Kathryn Andrews (1) (3)
Ms. Dianne Angus (1) (4)
Dr. David Stamler (3)
Cash salary
and fees
$
Non-
monetary
benefits
$
Super-
annuation
contribution
$
381,340
82,500
77,500
60,000
60,000
78,885
740,225
196,689
81,589
504,274
782,552
1,522,777
-
-
-
-
-
-
-
-
-
-
-
-
20,049
-
-
-
-
-
20,049
18,604
5,736
-
24,340
44,389
Long
service
leave
$
7,763
-
-
-
-
-
7,763
96
(8,920)
-
(8,824)
(1,061)
Equity
$
235,000
58,750
58,750
58,750
58,750
-
470,000
15,735
(3,433)
125,877
138,179
608,179
Total
$
644,152
141,250
136,250
118,750
118,750
78,885
1,238,037
231,124
74,972
630,151
936,247
2,174,284
Cash salary and fees includes movements in the annual leave provision relating to Geoffrey Kempler, Dianne Angus and
Kathryn Andrews.
Includes consulting fees paid to Dr. Ira Shoulson in the amount of $12,021.
The equity component of Kathryn Andrews' and David Stamler's remuneration represented the portion of unlisted options
granted in the year ending 30 June 2017 but vested during the year ending 30 June 2018.
The remuneration for Ms. Dianne Angus covers the period from 1 July 2017 to 10 October 2017, being the last day of her
employment with the Company. The amount also includes payments of unused leave balances.
The Directors received unlisted options during the year. The option prices were calculated using the Black-Scholes Model.
Total
(1)
(2)
(3)
(4)
(5)
Performance income as a proportion of total remuneration
All Executives are eligible to receive incentives as determined by the Board from time to time. Their performance
payments are based on a set monetary value, set number of shares or options or as a portion of base salary. Therefore,
there is no fixed proportion between incentive and non-incentive remuneration.
Non-Executive Directors are not entitled to receive bonuses and/or incentives. During the past two years, the
Directors have received equity as part of their total remuneration. Employees have received equity as recommended
by the Remuneration Committee.
34
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(b) Details of remuneration (continued)
Performance income as a proportion of total remuneration (continued)
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Directors
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Dr. George Mihaly
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. Ira Shoulson
Dr. David Sinclair
Mr. Tristan Edwards
Other key management personnel of the group
Ms. Kathryn Andrews
Ms. Dianne Angus
Dr. David Stamler
Fixed remuneration
2019
%
2018
%
At risk - LTI
2019
%
2018
%
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
-
-
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At risk long term incentive (LTI) relates to remuneration provided in the form of share based payments. There are no
short-term incentives considered to be at risk in the current or prior year.
(c) Share-based compensation
At the Annual General Meeting held on 17 November 2004, Shareholders approved the establishment of a new
Employee and Consultant Plan designed to reward Executives, Employees and/or Consultants for their contributions
to the consolidated entity. The plan is to be used as a method of retaining key personnel for the growth and development
of the Group's intellectual property rights. Due to the Group's United States presence, an United States plan and an
Australian plan were developed. At 30 June 2019, equity had been issued to 4 Directors, 2 former Directors, 2 Key
Management Personnel, 11 employees and 7 consultants under the Australian Plan.
The term and conditions of each grant of options affecting Directors and Key Management Personnel remuneration in
this reporting period are as follows:
Grant date
a
4-Nov-13
3-Oct-14
7-Jun-17
18-Dec-17
2-Nov-18
Date vested and
exercisable
a Expiry date
Exercise
price
Vested
Value per
option at
grant date
4-Nov-13
3-Oct-14
7-Jun-18
18-Dec-17
2-Nov-18
3-Nov-18
2-Oct-18
6-Jun-22
14-Dec-22
14-Dec-22
$0.73
$0.34
$0.07
$0.11
$0.11
Yes
Yes
Yes
Yes
Yes
$0.21
$0.17
$0.03
$0.05
$0.02
Options granted under the plan carry no dividend or voting rights.
35
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(c) Share-based compensation (continued)
When exercisable, each option is convertible into one ordinary share as soon as practical after the receipt by the Group
of the completed exercise form and full payment of such exercise price.
The exercise price of options will be equal to or less than the weighted average price at which the Group's shares are
traded on the Australian Securities Exchange during the 5 days up to and including the grant date or such other exercise
price that the Remuneration Committee determines to be appropriate under the circumstances.
The plan rules contain a restriction on removing the 'at risk' aspect of the instruments granted to executives. Plan
participants may not enter into any transaction designed to remove the 'at risk' aspect of an instrument before it vests.
Details of options over ordinary shares provided as remuneration to each of the Directors and Key Management
Personnel of the Group during the 2019 financial year are as follows (2018: 10,000,000 options):
Directors
Dr. Ira Shoulson
No. of options
granted as
remuneration
No. of options
vested during
the year
1,250,000
1,250,000
1,250,000
1,250,000
No ordinary shares were issued as a result of exercise of remuneration options by Directors and Key Management
Personnel of Alterity Therapeutics Limited during the current or previous financial year.
(d) Key management personnel disclosure
Options and right holdings
The number of options over ordinary shares in the Group held during the financial year by each Director of Alterity
Therapeutics Limited and other Key Management Personnel of the Group, including their personally related parties,
are set out below:
Option and right holdings
30 June 2019
Directors
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Dr. George Mihaly*
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. Ira Shoulson*
Dr. David Sinclair
Mr. Tristan Edwards
Other key management personnel
Ms. Kathryn Andrews
Dr. David Stamler
Balance at
the start
of the year
No.
5,000,000
1,250,000
1,250,000
1,250,000
1,250,000
-
-
-
500,000
4,000,000
Vested and
exercisable
No.
Unvested
No.
Granted as
compensation
No.
Options
exercised
No.
Other
movements
No.
-
-
-
-
-
1,250,000
-
-
-
-
-
-
- (1,250,000)
-
-
-
-
- (1,250,000)
-
-
-
-
Balance at
the end
of the year
No.
5,000,000
1,250,000
-
1,250,000
1,250,000
-
-
-
5,000,000
1,250,000
-
1,250,000
1,250,000
-
-
-
-
-
-
-
-
-
500,000
4,000,000
500,000
4,000,000
14,500,000
1,250,000
- (2,500,000) 13,250,000 13,250,000
-
-
-
-
-
-
-
-
-
-
-
* Other movements represented the holdings of Dr. George Mihaly and Dr Ira Shoulson when they ceased to be directors of the
Group on 8 April 2019.
36
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(d) Key management personnel disclosure (continued)
Options and right holdings (continued)
Granted as
compensation
No.
Options
exercised
No.
Options
expired
/forfeited
No.
Balance at
the end
of the year
No.
Vested and
exercisable
No.
Unvested
No.
Option and right holdings
30 June 2018
Directors
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Dr. George Mihaly
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. Ira Shoulson
Other key management personnel
Ms. Kathryn Andrews
Ms. Dianne Angus*
Dr. David Stamler
Balance at
the start
of the year
No.
4,000,000
1,000,000
1,000,000
1,000,000
1,000,000
-
5,000,000
1,250,000
1,250,000
1,250,000
1,250,000
-
500,000
2,360,000
4,000,000
14,860,000
-
-
-
10,000,000
- (4,000,000)
- (1,000,000)
- (1,000,000)
- (1,000,000)
- (1,000,000)
-
-
5,000,000
1,250,000
1,250,000
1,250,000
1,250,000
-
5,000,000
1,250,000
1,250,000
1,250,000
1,250,000
-
500,000
-
-
-
- (2,360,000)
-
4,000,000
-
- (10,360,000) 14,500,000 14,500,000
500,000
-
4,000,000
-
-
-
-
-
-
-
-
-
-
* Ms. Dianne Angus terminated employment effective 10 October 2017. The reduction in her option holdings includes options forfeited
due to not meeting vesting condition, and options expired as they were not exercised during the required period set out in the option
agreement.
All vested options are exercisable at the end of the year.
Shares provided on exercise of remuneration options
No ordinary shares were issued to key management personnel as a result of the exercise of remuneration options
during the financial year ended 30 June 2019 and 30 June 2018.
Shareholdings
The number of shares in the group held during the financial year by each Director of Alterity Therapeutics Limited and
other Key Management Personnel other than for remuneration, including their personally related parties, are set out
below:
Shareholdings
30 June 2019
Directors
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Dr. George Mihaly
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. Ira Shoulson
Dr. David Sinclair
Mr. Tristan Edwards
Other key management
personnel
Ms. Kathryn Andrews
Dr. David Stamler
Balance at the
start of the year
No.
Received as
compensation
No.
Options
exercised
No.
Net
change
other
No.
Balance at
the end of
the year
No.
18,011,000
326,666
226,666
43,111
-
-
-
-
-
-
18,607,443
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(226,666)
-
-
-
-
-
18,011,000
326,666
-
43,111
-
-
-
-
-
-
-
-
(226,666)
18,380,777
37
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(d) Key management personnel disclosure (continued)
Shareholdings (continued)
Shareholdings
30 June 2018
Directors
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Dr. George Mihaly
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. Ira Shoulson
Other key management
personnel
Ms. Kathryn Andrews
Ms. Dianne Angus
Dr. David Stamler
Balance at the
start of the year
No.
Received as
compensation
No.
Options
exercised
No.
Net change
other
No.
18,011,000
326,666
226,666
43,111
-
-
-
146,128
-
18,753,571
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
end of
the year
No.
18,011,000
326,666
226,666
43,111
-
-
-
-
-
-
-
-
-
(146,128)
-
-
-
-
(146,128)
18,607,443
Loans to key management personnel
There were no loans made to the Directors or other Key Management Personnel, including their personally related
parties.
Other transactions with key management personnel
There were no further transactions with Key Management Personnel not disclosed above.
38
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(e) Employment contracts of Directors and other key management personnel
The following Directors and Key Management Personnel were under contract at 30 June 2019:
Directors
Duration
Notice Requirements
Mr. Geoffrey Kempler
Until termination by
either party. Signed
21 September 2007
For Good Reason Mr Kempler
may terminate with 30 days’
notice
Without Good Reason Mr
Kempler may terminate with 90
days’ notice
Without Cause the Group may
terminate with 90 days’ notice
With Cause the Group may
terminate with 30 days’ notice
Termination
* Pay Geoffrey Kempler within
ninety (90) days of the
termination date $1,000,000
provided the Group has sufficient
capital requirements to fulfil this
clause
* Accrued entitlements including
all unreimbursed business
expenses
* Accelerate the vesting of any
unvested options
* Bonus pro-rated only if
termination occurs in 1st year
* Pay Geoffrey Kempler within
ninety (90) days of the
termination date $1,000,000
provided the Group has sufficient
capital requirements to fulfil this
clause
* Accrued entitlements including
all unreimbursed business
expenses
* Accelerate the vesting of any
unvested options
* Bonus pro-rated only if
termination occurs in 1st year
Key management
personnel
Ms. Kathryn Andrews
Duration
Notice Requirements
Termination
Until termination by
either party. Signed
11 November 2014
Ms Andrews may terminate with
30 days’ notice, or
* Accrued entitlements including
all unreimbursed business
expenses
Without Cause the Group may
terminate with 30 days’ notice, or * Unexercised options shall be
exercisable within 30 days after
With Cause the Group may
the date of termination
terminate without notice
39
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Remuneration report (continued)
(e) Employment contracts of Directors and other key management personnel
Key management
personnel
Duration
Notice Requirements
Termination
Dr. David Stamler
Until termination by
either party. Signed
18 April 2017
By the Group without cause or
by Dr Stamler with good reason,
each party is required to provide
3 months notice, increasing to 6
months notice after 18 months of
employment, unless otherwise
agreed in writing
With Cause, the Group may
terminate at any time upon
written notice
* Payment equivalent to seventy
five percent of current
annualised salary.
* Accrued entitlements including
all unreimbursed business
expenses
* Unexercised options shall be
exercisable within 30 days after
the date of termination
* Accrued entitlements including
all unreimbursed business
expenses
* Unexercised options shall be
exercisable within 30 days after
the date of termination
(f) Additional information
Details of remuneration: cash bonuses and options
No other cash bonuses were paid or have been forfeited in the current and prior year.
The following table provides the percentage of the available grant of share options that was paid or that vested in the
financial year and the percentage that was forfeited.
Year granted
Vested
(%)
Forfeited
(%)
Financial years in
which options
may vest
Minimum total
value of grant
yet to vest ($)
Total value of
grant yet to
vest ($)
a
Directors
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Dr. George Mihaly
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. Ira Shoulson
Dr. David Sinclair
Mr. Tristan Edwards
a
Other key management
personnel
Ms. Kathryn Andrews
Dr. David Stamler
2018
2018
2018
2018
2018
2019
-
-
100%
100%
100%
100%
100%
100%
-
-
2017
2017
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
[End of remuneration report]
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Meetings of directors
The following table sets out the number of Directors' Meetings (including meetings of committees of Directors) held
during the financial year and the number of meeting attended by each Director.
Mr. Geoffrey Kempler
Mr. Brian Meltzer
Mr. Peter Marks
Mr. Lawrence Gozlan
Dr. David Sinclair
Mr. Tristan Edwards
Dr. George Mihaly
Dr. Ira Shoulson
Board meetings
A
20
19
20
19
4
4
15
15
B
20
18
20
18
4
4
14
15
A
-
6
5
-
-
-
5
-
Meetings of committees
Audit
Remuneration
B
A
-
-
1
1
1
1
-
-
-
-
-
-
1
1
-
-
B
-
6
5
-
-
-
5
-
A = Number of meetings held during the time the director held office or was a member of the committee during the year
B = Number of meetings attended
Indemnifying directors and officers
During the financial year, the Group maintained an insurance policy to indemnify all current Directors and Officers
against certain liabilities incurred as a Director or Officer, including costs and expenses associated in successfully
defending legal proceedings. The contract of insurance prohibits disclosure of the nature of the liability and the amount
of the premium. The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an
Officer or Auditor of the Group or any related body corporate against a liability incurred as such an Officer or Auditor.
Share options/warrants on issue at 30 June 2019
As at 30 June 2019 the unissued ordinary shares of Alterity Therapeutics Limited under options/warrants were as
follows:
Date of expiry
18-Feb-20
25-May-20
6-Jun-22
14-Dec-22
31-Jan-23
19-Dec-19
Exercise price ($)
$0.26
$0.27
$0.07
$0.11
$0.083
$0.045
Number under options/warrants
2,000,000
1,400,000
7,350,000
13,850,000
700,000
586,672,964
611,972,964
Shares issued as a result of the exercise of options/warrants
During the year ended 30 June 2019 there have been no ordinary shares of Alterity Therapeutics Limited issued as a
result of the exercise of options.
Since 30 June 2019, there have been no ordinary shares of Alterity Therapeutics Limited issued as a result of the
exercise of options.
Shares issued as a result of the exercise of options/warrants (continued)
There are no amounts unpaid on the shares issued as a result of the exercise of the options during and since the end
of the 2019 financial year. The amount paid per share is the same as the exercise price.
Proceedings on behalf of the Group
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section
237 of the Corporations Act 2001.
41
Alterity Therapeutics Limited
Directors' report
30 June 2019
(continued)
Non-audit services
The company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor's expertise and experience with the company and/or the group are important.
During the year ended 30 June 2019, the Group did not engage the external auditor to provide non-audit services.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 43.
Corporate governance statement
In accordance with ASX listing Rule 4.10.3, the Company’s 2019 Corporate Governance Statements can be found on
its website at www.alteritytherapeutics.com.
Signed in accordance with a resolution of the Directors made pursuant to s298(2) of the Corporations Act 2001.
Mr. Geoffrey Kempler
Chairman & CEO
Melbourne
30 August 2019
42
Auditor’s Independence Declaration
As lead auditor for the audit of Alterity Therapeutics Limited (formerly known as Prana Biotechnology
Limited) for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there
have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Alterity Therapeutics Limited and the entities it controlled during the
period.
Sam Lobley
Partner
PricewaterhouseCoopers
Melbourne
30 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Alterity Therapeutics Limited
Consolidated financial statements
30 June 2019
Contents
Consolidated financial statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors' declaration
Page
45
46
47
48
49
83
These consolidated financial statements are for the Group consisting of Alterity Therapeutics Limited and its
subsidiaries. A list of major subsidiaries is included in note 15.
The consolidated financial statements are presented in the Australian currency.
Alterity Therapeutics Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered office is:
Level 3, 62 Lygon Street
Carlton Victoria 3053
Its principal place of business is:
Level 3, 460 Bourke Street
Melbourne Victoria 3000
The consolidated financial statements were authorised for issue by the directors on 30 August 2019. The directors have
the power to amend and reissue the consolidated financial statements.
All press releases, financial reports and other information are available at our Shareholders' Centre on our website:
www.alteritytherapeutics.com
44
Alterity Therapeutics Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Interest income
Other income
Expenses
Intellectual property expenses
General and administration expenses
Research and development expenses
Other operating expenses
Other gains/(losses)
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Notes
2
2
3
3
3
4
2019
$
108,538
4,951,167
2018
$
201,174
3,125,775
(322,097)
(4,308,352)
(12,983,185)
(132,965)
349,064
(12,337,830)
-
(12,337,830)
(224,580)
(4,341,058)
(6,698,016)
(58,172)
(270,860)
(8,265,737)
-
(8,265,737)
-
(12,337,830)
Cents
-
(8,265,737)
Cents
Loss per share for profit attributable to the ordinary equity holders of the
company:
Basic loss per share
Diluted loss per share
18
18
2.00
2.00
1.55
1.55
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
45
Alterity Therapeutics Limited
Consolidated statement of financial position
As at 30 June 2019
Notes
5(a)
6(a)
5(c)
6(b)
6(b)
30 June
2019
$
30 June
2018
$
14,399,904
4,829,497
631,769
19,861,170
15,235,556
3,152,410
266,625
18,654,591
48,748
48,748
19,909,918
71,422
71,422
18,726,013
2,718,174
601,995
3,320,169
2,055,247
588,693
2,643,940
34,976
34,976
3,355,145
16,554,773
916
916
2,644,856
16,081,157
7(a)
7(c)
7(b)
156,632,636 143,910,328
1,753,954
(141,236,838) (129,583,125)
1,158,975
16,554,773
16,081,157
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
46
Alterity Therapeutics Limited
Consolidated statement of changes in equity
For the year ended 30 June 2019
Notes
7(a)
Balance at 1 July 2017
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity
as owners:
Share-based payment expenses
Transaction costs
Expired options
Balance at 30 June 2018
Balance at 1 July 2018
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity
as owners:
Issue of ordinary shares
Share-based payment expenses
Transaction costs
Expired options
Balance at 30 June 2019
Reserves
$
Attributable to owners of
Alterity Therapeutics Limited
Accumulated
losses
$
2,320,480 (122,648,452)
(8,265,737)
(8,265,737)
-
-
Contributed
equity
$
144,018,006
-
-
Total
equity
$
23,690,034
(8,265,737)
(8,265,737)
-
(107,678)
-
(107,678)
143,910,328
143,910,328
-
-
13,084,629
-
(362,321)
-
12,722,308
156,632,636
764,538
-
-
-
1,331,064
(1,331,064)
(566,526)
1,331,064
1,753,954 (129,583,125)
1,753,954 (129,583,125)
(12,337,830)
(12,337,830)
-
-
764,538
(107,678)
-
656,860
16,081,157
16,081,157
(12,337,830)
(12,337,830)
-
-
89,138
-
-
-
684,117
(684,117)
(594,979)
684,117
1,158,975 (141,236,838)
13,084,629
89,138
(362,321)
-
12,811,446
16,554,773
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
47
Cash flows from operating activities
Payments to suppliers and employees
R&D tax refund
Interest received
Net cash (outflow) from operating activities
Cash flows from investing activities
Withdrawal of rental deposit
Payments for property, plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Transaction costs relating to issue of equity
Net cash inflow (outflow) from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Alterity Therapeutics Limited
Consolidated statement of cash flows
For the year ended 30 June 2019
Notes
2019
$
2018
$
8(a)
7(a)
7(a)
(17,325,579)
3,251,672
119,089
(13,954,818)
(9,466,459)
3,022,673
198,598
(6,245,188)
-
(7,022)
(7,022)
43,988
(62,405)
(18,417)
13,084,629
(362,320)
12,722,309
(1,239,531)
15,235,556
403,879
14,399,904
-
(107,678)
(107,678)
(6,371,283)
21,884,957
(278,118)
15,235,556
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
48
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
How numbers are calculated
This section provides additional information about those individual line items in the consolidated financial statements
that the directors consider most relevant in the context of the operations of the entity, including:
(a) accounting policies that are relevant for an understanding of the items recognised in the financial statements.
These cover situations where the accounting standards either allow a choice or do not deal with a particular type
of transaction
(b) analysis and sub-totals, including segment information
(c) information about estimates and judgements made in relation to particular items.
1 Segment information
2 Interest and other income
3 Loss for the year
4 Income tax expense
5 Financial assets and financial liabilities
6 Non-financial assets and liabilities
7 Equity
8 Cash flow information
50
50
50
51
52
54
56
58
49
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
1 Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief Executive Officer of Alterity Therapeutics
Limited. For the current and previous reporting periods, the Group's activities are predominantly within Australia and
cover research into Parkinson’s disease, Alzheimer's disease, Huntington disease and other neurodegenerative
disorders. Accordingly, the Group has identified one reportable segment.
2
Interest and other income
Interest income
R&D tax incentive
2019
$
108,538
4,951,167
5,059,705
2018
$
201,174
3,125,775
3,326,949
As the Group is still in the early stage of research and development for its products, it has neither generated revenue
from contracts with customers, nor decided on the revenue strategy (licensing, sale of pharmaceutical products) for
when the development phase is completed. As at and for the year ended 30 June 2019, the Group had no revenue
from contracts with customers.
Other income is made up of interest income which is recognised on a time proportion basis using the effective interest
method.
Critical judgements in calculating R&D tax incentive
The Group's research and development activities are eligible under an Australian Government tax incentive for eligible
expenditure from 1 July 2011. Management has assessed these activities and expenditure to determine which are likely
to be eligible under the incentive scheme. For the year ended 30 June 2019 the Group has recorded an item in other
income of $4,951,167 (2018: $3,125,775) to recognise this amount which relates to this financial year.
3 Loss for the year
Loss before income tax has been determined after:
General and administration expenses
Depreciation on fixed assets
Employee expenses (non R&D related)
Consultant and director expenses
Audit, internal control and other assurance expenses
Corporate compliance expenses
Insurance expenses
Office rental
Other administrative and office expenses
2019
$
2018
$
29,696
735,775
1,477,369
208,972
470,294
448,769
132,836
804,641
4,308,352
21,799
909,756
1,403,608
186,660
351,611
422,475
142,233
902,916
4,341,058
50
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
2019
$
2018
$
2,645,512
10,337,673
12,983,185
2,223,807
4,474,209
6,698,016
(349,064)
(349,064)
270,860
270,860
3 Loss for the year (continued)
Research and development expenses
Employee expenses
Other research and development expenses
Other operating expenses
Foreign exchange (gain)/loss
4
Income tax expense
(a) Income tax expense
No income tax expense has arisen in the current or prior years from either current or deferred taxation.
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit (Loss) from continuing operations before income tax expense
Tax at the Australian tax rate of 27.5% (2018 - 27.5%)
Tax at the oversea tax rate of 35.0% (2018 - 35.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Research and development expenditure (net of tax incentive)
Entertainment
Share-based payment
Other non-deductible expenses
Future tax benefits not recognised as an asset
Income tax expense
(c) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 27.5% - Australia & 35.0% - Overseas
2019
$
(12,337,830)
(3,392,903)
19,045
2018
$
(8,265,737)
(2,273,078)
12,375
1,688,887
1,730
24,513
119,002
(1,539,726)
1,539,726
-
1,187,557
1,694
210,248
112,308
(748,896)
748,896
-
2019
$
2018
$
130,709,461 125,041,203
34,373,956
35,913,682
Subject to the Group continuing to meet the relevant statutory tests, the tax losses are available for offset against future
taxable income.
51
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
4
Income tax expense (continued)
(c) Tax losses (continued)
At 30 June 2019, the Group had a potential tax benefit related to tax losses carried forward of $130,709,461. Such
amount includes net losses of $186,194 related to subsidiaries in the United States (U.S.). The Tax Cuts and Jobs Act
(TCJA) enacted by Congress in the U.S on 22 December 2017 cut the top corporate income tax rate from 35% to 21%.
For tax years beginning after December 31, 2017, the graduated corporate tax rate structure is eliminated and corporate
taxable income will be taxed at 21-percent flat rate. Additionally, the previous 20-year limitation on carry forward net
operating losses (NOL’s) has been removed, allowing the NOL’s to be carried forward indefinitely. The remaining tax
losses carried forward are indefinite and are attributable to the Group’s operations in Australia. As such the total unused
tax losses available to the Group, equal $130,790,461.
As at balance date, there are unrecognised tax losses with a benefit of approximately $35,913,682 (2018: $34,373,956)
that have not been recognised as a deferred tax asset to the Group. These unrecognised deferred tax assets will only
be obtained if:
•
•
•
The Group companies derive future assessable income of a nature and amount sufficient to enable the benefits to
be realised;
The Group companies continue to comply with the conditions for deductibility imposed by the law; and
No changes in tax legislation adversely affect the Group companies from realising the benefit.
(d) Unrecognised temporary differences
Temporary differences for which no deferred tax asset has been recognised as
recovery is not probable
Section 40-880 deductions
Accruals and provisions
Foreign exchange
Unrecognised deferred tax relating to the above temporary differences
2019
$
2018
$
418,289
1,105,153
(403,879)
1,119,563
307,880
238,868
737,151
278,117
1,254,136
376,241
Future benefits attributable to net temporary differences have not been brought to account, as the Directors do not
regard the realisation of such benefits as probable.
5 Financial assets and financial liabilities
This note provides information about the Group’s financial instruments, including:
•
•
•
•
an overview of all financial instruments held by the Group
specific information about each type of financial instrument
accounting policies (where relevant)
information about determining the fair value of the instruments, including judgements and estimation uncertainty
involved (if any).
52
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
5 Financial assets and financial liabilities (continued)
(a) Trade and other receivables
R&D tax incentive receivable
Accrued interest income
Goods and services tax receivable
30 June
2019
30 June
2018
Current
$
4,825,270
2,129
2,098
4,829,497
Non-
Current
Total
current
$
$
$
- 4,825,270 3,125,775
12,680
-
-
13,955
- 4,829,497 3,152,410
2,129
2,098
Non-
Total
current
$
$
- 3,125,775
12,680
-
-
13,955
- 3,152,410
R&D tax incentive receivable represents the amount of R&D tax incentive the Group expects to recover. For further
details, see note 2.
(i) Classification as trade and other receivables
Trade and other receivables are amounts due from external parties for entitlements that arise during the ordinary course
of business. They are generally due for settlement within 365 days and therefore are all classified as current. Trade
receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant
financing components, when they are recognised at fair value. The group holds the trade receivables with the objective
to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective
interest method. The Group’s impairment and other accounting policies for trade and other receivables are outlined in
notes 10(b) and 20(j) respectively.
(ii) Fair value of trade and other receivables
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair
value.
(iii) Impairment and risk exposure
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit
risk, foreign currency risk and interest rate risk can be found in note 10(a) and 10(b).
(b) Cash and cash equivalents
Current assets
Cash at bank and in hand
Deposits at call
30 June
2019
$
30 June
2018
$
11,194,862
3,205,042
14,399,904
9,042,843
6,192,713
15,235,556
53
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
5 Financial assets and financial liabilities (continued)
(b) Cash and cash equivalents (continued)
(i) Classification as cash equivalents
Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of
acquisition and are repayable with 24 hours notice with no loss of interest. See note 20(i) for the Group’s other
accounting policies on cash and cash equivalents.
(c) Trade and other payables
Trade payables
Accrued expenses
Other payables
30 June
2019
30 June
2018
Notes
Current
$
1,693,885
5(c)(i) 1,012,569
11,720
2,718,174
Non-
current
Total
Current
$
$
$
- 1,693,885 1,333,890
710,166
- 1,012,569
11,191
11,720
-
- 2,718,174 2,055,247
Non-
current
Total
$
$
- 1,333,890
710,166
-
11,191
-
- 2,055,247
Trade payables are unsecured and are usually paid within 30 days of recognition.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-
term nature.
(i) Accrued expenses
R&D accruals
Other accrued expenses
30 June
2019
Current
$
752,156
260,413
1,012,569
Non-
Total
current
$
$
752,156
-
260,413
-
- 1,012,569
Current
$
333,645
376,521
710,166
30 June
2018
Non-
current
$
-
-
-
Total
$
333,645
376,521
710,166
6 Non-financial assets and liabilities
This note provides information about the group's non-financial assets and liabilities, including:
•
•
specific information about each type of non-financial asset and non-financial liability
•
provisions (note 6(b))
accounting policies
54
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
30 June
2019
$
621,737
10,032
631,769
30 June
2018
$
256,821
9,804
266,625
6 Non-financial assets and liabilities (continued)
(a) Other current assets
Current assets
Prepayments
Others
(b) Provisions
Annual leave
Long service leave
30 June
2019
Non-
current
$
-
34,976
34,976
Current
$
245,804
356,191
601,995
30 June
2018
Non-
current
$
-
916
916
Total
$
266,487
323,122
589,609
Total
$
245,804
391,167
636,971
Current
$
266,487
322,206
588,693
A provision has been recognised for employee entitlements relating to long service leave. In calculating the present
value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on
historical data. The measurement and recognition criteria relating to employee benefits has been included in note 20
to this report.
(i) Amounts not expected to be settled within the next 12 months
The current provision for long service leave includes all unconditional entitlements where employees have completed
the required period of service and also those where employees are entitled to pro-rata payments in certain
circumstances. Majority of the balance is presented as current, since the Group does not have an unconditional right
to defer settlement. However, based on past experience, the Group does not expect all employees to take the full
amount of accrued long service leave or require payment within the next 12 months.
(ii) Movements in provisions
2019
Annual leave
$
266,487
308,032
(330,601)
1,886
245,804
Long service
leave
$
323,122
68,045
-
-
391,167
Total
$
589,609
376,077
(330,601)
1,886
636,971
Carrying amount at start of year
- additional provisions recognised
Amounts used during the year
Change in foreign exchange
Carrying amount at end of year
55
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
Annual leave
$
298,508
261,354
(293,375)
266,487
Long service
leave
$
399,970
26,515
(103,363)
323,122
Total
$
698,478
287,869
(396,738)
589,609
6 Non-financial assets and liabilities (continued)
(b) Provisions (continued)
(ii) Movements in provisions (continued)
2018
Carrying amount at start of year
- additional provisions recognised
Amounts used during the year
Carrying amount at end of year
7 Equity
(a) Contributed equity
Ordinary shares - fully paid
(i) Movements in ordinary shares:
Details
Opening balance 1 July 2017
Transaction costs
Balance 30 June 2018
Shares issued during the year
Transaction costs
Balance 30 June 2019
Notes
7(a)(i),
7(a)(ii)
30 June
2019
Shares
30 June
2018
Shares
30 June
2019
$
30 June
2018
$
860,837,432 533,891,470 156,632,636 143,910,328
Number of shares
$
-
533,891,470 144,018,006
(107,678)
533,891,470 143,910,328
13,084,628
326,945,962
(362,320)
-
860,837,432 156,632,636
2019
Details
a
Issue of shares under ATM Facility
13-Jul-18
Issue of shares under ATM Facility
4-Jan-19
4-Feb-19
Issue of shares under ATM Facility
21-Mar-19 Issue of shares under ATM Facility
21-Mar-19 Issue of shares under ATM Facility
21-Mar-19 Issue of shares under ATM Facility
21-Mar-19 Issue of shares under ATM Facility
8-Apr-19
8-Apr-19
Issue of shares under strategic investment by
LifeBiosciences LLC
Issue of shares to sophisticated and professional
investors
Number
Issue price
$
3,083,580
15,789,360
1,912,440
7,930,740
3,723,120
156,000
1,014,240
269,905,533
23,430,949
326,945,962
0.054
0.047
0.041
0.054
0.045
0.047
0.043
0.039
0.039
There were no new ordinary shares issued during the prior year.
Amount
$
166,086
749,614
78,508
430,346
169,064
7,341
43,544
10,526,318
913,807
13,084,628
56
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
7 Equity (continued)
(a) Contributed equity (continued)
(ii) Ordinary shares
Ordinary shares have no par value and the Group does not have a limited amount of authorised capital. On a show of
hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a
poll, each share is entitled to one vote.
(b) Accumulated losses
Movements in accumulated losses were as follows:
Balance at the beginning of the year
Net loss for the year
Reclassify expired options from reserves
Balance at the end of the year
(c) Reserves
Share based payment reserve
Notes
Options over fully paid ordinary shares
7(c)(i)
Notes
7(c)(i)
30 June
2019
$
30 June
2018
$
129,583,125 122,648,452
12,337,830
8,265,737
(1,331,064)
(684,117)
141,236,838 129,583,125
30 June
2019
Options/
Warrants
30 June
2018
Options/
Warrants
30 June
2019
$
30 June
2018
$
25,300,000
611,972,964
25,216,490
25,216,490
1,158,975
1,158,975
1,753,954
1,753,954
(i) Options over fully paid ordinary shares
During the year ended 30 June 2019, the following options over fully paid ordinary shares were issued to the directors
and employees under the 2004 Employees, Directors and Consultants Share and Option Plan. For further details, see
note 16. The table below also presents the number of options issued, lapsed or expired during the year then ended.
2019
Details
Options granted in prior period and issued in current period
a
13-Jul-18
04-Aug-18 Options lapsed during the period
28-Aug-18 Options granted during the period
Options lapsed during the period
01-Oct-18
Options lapsed during the period
24-Oct-18
02-Nov-18 Options granted during the period
03-Nov-18 Options lapsed during the period
11-Dec-18 Options lapsed during the period
Options lapsed during the period
5-Feb-19
Share-based payment expenses - options issued in prior period
30-Jun-19
Number
700,000
(306,490)
500,000
(360,000)
(200,000)
1,250,000
(200,000)
(1,200,000)
(100,000)
-
83,510
Amount
$
-
(54,016)
9,927
(62,776)
(33,959)
20,443
(42,280)
(427,293)
(63,793)
58,768
(594,979)
There were no options over fully paid ordinary shares exercised or forfeited during the current and prior years.
57
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
Notes
30 June
2019
Options/
Warrants
30 June
2018
Options/
Warrants
30 June
2019
$
30 June
2018
$
7(c)(ii)
586,672,964
586,672,964
-
-
-
-
-
-
7 Equity (continued)
(c) Reserves (continued)
Warrants
Short-term warrants
(ii) Short-term warrants
On 9 April 2019, the Group issued a total of 586,672,964 two for one free-attaching warrants each with an exercise
price of A$0.045 (4.5 cents), vesting on 8 June 2019 and expiring on 19 December 2019. These warrants were issued
as part of the strategic investment made by Life Biosciences LLC, and an accompanying placement with sophisticated
investors.
(iii) Nature and purpose of reserves
The share based payments reserve is used to recognise the fair value of options and warrants issued to directors,
employees and consultants but not exercised.
8 Cash flow information
(a) Reconciliation of profit after income tax to net cash inflow from operating activities
Loss for the year
Adjustment for:
Depreciation
Non-cash employee benefits expense - share-based payments
Net foreign exchange differences
Change in operating assets and liabilities:
Increase/(decrease) in provisions
(Increase)/ decrease in trade and other receivables
(Increase) /decrease in other current assets
Increase/(decrease) in trade and other payables
Net cash outflow from operating activities
(b) Non-cash investing and financing activities
Notes
30 June
2019
$
(12,337,830)
30 June
2018
$
(8,265,737)
29,696
89,138
(403,879)
21,799
764,539
278,117
47,362
(1,677,087)
(365,144)
662,926
(13,954,818)
(108,869)
(116,837)
18,988
1,162,812
(6,245,188)
There have been no non-cash investing and financing activities during the current and prior year.
58
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
Risk
This section of the notes discusses the group’s exposure to various risks and shows how these could affect the group’s
financial position and performance.
9 Critical estimates, judgements and errors
10 Financial risk management
11 Capital management
60
61
64
59
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
9 Critical estimates, judgements and errors
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal
the actual results. Management also needs to exercise judgement in applying the group’s accounting policies.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable
under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Going concern basis
The Group is a development stage medical biotechnology company and as such expects to be utilising cash until its
research activities have become marketable. For the year ended 30 June 2019, the Group incurred an operating loss
of $12,337,830 (2018: $8,265,737) and an operating cash outflow of $13,954,818 (2018: $6,245,188). As at 30 June
2019, the net assets of the Group stood at $16,554,773 (2018: $16,081,157) and the cash position has decreased to
$14,399,904 from $15,235,556 million at 30 June 2018. The Group has recorded a Trade and Other Receivable at 30
June 2019 in the amount of $4,825,270 from the Australian Taxation Office in respect of its 2019 research and
development tax incentive claim. The Group expects to receive this amount during the 12 months ended 30 June 2020
and also expects the research and development tax incentive to continue to be applicable in the subsequent years.
On 8 April 2019, the Company completed the strategic investment by Life Biosciences LLC ("Life") of an initial US$7.5
million (approximately A$10.526 million) in the Company. The Company also completed a private placement to raise
another A$0.9M from sophisticated investors. As part of these transactions, the Company also issued a total of
586,672,964 warrants each with an exercise price of A$0.045 (4.5 cents), vesting on 8 June 2019 and expiring on 19
December 2019, which can potentially raise up to approximately another A$26.4 million upon the holders' election to
convert in to the Company's ordinary shares. There is no commitment in this regard.
The Directors intend to raise new equity funding within the next twelve months to progress the Group's planned research
and development expenditure. Notwithstanding these plans, the Directors are confident that the Group has sufficient
liquidity with cash and other assets available as at 30 June 2019 to meet its creditors and other commitments. Further,
no asset is likely to be realised for an amount less than the amount at which it is recorded in the consolidated statement
of financial position as at 30 June 2019.
(b) R&D tax incentive
Refer to note 2 for details.
(c) Share-based payments
The value attributed to share options and remuneration shares issued is an estimate calculated using an appropriate
mathematical formula based on an option-pricing model. The choice of models and the resultant option value require
assumptions to be made in relation to the likelihood and timing of the conversion of the options to shares and the value
and volatility of the price of the underlying shares.
60
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
9 Critical estimates, judgements and errors (continued)
(c) Share-based payments (continued)
Refer to note 16 for more details.
10 Financial risk management
The Group's activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk. The
Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. Risk management is carried out under policies
approved by the Board of Directors and overseen by the Audit Committee.
(a) Market risk
(i) Foreign exchange risk
The Group engages in international purchase transactions and is exposed to foreign currency risk arising from various
currency exposures, primarily with respect to the Australian dollar. The parent entity also has exposure to foreign
exchange risk in the currency cash reserves it holds to meet its foreign currency payments. The Group does not make
use of derivative financial instruments to hedge foreign exchange risk.
The following financial assets and liabilities are subject to foreign currency risk, all the amounts in the table below are
displayed in $AUD at year-end spot rates:
Exposure
The group's exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar, was as
follows:
Cash and cash equivalents
Trade and other payables
Total exposure
USD
$
9,726,790
(1,196,358)
8,530,432
30 June 2019
EUR
$
178
-
178
GBP
$
433
(35,242)
(34,809)
USD
$
6,309,829
(607,150)
5,702,679
30 June 2018
EUR
$
173
(1,439)
(1,266)
GBP
$
428
(39,167)
(38,739)
Sensitivity
As shown in the table above, the group is primarily exposed to changes in USD/AUD exchange rates. The sensitivity
of profit or loss to changes in the exchange rates arises mainly from US-dollar denominated financial instruments and
there is no impact on other components of equity.
The Group's exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result
of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and
financial liabilities.
Based on the financial instruments held at 30 June 2019, had the Australian dollar weakened/strengthened by 6.36%
(2018: 7.18%) against the USD with all other variables held constant, the Group's post-tax loss for the year would have
been A$542,116 lower/higher (2018: A$409,391 lower/higher).
61
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
10 Financial risk management (continued)
(a) Market risk (continued)
Interest rate risk
(ii)
The Group's exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the
effective weighted average interest rates on classes of financial assets and financial liabilities.
2019
Financial assets
Cash and cash equivalents
Receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
2018
Financial assets
Cash and cash equivalents
Receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
Weighted
average effective
interest rate
%
Floating
interest rate
$
Fixed interest
rate - within 1
year
$
Fixed interest
rate - 1 to 5
years
$
Fixed interest
rate - over 5
years
$
Non-interest
bearing
$
Total
$
0.42
-
0.42
-
-
1.09
-
1.09
-
-
1,400,257
-
1,400,257
3,205,042
-
3,205,042
-
-
-
-
8,925,124
-
8,925,124
6,192,713
-
6,192,713
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,794,605 14,399,904
4,829,497
4,829,497
14,624,102 19,229,401
(2,718,174)
(2,718,174)
(2,718,174)
(2,718,174)
117,718 15,235,555
3,152,410
3,152,410
3,270,128 18,387,965
(2,055,247)
(2,055,247)
(2,055,247)
(2,055,247)
62
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
10 Financial risk management (continued)
(a) Market risk (continued)
Interest rate risk (continued)
(ii)
There has been a decrease in the Group's exposure to interest rate risk in the current year as the Group maintained a
lower balance of financial assets which are exposed to the fluctuation in interest rates. The Group maintains the same
manner in which it manages and measures its risk as it did in prior years.
Sensitivity
An increase or decrease of 1% in interest rates at the reporting date would have the following increase/(decrease)
effect on after tax loss and equity. This analysis assumes that all other variables, in particular foreign currency rates,
remain constant. The analysis is performed on the same basis for 2018. The percentage change is based on the
expected volatility of interest rates using market data and analysts’ forecasts.
Interest rates - increase by 100 basis points
Interest rates - decrease by 100 basis points
(b) Credit risk
Impact on post-tax loss
2019
$
14,003
(14,003)
2018
$
89,251
(89,251)
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has no significant concentration of credit risk and it is not the Group's policy to hedge credit risk.
There has been no significant change in the Group's exposure to credit risk since the previous year. The carrying
amount of the Group's financial assets represent the maximum credit exposure.
(i) Risk management
The Group ensures that surplus cash is invested with financial institutions of appropriate credit worthiness and limits
the amount of credit exposure to any one counter party. The financial institution where all cash is invested has a
Standard and Poors Rating of AA- as at 30 June 2019. The Group's most significant receivable comprises of the R&D
tax incentive receivable from the Australian Taxation Office, part of the Australian Government which has a Standard
and Poors Rating of AAA.
Impairment of financial assets
(ii)
The Group has one type of financial asset subject to the expected credit loss model, being the trade and other
receivables. While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the identified
impairment loss was immaterial.
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade and other receivables. The expected loss rates are based on the payment profiles over a
period of 60 months before 30 June 2019 and the corresponding historical credit losses experienced within this period.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors
affecting the ability of the customers to settle the receivables. On that basis, the loss allowance as at 30 June 2019
was concluded as nil as the Group has never experienced any write-offs from the Australian Taxation Office, in relation
to its R&D incentive over the past 60 months.
63
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
10 Financial risk management (continued)
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an
adequate amount of committed credit facilities. The Group manages liquidity risk by maintaining sufficient bank
balances to fund its operations.
Management monitors rolling forecasts of the Group's liquidity reserve on the basis of expected cash flows.
Maturities of financial liabilities
Contractual maturities of
financial liabilities
At 30 June 2019
Trade and other payables
Total
At 30 June 2018
Trade and other payables
Total
11 Capital management
Between 1
and 2
years
Between 2
and 5
years
Over 5
years
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
Total
contractu
al
cash
flows
Carrying
amount
liabilities
$
$
$
- 2,718,174 2,718,174
- 2,718,174 2,718,174
- 2,055,247 2,055,247
- 2,055,247 2,055,247
Less than
6 months
$
6 - 12
months
2,718,174
2,718,174
2,055,247
2,055,247
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and
to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal
capital structure, the Group may issue new shares or reduce its capital, subject to the provisions of the Group's
constitution. The capital structure of the Group consists of equity attributed to equity holders of the Group, comprising
contributed equity, accumulated losses and reserves disclosed in notes 7(a), 7(b) and 7(c). By monitoring undiscounted
cash flow forecasts and actual cash flows provided to the Board by the Group's Management the Board monitors the
need to raise additional equity from the equity markets.
64
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
Unrecognised items
This section of the notes provides information about items that are not recognised in the consolidated financial
statements as they do not (yet) satisfy the recognition criteria.
In addition to the items and transactions disclosed below, there are also:
(a) Unrecognised tax amounts – see note 6
(b) Non-cash investing and financing transactions – see note 10(b).
12 Contingent liabilities and contingent assets
13 Commitments
14 Events occurring after the reporting period
66
66
66
65
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
12 Contingent liabilities and contingent assets
There are no contingent assets or liabilities at the date of this report. The Group is not involved in any legal or arbitration
proceedings and, so far as the Directors are aware, no such proceedings are pending or threatened against the Group.
As at balance sheet date, the Group had a bank guarantee of $41,701 in relation to the head office lease.
13 Commitments
(a) Non-cancellable operating leases
Expenditure commitments relating to operating leases as detailed below, relate to the Group.
Commitments for minimum lease payments in relation to non-cancellable operating
leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
30 June
2019
$
94,726
17,085
-
111,811
30 June
2018
$
115,885
111,121
-
227,006
The table above comprises of commitments related to the operating lease arrangements on the Australia and U.S
offices. The Australia office lease is a non-cancellable lease with a 3-year term, with rent payable monthly in advance.
The lease expires on 17 September 2020. The U.S office lease is a non-cancellable lease with a 2-year term, with rent
payable monthly in advance. The lease expires on 31 October 2019.
(b) Remuneration commitments
Amounts disclosed as remuneration commitments include commitments arising from the service contracts of key
management personnel referred to in the remuneration report on pages 31 to 40 that are not recognised as liabilities
and are not included in the key management personnel compensation.
14 Events occurring after the reporting period
On 29 July 2019, the Company announced it has successfully completed its Phase 1 study of PBT434, a novel, orally
bioavailable small molecule inhibitor of alpha-synuclein aggregation.
No other matter or circumstance has occurred subsequent to year end that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or
economic entity in subsequent financial years.
66
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
Additional information
This section of the notes includes additional information that must be disclosed to comply with the accounting standards
and other pronouncements, but that is not immediately related to individual line items in the consolidated financial
statements.
15 Related party transactions
16 Share-based payments
17 Remuneration of auditors
18 Loss per share
19 Parent entity financial information
20 Summary of significant accounting policies
68
68
71
71
72
73
67
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
15 Related party transactions
(a) Parent entity
Detailed remuneration disclosures are provided in the remuneration report on pages 31 to 40.
Alterity Therapeutics Limited (formerly Prana Biotechnology Limited), a company limited by shares that was
incorporated in and is domiciled in Australia is the parent entity of the Group. The financial information for the parent
entity is disclosed in note 19.
(b) Subsidiaries
The parent entity has two wholly owned subsidiaries:
•
•
Alterity Therapeutics Inc, a company limited by shares that was incorporated in and is domiciled in the United
States; and
Alterity Therapeutics UK Ltd, a company limited by shares that was incorporated in and is domiciled in the
United Kingdom.
(c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
(d) Transactions with other related parties
The following transaction occurred with related parties:
2019
$
2,046,496
41,062
23,016
20,443
2,131,017
2018
$
1,522,777
44,389
(1,061)
608,179
2,174,284
During the year ended 30 June 2019 the Group paid a total of $520,000 (exc GST) in corporate advisory fees to
Montoya Pty Ltd, an associated entity of Mr. Lawrence Gozlan, a Non-Executive Director of the Group. Corporate
advisory services included seeking and advancing opportunities to expand the company’s product pipeline and other
sources of funding to commence and continue the company’s clinical trials. No outstanding balance remained unpaid
as at 30 June 2019.
There were no other related party transactions other than those related to Director and Key Management Personnel
remuneration and equity and transactions by the parent with its subsidiaries.
16 Share-based payments
(a) Employee and Consultant Plan
Equity based compensation benefits are provided to directors, employees and consultants under the 2004 ASX Option
Plan and the 2018 American Depository Receipts (ADS) Option Plan. These plans are to be used as a method of
retaining key personnel for the growth and development of the Group's intellectual property rights. At 30 June 2019,
equity had been issued to 4 Directors, 2 former Directors, 2 Key Management Personnel, 11 employees and 7
consultants under the 2004 ASX Plan.
68
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
16 Share-based payments (continued)
(a) Employee and Consultant Plan (continued)
Under this plan, eligible employees and consultants are offered shares or share options at nil consideration. The amount
of share or options that will vest depends on specific conditions set out by the CEO, the Remuneration Committee or
the full Board of Directors, where applicable. Once vested, the options remain exercisable until they expire.
(i) 2004 Australian Employee, Directors and Consultants Share and Option Plan - Shares
Outstanding at the beginning of the year
Granted
Forfeited
Exercised Options
Outstanding at the end of the year
2019
Number of
shares
13,277,715
-
-
-
13,277,715
2018
Number of
shares
13,277,715
-
-
-
13,277,715
(ii) 2004 Australian Employee, Directors and Consultants Share and Option Plan - Options
As at 1 July
Granted during the year
Forfeited/expired during the year
As at 30 June
Vested and exercisable at 30 June
2019
2018
Average
exercise price
per share
option
$
0.19
0.10
0.87
0.12
0.12
Number of
options
25,216,490
2,450,000
(2,366,490)
25,300,000
25,300,000
Average
exercise price
per share
option
$
0.29
0.11
0.31
0.19
0.19
Number of
options
26,826,063
12,100,000
(13,709,573)
25,216,490
25,216,490
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Series
Grant date
Expiry
date
Exercise
price
PBTAA
PBTAD
PBTAE
PBTAF
PBTAH
PBTAR
PBTAY
PBTAZ
PBTAS
PBTAAA
PBTAI
25-Oct-13
4-Nov-13
13-Dec-13
7-Feb-14
19-Feb-15
27-May-15
5-Aug-13
2-Oct-13
7-Jun-17
18-Dec-17
1-Feb-18
24-Oct-18
3-Nov-18
11-Dec-18
5-Feb-19
18-Feb-20
25-May-20
4-Aug-18
1-Oct-18
6-Jun-22
14-Dec-22
31-Jan-23
$0.61
$0.73
$1.04
$1.12
$0.26
$0.27
$0.66
$0.66
$0.07
$0.11
$0.08
Share options Share options
30 June 2018
30 June 2019
-
-
-
-
2,000,000
1,400,000
-
-
7,350,000
13,850,000
700,000
25,300,000
200,000
200,000
1,200,000
100,000
2,000,000
1,400,000
306,490
360,000
7,350,000
12,100,000
-
25,216,490
Weighted average remaining contractual life of options outstanding at end of
period
2.95
3.56
69
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
16 Share-based payments (continued)
(a) Employee and Consultant Plan (continued)
(ii) 2004 Australian Employee, Directors and Consultants Share and Option Plan - Options (continued)
Life of the Option
The life is the time period from grant date through to expiry.
Share price volatility
Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is
indicative of future movements. The life of the options is based on historical exercise patterns, which may not eventuate
in the future.
Dividend yield
The Group has yet to pay a dividend so it has been assumed the dividend yield on the shares underlying the options
will be 0%.
Risk free interest rate
This has been sourced from the Reserve Bank of Australia historical interest rate tables for government bonds.
Model inputs
Series
Grant date
PBTAY
PBTAZ
PBTAA
PBTAD
PBTAE
PBTAF
PBTAG
PBTAB
PBTAH
PBTAR
PBTAS
PBTAAA
PBTAI
a
5-Aug-13
2-Oct-13
25-Oct-13
4-Nov-13
13-Dec-13
7-Feb-14
7-Apr-14
3-Oct-14
19-Feb-15
27-May-15
7-Jun-17
18-Dec-17
1-Feb-18
Exercise
price
Share price at
Grant date
$
$
Expected share
price volatility
Years to
expiry
Dividend
yield
Risk-free
interest rate
0.66
0.66
0.61
0.73
1.04
1.12
0.25
0.34
0.26
0.27
0.07
0.11
0.08
0.38
0.41
0.38
0.44
0.69
1.18
0.23
0.22
0.16
0.17
0.05
0.07
0.06
62.00%
61.00%
63.60%
68.80%
70.70%
58.50%
289.40%
130.50%
74.80%
69.40%
100%
100%
100%
5.00
5.00
5.00
5.00
5.00
5.00
4.00
4.00
5.00
5.00
5.00
5.00
5.00
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
3.05%
3.24%
3.31%
3.46%
3.45%
3.44%
3.02%
2.71%
2.00%
2.25%
1.97%
2.38%
2.24%
The closing share market price of an ordinary share of Alterity Therapeutics Limited on the Australian Securities
Exchange at 30 June 2019 was $0.03 (30 June 2018: $0.04).
(b) Options issued outside of the Employee and Consultant Plan
There were no options granted during the year ended 30 June 2019 and 30 June 2018 outside of the plan.
There are no options outstanding at 30 June 2019. All equity issued outside of the plan has been expensed in prior
periods.
70
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
17 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
Audit and review of financial statements
Other assurance services
Audit and review of internal controls
Total remuneration for audit and other assurance services
2019
$
279,622
20,800
300,422
2018
$
232,960
20,000
252,960
Audit and review of financial statements consist of fees billed for assurance and related services that are reasonably
related to the performance of the audit or review of the Company’s consolidated financial statements. Included in this
balance are amounts related to additional regulatory filings during the 2019 and 2018 financial years.
18 Loss per share
(a) Basic loss per share
Basic loss per share
(b) Diluted loss per share
Diluted loss per share
(c) Reconciliation of loss used in calculating loss per share
2019
Cents
2.00
2019
Cents
2.00
2018
Cents
1.55
2018
Cents
1.55
2019
$
2018
$
Basic loss per share
Loss attributable to the ordinary equity holders of the Group used in calculating basic
loss per share:
12,337,830
8,265,737
Diluted loss per share
Loss attributable to the ordinary equity holders of the Group used in calculating basic
loss per share:
12,337,830
8,265,737
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
basic and diluted loss per share
(e)
Information concerning the classification of securities
2019
Number
2018
Number
615,772,236 533,891,470
Options and warrants that are considered to be potential ordinary shares are excluded from the weighted average
number of ordinary shares used in the calculation of basic loss per share. Where dilutive, potential ordinary shares are
included in the calculation of diluted loss per share. All the options on issue do not have the effect to dilute the loss per
share. Therefore, they have been excluded from the calculation of diluted loss per share.
71
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
19 Parent entity financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Reserves
Accumulated losses
Total equity
30 June
2019
$
19,861,170
235,803
20,096,973
3,316,609
34,976
3,351,585
30 June
2018
$
18,654,591
512,576
19,167,167
2,640,553
916
2,641,469
1,158,975
156,632,636 143,910,328
1,753,954
(141,046,223) (129,138,584)
16,525,698
16,745,388
Statement of profit or loss and other comprehensive income
Loss for the year
Total comprehensive loss for the year
(12,591,757)
(12,591,757)
(8,430,740)
(8,430,740)
72
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies
This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial
statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The
consolidated financial statements are for the Group consisting of Alterity Therapeutics Limited and its subsidiaries.
(a) Basis of preparation
These general purpose consolidated financial statements have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations
Act 2001. Alterity Therapeutics Limited is a for-profit entity for the purpose of preparing the consolidated financial
statements.
(i) Compliance with IFRS
The consolidated financial statements of the Alterity Therapeutics Limited Group also comply with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
These consolidated financial statements have been prepared under the historical cost basis.
(iii) Reclassification of comparatives
The group has reclassified certain expenditure items in prior year comparatives in order to be consistent with the current
year classification and presentation.
(iv) New and amended standards adopted by the Group
The Group has applied the following standards and amendments for first time in their annual reporting period
commencing 1 July 2018:
•
•
•
•
•
•
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Share-based
Payment Transactions
AASB 2017-1 Amendments to Australian Accounting Standards - Transfers to Investment Property, Annual
Improvements 2014-2016 Cycle and Other Amendments
AASB 2017-2 Amendments to Australian Accounting Standards - Further Annual Improvements 2014-2016 Cycle
Interpretation 22 Foreign Currency Transactions and Advance Consideration.
The Group also elected to adopt the following amendments early:
•
AASB 2018-1 Amendments to Australian Accounting Standards - Annual Improvements 2015-2017 Cycle.
The Group had to change its accounting policies without making retrospective adjustments following the adoption of
AASB 9 and AASB 15. This is disclosed in note 21. Most of the other amendments listed above did not have any impact
on the amounts recognised in prior years and are not expected to significantly affect the current or future years.
(v) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019
reporting years and have not been early adopted by the Group. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
73
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
(v) New standards and interpretations not yet adopted (continued)
Title of
standard
AASB 16 Leases
Nature of
change
Impact
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the
consolidated statement of financial position by lessees, as the distinction between operating and
finance leases is removed for lessees. Under the new standard, an asset (the right to use the
leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-
term and low-value leases.
The group has reviewed all leasing arrangements in light of the new lease accounting rules in
AASB 16. The standard will affect the accounting for the group’s operating leases.
As at the reporting date, the group has non-cancellable operating lease commitments of
$111,811 see note 13(a).
The group expects to recognise right-of-use assets of approximately $101,528 on 1 July 2019
and lease liabilities of $108,525 (after adjustments for prepayments and accrued lease payments
recognised as at 30 June 2019). Overall net assets will be approximately $6,914 lower, and net
current assets will be $14,293 lower due to the presentation of a portion of the liability as a
current liability.
The group expects that net loss after tax will increase by approximately $6,238 for the year ended
30 June 2020 as a result of adopting the new rules.
Operating cash flows will increase and financing cash flows decrease by approximately $94,857
as repayment of the principal portion of the lease liabilities will be classified as cash flows from
financing activities.
The Group’s activities as a lessor are not material and hence the Group does not expect any
significant impact on the consolidated financial statements. However, some additional disclosures
will be required from next year.
The Group will apply the standard from its mandatory adoption date of 1 July 2019.
The Group intends to apply the modified retrospective transition approach and will not restate
comparative amounts for the year prior to first adoption. Right-of-use assets will be measured at
the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease
expenses).
Mandatory
application
date/ Date of
adoption by
Group
There are no other standards that are not yet effective and that would be expected to have a material impact on the
entity in the current or future reporting years and on foreseeable future transactions.
(b) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Alterity Therapeutics
Limited as at 30 June 2019 and the results of all subsidiaries for the year then ended. Alterity Therapeutics Limited and
its subsidiaries together are referred to in this financial report as the Group.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
74
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
In preparing the consolidated financial statements, all inter-company balances and transactions, and unrealised
profits/losses arising within the consolidated entity are eliminated in full. Investments in subsidiaries are accounted for
at cost in the individual financial statements of Alterity Therapeutics Limited.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief Executive Officer of Alterity Therapeutics
Limited. For the current and previous reporting periods, the Group operated in one segment, being research into
Parkinson’s disease, Alzheimer's disease, Huntington disease and other neurodegenerative disorders.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the consolidated financial statements of each of the Group's entities are measured using the currency
of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial
statements are presented in Australian dollars ($), which is Alterity Therapeutics Limited's functional and presentation
currency.
(ii) Transactions and balances
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at
the date of the transaction (spot rates). Foreign currency monetary items at reporting date are translated at the
exchange rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated
in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Exchange differences are recognised in the statement of profit or loss and other comprehensive income in the period
in which they arise except for exchange difference on monetary items receivable from or payable to a foreign operation
for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation,
are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net
investment.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
•
assets and liabilities for each consolidated statement of financial position presented are translated at the closing
rate at the end of the respective reporting period.
•
•
income and expenses for each consolidated income statement and consolidated statement of comprehensive
income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions), and
all resulting exchange differences are recognised in other comprehensive income.
(e) Revenue recognition
The accounting policies for the group’s revenue from contracts with customers are explained in note 21. Interest income
is recognised on a time proportion basis using the effective interest method.
75
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(f)
Income tax
The income tax expense or revenue for the period is the tax payable/receivable on the current period's taxable
income/loss based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end
of the reporting period in the countries where the Group's subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred
tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the company is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
The Group has significant unused tax losses and as such a significant deferred tax asset; however, the deferred tax
asset has not been recognised, as it is not probable that future taxable profit will be available which the unused losses
and unused tax credits can be utilised, given the nature of the Group's business (research and development) and its
history of losses.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee
are classified as operating leases (note 13).
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased assets
are consumed.
76
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(h) Impairment of assets
At each reporting date, the Group reviews the carrying amounts of its assets to determine whether there is any indication
that those assets have been impaired. If any such indication exists, the recoverable amount of the asset is estimated
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised in the consolidated statement of profit or loss and other comprehensive income immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is reversed
to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
(or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in the consolidated statement of
profit or loss and other comprehensive income immediately.
(i) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less.
(j) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. See note 5(a) for further information about the Group’s accounting for
trade receivables and note 10(b) for a description of the Group's impairment policies.
(k)
Investments and other financial assets
(i) Classification
From 1 July 2019, the Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through OCI or through profit or loss), and
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms
of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in
equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election
at the time of initial recognition to account for the equity investment at fair value through other comprehensive income
(FVOCI).
77
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(k) Investments and other financial assets (continued)
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group
commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and
rewards of ownership.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at
fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of
principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit
or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are
presented as separate line item in the consolidated statement of profit or loss.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected
to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value
gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments
continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established.
(iv) Impairment
From 1 July 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has
been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables, see note 10(b) for further details.
(l) Options
Options recorded as equity instruments under AASB 132 are valued at fair value using the Black-Scholes model. The
expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-
transferability, exercise restrictions, and behavioural considerations. At each reporting date, the options are re-valued
to their current fair value, with the difference in fair value recorded in the consolidated statement of profit or loss and
other comprehensive income.
(m) Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting year in which they
are incurred.
78
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(n) Intangible assets
Research and development
Expenditure during the research phase of a project is recognised as an expense when incurred. Where no internally
generated intangible assets can be recognised, development expenditure is recognised as an expense in the period
as incurred. Development costs are capitalised if and only if, all of the following are demonstrated:
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
•
Internally-generated intangible assets, capitalised development costs, are stated at cost less accumulated amortisation
and impairment, and are amortised on a straight-line basis over their useful lives from the point at which the asset is
ready for use.
(o) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
(p) Share-based payments
Equity-based compensation benefits are provided to directors, employees and consultants via the 2004 Australian
Employee, Directors and Consultants Share and Option Plan & the 2018 US Employee, Directors and Consultants
Share and Option Plan. Information relating to these plans is set out in note 16.
The fair value of options granted under the 2004 Australian & 2018 US Employee, Directors and Consultants Share
and Option Plan is recognised as an expense with a corresponding increase in equity. The fair value is measured at
grant date and recognised over the period during which the recipients become unconditionally entitled to the options.
The fair value at grant date is determined using a Black-Scholes (for options without market condition) and Barrier
Pricing (for options with market conditions) model that takes into account the exercise price, the term of the option, the
impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations. The expected price volatility is based on historical volatility, going back the number of years
based on the life of the option.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of shares that will eventually vest.
79
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(q) Provisions
Provisions are recognised when the Group 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 estimated.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows. The discount rate used to determine the present value is a pre-tax rate that reflects current market
assessments of the time value of money and the risk specific to the liability. The increase in the provision due to the
passage of time is recognised as interest expense.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of
the receivable can be measured reliably.
(r) Employee benefits
(i) Short-term obligations
Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before
12 months after the end of the annual reporting period in which the employees render the related service, including
wages, and salaries. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid
when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages and salaries
are recognised as a part of current trade and other payables in the consolidated statement of financial position.
The Group’s obligations for annual leave are presented as part of provisions in the consolidated statement of financial
position. The obligations are presented as current liabilities in the consolidated statement of financial position if the
Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period
regardless of when the actual settlement is expected to occur.
(ii) Other long-term employee benefit obligations
The liabilities for long service leave are not expected to be settled wholly within 12 months after the end of the period
in which the employees render the related service. It is therefore measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of the reporting period using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the end of the
reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future
cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right
to defer settlement for at least twelve months after the reporting year, regardless of when the actual settlement is
expected to occur.
(s) Contributed equity
Ordinary share capital is recognised as equity at the fair value of the consideration received by the Group. Any
transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
80
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
20 Summary of significant accounting policies (continued)
(t) Loss per share
Basic loss per share is determined by dividing the net loss after income tax expense by the weighted average number
of ordinary shares outstanding during the financial period. For all periods presented, diluted loss per share is equivalent
to basic loss per share as the potentially dilutive securities are excluded from the computation of diluted loss per share
because the effect is anti-dilutive.
(u) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
21 Changes in accounting policies
This note explains the impact of the adoption of AASB 9 Financial Instruments and AASB 15 Revenue from Contracts
with Customers on the Group’s financial statements.
(a) Impact on the financial statements
As a result of the changes in the entity’s accounting policies, prior year financial statements have not been restated.
(b) AASB 9 Financial Instruments
AASB 9 replaces the provisions of AASB 139 that relate to the recognition, classification and measurement of financial
assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge
accounting.
The adoption of AASB 9 Financial Instruments from 1 July 2018 resulted in changes in accounting policies but no
adjustments to the amounts recognised in the consolidated financial statements. The new accounting policies are set
out in note 20(k) and below. In accordance with the transitional provisions in AASB 9(7.2.15) and (7.2.26), comparative
figures have not been restated.
(i) Classification and measurement
On 1 July 2018 (the date of initial application of AASB 9), the Group’s management has assessed which business
models apply to the financial assets held by the Group and has classified its financial instruments into the appropriate
AASB 9 categories. No reclassification was required upon the adoption of AASB 9.
(ii) Impairment of financial assets
The Group has only one type of financial assets that are subject to AASB 9’s new expected credit loss model, which is
trade and other receivables.
The Group was required to revise its impairment methodology under AASB 9 for each of these classes of assets. The
impact of the change in impairment methodology on the Group’s accumulated losses and equity is immaterial.
While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the identified impairment
loss was immaterial.
81
Alterity Therapeutics Limited
Notes to the financial statements
30 June 2019
(continued)
21 Changes in accounting policies (continued)
(c) AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 Revenue from Contracts with Customers from 1 July 2018 which resulted in changes
in accounting policies but no adjustments to the amounts recognised in the consolidated financial statements. As the
Group is still in the early stage of research and development for its products, it has neither generated revenue from
contracts with customers, nor decided on the revenue strategy (licensing, sale of pharmaceutical products) for when
the development phase is completed. Accordingly, the adoption of AASB 15 has no impact on the financial statements.
In prior reporting periods, revenue and other income of the Group primarily comprised of interest income and R&D tax
incentive which are not affected by the adoption of AASB 15.
82
Alterity Therapeutics Limited
Directors' declaration
30 June 2019
In the directors' opinion:
(a)
(b)
the consolidated financial statements and notes set out on pages 44 to 82 are in accordance with the
Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2019 and of its
performance for the financial year ended on that date, and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become
due and payable.
Note 20(c) confirms that the consolidated financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of directors.
Mr. Geoffrey Kempler
Director
Melbourne
30 August 2019
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Independent auditor’s report
To the members of Alterity Therapeutics Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Alterity Therapeutics Limited (formerly known as Prana
Biotechnology Limited) (the Company) and its controlled entities (together the Group) is in
accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2019 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of financial position as at 30 June 2019
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group runs a research and development (R&D) stage biopharmaceutical operation and is in the
process of developing potential treatments for neurodegenerative diseases. The Group owns a portfolio
of proprietary compounds with applications across different neurodegenerative diseases. It is
headquartered in Melbourne, Australia.
Materiality
For the purpose of our audit we used overall Group materiality of $616,800, which represents approximately
5% of the Group’s loss before tax.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
We chose Group loss before tax because, in our view, it is the benchmark against which the performance of
the Group is most commonly measured.
We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit Committee.
Key audit matter
How our audit addressed the key audit matter
Recognition of third party R&D contractual
costs
(Refer to note 3)
As the Group is in the R&D phase, a number of R&D
activities are conducted under contracts with third
parties. These contracts can have complex terms which
can impact the timing and recognition of these costs.
There is judgement involved in determining whether
the key terms of the contract have been met by the
third party and therefore whether a liability should be
recognised by the Group.
We have focused on the recognition of contractual costs
as part of the audit because these expenses are a
material item on the consolidated statement of profit or
loss and other comprehensive income and a key
contributor to the Group’s overall performance.
We have performed the following procedures, amongst
others:
obtained an understanding and evaluated the
design of the key controls over the purchasing
and payables process;
tested the operating effectiveness of key
controls designed to monitor contractual
costs;
tested a sample of third party expenses to
underlying invoices to assess the appropriate
classification;
tested a sample of payments made subsequent
to 30 June 2019 to assess whether they were
appropriately recorded as a liability as at 30
June 2019; and
obtained the contract register and examined a
sample of contracts to assess whether key
terms were appropriately recognised in the
financial statements.
Valuation of the R&D tax incentive receivable
(Refer to note 5(a)) $4.8 million
The Group claims certain expenditures under the
Australian Taxation Office (ATO) R&D Tax Incentive
scheme. The Group can claim a 43.5% refundable tax
offset for eligible expenditure if its aggregated turnover
is less than $20 million per annum, amongst other
requirements (the R&D tax incentive). The estimated
value of the R&D tax incentive receivable at 30 June
2019 was $4.8 million.
The estimated R&D tax incentive is recorded as an item
We obtained and examined the Group’s estimate of the
R&D tax incentive receivable recognised as at 30 June
2019. As part of our procedures we:
compared the estimate recorded in the
consolidated statement of financial position as
at 30 June 2018 to the amount of cash
received after lodgement of the 2018 R&D tax
incentive return to evaluate the accuracy of the
Group’s estimate as the R&D tax incentive
Key audit matter
How our audit addressed the key audit matter
of other income within the consolidated statement of
profit or loss and other comprehensive income with a
corresponding receivable entry. An R&D tax incentive
return is filed with the ATO in the subsequent financial
year, based on which the Group receives the incentive
in cash.
The Group makes a number of judgements in
determining the classification of eligible expenses and
the value of the R&D tax incentive is a key area of
estimation for the Group. The Group engaged third
party experts to assist with the review of the
classification of expenses underlying the Group’s claim
and with the lodgement of the R&D refund application.
We have focused on the R&D tax incentive receivable as
it is a material balance in the consolidated statement of
financial position and involves a degree of judgement
and interpretation of the R&D tax legislation by the
Group to determine the eligibility of R&D expenditures
under the scheme.
Accounting for the securities purchase
agreement with Life Biosciences LLC
(Refer to note 7)
During the year ended 30 June 2019, the Group
completed a strategic investment transaction with Life
Biosciences LLC (Life Biosciences). Under the terms of
the transaction, the Group issued 269,905,533 fully
paid ordinary shares at 3.9 cents per share, and
586,672,964 in free-attaching warrants to Life
Biosciences. The warrants have an exercise price of 4.5
cents per share and expire on 19 December 2019. The
Group received $10.5 million in cash on completion of
the transaction.
We have focused on the transaction with Life
Biosciences because it is a material capital raising event
and the terms and conditions in the agreement give rise
to complexities in the classification and measurement
of the shares and warrants issued.
receivable as at 30 June 2019 will be lodged
and received after the date of this audit report;
compared the nature of the R&D expenditures
included in the current year estimate to the
nature of the R&D expenditures in the prior
year estimate;
tested on a sample basis the R&D
expenditures against the eligibility criteria of
the R&D tax incentive scheme; and
obtained and read the correspondence and
advice from the Group’s third party expert and
compared this advice to the Group’s
calculation of the R&D tax incentive receivable
as at 30 June 2019.
In conjunction with our technical team in aspects of our
work, we performed the following procedures, amongst
others:
obtained and read the securities purchase
agreement between the Group and Life
Biosciences to obtain an understanding of the
key terms and conditions in order to evaluate
the application of the Australian Accounting
Standards;
obtained and evaluated the Group’s
assessment of the classification and
measurement of the shares and warrants
issued in light of the requirements of the
Australian Accounting Standards; and
agreed the receipt of cash associated with the
issuance of the securities to bank statements.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 31 to 40 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of Alterity Therapeutics Limited for the year ended 30 June
2019 complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
Sam Lobley
Partner
Melbourne
30 August 2019
Alterity Therapeutics Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 28 August 2019.
A. Distribution of equity securities
Ordinary shares
868,799,492 fully paid ordinary shares are held by 2,961 individual shareholders. All ordinary shares carry one vote
per share.
Analysis of numbers of equity security holders by size of holding:
Holding
No. of holders
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
including:
Unmarketable parcels
Options/Warrants
506
941
439
858
217
2,961
2,131
• 1,400,000 unlisted options exercisable at $0.27 on or before 25 May 2020, are held by 4 individual shareholders
• 2,000,000 unlisted options exercisable at $0.26 on or before 18 February 2020, are held by 2 individual shareholders
• 7,350,000 unlisted options exercisable at $0.07 on or before 6 June 2022, are held by 15 individual shareholders
• 13,850,000 unlisted options exercisable at $0.11 on or before 14 December 2022, are held by 9 individual shareholders
• 700,000 unlisted options exercisable at $0.08 on or before 31 January 2023, are held by 1 individual shareholders
• 586,672,964 short term warrants exercisable at $0.045 on or before 19 December 2019, are held by 8 individual shareholders.
All options/warrants do not carry a right to vote. Voting rights will be attached to the unissued shares when the options
have been exercised.
90
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
LIFE BIOSCIENCES LLC
JAGEN PTY LTD
BAYWICK PROPRIETARY LIMITED
MARQUETTE HOLDINGS PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
DONATELLO NIZZI
MS JIA LU
SCHWA PTY LTD
MR JAMES V BABCOCK
THE ENTRUST GROUP INC
CITOS SUPER PTY LTD
NRB DEVELOPMENTS PTY LTD
MS CHAO LEI
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
STONY RISES PTY LTD
MOUBRAY PTY LTD A/C>
MR DAVID JOHN SOUTHON
ROBERT & ARDIS JAMES FOUNDATION/C
MRS KATE ELIZABETH SCHROETER
Unquoted equity securities
There are no unquoted equity securities holding greater than 20%.
Alterity Therapeutics Limited
Shareholder information
30 June 2019
(continued)
Ordinary shares
Number held Percentage
of issued
shares
47.58
31.07
1.79
1.63
0.89
0.71
0.54
0.50
0.46
0.46
0.41
0.36
0.34
0.29
0.28
0.23
0.23
0.23
0.21
0.20
88.41
413,392,841
269,905,533
15,567,983
14,165,000
7,692,308
6,143,499
4,678,362
4,309,879
4,000,000
3,980,263
3,598,740
3,085,499
2,970,000
2,520,422
2,421,246
2,035,000
2,000,000
2,000,000
1,826,024
1,724,993
768,017,592
C. Shareholder enquiries
Shareholders with enquiries about their shareholdings should contact the Share Registry:
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford, Victoria, 3067, Australia
Telephone: 1300 85 05 05 (within Australia) + 61 3 9415 4000 (overseas)
Facsimile: + 61 3 9473 2500
Email: essential.registry@computershare.com.au
Website: www.computershare.com.au
D. Change of address, change of name and consolidation of shareholdings
Shareholders should contact the Share Registry to obtain details of the procedure required for any of these changes.
91
Alterity Therapeutics Limited
Shareholder information
30 June 2019
(continued)
E. Annual report mailing
Shareholders who wish to receive a hard copy of the Annual Financial Report should advise the Share Registry or the
Group in writing. Alternatively, an electronic copy of the Annual Financial Report is available from www.asx.com.au or
www.alteritytherapeutics.com. All shareholders will continue to receive all other shareholder information.
F. Tax file numbers
It is important that Australian resident shareholders, including children, have their tax file number or exemption details
noted by the Share Registry.
G. CHESS (Clearing House Electronic Sub-register System)
Shareholders wishing to move to uncertified holdings under the Australian Securities Exchange CHESS system should
contact their stockbroker.
H. Uncertified share register
Shareholding statements are issued at the end of each month that there is a transaction that alters the balance of your
holding.
I. Website
Shareholders wishing to access specific information about their holding can visit the Share Registry's website at
www.computershare.com.au
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