Clinuvel Pharmaceuticals Annual Report 2016

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CLINUVEL PHARMACEUTICALS
ANNUAL REPORT 2016

contents

Chair’s Letter

Managing DireCtor’s Letter

DireCtors’ report

reMuneration report

stateMent of profit or Loss anD other CoMprehensive inCoMe

stateMent of finanCiaL position

stateMent of Cash fLows

stateMent of Changes in equity

notes to anD forMing part of the finanCiaL stateMents

DireCtors’ DeCLaration

inDepenDent auDitor’s report

auDitor’s inDepenDenCe DeCLaration

sharehoLDer inforMation

Market perforManCe

gLossary

chair’s letter

Dear Shareholders,

scenesse® (afamelanotide
16mg) – european roll out
Following the approval of SCENESSE® in Europe the Group has
adapted and grown its team to facilitate distribution across Europe.
New skill sets have been added during this period, with a focus on
pharmacovigilance, quality assurance, compliance, and analytical
sciences. The evolving team responds to the needs of the business as
CLINUVEL expands the availability of SCENESSE® to serve patients
diagnosed with erythropoietic protoporphyria (EPP).

Being a new molecular entity and the first to ever address the unmet
need in the rare disease EPP, the regulatory authorities expect
CLINUVEL to closely manage the product’s life cycle. The European
approval was accompanied by a comprehensive Risk Management
Plan, strict parameters by which CLINUVEL should make the drug
available. The Company’s focus is on monitoring the ongoing safety of
the product (pharmacovigilance), as well as on collecting additional
data on the product under conditions of use. We have restricted the
product’s availability only to those expert centres who have worked
with EPP patients and are prepared to undergo the training and
accreditation necessary to comply with the demands of the national
and European authorities. Two non-interventional post-authorisation
studies have been initiated, one of which incorporates the first ever
international EPP patient registry, a long-term project designed
with experts in the field. While these measures place a burden on
physicians and patients to access treatment as well as on CLINUVEL,
we are all expected to add significantly to the overall understanding
of EPP and patient care in the future.

The first patients were treated under this programme in June 2016,
and the team has since received positive feedback from the clinics
regarding the impact of treatment and the ongoing need for access
to therapy. A larger product roll out is planned for 2017 as we work
towards making SCENESSE® available to all known EPP populations
in Europe.

us regulatory pathway
The clinical demand for SCENESSE® in the US has remained strong
since the conclusion of our trial program in 2013. In parallel to the
launch of the product in Europe, discussions have continued with
the Food and Drug Administration (FDA) to determine the pathway
forward for SCENESSE® in the US. Early into the new financial year we
saw positive developments for the US EPP program, with recognition
from the FDA in the form of Fast Track designation, a regulatory
mechanism to expedite the product’s regulatory review. Subsequently

the FDA accepted the existing clinical package for SCENESSE® as
sufficient for filing a New Drug Application (NDA) for EPP.

Discussions are ongoing with the agency as to the timing of a NDA
filing, however we realistically expect the first submissions to be
made in the 2016/17 financial year.

expanding the clinuVel group
CLINUVEL holds a unique position in the pharmaceutical space.
Few companies succeed in developing a novel drug, even fewer
when the target indication has never before been addressed by
medicine. Having succeeded along this journey thus far, the Group
must now look to capitalise on its position as a leader in the field of
melanocortins, and our expertise in the interaction of light and skin.

For some time now, both the Board and the management team have
held ambitions to grow CLINUVEL beyond a single product in a single
disorder, drawing on our team’s experience in R&D, regulatory affairs
and commercialisation. The first steps have already been taken,
with the development of SCENESSE® in the pigmentary disorder
vitiligo and the establishment of our Singaporean joint venture
VALLAURIX PTE LTD. At logical points our investors will be kept up to
date of progress, keeping in mind our need to protect our first-mover
advantage.

The year has been demanding of our teams, and yet they continue to
perform within a complex global environment. I thank them for their
diligence and continued commitment to the patients we aim to help.
I also extend the Board’s gratitude and appreciation to all who have
made the year a success – investors, shareholders, physicians, and
patients.

Stan McLiesh

Chairman

managing director’s letter

Dear Shareholders,

annual reView and Vision
It is with tribute to our patients, the medical communities who are
involved with CLINUVEL, and to our teams that I write to you at a time
when CLINUVEL is in a position to contemplate further expansion of
its operations. Establishing the first steps in European distribution
of SCENESSE® (afamelanotide 16mg) is an achievement of which we
are proud. In this review, and for those who recently became familiar
with the CLINUVEL story, I provide some historical context for the
future outlook of the CLINUVEL Group.

regulatory agencies and
pharmacoVigilance
For more than a decade CLINUVEL has executed a comprehensive
program which – from the outset – appeared complex due to a myriad
of unique issues. Owing to the novelty of the drug, its pharmacology,
mode of action, targeted rare disease and lack of available scientific
instruments to measure the impact of the disease on patients’ lives,
and overall therapy, our teams have faced numerous challenges
throughout the journey.

While drawing minimal attention we have worked for 12 years towards
obtaining European and US approval for the first melanocortin. Our
teams strive for achievement and setting realistic expectations as
they have shown long term commitment to the Company. As a first-in-
class drug for a rare disease which is not well defined by the medical
literature, we could not draw upon analogies within our industry. At
the very least, CLINUVEL’s numerous antecedents had shown us how
not to develop SCENESSE® and the plan was executed accordingly.

In a changing environment of increasing regulatory scrutiny within
the post-authorisation phase, our teams are required to constantly
adapt and change course. New guidelines, changing personnel,
differing views, and governmental pressures are just a few of the
factors that urge us to remain flexible.

I see contemporary drug development as a rigorous exercise to
demonstrate ongoing safety of a product not only during the testing
phase but also throughout compassionate use programs, special
access schemes, and after marketing authorisation. The burden of
instituting a pharmacovigilance system in each European country,
establishing the European EPP Disease Registry, committing
to monitor each EPP expert centre, and ensuring the proper
management of the drug’s distribution are just some of the many
measures required, and they come at a substantial financial cost.
The societal cost of pharmacovigilance is enormous and collectively,
the Company, expert centres, patients, and health care systems and

insurers are all in a conundrum and left with no choice but to share
the burden. Yet despite the load a benefit to the Company has arisen:
pharmacovigilance measures provide a competitive advantage over
any other company wishing to emulate our programs.

innoVation
In discussions with investors and the general public we often
encounter a misunderstanding of what constitutes pharmaceutical
innovation. Innovation should not be seen to be limited to the product
and its pharmacological activity in humans. Behind a novel product
which had not previously been developed – such as SCENESSE® –
is a new way of writing a dossier, new nomenclature, novel coding,
new scientific tools, presenting previously unknown instruments
and methodology, novel assays to measure and validation tools, a
new pool of expert physicians, and new treatment protocols where no
other templates can be used.

Put differently, introducing the concept of protecting light intolerant
and chronically ill patients with a pharmaceutically innovative
therapy had never been executed before. We needed to introduce this
concept to the medical community and convince it of its validity.
Often it was the medical community who convinced us how effective
the treatment actually was for their stigmatised patients. In vitiligo
we will face similar tasks of introducing the concept of repigmenting
patients, demonstrating the impact of vitiligo on one’s self-esteem
and sense of identity, and demonstrating the impact of regaining
one’s colour. Measuring pigmentation and repigmentation is relatively
novel in the field of drug development. We are determined to be the
first company to address vitiligo systemically with a pandermal
therapy.

marKet access and pricing
We have now received the first orders from the Netherlands, Austria,
and Italy. The novel therapy introduced a new set of challenges for
national insurers. Along the same vein, insurers needed to be made
aware of the new therapy, anticipating that each insurer would
resist the pricing of the proposed treatment. One could deliberate on
health economic arguments and the value of providing treatment to
EPP patients who have lived a life deprived of light, sun and outdoor
existence. However, the conclusion most insurers and advisory bodies
will arrive at is that EPP is not well characterised and understood by
most clinical experts, and that the lack of available alternative therapy
has made patients desperate for an effective treatment. CLINUVEL is
required to inform these payors in a relatively short time for them to
develop a deep level of understanding on the chronic disorder EPP.

Managing Director's Letter

corporate goVernance
CLINUVEL PHARMACEUTICALS LTD and its Board are committed
to establishing and achieving the highest standards of corporate
governance. The Company’s Corporate Governance statement for
the year ending 30 June 2016, based on the Australian Securities
Exchange Corporate Governance Council’s (ASXCGC) Corporate
Governance Principles and Recommendations, 3rd Edition, can
be found on our website at http://www.clinuvel.com/en/investors/
corporate-governance

We are cognisant of having a head start on insurers and advisory
bodies.Most importantly, for a long time we have understood that
SCENESSE® provides patients with the clinical freedom to lead a life
they never could conceive or would have experienced. EPP patients
are deprived and starved of light and live in a world of anxiety, not
taken seriously by their surroundings.

It was telling that in many ways the experience of patients no longer
using SCENESSE® after clinical trials were completed was worse
than not knowing that an effective treatment had existed. The abrupt
withdrawal of SCENESSE® becomes a concern at the time of writing,
since an increasing number of patients refuse to return to their
handicapped lives. Our teams have carefully listened to the endless
patients’ petitions and continued the development and distribution
of the drug.

We will use the same approach in our further developments over the
next few years for other products and for SCENESSE® in vitiligo. The
patients’ voice is paramount in CLINUVEL’s decision making process.
At the end of the day it is patients and expert physicians who hold the
fate of a drug in their hands, certainly in orphan diseases.

expansion
An economist from my Columbia business school days focused his life
on deciphering value investment on global exchanges. He passed on to
me the memorable lesson of selecting business domains: “successful
businesses are always sober in their presentation and from the
outside boring, invest in the boring”. Although it is counterintuitive to
deliberately pursue a boring business, the message sticks along the
thoughts of Graham-Dodd’s approach.

I tend to agree that sustainable success hinges on execution,
flexibility and persistence. Although these attributes are generally
less attended to in conventional business literature it goes a long way
to explain the delivery of corporate milestones by CLINUVEL’s teams.
Our financial team led by our CFO Darren Keamy and overseen by
the Audit & Risk Committee is focused on keeping an eye for detailed
management of expenditures and on realistic forecasting. They
execute without frills.

With the current foundation, one can expect that CLINUVEL will
seek to expand through organic growth and the identification of new
opportunities to allow the entire development program of SCENESSE®
and its paediatric version to come to fruition. Our VALLAURIX PTE
LTD laboratory team is growing in both number and quality and is
working towards the development of complementary products.

I see risks in pharmaceutical development as disproportionate
to the ultimate reward of launching a novel product to patients.
However, market analyses illustrate that market authorisation of a
pharmaceutical in itself creates value due to the relative lack of new
products. Here the risk over the product cycle is asymmetrically
distributed. By managing these risks over the years we have tailored
our attention and resources towards a simpler business model.

Whilst we are all proud of our recent successes, we are in no way
complacent about the next sets of challenges of continued European
reimbursement, entry in the US, and expanding the Company.

I thank you for your ongoing support and look forward to sharing
CLINUVEL’s success with you.

Philippe Wolgen

Managing Director, CLINUVEL Group

directors’ report

The Directors of the Board present their report on the Company and
its controlled entities for the financial year ended 30 June 2016 and
the Auditor’s Independence Declaration thereon.

SCENESSE® is the first melanocortin drug to have completed a clinical
trial program and obtain marketing authorisation in a major market.

directors
The names of Directors in office during or since the end of the year
are set out below.

Dr Wolgen has been instrumental in rebuilding a share register of
long term sophisticated and institutional investors. His international
contacts and network contribute to the support CLINUVEL enjoys
globally.

• Mr. S.R. McLiesh (Non-Executive Chair)

• Dr. P.J. Wolgen (Managing Director, Chief Executive Officer)

• Mrs. B.M. Shanahan (Non-Executive)

• Mr E. Ishag (Non-Executive)

• Mr. W. A. Blijdorp (Non-Executive)

Directors have been in office since the start of the financial year to the
date of this report unless otherwise stated.

information on directors
Mr. Stanley r. MclieSh (joined Board 2002)
non-executive chair
Member of the Remuneration Committee (Chair since 28 July 2014),
Member of the Audit and Risk Committee
Qualifications: BEd
Shares in CLINUVEL: 191,000
Conditional Performance Rights over shares in CLINUVEL: 85,000

Mr McLiesh has an extensive background in the commercialisation
of pharmaceutical products. He was closely involved in the transition
of CSL Limited (ASX: CSL) from government ownership through
corporatisation to a highly successful listed company as General
Manager. During this time he helped CSL expand its international
reach, brokering numerous
in-licensing agreements, M&A
transactions and partnerships with multinational firms.

Mr McLiesh is Vice President of the Board of Ivanhoe Girls Grammar
School in Melbourne and was previously a Non-Executive Director
of Unilife Medical Solutions Ltd (formerly ASX: UNS). The Chair of
CLINUVEL since 2008, Mr McLiesh has been involved in formulating
the successful European commercial strategy for SCENESSE®
(afamelanotide 16mg) .

dr. PhiliPPe j. Wolgen (joined Board 2005)
Chief Executive Officer, Managing Director
Non-voting member of the Audit and Risk Committee
and the Remuneration Committee
Qualifications: MBA, MD
Shares in CLINUVEL: 2,079,832
Conditional Performance Rights over shares in CLINUVEL: 1,424,864

Dr Wolgen was appointed as Managing Director of CLINUVEL in
November 2005 to lead the corporate turnaround of the company.

Under his leadership CLINUVEL reformulated the lead product
SCENESSE® (afamelanotide 16mg), identified its medical application
and ultimately obtained European marketing authorisation.

He helped CLINUVEL attract approximately AUD100 million in direct
funding to develop and launch SCENESSE®. Dr Wolgen is now leading
the CLINUVEL Group’s expansion, with an immediate focus on the
US and the further development of the company’s product pipeline.
His focus has been to establish a professional management team to
persist in the corporate objectives set.

Dr Wolgen holds an MBA from Columbia University NY and the London
Business School. Trained as a craniofacial surgeon, Dr Wolgen holds
an MD from the University of Utrecht, the Netherlands.

MrS. Brenda M. Shanahan (joined Board 2007)
non-executive director
Chair of the Audit and Risk Committee (since September 1, 2010)
Qualifications: BComm, FAICD, ASIA
Shares in CLINUVEL: 133,969
Conditional Performance Rights over shares in CLINUVEL: 70,000

Mrs Shanahan is an established member of the Australian finance
community who has also spent more than two decades working and
investing in medical R&D and commercialisation. She is currently
a non-executive director of DMP Asset Management, Challenger
Limited (ASX: CGF, since 2011) and Bell Financial Group (ASX: BFG,
since 2012), a director of the Kimberly Foundation of Australia Ltd,
and Chair of both the St Vincent’s Medical Research Institute and the
Aikenhead Centre for Medical Discovery in Melbourne.

Previously Mrs Shanahan was a member of the Australian Stock
Exchange and an executive director of a stockbroking firm, a fund
management company and an actuarial company. She was also
Chair of Challenger Listed Investments Ltd, the reporting entity for
four ASX listed firms (CKT, CIF, CDI and CWT).

Mrs Shanahan joined CLINUVEL in 2007, and was Non-Executive
Chair of the Board from late 2007 until July 2010. Her depth of
experience across global markets and medical research provides
significant value to the current Board and Company.

Mr. elie iShag (joined Board 2011)
non-executive director
Member of the Remuneration Committee
Shares in CLINUVEL: 148,195
Conditional Performance Rights over shares in CLINUVEL: 56,500

Mr Ishag is a London based entrepreneur with 50 years of commercial
experience, active in European asset management, real estate
development and IT. He is an Honorary Life Fellow of the UK Institute
of Directors (FIoD). With a background in pharmaceutical chemistry,
Mr Ishag is currently the Chairman of European Investments &
Developments Ltd, a privately held company with an investment
mandate in defined asset classes, property development and cross-

Directors' report

border commercial real estate. Mr Ishag has been extensively involved
in the commercial evolution and backing of various successful
ventures including IT company Espotting Media.

Since joining CLINUVEL in 2014, Mr Blijdorp has been actively involved
in the Company’s long-term strategy for product commercialisation,
growth, and development.

Mr. WilleM a. BlijdorP (joined Board 2015)
non-executive director
Shares in CLINUVEL: 383,145
Conditional Performance Rights over shares in CLINUVEL: 0

information on company secretary
Mr. darren M. KeaMy
Company Secretary, Chief Financial Officer
Qualifications: BComm, CPA

Mr Blijdorp is an international entrepreneur who has helped build
privately owned B&S International NV, one of the largest global
trading houses, over the past three decades. Mr Blijdorp has led
B&S’s growth, with the Dutch group – focused on the wholesale and
international trading of luxury and fast moving consumer goods
and pharmaceutical products – achieving a compounded annual
growth rate of 10% for the last decade. Formerly B&S’s CEO, Mr
Blijdorp now focuses on the company’s development and expansion
strategy as majority shareholder and supervisory director. In 2014
he was recognised for his expertise in merger and acquisitions and
leadership as the Ernst & Young Entrepreneur of the Year in the
Netherlands.

Mr Keamy, a Certified Practicing Accountant, joined CLINUVEL
PHARMACEUTICALS LTD in November 2005 and became Chief
Financial Officer of the Company in 2006. He has previously worked
in key management accounting and commercial roles in Amcor
Limited over a period of nine years and has experience working in
Europe in financial regulation and control within the banking and
retail pharmaceutical industries.

meeting of directors
The following table summarises the number of and attendance at all meetings of Directors during the financial year.

direCtor

Board

audit & risk Committee

remuneration & nomination
Committee

Mrs. B.M. Shanahan

Mr. S.R. McLiesh

Dr. P.J. Wolgen

Mr. e. ishag

Mr. W. Blijdorp

Column A indicates the number of meetings held during the period the Director was a member of the Board
and/or Board Committee.

Column B indicates the number of meetings attended during the period the Director was a member of the Board
and/or Board Committee.

principal actiVities
The principal activities of the consolidated entity during the
financial year were to develop its leading drug candidate SCENESSE®
(afamelanotide 16mg) for the treatment of a range of severe skin
disorders. CLINUVEL’s pioneering work aims at preventing the
symptoms of skin diseases related to the exposure to harmful
UV radiation and at repigmentation of the skin due to a number of
depigmentation disorders. There was no significant change in the
nature of activities during the financial year.

diVidends paid or recommended
No dividends were paid or declared during the financial year or after
reporting date.

reView of operations
The consolidated entity’s main strategic focus throughout the year,
consequent to the European Medicine Agency’s (EMA’s) granting
of marketing authorisation for SCENESSE® (afamelanotide 16mg)
in erythropoietic protoporphyria (EPP), was continuing to establish
a post-authorisation program to monitor ongoing patient safety
and effectiveness. A post authorisation safety study (PASS) was
established along with a disease registry, hospital sites were trained
and accredited in the collection of data and use of SCENESSE® and
a strict pharmacovigilance system to monitor long term patients’
safety during the commercial phase of the product was implemented.
A final reimbursement pricing structure is being established in key
European countries and submissions made to various payors in select
European regions for agreement, culminating in the first European
commercial launch of SCENESSE® in the 2016 northern hemisphere
summer. The R&D program in vitiligo and further melanocortin
development has continued throughout the year.

97%

70%

71%

A summary of CLINUVEL’s financial result is presented in the
following table:

Consolidated entity

2016

2015

Change

Revenues

6,419,707

3,259,962

Net Loss before income tax
expense

(3,153,718)

(10,414,376)

Loss after income tax expense

(3,153,718)

(10,414,376)

Basic earnings per share -
cents per share

Net tangible assets backing
per ordinary share

Dividends

Note: CLiNuveL does not operate individual segments.

(7.0)

(24.0)

$0.38

Nil

$0.25

Nil

(52%)

Nil %

Monthly operating average cash spend was 17% greater than the
previous year, being $0.782 million for 2015/16 compared to $0.667
million for the 2014/15 year. The increase in average monthly spend is
primarily due to a year-on-year increase in head count combined with
an increase in manufacturing-related expenditures from producing
implants available for supply. The group’s balance sheet has $17.835
million in net assets at 30 June 2016 compared to $11.205 million at
30 June 2015. Current liabilities decreased 6% to $2.288 million. The

Directors' report

group result for the year ending 30 June 2016 was a $3.154 million
loss, compared to a $10.414 million loss for the prior financial year,
a decrease in the loss of 70%. Non-cash items within the general
operations result along with first-time commercial revenues (see
following) were the key drivers for the difference.

The current year was the first full year of expenditures incurred by
VALLAURIX PTE LTD that is consolidated in the group result. Staffing,
non-clinical development work, travel and patent costs totalling
$180,655 were the key expenditure items affecting the group result for
2015/16 (2014/15: $90,797).

The distribution of SCENESSE® continued in Italy and Switzerland
with the ongoing subsidised supply of the drug to provide a
preventative treatment for adult erythropoietic protoporphyria (EPP)
patients under full-cost compensation Special Access Schemes.
These revenues increased 24% to $3.614 million for the 2015/16 year
compared to $2.912 million for the 2014/15 year. The increase in the
compensation price for the subsidised supply under these schemes
to maintain uniformity of the price of SCENESSE® sold in Europe
under the marketing authorisation more than offset the reduction
in the number of implants supplied into Italy and Switzerland as a
result of either delaying placing orders through the price negotiation
phase or from payors not willing to accept the revised price. The first
commercial sales of SCENESSE® occurred in 2015/16 which resulted
in $2.598million in sales revenues (2014/15: $ Nil.)

Revenues from ordinary activities include interest received from
surplus funds held in bank accounts and term deposits, moving
from $0.348 million to $0.208 million, a 40% decrease. The decrease
reflects a combination of lower average cash balances held year-
on-year in interest-bearing deposits, higher cash balances held in
non-Australian currencies which return negligible interest and
lower average interest rate yields on funds held year-on-year due to
government monetary policy lowering interest rates on deposits held.

Excluding the Australian government research and development
(R&D) refundable tax
incentives, R&D and commercialisation
expenditures accounted for 37% of the group’s total expense
result for 2015/16, compared to 18% for the 2014/15 year. R&D and
commercialisation costs, comprising clinical study costs, drug
delivery research manufacture and distribution, toxicity studies,
regulatory fees and research, development and commercialisation-
specific overheads such as personnel, were $3.735 million in 2016
compared to $2.603 million in 2015.

The Australian government refundable tax incentive of $0.609
million is a 50% increase to the refundable tax incentive recorded
for the 2014/15 year. The increase reflects the expected increase
in qualifying expenditures from local activities in connection to
the pre-clinical model demonstrating the safety of SCENESSE® in
combination with narrowband ultraviolet light therapy. This activity
is a regulatory requirement to support the introduction of new
combination therapies as the standard of care.

Clinical study costs decreased 42% from $0.232 million in 2015 to
$0.133 million in 2016. The continuing reduction in expenditures
on clinical development costs reflects the Company’s focus during
2015/16 on limiting its clinical efforts to completing the Singaporean
Phase II clinical study in vitiligo whilst it concentrated its resources
on the commercialisation activities in Europe and its regulatory
activities in the US.

Expenses toward the drug delivery manufacturing and distribution
program increased by 127%, from $0.450 million in 2014/15 to $1.022
million in 2015/16. An increase in implant production costs to meet
clinical, commercial and special access scheme requirements, along
with distribution set up costs to facilitate implant release within the
European Union were the primary reasons for the increase.

The average head count in 2015/16 of Research, Development &
Commercial personnel employed to oversee and monitor the clinical,
regulatory, manufacturing programs and post-marketing programs
was more than the head count over the course of 2014/15, resulting
in a 28% increase in Research, Development & Commercial overhead
costs (from $1.259 million in 2014/15 to $1.606 million in 2015/16).

Regulatory affairs related fees for both pre- and post-marketing
activities along with non-clinical development costs increased
47%, from $0.662 million in 2014/15 to $0.973 million in 2015/16. The
increase was largely due to the completion of the pre-clinical chronic
toxicology study which commenced in the latter part of the previous
financial year as part of its USA vitiligo development program.
Establishing the regulatory infrastructure to support the market
access of SCENESSE® into Europe and meet is post-authorisation
commitments with the EMA, particularly the pharmacovigilance and
safety reporting systems, were also a key driver to the 47% increase.

Marketing expenditures in the Company decreased marginally by 3%
to $0.778 million in 2015/16 from $0.802 million in 2014/15. Savings
from reduced conference and meeting sponsorships and share listing
costs were offset by increased marketing staff costs.

Patent fees increased 15%, from $0.232 million in 2014/15 to $0.266
million in 2015/16. The increase was related to further payments to
validate the European EPP patents after the marketing authorisation
was obtained, translating the patents to local language and increasing
renewal fees resulting from aging patents.

The result from general operations was $5.591 million in 2015/16
compared to $10.508 million in 2014/15, a 47% improvement. The
major contributor to the decrease in general operations was the
expensing of the accounting valuation of share-based payments
(Performance Rights) of $5.676 million in 2014/15 to $1.670 million in
2015/16. Performance Rights are valued at grant date and expensed
over their expected life, whether or not a benefit is received from these
amounts, either in the current or future reporting periods. Two of the
four performance conditions attached to the 2,789,810 Performance
Rights to Directors as approved by shareholders at the November
2014 Annual General Meeting were achieved and subsequently fully
expensed in the 2014/15 year.

General operations comprised 55% of the group’s total expense result
for 2015/16 compared to 75% in 2014/15. Other factors contributing to
the 47% decrease in general operations year-on-year are the reduction
in legal and corporate advisory fees incurred by the Company in
the previous financial year mostly in the Company responding to
the unsolicited bid proposal received from Retrophin Inc to acquire
all the issued ordinary shares in the Company, reduced travel costs
and realised gains from exchange rate movements in transactions
conducted in non-Australian currencies.

For the 2015/16 year the group started with $10.572 million in cash and
financial assets and finished with $13.845 million. In March 2016 the
group raised $8.335 million additional capital. For the reporting date
of 30 June 2016, due to movements in the Australian dollar compared
to other currencies used to meet working capital requirements, the
consolidated entity reported a gain of $0.187 million from holding
foreign currencies and in holding trade creditors in non-Australian
currencies (a $0.064 million gain for the same period last year).

At 30 June 2016 basic earnings per share were -$0.07 on 47,080,637
issued ordinary shares. This is compared to basic earnings per share
of -$0.24 as at 30 June 2015 on 44,554,787 issued ordinary shares.

CLINUVEL PHARMACEUTICALS LTD (ASX: CUV; XETRA-DAX: UR9;
ADR: CLVLY) is a global biopharmaceutical company focused on
developing drugs for the treatment of a range of severe skin disorders.
With its unique expertise in understanding the interaction of light
and human skin, the Company has identified patients with a clinical
need for photoprotection and another population with a need for
repigmentation. These various patient groups range from 5,000 to
45 million. CLINUVEL’s lead compound, SCENESSE® (afamelanotide
16mg), was approved by the European Commission in 2014 for the
prevention of phototoxicity (anaphylactoid reactions and burns) in adult
patients with erythropoietic protoporphyria (EPP). Headquartered
in Melbourne, Australia, CLINUVEL PHARMACEUTICALS LTD has
operations in Europe, the US and Singapore.

There were a number of significant events in 2015/16. These events
include:

a) On 2 July 2015, the Company announced that results from

Directors' report

its pivotal Phase III studies of SCENESSE® in the orphan
genetic disorder erythropoietic protoporphyria (EPP) had been
published in the New England Journal of Medicine, one of the
world’s most prestigious medical periodicals.

b) An announcement on 27 August 2015 confirmed the Company
would meet with the US Food and Drug Administration (FDA)
to discuss the overall development of SCENESSE® and the
filing requirements for a New Drug Application (NDA) for the
treatment of EPP (Type C meeting). A follow-on announcement
was made on 5 October 2015 confirming the Type C meeting
had been held whereby regulatory pathways were discussed
and the FDA requested to review photoprovocation and quality
of life data.

c) The Company reached agreement with the European Medicines
Agency’s
(EMA’s) Pharmacovigilance Risk Assessment
Committee (PRAC) treatment protocol as part of the agreed
risk management plan. This agreement allowed SCENESSE®
to be released for commercial supply and made available to
patients once pricing reimbursement structures were reviewed
and agreed with insurers and competent authorities. This
announcement occurred 21 September 2015. On 15 March 2016,
further to the agreed risk management plan with the EMA,
it was announced the first of the European expert porphyria
centres to treat EPP patients with SCENESSE® had undertaken
site training and accreditation to ensure compliance with the
treatment protocol as part of the PASS. On 22 June 2016 the
Company announced the first commercial sale of SCENESSE®
in Europe under European marketing authorisation. Patients
with EPP in the Netherlands commenced treatment following
this delivery.

d) The announcement on 3 December 2015 of positive preliminary
results from the Company’s Singaporean Phase II trial (CUV103),
evaluating SCENESSE® as a repigmentation therapy in patients
with vitiligo. The results were consistent with earlier findings
from the US Phase II trial (CUV102). In both studies SCENESSE®
was well tolerated and increased repigmentation in patients
with darker skin complexions, for whom vitiligo has an intense
psychological and significant social impact.

established Sponsored Level 1 American Depository Receipt
(ADR) programs, on 2 June 2016.

significant changes in the
state of affairs
The Directors are not aware of any matter or circumstance not
otherwise dealt with in this report that has significantly or may
significantly affect the operations of the consolidated entity.

significant eVents after
the reporting date
There has not been any matter, other than reference to the financial
statements that has arisen since the end of the financial year that
has affected or could significantly affect the operations of the
consolidated entity.

liKely deVelopments and expected results
The consolidated entity’s strategy is to focus on developing and
commercialising SCENESSE® as a medicinal photoprotective solution
for patients with EPP and who are most severely affected by exposure
to ambient and UV light. Further, the consolidated entity’s strategy is
to develop and commercialise SCENESSE® as a combination therapy
with narrowband ultraviolet B phototherapy for patients with vitiligo
in order to promote repigmentation of areas of the skin affected by
vitiligo.

In the previous year, the consolidated entity was successful in gaining
European regulatory approval for SCENESSE® in EPP in the form of a
historical first marketing authorisation. Consequent to the granting
of marketing authorisation, the consolidated entity has committed
itself to establishing a number of significant post-authorisation
commitments which have been agreed with the EMA under a long-
term risk management plan for SCENESSE®. The consolidated entity
will continue to work with a number of commissioned third parties to
support a European EPP Disease Registry to monitor long-term safety
and it will continue to invest in existing and new personnel with the
necessary skills and expertise to maintain the ongoing requirements
of the post-authorisation program in Europe. The consolidated entity
intends to increase its sales-focused workforce in Europe to promote
initial revenues once pricing agreements per country are established
with payors.

e) On 12 February 2016 the Company announced that SCENESSE®
received an additional orphan drug designation (ODD) from the
US FDA for the treatment of cutaneous variants of porphyria.
The ODD recognises the potential of SCENESSE® to treat
or prevent symptoms in rare forms of porphyria and offers
incentives to CLINUVEL to develop the drug for these patients.

Underpinned by the regulatory approval in Europe, along with the
information generated from its post-marketing commitments in
Europe, the consolidated entity is working towards gaining regulatory
approval for SCENESSE® in EPP in other important markets where
EPP is prevalent, including North America, in order to increase its
ability to commercialise SCENESSE®.

f) A capital raise of A$8.3million via a private placement to
existing and new institutional and professional investors,
announced on
15 March 2016. The Company stated
that the funds were earmarked to pursue the European
commercialisation program for SCENESSE® for patients with
EPP. The private placement was made at a price of A$3.30 per
share, representing an issue price equal to the closing price on
10 March 2016 (the date which the trading in Company’s shares
were placed into a trading halt) and a 2.9% discount to the 10
March 2016 10-day volume weighted average price.

g) On 24 March 2016 it was announced that the UK National
Institute for Health and Care Excellence (NICE) had held a
public workshop to scope the benefits and costs of SCENESSE®
in the treatment of adult patients with EPP. The workshop is
one of the last steps prior to national commissioning of the
treatment by the National Health Service (NHS) of England.
The workshop included a review of the specific burden of EPP
on patients’ lives, the number of treatment centres in the UK,
on patients eligible for treatment and the lack of a standard of
care. Company representatives attended the workshop along
with representatives of the EPP patient community, clinical
experts and scientists.

h) The Company joined Nasdaq’s International Designation, a
new visibility offering by Nasdaq for non-US companies with

The consolidated entity continues to conduct clinical studies to
evaluate the ability of SCENESSE® to activate melanocytes within
vitiliginous lesions and achieve repigmentation in combination with
NB-UVB in patients with vitiligo. Data from the soon-to-be-completed
Phase II study and the pre-clinical model demonstrating the safety
of SCENESSE® in combination with narrowband light therapy should
result in the consolidated entity moving towards later stage clinical
trials.

The consolidated entity has also focused on its manufacturing
requirements by working with its contract manufacturer to meet
clinical and commercial product supply in line with its timing
expectations. The consolidated entity,
recently
established VALLAURIX PTE LTD entity, will also expand its research
and development programs into its follow-on portfolio technologies to
SCENESSE®, CUV9900 and VLRX001. These melanocortin analogues
will be evaluated as an adjuvant maintenance therapy in vitiligo,
with the intention of developing both medicinal and non-prescriptive
formulations to be administered topically.

through

its

The consolidated entity is currently a loss-making enterprise
which has only recently reached the commercialisation phase
of drug development, 11 years since the start of its program. The
long-term financial success of the consolidated entity will be
ultimately measured on the basis of achieving a sustainable profit.
Key to becoming profitable is not only the successful research
and development of its portfolio of assets but also their successful

Directors' report

commercialisation, manufacturing and distribution, and the ability
to attract funding to support these activities should the need arise.
The following specific risks are reviewed continually by the Board
and management as they have the potential to affect the consolidated
entity’s achievement of the business goals detailed above. This list is
not exhaustive.

rounding of amounts
The Company is a type of Company referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191 and
therefore the amounts contained in this report and in the financial
report have been rounded to the nearest $1,000, or in certain cases, to
the nearest dollar.

• Technology – there is a risk that despite obtaining marketing
approvals, those products may ultimately prove not to be safe
and/or of clinical benefit.

• Supply – there is a risk that the manufacturing process may
not result in product batches meeting minimum specification
levels, that raw material components could not be sourced
to specification, and of non-controllable disruptions to the
products’ contract manufacturers.

• Clinical & Regulatory – there is a risk that clinical trials will not
yield the expected and desired results for the investigational
medicinal product(s) to obtain further regulatory approvals.

• Intellectual Property (IP) and market entry– future sales could
be impacted to the extent that there is not sufficiently robust
patent protection across the consolidated entity’s product
portfolio that will prevent competitors from entering the
marketplace to compete with the consolidated entity’s approved
products. Also, competitors
infringing the consolidated
entity’s IP rights may adversely impact the consolidated
entity’s ability to maximise the value to be made from product
commercialisation.

• Funding – cash outflows from its operations may be higher
than cash inflows. Therefore the ability of the consolidated
entity to successfully bring its products to market and achieve
a state of positive cash flow is dependent on its ability to access
sources of funding while containing its expenditures.

• Management – the consolidated entity’s corporate strategy
could be impacted adversely if the consolidated entity was not
able to retain its key management, members of staff and Board.

enVironmental regulation
and performance
regulated by
The consolidated entity’s operations are not
any significant environmental regulation under a law of the
Commonwealth, or of a State or Territory, or of any other jurisdiction.

indemnification and insurance
of directors and officers
During or since the end of the financial year the Company has given
an indemnity or entered an agreement to indemnify, or paid or agreed
to pay insurance premiums as follows.

The Company has paid premiums to insure each of the Directors
against liabilities for costs and expenses incurred by them in
defending any legal proceedings arising of their conduct while
acting in the capacity of Director of the Company, other than conduct
involving wilful breach of duty in relation to the Company. The cost
of the aforementioned insurance premium for 12 months was $24,700
(2015: $29,763).

directors’ Benefits and
interest in contracts
Since the end of the previous financial year no Director has received
or become entitled to receive a benefit (other than a benefit included
in the total amount of emoluments received or due and receivable by
Directors shown in the financial statements and the remuneration
report), because of a contract that the Director or a firm of which
the Director is a member, or an entity in which the Director has a
substantial interest has made with a controlled entity.

Further information on these contracts is included in Note 19 to the
financial statements.

remuneration report

principal oBjectiVe
The Board’s strategic objective that underpins its remuneration
policy is to retain the Company’s unique industry knowledge in
relation to the development of SCENESSE® at a critical stage of
the Company’s evolution. The Board is aware that any disruption
to the professional talent input would have a detrimental effect
to the Company’s ability to progress from an entirely research
and development-focused organisation to a commercial revenue-
generating enterprise. The Board has strived to secure staff and
management of the only pharmaceutical company active in
photoprotection and repigmentation and who are critical to the
development and commercialisation of an approved, first-in-class
medicinal photoprotective drug.

principles used to determine the
nature and amount of remuneration
This Remuneration Policy has been adopted by the Board of the
Company, to ensure that:

• The Company’s remuneration policies and systems comply
with the Corporations Act and ASX Listing Rules and support
the Company’s objectives as set by the Board from time to time.

• Remuneration of the Company’s key management personnel is
aligned with the interests of the Company and its shareholders
within an appropriate control framework.

• The relationship between performance and remuneration of

key management personnel is clear and transparent.

• The role of the Company’s Remuneration Committee in the

remuneration processes of the Company is clearly defined.

For the purpose of this Policy, “key management personnel” has
the meaning given in the Australian Corporations Act (which
adopts the definition in Accounting Standard AASB 124 Related
Party Disclosure). The definition captures those persons having
authority and responsibility for planning, directing and controlling
the activities of the Company, directly or indirectly, including any
Director (whether executive or otherwise) of the Company.

The policy has been adopted to cover the overall structure of
remuneration for:

• The Managing Director and other executive Directors (if any);

• Non-Executive Directors, including the Company Chair; and

• Senior management.

This Policy does not cover people employed through another company
such as third party contractors and secondees.

remuneration policy
The objectives of the Company’s Remuneration Policy are to ensure
that:

a) Remuneration is structured to align with the Company’s
interests, taking account of the Company’s strategies and risks.

b) The level and composition of remuneration is reasonable,
sufficient and provides competitive rewards that attract, retain
and motivate people of high calibre to work towards the long-
term growth and success of the Company.

c) The role that total fixed remuneration and short and long-term

incentives play is clearly defined.

d) The levels and structure of remuneration are benchmarked

against relevant peers.

e) There is a clear relationship between Company and individual
performance and remuneration of key management personnel.

f) The principles underlying the Company’s remuneration

structure are openly communicated and understood.

g) The Company complies with applicable legal requirements and

appropriate standards of governance.

h) Remuneration policies and practices are evaluated over time,
taking account of pay outcomes and the relationship between
pay and performance, and the results of any evaluations or
review processes.

i) Remuneration is consistent regardless of gender.

The total remuneration for each Executive is aimed to be market
competitive in which the executive is placed, and to reflect
performance and specific competencies.

The Company’s reward framework provides a mix of fixed and
variable pay, structured to incentivise both short-term and long-term:

• Short-term (generally cash payment in the form of performance-
based incentives at a fixed amount or as a percentage of base
salary).

• Long-term (generally based upon the issue of Performance
Rights to acquire shares in the Company, along with other fixed
amount cash incentives). Prior to the 2015/16 year, Performance
Rights were issued under the Company’s Conditional Rights
Plan, most recently approved by shareholders 12 November
2013 and also the more recent Company’s Performance Rights
Plan, approved by shareholders at the 2014 Annual General
Meeting (AGM). The vesting conditions can be either time and/
or performance milestone-based.

remuneration committee
The Board has provided a mandate to the Remu neration Committee
to provide advice on salaries and fees, short and long-term incentives
and employment terms and conditions for Directors, Executives and

reMuneration report

key management. The Remuneration Committee obtains independent
data to assess the appropriateness of remuneration packages,
given trends in comparative companies, industry or related field of
expertise. The Remuneration Committee may consult with specialist
remuneration consultants with experience in the healthcare industry
as part of making and reviewing remuneration recommendations.
For the year ended 30 June 2016, no remuneration recommendations
were received from specialist remuneration consultants.

The Corporate Governance Statement provides further information
on the role of the Remuneration Committee.

non-executiVe remuneration
Under the Company’s Constitution, the maximum aggregate
remuneration available for division among the Non-Executive
Directors is to be determined by the shareholders in a General
Meeting. At the 2015 Annual General Meeting, shareholders approved
an increase to the maximum aggregate remuneration payable from
$400,000 to $550,000. This amount (or some part of it) is to be divided
among the Non-Executive Directors as determined by the Board.

As from 1 September 2014, Non-Executive Directors’ base fees are
presently $65,000 per annum inclusive of superannuation (previously
$50,000 per annum). The Chair receives $110,000 per annum inclusive
of superannuation (previously $90,000 per annum) when in a Non-
Executive capacity. The Chair’s role is for a 12 month term, whereby
the Company reserves the right to extend the term for another 12
month period. The Heads of the Audit and Risk and the Remuneration
Committees receive an additional $15,000 per annum inclusive of
superannuation when in a Non-Executive capacity, and members
of the Audit and Risk and the Remuneration Committees who are
not the Committee Chair receive an additional $5,000 inclusive
of superannuation. Directors’ fees were increased in the previous
financial year to a level considered appropriate given their skills,
qualifications and experience comparative to the external market. It
was the first increase to Non-Executive Director fees since 2001.

Subject to shareholder approval, Non-Executive Directors can be
issued Performance Rights under the Company’s Performance Rights
Plan. Non-Executive Directors can be issued Performance Rights to
align their interests with those of shareholders and to reflect their
greater role in the management of the Company comparative to
peer companies (and reflected in a smaller management team). The
number of Performance Rights and nature of vesting is determined
after the Director’s appointment.

There are no further retirement benefits, other than statutory
superannuation entitlements, offered to Non-Executive Directors.

executiVe remuneration
Remuneration packages for Executives may include:

• Base pay and benefits (including statutory benefits);

• Short-term incentive payments through the achievement of

pre-specified performance-based targets;

• Longer-term business generation incentive payments through
the achievement of pre-specified performance-based targets;

• Discretionary payments

for exceptional performance,

innovation and/or expansion; and

• Long-term equity participation in the Company’s Performance

Rights Plans.

Base pay, including superannuation, is reviewed annually by
the Remuneration Committee to ensure the Executive’s pay is
competitive in international markets, industry and related fields of
expertise. Some key managerial contracts contain guaranteed base
pay increases linked to CPI data. Health insurance, accommodation
benefits and living away from home allowances are offered to key
management and Executives under specific circumstances.

The Managing Director has individual short-term and longer-term
incentive components to his Executive remuneration. Longer-term

incentive components include business generation incentives,
discretionary payments and equity participation through the
Company’s Performance Rights Plan. Appropriate targets are set by
the Remuneration Committee. The targets can relate to either the
clinical, regulatory development program or to corporate, commercial
and associated activities and are generally, but not always, evaluated
for achievement, reviewed and reset (if required) annually. Generally,
but not always, the quantifying of achievement of the Managing
Director’s short-term incentives for payment is assessed and made in
the year following the year of achievement.

For the 2015/16 financial year the Remuneration Committee evaluated
the performance of the Managing Director and awarded a short-term
incentive of 50% to base salary, compared to a short–term incentive
of 65% to base salary in the preceding year. However, for 2015/16 the
Managing Director received 16.24% less in base salary and short-term
employment benefits in comparison to the 2014/15 financial year.

In the 2014/15 year, the Managing Director elected to have paid out 50
days unused and accrued annual leave in lieu of taking such leave in
the current and previous years, as permitted by law, totalling $146,801.

In the most recent Annual General Meeting (AGM), the Company
obtained 84.4% of the proxy votes (including votes at the Board’s
discretion) in favour of adopting the 2014/15 remuneration report, and
this resolution was passed by poll. The Company did not receive any
further feedback at the AGM on its remuneration practices.

The methods used by the Remuneration Committee to assess Board
performance is disclosed in the Corporate Governance Protocol. The
remaining Executives receive discretionary short-term incentives,
generally evaluated annually against targets set at each performance
review.

The long-term equity remuneration is provided to Directors and
certain employees via the Company's Performance Rights Plan. See
below for further information.

company performance and executiVe
director remuneration
Due to the inherent and specific risk in pharmaceutical development
whereby the risks are exacerbated by the Company focusing on a
novel, first-in-class drug, the Board has adopted a business model
where most operational tasks are being retained in-house, where
possible, and most management responsibilities concentrated
between the Managing Director (acting in a dual capacity as Chief
Executive Officer and Chief Medical Officer) and the Acting Chief
Scientific Officer. The Managing Director has the responsibility of
guiding and overseeing the execution of the global corporate strategy
and has global responsibility for the safety aspects of the drug and
pharmacovigilance. The Acting Chief Scientific Officer is responsible
for pre-clinical programs and toxicology, the manufacturing of the
drug delivery program, clinical program and setting the regulatory
strategies in close coordination with the Board of Directors.
The Managing Director serves on the Commercial Management
Committee, set up to oversee the best commercial options for
SCENESSE®. As the business evolves and progresses through its
development path, it is expected this centralised management model
will also evolve and key management responsibilities will be shared
across new and existing senior management.

The current Managing Director Remuneration structure is designed
to maximise the motivation, retention and incentivisation of the
Managing Director to advance the Company’s program from its current
stage of development, taking into account the risk and complexity of
the current development and business model. It is also designed to
reflect the expertise, qualifications, seniority and achievements to
date of the Managing Director since joining the Company in 2005.

serVice agreements
On appointment to the Board, all Non-Executive Directors enter
into a service agreement with the Company in the form of a letter
of appointment. The letter summarises the Board’s policies, the
Director’s responsibilities and compensation for holding office.

reMuneration report

Remuneration and other terms of employment for the Managing
Director is formalised by a service agreement determined by the
Remuneration Committee. The agreement provides for base salary,
short and long-term incentives, other benefits and participation, when
eligible, in the Company's Performance Rights Plan. The Managing
Director, in consultation with the Remuneration Committee, oversees
the service agreements entered into with Company Executives,
providing for base salary, incentives, other benefits and participation,
when eligible, in the Company's Performance Rights Plan.

The details of the service agreements to the Managing Director and
key management personnel are:

• Dr Wolgen’s (Managing Director and Chief Executive Officer)
term of employment is 3 years from 15 March 2016, his base
salary inclusive of retirement benefits for the year to 30 June
2016 is $807,109 and his service agreement is with the wholly-
owned Singaporean subsidiary entity. Termination payment is
set at 12 months of base salary provided the termination is not
for a material breach of the agreement. The base salary is CPI
indexed. Dr Wolgen is required to provide 12 month’s notice.

• Dr Wright’s term of employment is on-going and his base
salary inclusive of superannuation for the year to 30 June 2016
is $252,012. Termination payments are set at 3 months of base
salary provided the termination is not for a material breach
of the agreement. Dr Wright is required to provide 3 month’s
notice.

• Mr Keamy’s term of employment is on-going and his base
salary inclusive of superannuation for the year to 30 June 2016
is $237,458. Termination payments are set at 3 months of base
salary provided the termination is not for a material breach
of the agreement. Mr Keamy is required to provide 3 month’s
notice.

share-Based remuneration
The consolidated entity has an ownership based scheme for Directors,
key management personnel and select consultants of the Company
and is designed to provide long-term incentives for Directors and
Executives to deliver long-term shareholder value.

PErFOrManCE rightS:
All Performance Rights issued fall under two Performance Rights
Plans:

a) the Company's Conditional Performance Rights Plan (2009);

and

b) Performance rights Plan (2014)
The Performance Rights Plan (2014) is available to eligible persons
of the Company. Any issue of Rights to Executive Directors requires
shareholder approval in accordance with ASX Listing Rules. All
Rights convert to one ordinary share of the consolidated entity and
are issued for nil consideration, have no voting rights, are not listed
on the ASX and are non-tradeable (other than with prior written Board
consent). They can be converted to ordinary shares at any time once
the vesting conditions attached to the Rights have been achieved,
whereby, at the discretion of the Board, they will be held by a Scheme
Trustee on behalf of the eligible person.

The eligible person cannot trade the shares held by the Scheme Trust
without prior written Board consent until the earlier of 7 years from
grant date of Performance Rights, when the eligible person ceases
employment or when all transfer restrictions are satisfied or waived
by the Board in its discretion. Performance Rights under this Plan
lapse after 7 years from grant date.

Performance Rights are valued for financial reporting purposes using
a binomial valuation model and are represented as accounting values
only in the financial statements. Holders of Performance Rights may
or may not receive a benefit from these amounts, either in the current
or future reporting periods. The value of all Performance Rights
granted, exercised and lapsed during the financial year is detailed in
the tables within the Remuneration Report.

In the 28 November 2014 Annual General Meeting, shareholders
approved the grant of Performance Rights to Directors under the
Performance Rights Plan (2014). Of the proxy votes received, between
87.4% to 89.1% (including votes at the Board’s discretion) were in favour
of granting Performance Rights to Directors.

details of remuneration
Key management personnel include all Directors (including Non-
Executive) and other key management personnel who together
have the authority and responsibility for planning, directing and
controlling the activities of the Group:

• Mr. S.R. McLiesh (Non-executive Chairman)

• Dr. P.J. Wolgen (Managing Director & Chief Executive Officer)

• Mrs. B.M. Shanahan (Non-Executive Director)

• Mr. E. Ishag (Non-Executive Director)

• Mr. W. Blijdorp (Non-Executive Director)

b) the Company's Performance Rights Plan (2014).

• Dr. D.J. Wright (Acting Chief Scientific Officer)

• Mr. D.M. Keamy (Chief Financial Officer and Company

Secretary)

All key management personnel have been appointed to the positions
detailed above for the past two years unless specified otherwise.

a) Conditional Performance rights Plan (2009)
The Conditional Performance Rights Plan (2009) is available to eligible
employees of the Company. Any issue of Rights to Executive Directors
requires shareholder approval in accordance with ASX Listing Rules.
All Rights convert to one ordinary share of the consolidated entity
and are issued for nil consideration, have no voting rights, are non-
transferable and are not listed on the ASX. They can be converted to
ordinary shares at any time once the vesting conditions attached to
the Rights have been achieved, whereby they will be held by a Scheme
Trustee on behalf of the eligible employee for up to 7 years.

The eligible employee can request for shares to be transferred from
the Scheme Trust after 7 years or at an earlier date if the eligible
employee is no longer employed by the Company or all transfer
restrictions are satisfied or waived by the Board in its discretion.

the Conditional Performance Rights Plan

Since
(2009) was
implemented, 872,985 (or 25.1%) of the Performance Rights issued
under this Plan have lapsed or have been forfeited.

The Company does not intend to make future issues of Performance
Rights under this 2009 Plan.

key ManageMent personneL reMuneration of the CoMpany for the years enDing 30 June 2016 & 30 June
2015

reMuneration report

short-term employment Benefits

gross salary

short term
inCentive

annual leave
Paid Out⁴

year

DireCtors

Dr. P.J. Wolgen

Mr. S.R. McLiesh

Mrs. B.M. Shanahan

Mr. L.J. Wood

Mr. e. ishag

Mr. W.A. Blijdorp

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

807,109

765,506

100,457

95,946

73,059

70,822

5,417

70,000

66,667

65,000

29,083

other key ManageMent personneL

Dr. D.J. Wright

Mr. D.M. Keamy

total

2016

2015

2016

2015

2016

2015

232,704

229,265

218,150

200,784

1,566,479

1,463,490

373,969

462,056

4,000

11,463

11,315

10,500

389,284

484,019

146,801

other¹

20,455

60,168

20,455

60,168

long-term
employment
Benefits

share-Based
payments
(aCCounting
Charge only)²

super-annuation /
pension fund

performanCe
rights

total

2,071

9,543

9,115

6,941

6,728

19,308

18,783

19,308

18,516

55,100

55,213

1,130,261 ³

2,331,794

4,862,453 ³

6,299,055

44,805

154,805

245,445

350,506

44,805

124,805

193,605

271,155

5,417

31,363

101,363

135,523

202,190

65,000

29,083

38,575

294,587

29,154

288,665

120,470

369,243

67,778

297,578

1,410,279

3,441,597

5,533,958

7,743,649

1 ‘Other’ includes health insurance, housing, relocation to Singapore and other allowances that may be subject to fringe benefits tax.

2 As these values are accounting values the key management personnel may or may not actually receive any benefit from these amounts, either in the current or future reporting periods. The value of all Performance Rights and
share options granted, exercised and lapsed during the financial year is detailed in the following tables within the Remuneration Report. Performance Rights were priced using a binomial pricing model.

3 $1,119,935 of the 2016 value (2015: $4,839,827) relates to the issue of 2,499,810 Performance Rights to Dr. Wolgen which was approved by shareholders of the consolidated entity at the 28 November 2014 Annual General
Meeting. Performance Rights are subject to milestones being achieved before they can be exercised.

4 unused and accrued annual leave was paid out in lieu of taking such leave during the year, as permitted by law.

the reLative proportions of reMuneration between fixeD anD baseD on perforManCe for the years
enDing 30 June 2016 anD 30 June 2015

fixed remuneration

performanCe Based

fixed remuneration

performanCe Based

2016

2015

Dr. P.J. Wolgen

Dr. D.J. Wright

Mr. D.M. Keamy

35%

86%

64%

65%

14%

36%

15%

86%

74%

85%

14%

26%

terMs anD ConDitions of eaCh grant of rights affeCting reMuneration in the Current or future
reporting perioDs

reMuneration report

entity

CLiNuveL

numBer of rights

value per right on
grant date

91,667

116,667

75,000

553,890

692,475

90,700

158,725

90,700

113,375

$1.04

$1.19

$2.59

$2.16

Class

Ordinary

grant date

vesting date for retention in
sCheme trust

25/11/2010

14/01/2013

28/11/2014

17/03/2015

shares proVided upon exercise of rights

DEtailS OF SharES iSSuED During thE FinanCial yEar aS a rESult OF ExErCiSE OF rightS
Nil shares were issued as a result of exercise of options.

aDDitiOnal inFOrMatiOn On rightS iSSuED tO kEy ManagEMEnt PErSOnnEl
* For Retention in the Scheme Trust - Transfer Restrictions Apply

reMuneration ConDitionaL perforManCe rights hoLDings of key ManageMent personneL – 2016

BalanCe at
start of year

granted as
Compensation

exerCised

lapsed and
expired

BalanCe at
end of year

vested and
exerCisaBle

unvested

DireCtors

Mr. e. ishag

Mr. S.R. McLiesh

Mrs. B.M. Shanahan

Dr. P.J. Wolgen

Mr. W.A. Blijdorp

exeCutives

Dr. D.J. Wright

Mr. D.M. Keamy

56,500

85,000

70,000

1,424,864

128,125

238,760

56,500

85,000

70,000

14,000

20,000

42,500

65,000

50,000

1,424,864

499,890

924,974

128,125

238,760

8,000

26,000

120,125

212,760

reMuneration report

additional information - remuneration
For each cash bonus and right granted, the percentage of the available grant or bonus that was paid or vested in the financial year, and the
percentage forfeited due to unmet milestones (including service length), is set out below. Bonuses are paid in the year following the period of
performance.

reMuneration DetaiLs of Cash inCentives anD rights

inCentives

paid

50%

forfeited

50%

Dr. P.J.
Wolgen

Mr. S.R.
McLiesh

Mrs. B.M.
Shanahan

Mr. e. ishag

Mr. W.A.
Blijdorp

Dr. D.J.
Wright

Mr. D.M.
Keamy

year
granted

type

vested

forfeited

latest year
for vesting

minimum
grant value
yet to vest ($)

maximum
grant value
yet to vest ($)

performanCe rights

2010/11

Rights

2014/15

Rights

20%

2011/12

Rights

2014/15

Rights

16.7%

2011/12

Rights

2014/15

Rights

2011/12

Rights

2014/15

Rights

2011/12

Rights

2012/13

Rights

2014/15

Rights

2011/12

Rights

2012/13

Rights

2014/15

Rights

20%

No limitation

2021/22

No limitation

2021/22

No limitation

2021/22

No limitation

2021/22

No limitation

2021/22

No limitation

2021/22

300,001

1,619,935

26,690

64,800

16,682

64,800

16,682

45,360

42,819

29,700

69,120

58,334

29,700

224,640

The exercise price for those Rights granted between 2009/10 and 2014/15 was $Nil. Excluding the CEO Short Term Incentive, cash bonuses paid to Executives were discretionary.

shares held By Key management personnel
The number of ordinary shares in the Company during the 2016 reporting period held by each of the Group’s Key Management Personnel,
including their related parties, is set out below:

reMuneration report

year ending 30 June 2016

personnel

Mr. e. ishag

Mr. S.R. McLiesh

Mrs. B.M. Shanahan

Dr. P.J. Wolgen

Mr. W.A. Blijdorp

Dr. D.J. Wright

Mr. D.M. Keamy

BalanCe at start
of year

granted as
remuneration

reCeived on
exerCise

other Changes

held at the end of
reporting period

148,195

191,000

133,969

2,079,832

383,145

236,874

166,400

148,195

191,000

133,969

2,079,832

383,145

236,874

166,400

shares unDer option

details of unissued shares or interests under options or rights

entity

numBer of shares
under options

numBer of shares
under rights

exerCise
priCe

Class

ClINuvEl PhARmACEuTICAlS lTd

2,556,250

$Nil

Ordinary

loans to directors and executiVes
No loans were granted to Directors or Executives for the years ending 30 June 2016 and 30 June 2015.

expiry date

upon achievement of specific performance
and time-based milestones

reMuneration report

performance of clinuVel p harmaceuticals ltd and controlled entities
The consolidated entity is solely dedicated to the research, development and commercialisation of its unique and medically beneficial
technology. It is anticipated the consolidated entity will not derive profit and pay a dividend until commercialisation of the drug under research
and development has occurred and sales reach a level which exceeds the cost base of the consolidated entity. With very few peer competitors
developing drugs in the field of photoprotection and repigmentation, shareholder interest is promoted through the Company successfully
completing clinical trials, achieving regulatory milestones and pursuing potential new and larger markets. The table below shows the progress
made in moving through the clinical pathway and into the commercialisation pathway, reflecting the performance of the Executive team,
whilst also comparing the progress in moving through these pathways against the movement in the Company’s market capitalisation.

The remuneration and incentive framework, which has been put in place by the Board, has ensured the Executives are focussed on both
maximising short-term operating performance and long-term strategic growth. This has been an important factor in the consolidated entity
moving into the commercialisation phase of its drug which has been subject to sustained research and development.

2010

2011

2012

2013

2014

2015

2016

year ending 30 June

regulatory/CliniCal milestone

Phase ii AK Study – europe/Australia

Ph II/III EPP Study – Europe/Australia – Trial 1

Phase iii PLe Study – europe/Australia

Phase ii Solar urticaria Study – europe

Phase II PdT Study – Europe

Phase ii ePP Study – uSA

Ph III EPP Study – Europe Trial 2

Ph iii PLe Study – europe

Ph iii ePP Study – uSA

Ph ii vitiligo Studies – europe/uSA

Ph ii vitiligo Study - Singapore

Orphan Drug Designation ePP – Australia

Ph ii HHD Study – italy

Orphan Drug Designation HHD– eu & uSA

Application for marketing authorisation submitted with eMA

vAllAuRIx PTE lTd – formulation & melanocortin development

Post-marketing authorisation commitments

First commercial sales

Market capitalisation (A$ million)

127

203

reMuneration report

non-audit serVices
For the year ended 30 June 2016, Grant Thornton Australia provided audit services to the Company. Grant Thornton Australia also provided
non-audit services, specifically general tax advice concerning the Australian R&D tax incentive regime. Details of amounts paid or payable to
the auditor for non-audit services provided during the year by the auditor are outlined in Note 18 to the financial statements.

For the year ending 30 June 2016 Grant Thornton Australia only provided audit services to the Company.

The Directors are satisfied that the provision of non-audit services, during the year, by the auditor is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 18 to
the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit Committee, for the
following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 ‘Code of Ethics for
Professional Accountants’ issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or
jointly sharing economic risks and rewards.

auditor's independence declaration
The auditor’s independence declaration as required by s.307C of the Corporations Act 2001 is included and forms part of this Directors’ Report.

proceedings on Behalf of the company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company
is party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not party to any such proceedings during the year.

Signed in accordance with a resolution of the Board of Directors pursuant to s.298(2) of The Corporations Act 2001.

Dr. Philippe Wolgen, MBA MD

Director

Dated this 24th day of August, 2016

statement of profit or loss
and other comprehensiVe
income for the year
ended 30 june 2016

Total revenues

Other income

Total expenses

Loss before income tax expense

Income tax expense/(benefit)

Loss after income tax expense

net profit/(loss) for the year

other CoMprehensive inCoMe

Items that may be re-classified subsequently to profit or loss

exchange differences of foreign exchange translation of foreign operations

Income tax (expense)/benefit on items of other comprehensive income

Other comprehensive loss for the period, net of income tax

note

Consolidated entity

2016

2015

6,419,707

3,259,962

796,531

470,273

(10,369,956)

(14,144,611)

(3,153,718)

(10,414,376)

(3,153,718)

(10,414,376)

(3,153,718)

(10,414,376)

273,786

(268,143)

total Comprehensive inCome/(loss) for the period

(2,879,932)

(10,682,519)

profit/(Loss) for the year attributabLe to:

Non-controlling interest

Owners of the parent

totaL CoMprehensive inCoMe/(Loss) attributabLe to:

Non-controlling interest

Owners of the parent

(32,518)

(16,343)

(3,121,200)

(10,398,033)

(3,153,718)

(10,414,376)

(32,518)

(16,343)

(2,847,414)

(10,666,176)

(2,879,932)

(10,682,519)

Basic and diluted earnings per share - cents per share

(7.0)

(24.0)

The accompanying notes form part of these financial statements.

statement of financial
position as at 30 june 2016

Current assets

Cash and cash equivalents

Trade and other receivables

inventory

Other assets

total Current assets

non-Current assets

Property, plant and equipment

total non-Current assets

total assets

Current LiabiLities

Trade and other payables

Provisions

total Current liaBilities

non-Current LiabiLities

Provisions

total non-Current liaBilities

total liaBilities

net assets

equity

equity attributabLe to owners of the parent:

Contributed equity

Reserves

Accumulated losses

equity attriButaBle to the owners of the parent

equity attriButaBle to non-Controlling (minority equity) interest

total equity

The accompanying notes form part of these financial statements.

note

16(a)

Consolidated entity

2015

10,572,295

1,960,453

837,135

204,623

2016

13,844,703

4,823,770

1,082,163

222,961

19,973,597

13,574,506

164,670

69,369

20,138,267

13,643,875

1,573,361

715,017

2,288,378

15,369

2,303,747

17,834,520

1,860,636

574,640

2,435,276

3,308

2,438,584

11,205,291

146,764,500

138,465,335

4,094,977

2,698,338

(133,063,239)

(129,942,039)

17,796,238

38,282

17,834,520

11,221,634

(16,343)

11,205,291

statement of cash flows for
the year ended 30 june 2016

Cash fLows froM operating aCtivities

GST and vAT refunds

Receipts from customers

interest received

Payments to suppliers and employees

note

Consolidated entity

2016

2015

534,297

581,114

3,648,388

2,545,080

167,559

353,960

(9,387,177)

(8,009,966)

net Cash provided By (used in) operating aCtivities

16(B)

(5,036,933)

(4,529,812)

Cash fLows froM investing aCtivities

Payments for property, plant and equipment

Proceeds received for property, plant and equipment

net Cash provided By (used in) investing aCtivities

Cash fLows froM finanCing aCtivities

Proceeds from issue of ordinary shares

Equity contribution by subsidiary non-controlling interest

Payment of share issue costs

net Cash provided By (used in) finanCing aCtivities

net inCrease/(deCrease) in Cash held

Cash and Cash equivalents at Beginning of the year

effects of exchange rate changes on foreign currency held

(98,051)

(12,097)

1,400

(10,697)

8,335,305

250,000

89,118

(36,059)

8,388,364

(27,300)

222,700

3,253,380

(4,317,809)

10,572,295

14,625,583

19,028

264,521

Cash and Cash equivalents at end of the year

16(a)

13,844,703

10,572,295

The accompanying notes form part of these financial statements.

statement of changes
in equity for the year
ended 30 june 2016

share
Capital

performanCe
rights
reserve

foreign
CurrenCy
translation
reserve

total
attriButaBle
to owners of
parent

non-
Controlling
interest

retained
earnings

BalanCe at 30 June 2014

133,567,056

1,321,529

116,517

(119,577,370)

15,427,732

issue of Share Capital under private
placement

250,000

issue of Share Capital under share-based
payment

4,650,579

(4,650,579)

employee share-based payment options

5,642,728

Capital raising costs

(2,300)

250,000

33,364

5,676,092

(2,300)

transaCtions with owners

138,465,335

2,313,678

116,517

(119,544,006)

21,351,524

total
equity

15,427,732

250,000

5,676,092

(2,300)

21,351,524

loss for the year

other CoMprehensive inCoMe:

exchange differences of foreign exchange
translation of foreign operations

(10,398,033)

(16,343)

(10,414,376)

268,143

BalanCe at 30 June 2015

138,465,335

2,313,678

384,660

(129,942,039)

11,221,634

(16,343)

11,205,291

Equity contribution by subsidiary non-
controlling interest

issue of Share Capital under private
placement

issue of Share Capital under share-based
payment

employee share-based payment options

8,335,305

1,670,425

Capital raising costs

(36,140)

87,143

8,335,305

1,670,425

(36,140)

8,335,305

1,670,425

(36,140)

transaCtions with owners

146,764,500

3,984,103

384,660

(129,942,039)

21,191,224

70,800

21,262,024

loss for the year

other CoMprehensive inCoMe:

exchange differences of foreign exchange
translation of foreign operations

(3,121,200)

(32,518)

(3,153,718)

(273,786)

BalanCe at 30 June 2016

146,764,500

3,984,103

110,874

(133,063,239)

17,796,238

38,282

17,834,520

notes to and forming part of
the financial statements for
the year ended 30 june 2016

1. Basis of preparation
The financial report is a general purpose financial report that has
been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001. Compliance
with Australian Accounting Standards ensures the consolidated
financial statements and notes of the consolidated entity with
International Financial Reporting Standards (‘IFRS’). CLINUVEL
PHARMACEUTICALS LTD is a for-profit entity for the purposes of
reporting under Australian Accounting Standards.

The financial report has been prepared on an accruals basis and is
based on historical costs and does not take into account changing
money values or, except where stated, current valuations of financial
assets. Cost is based on the fair values of the consideration given in
exchange for assets. The accounting policies have been consistently
applied, unless otherwise stated.

Both the functional and presentation currency of the group and its
Australian controlled entities is Australian dollars. The functional
currency of certain non Australian controlled entities is not
Australian dollars. As a result, the results of these entities are
translated to Australian dollars for presentation in the CLINUVEL
PHARMACEUTICALS LTD financial report.

In applying Australian Accounting Standards management must
make judgment regarding carrying values of assets and liabilities
that are not readily apparent from other sources. Assumptions and
estimates are based on historical experience and any other factor
that are believed reasonable in light of the relevant circumstances.
These estimates are reviewed on an ongoing basis and revised in
those periods to which the revision directly affects.

All accounting policies are chosen to ensure the resulting financial
information satisfies the concepts of relevance and reliability.

The financial statements of the consolidated entity have been prepared
on a going concern basis. The consolidated entity’s operations
are subject to major risks due primarily to the nature of research
development and the commercialisation to be undertaken. The risk
factors set out may materially impact the financial performance and
position of the consolidated entity.

The going concern basis assumes that, if required, future capital
raisings will be available to enable the consolidated entity to
undertake the research, development and commercialisation of its
projects and that the subsequent commercialisation of products
will be successful. The financial statements take no account
of the consequences, if any, of the inability of the consolidated
entity to obtain adequate funding or of the effects of unsuccessful
research, development and commercialisation of the consolidated
entity's projects. The consolidated entity has successfully raised
additional working capital in past years. Should cash flows from its
commercialisation activities not provide adequate funding to sustain
its research, development and commercialisation projects in the
coming financial year, the Directors would consider the need to bring
in additional funds from various funding sources.

a) PrinCiPlES OF COnSOliDatiOn
The consolidated financial statements are prepared by combining the
financial statements of all the entities that comprise the consolidated
entity, being the Company (the parent entity) and its subsidiaries
as defined in Accounting Standard AASB 10 Consolidated Financial
Statements. Consistent accounting policies are employed in the
preparation and presentation of the consolidated financial statements.

The consolidated financial statements include the information and
results of each subsidiary from the date on which the Company
obtains control and until such time as the Company ceases to control
such entity. In preparing the consolidated financial statements, all
intercompany balances and transactions, and unrealised profits
arising within the consolidated entity are eliminated in full.

Non-controlling interests, presented as part of equity, represent the
portion of a subsidiary’s profit or loss and net assets that is not held
by the Group. The Group attributes total comprehensive income or
loss of subsidiaries between the owners of the parent and the non-
controlling interests based on their respective ownership interests.

A list of controlled entities is found in Note 8 of the Financial
Statements.

b) inCOME tax
At present it is uncertain that tax losses can be utilised. Once a
position becomes known, tax losses will be brought to account.

current tax
Current tax is calculated by reference to the amount of income tax
payable or recoverable in respect of the taxable profit or loss for the
period. It is calculated using tax rates and tax laws that have been
enacted or substantially enacted by reporting date. Current tax for
current and prior periods is recognised as a liability (or asset) to the
extent it is unpaid (or refundable).

deferred tax
Deferred tax is accounted for using the comprehensive balance sheet
liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in
the financial statements and corresponding tax base of those items.

In principle, deferred tax liabilities are recognised on all taxable
differences. Deferred tax assets are recognised for deductible
temporary differences and unused tax losses to the extent that it
is probable that sufficient unused tax losses and tax offsets can be
utilised by future taxable profits. However, deferred tax assets and
liabilities are not recognised if the temporary differences given rise
to them arise from the initial recognition of assets and liabilities
(other than as a result of a business combination) which affect neither
taxable income nor accounting profit. Furthermore, a deferred tax
liability is not recognised in relation to taxable temporary differences
arising from goodwill.

Deferred tax
liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where the
consolidated entity is able to control the reversal of the temporary
differences and it is probable that the temporary differences will not
reverse in the foreseeable future. Deferred tax assets arising from

notes t o the Financia L stateMents

deductible temporary differences associated with these investments
and interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to utilise
the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply to the period(s) when the asset and liability
giving rise to them are realised or settled, based on tax rates (and tax
laws) that have been enacted or substantially enacted by reporting
date. The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which
the consolidated entity expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Company/consolidated entity intends to settle its current tax assets
and liabilities on a net basis.

tax Consolidation
The Company and its wholly-owned Australian entities are part of
a tax-consolidation group under Australian Taxation law. CLINUVEL
PHARMACEUTICALS LTD is the head entity of the tax-consolidation
group.

Current and Deferred tax For the Period
Current and deferred tax is recognised as an expense or income in the
Statement of Profit or Loss and Other Comprehensive Income, except
when it relates to items credited or debited directly to equity, in which
case the deferred tax is also recognised directly in equity, or where
it arises from the initial accounting for a business combination, in
which case it is taken into account in the determination of goodwill
or discount on acquisition.

C) CaSh anD CaSh EquivalEntS
Cash and cash equivalents comprise of cash on hand, at call deposits
with banks or financial institutions, bank bills and investments in
money market instruments where it is easily convertible to a known
amount of cash and subject to an insignificant risk of change in value.

D) PrOPErty, Plant anD EquiPMEnt
Plant and equipment are stated at cost less accumulated depreciation
and impairment. Cost includes expenditure that is directly attributable
to the acquisition of the item. In the event that settlement of all or
part of the purchase consideration is deferred, cost is determined by
discounting the amounts payable in the future to their present value
as at the date of acquisition.

Depreciation is calculated on diminishing value so as to write off the
net cost of each asset over its expected useful life to its estimated
residual value. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each annual reporting
period and adjusted if appropriate. An asset’s carrying amount
is written off immediately to its recoverable amount if the assets
carrying amount is greater than its estimated recoverable amount.

The following diminishing value percentages are used in the
calculation of depreciation:

• Computers and software 40%

• All other assets 7.5% to 33.3%

Gains and losses on disposal of assets are determined by comparing
proceeds upon disposal with the asset’s carrying amount. These are
included in the Statement of Profit or Loss and Other Comprehensive
Income.

E) invEStMEntS anD OthEr FinanCial aSSEtS
The consolidated entity classifies its financial assets into financial
assets at fair value through profit and loss and loans and receivables.
Financial assets at fair value through profit and loss are held for
trading if the entity does not have a positive intention to hold its
investment in the financial asset until maturity (if a fixed maturity)
or if it intends to hold the financial asset for an undefined period.

Loans and receivables are non-derivate financial assets with fixed
payments that are not quoted in an active market. They are included
in current assets, except those loans and receivables that are due
more than 12 months from reporting date.

F) invEntOry
Raw, materials, work in progress and finished goods are stated at the
lower of cost or net realisable value. Cost comprises, direct material
and labour. Costs are assigned to individual items of inventory on the
basis of weighted average costs. Net realisable value is the estimated
selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the
sale.

g) rESEarCh anD DEvElOPMEnt ExPEnDiturE
Expenditure on research activities is recognised as an expense in
the period in which it is incurred. Where no internally-generated
intangible asset can be recognised, development expenditure is
recognised as an expense in the period as incurred. An intangible
asset arising from development (or from the development phase of
an internal project) is recognised if, and only if, all of the following is
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 probably 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.

The consolidated entity uses its critical judgment in continually
assessing whether development expenditures meet the recognition
criteria of an intangible asset.

Whilst at the end of the financial year the consolidated entity had
received European regulatory approval and launched a European
product the above criteria have not been fully satfisfied to support
the recognition and generation of an internally generated intangible
asset.

h) intangiblE aSSEtS - traDEMarkS,
PatEntS anD Sub- liCEnCE
Trademarks, patents and licences have a finite useful life and are
recorded at cost less accumulated amortisation and impairment
losses. Amortisation is charged on a straight line basis over the
shorter of the relevant agreement or useful life. The estimated useful
life and amortisation method is reviewed at the end of each annual
reporting period.

Sub-licence
The sub-licences to develop and commercialise SCENESSE® have
expired and the consolidated entity no longer holds the sub-licences.
The sub-licences have been fully amortised on a straight line basis
over 10 years.

i) PayaBleS
Trade payables and other accounts payable are recognised when
the consolidated entity becomes obliged to make future payments
resulting from the purchase of goods and services, incurred prior to
the end of the financial year.

j) EMPlOyEE bEnEFitS
Provision is made for benefits accruing to employees in respect of
wages and salaries, annual leave and long service leave when it is
probable that settlement will be required and they are capable of
being measured reliably.

notes t o the Financia L stateMents

Provisions made in respect of employee benefits expected to be
settled within 12 months, are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement.

• where the amount of GST incurred is not recoverable from
the taxation authority, it is recognised as part of the costs of
acquisition of an asset or as part of an item of expense; or

Provisions made in respect of employee benefits which are not
expected to be settled within 12 months are measured as the present
value of the estimated future cash outflows to be made by the
consolidated entity in respect of services provided by employees up
to reporting date. The discount rate used to estimate future cash flows
is per the Australian corporate bond rates as commissioned by the
Group of 100 and published by Milliman Australia at reporting date.

k) DirECtOrS’ rEMunEratiOn –
Share-BaSed PayMent S
Under AASB 2 Share-based Payments, the consolidated entity must
determine the fair value of options and Performance Rights issued
to employees as remuneration and recognise an expense in the
Statement of Profit or Loss and Other Comprehensive Income. This
standard is not limited to options and to Performance Rights. It also
extends to other forms of equity based remuneration. The fair value
of options is measured by the use of the binominal options pricing
model. The fair value of Performance Rights is measured by either
a binomial or a trinomial model. It is determined at grant date and
expensed on a straight- line basis over the vesting period. The fair
value of options and Performance Rights is shown as an expense in
profit or loss.

l) rEvEnuE anD OthEr inCOME
interest
Interest revenue is recognised on a proportional basis that takes into
account the effective yield on the financial asset.

Sale reimbursements under Special access
Schemes & Commercial Sales
Revenue from reimbursement of implant sales from insurance
companies is recognised when the consolidated entity has transferred
to the buyer the significant risks and rewards of ownership of the
goods.

government r&D tax incentive
Other income from the government R&D tax incentive program is
recognised when it has been established that the conditions of the
tax incentive have been met and that the expected amount of tax
incentive can be reliably measured.

M) Share caPital
Ordinary share capital is recognised at the fair value of the
consideration received by the Company.

Any transaction costs arising on the issue of ordinary shares are
recognised directly in equity as a reduction of the shares proceeds
received.

n) earningS Per Share
basic Earnings Per Share
Basic earnings per share is determined by dividing net profit after
income tax attributable to members of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares issued during
the year.

Diluted Earnings Per Share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated
with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.

O) gOODS anD SErviCES tax/
valuE aDDED tax (gSt)
Revenues, expenses and assets are recognised net of the amount of
‘goods and services tax’ or ‘valued added tax‘ as it is known in certain
jurisdictions (GST), except:

• for receivables and payables which are recognised inclusive of

GST.

The net amount of GST recoverable from, or payable to, the taxation
authority is included as part of receivables or payables. Cash flows
are included in the Statement of Cash Flow on a gross basis. The
GST component of cash flows arising from investing and financing
activities which is recoverable from, or payable to, the taxation
authority is classified as operating cash flows.

P) iMPairMEnt OF aSSEtS
At each reporting date, the consolidated entity reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the
asset is estimated in order 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 consolidated entity estimates the
recoverable amount of the cash-generating unit to which the asset
belongs.

Intangible assets with indefinite useful lives and intangible assets not
yet available for use are tested for impairment annually and whenever
there is an indication that the asset may be impaired. 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 risk specified 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 (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised in the Statement of Profit or Loss
and Other Comprehensive Income immediately.

Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased 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 (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised in the Statement of
Profit or Loss and Other Comprehensive Income immediately.

q) leaSeS
Lease payments for operating leases, where substantially all the risks
and benefits remain with the lessors, are charged as expenses in the
periods in which they are incurred.

r) COMParativES
Where necessary, comparatives have been reclassified and
repositioned for consistency with current year disclosure.

S) PrOviSiOnS
Provisions are recognised when a present obligation to the future
sacrifice of economic benefits becomes probable, and the amount of
the provision can be measured reliably.

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.

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.

notes t o the Financia L stateMents

t) FOrEign CurrEnCy 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. 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 profit or loss in the period in which
they arise as defined in AASB 121: The Effects of Changes in Foreign
Exchange Rates.

Foreign subsidiaries that have a functional currency different from
the presentation currency are translated into the presentation
currency as follows:

• At the spot rate at reporting date for assets and liabilities; and

• At average monthly exchange rates for income and expenses.

Resulting differences are recognised within equity in a foreign
currency translation reserve.

u) OthEr CurrEnt aSSEtS
Other current assets comprise prepayments of drug peptide yet to
be used in CLINUVEL PHARMACEUTICALS LTD's trial program
and prepayments for certain insurances yet to expire, along with
other general prepayments. The expenditures represent an unused
expense and therefore a decrease in future economic benefit has yet
to be incurred.

v) SharE-baSED PayMEnt tranSaCtiOnS
Benefits are provided to employees of the Group in the form of
share-based payment transactions, whereby employees render
services in exchange for shares or rights over shares (‘equity-settled
transactions’).

The cost of these equity-settled transactions with employees is
measured by reference to the fair value at the date at which they
are granted. The fair value is determined using either a binomial
or a trinomial options pricing model. In valuing equity-settled
transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of CLINUVEL
PHARMACEUTICALS LTD (‘market conditions’).

w) CritiCal aCCOunting
EStiMatES anD juDgMEnt
The Directors evaluate estimates and judgments incorporated into
the financial report based on historical knowledge and best available
current information. Estimates assume a reasonable expectation of
future events and are based on current trends and economic data,
obtained both externally and within the Group.

key estimates – share-based payments transactions
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
using either a Black-Scholes, a binomial or a trinomial model, using
the assumptions detailed in Note 22.

key judgements – tax losses
Given the Company’s and each individual entities’ history of recent
losses, the Group has not recognised a deferred tax asset with regard
to unused tax losses and other temporary differences, as it has not
been determined whether the Company or its subsidiaries will
generate sufficient taxable income against which the unused tax
losses and other temporary differences can be utilised. The value of
tax losses not recognised is included in Note 3.

x) nEw aCCOunting StanDarDS
and interPretationS
In the current year, the Group has adopted all of the new and revised
Standards and Interpretations issued by the Australian Accounting
Standards Board that are relevant to its operations and effective for
the current annual reporting period. The adoption of the new and
revised standards had minimum or no impact to the Group’s financial
statements.

y) nEw auStralian aCCOunting StanDarDS
iSSuED but nOt yEt EFFECtivE
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2016 reporting periods,
and have not yet been adopted by the Group. The Group’s assessment
of the impact of these new standards and interpretations is set out
below:

aaSb 9 Financial instruments (December 2014)
AASB 9 introduces new requirements for the classification and
measurement of financial assets and liabilities and includes a forward-
looking ‘expected loss’ impairment model and a substantially-
changed approach to hedge accounting.

The cost of equity-settled transactions is recognised, together with
a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award (‘vesting date’).

These requirements
improve and simplify the approach for
classification and measurement of financial assets compared with
the requirements of AASB 139. The main changes are:

The cumulative expense recognised for equity-settled transactions
at each reporting date until vesting date reflects (i) the extent to
which the vesting period has expired and (ii) the number of awards
that, in the opinion of the Directors of the Group, will ultimately
vest. This opinion is formed based on the best available information
at reporting date. No adjustment is made for the likelihood of market
performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date.

Where the terms of an equity-settled award are modified, as a
minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the
value of the transaction as a result of the modification, as measured at
the date of modification. Where an equity-settled award is cancelled,
it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately.
However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a modification of
the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as
additional share dilution in the computation of earnings per share.

• Financial assets that are debt instruments will be classified
based on: (i) the objective of the entity’s business model for
managing the financial assets; and (ii) the characteristics of
the contractual cash flows.

• Allows an irrevocable election on initial recognition to present
gains and losses on investments in equity instruments that are
not held for trading in other comprehensive income (instead
of in profit or loss). Dividends in respect of these investments
that are a return on investment can be recognised in profit or
loss and there is no impairment or recycling on disposal of the
instrument.

• Introduces a ‘fair value through other comprehensive income’
measurement category for particular simple debt instruments.

• Financial assets can be designated and measured at fair
value through profit or loss at initial recognition if doing
so eliminates or significantly reduces a measurement or
recognition inconsistency that would arise from measuring
assets or liabilities, or recognising the gains and losses on
them, on different bases.

• Where the fair value option is used for financial liabilities the

change in fair value is to be accounted for as follows:

notes t o the Financia L stateMents

z) SegMent rePorting
A segment is a component of the consolidated entity that earns
revenues or incurs expenses whose results are regularly reviewed by
the chief operating decision makers and for which discrete financial
information is prepared. The consolidated entity has no operating
segments within the definition of AASB 8 Operating Segments.

It has established entities in more than one geographical area.
Revenues from reimbursement revenue are 100% earned from entities
within Europe, which is consistent with the comparative period. The
non-current assets that are not held within Australia are immaterial
to the Group.

100% of the revenue from sales reimbursements under special access
schemes is generated from seven end users (2015: six end users). 100%
of the revenue from commercial sales is from one end user (2015: nil).

aa) rOunDing OF aMOuntS
The entity has applied the relief available to it under ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191 and
accordingly, amounts in the financial statements and directors’
report have been rounded off to the nearest $1,000, or in certain cases,
the nearest dollar.

◦ the change attributable to changes in credit risk are

presented in Other Comprehensive Income (‘OCI’)

◦ the remaining change is presented in profit or loss

If this approach creates or enlarges an accounting mismatch in
the profit or loss, the effect of the changes in credit risk are also
presented in profit or loss. Otherwise, the following requirements
have generally been carried forward unchanged from AASB 139
into AASB 9:

◦ classification and measurement of financial liabilities; and

◦ derecognition requirements

for financial assets and

liabilities.

AASB 9 requirements regarding hedge accounting represent a
substantial overhaul of hedge accounting that enable entities to better
reflect their risk management activities in the financial statements.

Furthermore, AASB 9 introduces a new impairment model based
on expected credit losses. This model makes use of more forward-
looking information and applies to all financial instruments that are
subject to impairment accounting.

The entity is yet to undertake a detailed assessment of the impact
of AASB 9. However, based on the entity’s preliminary assessment,
the Standard is not expected to have a material impact on the
transactions and balances recognised in the financial statements
when it is first adopted for the year ending 30 June 2019.

aaSb 15 revenue from Contracts with Customers
AASB 15:

• replaces AASB 15 Revenue and some revenue-related

Interpretations:

◦ establishes a new control-based revenue recognition model;

◦ changes the basis for deciding whether revenue is to be

recognised over time or at a point in time;

◦ provides new and more detailed guidance on specific topics
(e.g., multiple element arrangements, variable pricing,
rights of return, warranties and licensing); and

◦ expands and improves disclosures about revenue.

The entity is yet to undertake a detailed assessment of the impact
of AASB 15. However, based on the entity’s preliminary assessment,
the Standard is not expected to have a material impact on the
transactions and balances recognised in the financial statements
when it is first adopted for the year ending 30 June 2019.

aaSb 16 leases
AASB 16:

• replaces AASB 117 Leases and some lease-related Interpretations

• requires all leases to be accounted for ‘on-balance sheet’ by

lessees, other than short-term and low value asset leases

• provides new guidance on the application of the definition of

lease and on sale and lease back accounting

• largely retains the existing lessor accounting requirements in

AASB 117

• requires new and different disclosures about leases

The entity is yet to undertake a detailed assessment of the impact
of AASB 16. However, based on the entity’s preliminary assessment,
the Standard is not expected to have a material impact on the
transactions and balances recognised in the financial statements
when it is first adopted for the year ending 30 June 2020.

2. profit/(Loss) froM Continuing operations

notes t o the Financia L stateMents

(a)

revenues

interest revenue – other persons

Sales reimbursements

Commercial sales

Consolidated entity

2016

208,368

3,613,764

2,597,575

2015

348,409

2,911,553

total revenues

6,419,707

3,259,962

(b)

other inCoMe

Government R&D tax incentive

Gain/(loss) on restating foreign currency creditors and currencies held

total other inCome

(C)

expenses

Clinical development costs

Drug formulation R&D, manufacture & distribution

Regulatory (Pre & Post Marketing) & Non-clinical

Clinical, Regulatory & Commercial overheads

Business marketing & listing

Licenses patents and trademarks

General operations (incl Board)

total expenses

(D)

profit/(Loss) before inCoMe tax inCLuDes the foLLowing speCifiC expenses

Employee benefits expense

depreciation on property, plant & equipment

loss on sale of property, plant and equipment

Share-based payments

Operating lease expense – minimum lease payments

609,059

187,472

796,531

133,461

1,022,082

973,221

406,126

64,147

470,273

231,963

450,090

662,069

1,606,026

1,258,823

777,725

266,072

801,556

232,150

5,591,369

10,507,960

10,369,956

14,144,611

4,360,203

3,900,848

25,526

1,670,425

356,842

26,539

29,875

5,676,092

339,744

3. inCoMe tax expense

notes t o the Financia L stateMents

(a)

the priMa faCie tax on profit (Loss) is reConCiLeD to the inCoMe tax expense (benefit) as foLLows:

Prima facie tax payable on profit (loss) from ordinary activities before income tax at 30% (2015: 30%):

(946,115)

(3,124,313)

Consolidated entity

2016

2015

Add:

Tax effect of

(b)

Tax losses

Non deductible entertainment

Share-based payments

Research and development deduction

(Over)/under provision of income tax in previous years

Refundable tax offset

Other

939

501,128

396,702

235,582

(182,718)

4,318

1,928

1,702,828

280,087

(424,901)

(121,838)

Total deferred tax assets not brought to account

9,836

(1,686,186)

DeferreD tax assets arising froM unConfirMeD tax Losses anD net tiMing DifferenCes not brought to aCCount at reporting Date
as reaLisation of the benefit is not regarDeD as probabLe. the benefits wiLL onLy be obtaineD if the ConDitions set out in note
1(b) oCCur:

Net temporary differences

total

The tax rate used in this report is the corporate tax rate of 30%. There has been no change in the corporate tax rate when compared with the previous reporting period.

4. traDe anD other reCeivabLes

Current

Trade debtors

Accrued income

Sundry debtors

total

38,852,707

40,540,810

(94,113)

(1,772,380)

38,758,594

38,768,430

Consolidated entity

2015

1,478,310

32,731

449,412

1,960,453

2016

2,759,012

1,320,996

743,762

4,823,770

The carrying amount of receivables is a reasonable approximation of fair value. All of the Group’s trade and other receivables have been reviewed for indicators of impairment. All receivables are non-interest bearing.

ageing anD iMpairMent Losses

The ageing of the trade receivables for the Group at reporting date was:

Not past due

Past due 61-90 days

Past due >90 days

total

amount impaired

amount not impaired

total

amount impaired

amount not impaired

total

2016

2015

2,759,012

969,462

195,711

313,137

1,478,310

notes t o the Financia L stateMents

5. inventory

Current inventory

Raw materials – at cost

Finished goods – at cost

total

6. other assets

Current prepayMents

Prepaid peptide

Other

total

7. property, pLant anD equipMent

pLant anD equipMent

At cost

Less: accumulated depreciation

suB-total

furniture anD fittings

At cost

Less: accumulated depreciation

suB-total

total property, plant and equipment

Consolidated entity

2015

391,156

445,979

837,135

Consolidated entity

2015

134,722

69,901

204,623

Consolidated entity

2015

364,171

(299,015)

65,156

17,182

(12,969)

4,213

69,369

2016

364,879

717,284

1,082,163

2016

138,080

84,881

222,961

2016

405,484

(319,167)

86,317

96,044

(17,691)

78,353

164,670

notes t o the Financia L stateMents

MoveMents in Carrying aMounts - property, pLant anD equipMent

movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the financial year.

plant and equipment

furniture and fittings

total

Consolidated entity

Carrying amount at 30 June 2014

Additions

Disposals

Depreciation written back on disposal

Depreciations expense

exchange differences

Carrying amount at 30 June 2015

Additions

Disposals

Depreciation written back on disposal

Depreciations expense

Make-good

exchange differences

Carrying amount at 30 June 2016

8. interests in subsiDiaries

name of entity

Country of inCorporation

87,614

12,096

(105,327)

96,257

(23,328)

(2,156)

65,156

42,496

(1,184)

944

(20,804)

(291)

86,317

26,847

114,461

12,096

(62,472)

(167,799)

43,735

(3,211)

(686)

4,213

139,992

(26,539)

(2,842)

69,369

64,157

106,653

(4,722)

14,705

(1,184)

944

(25,526)

14,705

(291)

78,353

164,670

ownership interest

2016

2015

parent entity

ClINuvEl PhARmACEuTICAlS lTd

Australia

ControLLeD entities

A.C.N. 108 768 896 Pty Ltd

ClINuvEl (uK) lTd

CLiNuveL, iNC.

CLiNuveL AG

ClINuvEl SINGAPORE PTE lTd

vAllAuRIx PTE lTd

Australia

united Kingdom

united States

Switzerland

Singapore

100%

82%

100%

82%

9. traDe anD other payabLes

notes t o the Financia L stateMents

Current

total

unsecured trade creditors

Sundry creditors and accrued expenses

(a)

aggregate aMounts payabLe to:

Directors and Director-related entities

Consolidated entity

2015

260,600

1,600,036

1,860,636

2016

231,016

1,342,345

1,573,361

373,712

476,516

(b)

austraLian DoLLar equivaLents of aMounts payabLe in foreign CurrenCies not effeCtiveLy heDgeD anD inCLuDeD in traDe anD
sunDry CreDitors:

uS Dollars

British Pounds

Swiss Franc

Singapore Dollars

Other

total

For an analysis of the sensitivity of trade and other payables to foreign currency risk refer to Note 21.

(C)

terMs anD ConDitions:

Trade and sundry creditors are non-interest bearing and normally settled on 30 day terms.

10. provisions

Current

Employee benefits

total

non-Current

Employee benefits

Other provisions

total

201,860

164

202,024

108,683

204,287

389,607

702,577

Consolidated entity

2016

715,017

627

14,742

15,369

2015

574,640

3,308

notes t o the Financia L stateMents

MoveMents in Carrying aMounts - provisions

The carrying amounts and movements in other provisions account are as follows:

Carrying amount at 30 June 2015

Provisions made during the year

unwind of discount

Carrying amount at 30 June 2016

11. ContributeD equity

(a) issueD anD paiD up CapitaL

Consolidated entity

make-good

total

14,704

14,742

2016

14,704

14,742

Consolidated entity

2015

47,080,637 fully paid ordinary shares (2015: 44,554,787)

146,764,500

138,465,335

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up
on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. The Company does not have a limited amount of authorised capital and issued shares do not have a par
value.

(b) MoveMents in orDinary share CapitaL

2016

no.

Consolidated entity

2015

no.

at the Beginning of the finanCial year

44,554,787

138,465,335

42,391,435

133,567,056

issued during the year

2,525,850

8,335,305

59,810

250,000

Conditional Rights issued and transferred from Conditional Rights reserve

Less: transaction costs

2,103,542

4,650,579

(36,140)

(2,300)

BalanCe at the end of the finanCial year

47,080,637

146,764,500

44,554,787

138,465,335

During the year there were no Conditional Performance Rights issued or exercised.

As at 30 June 2016 the following Conditional Performance Rights existed which if exercised, would result in the issue of fully paid ordinary shares:

expiry Date

exerCise priCe

nuMber of ConDitionaL rights

upon achievement of various performance milestones

Nil$

2,556,250

12. reserves

notes t o the Financia L stateMents

ConDitionaL perforManCe rights reserve:

BalanCe at the Beginning of period

Share-based payment

Transfer to share capital

Lapsed, forfeited Rights

Consolidated entity

2016

2,313,678

1,670,425

2015

1,321,529

5,676,092

(4,650,579)

(33,364)

BalanCe at the end of period

3,984,103

2,313,678

The Conditional Performance Rights reserve arises on the grant of Conditional Performance Rights to eligible employees under the Conditional Performance Rights Plan. Amounts are transferred out of the reserve and into
issued capital when the Rights are exercised and to retained earnings when Rights lapse.

foreign CurrenCy transLation reserve:

BalanCe at the Beginning of period

Translating foreign subsidiary to current rate at reporting date

BalanCe at the end of period

total reserves

13. aCCuMuLateD Losses

384,660

(273,786)

110,874

116,517

268,143

384,660

4,094,977

2,698,338

Consolidated entity

non-Controlling interest

2016

2015

2016

Accumulated losses at the beginning of the year

(129,942,039)

(119,577,370)

(16,343)

Transfer from Performance Rights reserve of lapsed & expired Rights

33,364

Net loss attributable to the members of ClINuvEl PhARmACEuTICAlS lTd

(3,121,200)

(10,398,033)

aCCumulated losses at the end of the finanCial year

(133,063,239)

(129,942,039)

(32,518)

(48,861)

2015

(16,343)

14. Lease CoMMitMents

operating Lease CoMMitMents

Non-cancellable operating leases contracted for but not capitalised in the accounts

Payable:

total

not later than 1 year

later than 1 year but not later than 5 years

Consolidated entity

2016

2015

155,189

91,934

247,123

172,795

33,355

206,150

Operating leases comprises commitments for office premises, accommodation for relocated employees and miscellaneous equipment.

No contingent rental clauses exist in lease agreements. Lease agreements range from 3 months to 34 months as from the reporting date and contain renewal options. Fixed increases are factored into some of the agreements.

notes t o the Financia L stateMents

15. earnings per share (eps)

(a) Basic earnings per share (cents per share)

Consolidated entity

2016

(7.0)

2015

(24.0)

(b) The Weighted Average Number of Ordinary Shares (WANOS) used in the calculation of basic earnings per share

45,286,317

43,373,683

(3,153,718)

(10,414,376)

As at 30 June 2016 the Company had on issue unlisted Performance Rights over unissued capital. These Rights are not considered dilutive as they do not increase the net loss per share.

Between the reporting date and the date of the completion of this financial report, 644,590 unlisted Performance Rights became exercisable and were issued into ordinary shares. Otherwise there have been no other
transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares outstanding between the reporting date and the date of the completion of this financial report.

As the group is in a loss situation all Rights are considered anti dilutive and have been excluded from the calculation of diluted earnings per share. Therefore basic and diluted earnings per share are the same. The number of
Performance Rights that could potentially dilute earnings per share in the future, as at the date of this report is 1,911,660 (2015: 2,556,250).

16. Cash fLow inforMation

(a) reConCiLiation of Cash

Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the balance sheet as follows:

2016

Cash at bank

Cash on hand

Deposits on call

Term deposits

Security bonds

total Cash

3,936,720

555

79,147

9,750,000

78,281

13,844,703

Consolidated entity

2015

2,840,536

618

344,469

7,300,000

86,672

10,572,295

(b) reConCiLiation of Cash fLows froM operating aCtivities with operating profit (Loss)

operating profit (loss) after inCome tax

(3,153,718)

(10,414,376)

Non cash flows in operating (loss):

depreciation expense on property, plant & equipment

exchange rate effect on foreign currencies held

executive share option expense

Loss on sale of non-current assets

unrealised loss on foreign exchange translation

Changes in assets and liabilities:

(increase)/decrease in receivables

(increase)/decrease in inventories

(increase)/decrease in prepayments

increase/(decrease) in payables

increase/(decrease) in provisions

25,526

(19,028)

1,670,425

(273,786)

(2,863,317)

(245,028)

(18,338)

(297,403)

137,734

26,539

(264,521)

5,676,092

29,251

268,143

(356,822)

(837,135)

623,446

762,304

(42,733)

net Cash used in operating aCtivities

(5,036,933)

(4,529,812)

Cash at bank earns floating rates based on daily bank deposit rates. The carrying amounts of cash and cash equivalents represent fair value.

The effective interest rate on short-term deposits was 3.01% (2015: 3.48%). These deposits have an average maturity date of 165 days (2015: 115 days).

notes t o the Financia L stateMents

17. key ManageMent personneL DisCLosures

the DireCtors of CLinuveL pharMaCeutiCaLs LtD During the year were:

Mr. S.R. McLiesh (Non-executive Chair)

Mrs. B.M. Shanahan (Non-executive Director)

Dr. P.J. Wolgen (Managing Director)

Mr. e. ishag (Non-executive Director)

Mr. W.A. Blijdorp (Non-executive Director)

the other key ManageMent personneL of CLinuveL pharMaCeutiCaLs LtD During the year were:

dr. d. J. Wright (Acting Chief Scientific Officer)

mr. d. m. Keamy (Chief Financial Officer, Company Secretary)

Please see the Remuneration Report from page 14 for further information.

key ManageMent personneL CoMpensation

short-terM eMpLoyee benefits:

Post-employment benefits

Long-terM benefits:

Termination benefits

Share-based payments

total

No loans or other transactions existed with key management personnel.

18. auDitor's reMuneration

Amounts received or due and receivable by Grant Thornton for:

audit services and review

other services

total

Consolidated entity

2015

2,154,478

55,213

5,533,958

7,743,649

2016

1,976,218

55,100

1,410,279

3,441,597

Consolidated entity

2016

67,500

27,500

95,000

2015

66,500

notes t o the Financia L stateMents

19. related party disclosures
directorS
The Directors of CLINUVEL PHARMACEUTICALS LTD during the
financial year were:

21. financial instruments
CLINUVEL PHARMACEUTICALS LTD and consolidated entities have
exposure to the following risks from its use in financial instruments:

S.R. McLiesh, P.J. Wolgen, B.M. Shanahan, E. Ishag, W.A. Blijdorp.

whOlly-OwnED grOuP tranSaCtiOnS
loans
The loan receivable by CLINUVEL PHARMACEUTICALS LTD from
A.C.N. 108 768 896 Pty Ltd is non-interest bearing. A provision
for non-recovery has been raised in the accounts of CLINUVEL
PHARMACEUTICALS LTD to the extent that a deficiency in net assets
exists in A.C.N. 108 768 896 Pty Ltd. The loan to A.C.N. 108 768 896 Pty
Ltd as at 30 June 2016 is $4,370,640 (2015: $4,370,640).

a) Market Risk

b) Credit Risk

c) Liquidity Risk

The Board of Directors oversees and reviews the effectiveness of
the risk management systems implemented by management. The
Board has assigned responsibility to the Audit and Risk committee to
review and report back to the Board in relation to the Company’s risk
management systems.

The loan receivable by CLINUVEL PHARMACEUTICALS LTD from
CLINUVEL, INC. is non-interest bearing. Repayment of the loan will
commence upon commercialisation of the Company’s drug candidate.
A provision for non-recovery has been raised in the accounts of
CLINUVEL PHARMACEUTICALS LTD to the extent that a deficiency
in net assets exists in CLINUVEL, INC. The loan to CLINUVEL, INC. as
at 30 June 2016 is $10,640,482 (2015: $10,338,331).

a) MarKet riSK
Market risk is the risk of changes to market prices of foreign
exchange purchases, interest rates and/or equity prices resulting in a
change in value of the financial instruments held by the consolidated
entity. The objective to manage market risk is to ensure exposures
are contained within acceptable parameters, to minimise costs and
to stabilise existing assets.

Foreign Currency risk
The consolidated entity is exposed to foreign currency risk on future
commercial transactions and recognised assets and liabilities that
are denominated in a currency other than the functional currency of
each of the group’s entities, primarily US dollars (USD), Euros (EUR),
Swiss francs (CHF), Singapore dollars (SGD) and Great British pounds
(GBP). The parent entity is exposed to the risk of its cash flows being
adversely affected by movements in exchange rates that will increase
the Australian dollar value of foreign currency payables.

The consolidated entity’s policy of managing foreign currency risk
is to purchase foreign currencies equivalent to the cash outflow
projected over minimum 30 days by the placement of market orders
or forward exchange contracts to achieve a target rate of exchange,
with protection floors in the event of a depreciating Australian dollar
exchange rate, to run for the time between recognising the exposure
and the time of payment. In the event of an appreciating Australian
dollar, the amount of foreign currency held is minimised at a level
to only meet short term obligations in order to maximise gains in
an appreciating Australian currency. CLINUVEL does not engage in
speculative transactions in its management of foreign currency risk.
No forward exchange contracts had been entered into as at 30 June
2016 and as at 30 June 2015.

The loan receivable by CLINUVEL PHARMACEUTICALS LTD from
CLINUVEL AG is non-interest bearing. Repayment of the loan will
commence upon commercialisation of the Company’s drug candidate.
A provision for non-recovery has been raised in the accounts of
CLINUVEL PHARMACEUTICALS LTD to the extent that a deficiency
in net assets exists in CLINUVEL AG. The loan to CLINUVEL AG as at
30 June 2016 is $18,293,460 (2015: $19,042,355).

The loan receivable by CLINUVEL PHARMACEUTICALS LTD from
CLINUVEL SINGAPORE PTE LTD is non-interest bearing. Repayment
of the loan will commence upon commercialisation of the Company’s
drug candidate. A provision for non-recovery has been raised in the
accounts of CLINUVEL PHARMACEUTICALS LTD to the extent that
a deficiency in net assets exists in CLINUVEL SINGAPORE PTE LTD.
The loan to CLINUVEL SINGAPORE PTE LTD as at 30 June 2016 is
$215,774 (2015: $63,026).

The loan receivable by CLINUVEL PHARMACEUTICALS LTD from
CLINUVEL (UK) LTD is non-interest bearing. Repayment of the loan
will commence upon commercialisation of the Company’s drug
candidate. A provision for non-recovery has been raised in the
accounts of CLINUVEL PHARMACEUTICALS LTD to the extent that
a deficiency in net assets exists in CLINUVEL (UK) LTD. The loan to
CLINUVEL (UK) LTD as at 30 June 2016 is $3,248,740 (2015: $198,933).

Director related and key management
personnel transactions and entities
There are no transactions and relationships in existence as at 30 June
2016 between Directors and the Company and its related entities.

20. segment information
A segment is a component of the consolidated entity that earns
revenues or incurs expenses whose results are regularly reviewed by
the chief operating decision makers and for which discrete financial
information is prepared. The consolidated entity has no operating
segments within the definition of AASB 8 Operating Segments.

notes t o the Financia L stateMents

the ConsoLiDateD entity's exposure to foreign CurrenCy risk at 30 June 2016

Cash & Cash
equivalents

trade
deBtors &
other assets

trade, other
payaBles &
provisions

Consolidated entity

2016

total

Cash & Cash
equivalents

trade
deBtors &
other assets

trade, other
payaBles &
provisions

2015

total

uSD

euR

CHF

GBP

SGD

Other

897,509

717,433

500,344

137,621

550,442

1,915

(467,104)

432,320

2,433,538

(42,150)

3,108,821

409,378

(129,709)

780,013

51,624

5,225

(61,149)

128,096

(752,847)

(197,180)

(834)

451,661

497,192

477,211

12,875

335,961

(535,129)

(83,468)

931,000

219,519

3,454

2,730

(35,108)

1,393,084

(130,332)

566,398

(112,669)

(96,340)

(738,815)

(400,124)

Sensitivity analysis of Foreign Currency risk
During the financial year the Company had a principal foreign
currency transaction risk exposure to the Singapore dollar. Assuming
all other variables remain constant, an appreciation in the Australian
dollar is advantageous to the consolidated entity as foreign currencies
are required to be purchased from Australian dollars to pay for a key
component of the clinical development program.

For the consolidated entity, a 5% appreciation of the Australian dollar
against the Singapore currency would have increased profit and loss
and equity by $81,241 for the year ended 30 June 2016 (2015: $71,646),
on the basis that all other variables remain constant. 5% is considered
representative of the market volatility in the Australian/Singapore
dollar rate for the period.

For the consolidated entity, a depreciation of the Australian dollar
against the Singapore currency would have an equal but opposite
effect to the above, on the basis that all other variables remain
constant.

The Group’s exposure to other foreign currency movements is not
considered as material.

B) credit riSK
Credit risk arises from the potential failure of counterparties to meet
their contractual obligations, resulting in a loss to the consolidated
entity.

Credit risk in relation to the consolidated entity is the cash and
cash equivalents deposited with banks, trade and other receivables.
Exposure to credit risk in trade debtors is limited to eight government
funded counterparties across Italian, Swiss and Dutch medical
institutions.

The maximum credit exposure is the carrying value of the cash and
cash equivalents deposited with banks, trade and other debtors and
foreign, wholly-owned subsidiaries.

C) liquiDity riSk
Liquidity risk is the risk the consolidated entity will not be able to
meets its financial obligations when they fall due. It is the policy of
the consolidated entity to ensure there is sufficient liquidity to meet
is liabilities when due without incurring unnecessary loss or damage.
The consolidated entity holds cash and cash equivalents in liquid
markets. It does not hold financing facilities, overdrafts or borrowings.

interest rate risk
The consolidated entity holds floating interest bearing assets
therefore exposure to interest rate risk exists. It does not hold interest
bearing liabilities.

Fair value Estimation
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement for disclosure purposes.

The consolidated entity currently finances its operations through
reserves of cash and liquid resources and does not have a borrowing
requirement. In order to be protected from, and to take advantage of,
interest rate movements it is the consolidated entity’s policy to place
cash into deposits and other financial assets at both fixed and variable
(floating) rates. The Board monitors the movements in interest rates
in combination with current cash requirements to ensure the mix
and level of fixed and floating returns is in the best interests of the
consolidated entity.

Sensitivity analysis of interest rate risk
For the consolidated entity, at 30 June 2016, if interest rates had
changed by +/- 50 basis points from the year-end rates (a movement
considered reflective of the level of interest rate movements
throughout the course of the financial year), with effect from the
beginning of the year, profit and equity would be $51,523 higher/
lower (2015: $59,612 higher/ lower). This analysis assumes all other
variables are held constant.

Price risk
CLINUVEL PHARMACEUTICALS LTD and its consolidated entities
was formerly exposed to price risk in its investments in income
securities classified in the Statement of Financial Position as
held for trading. The consolidated entity no longer holds income
securities. Neither the consolidated entity nor the parent is exposed
to commodity price risk.

The fair value of financial instruments traded in active markets is
based on quoted market prices at reporting date. The quoted market
price for the consolidated entity is the bid price. For longer term debt
instruments held by the consolidated entity, dealer quotes are used to
determine fair value.

The carrying value of trade payables is assumed to approximate their
fair values due to their short-term nature.

The consolidated entity manages its liquidity needs by carefully
identifying expected operational expenses by month and ensuring
sufficient cash is on hand, across appropriate currencies, in the day-
to-day bank accounts for a minimum 30 day period. When further
liquidity is required the consolidated entity draws down on its cash
under management to service future liquidity needs.

limited

Capital risk Management
The consolidated entity’s equity
to shareholder
contributions, supported by the cash inflows received from the full
cost reimbursement programs in Italy and Switzerland for providing
SCENESSE® to EPP patients. Its capital management objectives is
limited to ensuring the equity available to the Company will allow it
to continue as a going concern and to realise adequate shareholder
return by progressing in its developmental research of SCENESSE®
and achieving eventual commercialisation whereby revenues will
exceed expenditures.

ContraCtuaL Maturities of finanCiaL assets as at 30 June 2016

notes t o the Financia L stateMents

Cash anD Cash equivaLents

Carrying amount

6 months or less

Greater than 6 months

total

other finanCiaL assets (inCLuDes traDe anD other reCeivabLes)

Carrying amount

6 months or less

Greater than 6 months

total

ContraCtuaL Maturities of finanCiaL LiabiLities as at 30 June 2016

traDe anD other payabLes

Carrying amount

6 months or less

Greater than 6 months

total

22. eMpLoyee benefits

the aggregate eMpLoyee benefit LiabiLity is CoMpriseD of :

Provision for annual leave

Provision for long service leave

Accrued FBT, payroll, superannuation, pension funds, employee insurances

Consolidated entity

2015

10,572,295

2016

13,844,703

10,572,295

4,823,770

2016

1,573,361

1,551,891

21,470

1,573,361

2016

413,281

302,362

500,723

1,960,453

1,803,884

156,569

1,960,453

Consolidated entity

2015

1,860,636

1,798,917

61,719

1,860,636

Consolidated entity

2015

316,271

261,676

660,624

total

1,216,366

1,238,571

notes t o the Financia L stateMents

Share-BaSed PayMent S
The consolidated entity has two Conditional Performance Rights
schemes which are ownership based for key management personnel
and select consultants (including Directors) of the Company.

The number of Rights granted is subject to approval by the
Remuneration Committee. Performance Rights currently have
specific terms and conditions, being the achievement of performance
milestones set by the Directors of the consolidated entity.

a) Conditional Performance rights Plan (2009)
The Conditional Performance Rights Plan (2009) is available to eligible
employees of the Company. Any issue of Performance Rights to
executive Directors requires shareholder approval in accordance with
ASX Listing Rules. All Performance Rights convert to one ordinary
share of the consolidated entity, are issued for nil consideration, have
no voting rights, are non-transferable and are not listed on the ASX.
They can be converted to ordinary shares at any time once the vesting
conditions attached to the Performance Rights have been achieved,
whereby they will be held by a Scheme Trustee on behalf of the
eligible employee for up to 7 years. The eligible employee can request
for shares to be transferred from the Scheme Trust after 7 years or

at an earlier date if the eligible employee is no longer employed by
the Company or all transfer restrictions are satisfied or waived by the
Board in its discretion.

b) Performance rights Plan (2014)
The Performance Rights Plan (2014) is available to eligible persons of
the Company. Any issue of Performance Rights to executive Directors
requires shareholder approval in accordance with ASX Listing
Rules. All Performance Rights convert to one ordinary share of the
consolidated entity, are issued for nil consideration, have no voting
rights, are not listed on the ASX and are non-tradeable (other than
with prior written Board consent). They can be converted to ordinary
shares at any time once the vesting conditions attached to the
Performance Rights have been achieved, whereby, at the discretion
of the Board, they will be held by a Scheme Trustee on behalf of the
eligible person. The eligible person cannot trade in the shares held
by the Scheme Trust without prior written Board consent until the
earlier of 7 years from grant date of Performance Rights, when the
eligible person ceases employment or when all transfer restrictions
are satisfied or waived by the Board in its discretion. Performance
Rights under this Plan lapses after 7 years from grant date.

the foLLowing share-baseD payMent arrangeMents were in existenCe at 30 June 2016

performanCe
rights series

numBer

grant date

expiry date

exerCise
priCe

fair value at
grant date

issued 07/01/2010

10,000

07/01/2010

issued 25/11/2010

299,999

25/11/2010

issued 16/09/2011

381,386

16/09/2011

issued 16/11/2011

90,000

16/11/2011

issued 14/01/2013

75,000

14/01/2013

issued 04/12/2014

1,246,365

28/11/2014

issued 17/03/2015

453,500

17/03/2015

The earlier of achievement of specific performance milestones
and cessation of employment/directorship

$ Nil

$1.70

$1.04

Between $0.55 and
$0.72

$0.67

$1.19

$2.60

$2.16

hoLDings of aLL issueD ConDitionaL perforManCe rights – 2016

notes t o the Financia L stateMents

performanCe
rights series

issued 07/01/2010

issued 25/11/2010

issued 16/09/2011

issued 16/11/2011

issued 14/01/2013

BalanCe at
start of
year

10,000

299,999

381,386

90,000

75,000

issued 04/12/2014

1,246,365

issued 17/03/2015

453,500

total

2,556,250

granted as
Compensation

exerCised

expired &
lapsed

BalanCe at end
of year

vested and
exerCisaBle

unvested

10,000

299,999

381,386

90,000

75,000

1,246,365

453,500

2,556,250

10,000

553,890

90,700

299,999

381,386

90,000

75,000

692,475

362,800

654,590

1,901,660

Weighted average
exercise price

$Nil

Performance Rights were priced using either a binomial or trinomial pricing model. There is no limitation on the life of the right. Expected volatility of each right is based on the historical share price for the approximate length of
time for the expected life of the Rights. it is assumed that the consolidated entity will not pay any dividends during the life of the option, and the risk free rate used in the pricing model is assumed to be the yield on ranging from
1 year to 10 year Government bonds. The exercise conditions are non-marketable and a discount for lack of marketability was applied to the pricing model.

hoLDings of aLL issueD ConDitionaL perforManCe rights – 2015

performanCe
rights series

BalanCe at
start of year

granted as
Compensation

issued 16/10/2009

issued 07/01/2010

issued 25/11/2010

issued 16/09/2011

issued 16/11/2011

issued 14/01/2013

issued 04/12/2014

issued 17/03/2015

104,500

10,000

449,166

447,816

230,000

225,000

exerCised

(104,500)

(149,167)

(66,430)

(90,000)

(150,000)

2,789,810

(1,543,445)

453,500

expired &
lapsed

BalanCe at
end of year

vested and
exerCisaBle

unvested

(50,000)

10,000

299,999

381,386

90,000

75,000

1,246,365

453,500

10,000

299,999

381,386

90,000

75,000

1,246,365

453,500

total

1,466,482

3,243,310

(2,103,542)

(50,000)

2,556,250

10,000

2,546,250

Weighted average
exercise price

$Nil

Performance Rights were priced using either a binomial or trinomial pricing model. There is no limitation on the life of the right. Expected volatility of each right is based on the historical share price for the approximate length
of time for the expected life of the Rights. it is assumed that the consolidated entity will not pay any dividends during the life of the option, and the risk free rate used in the pricing model is assumed to be the yield on 10 year
Government bonds. The exercise conditions are non-marketable and a discount for lack of marketability was applied to the pricing model.

23. CLinuveL pharMaCeutiCaLs LtD parent CoMpany inforMation

notes t o the Financia L stateMents

Clinuvel pharmaCeutiCals ltd

2016

13,674,405

6,355,032

20,029,437

1,244,389

627

1,245,016

146,764,500

3,984,119

(131,964,198)

18,784,421

(3,036,801)

2015

10,198,964

3,401,189

13,600,153

1,745,213

3,308

1,748,521

138,465,335

2,313,694

(128,927,397)

11,851,632

(9,552,573)

assets

Current assets

Non-current assets

total assets

LiabiLities

Current liabilities

Non-current liabilities

total liaBilities

equity

Issued equity

Share–based payments reserve

Accumulated losses

total equity

finanCiaL perforManCe

Net profit (loss) for the year

Other comprehensive income

total Comprehensive inCome

24. suBsequent eVents
There have not been any matters financial in nature, other than
reference to the financial statements that has arisen since the end
of the financial year that has affected or could significantly affect the
operations of the consolidated entity.

25. additional company information
CLINUVEL PHARMACEUTICALS LTD is a listed public company
incorporated and operating in Australia.

The Registered office is:

Level 5, 160 Queen St
Melbourne VIC 3000
Ph: (03) 9660 4900

directors’ declaration

In the opinion of the Directors:

1. the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:

a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of their performance for the year

ended on that date; and

b) complying with Accounting Standards; and

c) complying with International financial Reporting Standards as disclosed in Note 1

2. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

3. the remuneration disclosures set out in the Annual Report comply with Australian Accounting Standards 124 Related Party Disclosures

and the Corporations Regulations 2001.

This declaration is made in accordance with a resolution of the Board of Directors. The Directors have been given the declarations by the Chief
Executive Officer and Chief Financial Officer required by Section 295A of the Corporations Act 2001.

Dr. Philippe Wolgen, MBA MD

Director

Dated this 28th day of August, 2016

auDitor's report

The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000

Correspondence to:
GPO Box 4736
Melbourne Victoria 3001

T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au

Independent Auditor’s Report
To the Members of Clinuvel Pharmaceuticals Limited

Report on the financial report
We have audited the accompanying financial report of Clinuvel Pharmaceuticals Limited
(the “Company”), which comprises the consolidated statement of financial position as at 30
June 2016, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for
the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information and the directors’ declaration of the consolidated entity
comprising the Company and the entities it controlled at the year’s end or from time to time
during the financial year.

Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001. The Directors’ responsibility also includes 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. The Directors also state, in the notes to the financial report, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, the financial
statements comply with International Financial Reporting Standards.

Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. Those standards
require us to comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is
free from material misstatement.

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm
is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.

auDitor's report

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
report, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the
Company’s preparation of the financial report that gives a true and fair view in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Directors, as well as evaluating the
overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.

Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.

Auditor’s opinion
In our opinion:

the financial report of Clinuvel Pharmaceuticals Limited is in accordance with the
Corporations Act 2001, including:

giving a true and fair view of the consolidated entity’s financial position as at 30
June 2016 and of its performance for the year ended on that date; and

complying with Australian Accounting Standards and the Corporations
Regulations 2001; and

the financial report also complies with International Financial Reporting Standards as
disclosed in the notes to the financial statements.

Report on the remuneration report
We have audited the remuneration report included in pages 10 to 17 of the directors’ report
for the year ended 30 June 2016. 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.

auDitor's report

Auditor’s opinion on the remuneration report
In our opinion, the remuneration report of Clinuvel Pharmaceuticals Limited for the year
ended 30 June 2016, complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

B.A. Mackenzie
Partner - Audit & Assurance

Melbourne, 25 August 2016

auDitor's inDepenDance DecLaration

The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000

Correspondence to:
GPO Box 4736
Melbourne Victoria 3001

T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au

Auditor’s Independence Declaration
To the Directors of Clinuvel Pharmaceuticals Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead
auditor for the audit of Clinuvel Pharmaceuticals Limited for the year ended 30 June 2016, I
declare that, to the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the
audit.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

B. A. Mackenzie
Partner - Audit & Assurance

Melbourne, 25 August 2016

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.

shareholder information
as at 30 septemBer 2016

Additional information as at 30 September 2016 required by the ASX and not shown elsewhere in this report is as follows:

1. shareholding

a) Distribution of sharehoLDer nuMbers

Category (size of holding)

total holders

1-1,000

1,001-5,000

5,001-10,000

10,001-100,000

100,001-999,999,999

total

1,811

698

137

200

2,873

b) sharehoLDings heLD in Less than MarketabLe parCeLs

total

minimum parCel size

Minimum $ 500.00 parcel at $ 6.06 per unit

units

698,569

1,653,931

1,021,479

5,339,440

39,011,808

47,725,227

holders

256

ordinary fully paid shares

% of issued Capital

1.46

3.47

2.14

11.19

81.74

100.00

units

5,755

C) substantiaL sharehoLDings (aCCorDing to Most reCent substantiaL hoLDer DisCLosures reCeiveD up
to 3 oCtober 2016)

name

Lagoda investment Management, LLC

FiL Limited

A.C.N. 108 768 896 Pty Ltd*

ender 1 LLC

no. ordinary shares & ameriCan depository reCeipts

4,720,236

4,531,171

3,721,898

2,340,824

* Inclusive of the relevant interest of shareholder dr Philippe Jacques Wolgen for 2,474,836 quoted ordinary shares, as disclosed in a further substantial holder disclosure notice dated 10 August 2016.

D) voting rights

The voting rights attaching to each class of equity securities are set out below:

(i) orDinary shares

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

(ii) perforManCe rights

Performance Rights have no voting rights.

sharehoLDer in ForMation

e) Largest sharehoLDers

position name

numBer of ordinary
fully paid shares held

% held of issued
ordinary Capital

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

J P mORGAN NOmINEES AuSTRAlIA lImITEd

NATIONAl NOmINEES lImITEd

hSBC CuSTOdY NOmINEES (AuSTRAlIA) lImITEd

ACN 108 768 896 PTY lTd

eNDeR 1 LLC

CITICORP NOmINEES PTY lImITEd

DR MARK eDWiN BADCOCK

hSBC CuSTOdY NOmINEES (AuSTRAlIA) lImITEd - A/C 2

NATIONAl NOmINEES lImITEd

BIOTECh lAB SINGAPORE PTE lTd

m BAdCOCK ANd P Chu SuPERANNuATION FuNd PTY lTd

BNP PARIBAS NOmS PTY lTd

hSBC CuSTOdY NOmINEES (AuSTRAlIA) lImITEd-GSCO ECA

hSBC CuSTOdY NOmINEES (AuSTRAlIA) lImITEd

hEAdSTART GlOBAl hOldINGS lTd

ABN AmRO ClEARING SYdNEY NOmINEES PTY lTd

mERRIll lYNCh (AuSTRAlIA) NOmINEES PTY lImITEd

MR DAviD JOHN LeWiS

mR dAvId WIllIAm TREvORROW

DR CORiNNe GiNiFeR

totals: top 20 holders of ordinary fully paid shares (total)

total remaining holders BalanCe

9,622,582

8,091,144

6,310,798

3,720,898

2,590,824

1,667,617

842,078

784,143

695,725

604,598

500,000

488,259

403,958

364,471

337,633

274,033

203,959

200,000

195,122

183,849

38,081,691

9,643,536

20.16

16.95

13.22

7.80

5.43

3.49

1.76

1.64

1.46

1.27

1.05

1.02

0.85

0.76

0.71

0.57

0.43

0.42

0.41

0.39

79.79

20.21

sharehoLDer in ForMation

2. company secretary
The name of the Company Secretary is:

Darren Keamy

7. directory
nOn-ExECutivE Chair
Stan McLiesh

3. registered office
The address of the principle registered office in Australia at 30

nOn-ExECutivE DirECtOrS
Brenda Shanahan, Elie Ishag, Willem Blijdorp

September 2016 was:

Level 5, 160 Queen St

Melbourne, VIC 3000

Telephone: +61 3 9660 4900

Fax: +61 3 9660 4999

Email: mail@clinuvel.com

Website: http://www.clinuvel.com

As of 17 October 2016, the principle registered office in Australia is:

Level 6, 15 Queen St

Melbourne, VIC 3000

Telephone: +61 3 9660 4900

Fax: +61 3 9660 4999

Email: mail@clinuvel.com

Managing DirECtOr anD ChiEF ExECutivE OFFiCEr
Dr Philippe Wolgen

aCting ChiEF SCiEntiFiC OFFiCEr
Dr Dennis Wright

ChiEF FinanCial OFFiCEr anD COMPany SECrEtary
Darren Keamy

auDitOr
Grant Thornton Australia Limited

The Rialto, Level 30, 525 Collins St, Melbourne, VIC 3000, Australia

BanKer
National Australia Bank (NAB)

Website: http://www.clinuvel.com

Western Branch, 460 Collins St, Melbourne, VIC 3000, Australia

4. register of securities
Computershare Investor Services Pty Ltd

lEgal COunSEl
Arnold Bloch Leibler

Yarra Falls, 453 Johnston St, Abbotsford, VIC 3067, Australia

Level 21, 333 Collins St, Melbourne, VIC 3000, Australia

Bristows LLP

100 Victoria Embankment, London EC4Y 0DH, United Kingdom

iP laWyer
Dipl.-Ing Peter Farago

Baadestr 3, Munich 80, Germany

Tel: +61 3 9415 4000

5. australian securities e xchange limited
Quotation has been granted for all the ordinary shares on all Member

Exchanges of the Australian Securities Exchange Limited

(ASX: CUV).

The Company’s shares are also quoted on other international

exchanges as follows:

• Germany: Frankfurt and XETRA: UR9
• USA: Level 1 American Depositary Receipt (ADR) code: CLVLY

(ADR Custodian: Bank of New York Mellon)

6. restricted securities
Restricted securities on issue at June 30 2016: Nil.

marKet performance

share price asx:cuV

$6.00

$5.00

$4.00

$3.00

$2.00

$1.00

JUL 2015

OCT 2015

JAN 2016

APR 2016

daily trading Volume

250,000

200,000

150,000

100,000

50,000

JUL 2015

OCT 2015

JAN 2016

APR 2016

gLossary

glossary

alPha-MElanOCytE StiMulating
hOrMOnE (α-MSh)
A peptide hormone which activates or stimulates the production
and release of (eu)melanin in the skin (melanogenesis).

direct Solar radiation
The part of extraterrestrial solar radiation which, as a
collimated beam, reaches the earth’s surface after selective
attenuation by the atmosphere.

EurOPEan MEDiCinES agEnCy (EMa)
The decentralised body of the European Union regulating
medical drugs and devices.

erytheMa (actinic-Solar)
Reddening of the dermis (the top layer of skin), with or without
inflammatory component, caused by the actinic effect of solar
radiation or wavelengths of light by artificial optical radiation
(source).

EuMElanin
A black or brown pigment mainly concerned with the
protection of the skin by absorbing incoming UV radiation.
This protective ability warrants melanin to be termed a
photoprotectant (a substance capable of providing protection
against radiation from the sun). α-MSH acts specifically to
stimulate (eu)melanin synthesis.

FOOD anD Drug aDMiniStratiOn (FDa)
The USA’s regulatory agency for food, tobacco, medicines and
devices.

FitzPatriCk SCalE
A numerical classification schema that classifies the response
of different types of skin to UV light.

• Fitzpatrick type I - white unpigmented skin, always burns;
• Fitzpatrick type II - white unpigmented skin, usually burns;
• Fitzpatrick type III - olive pigmented skin, sometimes mild

burns;

• Fitzpatrick type IV - brown pigmented skin, rarely burns;
• Fitzpatrick type V - dark brown pigmented skin, seldom burns;
• Fitzpatrick type VI - black pigmented skin, never burns.

narrOwbanD ultraviOlEt b (nb-
uvb) PhOtOthEraPy
Therapy which utilises an ultraviolet B light source to activate
melanin in vitiliginous lesions of the skin.

nEw Drug aPPliCatiOn (nDa)
A formal application to the FDA to approve a drug product for
sale.

PheoMelanin
A reddish pigment, a very weak absorptive of UV radiation. It
also acts as a photosensitiser (makes your skin sensitive to
light), where it increases sun sensitivity and skin ageing.

PhaSe i
The first trials of a new drug candidate in humans, Phase I
trials are designed to evaluate how a new drug candidate
should be administered, to identify the highest tolerable dose
and to evaluate the way the body absorbs, metabolises and
eliminates the drug.

PhaSe ii
A Phase II trial is designed to continue to test the safety of the
drug candidate, and begins to evaluate whether, and how well,
the new drug candidate works (efficacy). Phase II trials often
involve larger numbers of patients.

PhaSE iib/PhaSE iii
Advanced-stage clinical trials that should conclusively
demonstrate how well a therapy based on a drug candidate
works. Phase III trials can be longer and typically much
larger than Phase II trials, and frequently involve multiple
test sites. The goal is statistically determining whether a
therapy clinically improves the health of patients undergoing
treatment while remaining safe and well tolerated.

PharMacodynaMicS
The study of the time course of a drug’s actions in the body.

PharMacoKineticS
The part of pharmacology that studies the release and
availability of a molecule and drug in the human body.

PhotoderMatoSeS
Skin diseases onset by exposure of skin to sunlight and UV.

iMMunOCOMPrOMiSED
Having an immune system that has been impaired by disease
or treatment, such as immunosuppressive drugs used to
prevent organ rejection in transplant patients.

PhotoProtection
Protection from light and ultraviolet radiation. Melanin
provides natural photoprotection to skin, whilst sunscreens
provide artificial photoprotection.

iMMunOMODulatOry
Changes to the level of a person’s immunity.

SubCutanEOuS
Underneath the skin.

MarkEting authOriSatiOn aPPliCatiOn (Maa)
A formal application to the EMA to approve a drug product or
medical device for sale.

SuStainED rElEaSE/COntrOllED-rElEaSE
Process whereby a drug is released from a formulation over a
period of time.

Melanin
The dark pigment synthesised by melanocytes; responsible
for skin pigmentation.

thyMine diMerS
DNA changes which are characteristic of UV damage.

thEraPEutiC gOODS aDMiniStratiOn (tga)
Australia’s regulatory agency for medicinal products and
devices.

ultraviOlEt (uv) raDiatiOn
Part of the electromagnetic spectrum at wavelengths below
400 nanometers, also called the invisible portion of light.
There are three sub-types of UV: UVC <280 nm; UVB 280 – 320
nm; UVA 320 – 400 nm.

MelanocyteS
The cells in the skin that produce melanin.

MelanogeneSiS
The process whereby melanin is produced in the body.

MiniMuM ErythEMa DOSE (MED)
The actinic dose that produces a just noticeable erythema
on normal, non-exposed, “fair” skin. The quantity usually
corresponds to a radiant exposure of monochromatic (=1
wavelength) radiation at the maximum spectral efficiency
(α=295 nm) of approximately 100 J/m2.

CLINUVEL PHARMACEUTICALS

ANNUAL REPORT 2016

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