More annual reports from Kazia Therapeutics Limited:
2023 ReportPeers and competitors of Kazia Therapeutics Limited:
Entasis Therapeutics Holdings Inc.A N N UA L R E P O R T 2 0 2 0
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2020 at a glance
Chairman’s letter
CEO’s report
Key milestones and highlights – 2019/2020
10 Pipeline review
13 GBM Agile
14 Working with the best
15 The journey to a commercial product
19 Financial report FY20
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THE PATH AHEAD IS CLEAR. KAZIA IS UNFALTERING
IN OUR COMMITMENT TO TAKE PAXALISIB INTO AN
INTERNATIONAL PIVOTAL STUDY FOR REGISTRATION.
OUR SUCCESS WILL MEAN THE FIRST NEW DRUG FOR
PATIENTS DIAGNOSED WITH GLIOBLASTOMA IN MORE
THAN TWO DECADES.
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ANNUAL REPORT 2020
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2020 AT A GLANCE
Kazia Therapeutics is an oncology-focused biotechnology company, developing innovative
anti-cancer drugs. We collaborate with clinicians, scientists, and researchers around the world
to bring new hope to patients with cancer.
Paxalisib is
currently in clinical
trials at world-
leading centres
in a wide range
of different forms
of brain cancer
Glioblastoma is
the most common
and the most
aggressive form
of primary brain
cancer
5
Ongoing clinical
trials with paxalisib
368
Hospitals currently
recruiting patients
to paxalisib
clinical trials
121
Patients treated
with paxalisib
worldwide to date
As at 30 June 2020
As at 30 June 2020
As at 30 June 2020
133,000
Patients diagnosed with glioblastoma
worldwide each year
Source: GLOBOCAN 2012
85-90%
Of glioblastoma patients have dysregulation of
the PI3K pathway, which is targeted by paxalisib
Source: Cancer Genome Atlas
65%
Of patients will
never respond to
temozolomide,
the only existing
standard of care
Source: AA Pandith
et al. (2018) Scientific
Reports 8:6704
Since 2016, Kazia
has built a lean,
highly efficient
business focused
on clinical
development of
novel anti-cancer
therapies
2,450
2017
2018
2019
2020
4,020
4,150
4,304
US$ 1.5b
Forecast global commercial market
opportunity for glioblastoma per annum
63
78.9%
Media mentions
for FY2020
Patents granted for
paxalisib worldwide
Of operating cashflows
invested in R&D (FY20)
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KAZIA THERAPEUTICS LIMITED
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’
Overall Survival
Paxalisib:
17.7months
Temozolomide
(existing standard
of care):
12.7months
Interim analysis as at
29 February 2020
Cantrixil is
currently
completing a
clinical trial in
ovarian cancer
25
Patients treated
with Cantrixil
worldwide to date
Progression-Free
Survival
Cantrixil:
5.5months
3.4months
Chemotherapy:
As at 30 June 2020
Interim analysis as at
30 September 2019
Number of new therapies
approved by FDA, 2010-2020
Number of clinical trials
commenced, 2019
5-year survival of
patients
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Lung cancer:
17
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Glioblastoma:
Breast cancer:
135
35
Glioblastoma:
Breast cancer:
90
3
Glioblastoma:
Source: US Food and
Drug Administration
Source: clinicaltrials.gov
Source: US National
Cancer Institute
Enterprise value (market capitalisation,
less cash) (AU$)
$35.6m
Indicative Analyst Valuation (AU$)
$12.7m
$5.7m
$14.9m
$3.8m
13 May 2018
19 Sept 2018
1 Apr 2019
31 Mar 2019
23 Jun 2019
$103M
$103M
$115M
$137M
$137M
30 June
2016
30 June
2017
30 June
2018
30 June
2019
30 June
2020
Source: Edison Research
ANNUAL REPORT 2020
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CHAIRMAN’S LETTER
IT IS FAIR TO SAY THAT
THESE RESULTS HAVE
SUBSTANTIALLY EXCEEDED
EXPECTATIONS, AND
THEY DEMONSTRATE
THE RICH AND GROWING
POTENTIAL OF THIS
VERY PROMISING DRUG
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KAZIA THERAPEUTICS LIMITED
Dear Shareholder,
Our company concludes the 2020
financial year in a very strong
position, despite the ongoing
COVID-19 pandemic. We are
reporting very encouraging data,
we are well-funded, and we have
a clear path forward for our lead
asset, paxalisib. I am very pleased
to highlight here some of Kazia’s
specific achievements during the past
twelve months.
FINANCIAL PERFORMANCE
Our cash balance at 30 June
2020 was $8.8 million, versus
$5.4 million at 30 June 2019. Our
total assets were $23 million, as
against $21.2 million at 30 June
2019. We committed net outlays of
$8.8 million to advance the company,
of which 79% was devoted directly
to investment in R&D.
Kazia remains, in your Board’s view,
an exceptionally efficient drug
development business. With the
resources at hand, the company
has completed recruitment of two
international clinical trials, has
continued to support four ongoing
investigator-initiated studies, has
presented data at four international
conferences, and has executed an
extensive program of regulatory and
manufacturing work to support the
critical transition of paxalisib into a
pivotal study for registration.
FUNDING
We have completed two financing
rounds during the financial year,
in October 2019 and April 2020.
In aggregate, these efforts have
raised some $13 million in new
capital for the company and have
brought significant and high-quality
institutional support to the share
register. Both raises were executed
at extremely competitive terms:
a 17% discount to 5-day VWAP in
October, and a 3% discount in April,
notwithstanding the very challenging
environment in capital markets
associated with COVID-19.
Aside from the vital funding that
these transactions provided, we have
been pleased to welcome a number
of new institutional investors to the
Kazia register. It has been noted
previously that few listed companies
can achieve their full potential
without the support of professional
investors, and each of the three
financing rounds that Kazia has
completed have been anchored by
institutional participants. Most of the
participants in earlier rounds have
continued to support the company in
its most recent raise, reflecting their
robust and ongoing commitment to
the company’s success.
In parallel, the company offered
existing shareholders an opportunity
to strengthen their position on the
same terms as institutional investors,
via a Share Purchase Plan (SPP) in
May 2020. This was extremely well
supported and raised approximately
$1.8 million. The proceeds of our
last SPP, in 2018, allowed us to put
in place several high-quality clinical
research collaborations for paxalisib,
and we expect to likewise apply the
funds from this SPP directly to the
task of bringing hope to patients with
brain cancer.
PROGRESS
I have said before that the lifeblood
of any life sciences company is clinical
data. On that score, I will allow the
numbers to speak for themselves.
Paxalisib has reported a progression-
free survival of 8.4 months (versus
5.3 months for temozolomide, the
existing standard of care), and an
overall survival of 17.7 months (versus
12.7 months for temozolomide). It
is fair to say that these results have
substantially exceeded expectations,
and they demonstrate the rich
and growing potential of this very
promising drug.
OUTLOOK
Given these data, our highest priority
is to move paxalisib swiftly into a
pivotal study for registration. We are
delighted to have been accepted onto
the GBM AGILE study, a ground-
breaking international clinical trial
that has been established by many of
the leading experts in glioblastoma
to expedite the delivery of new drugs
for this very challenging disease.
As previously flagged, we expect
commencement of GBM AGILE in
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the second half of calendar 2020,
although of course we continue
to monitor the rapidly changing
operational environment.
The GBM AGILE study places
paxalisib on a direct path to
commercialisation. If the drug’s
performance matches our hopes and
expectations, it stands to become
the first drug approved for this group
of patients in over twenty years, and
the first signal of hope that even this
most challenging of cancers can be
beaten.
I have said previously that we
consider the best path forward for
Cantrixil to lie in a partnership with a
larger company, one who shares our
belief in the asset’s potential, and
who brings to the partnership the
wherewithal and technical resources
to fully realise that potential. Our
efforts on this front remain ongoing,
and will be driven by final data from
the phase I study, which we expect to
have on hand in Q4 CY2020.
I would like to thank my fellow
directors and our management team,
led by our CEO, James Garner, for
their dedicated and unflagging work
in support of the company. In the
four years or so since Kazia began
to take form, we have achieved a
great deal, but our most important
work lies ahead. We are grateful to
our shareholders whose support has
made these achievements possible,
and I look forward to reporting our
further progress in the year ahead.
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Iain Ross
Chairman of the Board
ANNUAL REPORT 2020
5
CEO’S REPORT
PUT SIMPLY, IT APPEARS
THAT PAXALISIB MAY BE
ABLE TO EXTEND THE
LIFE OF PATIENTS WITH
GLIOBLASTOMA
6
KAZIA THERAPEUTICS LIMITED
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Dear Fellow Shareholder,
We have made great strides over
the past twelve months, and it is a
testament to the hard work of many
people that we now stand poised
shortly to commence a pivotal
study for registration with paxalisib
(formerly GDC-0084). Kazia has
come a very long way in the last four
years or so.
So many important things happened
in FY2020 that it is difficult to single
out individual events, but I wanted to
share several personal highlights.
First, in November 2019, we
presented interim data from the
ongoing phase II study of paxalisib
at the Society for Neuro-Oncology
(SNO) annual meeting. This data
showed a median progression-free
survival (PFS) of 8.4 months. The
benchmark for this patient group,
which is achieved by temozolomide,
the existing standard of care, is
5.3 months, so this was clearly a
tremendously encouraging result.
For the first time, we had solid
evidence that paxalisib was effective,
using a measure that would likely be
acceptable for FDA registration.
However, we were able to move
beyond this in May 2020 with
data presented at the prestigious
American Society of Clinical
Oncology (ASCO) annual meeting.
This showed a median overall
survival (OS) of 17.7 months, versus
an historical benchmark of 12.7
months for temozolomide. Put
simply, it appears that paxalisib
may be able to extend the life of
patients with glioblastoma. No drug
has convincingly demonstrated this
ability in the last twenty years. If
it continues to be borne out in the
larger study we’re about to enter into,
this result will transform the practice
of neuro-oncology.
Finally, the Cantrixil program in
ovarian cancer has continued
to deliver. Presentations at the
European Society for Medical
Oncology in September 2019, and to
the American Association for Cancer
Research in June 2020, both showed
promising signs of activity for the
drug. We have said previously that we
feel the potential of Cantrixil would
be best realised with the support of
a larger company, and the emerging
data will no doubt help to fuel those
discussions as we bring the phase I
study to completion.
Meanwhile, the path ahead for
Kazia is clear. We are unfaltering in
our commitment to take paxalisib
into an international pivotal study
for registration. Our success will
mean the first new drug for patients
diagnosed with glioblastoma in more
than two decades. Our data readouts
over the past twelve months, coupled
with the work already underway
for GBM AGILE, mean that this is
no longer merely an aspiration,
but rather a concrete, realistic, and
comprehensive plan. We know what
we need to do, and we have the
resources, the expertise, and the
determination to see it through.
I am thankful to my colleagues on the
Board and in the Management Team
for their indefatigable dedication
and unfailing professionalism, and
we remain extremely grateful for the
ongoing support of our investors,
whose strong commitment to
the company is reflected in these
important achievements.
Dr James Garner
Chief Executive Officer
Behind each of these headline
data points is a mass of detailed
and painstaking work by the Kazia
team, which collectively supports
paxalisib’s journey through the
complex regulatory pathway to a
marketed product. One important
landmark on this journey was the
confirmation in late 2019 that
‘paxalisib’ was approved by the WHO
as the international non-proprietary
name for the drug, which previously
carried the code number GDC-0084.
The United States Adopted Name
(USAN) Council approved the name
‘paxalisib’ for the US in May 2020,
and so our drug now has its formal
name for all future development.
Given the very positive data, our
intent had been to launch a Kazia-
sponsored phase III study in CY2020.
However, our invitation to join the
international GBM AGILE has led
to a change in strategy. In our view,
GBM AGILE offers a faster, more
cost-effective path to market, in a
clinical trial of exceptional quality,
and with the engagement and
support of most of the top clinicians
in this field, as well as the enthusiastic
endorsement of the US Food and
Drug Administration (FDA). The
cutting-edge adaptive approach is
only one of the features that attracts
us to the study, and paxalisib will be
an ideal fit with both its objectives
and its design.
We expect GBM AGILE to begin
recruiting patients in the second half
of CY2020. When it does, it will be
the seventh clinical trial of paxalisib.
This reflects the fact that our drug
has, over the past several years,
moved from being a glioblastoma
drug to something much larger, a
brain cancer drug. We have clinical
studies ongoing in childhood brain
cancer, and in metastatic brain
cancer, which is cancer that has
spread to the brain from elsewhere in
the body, and each of these studies
presents the opportunity to expand
the use of paxalisib and to help a
greater number of patients with this
very challenging disease.
ANNUAL REPORT 2020
7
KEY MILESTONES AND HIGHLIGHTS – 2019/2020
• New CEO
recruited from
Sanofi to drive
establishment
of Kazia
Therapeutics.
• Paxalisib
(GDC-0084)
licensed from
Genentech, Inc
2016
• New Chairman
installed to
accelerate
corporate
transformation.
• FDA consultation
regarding future
development path
for paxalisib
• Launch of Kazia
Therapeutics
branding,
replacing legacy
corporate identify.
2017
• FDA grants
Orphan Drug
Designation
to paxalisib.
• Commencement
of recruitment
to phase II study
of paxalisib in
glioblastoma.
• Partnership with
St Jude Children’s
Research Hospital
to explore
paxalisib in DIPG.
• Funding round
of A$ 4.3 million.
• Partnership
with Dana Farber
Cancer Institute to
explore paxalisib
in breast cancer
brain metastases.
2018
August 2019
Kazia’s phase I
study of Cantrixil
in ovarian cancer
completes
recruitment.
September 2019
October 2019
Kazia raises
AU$ 4 million
from institutional
investors in an
equity placement.
St Jude Children’s
Research
Hospital declares
a maximum
tolerated dose
in its ongoing
phase I study of
paxalisib in DIPG,
supporting future
development for
paediatric use.
November 2019
Interim data from
the paxalisib
phase II study
in glioblastoma
shows a
progression-free
survival of 8.4
months, compared
to 5.3 months
for the existing
standard of care.
December 2019
Paxalisib is
accepted onto
the international
GBM AGILE
pivotal study. This
is expected to
provide definitive
data for FDA
approval, with
recruitment
to begin in
2H CY2020.
• Top-line safety
data from phase II
study of paxalisib
in glioblastoma.
• Partnership
with Alliance for
Clinical Trials
in Oncology to
explore paxalisib in
brain metastases.
2019
July 2019 (FY20)
Kazia collaborates
with Memorial
Sloan Kettering
Cancer Center in
New York on a
phase I study to
explore paxalisib
in combination
with radiotherapy
for metastatic
brain cancer.
8
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May 2020
Kazia commences
manufacture of
investigational
product for GBM
AGILE.
June 2020
Interim data from
the paxalisib
phase II study
in glioblastoma
revises the
progression-
free survival
to 8.5 months
(8.4 months
previously), once
the entire patient
group is included.
February 2020
Kazia’s phase II
study of paxalisib
in glioblastoma
completes
recruitment.
May 2020
Interim data from
the paxalisib
phase II study in
GBM shows an
overall survival
of 17.7 months,
compared to
12.7 months
for the existing
standard of care.
April 2020
Kazia raises AU$
9.0 million from
institutional
investors in an
oversubscribed
equity placement
with an
accompanying
share purchase
plan for existing
shareholders.
January 2020
World Health
Organisation
confirms
‘paxalisib’ as the
international
non-proprietary
name (INN) for
the drug formerly
known as
GDC-0084.
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ANNUAL REPORT 2020
9
PIPELINE REVIEW
Moving Towards Registration
The transition to a registrational study is a quantum leap in the development of a new drug.
No longer are we exploring the potential of our drug. Rather, we are single-mindedly focused on
making it available to patients and clinicians.
PAXALISIB (GDC-0084)
In last year’s Annual Report, we celebrated the return of paxalisib to the clinic, with five ongoing clinical studies underway
in different forms of brain cancer. Just one year later, we are already rich with promising data from the first of these
studies, our phase II study in glioblastoma. Meanwhile, the four investigator-initiated studies have been making excellent
progress, and we expect to see initial data from several of them in calendar 2020.
Registration
Indication
Phase
Sponsor
Status
NCT03522298
Glioblastoma
NCT03994796
Brain metastases
NCT03765983
Breast cancer brain
metastases (with Herceptin)
NCT03696355
DIPG
NCT04192981
Brain metastases
(with radiotherapy)
II
II
II
I
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Kazia Therapeutics
Fully recruited
Alliance for Clinical
Trials in Oncology
Recruiting
Dana-Farber Cancer
Institute
Recruiting
St Jude Children’s
Research Hospital
Fully recruited
Memorial Sloan
Kettering Cancer Center
Recruiting
NCT03970447
(GBM AGILE)
Glioblastoma
II / III
Global Coalition for
Adaptive Research
Set-up
10 KAZIA THERAPEUTICS LIMITED
Our phase II study in glioblastoma was designed to
transition paxalisib from the very advanced recurrent
patients examined in the original phase I study to the
newly-diagnosed patients who we see as the preferred
target population for the drug. We enrolled the first
patient in September 2018 and recruited our thirtieth
and final patient in February 2020.
Preliminary efficacy data from this study was released
in November 2019 at the Society for Neuro-Oncology
(SNO) Annual Meeting. It showed a progression-free
survival (PFS) for patients treated with paxalisib of
8.4 months. The existing standard of care treatment,
temozolomide, is associated with a PFS of 5.3 months.
While the comparison between studies is always complex
and imperfect, the magnitude of difference points very
strongly towards a meaningful treatment advantage
with paxalisib. In short, this was our first concrete
evidence that paxalisib works, and as such it has ignited
huge interest in the drug from clinicians, investors, and
potential partners.
Progression-Free Survival (PFS)
Paxalisib
8.4 months
Temozolomide
5.3 months
PFS is an important measure of a drug’s efficacy. In
many cases, it can serve as an ‘approvable endpoint’,
providing sufficient evidence for FDA to grant a marketing
authorisation. In other cases, PFS is strongly predictive of
success in other metrics.
Nevertheless, the gold standard for any new drug is
the ability to extend life, or overall survival (OS) in the
language of drug development. In May 2020, at the
prestigious Annual Meeting of the American Society for
Clinical Oncology (ASCO), we released initial data from
the study which showed an OS of 17.7 months, versus 12.7
months for temozolomide. This is a dramatic difference.
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PIPELINE REVIEW – MOVING TOWARDS REGISTRATION (continued)
Should it be replicated in a larger study, it would certainly
provide a basis for FDA approval. Very few drugs are
able to prolong the lives of glioblastoma patients, and so
paxalisib has staked its claim at the forefront of the global
drug development effort in this very challenging disease.
Overall Survival (OS)
Paxalisib
17.7 months
Temozolomide
12.7 months
The study remains ongoing, and further data will emerge
during the second half of 2020. However, the key
conclusions are already clear. Paxalisib is an efficacious
drug, and on that basis deserves to move forward into a
pivotal study for registration.
On the basis of these emerging data, we were given the
opportunity to include paxalisib in a ground-breaking
international clinical study named GBM AGILE. This is
a new kind of approach to clinical development that is
sometimes called a ‘platform study’ or ‘master protocol
study’. It provides a standard approach to testing multiple
drugs for a disease, comparing them against a shared
control arm. There are many advantages to this approach,
including substantial savings in cost and time. More
importantly, the study is strongly supported by FDA, and
provides a very rigorous basis on which to demonstrate
the efficacy of paxalisib.
We are currently working through the complex set-up
requirements for GBM AGILE, and expect to begin
recruitment in the second half of CY2020.
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KAZIA THERAPEUTICS LIMITED
Of the four investigator-initiated studies, the study at St
Jude Children’s Research Hospital in DIPG is perhaps the
most advanced, and we expect initial data in the second
half of CY2020. DIPG is a devastating childhood brain
cancer, with an average life expectancy from diagnosis
of around 9-10 months. No drug treatment has shown
convincing evidence of efficacy, and the standard of care
remains palliative radiotherapy. To date, more than two
dozen children with the disease have received paxalisib,
and we look forward to seeing an initial read-out from this
important study.
The remaining three investigator-initiated studies are
progressing well. In the phase II breast cancer brain
metastases study at Dana-Farber Cancer Institute, initial
data is also anticipated during CY2020. The phase II study
by the Alliance for Clinical Trials in Oncology, in which
paxalisib is being tested alongside Lilly’s abemaciclib and
Roche’s entrectinib, is recruiting well. The most recent
study, a phase I trial examining paxalisib in combination
with radiotherapy for brain metastases at Memorial Sloan
Kettering Cancer Center in New York is also well underway.
In June 2020, Dr Jonathan Yang, the principal investigator
on the study, reported some very early data from the first
patient in the study, which showed a promising response to
treatment.
These many clinical trials are only the leading edge of a
complex and substantial body of work to move paxalisib
towards a marketing approval, and extensive activity goes
on behind the scenes in manufacturing, in regulatory
affairs, and in the laboratory. One visible result of this was
confirmation in December 2019 that the World Health
Organisation had approved paxalisib as the formal
international non-proprietary name (INN) of the drug
formally known as GDC-0084. In May 2020, this was
endorsed by the United States Adopted Name (USAN)
Council. As in all aspects of drug development, the naming
of new medicines is a technical and highly regulated
process, and it represents a gratifying coming of age for
paxalisib.
CANTRIXIL
The ongoing phase I study of Cantrixil in ovarian cancer
completed recruitment in August 2019, and the last
follow-up visit by the last patient occurred in April 2020.
Interim data was presented at the European Society for
Medical Oncology (ESMO) conference in September 2019.
It showed several patients responding well to Cantrixil,
and suggested a PFS of 5.3 months, which compares
favourably to the figure of 3.4 months which is typical for
patients as advanced as those in the study. Further data
was presented at the American Association of Cancer
Research (AACR) annual meeting in June 2020. It reported
one complete response (CR) and two partial responses
(PR) out of sixteen evaluable patients, making an overall
response rate (ORR) of 19%. Final data is expected to be
available in the second half of CY2020.
GBM AGILE
Paxalisib’s path to market
The ground-breaking GBM AGILE clinical
trial is expected to serve as the pivotal
study for paxalisib, providing the core
clinical data to support its approval
as a commercial pharmaceutical product.
The randomised clinical trial was purportedly invented
by James Lind, an eighteenth-century Scottish doctor
who worked with the British Royal Navy. Observing high
mortality from scurvy among seamen, he hypothesised
that citrus fruit may improve outcomes. He assigned one
group of scorbutic sailors to receive oranges and lemons,
while the other received seawater. After six days, they ran
out of fruit, but it was already clear that the treated sailors
were very much improved.
Our approach to demonstrating the efficacy of a new
medicine has not changed very much since Lind’s time.
Drugs are still compared individually to control groups.
Hypotheses are set down at the beginning of the trial
and can only be proven or disproven, but not modified
or refined. And the number of patients in a trial remains
largely a matter of educated guesswork. In some cases,
we end up with too few, and fail to detect the benefit of a
drug. More often, we recruit too many, which is a waste of
resources.
In consequence, the average cost of developing a new
drug is estimated to exceed US$ 1 billion, and the process
typically takes 12-15 years. This delays the introduction
of new medicines and necessitates high prices for
those that are successful. In challenging diseases such
as glioblastoma, it has indirectly reduced investment
such that no new drugs have been approved for newly-
diagnosed patients since the last century.
GBM AGILE lies at the cutting edge of new thinking about
clinical trials. It has been established independently of
any individual pharmaceutical company by some of the
leading experts in the field. The study provides a long-
term platform into which potential new treatments can
be placed for a period of time to investigate their use in
glioblastoma. Several drugs may run concurrently, and all
are compared against a common control group, saving
substantial time and cost. Moreover, GBM AGILE is an
adaptive study, in which innovative Bayesian statistical
techniques are used to adjust the number of patients
dynamically so as to reach an answer for each drug as
efficiently as possible.
GBM AGILE is sponsored by the Global Coalition for
Adaptive Research (GCAR), a US-based not-for-profit
corporation. The global lead investigator is Professor
Timothy Cloughesy, a world-leading neuro-oncologist
based at UCLA Medical School, who has substantial
clinical trial experience with paxalisib.
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GCAR and Kazia share a profound vision to bring new
therapies forward for patients with glioblastoma. GBM
AGILE is a bold and exciting attempt to reimagine the drug
development process. The development of paxalisib has
been innovative in many ways, and participation in GBM
AGILE is a fitting final step in the drug’s journey to become
a marketed product.
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Current Number of Trial Sites
1
Current Participating Therapy
Planned Geographic Reach:
US, Canada, Europe, China
For More Information
Web: https://www.gcaresearch.org/
Twitter: @GCAResearch
Instagram: @GCAResearch
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Timothy Cloughesy
ANNUAL REPORT 2020
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WORKING WITH THE BEST
Kazia is privileged to work with cancer researchers around the globe who share our passion for
good science and our commitment to patients.
Dr Dun has conducted
extensive laboratory
research on Kazia’s
paxalisib, exploring its
potential use as a
therapy for DIPG.
This important clinical trial
will provide valuable insights
into the complex interplay
of tumour biology, drug
treatment, and radiotherapy,
and may point to additional
opportunities for paxalisib to
benefit patients with
brain cancer.
Dr Matt Dun
Dr T. Jonathan Yang
Dr Matt Dun is a Senior Lecturer at the University
of Newcastle, Australia. After an early career in the
Royal Australian Navy, he completed his PhD in 2012
and began to develop his interests in researching cancer
through the new field of proteomics. In contrast to the
more established science of cancer genetics, proteomics
tries to understand the genesis and growth of a tumour by
studying the vast array of proteins that are generated.
Dr Dun founded the Cancer Signalling Research Group at
the University of Newcastle, with an initial focus on blood
cancers. In 2018, he received the devastating news that
his daughter, Josie, had been diagnosed with DIPG, a rare
childhood brain cancer. Struck by the paucity of knowledge
and research in the disease, he collaborated with many of
the global leaders in childhood brain cancer to develop
new theories about how it may be treated. His work has led
to the first, high-resolution, quantitative proteomic analysis
of the disease.
As a tireless advocate for research into this disease,
Dr Dun has been recognised by more than 20 national
and international awards. He is an Emerging Leadership
Fellow at the National Health and Medical Research
Council (NHMRC) and was named the Outstanding
Cancer Research Fellow at the NSW’s Premier Awards
for Outstanding Cancer Research in 2019, and a Young
Tall Poppy Science Award winner in 2020. Also in 2020,
he was invited to join the ‘Preclinical Working Group’ of
the Pacific Neuro Oncology Consortium (PNOC) known
as ‘DMG-ACT’.
To support his research, Dr Dun founded RUNDIPG, a
charity focused on supporting cutting-edge research into
DIPG. As a world-leading researcher, and as a patient
advocate, he has been extensively profiled in national print
and television media and has attracted many hundreds of
thousands of dollars to DIPG research.
Dr Dun has conducted extensive laboratory research on
Kazia’s paxalisib, exploring its potential use as a therapy
for DIPG. This work has already shown paxalisib to be
broadly active against DIPG cell lines, and has proceeded
to identify potential combinations of paxalisib with other
therapies that may lead to enhanced efficacy in patients.
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KAZIA THERAPEUTICS LIMITED
Dr T. Jonathan Yang is Director of Metastatic
Disease in the Department of Radiation Oncology at
Memorial Sloan Kettering Cancer Center in New York.
He completed his PhD at Vrije Universiteit Amsterdam
in the Netherlands and his medical training at Yale
University, before undertaking specialist training.
This critical discipline of radiation oncology focuses
on using radiotherapy to treat cancer, and Dr Yang is
highly experienced in cutting-edge techniques such
as stereotactic radiotherapy.
Dr Yang’s primary interest is in tumours of the central
nervous system, including both primary brain tumours
(such as glioblastoma), and metastatic brain tumours, as
well as leptomeningeal carcinomatosis. He has been a
pioneer in the new technology of proton beam therapy and
works closely with the New York Proton Center that was
established in 2019 as a collaboration between Memorial
Sloan Kettering Cancer Center, Mount Sinai Hospital,
and the Montefiore Health System. Proton beam therapy
is a highly targeted form of radiation therapy that aims
to selectively destroy tumour with limited damage to
surrounding tissue.
In addition to his clinical practice, he is a prolific
clinical researcher in brain cancer, and has particularly
investigated how novel targeted pharmacological
therapies can augment and support radiotherapy. One
of his areas of research considers how radiotherapy can
be used not just to prolong survival but also to improve
quality of life, especially by minimising side effects. He has
more than ninety publications and posters in the field of
radiation oncology.
Dr Yang’s work has previously shown that changes in
the PI3K pathway can be associated with resistance to
radiotherapy in brain tumours. His research has led him to
examine Kazia’s paxalisib as a potential way to augment
the effects of radiotherapy, and to avoid the problem of
resistance. In 2019, he launched a phase I clinical trial to
examine paxalisib in combination with radiotherapy in
brain metastases (NCT04192981). This important clinical
trial will provide valuable insights into the complex
interplay of tumour biology, drug treatment, and
radiotherapy, and may point to additional opportunities
for paxalisib to benefit patients with brain cancer.
THE JOURNEY TO A COMMERCIAL PRODUCT
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With paxalisib poised to enter a pivotal study, our journey to a commercial product
begins its final stage
REDUCING RISK
A new cancer drug typically spends up to fifteen years in research and development before it is approved by regulatory
agencies for widespread use by patients. By far the majority of new drugs fail somewhere along the journey. Only about
1 in 10 drugs that enter phase I human trials will ever reach market.
Likelihood of Success for a Drug in Development
Phase I
10%
chance
of success
Phase II
Phase III
Approval
15%
chance
of success
50%
chance
of success
85%
chance
of success
Kazia’s paxalisib is about to enter the final step in this process, phase III human trials, and statistically this implies
approximately a 50% likelihood of it succeeding. However, the fact that the PI3K mechanism is very well-validated, and
the fact that paxalisib is targeting an orphan indication, both considerably enhance its chances of success. On balance,
paxalisib is considerably more likely at this stage to reach market than not.
Source: BIO
ANNUAL REPORT 2020
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THE JOURNEY TO A COMMERCIAL PRODUCT (continued)
COMMERCIAL OPPORTUNITY
Glioblastoma is generally estimated to represent a
US$1.5 billion per annum global market. Temozolomide,
the existing standard of care, achieved peak sales of
slightly more than US$ 1 billion before it lost patent
protection, so this gives confidence that the estimate is
broadly correct.
For any new drug, the largest geographic market is
typically in the United States, and for this reason Kazia has
invested considerable effort during the development of
paxalisib in running clinical trials in the United States and in
optimising the regulatory package for FDA.
Global Market for New Oncology Drugs, 2023
Pricing
In the United States, the median cost of a newly
approved cancer drug in 2018 was
US$ 148,000
per year of treatment
Source: IQVIA Institute for Human Data Science
UNITED STATES
EUROPE
JAPAN
$100 billion
13% growth rate
$42 billion
10% growth rate
$14 billion
7% growth rate
REST OF
THE WORLD
$32 billion
15% growth rate
EMERGING
MARKETS
$28 billion
16% growth rate
Source: IQVIA Institute for Human Data Science
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PRODUCT APPROVAL
MARKETING
Once paxalisib completes its participation in GBM AGILE,
it will need to undergo a detailed review by regulatory
agencies in each country for which it will be marketed.
The end result of this review is usually referred to as either
a marketing authorisation or a product approval. Only
after approval can the drug be marketed to clinicians and
prescribed to patients, and only at this point does the
company begin to make sales revenue.
Paxalisib has been chosen by the World Health
Organisation as the international non-proprietary name
(INN) for the drug originally designated GDC-0084.
However, this will not be the commercial brand name.
When paxalisib is launched to the market, it will have a
trademarked brand, which also requires approval by the
regulatory agency. This will be finalised at the time of our
NDA submission.
Examples of National Regulatory Agencies
Examples of Commercial Brands and
Corresponding INNs
United States
Australia
European Union
China
Japan
FDA
TGA
EMA
NMPA
PMDA
The complex package of documentation that is submitted
to a regulatory agency is usually referred to as an NDA
(New Drug Application). When paper submissions were
the norm, an NDA would typically require a minivan
for transport to the agency. These days, submission is
performed electronically.
Even drugs with successful phase III clinical trials are not
guaranteed approval. Regulatory agencies examine the
total body of data, including areas such as manufacturing.
The chances of a drug with positive phase III data securing
product approval are around 90%.
For cancer drugs, the quality of the human trial data is
paramount. The gold standard for any new cancer drug
is to show an ability to extend life (overall survival). Sadly,
very few cancer drugs at present are curative. Increasingly,
progression-free survival is sometimes used as a
surrogate endpoint. Endpoints such as tumour reduction
or changes in blood tests are very rarely approvable. For
paxalisib, the endpoint of the GBM AGILE study will be
overall survival, and so the data should be very robust for
approval purposes.
Review of an NDA usually takes about one year. However,
in the US, for drugs which target a disease of high unmet
need, FDA will sometimes grant Priority Review status,
which means that the review will be completed within
six months. Kazia expects paxalisib to be eligible for
Priority Review.
Panadol®
Nexium®
Lipitor®
Adalat®
Januvia®
paracetamol
esomeprazole
atorvastatin
nifedipine
sitagliptin
Marketing a pharmaceutical product is complex and
highly regulated. Any claim made regarding the product
must be supported by concrete scientific data and must
be within the scope of the product approval granted by
the regulatory agency. The primary customers are expert
clinicians, so sales personnel need a deep technical
understanding of the field.
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Marketing does not begin only after approval. During
the pivotal study, companies start working closely with
senior clinicians, sometimes referred to as key opinion
leaders (KOLs), to understand exactly how the drug will be
positioned in the market.
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ANNUAL REPORT 2020
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18 KAZIA THERAPEUTICS LIMITED
FINANCIAL REPORT FY20
19
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the
‘consolidated entity’) consisting of Kazia Therapeutics Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the
entities it controlled at the end of, or during, the year ended 30 June 2020.
DIRECTORS
The following persons were Directors of Kazia Therapeutics Limited (ABN 37 063 259 754) during the whole of the financial year
and up to the date of this report, unless otherwise stated:
Iain Ross
Bryce Carmine
Steven Coffey
James Garner
PRINCIPAL ACTIVITIES
During the financial year the principal continuing activity of the consolidated entity consisted of pharmaceutical research and
development.
DIVIDENDS
There were no dividends paid, recommended or declared during the current or previous financial year.
REVIEW OF OPERATIONS
The loss for the consolidated entity after providing for income tax amounted to $12,467,466 (30 June 2019: $10,270,264).
The attached financial statements detail the performance and financial position of the consolidated entity for the year ended
30 June 2020.
Cash resources
At 30 June 2020, the consolidated entity had total funds, comprising cash at bank and on hand of $1,264,044 and short term
deposits of $7,500,000. Total current assets at year-end stand at $10,653,601 including $1,017,278 of R&D tax rebate receivable.
Going concern
The financial statements have been prepared on a going concern basis. The Directors have considered this to be appropriate.
Refer to ‘Going concern’ in note 2 to the financial statements for further details.
Impact of COVID-19
The directors have considered the impact of COVID-19 on the operations of the Company and make the following observations:
(1) Kazia’s key clinical trials (phase II study of paxalisib in glioblastoma and phase I study of Cantrixil in ovarian cancer) were fully
recruited prior to the onset of restrictions associated with COVID-19 in the United States and Australia;
(2) the GMB AGILE study, which is planned to serve as a pivotal study for paxalisib in glioblastoma, remains on track, and
initiation of recruitment continues to be expected in 2H CY2020;
(3) In general, clinical research in advanced cancer is relatively protected from pandemic disruption due to the ongoing and
time-critical need for patient care in specialised facilities which cannot easily be repurposed;
(4) The Company is pre-revenue, and so changes in customer behaviour over the next several years due to public health
restrictions and reduced economic activity have little to no impact on its finances;
Accordingly the directors do not foresee any material impacts on the Company’s operations as a result of the COVID-19
outbreak.
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 dollar.
20
KAZIA THERAPEUTICS LIMITED Research and development report
The company’s lead development candidate is paxalisib (formerly known as GDC-0084), a small molecule, brain-penetrant
inhibitor of the PI3K / Akt / mTor pathway, that is being developed as a potential therapy for glioblastoma (GBM), the most
common most aggressive form of primary brain tumour in adults, as well as other forms of brain cancer. Paxalisib is orally
administered and is presented in a 15mg capsule formulation. The development candidate is the subject of IND 112,608 with the
US FDA, and was granted orphan designation in February 2018.
Paxalisib was developed by Genentech, Inc (South San Francisco, California) and the company entered into a worldwide exclusive
license for the asset in October 2016. Prior to this transaction, Genentech had completed an extensive preclinical development
program that provided convincing validation for paxalisib as a potential drug for brain cancer. Genentech also completed a phase
I clinical trial in 47 patients with advanced recurrent grade III and grade IV glioma. The most common adverse events were oral
mucositis and hyperglycemia. Per RANO criteria, 40% of patients exhibited a best observable response of stable disease, and
26% demonstrated a metabolic partial response on FDG-PET.
The development candidate was granted the International Non-Proprietary Name (INN) ‘paxalisib’ by the World Health
Organisation in December 2019. This was confirmed as the United States Adopted Name (USAN) by the USAN Council in April
2020.
During the period, the company has completed recruitment to a phase IIa clinical study in patients with newly-diagnosed
glioblastoma who exhibit unmethylated MGMT promotor status (NCT03522298). Unmethylated MGMT status confers near-total
resistance to temozolomide, the existing standard of care, and represents approximately two-thirds of the total incident GBM
population. This phase IIa study recruited patients at five centres in the United States.
In May 2019, the company reported interim data from the initial dose escalation component of the study. In the newly-diagnosed
population, a maximum tolerated dose (MTD) of 60mg was achieved, which is higher than the MTD of 45mg reported in the
phase I study in recurrent patients. Adverse events were generally mild and reversible. Dose-limiting toxicities of mucositis and
hyperglycemia were consistent with the PI3K inhibitor class and with prior clinical experience of this agent. In November 2019,
the company reported initial interim efficacy data from the dose escalation component at the Society for Neuro-Oncology (SNO)
Annual Meeting. These data showed a median progression-free survival of 8.4 months, which compares favourably in an indirect
comparison to temozolomide, the existing standard of care, which is associated with a mPFS of 5.3 months in this population. In
June 2020, an additional interim analysis was presented at the American Association of Cancer Research (AACR) Virtual Annual
Meeting II, which showed a mPFS of 8.5 months on the entire data set and a median overall survival (OS) of 17.7 months. The
corresponding figure for temozolomide is 12.7 months. Final data is expected in late CY2020 or early CY2021.
In February 2020, the company’s collaborators at St Jude Children’s Research Hospital in Memphis, TN completed recruitment
to a phase I investigator-initiated clinical study of paxalisib in diffuse intrinsic pontine glioma (DIPG), a rare but highly-aggressive
childhood brain cancer with no approved pharmacological treatments (NCT03696355). The St Jude study seeks to establish an
MTD in the paediatric population before enrolling an expansion cohort to seek definitive signals of efficacy. The St Jude study is
primarily funded by the hospital, with support via a financial grant from Kazia. In September 2019, the company announced that a
pediatric MTD of 27 mg/m2 had been determined, which is approximately comparable to the doses used in adult clinical studies.
Initial interim efficacy data is expected in 2H CY2020.
A phase II investigator-initiated clinical study is ongoing at Dana-Farber Cancer Institute in Boston, MA, exploring paxalisib in
combination with Herceptin (trastuzumab) for HER2+ breast cancer brain metastases, a population for which there are again no
approved pharmacological treatments (NCT03765983). The Dana-Farber study is primarily funded by the hospital, with support
via a financial grant from Kazia. Initial interim efficacy data is expected in 2H CY2020.
In May 2019, the company joined a phase II clinical study sponsored by the Alliance for Clinical Trials in Oncology, a large
academic research organisation, and funded by the US National Cancer Institute (NCT03994796). The Alliance study is a
genomically-guided, multi-drug study in patients with brain metastases from any primary tumour. Those with mutations affecting
the PI3K / Akt / mTOR pathway will be assigned to receive paxalisib, while patients with other driving mutations may receive
abemaciclib (Eli Lilly & Company) or entrectenib (Genentech, Inc). The study commenced recruitment on schedule in July 2019,
and is expected to recruit approximately 150 patients, evenly divided between the three treatment arms, over the course of a
two-year period. The company is not yet in a position to provide guidance on the timing of likely data read-outs.
In July 2019, the company entered into a collaboration with researchers at Memorial Sloan Kettering Cancer Center in New York,
NY to conduct a phase I clinical study with paxalisib in combination with radiotherapy for brain metastases and leptomeningeal
metastases (NCT04192981). The Sloan Kettering study is primarily funded by the hospital, with support via a financial grant from
Kazia. Recruitment commenced in Q4 CY2019 and the study is ongoing.
In December 2019, the company entered into a preliminary agreement with the Global Coalition for Adaptive Research (GCAR),
a US-based 501(C)(3) non-profit organisation dedicated to advancing the development of new therapies via the application
of cutting edge statistical methodologies. The agreement relates to set-up work for the planned entry of paxalisib into GBM
AGILE, an international multi-drug platform study in glioblastoma that is sponsored by GCAR. The first agent to enter GBM
AGILE was Bayer’s Stivarga (regorafenib), and paxalisib was invited onto the study as the second agent by GCAR’s Arm Selection
Committee in 4Q CY2019. It is envisaged that further agents will be added in due course. GBM AGILE is heavily supported by
clinicians and regulatory agencies, and provides an optimal path to market for paxalisib in glioblastoma. As a result, the company
has discontinued development of its own planned phase III clinical study and has adopted GBM AGILE as the pivotal study for
registration of paxalisib. It is expected that recruitment to the paxalisib arm will commence in 2H CY2020.
Two key research papers were published in relation to paxalisib during FY2020. First, a paper by Wen et al. in Clinical Cancer
Research presented a definitive analysis of the Genentech phase I clinical study in recurrent glioma. This data had previously only
been available to researchers via a 2016 ASCO poster. Second, Ellingson et al. published a paper in the same journal detailing a
21
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 post hoc analysis of the Genentech phase I study, using advanced imaging analysis methodologies. The Ellingson analysis was
able to correlate plasma concentrations of paxalisib with pharmacodynamic changes on MRI and PET, and to also connect those
changes with progression-free survival. As such, the analysis provides a powerful pharmacodynamic proof-of-concept for the
drug in glioblastoma.
Cantrixil (TRX-E-002-1) is the company’s second clinical asset, and is derived from a proprietary drug discovery program. It is
being developed as a potential therapy for ovarian cancer.
Research undertaken by Yale University (New Haven, Connecticut) has provided preclinical evidence that Cantrixil is active against
both differentiated cancer cells and tumour-initiating cells (sometimes referred to as ‘cancer stem cells’). The latter are thought
to be an important component of chemotherapy resistance and disease recurrence in diseases such as ovarian cancer, and thus
Cantrixil has potential to offer benefit to the approximately three-quarters of ovarian cancer patients who are not adequately
managed by conventional chemotherapy treatments.
In December 2016, the company commenced a phase I clinical trial of Cantrixil in patients with ovarian cancer (NCT02903771).
The study is designed to establish the safety and tolerability of the development candidate, to determine a Maximum Tolerated
Dose (MTD), and to explore indicative signals of clinical efficacy. Data from the initial dose escalation cohort was reported at the
American Association of Cancer Research meeting in April 2019. Cantrixil was broadly well-tolerated, and an MTD of 5 mg/kg was
determined. Dose-limiting toxicities were generally gastrointestinal in nature. The company presented an interim efficacy analysis
at the American Association of Cancer Research (AACR) Virtual Annual Meeting II, which reported a median progression-free
survival of 5.5 months. Of 16 evaluable patients, one exhibited a complete response (CR), and two demonstrated a partial
response to treatment (PR), making for an overall response rate (ORR) of 19%. The company expects to report final data from this
study by the end of CY2020.
Subsequent events
Since the end of the financial year, the United States Food and Drug Administration (FDA) has awarded Rare Pediatric Disease
Designation (RPDD) to Kazia’s paxalisib (formerly GDC-0084) for the treatment of Diffuse Intrinsic Pontine Glioma (DIPG), a rare
and highly-aggressive childhood brain cancer. In August 2020 United States Food and Drug Administration (FDA) has granted
Orphan Drug Designation (ODD) to Kazia’s paxalisib (formerly GDC-0084) for the treatment of malignant glioma, which includes
Diffuse Intrinsic Pontine Glioma (DIPG), a rare and highly aggressive childhood brain cancer. During August 2020 the FDA has
also granted Fast Track Designation (FTD) to paxalisib for the treatment of glioblastoma, the most common and most aggressive
form of primary brain cancer
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the consolidated entity during the financial year.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The consolidated entity has a reasonable expectation that over the course of the coming 12 months:
• Final results will be reported from the phase II clinical trial of paxalisib in glioblastoma;
• Final results will be reported from the phase I clinical trial of Cantrixil (TRX-E-002-1) in ovarian cancer;
•
•
Interim results will be reported from the phase I clinical trial of paxalisib in DIPG at St Jude Children’s Research Hospital;
Interim results will be reported from the phase II clinical trial of paxalisib in HER2+ brain metastases at Dana-Farber Cancer
Institute; and
• Recruitment will commence to the GBM AGILE pivotal study of paxalisib in glioblastoma.
ENVIRONMENTAL REGULATION
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
22
KAZIA THERAPEUTICS LIMITED INFORMATION ON DIRECTORS
‘Other current directorships’ quoted below are current directorships for listed entities only and excludes directorships of all other
types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted below are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Name:
Title:
Iain Ross
Non-Executive Director, Chairman
Qualifications:
B.Sc. (Hons). C Dir.
Experience and expertise:
Iain, based in the UK, is an experienced Director and has served on a number of
Australian company boards. He is Chairman of Redx Pharma plc (LSE:REDX), Silence
Therapeutics plc (LON:SLN) and Biomer Technology Limited. In his career he has
held senior positions in Sandoz AG, Fisons Plc, Hoffmann-La Roche AG and Celltech
Group Plc and also undertaken a number of start-ups and turnarounds on behalf
of banks and private equity groups. His track record includes multiple financing
transactions having raised in excess of £300 million, both publicly and privately, as
well as extensive experience of divestments and strategic restructurings and has
over 20 years in cross-border management as a Chairman and CEO. He has led and
participated in six London Stock Exchange (‘LSE’) Initial Public Offerings,(4 LSE, 1 ASX,
1 NASDAQ) and has direct experience of mergers and acquisitions transactions in
Europe, USA and the Pacific Rim.
Other current directorships:
Redx Pharma plc (LSE:REDX), Silence Therapeutics plc (LON:SLN)
Former directorships (last 3 years):
Premier Veterinary Group Plc (LSE:PVG), Anatara Lifesciences Limited (ASX:ANR) and
e-Therapeutics plc (LSE:ETX).
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Name:
Title:
Member of Remuneration and Nomination Committee, Member of Audit, Risk and
Governance Committee.
800,001 ordinary shares
None
None
Bryce Carmine
Non-Executive Director
Qualifications:
B.Sc., Biochemistry, Microbiology & Genetics
Experience and expertise:
Bryce spent 36 years working for Eli Lilly & Co. and retired as Executive Vice President
for Eli Lilly & Co, and President, Lilly Bio-Medicines. Prior to this he lead the Global
Pharmaceutical Sales and Marketing and was a member of the company’s Executive
Committee. Mr Carmine previously held a series of product development portfolio
leadership roles culminating when he was named President, Global Pharmaceutical
Product Development, with responsibility for the entire late-phase pipeline
development across all therapeutic areas for Eli Lilly. During his career with Lilly,
Bryce held several country leadership positions including President Eli Lilly Japan,
Managing Dir. Australia/NZ & General Manager of a JV for Lilly in Seoul, Korea. Bryce
is currently Chairman and CEO of HaemaLogiX Pty Ltd, a Sydney based privately
owned biotech.
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Name:
Title:
Qualifications:
Member of Audit, Risk and Governance Committee, Chair of Remuneration and
Nomination Committee.
266,293 ordinary shares
None
None
Steven Coffey
Non-Executive Director
B. Comm, CA
23
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020
Experience and expertise:
Steven is a Chartered Accountant and registered company auditor and has
over 35 years experience in the accounting and finance industry. He has been a
partner in the chartered accounting firm Watkins Coffey Martin since 1993. He is a
Non-executive Director of The Docyard Limited (ASX:TDY) and chairs both the Audit
and Risk Committee and the Remuneration Committee for that company. Steven sits
on the board of a number of large private family companies and audits a number of
large private companies and not-for-profit entities.
Other current directorships:
The Docyard Limited (ASX:TDY)
Former directorships (last 3 years):
None
Special responsibilities:
Chair of Audit, Risk and Governance Committee, Member of Remuneration and
Nomination Committee.
Interests in shares:
326,474 ordinary shares
Contractual rights to shares:
None
Name:
Title:
Dr James Garner
Chief Executive Officer, Managing Director
Qualifications:
MA, MBA, MBBS, BSc (Hons), MAICD
Experience and expertise:
Dr Garner is an experienced life sciences executive who has previously worked with
companies ranging from small biotechs to multinational pharmaceutical companies
such as Biogen and Takeda. His career has focused on regional and global
development of new medicines from preclinical to commercialisation.
Dr Garner is a physician by training and holds an MBA from the University of
Queensland. He began his career in hospital medicine and worked for a number of
years as a corporate strategy consultant with Bain & Company before entering the
pharmaceutical industry. Prior to joining Kazia in 2016, he led R&D strategy for Sanofi
in Asia-Pacific and was based in Singapore.
Other current directorships:
Former directorships (last 3 years):
None
None
Interests in shares:
Interests in options:
275,000 ordinary shares
1,200,000 options with exercise price of $0.4925 expiring 4 January 2024
Contractual rights to shares:
None
COMPANY SECRETARY
Kate Hill (CA, GAICD, BSc (Hons)) has held the role of Company Secretary since 9 September 2016.
Kate has over 20 years’ experience as an audit partner with Deloitte Touche Tohmatsu, working with ASX listed and privately
owned clients. She has worked extensively in regulated environments including assisting with Initial Public Offerings, capital
raising and general compliance, as well as operating in an audit environment. She is a Non-executive Director of Countplus
Limited (ASX:CUP) and Elmo Software Limited (ASX:ELO) as well as Chair of their Audit and Risk Committees. She is also Chair of
Seeing Machines Limited (AIM:SEE).
MEETINGS OF DIRECTORS
The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year
ended 30 June 2020, and the number of meetings attended by each director were:
Full Board
Audit,
Risk & Governance
Committee
Remuneration &
Nomination
Committee
Attended
Held
Attended
Held
Attended
Held
9
9
9
9
9
9
9
9
2
2
2
-
2
2
2
-
1
1
1
-
1
1
1
-
Iain Ross
Bryce Carmine
Steven Coffey
James Garner
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
24
KAZIA THERAPEUTICS LIMITED
REMUNERATION REPORT (AUDITED)
The remuneration report, which has been audited, outlines the Key Management Personnel (‘KMP’) remuneration arrangements
for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities
of the group, directly or indirectly.
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Details of remuneration
• Service agreements
• Share-based compensation
• Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
Remuneration philosophy
Remuneration for Directors and Senior Executives is based on the overall objective of attracting and retaining people of high
quality who will make a worthwhile contribution to the consolidated entity in the short, medium and long term, and thereby
contribute to long term shareholder value. The Board and its Remuneration and Nomination Committee take a balanced position
between the need to pay market rates to attract talent, and the financial resources of the consolidated entity, in determining
remuneration.
Non-Executive Directors remuneration
The Constitution of the consolidated entity and the ASX listing rules specify that the aggregate remuneration of Non-Executive
Directors shall be determined from time to time by General Meeting. The last determination for the consolidated entity was at the
Annual General Meeting held on 28 October 2005 when the shareholders approved an aggregate remuneration of $560,000.
Non-Executive Directors’ fees are reviewed periodically by the Board and are regularly compared with those of companies of
comparable market capitalisation and stage of development. The Chairman’s fees are determined independently to the fees of
other non-executive Directors based on comparative roles in the external market. The Non-Executive Directors fee structure is a
fixed fee model and includes superannuation. Directors fees for the current financial year have been held at the same level as in
the prior financial year.
Executive Directors and other KMP
The Board and the Remuneration and Nomination Committee, in consultation with the Managing Director, have put in
place a remuneration structure which provides incentive for employees to drive the activities of the company forward. These
arrangements are reviewed annually at the end of the calendar year.
The Board determines an appropriate level of fixed remuneration for the CEO and Group Executives, as well as the proportion of
performance based remuneration.
The executive remuneration and reward framework has three components:
•
fixed remuneration
• short-term performance incentives - cash bonus
• share-based payments - award of options through the ESOP
Fixed remuneration is reviewed annually by the Remuneration and Nomination Committee based on individual performance,
the overall performance of the consolidated entity and comparable market remunerations. The Remuneration and Nomination
Committee approved increases in fixed remuneration during the financial year ended 30 June 2020.
25
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 The short-term incentives program is designed to align the targets of the consolidated entity with the performance hurdles of
executives. Short-term incentive payments are granted to executives based on specific annual performance objectives, metrics
and performance appraisals. Annual performance reviews are conducted at the end of each calendar year and bonuses are paid
shortly after the performance reviews are completed. Annual performance objectives cover matters such as progress in clinical
trials, and management of the Company’s financial resources.
The Board or the Remuneration and Nomination Committee may, at its discretion, award bonuses for exceptional performance.
The Remuneration and Nomination Committee approved the payment of cash bonuses to the CEO and employees in respect of
the financial year ended 30 June 2020.
The long-term incentive comprises equity-based payments. The consolidated entity aims to attract and retain high calibre
executives, and align their interests with those of the shareholders, by granting equity-based payments which are issued at a
premium to the share price on date of issue and vest in tranches based on tenure. The share-options issued to executives are
governed by the ESOP.
Employee share option plan
The Employee Share Option Plan (‘ESOP’) was most recently approved by shareholders on 15 November 2017.
The ESOP provides for the issue of options to eligible individuals, being employees or Officers of the consolidated entity, however
it excludes Non-Executive Directors.
Each option issued under the ESOP entitles its holder to acquire one fully paid ordinary share and is exercisable at a price based
on a formula, which includes the weighted average price of such shares at the close of trading on the Australian Securities
Exchange for the seven days prior to the date of issue, and a premium which is applied to this value. The number of options
offered, the amount payable, the vesting period, the option period, the conditions of exercise or any other factors are at the
discretion of the Board of Directors.
The consolidated entity issued 1,450,000 share options under the ESOP during the financial year that ended 30 June 2020, of
which 1,300,000 were issued to KMP.
Any change to the ESOP will require approval by shareholders.
Use of remuneration consultants
During the financial year ended 30 June 2020, the consolidated entity did not engage remuneration consultants.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The KMP of the consolidated entity consisted of the following directors of Kazia Therapeutics Limited:
•
Iain Ross - Non-Executive Director, Chairman
• Bryce Carmine - Non-Executive Director
• Steven Coffey - Non-Executive Director
• Dr James Garner - Managing Director, CEO
And the following persons:
• Gabrielle Heaton - Director of Finance and Administration
• Kate Hill - Company Secretary
26
KAZIA THERAPEUTICS LIMITED Short-term benefits
Post-
employment
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Movements
in accrued
leave
Non-
monetary
$
Super-
annuation
$
Equity-
settled
options
$
Total
$
135,272
75,000
75,000
-
-
-
-
-
-
-
7,125
7,125
-
-
-
135,272
82,125
82,125
473,000 180,000
23,423
62,035
206,465
944,923
195,000
17,500
127,875
15,000
7,275
-
20,188
10,745
250,708
-
12,826
155,701
1,081,147
212,500
30,698
96,473
230,036
1,650,854
2020
Non-Executive Directors:
I Ross*
B Carmine
S Coffey
Executive Directors:
J Garner
Other Key Management Personnel:
G Heaton
K Hill
*
Salary paid in UK pounds, but disclosed in Australian dollars using a conversion rate of 0.5323
The table above does not include long service leave as no KMP have been employed by the consolidated entity for more than
5 years.
27
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 Short-term benefits
Post-
employment
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Movements
in accrued
leave
Non-
monetary
$
Super-
annuation
$
Equity-
settled
options
$
Total
$
130,270
75,000
75,000
-
-
-
-
-
-
-
7,125
7,125
-
-
-
130,270
82,125
82,125
445,500
90,000
16,562
50,873
88,150
691,085
180,000
20,400
125,000
15,000
1,030,770
125,400
2,666
-
19,228
19,038
-
15,280
21,580
237,384
161,580
84,161
125,010
1,384,569
2019
Non-Executive Directors:
I Ross*
B Carmine
S Coffey
Executive Directors:
J Garner
Other Key Management Personnel:
G Heaton
K Hill
*
Salary paid in UK pounds, but disclosed in Australian dollars using a conversion rate of 0.5527
The table above does not include long service leave as no KMP have been employed by the consolidated entity for more than
5 years.
The relative proportions of remuneration that are linked to performance and those that are at risk
Name
Non-Executive Directors:
Iain Ross
Bryce Carmine
Steven Coffey
Executive Directors:
James Garner
Other Key Management Personnel:
Gabrielle Heaton
Kate Hill
Fixed remuneration
At risk - STI
At risk - LTI
2020
2019
2020
2019
2020
2019
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
59%
74%
19%
13%
22%
89%
82%
85%
78%
7%
10%
9%
9%
4%
8%
-
-
-
13%
6%
13%
28
KAZIA THERAPEUTICS LIMITED Consequences of performance on shareholder wealth
Shareholder wealth in a company engaged in drug development is generally driven by successful commercialisation, out-licence
or sale of a drug candidate, and is a long term proposition, rather than being linked to annual financial performance. The
directors have selected a CEO and key management team who, in the directors’ opinion, are well placed to realise such an
outcome for our shareholders. Now that the current CEO and management team have been in place for a number of years,
the directors are able to provide the below table showing increase in enterprise value of the Company over the relevant period,
with details of bonuses and options awarded each year, to demonstrate the link between performance, reward and increase in
shareholder wealth.
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Enterprise value
3,794,773
5,736,560
12,659,955
14,884,643
35,582,939
Total bonuses paid to KMP
Number of bonus participants
Share options issued to KMP
38,967
191,135
4
5
-
-
125,400
212,500
3
3
880,000
450,000
362,000
100,000
1,300,000
Number of KMP granted options
3
2
2
2
3
Enterprise Value of the Company has been calculated as the market capitalisation of the Company at each period end, adjusted
for cash held at year end, and the for anticipated R&D cash rebate (deemed to be essentially cash). The use of Enterprise Value
seeks to represent the underlying value of the business after adjusting for cash or debt balances.
During the year ended 30 June 2016, a total of 750,000 options were issued to the newly appointed CEO, Dr James Garner, and
these have now been cancelled and replaced with 1,200,000 options issued in the current financial year. Both of these grants are
included in the above analysis, although the recent grant of 1,200,000 is in replacement of the initial grant.
Voting and comments made at the consolidated entity’s last Annual General Meeting
The consolidated entity received 98.64% of “yes” votes on its Remuneration Report for the financial year ending 30 June 2019.
The consolidated entity received no specific feedback on its Remuneration Report at the Annual General Meeting.
Bonuses included in remuneration
Details of short term incentive cash bonuses awarded as remuneration to each key management personnel are included in the
above tables.
Service agreements
Under Remuneration and Nomination Committee policy, employment contracts are entered into with each of the executives
who is considered to be KMP. Under the terms of the contracts, remuneration is reviewed at least annually. The employment
contracts of KMPs include a termination clause whereby a party can terminate the agreement on notice. Such notice may vary
between 4 weeks and 6 months. Under the terms of each contract, payment in lieu can be made by the consolidated entity to
substitute the notice period. The consolidated entity may terminate the contracts at any time without cause if serious misconduct
has occurred. In the event that employment is terminated for cause, no severance pay or other benefits are payable by the
consolidated entity.
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of
these agreements are as follows:
Name:
Title:
James Garner
Chief Executive Officer, Managing Director
Agreement commenced:
1 February 2016
Term of agreement:
Full-time employment
Details:
Name:
Title:
Base salary to be reviewed annually by the Remuneration and Nomination Committee.
James’s appointment with the consolidated entity may be terminated with the consolidated
entity giving 6 months’ notice or by James giving 6 months’ notice. The consolidated entity
may elect to pay James equal amount to that proportion of his salary equivalent 6 months’
pay in lieu of notice, together with any outstanding entitlements due to him.
The current base salary, as from 1 January 2020, is $488,000 including an allowance for
health benefits.
Gabrielle Heaton
Director of Finance and Administration
Agreement commenced:
13 March 2017
Term of agreement:
Full time employment
Details:
Base salary to be reviewed annually by the Remuneration and Nomination Committee.
Gabrielle’s appointment with the consolidated entity may be terminated with the consolidated
entity giving 4 weeks’ notice or by Gabrielle giving 4 weeks’ notice. The consolidated entity
may elect to pay Gabrielle equal amount to that proportion of her salary equivalent 4 weeks’
pay in lieu of notice, together with any outstanding entitlements due to her.
The current base salary, from 1 January 2020, is $200,000.
29
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 Name:
Title:
Kate Hill
Company Secretary
Agreement commenced:
9 September 2016
Term of agreement:
Part-time contractor
Details:
Base remuneration is based on time worked. Daily rate to be reviewed annually by
the Remuneration and Nomination Committee, with an uplift of 10% on the daily rate
applied from 1 January 2019. The contract is open ended. Kate’s appointment with the
consolidated entity may be terminated with the consolidated entity giving 60 days’ notice
or by Kate giving 60 days’ notice.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
The terms and conditions of each grant of options over ordinary shares granted as remuneration to Directors or other Key
Management Personnel in this financial year or future financial years are set out below.
The options issued on 13 November 2019 were to James Garner, and represented part of a modification to an earlier tranche of
options granted to Dr Garner in early 2016.
The options which were cancelled as part of this modification had the following terms:
•
Initially granted on 1 February 2016
• 500,000 had a exercise price of $1.988 and were fully vested at the time of the cancellation, expiry 1 February 2021
• 250,000 had a exercise price of $2.606 and were unvested at the time of the cancellation, expiry 1 February 2021
• On the date of cancellation, the fair value of the options was de minimus.
The newly issued options had the following terms:
• Exercise price of $0.49
• 50% fully vested at time of grant, the remainder to vest equally over a three-year period starting 4 January 2020
• Expiry 4 January 2024
• Fair value at grant date of $216,000
The options issued on 13 January 2020 were to Kate Hill (50,000 options, with a fair value at grant date of $17,000) and Gabrielle
Heaton (50,000 options, with a fair value at grant date of $17,000). There are no performance conditions, consistent with the
Company’s Employee Share Option Plan rules, as reapproved by shareholders on 15 November 2017.
In all cases of employee options, an option will only vest if the option holder continues to be a full-time employee with the
Company or an Associated Company during the vesting period relating to the option.
Grant date
13/11/2019
13/11/2019
13/11/2019
13/11/2019
13/01/2020
13/01/2020
13/01/2020
13/01/2020
No
of options
Vesting
date
Exercise
date
Expiry date
Exercise price
$
600,000
13/11/2019
13/11/2019
04/01/2024
200,000
04/01/2020
04/01/2020
04/01/2024
200,000
04/01/2021
04/01/2021
04/01/2024
200,000
04/01/2022
04/01/2022
04/01/2024
25,000
25,000
25,000
25,000
1,300,000
13/01/2021
13/01/2021
13/01/2025
13/01/2022
13/01/2022
13/01/2025
13/01/2023
13/01/2023
13/01/2025
13/01/2024
13/01/2024
13/01/2025
$0.49
$0.49
$0.49
$0.49
$0.88
$0.88
$0.88
$0.88
Fair value per
option at
grant
$
$0.18
$0.18
$0.18
$0.18
$0.34
$0.34
$0.34
$0.34
Options granted carry no dividend or voting rights. Each option is convertible to one ordinary share upon exercise. No
options were exercised or lapsed during the year. An option will only vest if the option holder continues to be a full-time
employee with the Company or an Associated Company during the vesting period relating to the option.
30
KAZIA THERAPEUTICS LIMITED Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of Key Management
Personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
B Carmine
S Coffey
I Ross
J Garner
K Hill
G Heaton
Balance at
the start of
the year
Purchased
on market
Balance at
the end of
the year
131,293
181,474
475,001
110,000
30,000
-
927,768
135,000
145,000
325,000
165,000
-
10,000
780,000
266,293
326,474
800,001
275,000
30,000
10,000
1,707,768
Option holding
The number of options over ordinary shares in the company held during the financial year by each Director and other members of
Key Management Personnel of the consolidated entity, including their personally related parties, is set out below:
Options over ordinary shares
S Coffey *
J Garner **, ***
K Hill **
G Heaton **
Balance at
the start of
the year
Granted as
remuneration
Expired
Cancelled
as part of
modification
Balance at
the end of
the year
5,875
750,000
270,000
192,000
-
(5,875)
-
-
1,200,000
50,000
50,000
-
-
-
(750,000)
1,200,000
-
-
320,000
242,000
1,217,875
1,300,000
(5,875)
(750,000)
1,762,000
*
**
***
The above listed options were not issued as part of remuneration.
Options issued under the Employee Share Option Plan. Unvested options are forfeited upon cessation of employment with the Company.
The previously issued 750,000 options were cancelled and 1,200,000 new options issued. These transactions together have been accounted for
as a modification.
Other transactions with key management personnel and their related parties
There was no other transaction with KMP and their related parties.
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION
Unissued ordinary shares of Kazia Therapeutics Limited under option at the date of this report are as follows. All options are
unlisted and were issued under the Company’s Employee Share Option Plan.
Grant date
16 November 2015
5 September 2016
31 October 2016
12 October 2016
21 November 2016
7 August 2017
5 February 2018
4 January 2019
13 November 2019
13 January 2020
Expiry date
16 November 2020
5 September 2021
1 November 2021
17 October 2021
23 November 2021
7 August 2022
5 February 2023
4 January 2024
4 January 2024
13 January 2025
Exercise
Price
Closing
Balance
$2.200
$1.630
$1.380
$1.560
$1.380
$0.670
$0.780
$0.492
$0.492
$0.881
236,667
50,000
12,500
62,000
50,000
224,000
440,000
250,000
1,200,000
250,000
2,775,167
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
company or of any other body corporate.
31
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 SHARES ISSUED ON THE EXERCISE OF OPTIONS
There were no ordinary shares of Kazia Therapeutics Limited issued on the exercise of options during the year ended 30 June
2020 and up to the date of this report.
INDEMNITY AND INSURANCE OF OFFICERS
The consolidated entity has not indemnified the Directors and Executives of the consolidated entity for costs incurred, in their
capacity as a Director or Executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the consolidated entity paid a premium in respect of a contract to insure the Directors and Executives
of the consolidated entity against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
INDEMNITY AND INSURANCE OF AUDITOR
The consolidated entity has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of
the consolidated entity or any related entity against a liability incurred by the auditor.
During the financial year, the consolidated entity has not paid a premium in respect of a contract to insure the auditor of the
consolidated entity or any related entity.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf
of the company for all or part of those proceedings.
NON-AUDIT SERVICES
There were no non-audit services provided during the financial year by the auditor.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF GRANT THORNTON
AUDIT PTY LTD
There are no officers of the company who are former partners of Grant Thornton Audit Pty Ltd.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.
AUDITOR
Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the Directors
Dr James Garner
Managing Director, Chief Executive Officer
Mr Iain Ross
Chairman
27 August 2020
Sydney
32
KAZIA THERAPEUTICS LIMITED
33
2020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 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. www.grantthornton.com.au Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Kazia Therapeutics Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Kazia Therapeutics Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants S M Coulton Partner – Audit & Assurance Sydney, 27 August 2020 CONTENTS
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the members of Kazia Therapeutics Limited
Shareholder information
Page
36
37
38
40
41
64
65
70
34
KAZIA THERAPEUTICS LIMITED GENERAL INFORMATION
The financial statements cover Kazia Therapeutics Limited as a consolidated entity consisting of Kazia Therapeutics Limited and
the entities it controlled at the end of or during the year. The financial statements are presented in Australian dollars, which is
Kazia Therapeutics Limited’s functional and presentation currency.
Kazia Therapeutics Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Three International Towers,
Level 24
300 Barangaroo Avenue
Sydney NSW 2000
A description of the nature of the consolidated entity’s operations and its principal activities are included in the Directors’ report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 August 2020. The directors
have the power to amend and reissue the financial statements.
35
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS Revenue and other income
Other income
Finance income
Expenses
Research and development expense
General and administrative expense
Loss on disposal of fixed assets
Fair value losses on financial assets at fair value through profit or loss
Loss on revaluation of contingent consideration
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit for the year attributable to the owners of
Kazia Therapeutics Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net exchange difference on translation of financial statements of foreign controlled
entities, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Kazia Therapeutics Limited
Basic earnings per share
Diluted earnings per share
Note
Consolidated
2020
$
2019
$
5
995,000
1,465,428
65,905
99,619
(9,494,328)
(6,475,626)
(3,689,867)
(3,785,563)
-
(1,076)
(167,814)
(1,808,512)
(474,557)
(62,729)
(12,765,661)
(10,568,459)
7
298,195
298,195
(12,467,466)
(10,270,264)
(3,520)
(3,520)
(88,986)
(88,986)
(12,470,986)
(10,359,250)
Cents
(17.07)
(17.07)
Cents
(17.86)
(17.86)
32
32
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes
36
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the year ended 30 June 2020KAZIA THERAPEUTICS LIMITED Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Financial assets
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Contingent consideration
Total current liabilities
Non-current liabilities
Deferred tax
Contingent consideration
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other contributed equity
Reserves
Accumulated losses
Total equity
Note
Consolidated
2020
$
2019
$
8
9
10
11
12
13
14
15
16
17
18
19
20
8,764,044
5,433,868
1,352,252
537,305
10,653,601
1,710,703
369,604
7,514,175
-
167,814
12,410,139
13,494,483
12,410,139
13,662,297
23,063,740
21,176,472
3,488,933
1,763,940
191,451
136,352
1,387,089
-
5,067,473
1,900,292
3,412,788
457,899
3,870,687
8,938,160
3,710,983
1,370,431
5,081,414
6,981,706
14,125,580
14,194,766
48,781,214
36,641,519
464,000
464,000
1,065,923
2,037,453
(36,185,557)
(24,948,206)
14,125,580
14,194,766
The above statement of financial position should be read in conjunction with the accompanying notes
37
STATEMENT OF FINANCIAL POSITIONAs at 30 June 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 Consolidated
Contributed
equity
$
Other
contributed
equity
$
Foreign
currency
translation
reserve
$
Share
based
payments
reserve
$
Accumulated
losses Total equity
$
$
Balance at 1 July 2018
31,575,824
464,000
(362,682)
2,242,734
(14,677,942)
19,241,934
Loss after income tax benefit
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Shares issued (note 18)
Share issue costs (note 18)
Transactions with owners in their
capacity as owners:
-
-
-
5,405,760
(340,065)
Share-based payments (note 33)
-
-
-
-
-
-
-
-
(88,986)
(88,986)
-
-
-
-
-
-
-
-
246,387
(10,270,264)
(10,270,264)
-
(88,986)
(10,270,264)
(10,359,250)
-
-
-
5,405,760
(340,065)
246,387
Balance at 30 June 2019
36,641,519
464,000
(451,668)
2,489,121
(24,948,206)
14,194,766
The above statement of changes in equity should be read in conjunction with the accompanying notes
38
STATEMENT OF CHANGES IN EQUITYFor the year ended 30 June 2020KAZIA THERAPEUTICS LIMITED Consolidated
Contributed
equity
$
Other
contributed
equity
$
Foreign
currency
translation
reserve
$
Share
based
payments
reserve
$
Accumulated
losses Total equity
$
$
Balance at 1 July 2019
36,641,519
464,000
(451,668)
2,489,121
(24,948,206)
14,194,766
Loss after income tax benefit
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Shares issued (note 18)
Share issue costs (note 18)
Transactions with owners in their
capacity as owners:
Share-based payments (note 33)
Expired options
-
-
-
12,972,747
(833,052)
-
-
-
-
-
-
-
-
-
-
(3,520)
(3,520)
-
-
-
-
-
-
-
-
-
262,105
(12,467,466)
(12,467,466)
-
(3,520)
(12,467,466)
(12,470,986)
-
-
-
12,972,747
(833,052)
262,105
-
(1,230,115)
1,230,115
Balance at 30 June 2020
48,781,214
464,000
(455,188)
1,521,111
(36,185,557)
14,125,580
The above statement of changes in equity should be read in conjunction with the accompanying notes
39
STATEMENT OF CHANGES IN EQUITY (CONTINUED)For the year ended 30 June 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTSANNUAL REPORT 2020 Cash flows from operating activities
Payments to suppliers (inclusive of GST)
R&D cash rebate
Net cash used in operating activities
Cash flows from investing activities
Proceeds from disposal of shares
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Note
Consolidated
2020
$
2019
$
(10,200,368)
(8,905,468)
1,390,849
2,191,258
31
(8,809,519)
(6,714,210)
-
-
2,359,137
2,359,137
18
12,139,695
12,139,695
3,815,695
3,815,695
3,330,176
(539,378)
5,433,868
5,956,182
-
17,064
Cash and cash equivalents at the end of the financial year
8
8,764,044
5,433,868
The above statement of cash flows should be read in conjunction with the accompanying notes
40
STATEMENT OF CASH FLOWSFor the year ended 30 June 2020KAZIA THERAPEUTICS LIMITED NOTE 1. GENERAL INFORMATION
The financial statements cover Kazia Therapeutics Limited as a consolidated entity consisting of Kazia Therapeutics Limited and
its subsidiaries. The financial statements are presented in Australian dollars, which is Kazia Therapeutics Limited’s functional and
presentation currency.
Kazia Therapeutics Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Three International Towers
Level 24, 300 Barangaroo Avenue
Sydney NSW 2000
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 27 August 2020. The Directors
have the power to amend and reissue the financial statements.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards
and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any
significant impact on the financial performance or position of the consolidated entity.
The following new Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 16 Leases
General impact of application of AASB 16 Leases
AASB 16 has been applied from 1 July 2019. The standard introduces new requirements with respect to lease accounting by
removing the distinction between operating and finance leases, requiring the recognition of a right-of-use asset and a lease
liability at commencement for all leases except for short-term leases, being those less than 12 months, and leases of low-value
assets.
Impact of the definition of a new lease
The change in definition of a lease mainly relates to the concept of control. AASB 16 determines whether a contract contains a
lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange
for consideration. The consolidated entity has applied this definition to all lease contracts currently held. The new policy is set out
below.
As the consolidated entity is not party to any material leases with a term in excess of 12 months, the adoption of the new standard
has not had a material impact on the current period.
Interpretation 23 Uncertain tax positions
Interpretation 23 clarified the application of the recognition and measurement criteria in AASB 112 Income Taxes (AASB 112)
where there is uncertainty over income tax treatments and requires an assessment of each uncertain tax position as to whether
it is probable that a taxation authority will accept the position. Where it is not probable, the effect of the uncertainty is reflected
in determining the relevant taxable profit or loss, tax bases, unused tax losses and unused tax credits or tax rates. The amount
is determined as either the single most likely amount or the sum of the probability weighted amounts in a range of possible
outcomes, whichever better predicts the resolution of the uncertainty. Judgments are reassessed as and when new facts and
circumstances are presented.
Interpretation 23 is effective for the Group’s annual financial reporting period beginning on 1 July 2019. The Company is of the
view that there are no material uncertain positions which impact the Group’s accounting for income taxes.
Going concern
The consolidated entity incurred a loss after income tax of $12,467,466 (2019: $10,270,264), was in a net current asset position
of $5,586,128 (2019: net current asset position of $5,613,883) and had net cash outflows from operating activities of $8,809,519
(2019: $6,714,210) for the year ended 30 June 2020.
As at 30 June 2020 the consolidated entity had cash in hand and at bank of $8,764,044.
The financial statements have been prepared on a going concern basis, which contemplates continuity of normal activities and
realisation of assets and settlement of liabilities in the normal course of business. As is often the case with drug development
companies, the ability of the consolidated entity to continue its development activities as a going concern is dependent upon it
deriving sufficient cash from investors, from licensing and partnering activities, and from other sources of revenue such as grant
funding.
41
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The directors have considered the cash flow forecasts and the funding requirements of the business and continue to explore grant
funding, licensing opportunities and equity investment opportunities in the Company. In particular, the directors have considered
the impact of COVID-19 on the operations of the Company, and make the following observations:
• Kazia’s key clinical trials (phase II study of paxalisib in glioblastoma and phase I study of Cantrixil in ovarian cancer) were fully
recruited prior to the onset of restrictions associated with COVID-19 in the United States and Australia;
• The GBM AGILE study, which is planned to serve as a pivotal study for paxalisib in glioblastoma, remains on track, and
initiation of recruitment continues to be expected in 2H CY2020;
•
In general, clinical research in advanced cancer is relatively protected from pandemic disruption due to the ongoing and
time-critical need for patient care in specialised facilities that cannot easily be repurposed;
• The Company is pre-revenue, and so changes in customer behaviour over the next several years due to public health
restrictions and reduced economic activity have little to no impact on its finances;
• The Company was able to secure funding of approximately $9million at the height of the initial wave of COVID-19, with
additional demand from institutional investors at that time, which could not be satisfied within the Company’s placement
capacity;
• The directors do not foresee any other impacts on the Company’s ability to raise additional funding as a result of COVID-19.
The directors are confident that the abovementioned strategies are appropriate to generate sufficient funding to allow the
consolidated entity to continue as a going concern.
Accordingly the directors have prepared the financial statements on a going concern basis. Should the above assumptions
not prove to be appropriate, there is material uncertainty whether the consolidated entity will continue as a going concern and
therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in
these financial statements.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for
for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board (‘IASB’).
The financial statements have been prepared on an accruals basis and under the historical cost conventions, except for listed
equity investments which are carried at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are
disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 29.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kazia Therapeutics Limited
(‘company’ or ‘parent entity’) as at 30 June 2020 and the results of all subsidiaries for the year then ended. Kazia Therapeutics
Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when
the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference is between the consideration
transferred and the book value.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together
with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as
the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of
resources to operating segments and assessing their performance. The CODM is considered to be the Board of Directors.
42
KAZIA THERAPEUTICS LIMITED NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currency translation
The financial statements are presented in Australian dollars, which is the consolidated entity’s functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or
loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates,
which approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are recognised
in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation is disposed of.
Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation
shall be recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net
investment.
Financial Instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value
through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial
liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the
financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
Subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:
•
•
financial assets at amortised cost
financial assets at fair value through profit or loss (FVPL)
Classifications are determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial assets
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVPL):
•
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where
the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this
category of financial instruments.
Financial assets at fair value through profit or loss (FVPL)
Financial assets that are held within a business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair
value through profit and loss. Further, irrespective of business model, financial assets whose contractual cash flows are not solely
payments of principal and interest are accounted for at FVPL. The Group’s investments in equity instruments and derivatives fall
under this category.
Impairment of financial assets
AASB 9’s new impairment model uses more forward looking information to recognize expected credit losses - the ‘expected
credit losses (ECL) model’. The application of the new impairment model depends on whether there has been a significant
increase in credit risk. The Group considers a broader range of information when assessing credit risk and measuring expected
credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
43
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In applying this forward-looking approach, a distinction is made between:
•
•
financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk
(‘Stage 1’) and
financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not
low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected
credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected
life of the financial instrument.
Classification and measurement of financial liabilities
The Group’s financial liabilities comprise trade and other payables. Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or
loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included
within finance costs or finance income.
Revenue from contracts with customers
The Group does not earn revenue from contracts with customers.
Finance Income
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.
Grant income
The R&D Tax Incentive is a government program which helps to offset some of the incurred costs of R&D. Eligible expenditure
incurred under the scheme in a financial year attracts an additional 43.5% tax deduction, and for a group earning income of less
than $20 million, the cash value of the additional deduction is remitted to the taxpayer. In accordance with AASB 120, as the
compensation relates to expenses already incurred, it is recognised in profit or loss of the period in which it becomes receivable.
Accordingly the group accounts for the R&D Tax Incentive in the same year as the expenses to which it relates.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying
amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there
are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either
the same taxable entity or different taxable entities which intend to settle simultaneously.
Kazia Therapeutics Limited (the ‘parent entity’) and its wholly-owned Australian controlled entities have formed an income
tax consolidated group under the tax consolidation regime. Kazia Therapeutics Limited as the parent entity discloses all of
the deferred tax assets of the tax consolidated group in relation to tax losses carried forward (after elimination of inter-group
transactions). The tax consolidated group has applied the ‘separate taxpayer in the group’ allocation approach in determining the
appropriate amount of taxes to allocate to members of the tax consolidated group.
As the tax consolidation group continues to generate tax losses there has been no reason for the company to enter a tax funding
agreement with members of the tax consolidation group.
44
KAZIA THERAPEUTICS LIMITED NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interpretation 23 Uncertain tax positions
Interpretation 23 clarified the application of the recognition and measurement criteria in AASB 112 Income Taxes (AASB 112)
where there is uncertainty over income tax treatments and requires an assessment of each uncertain tax position as to whether
it is probable that a taxation authority will accept the position. Where it is not probable, the effect of the uncertainty is reflected
in determining the relevant taxable profit or loss, tax bases, unused tax losses and unused tax credits or tax rates. The amount
is determined as either the single most likely amount or the sum of the probability weighted amounts in a range of possible
outcomes, whichever better predicts the resolution of the uncertainty. Judgments are reassessed as and when new facts and
circumstances are presented.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held
primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash
or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting
period. All other assets are classified as non-current.
A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it
is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the
liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Research and development
Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised
only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be
measured reliably.
Leases
Under AASB 16, leases are accounted for as follows:
• Right-of-use assets and lease liabilities are recognised in the consolidated statement of financial position, initially measured at
the present value of future lease payments;
• Depreciation on right-of-use assets and interest on lease liabilities are recognised in the consolidated statement of profit or
loss; and
• The total amount of cash paid under lease arrangements is separated into a principal portion (presented within financing
activities) and interest (presented within operating activities) in the consolidated cash flow statement.
Lease incentives under AASB 16 are recognised as part of the measurement of right-of-use assets and lease liabilities.
Under AASB 16, right-of-use assets are tested for impairment in accordance with AASB 136 Impairment of Assets. This replaces
the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets, the consolidated entity has opted to
recognise a lease expense on a straight-line basis as permitted by AASB 16. This expense is presented within other expenses in
the consolidated statement of profit or loss.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the
date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not
amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured
at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of
intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset.
The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption
or useful life are accounted for prospectively by changing the amortisation method or period.
Patents and trademarks
Significant costs associated with patents and intellectual property are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite useful life of 5 years.
Licensing agreement for paxalisib (formerly GDC-0084)
The Licensing Agreement asset was initially brought to account at fair value, and is being amortised on a straight-line basis over
the period of its expected benefit, being the remaining life of the patent, which was15 years from the date of acquisition.
45
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of non-financial assets
Non-financial assets with finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present
value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating
unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating
unit.
Compound financial instruments
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost
using the effective interest rate method, whereas the equity component is not remeasured. Interest, gains and losses relating to
the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to equity; no gain or loss is
recognised on conversion.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event,
it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount
of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled
within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date is measured
as the present value of expected future payments to be made in respect of services provided by employees up to the reporting
date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date
on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash
outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees under the terms of the Employee Share Option
Plan (‘ESOP’) and consultants as compensation for services performed.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free
interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated
entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of
the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss
for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
• during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
•
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting
date.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the
share-based compensation benefit as at the date of modification.
46
KAZIA THERAPEUTICS LIMITED NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award
is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is
treated as if they were a modification.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred, including interest on short-term and long-term borrowings.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the
absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use.
Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are
determined based on a reassessment of the lowest level input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable,
with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options, including share based payments relating to the issue
of shares are, shown in equity as a deduction, net of tax, from the proceeds.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Kazia Therapeutics Limited, 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 financial 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.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2020. The consolidated entity’s
assessment of the impact of these new or amended Accounting Standards and Interpretations is that none are deemed to have a
material impact on the entity.
47
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on
historical experience and on other various factors, including expectations of future events, management believes to be reasonable
under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The
judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities (refer to the respective notes) within the next financial year are discussed as follows:
Research and development expenses
The Directors do not consider the development programs to be sufficiently advanced to reliably determine the economic benefits
and technical feasibility to justify capitalisation of development costs. These costs have been recognised as an expense when
incurred.
Research and development expenses relate primarily to the cost of conducting human clinical and pre-clinical trials. Clinical
development costs are a significant component of research and development expenses. Estimates have been used in determining
the expense liability under certain clinical trial contracts where services have been performed but not yet invoiced. Generally the
costs, and therefore estimates, associated with clinical trial contracts are based on the number of patients, drug administration
cycles, the type of treatment and the outcome being measured. The length of time before actual amounts can be determined will
vary depending on length of the patient cycles and the timing of the invoices by the clinical trial partners.
Clinical trial expenses
Estimates have been used in determining the expense liability under certain clinical trial contracts being performed but not yet
invoiced.
Share-based payment transactions
The consolidated entity 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 by using the Black-Scholes option pricing
model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and
assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and
liabilities within the next annual reporting period but may impact profit or loss and equity.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based
on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted)
in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3:
Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and
therefore which category the asset or liability is placed in can be subjective.
Research and development tax rebate
The R&D Tax Incentive is recognised when a reliable estimate of the amounts receivable can be made. For the year ended
30 June 2020 the group has estimated the rebate which will be received in early 2021 and has accrued that amount as income in
the statement of profit or loss and other comprehensive income.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets
at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to
impairment. If an impairment trigger exists, the recoverable amount of the asset is determined.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses. There have been no deferred tax
assets recognised in the financial statements.
Business combinations
The consolidated entity entered into a business combination in a prior year. The transaction was complex, involving the licensing
of an asset from one party and the purchase of a company from another party. Significant judgement was required in determining
that the transaction was a business combination and in relation to the identification and valuation of assets and liabilities
acquired.
Contingent consideration
The fair value of contingent consideration is dependent on the key assumptions including probability of milestones occurring,
timing of settlement and discount rates.
48
KAZIA THERAPEUTICS LIMITED NOTE 4. OPERATING SEGMENTS
Identification of reportable operating segments
The consolidated entity’s operating segment is based on the internal reports that are reviewed and used by the Board of
Directors (being the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of
resources.
The consolidated entity operates in the pharmaceutical research and development business. There are no operating segments for
which discrete financial information exists.
The information reported to the CODM, on at least a quarterly basis, is the consolidated results as shown in the statement of
profit or loss and other comprehensive income and statement of financial position.
Major customers
During the current and prior financial year there were no major customers.
NOTE 5. OTHER INCOME
Net foreign exchange gain
Payroll tax rebate
Subsidies and grants
Reimbursement of expenses
Research and development rebate
Other income
NOTE 6. EXPENSES
Loss before income tax includes the following specific expenses:
Depreciation
Property, plant and equipment
Amortisation
GDC licensing agreement
Total depreciation and amortisation
Net foreign exchange loss
Net foreign exchange loss
Leases
Expense relating to short term leases
Superannuation expense
Defined contribution superannuation expense
Employee benefits expense excluding superannuation
Employee benefits expense excluding superannuation
Other expenses
Revaluation of contingent consideration
Consolidated
2020
$
4,631
2,259
20,000
-
2019
$
-
318
9,413
24,614
968,110
1,431,083
995,000
1,465,428
Consolidated
2020
$
2019
$
-
103
1,084,344
1,084,347
1,084,344
1,084,450
-
17,835
107,929
78,521
139,697
128,271
1,525,599
1,395,831
474,557
62,729
49
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 7. INCOME TAX BENEFIT
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Gain/loss on revaluation of contingent consideration
Research and Development claim
Tax losses and timing differences not recognised
Income tax benefit
Consolidated
2020
$
2019
$
(12,765,661)
(10,568,459)
(3,510,557)
(2,906,326)
72,079
130,503
279,675
67,756
17,250
393,548
(3,028,300)
(2,427,772)
2,730,105
(298,195)
2,129,577
(298,195)
Consolidated
2020
$
2019
$
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised-Australia
67,429,803
57,049,913
Potential tax benefit @ 27.5%
Unused tax losses for which no deferred tax asset has been recognised-US
Potential tax benefit at statutory tax rates @ 21%-US
18,543,196
15,688,726
1,570,207
2,365,967
329,743
496,853
NOTE 8. CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term deposits
NOTE 9. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Trade receivables
R&D tax rebate receivable
Less: Allowance for expected credit losses
Other receivables
Deposits held
Less: Provision for impairment of deposits held
Consolidated
2020
$
2019
$
1,264,044
833,868
7,500,000
4,600,000
8,764,044
5,433,868
Consolidated
2020
$
439
2019
$
16,767
1,017,278
1,439,825
-
(16,767)
1,017,717
1,439,825
177,125
566,508
(409,098)
112,017
563,982
(405,121)
1,352,252
1,710,703
Deposits held included a guarantee to the value of €250,000 ($409,098) for the “APO Trend” case. Please refer to note 26 for
further information on this matter.
Allowance for expected credit losses
The consolidated entity has recognised a loss of nil (2019: $16,767) in profit or loss in respect of impairment of receivables
(excluding ‘deposits held’) for the year ended 30 June 2020.
50
KAZIA THERAPEUTICS LIMITED NOTE 10. CURRENT ASSETS - OTHER
Prepayments
NOTE 11. NON-CURRENT ASSETS - FINANCIAL ASSETS
Listed ordinary shares – FVTPL
Unlisted shares and options – FVTPL
Refer to note 23 for further information on fair value measurement.
NOTE 12. NON-CURRENT ASSETS - INTANGIBLES
Patents and intellectual property – at cost
Less: Accumulated amortisation
Licensing agreement – at acquired fair value
Less: Accumulated amortisation
Consolidated
2020
$
2019
$
537,305
369,604
Consolidated
2020
$
-
-
-
2019
$
25,014
142,800
167,814
Consolidated
2020
$
2019
$
2,850,517
2,850,517
(2,850,517)
(2,850,517)
-
-
16,407,788
16,407,788
(3,997,649)
(2,913,305)
12,410,139
13,494,483
12,410,139
13,494,483
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Amortisation expense
Balance at 30 June 2019
Amortisation expense
Balance at 30 June 2020
Paxalisib
licensing
agreement
$
Total
$
14,578,830
14,578,830
(1,084,347)
(1,084,347)
13,494,483
13,494,483
(1,084,344)
(1,084,344)
12,410,139
12,410,139
NOTE 13. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables
Accrued payables
Other current liability
Refer to note 22 for further information on financial instruments.
Consolidated
2020
$
2019
$
1,693,632
1,049,944
1,795,301
-
713,517
479
3,488,933
1,763,940
51
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 14. CURRENT LIABILITIES - PROVISIONS
Employee benefits
NOTE 15. CURRENT LIABILITIES - CONTINGENT CONSIDERATION
Contingent consideration (see note 17)
NOTE 16. NON-CURRENT LIABILITIES - DEFERRED TAX
Deferred tax liability associated with Licensing Agreement
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Consolidated
2020
$
2019
$
191,451
136,352
Consolidated
2020
$
1,387,089
2019
$
-
Consolidated
2020
$
2019
$
3,412,788
3,710,983
298,195
298,195
3,114,593
3,412,788
3,412,788
3,710,983
NOTE 17. NON-CURRENT LIABILITIES - CONTINGENT CONSIDERATION
Contingent consideration
Consolidated
2020
$
2019
$
457,899
1,370,431
During the 2017 financial year, the consolidated entity acquired 100% of the issued shares in Glioblast Pty Ltd, a privately-held,
neuro-oncology-focused Australian biotechnology company. On the same day, Kazia entered into a worldwide licensing
agreement with Genentech to develop and commercialise GDC-0084, now known as paxalisib.
The Glioblast acquisition contains four contingent milestone payments, the first two milestone payments are to be settled with
Kazia shares, and the third and fourth milestone payments are to be settled with either cash or Kazia shares at the discretion of
Kazia. Milestone 1 has now been paid out, and Milestone 3 has lapsed.
The Genentech Agreement comprises of one milestone payment payable on the first commercial licensed product sale.
The range of outcomes of contingent consideration are summarised below:
Milestone - High/Low outcomes
Milestone 2
Milestone 4
Milestone 5
High
Low
1,250,000
1,250,000
4,199,000
3,400,000
1,394,000
1,394,000
6,843,000
6,044,000
Each milestone payment is probability weighted for valuation purposes. The milestone payments are discounted to present value,
using a discount rate of 35% per annum, if they are expected to be achieved more than 12 months after the valuation date. The
contingent consideration was revalued at 30 June 2020 to take into account revised estimated probabilities and timelines of
certain milestones being achieved, and a portion of the discount has unwound with the resultant Loss on contingent consideration
being recognised in profit and loss.
Kazia is also required to pay royalties to Genentech in relation to net sales. These payments are related to future financial
performance, and are not considered as part of the consideration in relation to the Genentech Agreement.
52
KAZIA THERAPEUTICS LIMITED NOTE 18. EQUITY - CONTRIBUTED EQUITY
Consolidated
2020
Shares
2019
Shares
2020
$
2019
$
Ordinary shares - fully paid
94,598,369
62,166,673
48,781,214
36,641,519
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
$
1 July 2018
48,409,621
31,575,824
Share placement
24 October 2018
8,900,001
$0.380
3,382,000
Milestone 1 shares issued in connection with
purchase of Glioblast Pty Limited (GDC-0084)
9 November 2018
2,820,824
$0.440
1,250,000
Issued under Share Purchase Plan
23 November 2018
2,036,227
Share issue transaction costs
-
$0.380
$0.000
773,760
(340,065)
36,641,519
30 June 2019
62,166,673
1 November 2019
10,000,000
$0.400
4,000,000
16 April 2020
11 May 2020
18,041,667
4,390,010
19
-
$0.400
$0.400
$4.000
$0.000
30 June 2020
94,598,369
7,216,667
1,756,004
76
(833,052)
48,781,214
Balance
Share placement
Share placement
Issued under the Share Purchase Plan
Issued on conversion of options
Share issue transaction costs
Balance
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to
the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not
have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it
can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as
total borrowings less cash and cash equivalents.
The capital structure of the consolidated entity consists of cash and cash equivalents and equity attributable to equity holders.
The overall strategy of the consolidated entity is to continue its drug development programs, which depends on raising sufficient
funds, through a variety of sources including issuing of additional share capital, as may be required from time to time.
The capital risk management policy remains unchanged from the prior year.
NOTE 19. EQUITY - OTHER CONTRIBUTED EQUITY
Convertible note - Triaxial
Consolidated
2020
$
2019
$
464,000
464,000
On 4 December 2014, the consolidated entity and the convertible note holder (‘Triaxial’) signed a Convertible Note Deed Poll
(‘Deed’) which superseded the precedent Loan Agreement between Triaxial shareholders and the consolidated entity. The
Deed extinguishes the liability created by the Loan Agreement and provides that the Convertible Notes will convert into a
pre-determined number of ordinary shares on the achievement of defined milestones established in the schedule of the Deed.
Accordingly the convertible note has been reclassified as an equity instrument rather than debt instrument.
53
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 19. EQUITY - OTHER CONTRIBUTED EQUITY (CONTINUED)
During the financial year ended 30 June 2017, the Company reached two milestones triggering the conversion of a portion of its
convertible note as follows;
• on 11 August 2016 the Company announced the submission of an IND application. On 10 September 2016, the Company
received a letter from the FDA advising the study may proceed triggering conversion of 20,000,000 ordinary shares.
• on 31 October 2016, the Company announced it had licensed a Phase II ready molecule triggering the conversion of
16,000,000 ordinary shares.
During the financial year ended 30 June 2018, a portion of the convertible notes was extinguished.
The remaining portion of the convertible note will be exercised at the holders’ discretion on completion of Phase II clinical trial or
achieving Breakthrough Designation, and would convert to 1,856,000 ordinary shares if converted. Completion will be deemed to
occur upon the receipt by the consolidated entity of a signed study report or notification of the designation. There is a possibility
for an early conversion of the convertible notes if a third party acquires more than 50% of the issued capital of the consolidated
entity.
NOTE 20. EQUITY - RESERVES
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to
Australian dollars.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and executive directors as part of their
remuneration, and other parties as part of their compensation for services.
NOTE 21. EQUITY - DIVIDENDS
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Franking credits
There were no franking credits available at the reporting date.
NOTE 22. FINANCIAL INSTRUMENTS
Financial risk management objectives
The consolidated entity’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The
consolidated entity uses different methods to measure and manage the different types of risks to which it is exposed. These
methods include monitoring the levels of exposure to interest rates and foreign exchange, ageing analysis and monitoring of
specific credit allowances to manage credit risk, and, rolling cash flow forecasts to manage liquidity risk.
Market risk
Foreign currency risk
The consolidated entity operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollars (‘USD’). Foreign exchange risk arises from future transactions and recognised assets and
liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations.
As of 30 June 2020, the consolidated entity did not hold derivative financial instruments in managing its foreign currency,
however, the consolidated entity may from time to time enter into hedging arrangements where circumstances are deemed
appropriate. The consolidated entity used natural hedging to reduce the foreign currency risk, which involved processing USD
payments from cash held in USD. Foreign subsidiaries with a functional currency of Australian Dollars (‘AUD’) have exposure to
the local currency of these subsidiaries and any other currency these subsidiaries trade in.
The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the
reporting date was as follows:
Consolidated
US dollars
Euros
Assets
Liabilities
2020
$
2019
$
2020
$
2019
$
272,450
30,720
2,196,281
1,046,504
-
-
-
731
272,450
30,720
2,196,281
1,047,235
The consolidated entity had net liabilities denominated in foreign currencies of $2,448,320 as at 30 June 2020 (2019: net
liabilities $1,016,515).
54
KAZIA THERAPEUTICS LIMITED NOTE 22. FINANCIAL INSTRUMENTS (CONTINUED)
If the AUD had strengthened against the USD by 10% (2019: 10%) then this would have had the following impact:
Consolidated - 2020
% change
Effect on
profit before
tax
Effect on
equity
% change
AUD strengthened
AUD weakened
Effect on
profit before
tax
Effect on
equity
US dollars
10%
244,832
244,832
(10%)
(244,832)
(244,832)
Consolidated - 2019
% change
Effect on
profit before
tax
Effect on
equity
% change
AUD strengthened
AUD weakened
Effect on
profit before
tax
Effect on
equity
US dollars
Euros
Price risk
10%
10%
101,578
101,578
73
73
101,651
101,651
(10%)
(10%)
(101,578)
(101,578)
(73)
(73)
(101,651)
(101,651)
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity’s exposure to market interest rates relate primarily to the investments of cash balances.
The consolidated entity has cash reserves held primarily in Australian dollars and United States dollars and places funds on
deposit with financial institutions for periods generally not exceeding three months.
As at the reporting date, the consolidated entity had the following variable interest rate balances:
Consolidated
Cash at bank and in hand
Short term deposits
Net exposure to cash flow interest rate risk
2020
2019
Weighted
average
interest rate
%
0.04%
0.95%
Weighted
average
interest rate
%
0.03%
1.88%
Balance
$
1,264,044
7,500,000
8,764,044
Balance
$
833,868
4,600,000
5,433,868
The consolidated entity has cash and cash equivalents totalling $8,764,044 (2019: $5,433,868). An official increase/decrease in
interest rates of 100 basis points (2019: 100 basis points) would have a favourable/adverse effect on profit before tax and equity
of $87,640 (2019: $54,337) per annum. The percentage change is based on the expected volatility of interest rates using market
data and analysts forecasts.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The entity is not exposed to significant credit risk on receivables.
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative
across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking
information that is available.
The consolidated entity places its cash deposits with high credit quality financial institutions and by policy, limits the amount
of credit exposure to any single counter-party. The consolidated entity is averse to principal loss and ensures the safety and
preservation of its invested funds by limiting default risk, market risk, and reinvestment risk. The consolidated entity mitigates
default risk by constantly positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any
financial institution.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the
failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a
period greater than 1 year.
There are no significant concentrations of credit risk within the consolidated entity. The credit risk on liquid funds is limited as the
counter parties are banks with high credit ratings.
Credit risk is managed by limiting the amount of credit exposure to any single counter-party for cash deposits.
55
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 22. FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity risk
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring actual and
forecast cash flows and matching the maturity profiles of financial assets and liabilities. In particular, contingent consideration
may be satisfied either by payment of cash or by issue of shares, at the discretion of the entity.
Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Weighted
average
interest
rate
%
1 year or less
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Remaining
contractual
maturities
$
-
-
-
1,693,632
1,795,301
4,199,000
7,687,933
-
-
-
-
-
-
2,644,000
2,644,000
-
-
-
-
1,693,632
1,795,301
6,843,000
10,331,933
Weighted
average
interest
rate
%
1 year or less
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Remaining
contractual
maturities
$
-
-
-
1,049,944
713,517
-
1,763,461
-
-
-
-
-
-
-
-
1,049,944
713,517
5,449,000
1,394,000
6,843,000
5,449,000
1,394,000
8,606,461
Consolidated - 2020
Non-derivatives
Trade payables
Accrued payables
Contingent consideration
Total non-derivatives
Consolidated - 2019
Non-derivatives
Trade payables
Accrued payables
Contingent consideration
Total non-derivatives
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
56
KAZIA THERAPEUTICS LIMITED NOTE 23. FAIR VALUE MEASUREMENT
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2020
Liabilities
Contingent consideration
Total liabilities
Consolidated - 2019
Assets
Ordinary shares - listed
Unlisted options
Total assets
Liabilities
Contingent consideration
Total liabilities
Level 1
$
-
-
Level 1
$
25,014
-
25,014
-
-
Level 2
$
Level 3
$
Total
$
-
-
1,844,988
1,844,988
1,844,988
1,844,988
Level 2
$
-
-
-
-
-
Level 3
$
-
142,800
142,800
1,370,431
1,370,431
Total
$
25,014
142,800
167,814
1,370,431
1,370,431
There were no transfers between levels during the financial year.
The fair value of contingent consideration related to the acquisition of Glioblast Pty Ltd and the licence agreement is estimated
by probability-weighting the expected future cash outflows, adjusting for risk and discounting.
The effects on the fair value of risk and uncertainty in the future cash flows are dealt with by adjusting the estimated cash flows
rather than adjusting the discount rate. The estimated cashflows were adjusted based on the directors’ assessment of achieving
contracted milestones as disclosed in Note 17. The probabilities used fell in the range of 35% to 55% and were informed by
generally accepted industry probabilities of drugs achieving certain milestones in their progression towards registration.
NOTE 24. KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is
set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2020
$
2019
$
1,324,345
1,175,398
96,473
230,036
84,161
125,010
1,650,854
1,384,569
Please refer to note 28 for other transactions with key management personnel and their related parties.
57
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 25. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by Grant Thornton Audit Pty Ltd, the
auditor of the company:
Audit services - Grant Thornton Audit Pty Ltd
Audit or review of the financial statements
NOTE 26. CONTINGENT LIABILITIES
Consolidated
2020
$
2019
$
124,250
119,800
The consolidated entity is continuing to prosecute its Intellectual Property (‘IP’) rights against an Austrian company, APOtrend. At
30 June 2018 the Austrian Supreme Court had rendered a final decision on the patent infringement. As a result, Kazia is entitled
to make a claim against APOtrend in relation to two of the three products which were the subject of the claim, while for the third
product, Kazia’s claim was denied. In respect of this third product, APOtrend is entitled to claim compensation for damages
caused by a preliminary injunction, and has three years from the date of the Austrian Supreme Court finding to do so. At the date
of this report, no claim has been made by either party. Kazia is entitled to access APOtrend’s books to calculate a license fee/
other payment claims against APOtrend. Kazia is currently trying to enforce this right in court.
The consolidated entity has provided a guarantee to the value of €250,000 ($409,098) with the court to provide a security for
potential damage claims raised by APOtrend (which is not limited to this amount, however). As at 30 June 2020, the receivable
balance continues to be fully impaired on the basis that it is unlikely to be recovered.
NOTE 27. COMMITMENTS
Lease commitments comprise contracted amounts for leases of premises. The agreement has a duration less than 12 months
from financial year end and committed amounts are not material.
NOTE 28. RELATED PARTY TRANSACTIONS
Parent entity
Kazia Therapeutics Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the directors’
report.
Transactions with related parties
There was no other transaction with KMP and their related parties.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
58
KAZIA THERAPEUTICS LIMITED NOTE 29. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Other contributed equity
Reserves
Accumulated losses
Total equity
Parent
2020
$
(11,064,061)
(11,064,061)
2019
$
(7,198,302)
(7,198,302)
Parent
2020
$
9,702,674
22,112,813
1,521,946
5,392,632
2019
$
7,015,002
20,677,299
213,444
5,294,858
48,781,214
36,641,519
464,000
1,521,111
464,000
2,489,121
(34,046,144)
(24,212,199)
16,720,181
15,382,441
Reserves comprise Share Based Payments Reserve.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019, except as detailed in note 26.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment at as 30 June 2020 and 30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for
the following:
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
NOTE 30. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 2:
Name
Kazia Laboratories Pty Ltd
Kazia Research Pty Ltd
Kazia Therapeutics Inc.
Glioblast Pty Ltd
Principal place of business /
Country of incorporation
Australia
Australia
United States of America
Australia
Ownership interest
2020
%
100.00%
100.00%
100.00%
100.00%
2019
%
100.00%
100.00%
100.00%
100.00%
59
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 31. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH USED IN
OPERATING ACTIVITIES
Consolidated
2020
$
2019
$
Loss after income tax benefit for the year
(12,467,466)
(10,270,264)
Adjustments for:
Depreciation and amortisation
Impairment of property, plant and equipment
Net fair value loss on financial assets
Share-based payments
loss on contingent consideration
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase in accrued revenue
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Decrease in deferred tax liabilities
Increase/(decrease) in other provisions
Net cash used in operating activities
NOTE 32. EARNINGS PER SHARE
1,084,344
1,084,450
-
167,814
262,105
474,557
358,452
-
(167,701)
1,721,472
(298,195)
55,099
1,076
1,808,511
246,387
62,729
824,776
(138,188)
398,350
(408,867)
(298,195)
(24,975)
(8,809,519)
(6,714,210)
Consolidated
2020
$
2019
$
Loss after income tax attributable to the owners of Kazia Therapeutics Limited
(12,467,466)
(10,270,264)
Weighted average number of ordinary shares used in calculating basic earnings
per share
Weighted average number of ordinary shares used in calculating diluted earnings
per share
Basic earnings per share
Diluted earnings per share
Number
Number
73,053,514
57,503,555
73,053,514
57,503,555
Cents
(17.07)
(17.07)
Cents
(17.86)
(17.86)
1,865,000 unlisted convertible notes with a face value of $464,000 and 2,775,167 unlisted options have been excluded from the
above calculations as they were anti-dilutive.
NOTE 33. SHARE-BASED PAYMENTS
The options in the first three tranches in the table below were issued as consideration for services rendered in relation to capital
raising conducted during a previous year by the consolidated entity, and have now expired.
The options in the remaining tranches in the table below have been issued to employees under the ESOP. In total, $262,105 (2019:
$246,387) of employee remuneration expense (all of which related to equity-settled share-based payment transactions) has been
included in profit or loss during the year and credited to share-based payment reserve.
Options in tranches 5-7 and 15 represent a modification which occurred during the year. The options in tranches 5-7 were
cancelled and the options in tranche 15 issued in their stead. These options were issued to the CEO and Managing Director,
and the modification was approved by the shareholders on 13 November 2019. The option pricing model used to determine the
incremental fair value was a Black-Scholes option pricing model. The inputs into the valuation model are set out in a table later in
this note and the assumptions with regard to dividends, volatility and risk-free rate are relevant to the newly issued replacement
options. The volatility was determined based upon historical volatility. The fair value of the new options granted was $216,000
and the fair value of the old options was de minimus just prior to the modification. Therefore, the incremental fair value of the
modification was $216,000.
60
KAZIA THERAPEUTICS LIMITED NOTE 33. SHARE-BASED PAYMENTS (CONTINUED)
The terms of the options were agreed by the directors on 4 January 2019, including immediate vesting of 50% of the options,
with the remaining options to vest in equal portions over the following three years starting 4 January 2020. The options will expire
on 4 January 2024. Because the options required shareholder approval they were not issued until that approval was granted on
13 November 2019, however the terms were as agreed on 4 January 2019.
2020
Tranche
Grant date Expiry date
04/03/2015
16/12/2019
04/03/2015
18/12/2019
Exercise
price
$1.500
$1.500
Balance at
the start of
the year
46,647
19,952
24/06/2015
30/06/2020
$4.000
519,000
16/11/2015
16/11/2020
$2.200
236,667
18/03/2016
01/02/2021
$1.990
300,000
18/03/2016
01/02/2021
$1.990
200,000
18/03/2016
01/02/2021
$2.610
250,000
05/09/2016
05/09/2021
12/10/2016
17/10/2021
31/10/2016
01/11/2021
21/11/2016
23/11/2021
$1.630
$1.560
$1.380
$1.380
50,000
62,000
12,500
50,000
07/08/2017
07/08/2022
$0.670
224,000
05/02/2018 05/02/2023
$0.780
440,000
04/01/2019
04/01/2024
$0.492
250,000
13/11/2019
04/01/2024
13/01/2020
13/01/2025
$0.492
$0.881
-
-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Granted
Modified
Expired
the year
Balance at
the end of
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(300,000)
(200,000)
(250,000)
-
-
-
-
-
-
-
1,200,000
250,000
-
(46,647)
(19,952)
(519,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
236,667
-
-
-
50,000
62,000
12,500
50,000
224,000
440,000
250,000
1,200,000
250,000
Weighted average exercise price
$1.960
$0.880
$2.348
$3.716
$0.797
2,660,766
250,000
450,000
(585,599)
2,775,167
No options were exercised or forfeited during the year.
At the end of the period the following outstanding options were vested and exercisable:
• Options in tranches 4, 8, 10, 11 and 13 were vested and exercisable
• Options in tranche 16 were unvested
• Options in the other tranches were vested as follows: 9: 75%, 12: 50% 14: 50% and 15: 67%. All were able to be exercised at
year end.
All remaining options are expected to vest in future periods.
The weighted average remaining contractual life of options outstanding at the 30 June 2020 is 2.78 years.
61
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS NOTE 33. SHARE-BASED PAYMENTS (CONTINUED)
2019
Tranche
Grant date Expiry date
04/03/2015
16/12/2019
04/03/2015
18/12/2019
Exercise
price
$1.500
$1.500
Balance at
the start of
the year
46,647
19,952
24/06/2015
30/06/2020
$4.000
519,000
16/11/2015
16/11/2020
$2.200
236,667
18/03/2016
01/02/2021
$1.990
300,000
18/03/2016
01/02/2021
$1.990
200,000
18/03/2016
01/02/2021
$2.610
250,000
05/09/2016
05/09/2021
12/10/2016
17/10/2021
31/10/2016
01/11/2021
21/11/2016
23/11/2021
$1.630
$1.560
$1.380
$1.380
50,000
62,000
12,500
50,000
07/08/2017
07/08/2022
$0.670
224,000
05/02/2018 05/02/2023
$0.780
440,000
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Granted
Exercised
Forfeited on
cessation of
employment
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,647
19,952
519,000
236,667
300,000
200,000
250,000
50,000
62,000
12,500
50,000
224,000
440,000
250,000
2,660,766
04/01/2019
04/01/2024
$0.492
-
250,000
2,410,766
250,000
Weighted average exercise price
$2.120
$0.490
$0.000
$0.000
$1.960
At the end of the period the following options were vested and exercisable:
• Options from Tranche 1 to Tranche 6, Tranches 8, 10 and 11 were vested and exercisable
• Options in Tranches 7 and 14 were unvested
• Options from Tranche 9 and 13 were vested and exercisable as to 50%
• Options from Tranche 12 were vested and exercisable as to 25%
All remaining options are expected to vest in future periods. No options have expired during the financial year.
The weighted average remaining contractual life of options outstanding at the 30 June 2019 is 1.43 years.
Employee share options
During the year ended 30 June 2020, 250,000 options have been issued to the employees by the consolidated entity pursuant to
the Company’s Employee Share Option Plan.
• Tranche 16 of 250,000 options vesting equally over 4 years in annual intervals from 13 January 2021
Also during the year, 750,000 options were cancelled and replaced by 1,200,000 new options issued in their place. This has been
accounted for as a modification of the first series of options, as their cancellation was contingent upon receipt of shareholder
approval for the issue of the new options.
Of the new options, which are shown as tranche 15:
• 50% vested immediately
•
the remaining 50% vest equally over 3 years in annual intervals from 4 January 2020
An option will only vest if the option holder continues to be a full-time employee with the Company or an Associated Company
during the vesting period relating to the option.
Conditions for an option to be exercised:
• The option must have vested and a period of 1 year from the date the option was issued must have expired;
• Option holder must have provided the Company with an Exercise Notice and have paid the Exercise Price for the option.
• The Exercise Notice must be for the exercise of at least the Minimum Number of Options;
• The Exercise Notice must have been provided to the Company and Exercise Price paid before the expiry of 5 years from the
date the Option is issued.
Options Valuation
In order to obtain a fair valuation of these options, the following assumptions have been made:
62
KAZIA THERAPEUTICS LIMITED NOTE 33. SHARE-BASED PAYMENTS (CONTINUED)
The Black Scholes option valuation methodology has been used with the expectation that the majority of these options would be
exercised towards the end of the option term. Inputs into the Black Scholes model includes the share price at grant date, exercise
price, volatility, and the risk free rate of a five year Australian Government Bond on grant date.
Risk-free rate and grant date
For all tranches, the risk-free rate of a five-year Australian Government bond on grant date was used. Please refer to the table below for
details.
Options in Tranches 1 to 16 have various vesting periods and exercising conditions. These options are unlisted as at 30 June 2020.
No dividends are expected to be declared or paid by the consolidated entity during the terms of the options.
The underlying expected volatility was determined by reference to historical data of the Company’s shares over a period of time.
No special features inherent to the options granted were incorporated into measurement of fair value.
Based on the above assumptions, the table below sets out the valuation for each tranche of options:
Grant date
Expiry date
16/11/2015
16/11/2020
05/09/2016
05/09/2021
12/10/2016
17/10/2021
31/10/2016
01/11/2021
21/11/2016
23/11/2021
07/08/2017
07/08/2022
05/02/2018
05/02/2023
04/01/2019
04/01/2024
13/11/2019
13/11/2024
13/01/2020
13/01/2025
Share
price at
Grant Date
$0.140
$0.105
$0.098
$0.090
$0.092
$0.430
$0.500
$0.340
$0.410
$0.620
NOTE 34. SUBSEQUENT EVENTS
Exercise
price Volatility (%)
Remaining
Life (years)
Risk free
Rate (%)
Fair value
per option
$2.200
158.00%
$1.630
$1.560
$1.380
$1.380
$0.670
$0.780
$0.493
$0.493
$0.881
122.00%
122.00%
122.00%
122.00%
74.50%
74.50%
74.50%
74.50%
74.50%
0.37
1.16
1.29
1.20
1.20
2.08
2.58
3.50
4.20
4.50
2.04%
1.60%
1.89%
1.87%
2.10%
1.95%
1.95%
1.95%
1.95%
1.95%
$1.280
$0.840
$0.780
$0.720
$0.730
$0.206
$0.200
$0.140
$0.180
$0.340
In August 2020 the Company was advised that the United States Food and Drug Administration (FDA) has awarded Rare
Pediatric Disease Designation (RPDD) to Kazia’s paxalisib (formerly GDC-0084) for the treatment of Diffuse Intrinsic Pontine
Glioma (DIPG), a rare and highly-aggressive childhood brain cancer.
In August 2020 the Company was also advised that the FDA has awarded Fast Track Designation (FTD) to paxalisib for the
treatment of glioblastoma, the most common and the most aggressive form of primary brain cancer in adults.
In August 2020 United States Food and Drug Administration (FDA) has granted Orphan Drug Designation (ODD) to Kazia’s
paxalisib (formerly GDC-0084) for the treatment of malignant glioma, which includes Diffuse Intrinsic Pontine Glioma (DIPG),
a rare and highly aggressive childhood brain cancer.
63
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS DIRECTORS’ DECLARATION
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at
30 June 2020 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Board of Directors
Mr Iain Ross
Chairman
27 August 2020
Sydney
Dr James Garner
Managing Director, Chief Executive Officer
64
KAZIA THERAPEUTICS LIMITED
KAZIA THERAPEUTICS LIMITED
Independent auditor’s report to the members of Kazia Therapeutics Limited
65
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS 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. www.grantthornton.com.au Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Kazia Therapeutics Limited Report on the audit of the financial report Opinion We have audited the financial report of Kazia Therapeutics Limited (the Company) and its controlled entities (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, 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, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KAZIA THERAPEUTICS LIMITED
Independent auditor’s report to the members of Kazia Therapeutics Limited
66
KAZIA THERAPEUTICS LIMITED Material uncertainty related to going concern We draw attention to Note 2 in the financial statements, which indicates that the Group incurred a net loss of $12,467,466 during the year ended 30 June 2020, and had a net operating cash outflows of $8,809,519. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Intangible asset impairment (Note 2, Note 3 & Note 12) The Group carries on its statement of financial position the Licensing Agreement which grants the Group the right to develop the paxalisib (formerly known as GDC-0084) molecule. The asset has a carrying value of $12,410,139 and is being amortised over the 20-year life of the underlying patent. AASB 136 Impairment of Assets requires an entity to assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any indication exists, the entity shall estimate the recoverable amount of the asset. Assessing whether there is any indication that an asset may be impaired involves a high degree of judgement. This area is a key audit matter due to the complexities and high degree of judgement in assessing whether there are indicators of impairment. Our procedures included, amongst others: • obtaining an understanding of and evaluating management’s process and controls related to the assessment of the existence of impairment indicators; • reviewing and assessing management’s documented consideration of the existence of any impairment indicators; as well as making enquiries with management’s experts, for their expert opinions relating to the science; • considering each of the internal and external factors outlined by AASB 136 and assessing whether any indicators of impairment are present; • reviewing management’s assessment of the potential impact of COVID-19 on the performance of the asset; • evaluating all information gathered to form a view as to the reliability of management’s determination; and • assessing the adequacy of the relevant disclosures in the financial statements. KAZIA THERAPEUTICS LIMITED
Independent auditor’s report to the members of Kazia Therapeutics Limited
67
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS Completeness of contingent consideration (Note 2, Note 3, Note 15 & Note 17) During the 2017 financial year, the consolidated entity acquired 100% of the issued shares in Glioblast Pty Ltd, a privately-held, neuro-oncology-focused Australian biotechnology company. On the same day, Kazia entered into a worldwide licensing agreement with Genentech to develop and commercialise paxalisib (formerly known as GDC-0084). As disclosed in Note 17, the acquisition agreements contain contingent payments dependent on the achievement of contracted milestones. Management experts were used in the assessment of the likely success and timing of each milestone. The estimate of the contingent consideration at 30 June 2020 is $1,844,988. We consider the fair value of the contingent consideration at 30 June 2020 to be a key audit matter due to the high level of subjectivity and management judgement involved in calculating the contingent consideration and the materiality of the amounts in question. Our procedures included, amongst others; • obtaining an understanding of and evaluating management’s process and controls related to the estimation of the liability; • evaluating the competence, capabilities and objectivity of management's experts; • obtaining management’s calculation of the contingent consideration liability and assessing the key inputs and assumptions made by management’s experts; • where management’s assumptions are applied to other critical accounting estimates, such as the valuation of intangible assets described above, assessing whether those assumptions have been applied consistently across estimates; • reviewing management’s assessment of the potential impact of COVID-19 on the valuation of the contingent consideration and key inputs in the valuation model; and • assessing the adequacy of the relevant disclosures in the financial statements. Recognition of R&D tax incentive (Note 2, Note 3, Note 5, Note 7 & Note 9) Under the research and development (R&D) tax incentive scheme, the Group receives a 43.5% refundable tax offset of eligible expenditure if its turnover is less than $20 million per annum, provided it is not controlled by income tax exempt entities. A Registration of R&D Activities Application is filed with AusIndustry in the following financial year and, based on this filing, the Group receives the incentive in cash. Management engaged an R&D expert to perform a detailed review of the Group’s total R&D expenditure to determine the potential claim under the R&D tax incentive legislation. The receivable at year-end for the incentive was $1,017,278. This represents an estimated claim for the period 1 July 2019 to 30 June 2020. This area is a key audit matter due to the size of the receivable and because there is a degree of judgement and interpretation of the R&D tax legislation required by management to assess the eligibility of the R&D expenditure under the scheme. Our procedures included, amongst others: • obtaining and documenting, through discussions with management, an understanding of the process to estimate the claim; • evaluating the competence, capabilities and objectivity of management's expert; • utilising an internal R&D tax specialist in: • reviewing the methodology used by management for consistency with the R&D tax offset rules; and • considering the nature of the expenses against the eligibility criteria of the R&D tax incentive scheme to assess whether the expenses included in the estimate were likely to meet the eligibility criteria. • inspecting supporting documentation for a sample of expenses claimed to assess validity of the claimed amount and eligibility against the R&D tax incentive scheme criteria; • comparing the nature of the R&D expenditure included in the current year estimate to the prior year claim; • comparing the eligible expenditure used in the receivable calculation to the expenditure recorded in the general ledger; • considering the entity's history of successful claims; • inspecting copies of relevant correspondence with AusIndustry and the Australian Taxation Office related to the claims; and • assessing the adequacy of the relevant disclosures in the financial statements. KAZIA THERAPEUTICS LIMITED
Independent auditor’s report to the members of Kazia Therapeutics Limited
68
KAZIA THERAPEUTICS LIMITED Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.pdf. This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 25 to 31 of the Directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Kazia Therapeutics Limited, for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. 69
ANNUAL REPORT 20202020 AT A GLANCECHAIRMAN’S LETTERCEO’S REPORTKEY MILESTONESPIPELINE REVIEWFINANCIAL REPORTDIRECTORS’ REPORTFINANCIAL STATEMENTS Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants S M Coulton Partner – Audit & Assurance Sydney, 27 August 2020 SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 21 August 2020.
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10.001 - 100,000
Over 100,000
Total
Holding less than a marketable parcel
EQUITY SECURITY HOLDERS
The names of the twenty largest quoted equity security holders are listed below:
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
WILLOUGHBY CAPITAL PTY LTD
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