MediaValet Annual Report 2017

FY2017 Annual Report · MediaValet

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Full-Year Report 2017 Financial Year Ended 30 June 2017(Previous corresponding period: financial year ended 30 June 2016)Delivering emergency medical solutions dedicated to improving patient outcomesFull-Year Report 2017
Financial Year
Ended 30 June 2017

(Previous corresponding period:
financial year ended 30 June 2016)

Annual Financial Report 2017Chairman’s and CEO’s Report

Full-year Results

REVENUE
(GROSS) UP

NET PROFIT
AFTER TAX UP

22% 16%

EUROPEAN
PENTHROX®
REVENUE UP

GLOBAL
RESPIRATORY DEVICE
SALES (GROSS) UP

MR JOHN SHARMAN

MR DAVID WILLIAMS

CHIEF EXECUTIVE
OFFICER

CHAIRMAN

53% 50%

Positioned for global
success

The financial result
represents

Medical Developments International
Limited. (ASX: MVP) delivered
22% growth in Gross Revenue to
$18.91m and 16% growth in Net
Profit after Tax of $1.82 million for the
year ended 30 June 2017.

MVP has declared a fully franked full
year dividend of 2 cents per share.

We expect a significant uplift in
revenues in the short to medium
term as new country registrations for
Penthrox® and the new channels of
distribution for respiratory products
translate into sales.

22% growth in gross revenue to a record
$18.91m

16% growth in Net Profit after Tax of $1.82m

353% growth in gross Respiratory Device
sales (USA)

182% growth in gross Breath-A-Tech®
Respiratory Device sales

56% growth in gross Australian Respiratory
Device sales

50% growth in gross Global Respiratory
Device sales

593% growth in Penthrox® revenue
(New Zealand)

53% growth in Penthrox® revenue (Europe)

41% growth in Vet Device sales

Medical Developments International LimitedThe future of MVP

Our ambition is to make Penthrox® a main stream analgesic
of choice around the world and our Respiratory Devices
global leaders in their field.

Over the next 12 months we expect to:

• Have Penthrox® approved for sale in more than 37

countries arround the world;

• Begin production in our manufacturing facility;

• Conclude additional distribution partnerships for

Penthrox® and Respiratory Devices for new countries;

• Advance work on producing new manufacturing

technologies for small molecule pharmaceuticals; and

• Continue our clinical program focussed on:

• gathering the clinical data needed to open an IND
and submit a ‘New Drug Application’ to the Food
& Drug Administration in the USA; and

Our initiative to develop new production technologies is
progressing as well as we could have hoped for and we
have identified three potential products so far which we think
will deliver value to shareholders.

We have an increasing portfolio of submitted Patent
Applications protecting Penthrox® and our manufacturing
technology which, of itself, should revolutionise the way we
make Penthrox® in the future.

Our work to get Penthrox® approved for sale in the USA is
progressing on schedule. Our clinical program has begun
and we had an excellent meeting with the FDA in May, which
has given us renewed confidence. In our view, Penthrox®
has the capability to be a significant ‘non opioid’ analgesic
across the USA.

Our portfolio of respiratory devices is growing and we are
delivering good sales growth. The opportunities across the
world for our respiratory devices, and especially in the USA
in the shorter term, are significant. We are well on the way to
delivering on these expectations.

• extending the indication for use of Penthrox®

We look forward to reporting our progress and successes.

globally.

Over the next few years our global market approvals and
‘indication extensions’ are expected to deliver strong growth
for our company. We are targeting new market approvals in
22 European countries over the next 6 months and 37 new
countries in total over the next 12 months. In addition, we
expect to have completed our pre-clinical work and opened
our IND in the USA. Our planned launches for Penthrox® are
detailed below.

“These results are
ahead of the significant
growth in new country
registrations expected in the
short term and US market
penetration of our
respiratory products.”

Penthrox® launch and planned launch milestones

Penthrox launch and planned launch milestones

2015

2020

Pre 2000

1975
Launched:
§

Australia

2002
Launched:
§

New Zealand

2010

2009
Launched:
§ Moldova

2014
Launched:
§
South
Africa

2011
Launched:
§

Guatemala

2010
Launched:
§
§
§

Azerbaijan
Georgia
Ukraine

2015
Launched:
§

Singapore

2011
Launched:
§

Kazakhstan

Launch and Planned Launch Milestones

2016
Launched:
§
§
§

Ireland
UAE
UK

2017
Plan Launch:

§
France
§
Belgium
§ Mexico
§
Taiwan
§
Jordan
§
Iraq

2018 & 2019
Plan Launch:
§
Canada
§
Germany
§
Italy
§
Spain
§
Switzerland
§
Portugal
§
Austria
§
South Korea
§
Netherlands
§
Denmark
§
Luxemburg
§
Czech
Republic
§
Poland
§
Hungary
§
Slovakia
§ Macedonia
§
Albania
§ Montenegro
§
Kosovo

2018 & 2019
Plan Launch:
§
Slovenia
§
Croatia
§
Serbia
§
Greece
§ Malta
§
§
§
§ Monaco
§
§
§
§
§
§

Saudi Arabia
San Marino
Bosnia
Vatican City
Herzegovina
Andorra

Norway
Sweden
Liechtenstein

2020
Plan Launch:
§ USA

2020
Plan Launch:
§ Russia

Annual Financial Report 2017Key Achievements for FY17

Penthrox®

First sales of Penthrox® in France and Belgium

Second shipment of Penthrox® sold into France, UK and Ireland

National Reimbursement of Penthrox® in France

Progress towards regulatory approval for Penthrox® in 22 European countries

Regulatory approval in the UAE

Regulatory approval and first sales in Taiwan

Distribution deal signed with Purdue Pharma in Canada

Distribution deal signed with BL&H Co Ltd Corporation in Korea

Distribution deal signed with Lancet in Russia

Received upfront payments from Korea and Canada

Registration underway for Penthrox® to be approved in Canada

Two new Global Patent Applications for Penthrox® Inhalers

Enrolled first patient in Penthrox® Post Authorisation Safety Study in Europe

Launched Paediatric trial in the United Kingdom and Ireland

Commenced pre-clinical and clinical work for FDA approval

Commenced pre-clinical and clinical work for Penthrox® indication extensions

Regulatory submissions ongoing in Saudi Arabia, Hong Kong, Mexico, South Korea, Iraq and Jordon

Further regulatory submissions expected for another 20+ countries in the next 12 months

Respiratory Medical Devices

Achieved reimbursement status from insurance companies across the USA

Launched Space Chamber Plus® range into circa 11,000 pharmacies in the USA

353% growth in gross Respiratory Device revenue (USA)

Global sales growth of 50% (gross)

Record sales and continued growth for Australia’s number 1 brand: Breath-A-Tech®

Sales growth of 32% in UK and Europe

Sales growth of 23% in New Zealand

Patent Application for new respiratory device

Launch of six new respiratory products

Medical Developments International Limited
Other

Construction of Global Penthrox® Manufacturing Facility in Scoresby completed on time and
on budget

Improvement in manufacturing costs and efficiency

Debt free

Received R&D Tax Incentive concession of $245,000

Signed deal with the CSIRO to develop new manufacturing technologies

Continued investment in clinical development programs and trials

MVP has 9 Patent and Patent applications

MVP has Trademarks in over 30 countries

Ongoing fully franked interim and full year dividends

Penthrox® Developments

Penthrox® was launched in the French and Belgium markets
in February 2017 and feedback from these markets is very
positive. These launches were milestone events and in
preparation for the launches, MVP received and delivered its
largest ever single order for Penthrox®. Since launch, MVP
has delivered its second order for the French market.

In the UK and Ireland, our distributor is making good
progress and in June 2017, MVP supplied its second order
post launch in the UK and Ireland. Galen continue to grow
Penthrox® sales into hospitals in the UK and Ireland.
56 hospitals have now approved Penthrox® into
formulary listing and are using the product. These include
six of the eleven Major Trauma Centres in the UK and we
expect another to approve the use of Penthrox® in the
coming months.

The guidelines for the use of Penthrox® in Ambulance
services throughout Ireland were approved by PHECC in
Penthrox®
May. Penthrox® is available for use in all Ambulance Services
UK and Ireland formulary approvals
in Ireland and will be rolled out across the country once
training of Emergency Medical Technicians, Paramedics
and Advanced Paramedics is completed which is expected
before the end of the year.

Target Formulary approvals

160

140

120

100

a
t
i
p
s
o
H

Target formulary approval
within the next three months

The Joint Royal College Ambulance Liaison Committee
s
e
i
r
(‘JRCALC’) is expected to issue updated pain
a
u
m
management guidelines by October. Penthrox® is expected
r
o
F
to be listed in these guidelines for all ambulance services.
Our distributor has advised us that four Ambulance Trusts
are already actively engaging in protocol assessments for
the use of Penthrox® in anticipation of the guideline listing
for Penthrox®.

Formulary approval obtained

Aug-16

0
Feb-16

Our target is to achieve formulary approval in 160 hospitals.
It is estimated that 60% of trauma cases in the UK are seen
by the top 30% of hospitals. The below tables highlight
our progress.

Aug-17

Feb-17

Feb-18

Penthrox® UK and Ireland formulary approval

Penthrox®
UK and Ireland formulary approvals

160

140

120

100

s
e
i
r
a
u
m
r
o
F

a
t
i
p
s
o
H

Target Formulary approvals

Target formulary approval
within the next three months

Formulary approval obtained

143

126

100

s
r
e
m
o
t
s
u
C
f
o

o
N

145

120

0
Feb-16

Aug-16

Feb-17

Aug-17

Feb-18

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Penthrox® French Customers

143

126

100

s
r
e
m
o
t
s
u
C
f
o

o
N

145

120

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Annual Financial Report 2017

Penthrox® is making excellent progress in France. In
market sales and formulary approvals are growing at a much
quicker rate than the UK, where the formulary approval
process is long and arduous. We summarise the progress
our partner is making in France as follows:

• They are targeting formulary approval in 350 hospitals

• They have already submitted 250 formulary

applications

• They have achieved 99 formulary approvals in France

• They have 21 rejected formulary applications

• 143 hospitals have ordered Penthrox® in France

• About 50% of customers who have ordered Penthrox®

have already re-ordered

We are confident Penthrox® will be a very significant drug in
France and more importantly, we are confident our partners
in Europe are well placed to deliver aggressive sales growth
over the coming years.

In November 2016 MVP’s European Partner submitted
an application to the United Kingdom’s Medicines &
Healthcare products Regulatory Agency (MHRA) under
the Decentralised Procedure to have Penthrox® approved
for sale in Germany, Italy, Spain, Sweden, Switzerland,
Finland, Austria, Denmark, Poland, Portugal, Bulgaria,
Croatia, Cyprus, Czech Republic, Estonia, Latvia, Lithuania,
Luxemburg, Romania, Slovakia and Slovenia. We are
currently ahead of our target dates and have responded
in full to the questions raised by the regulatory agencies
as part of the day 105 ‘stop clock’. We do not expect any
further issues to be raised from here and the approval and

closure of the decentralised procedure is expected before
the end of calendar year 2017. National approvals for the
sale of Penthrox® will follow for each country and sales are
expected to commence during H2 FY18.

In addition, ‘National Regulatory Applications’ are expected
to be filed with the relevant agencies in the Netherlands,
Greece, Macedonia, Serbia, Albania, Liechtenstein,
Montenegro, Kosovo, San Marino, Vatican City, Bosnia and
Herzegovina, Andorra and Monaco in due course. Approvals
to sell Penthrox® in these countries are expected during
FY18 and beyond.

Elsewhere in the world our regulatory submissions to
Mexico, Iran, Hong Kong, Saudi Arabia, Iraq, Jordan and
Korea are progressing.

In all, MVP is working towards approvals to sell Penthrox® in
another 37 countries over the next 12 to 18 months.

MVP finalised licensing and distribution deals in Korea
and Canada during the half year and received milestone
payments. A new licensing and distribution deal was also
signed in Russia in April 2017.

Penthrox® sales to New Zealand grew 593% stemming
from the decision during the year by New Zealand’s leading
provider of Ambulance Services, St John Ambulance,
to change their clinical practice and guidelines such that
“Entonox (Nitrous Oxide) was discontinued with Penthrox®
the sole inhaled analgesic administered”.

Penthrox® was approved for sale by the Food and Drug
Administration in Taiwan and we made our first sale into
Taiwan in March 2017.

Table 2

Expected approvals for Penthrox® over the next 12 to 18 months

Czech Republic
Poland
Slovakia
Macedonia
Albania
Montenegro
Kosovo
Slovenia
Croatia
Serbia
Greece
Malta
Norway
Andorra
Italy
Germany
Sweden
Switzerland
Mexico

Portugal
Spain
Saudi Arabia
Hong Kong
Jordan
Iraq
Canada
Austria
South Korea
Netherlands
Denmark
Luxemburg
Liechtenstein
Monaco
San Marino
Bosnia
Vatican City
Herzegovina

Expected approvals for Penthrox® over the next 12 to 18 months

Medical Developments International LimitedUnited States of America

Recent developments in the USA around opioid addiction
and abuse make the clinical need and market opportunity
for Penthrox® very attractive. Given the public and legislative
bias expressed by the USA government and its Food Drug
Administration (FDA) against the use of opioids, Penthrox®
as a non-opioid / non-narcotic, fast acting, safe, easy to

serious conditions and fill an unmet medical need in the
USA. The purpose is to get important new drugs to the
patient earlier. After our meeting at the FDA we are of the
view that a Fast Track application to get Penthrox® approved
in the USA is appropriate.

The program of work and timeframes (excluding any Fast
Track) is illustrated below:

Penthrox® clinical program for USA

Future of Penthrox®
Penthrox® clinical program for USA

2017

IND Toxicology:
- 2 by 28 Day Repeat Dose
studies
- General validation and
assay studies to support
existing data


 

Safety Pharmacology:
- General functional
Observational
Battery studies to
support existing data

FDA meeting

2018

2019

2020

Repeat dose and dose ranging
Healthy Volunteer Trial

Additional Phase III to support
existing Phase III studies and data

FDA meeting

FDA Approval

IND submission
to FDA

IND Pharmacokinetics:
- General In Vitro
studies to support
existing data

Submit NDA to
US FDA

Launch In USA

Phase III & NDA
Pharmacokinetics and
Toxicology Studies:
- General studies to
support existing data

Pre NDA
meeting
with FDA

use, store and administer acute pain drug offers an attractive
alternative.

In May 2017, MVP met with the FDA to discuss and
confirm our proposed regulatory program designed to have
Penthrox® approved for sale in the USA. That meeting was
very positive and MVP now has a clear understanding of the
support and requirements the FDA has in terms of approving
Penthrox® for sale in the USA. MVP is proceeding with its
development program comprising a number of clinical and
non-clinical studies. The clinical and non-clinical work in
several cases repeats work done and we are confident the
data collected will reconfirm what we already know and what
has already been accepted previously by various regulators
in Europe and elsewhere in the world.

We estimate the work needed to submit a New Drug
Application (NDA) in the USA will be completed within two
and a half years, at a cost of $US15 million.

Most importantly, we expect to submit our application to
have our Investigational New Drug applications accepted
early in calendar year 2018.

Respiratory
Developments

Our respiratory device business continues to grow strongly.
Overall gross revenue from respiratory devices grew 50%.

Sales of respiratory devices in the Australian market grew
56% (gross), with our Breath-A-Tech® branded range of
Space Chambers and respiratory products continuing to
exceed expectations (up 182% yoy), reinforcing MVP as
market leader in Australia.

Gross sales into the USA market grew 353% and we
continue to build our business in that market. We incurred
several ‘promotional and start up offer’ expenses during the
year which we do not expect to continue. Since we finalised
our distribution deals with McKesson, AmerisourceBergen
and Cardinal Health, MVP’s Space Chamber Plus® range of
devices and masks can be found in over 11,000 pharmacies
across the USA. We completed ‘ranging’ deals in FY17 with
each of Walmart, Kmart, Costco, Price Chopper, Sams Club
and Independent Pharmacy Co-Op. These deals represent a
critical ‘footprint’ within the USA retail pharmacy market. We
expect additional pharmacy distribution deals over the next
12 months. We are well on the way to establishing ourselves
as a major supplier of Respiratory Devices in the USA. We

Annual Financial Report 2017expect to deliver significant sales growth in that market in
the years ahead.

the pre-hospital setting. Journal of Military and Veterans’
Health 2016;

Sales into Europe and the UK grew 32% and this region
continues to make a significant contribution to the profits of
our business.

Sales of respiratory devices to New Zealand grew 23%.
This growth reflects consumers buying our medical devices
outside of the fully rebated Pharmac reimbursement
program and is testimony to the quality and performance of
our products.

• Coffey F, Dissmann P et al. Methoxyflurane Analgesia
in Adult Patients in the Emergency Department: A
Subgroup Analysis of a Randomized, Double-blind,
Placebo-controlled Study (STOP!). Adv Ther 2016;

• Blair HA and Frampton JE. Methoxyflurane: A Review in

Trauma Pain. Clin Drug Investig 2016;

• Dayan A. Analgesic Use of Inhaled Methoxyflurane:

Evaluation of its Potential Nephrotoxicity. Human and
Experimental Toxicology 2015.

Clinical Developments

Completed study:

MVP continues to invest heavily in our clinical and research
programs. Our ambition is to extend the use of Penthrox®
into Acute Pain applications including Surgical Procedures,
Breakthrough Pain and ultimately Home Use. Together with
our partners we have begun developing clinical programs
to expand the indication for use of Penthrox® to acute
pain procedures in the European Union. The benefit of this
extension will be available to both our partners in Europe
and, more importantly, it will provide essential clinical data
to have the market opportunity for Penthrox® extended in
jurisdictions worldwide. By way of example we believe the
market for Surgical Procedures is bigger than the global
opportunity for Penthrox® in Trauma Pain, our traditional
market.

During the period, a number of important studies were
completed and published or were ongoing including:

New publications:

• Gaskell AL, Jephcott CG, et al. Self-administered

methoxyflurane for procedural analgesia: experience
in a tertiary Australasian centre: Anaesthesia 2016;

• Frangos J, Mikkonnen A, et al. Derivation of an

occupational exposure limit for an inhalation analgesic
methoxyflurane (Penthrox®) Regulatory Toxicology and
Pharmacology;

• Hey P, Shan J, et al. Inhaled methoxyflurane (Penthrox®)
improves tolerability and success of nasogastric probe
insertion for esophageal physiological studies: a pilot
study. Journal of Gastroenterology and Hepatology
2016;

• Nguyen NQ, Burgess J, et al. Effects of Penthrox®

on Psychomotor Function in Humans: Psychomotor
and cognitive effects of 15-minute inhalation of
methoxyflurane in healthy volunteers: implication for
post-colonoscopy care A Randomized Placebo Trial.
Endoscopy International Open 2016;

• Oxer H. Vital Signs Stability during Methoxyflurane

Analgesia: Effects of Penthrox® (methoxyflurane) as an
analgesic on cardiovascular and respiratory functions in

• Comparison of Inhalational Methoxyflurane (Penthrox®)
And Intramuscular Tramadol for Prehospital Analgesia.
(Singapore Emergency Ambulance Service). The trial
found Penthrox® was superior to IM Tramadol in terms
of analgesic efficacy and speed of onset as well as
administration.

On-going studies:

• TRUS-biopsy: A phase III double-blind placebo-

controlled randomised trial of methoxyflurane with
periprostatic local anaesthesia to reduce the discomfort
of transrectal ultrasound-guided prostate biopsy (Pain-
Free TRUS B).

• PASS – A Post Authorisation Safety Study designed to
track any adverse events to the users of Penthrox® in
Europe. The study is scheduled to last two years and the
data gathered will be extremely valuable in existing and
prospective Penthrox® markets around the world.

• A randomised, double-blind, multicentre, placebo

controlled study to evaluate the safety and efficacy of
methoxyflurane (Penthrox®) for the treatment of acute
pain in children and adolescents from 6 to less than 18
years of age (presenting to an Emergency Department
with minor trauma) MEOF-002. This study is designed
to be both European and USA compliant which if
successful will extend the use of Penthrox® to the
paediatric population in Europe and then hopefully in the
USA. The study launched in May 2017.

Apart from the USA studies, MVP and its partners
are also planning:

• Before-After Implementation Study Comparing the
Effectiveness of Nurse Initiated Pain Protocol with
Self- Administered Inhaled Analgesia in the Emergency
Department (SingHealth);

• Open randomised clinical trial to compare speed of pain
relief between methoxyflurane and standard of care for
treating patients with trauma pain in Spanish emergency
units. (MVP Partner);

Medical Developments International Limited• Efficacy and safety of Penthrox® for the moderate to
severe acute pain in patients with biliary colic. (MVP
Partner) – draft synopsis available;

• Mountain rescue study in Italy (MVP Partner) – planning

stages.

Commercial
Developments

New Manufacturing Facility

These studies will extend the body of safety and efficacy
data for Penthrox® in adults and children and enable MVP
to leverage the outcome of these studies in the proposed
New Drug Application (NDA) to the USA and registrations
elsewhere in the world.

Our longer-term ambition is to gather sufficient clinical and
safety data to extend the use of Penthrox® into:

a) minor surgical procedures;

Our new purpose built state of the art manufacturing facility
in Scoresby was completed during the year with the facility
currently undergoing final validation. The facility will house
MVP’s commercial scale plant for the new methoxyflurane
manufacturing process and also houses state of the
art R&D product testing laboratories. The new plant will
accommodate medium to long term forecasted demand and
is expected to come online later in CY 2017.

b) breakthrough post-operative and cancer pain;

CSIRO Project

c) repeat use scenarios; and ultimately;

d) home use.

Product Development

During the period MVP filed two separate Patent
Applications protecting its new Penthrox® delivery device
technology. In total, we have filed six Patent Applications to
protect Penthrox®.

MVP filed one additional Patent Application to protect a new
respiratory device developed by MVP.

MVP expects to submit additional patent applications as we
extend our respiratory product offering in the future.

During the year MVP entered into an agreement with the
CSIRO to further develop our manufacturing technology
and capability for application to other small molecule
pharmaceuticals. This agreement extends MVP’s existing
partnership with the CSIRO. Our collective ambition is to
develop the next generation of manufacturing technologies
to make ‘small molecule’ pharmaceutical products at a
significantly reduced cost and improved quality, compared
with traditional processes. This project is progressing well
and showing encouraging early signs. The initial assessment
and investigations indicate there are at least three new
molecules that we should be able to manufacture using our
technology. These molecules are in billion dollar markets and
relate to the areas of chronic and mild pain medication, and
asthma and COPD medication.

Opening of our new manufacturing facility in Scoresby

Annual Financial Report 2017Penthrox®: Rest of World

MVP continues to negotiate with interested parties from
around the world in terms of registering and selling
Penthrox®. A number of key markets are drawing strong
interest and we are encouraged by the responses we are
getting from interested parties looking to partner Penthrox®
in the USA. We are confident new distribution deals and
registrations will be achieved in due course.

Vet

Our Vet business grew 41% in FY17 as MVP continues to
win new orders from China and South-East Asia.

FY17 Full Year Financial
Result

Our full year result has delivered gross revenue growth of
22% and Net profit after tax growth of 16%.

Operating Expenses grew 13% for the period. However,
the results include a number of one off expenses such as a
foreign exchange loss of $0.200m, expenses relating to the
launch of new product in the USA, expenses relating to the
approval of Penthrox® in Europe and costs relating the new
manufacturing facility. We estimate these costs total another
$0.350m. We estimate these non-recurring costs total
$0.550m for the year.

MVP continues to invest in our business and people. MVP
has employed an additional 26 people since the beginning
of 2016 to cater for the workload resulting from the ongoing
registration activity and planned new market launches over
the next 12 to18 months. We are now well placed for the
future and do not expect further significant investment.

MVP continues to invest in clinical studies, research and
development and product development. Some of these
expenses have capitalised to intangible assets where
appropriate and the remainder has been taken directly to the
profit and loss.

MVP recorded $1.9m as revenue from the amortisation of
upfront and milestone payments received as at 30 June
2017. In line with accounting practices these receipts are
required to be amortised over the contract term.

We received a $0.245 million R&D tax incentive refund
during the year and a further $0.424 million is expected in
the coming months in relation to FY17.

Dividend

The Board of Directors has declared a fully franked full year
dividend of 2 cents per share to the holders of fully paid
ordinary shares as at the record date of 1 September 2017
to be paid to shareholders on 6 October 2017. A Dividend
Reinvestment Plan is again being offered.

Thank you

We would like to thank our staff, our trading partners and shareholders for their efforts and support and look forward to
further success in FY18 and beyond.

Further information

MR JOHN SHARMAN

MR DAVID WILLIAMS

CHIEF EXECUTIVE OFFICER

CHAIRMAN

+61 3 9547 1888

+61 414 383 593

Medical Developments International LimitedProduct Portfolio

Pharmaceutical

Analgesia

Penthrox®

Medical

Asthma

Space Chamber Plus®

Anti-Static Space Chamber Plus®

Compact Space Chamber Plus®

Anti-Static Compact Space Chamber Plus®

Space Chamber Plus® Autoclavable spacer

Breath-A-Tech® Spacer

Breath-A-Tech® Hospital Spacer

Breath-Alert® Peak Flow Meter

MyMDI® Portable Nebuliser

MyMDI® Pulse Oximeter

Face masks EZ-fit silicone and disposable face masks

Oxygen

OXI-Port® oxygen therapy device

OXI-Sok oxygen therapy device

OXI-Pro oxygen resuscitation device

OXI-Life oxygen resuscitation device

OXI-Saver™ closed circuit oxygen resuscitation device

OXI-Dive closed circuit oxygen resuscitation device

OXI-Vac™ suction system

Regulators

KDK™ regulator/flow meter with oxygen flush

Absorbers

KAB™ carbon dioxide absorber

Veterinary

Anaesthesia MK5 closed circuit anaesthetic machine

LANA closed circuit anaesthetic machine

Mini-KOM™ anaesthetic machine

Breath-Alert® breathing monitorVeterinary Spacers

Annual Financial Report 2017

Pharmaceuticals

MVP is a world leader in
the management of acute
and procedural pain

Building our Business

MVP manufactures its world leading inhaled analgesic from
its premises in Springvale, Victoria, Australia. MVP is the
sole manufacturer of the active molecule worldwide and
continues to develop new markets and applications for the
iconic brand Penthrox®. Penthrox® continues to be used
as a ‘first line’ product for the treatment of pain in trauma
by all Ambulance Services in Australia and New Zealand.
MVP continues the promotional focus into the Australian
Ambulance services ensuring that the strong positioning
of Penthrox® is maintained. Moving forward, the strategy is
to continue to broaden the range of customers (hospitals,
general practice, dental and cosmetic) domestically and
continue to grow the countries that can be served by
Penthrox®. In FY17 Penthrox® was successfully launched
into France and Belgium. With a number of countries to
come online in FY18.

Product Suite

MVP is continuing to develop additional formulations of
Penthrox® to provide improved convenience, utility and value
for its customers. This includes investing in the product
development of a next generation Penthrox® inhalers.

Medical Developments International Limited

Medical devices

Building our product
range

MVP’s focus in FY18 will be to add to our established
product range, to build on the solid foundation that
has been established with our current partnerships
in Australia and overseas. At the same time MVP will
develop new collaborations for future growth. Core to
the growth is the development of new and improved
models of:

• Asthma/COPD Space Chambers

• Penthrox® Inhaler

• Peak Flow Meters

• Portable Nebulisers

•

Pulse Oximeter

•

Face Masks

•

Tourniquets

•

Emergency Medicine consumable equipment

Asthma Devices

MVP’s Asthma devices business has been strong for
many years and continues to provide solid sales and
profit.

The success of this business over recent years has
been due to four factors:

• The strength of the Allersearch brand in Australian
Hospitals and Pharmacies through our distribution
partner

• The growth of the OAPL sales in Hospitals and

Pharmacies within Australia

• The acquisition and strong growth of the

Breath-A-Tech® range

• Growing sales of our range of Asthma products
through established international partners and
new customers. Of particular note is the ongoing
growth in respiratory sales in the USA with MVP
products now in approximately 11,000 pharmacies
across the USA.

Product Development

MVP’s Space Chamber is well known in the market
place as the ‘Rolls Royce’ brand and it offers the
greatest opportunity for future growth in the Asthma
devices market. To assist in future growth MVP has
developed new and improved Space Chambers
to assist with product differentiation and local and
international penetration.

Annual Financial Report 2017Oxygen & other
Medical equipment

Safe, precision engineering
and custom design kits
and accessories

MVP manufactures a range of oxygen therapy and resuscitation
equipment, providing healthcare professionals and trained
personnel with the ability to administer oxygen to patients in an
emergency situation. These devices range from basic through to
advanced systems of delivering oxygen therapy or resuscitation.

Product Suite

• OXI-Port® oxygen therapy device

• OXI-Sok oxygen therapy device

• OXI-Pro oxygen resuscitation device

• OXI-Life oxygen resuscitation device

• OXI-Saver™ closed circuit oxygen resuscitation device

• OXI-Dive closed circuit oxygen resuscitation device

• OXI-Vac™ suction system

These products are all custom assembled and tested at MVP’s
TGA approved manufacturing facilities in Melbourne, Australia.

The Market

The MVP’s oxygen equipment is purchased and used by:

• Ambulance services

• Fire brigades

• Lifesaving clubs

• Military

• First aid organisations

• Dental markets

Medical Developments International Limited

Veterinary

MVP re-invigorates its
Veterinary product range

Products

• Anaesthetic machines

• Vaporisers

• Breathing monitors

• Veterinary Spacers

The Market

MVP offers a range of open and closed circuit
anaesthetic machines to the veterinary market, which are
popularly known as Komesaroff anaesthetic machines.
MVP has developed a unique market position regarding
the design, manufacture and supply of closed circuit
anaesthetic machines to this particular niche market
in Europe.

Whilst the majority of MDI’s veterinary products continue
to be sold in Europe through our distributor, Kruuse (one
of Europe’s largest veterinary distribution companies),
the launch of a new machine, and with a new catalogue
veterinary sales continue to grow. MVP expect to expand
its growth into Asia through various distributors.

New Product Development

MVP’s Breath-Alert® breathing monitor (Mark IV)
continued to sell well on new but simple selling features
such as size (smaller unit), ease of use and battery
longevity. Through new products, a specifically tailored
catalogue and promotion via our Australian distributor
will assist future sales growth.

Annual Financial Report 2017

Board of Directors

Mr David Williams
Non-Executive Chairman

Dr Harry Oxer AM
Non-Executive Director

Mr Leon Hoare
Non-Executive Director

Managing Director of Kidder Williams
Ltd, with over 30 years’ experience in
the investment banking sector. He is also
Chairman of PolyNovo Ltd. Mr Williams
is Chairman of the Remuneration and
Nominations Committee.

Dr Oxer is a Medical Consultant to MDI
and St John Ambulance in Western
Australia. Dr Oxer was a long-time
member of the State Executive for St
John Ambulance (WA) until his retirement
in rotation in 2012, and was the previous
Medical Director for twenty-six years.
He has taught, lectured and published
extensively over the years, both nationally
and internationally. Dr Oxer is also a past
Chairman of the Australian Resuscitation
Council and has a major interest in
resuscitation, oxygen therapy and
pain relief.

Mr Max Johnston
Non-Executive Director

Mr Johnston is a non-executive
director of Polynovo Limited and a
former non-executive Director and
Chairman of Probiotec Limited and a
former non-executive Director of Enero
Group Limited. For 11 years he was
President and Chief Executive Officer
of Johnson & Johnson Pacific and
an Executive Director of Johnson &
Johnson. Mr Johnston has also held
several prominent industry roles as a
past President of ACCORD Australasia
Limited, a former Vice Chairman of the
Australian Food and Grocery Council and
a former member of the board of ASMI.
Mr Johnston has had extensive overseas
experience during his career in leading
businesses in Western and Central-
Eastern Europe, Africa as well as Asia-
Pacific. Mr Johnston is also a member of
the MDI Audit & Risk Committee.

Mr Philip Powell
Non-Executive Director

Mr Powell, a Chartered Accountant,
has an extensive finance background
and commenced working in investment
banking in 1996 at Hambros Corporate
Finance following ten years industry
experience in senior finance roles with
ASX listed public company OAMPS
Limited. Prior to these roles, he worked
for ten years within the Assurance
Division at Arthur Andersen & Co.

From January 2006 to July 2013 he was
a Director at Corporate Finance Advisory
firm Kidder Williams. Philip is also a Non-
executive Director of PolyNovo Limited
(ASX: PNV).

Philip is Chairman of MDI’s Audit and
Risk Committee.

The above-named directors held office
during and since the end of the financial year.

Mr Hoare is the Managing Director of
Lohmann & Rauscher Australia/New
Zealand (ANZ), a private EU based
medical device company. Previously
he was Managing Director of Smith
& Nephew ANZ, which is one of the
company’s largest global subsidiaries
outside the USA. Until 2014 he served
as President of Smith & Nephew’s Asia
Pacific Advanced Wound Management
(AWM) business for 5 years. He was
also a member of the Global Executive
Management for the AWM Division. In his
24 years with Smith & Nephew, he also
held roles in Marketing, Divisional and
General Management.

24 Medical Developments International
Limited Mr Hoare’s career also included
a senior role at Bristol-Myers Squibb
in surgical products, and Vice-Chair of
Australia’s peak medical device body,
Medical Technology Association of
Australia.

He is also a Non-Executive Director of
PolyNovo Limited (ASX: PNV).

Mr Allan McCallum
Non-Executive Director

Mr McCallum has over 20 years’ public
companies experience including an
ASX 50 company and has served on
numerous committees including: Audit,
Remuneration & Nomination, and as an
Independent Director on Related Parties
(Governance) Committees. Mr McCallum
is a member of the Remuneration and
Nominations Committee. He is also
Chairman of Tassal Group Ltd and Cann
Group Limited.

Medical Developments International Limited

Full-Year Report 2017
Financial Year
Ended 30 June 2017

(Previous corresponding period:
financial year ended 30 June 2016)

Annual Financial Report 2017Contents

Directors’ Report

Independence Declaration to the Directors of Medical Developments International Limited

Independent Auditor’s Report to the Members of Medical Developments International Limited

Directors’ Declaration

Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Financial Year
Ended 30 June 2017

Consolidated Statement of Financial Position as at 30 June 2017

Consolidated Statement of Changes in Equity for the Financial Year Ended 30 June 2017

Consolidated Statement of Cash Flows for the Financial Year Ended 30 June 2017

Notes to the Financial Statements for the Financial Year Ended 30 June 2017

Medical Developments International LimitedDirectors’ Report

The directors of Medical Developments International Limited
(‘MDI’) herewith submit the annual financial report of the
company for the financial year ended 30 June 2017. In order
to comply with the provisions of the Corporations Act 2001,
the directors report as follows:

Information about the
Directors

The names and particulars of the directors of the company
during or since the end of the financial year are:

Mr D J Williams, B.Ec (Hons), M.Ec, FAICD

Non-Executive Chairman (since 16 September 2003)

Managing Director of Kidder Williams Ltd, with over 30
years’ experience in the investment banking sector. He is
also Chairman of PolyNovo Ltd. Mr Williams is Chairman of
the Remuneration and Nominations Committee.

Mr A D McCallum, Dip.Ag Science, FAICD

Non-Executive Director (since 27 October 2003)

Mr McCallum has over 20 years’ public companies
experience including an ASX 50 company and has served
on numerous committees including: Audit, Remuneration
& Nomination, and as an Independent Director on Related
Parties (Governance) Committees. Mr McCallum is a
member of the Remuneration and Nominations Committee.
He is also Chairman of Tassal Group Ltd and Cann Group
Limited.

Dr H F Oxer, AM, ASM, KStJ

MA (Hons), MB.BChir (Cantab), MRCS.LRCP, DA,
FFARCS, FRCA, FFARACS, FANZCA, FACAP, DipDHM

Non-Executive Director (since 28 December 2006)

Dr Oxer is a Medical Consultant to MDI and St John
Ambulance in Western Australia. Dr Oxer was a long-time

member of the State Executive for St John Ambulance
(WA) until his retirement in rotation in 2012, and was the
previous Medical Director for twenty-six years. He has
taught, lectured and published extensively over the years,
both nationally and internationally. Dr Oxer is also a past
Chairman of the Australian Resuscitation Council and has
a major interest in resuscitation, oxygen therapy and pain
relief.

Mr R M Johnston

Non-Executive Director (since 5 November 2012)

Mr Johnston is a non-executive director of Polynovo Limited
and a former non-executive Director and Chairman of
Probiotec Limited and a former non-executive Director of
Enero Group Limited. For 11 years he was President and
Chief Executive Officer of Johnson & Johnson Pacific and
an Executive Director of Johnson & Johnson. Mr Johnston
has also held several prominent industry roles as a past
President of ACCORD Australasia Limited, a former Vice
Chairman of the Australian Food and Grocery Council and a
former member of the board of ASMI. Mr Johnston has had
extensive overseas experience during his career in leading
businesses in Western and Central-Eastern Europe, Africa
as well as Asia-Pacific. Mr Johnston is also a member of the
MDI Audit & Risk Committee.

Mr L Hoare, AssocDipAppSc (Orth), GradDipBus,
GAICD

Non-Executive Director (since 27 September 2013)

Mr Hoare is the Managing Director of Lohmann & Rauscher
Australia/New Zealand (ANZ), a private EU based medical
device company. Previously he was Managing Director of
Smith & Nephew ANZ, which is one of the company’s largest
global subsidiaries outside the USA. Until 2014 he served
as President of Smith & Nephew’s Asia Pacific Advanced
Wound Management (AWM) business for 5 years. He was
also a member of the Global Executive Management for the
AWM Division. In his 24 years with Smith & Nephew, he also
held roles in Marketing, Divisional and General Management.

Annual Financial Report 2017Mr Hoare’s career also included a senior role at Bristol-Myers
Squibb in surgical products, and Vice-Chair of Australia’s
peak medical device body, Medical Technology Association
of Australia.

He is also a Non-Executive Director of PolyNovo Limited
(ASX: PNV).

Mr P J Powell, B.Com (Hons) ACA, F Fin, MAICD

Non-Executive Director (since 17 December 2014)

Mr Powell, a Chartered Accountant, has an extensive
finance background and commenced working in investment
banking in 1996 at Hambros Corporate Finance following
ten years industry experience in senior finance roles with
ASX listed public company OAMPS Limited. Prior to these
roles, he worked for ten years within the Assurance Division
at Arthur Andersen & Co.

From January 2006 to July 2013 he was a Director at
Corporate Finance Advisory firm Kidder Williams. Philip is
also a Non-executive Director of PolyNovo Limited (ASX:
PNV).

Philip is Chairman of MDI’s Audit and Risk Committee.

The above-named directors held office during and since the
end of the financial year.

Directorships of other
listed companies

Directorships of other listed companies held by the directors
in the 3 years immediately before the end of the financial
year are as follows:

Name

Company

Period of
Directorship

David Williams

Allan McCallum

Polynovo Limited
(Chairman)

Since 13 March
2014

IDT Australia Limited

Until 19 May 2015

Tassal Group Ltd
(Chairman)

Since October
2003

Cann Group Limited
(Chairman)

Since 5 May 2017

Probiotec Ltd

Until 28 November
2016

Max Johnston

Enero Group Limited

Since March 2011

Polynovo Limited

Since 13 May 2014

Philip Powell

Polynovo Limited

Since 13 May 2014

Leon Hoare

Polynovo Limited

Since 27 January
2016

Company Secretary

Mr Mark Edwards, CA.

Mr Edwards is also the Group Financial Controller of the
company.

Principal Activities

The company’s principal activities during the course of the
financial year were the manufacture and distribution of a
pharmaceutical drug and medical and veterinary equipment.

Review of
Operations
Penthrox® Developments

In the UK and Ireland, our distributor is making good
progress and in June 2017, MVP supplied its second order
post launch in the UK and Ireland. Galen continue to grow
Penthrox® sales into hospitals in the UK and Ireland. 56
hospitals have now approved Penthrox® into formulary
listing and are using the product. These include six of the
eleven Major Trauma Centres in the UK and we expect
another to approve the use of Penthrox® in the coming
months.

The guidelines for the use of Penthrox® in Ambulance
services throughout Ireland were approved by PHECC in
May. Penthrox® is available for use in all Ambulance Services
in Ireland and will be rolled out across the country once
training of Emergency Medical Technicians, Paramedics
and Advanced Paramedics is completed which is expected
before the end of the year.

The Joint Royal College Ambulance Liaison Committee
(‘JRCALC’) is expected to issue updated pain management
guidelines by October. Penthrox® is expected to be
listed in these guidelines for all ambulance services. Our
distributor has advised us that four Ambulance Trusts are
already actively engaging in protocol assessments for the
use of Penthrox® in anticipation of the guideline listing for
Penthrox®.

Our target is to achieve formulary approval in 160 hospitals.
It is estimated that 60% of trauma cases in the UK are seen
by the top 30% of hospitals.

Penthrox® is making excellent progress in France. In market
sales and formulary approvals are growing at a much quicker

Medical Developments International Limitedrate than the UK, where the formulary approval process is
long and arduous. We summarise the progress our partner
is making in France as follows:

to change their clinical practice and guidelines such that
“Entonox (Nitrous Oxide) was discontinued with Penthrox®
the sole inhaled analgesic administered”.

• They are targeting formulary approval in 350 hospitals.

•

They have already submitted 250 formulary applications.

Penthrox® was approved for sale by the Food and Drug
Administration in Taiwan and we made our first sale into
Taiwan in March 2017.

•

They have achieved 99 formulary approvals in France.

•

They have 21 rejected formulary applications.

•

143 hospitals have ordered Penthrox® in France.

•

About 50% of customers who have ordered Penthrox®
have already re-ordered.

Elsewhere in the world our regulatory submissions to
Mexico, Iran, Hong Kong, Saudi Arabia, Iraq, Jordan and
Korea are progressing.

In all, MVP is working towards approvals to sell Penthrox® in
another 37 countries over the next 12 to 18 months.

MVP finalised licensing and distribution deals in Korea
and Canada during the half year and received milestone
payments. A new licensing and distribution deal was also
signed in Russia in April 2017.

Penthrox® sales to New Zealand grew 593% stemming
from the decision during the year by New Zealand’s leading
provider of Ambulance Services, St John Ambulance,

United States of America

In May 2017, MVP met with the FDA to discuss and
confirm our proposed regulatory program designed to have
Penthrox® approved for sale in the USA. That meeting was
very positive and MVP now has a clearer understanding
of the support and requirements the FDA has in terms of
approving Penthrox® for sale in the USA. MVP is proceeding
with its development program comprising a number of
clinical and non-clinical studies. The clinical and non-clinical
work in several cases repeats work done and we are
confident the data collected will reconfirm what we already
know and what has already been previously accepted by
various regulators elsewhere in the world.

We estimate the work needed to submit a New Drug
Application (NDA) in the USA will be completed within two
and a half years, at a cost of $US15 million.

Most importantly, we expect to submit our application to
have our Investigational New Drug applications accepted
early in calendar year 2018.

We are also planning to submit a ‘Fast Track’ application
to the FDA at the time of our IND submission. The ‘Fast
Track’ application is a process designed to facilitate the
development, and expedite the review of drugs to treat
serious conditions and fill an unmet medical need in the
USA. The purpose is to get important new drugs to the
patient earlier. After our meeting at the FDA we are of the
view that a Fast Track application to get Penthrox® approved
in the USA is appropriate.

Respiratory
Developments

Our respiratory device business continues to grow strongly.
Overall gross revenue from respiratory devices grew 50%.

Sales of respiratory devices in the Australian market grew
56% (gross), with our Breath-A-Tech® branded range of

Annual Financial Report 2017Space Chambers and respiratory products continuing to
exceed expectations (up 182% yoy), reinforcing MVP as
market leader in Australia.

Gross sales into the USA market grew 353% and we
continue to build our business in that market. We incurred
several ‘promotional and start up offer’ expenses during the
year which we do not expect to continue. Since we finalised
our distribution deals with McKesson, AmerisourceBergen
and Cardinal Health, MVP’s Space Chamber Plus range of
devices and masks can be found in over 11,000 pharmacies
across the USA. We completed ‘ranging’ deals in FY17 with
each of Walmart, Kmart, Costco, Price Chopper, Sams Club
and Independent Pharmacy Co-Op. These deals represent a
critical ‘footprint’ within the USA retail pharmacy market. We
expect additional pharmacy distribution deals over the next
12 months. We are well on the way to establishing ourselves
as a major supplier of Respiratory Devices in the USA. We
expect to deliver significant sales growth in that market in
the years ahead.

Sales into Europe and the UK grew 32% and this region
continues to make a significant contribution to the profits of
our business.

•

methoxyflurane (Penthrox®) Regulatory Toxicology and
Pharmacology;

Hey P, Shan J, et al. Inhaled methoxyflurane (Penthrox®)
improves tolerability and success of nasogastric probe
insertion for esophageal physiological studies: a pilot
study. Journal of Gastroenterology and Hepatology
2016;

Nguyen NQ, Burgess J, et al. Effects of Penthrox®
on Psychomotor Function in Humans: Psychomotor
and cognitive effects of 15-minute inhalation of
methoxyflurane in healthy volunteers: implication for
post-colonoscopy care A Randomized Placebo Trial.
Endoscopy International Open 2016;

Oxer H. Vital Signs Stability during Methoxyflurane
Analgesia: Effects of Penthrox® (methoxyflurane) as an
analgesic on cardiovascular and respiratory functions in
the pre-hospital setting. Journal of Military and Veterans’
Health 2016;

•

Blair HA and Frampton JE. Methoxyflurane: A Review in
Trauma Pain. Clin Drug Investig 2016;

Dayan A. Analgesic Use of Inhaled Methoxyflurane:
Evaluation of its Potential Nephrotoxicity. Human and
Experimental Toxicology 2015.

Clinical Developments

Completed study:

During the period, a number of important studies were
completed and published or were ongoing including:

New publications:

• Comparison of Inhalational Methoxyflurane (Penthrox®)
And Intramuscular Tramadol for Prehospital Analgesia.
(Singapore Emergency Ambulance Service). The trial
found Penthrox was superior to IM Tramadol in terms
of analgesic efficacy and speed of onset as well as
administration.

On-going studies:

• TRUS-biopsy: A phase III double-blind placebo-

controlled randomised trial of methoxyflurane with
periprostatic local anaesthesia to reduce the discomfort
of transrectal ultrasound-guided prostate biopsy (Pain-
Free TRUS B).

• PASS – A Post Authorisation Safety Study designed to
track any adverse events to the users of Penthrox in
Europe. The study is scheduled to last two years and the
data gathered will be extremely valuable in existing and
prospective Penthrox markets around the world.

• Gaskell AL, Jephcott CG, et al. Self-administered

methoxyflurane for procedural analgesia: experience in a
tertiary Australasian centre: Anaesthesia 2016;

• Frangos J, Mikkonnen A, et al. Derivation of an

occupational exposure limit for an inhalation analgesic

•

A randomised, double-blind, multicentre, placebo
controlled study to evaluate the safety and efficacy of
methoxyflurane (Penthrox®) for the treatment of acute
pain in children and adolescents from 6 to less than 18
years of age (presenting to an Emergency Department
with minor trauma) MEOF-002. This study is designed

Medical Developments International Limitedto be both European and USA compliant which if
successful will extend the use of Penthrox® to the
paediatric population in Europe and then hopefully in the
USA. The study launched in May 2017.

Apart from the USA studies, MVP and its partners are also
planning:

• Before-After Implementation Study Comparing the
Effectiveness of Nurse Initiated Pain Protocol with
Self- Administered Inhaled Analgesia in the Emergency
Department (SingHealth);

•

Open randomised clinical trial to compare speed of pain
relief between methoxyflurane and standard of care for
treating patients with trauma pain in Spanish emergency
units. (MVP Partner);

• Efficacy and safety of Penthrox® for the moderate to
severe acute pain in patients with biliary colic. (MVP
Partner) – draft synopsis available;

•

Mountain rescue study in Italy (MVP Partner) – planning
stages.

Our longer-term ambition is to gather sufficient clinical and
safety data to extend the use of Penthrox® into:

a) minor surgical procedures;

b) breakthrough post-operative and cancer pain;

c) repeat use scenarios; and ultimately

d) home use.

currently undergoing final validation. The facility will house
MVP’s commercial scale plant for the new methoxyflurane
manufacturing process and also houses state of the
art R&D product testing laboratories. The new plant will
accommodate medium to long term forecast demand and is
expected to come online later in CY2017.

CSIRO Project

Penthrox®: Rest of World

Vet

Product Developments

Our Vet business grew 41% in FY17 as MVP continues to
win new orders from China and South-East Asia.

During the period MVP filed two separate Patent
Applications protecting its new Penthrox® delivery device
technology. In total, we have filed six Patent Applications to
protect Penthrox®.

MVP filed one additional Patent Application to protect a new
respiratory device.

MVP expects to submit additional patent applications as we
extend our respiratory product offering in the future.

Commercial
Developments

New Manufacturing Facility

FY17 Full Year Financial
Result

Our full year result has delivered gross revenue growth of
22% and Net profit after tax growth of 16%.

Our new purpose built state of the art manufacturing facility
in Scoresby was completed during the year with the facility

MVP continues to invest in our business and people. MVP
has employed an additional 26 people since the beginning

Annual Financial Report 2017of 2016 to cater for the workload resulting from the ongoing
registration activity and planned new market launches over
the next 12 to 18 months. We are now well placed for the
future and do not expect further significant investment.

We expect a significant uplift in revenue in the medium
term as new country registrations for Penthrox® translate
into sales and the new channels of distribution for asthma
devices translate into further sales growth.

We received a $0.245 million R&D tax incentive refund
during the year and a further $0.424 million is expected in
the coming months in relation to FY17.

holders of fully paid ordinary shares as at the record date of
1 September 2017, to be paid to the shareholders on the 6
October 2017. Refer below for further details.

There has not been any other matter or circumstance that
has arisen that has significantly affected, or may significantly
affect the operations of the company, the results of those
operations, or the state of affairs of the company in future
years.

Dividends

The Board of Directors is pleased to declare a Final Dividend
of 2 cents per share fully-franked.

MVP intends to implement a Dividend Reinvestment Plan
which will allow shareholders to use the proceeds from the
Full Year Dividend to purchase MVP shares at a 5% discount
to the volume weighted average price of all of the company’s
fully paid shares sold on the ASX during the 10 trading days
immediately before the record date.

The timetable for the Final Dividend for the year ended 30
June 2017 is:

Dividend

Key dates

Event

18 August 2017

Declaration of Final Dividend

1 September 2017

22 September 2017

Record Date for eligible
shareholders to receive
dividend

Date for shareholders to
elect to participate in
Dividend Reinvestment Plan

Financial Position

6 October 2017

Payment Date

The capital structure of the Group remained stable during
the period.

•

Interest bearing liabilities at 30 June 2017 total $0.429m;
and

The debt facility available to the company was unused
as at 30 June 2017 and the company has extended
this facility post 30 June 2017 (refer subsequent events
below).

Changes in State of Affairs

During the financial year there was no significant change in
the state of affairs of the company other than that referred to
in the financial statements or notes thereto.

Subsequent Events

In August 2017, the Company signed an unconditional Term
Sheet with its financiers to extend its Bank Bill Facility. The
initial facility for $5m was due to expire in October 2018.
The new facility will increase to $11m and will extend to
August 2019.

On the 18th August 2017 the Board of Directors declared
a fully franked final dividend of 2 cents per share to the

Indemnification of Officers and Auditors

During the financial year, the company paid a premium in
respect of a contract insuring the directors of the company
(as named above) and all executive officers of the company
against a liability incurred as such a director, secretary or
executive officer 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.

The company has not otherwise, during or since the end
of the financial year, indemnified or agreed to indemnify an
officer or auditor of the company against a liability incurred
as such an officer or auditor.

Directors’ Meetings

The following table sets out the number of directors’
meetings (including meetings of committees of directors)
held during the financial year and the number of meetings
attended by each director (while they were a director or
committee member). During the financial year, 9 Board
meetings, two Audit and Risk Committee meetings and one
Remuneration and Nominations committee meeting were held.

Medical Developments International LimitedDirectors’ Shareholdings

The following table sets out each director’s relevant interest
in shares as at the date of this report.

D.J. Williams

17,970,388

Fully paid shares

Directors hold no options over shares as at 30 June 2017.

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

384,671

193,118

30,365

10,121

255,157

Board of Directors

Audit & Risk Committee

Remuneration & Nominations
Committee

Held

Attended

Held

Attended

Held

Attended

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

Audited Remuneration Report

Key Management Personnel Details

This remuneration report, which forms part of the directors’
report, sets out information about the remuneration
of Medical Developments International Limited’s key
management personnel for the financial year ended 30 June
2017. The term ‘key management personnel’ refers to those
persons having authority and responsibility for planning,
directing and controlling the activities of the consolidated
entity, directly or indirectly, including any director (whether
executive or otherwise) of the consolidated entity. The
prescribed details for each person covered by this report are
detailed below under the following headings:

• Key management personnel

•

Remuneration policy

•

Relationship between the remuneration policy and
company performance

•

Remuneration of key management personnel

•

Key terms of employment contracts.

`The company’s key management personnel consist of the
following directors and executives:

The directors of the company during or since the end of the
financial year were:

• D.J. Williams (Chairman, Non-executive)

• H. F. Oxer (Non-executive)

•

A.D. McCallum (Non-executive)

•

R.M. Johnston (Non-executive)

•

L. Hoare (Non-executive)

•

P. Powell (Non-executive)

The company executives during or since the end of the
financial year were:

• J. Sharman (Chief Executive Officer)

•

M. Edwards (Company Secretary)

Except as noted, the named persons held their current
position for the whole of the financial year and since the end
of the financial year.

Annual Financial Report 2017

Key management personnel equity holdings – fully paid ordinary shares

2017

Balance at
30 June 2016
No.

Issued during the
year via DRP
No.

Received on
exercise of options
No.

Net Other
Change
No.

Balance at
30 June 2017
No.

D.J. Williams *

17,809,855

139,115

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

J. Sharman

M. Edwards

381,690

191,622

30,131

10,043

253,180

28,683

2,981

1,496

234

1,977

1,629

21,418

17,970,388

384,671

193,118

30,365

10,121

255,157

510,312

800,000

(320,000)

* Mr. Williams acquired 30,000 shares during the year and ceased being trustee for 8,582 shares owned by Saul Williams

18,705,204

147,510

800,000

(298,582)

19,354,132

2016

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

J. Sharman

M. Edwards

Balance at
30 June 2015
No.

23,371,990

477,497

207,013

30,000

10,000

352,074

109,230

24,557,804

Issued during the year
via DRP
No.

Net Other
Change
No.

Balance at
30 June 2016
No.

77,865

1,668

909

131

1,106

125

81,847

(5,640,000)

17,809,855

(97,475)

(16,300)

(100,000)

(80,672)

381,690

191,622

30,131

10,043

253,180

28,683

(5,934,447)

18,705,204

Key management personnel share option plan

In the prior year (on 18 January 2016) the company
announced it has agreed to a Long-Term Incentive
Plan ‘LTIP’ with Mr. John Sharman, the CEO of Medical
Developments International Limited to encourage his long-
term commitment to the business.

The key plan features are summarised as follows:

• A grant of 400,000 options with a strike price of $2.50
but vesting only when the MVP share price has been
above $4.50 at all times for 60 continuous ASX Trading
days. These options were due to expire on 28 February
2017, however vested and were exercised on 10 August
2016;

•

A grant of 400,000 options with a strike price of $2.50
but vesting only when the MVP share price has been
above $5.50 for 60 continuous ASX Trading days. These
options were due to expire on 30 September 2017,
however vested and were exercised on 5 October 2016;
and

• A grant of 200,000 options with a strike price of $2.50
but vesting only when reimbursement is approved for
Penthrox® in Germany or Registration is approved in
Germany (whichever occurs first). These options expired
on 31 December 2016.

Each share option converted into one ordinary share of
Medical Developments Limited on exercise. No amounts are
paid or payable by the recipient on the receipt of the option
nor are they tradeable at any time. The options carried
neither rights to dividends or voting rights.

Under the terms of the plan, all outstanding options were to
be cancelled if Mr. Sharman leaves or is otherwise no longer
employed at MVP for any reason. When the LTIP delivers
an entitlement to an equity interest via the prevailing share
price hurdle, Mr. Sharman will have 3 months to exercise the
relevant options, after which the relevant options will lapse.
In each case, 60% of the new shares issued by exercising
options will be escrowed for a period of 12 months from
issue date.

Medical Developments International LimitedThere has been no alteration to the terms and conditions of the above share based payment arrangement since grant date.
There has been no further issue of options in the year ended 30 June 2017.

2017

Balance
at 30 June
2016
No.

Granted as
remuneration
No.

Exercised
No.

Lapsed
No.

Balance
at 30 June
2017
No.

Balance
vested at
30 June
2017
but not
exercised
No.

Balance
not vested
at 30 June
2017
N0.

Options
vested
during
the year
No.

J. Sharman

1,000,000

(800,000)

(200,000)

2016

Balance at 30
June 2015
No.

Granted as
remuneration
No.

Balance at 30
June 2016
No.

Balance
vested at 30
June 2016 but
not exercised
No.

Balance not
vested at 30
June 2016
No.

Options vested
during the year
No.

J. Sharman

1,000,000

400,000

600,000

400,000

Share options made to Mr. Sharman were made in accordance with the provisions of the employee share option plan. The
above represented the only existing options over shares as at 30 June 2016. All vested options are exercisable. These
options do not have the right, by virtue of the option, to participate in share issues or interest issue of the company.

Issuing Entity

Tranche

Number of shares
under option

Class of shares

Exercise price
of option

Expiry date
of options

Medical Developments International Ltd

400,000

200,000

1,000,000

Ordinary

$2.50

28-Feb-17

30-Sep-17

31-Dec-16

Tranche 1 – was exercised on 10 August 2016.
Tranche 3 – Lapsed on 31 December 2016.

Tranche 2 – was exercised on 5 October 2016.

Remuneration Policy

The board continues to set remuneration at a level that will
attract directors and executives of high calibre. The two key
elements are:

• base salary and fees, which are determined by reference
to the market rate based on payments at similar sized
companies in the industry; and

•

Performance incentives, which have two components
– short term incentives based on achieving key
performance indicators during the year and payable
in cash, and long-term incentives payable in equity,
the value of which depends on the share price of the
company.

The remuneration and nominations committee, comprised
of D.J. Williams and A.D. McCallum, determines the salary
package of the CEO of the company and reviews the

compensation of the non-executive directors on an annual
basis. Changes are approved by the board as a whole.

Relationship between the Remuneration Policy and
Company Performance

The board aims to ensure there is a strong link between
company performance and remuneration and believes that
the use of performance incentives ensures that company
performance is reflected in the quantum of payments made
to executives. Performance metrics are selected to ensure
that the interests of management are aligned with those
of shareholders. For short term incentives, key metrics are
NPAT (net profit after tax), used to directly link company
earnings and cash bonuses and other operational measures,
the achievement of which provides the basis for future
growth and profitability.

Annual Financial Report 2017
The table and graph below depict the company’s earnings for the current financial year and the previous seven financial
years, which demonstrate that the company has been consistently profitable.

Net Proﬁt After Tax 2010-2017

0
0
0
’
$

3,000

2,500

2,000

1,500

1,000

500

2010

2011

2012

2013

2014

2015

2016

2017

The following table shows the company’s share prices for the current financial year and the previous seven financial years.

2010

2011

2012

2013

2014

2015

2016

2017

Share price - start ($)

0.18

0.22

0.40

0.79

1.27

1.32

2.68

6.10

Share price - end ($)

0.22

0.40

0.79

1.27

1.32

2.68

6.10

4.95

Interim Dividend (cps)*

Final Dividend (cps)*

3.00

2.00

Basic Earnings per Share (cps)

1.70

3.40

5.10

4.10

1.50

2.65

2.70

3.10

Diluted Earnings per Share (cps)

1.70

3.40

5.10

4.10

1.50

2.65

3.10

*Franked to 100% at 30% corporate income tax rate.

Dividends

A further 2c full franked dividend per fully paid ordinary share has been declared for the full year.

Elements of director and executive remuneration

Remuneration packages contain the following key elements:

1. Primary benefits – salary/fees and cash bonuses

2. Post-employment benefits – superannuation

3. Equity – rights to shares granted under the Chief Executive Officer Long Term Incentive Plan (CEO LTIP).

Medical Developments International LimitedDirectors

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

2017

Executives

J. Sharman
(Chief Executive Officer)

M. Edwards
(Company Secretary)

The following table discloses the remuneration of the directors of the company in 2017:

2017

Short-Term Employee
Benefits

Post
Employment

Salary & Fees
$

Bonus
$

Superannuation
$

Long-term
employee
benefits

Long service
leave

Share-Based
Payments

Total

Options
& Rights
$

73,290

45,000

44,050

297,340

50,493

41,096

31,096

245,973

22,797

3,904

12,954

51,367

Short-Term Employee
Benefits

Post
Employment

Salary
& Fees
$

Bonus
$

Superannuation
$

Long-term
employee
benefits

Long
service
leave

Share-Based
Payments

Total

Options
& Rights
$

Remuneration
Linked to
performance

299,834

162,500

25,166

14,425

13,399

515,324

32%

154,642

4,566

15,125

581

174,914

454,476

167,066

40,290

15,006

13,399

690,238

Both Mr Sharman and Mr Edwards remuneration comprised a performance related component of $162,500 and $4,566
respectively. No directors remuneration contained a performance related component.

(i) The value of the options granted to Mr Sharman as part of his remuneration was calculated at grant date using a Monte
Carlo simulation pricing model. The model estimates the achievement of the vesting hurdles and calculated the present
value of the payoff on vesting. This value is amortised over potential vesting period and disclosed as part of remuneration
for the financial year with an adjustment made to remuneration expense for any options vesting earlier or probable to do so.

Annual Financial Report 2017The following table discloses the remuneration of the directors of the company in 2016:

2016

Short-Term Employee
Benefits

Post
Employment

Salary & Fees
$

Bonus
$

Superannuation
$

Long-term
employee
benefits

Share-Based
Payments

Total

Long service
leave
$

Options &
Rights
$

Directors

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

61,644

37,671

19,671

231,999

5,856

3,579

19,869

40,041

67,500

41,250

39,540

272,040

The following table discloses the remuneration of the key executives of the company in 2016:

2016

Executives

J. Sharman
(Chief Executive Officer)

M. Edwards
(Company Secretary)

Short-Term Employee
Benefits

Post
Employment

Salary
& Fees
$

Bonus
$

Superannuation
$

Long-term
employee
benefits

Long
service
leave

Share-Based
Payments

Total

Options &
Rights
$

Remuneration
Linked to
performance

290,664

30,000

26,314

14,425

318,185

679,588

145,453

4,566

14,207

581

164,807

436,117

34,566

40,521

15,006

318,185

844,395

No key management personnel appointed during the period received a payment as part of his or her consideration for
agreeing to hold the position.

Elements of remuneration related to performance

Fees paid to non-executive directors are not directly tied to performance. Salaries paid to the key executives are also not
directly tied to performance. The short term and long-term incentive programmes are directly related to performance, and
the conditions and assessment methods are explained below.

Short-term incentives

The determination and approval of any potential bonuses is at the discretion of the Board.

During the 2017 financial year, discretionary bonuses totalling $167,066 (2016: $34,566) were determined and approved by
the Remuneration and Nominations Committee in relation to key management personnel in respect of their performance in
the 2016 financial year.

Contracts for services

Mr Sharman is employed under an open-ended contract with a notice period of three months. The contract does not provide
for any termination payments beyond payment for the notice period and any accrued annual leave.

Medical Developments International LimitedMr Edwards is employed under an open-ended contract with a notice period of four weeks. The contract does not provide
for any termination payments beyond payment for the notice period and any accrued annual leave.

Non-audit services

The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The non-audit services related to the provision of taxation and other accounting and assurance
services and totalled $26,075. The directors do not believe that the provision of advice of this nature compromises the
general principles relating to auditor’s independence, as set out by the Institute of Chartered Accountants in Australia.

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined
in note 7 to the financial statements.

Auditor’s independence declaration

The auditor’s independence declaration is included on page 32 of the annual report.

Rounding off of amounts

The Company is a Company of the kind referred to in ASIC Corporations (rounding in Financial/Director’s Reports) Instrument
2016/191 dated 24 March 2016, and in accordance with that Corporations Instrument, amounts in the directors’ report and
the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the directors.

David Williams

Chairman

Melbourne, 18 August 2017

Annual Financial Report 201732

Medical Developments International Limited

Annual Financial Report 2017

Medical Developments International Limited

Annual Financial Report 2017

Medical Developments International Limited

Directors’ Declaration

The directors declare that:

a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as

and when they become due and payable;

b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position
and performance of the consolidated entity;

c) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in

note 1 of the financial statements; and

d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

David Williams

Chairman

Melbourne, 18 August 2017

Annual Financial Report 2017
Consolidated Statement of Profit or Loss and Other
Comprehensive Income for the Financial Year Ended
30 June 2017

Gross revenue from sale of goods and contracts

Less discounts and claims

Net revenue from sale of goods and contracts

Cost of sales

Gross profit

Other income

Distribution expenses

Marketing expenses

Occupancy expenses

Administration expenses

Regulatory and registration expenses

Finance expenses

Other expenses

Profit before income tax expense

Income tax expense

Profit for the year

Other Comprehensive Income

Note

4(a)

5(a)

2017
$’000

18,904

(557)

18,347

(5,764)

12,583

(941)

(2,759)

(609)

(3,696)

(1,042)

(7)

(1,077)

2,463

(643)

1,820

2016
$’000

15,495

(24)

15,471

(4,260)

11,211

(900)

(1,637)

(541)

(3,559)

(1,253)

(24)

(1,018)

2,301

(732)

1,569

Items that may be reclassified subsequently to profit or loss, net of
income tax

Exchange differences on translating foreign operations

Total comprehensive income for the year

(6)

1,814

(61)

1,508

Profit for the year attributable to:

Owners of the parent

1,820

1,569

Total comprehensive income for the year attributable to:

Owners of the parent

1,814

1,508

Earnings per share:

Basic (cents per share)

Diluted (cents per share)

3.1

2.7

Notes to the financial statements are included on pages 42-67

Consolidated Statement of Financial Position
as at 30 June 2017

Current Assets

Cash and cash equivalents

Trade and other receivables

Inventories

Current tax receivable

Other

Total Current Assets

Non-Current Assets

Property, plant and equipment

Deferred tax assets

Goodwill

Other intangible assets

Total Non-Current Assets

Total Assets

Current Liabilities

Trade and other payables

Borrowings

Provisions

Current tax liabilities

Other

Total Current Liabilities

Non-Current Liabilities

Borrowings

Provisions

Other

Total Non-Current Liabilities

Total Liabilities

Net Assets

Equity

Issued capital

Reserves

Retained earnings

Total Equity

Note

29(a)

5(c)

5(d)

5(c)

30 June 2017
$’000

30 June 2016
$’000

1,691

5,232

2,424

209

323

9,879

6,637

1,282

8,874

15,092

31,885

41,764

2,737

146

346

2,077

5,306

283

159

14,416

14,858

20,164

21,600

5,620

7,520

2,667

244

16,051

2,614

1,928

8,874

11,772

25,188

41,239

2,518

143

254

4,124

1,772

8,811

338

114

12,951

13,403

22,214

19,025

15,008

11,916

264

6,328

21,600

257

6,852

19,025

Notes to the financial statements are included on pages 42-67

Annual Financial Report 2017

Consolidated Statement of Changes in Equity
for the Financial Year Ended 30 June 2017

2017

Opening balance

Profit for the year

Other comprehensive income for the year, net of income tax

Total comprehensive income for the year

Share based payments

Dividends paid

Shares issue as part of ESS

Dividends reinvested in the form of shares

Equity raising costs

Closing balance

Financial Year Ended 30 June 2016

2016

Opening balance

Profit for the year

Other comprehensive income for the year, net of income tax

Total comprehensive income for the year

Share based payments

Dividends paid

Shares issue related to business acquisition

Dividends reinvested in the form of shares

Equity raising costs

Closing balance

Issued
capital
$’000

Retained
earnings
$’000

Employee
equity
settled
benefits
reserve
$’000

Foreign
currency
translation
reserve
$’000

Total
$’000

11,916

6,852

318

(61)

19,025

2,000

1,107

(15)

1,820

(2,344)

(6)

1,820

(6)

1,814

(2,344)

2,000

1,107

(15)

15,008

6,328

331

(67)

21,600

Employee
equity
settled
benefits
reserve
$’000

Foreign
currency
translation
reserve
$’000

Issued
capital
$’000

Retained
earnings
$’000

10,946

6,440

1,569

318

(1,157)

440

534

(4)

Total
$’000

17,407

1,569

(82)

1,487

318

(1,157)

440

534

(4)

(82)

11,916

6,852

318

(61)

19,025

Notes to the financial statements are included on pages 42-67

Medical Developments International Limited
Consolidated Statement of Cash Flows
for the Financial Year Ended 30 June 2017

Note

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Receipts from government grants

Upfront and milestone payments received

Interest paid

Income tax paid

Net cash generated by operating activities

29(b)

Cash flows from investing activities

Interest received

Payments for plant and equipment

Payments for other intangible assets

Payments for business acquisition

Net cash used in investing activities

Cash flows from financing activities

Dividends paid (net of DRP)

Proceeds from the issue of shares

Share issue transaction costs

Payments for hire purchase finance

Repayment of borrowings

Net cash generated by/(used in) financing activities

2017
$’000

14,704

(14,049)

347

7,350

(7)

(4,334)

4,011

(4,353)

(4,324)

(8,666)

(1,238)

2,000

(15)

(52)

695

2016
$’000

12,689

(11,050)

10,858

(24)

(406)

12,067

(1,421)

(2,724)

(2,029)

(6,152)

(623)

(4)

(92)

(538)

(1,257)

Net (decrease)/increase in cash and cash equivalents

(3,960)

4,658

Cash and cash equivalents at the beginning of the financial year

5,620

954

Effects of exchange rate changes on the balance of cash held in
foreign currencies

Cash and cash equivalents at the end of the financial year

29(a)

1,691

5,620

Notes to the financial statements are included on pages 42-67

Annual Financial Report 2017Notes to the Financial Statements
for the Financial Year Ended 30 June 2017

1. Significant accounting

policies

Statement of Compliance

The financial report is a general purpose financial report
which has been prepared in accordance with the
Corporations Act 2001, Australian Accounting Standards
and Interpretations, and complies with other requirements of
the law.

The financial statements comprise the consolidated financial
statements of the Group.

For the purposes of preparing the consolidated financial
statements, the Company is a for-profit entity. Accounting
Standards include Australian Accounting Standards.
Compliance with Australian Accounting Standards ensures
that the financial statements and notes of the company
comply with International Financial Reporting Standards
(‘IFRS’).

The financial statements were authorised for issue by the
directors on 18 August 2017.

Basis of Preparation

The consolidated financial statements have been prepared
on the basis of historical cost, except for certain non-
current assets and financial instruments that are measured
at revalued amounts or fair values, as explained in the
accounting policies below. Historical cost is generally based
on the fair values of the consideration given in exchange for
goods and services. All amounts are presented in Australian
dollars, unless otherwise noted.

Fair value is 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, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value
of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing
the asset or liability at the measurement date. Fair value

for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a
basis, except for share-based payment transactions that are
within the scope of AASB 2, leasing transactions that are
within the scope of AASB 117, and measurements that have
some similarities to fair value but are not fair value, such as
net realisable value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which are
described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity
can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices

included within Level 1, that are observable for the asset
or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset

or liability.

The company is a company of the kind referred to in
ASIC Class Order 98/0100, dated 10 July 1998, and in
accordance with that Class Order amounts in the financial
report are rounded off to the nearest thousand dollars,
unless otherwise noted.

Basis of consolidation

The consolidated financial statements incorporate the
financial statements of the Company and entities (including
special purpose entities) controlled by the Company (its
subsidiaries). Control is achieved where the Company has
the power to govern the financial and operating policies of
an entity so as to obtain benefits from its activities.

Income and expense of subsidiaries acquired or disposed of
during the year are included in the consolidated statement
of profit or loss and other comprehensive income from the
effective date of acquisition and up to the effective date of
disposal, as appropriate. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and

Medical Developments International Limitedto the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.

(d) Financial assets

Loans and receivables

Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses
are eliminated in full on consolidation.

Trade receivables, loans, and other receivables that have
fixed or determinable payments that are not quoted in an
active market are classified as ‘loans and receivables’. Loans
and receivables are measured at amortised cost using the
effective interest rate method less impairment.

Changes in the Group’s ownership interests in subsidiaries
that do not result in the Group losing control are accounted
for as equity transactions. The carrying amounts of the
Group’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in
the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.

Significant accounting policies

The following significant accounting policies have been
adopted in the preparation and presentation of the
financial report:

(a) Borrowings

Borrowings are recorded initially at fair value, net of
transaction costs.

Subsequent to initial recognition, borrowings are measured
at amortised cost with any difference between the initial
recognised amount and the redemption value being
recognised in profit and loss over the period of the
borrowing using the effective interest rate method.

(b) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in
banks and investments in money market instruments, net of
outstanding bank overdrafts.

A liability is recognised for benefits accruing to employees
in respect of wages and salaries, annual leave, long service
leave, and sick leave when it is probable that settlement will
be required and they are capable of being measured reliably.

Liabilities recognised in respect of wages and salaries,
annual leave and sick leave expected to be settled within
12 months, are measured at their nominal values using the
remuneration rate expected to apply at the time
of settlement.

Liabilities recognised in respect of annual leave and long
service leave which are not expected to be settled within
12 months are measured using an estimate of the present
value of the future cash outflows to be made by the
company in respect of services provided by employees
up to reporting date.

Interest income is recognised by applying the effective
interest rate.

Impairment of financial assets

Financial assets, other than those at fair value through
profit and loss, are assessed for indicators of impairment
at each balance sheet date. Financial assets are impaired
where there is objective evidence that as a result of one
or more events that occurred after the initial recognition of
the financial asset, the estimated future cash flows of the
investment have been impacted.

(e) Financial instruments issued by the company

Debt and equity instruments

Debt and equity instruments are classified as either liabilities
or as equity in accordance with the substance of the
contractual arrangement.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments
are recognised directly in equity as a reduction of the
proceeds of the equity instruments to which they relate.
Transaction costs are the costs that are incurred directly in
connection with the issue of those equity instruments and
would not have been incurred had those instruments not
been issued.

Interest and dividends

Interest and dividends are classified as expenses or as
distributions of profit consistent with the balance sheet
classification of the related debt or equity instruments or
component parts of compound instruments.

(f) Foreign currency

The individual financial statements of each group entity
are presented in the currency of the primary economic
environment in which the entity operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each group
entity are expressed in Australian dollars (‘$’), which is the
functional currency of the Company and the presentation
currency for the consolidated financial statements.

In preparing the financial statements of each individual group
entity, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognised
at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary
items denominated in foreign currencies are retranslated at

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Annual Financial Report 2017

the rates prevailing at that date. Non-monetary items carried
at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are
not retranslated.

Exchange differences on monetary items are recognised in
profit or loss in the period in which they arise, except for:

• exchange differences on foreign currency borrowings

relating to assets under construction for future productive
use, which are included in the cost of those assets when
they are regarded as an adjustment to interest costs on
those foreign currency borrowings;

•

exchange differences on transactions entered into in
order to hedge certain foreign currency risks below for
hedging accounting policies; and

exchange differences on monetary items receivable from
or payable to a foreign operation for which settlement is
neither planned nor likely to occur (therefore forming part
of the net investment in the foreign operation), which are
recognised initially in other comprehensive income and
reclassified from equity to profit or loss on repayment of
the monetary items.

For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are translated into Australian dollars using
exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average
exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case
the exchange rates at the dates of the transactions are
used. Exchange differences arising, if any, are recognised
in other comprehensive income and accumulated in equity
(attributed to non-controlling interests as appropriate).

(g) Goods and services tax

Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:

• where the amount of GST incurred is not recoverable

from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of
expense; or

•

for receivables and payables which are recognised
inclusive of GST.

The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables.

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

(h) Goodwill

Goodwill, representing the excess of the cost of acquisition
over the fair value of the identifiable net assets acquired, is
recognised as an asset and not amortised but tested for
impairment annually and whenever there is an indication that
the goodwill may be impaired. Any impairment is recognised
immediately in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income and is not subsequently
reversed. Refer also to note 1(j).

(i) Government grants

Government grants are assistance by the government in the
form of transfers of resources to the company in return for
past or future compliance with certain conditions relating
to the operating activities of the company. Government
grants include government assistance where there are no
conditions specifically relating to the operating activities
of the company other than the requirement to operate in
certain regions or industry sectors.

Government grants relating to income are recognised as
income over the periods necessary to match them with
the related costs. Government grants that are receivable
as compensation for expenses or losses already incurred
or for the purpose of giving immediate financial support to
the company with no future related costs are recognised as
income of the period in which it becomes receivable.

Government grants relating to assets are treated as deferred
income and recognised in the profit and loss over the
expected useful lives of the assets concerned.

(j) Impairment of assets

At each reporting date, the company reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where
the asset does not generate cash flows that are independent
from other assets, the company estimates the recoverable
amount of the cash generating unit to which the asset
belongs.

Goodwill, intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that
the asset may be impaired. An impairment of goodwill is not
subsequently reversed. Recoverable amount is the higher
of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the

Medical Developments International Limitedcarrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income immediately, unless
the relevant asset is carried at fair value, in which case the
impairment loss is treated as a revaluation decrease.

based on tax rates (and tax laws) that have been enacted or
substantively enacted by reporting date. The measurement
of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which
the company expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.

Where an impairment loss (other than Goodwill)
subsequently reverses, the carrying amount of the asset
(or cash generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent
that the increased carrying amount does not exceed the
carrying amount that would have been determined had no
impairment loss been recognised for the asset (or cash-
generating unit) in prior years. A reversal of an impairment
loss is recognised in profit or loss immediately, unless the
relevant asset is carried at fair value, in which case the
reversal of the impairment loss is treated as a revaluation
increase.

(k) Income tax

Current tax

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

Where the Group qualifies for the research and development
tax incentive refund (at 45%), this reduces the current tax
expense recognised in profit and loss for the period.

Deferred tax

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

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

Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled,

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

Current and deferred tax for the period

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

(l) Intangible assets

Patents, trademarks and licenses

Patents, trademarks and licenses are recorded at cost less
accumulated amortisation and impairment. Amortisation is
charged on a straight-line basis over their estimated useful
lives of 10 years. The estimated useful life and amortisation
method is reviewed at the end of each annual reporting
period.

Research and development costs

Expenditure on research activities is recognised as an
expense in the period in which it is incurred. Where no
internally-generated intangible asset can be recognised,
development expenditure is recognised as an expense in the
period as incurred.

An intangible asset arising from development (or from the
development phase of an internal project) is recognised if,
and only if, all of the following are demonstrated:

•

the technical feasibility of completing the intangible asset
so that it will be available for use or sale;

the intention to complete the intangible asset and use or
sell it;

•

the ability to use or sell the intangible asset;

•

how the intangible asset will generate probable future
economic benefits;

the availability of adequate technical, financial and other
resources to complete the development and to use or
sell the intangible asset; and

•

the ability to measure reliably the expenditure attributable
to the intangible asset during its development.

Annual Financial Report 2017Internally-generated intangible assets in respect of
development costs are stated at cost less accumulated
amortisation and impairment, and are amortised on a
straight-line basis over their estimated useful life of 5 years
commencing from the date that revenue results.

Registration costs

Items of expenditure on registrations are capitalised to the
extent that such costs can be measured reliably, future
economic benefits are attributable to the expenditure,
and it is probable that such future economic benefits will
eventuate.

Any capitalised registration costs are amortised over a
period of 5 - 20 years in which the corresponding benefits
are expected to arise, commencing from commercial sales
to any of the countries for which the registration costs
contributed to a successful registration.

The unamortised balance of registration costs capitalised in
previous periods is reviewed regularly at each reporting date,
to ensure the criteria for deferral continue to be met. Where
such costs are no longer recoverable, they are written off as
an expense in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income.

Brandnames

Brandnames arising on acquisition of a business are carried
at cost as established at the date of acquisition of the
business less any applicable impairment charge (if any). They
are not amortised but subject to annual tests for impairment.
For the purposes of impairment testing, brandnames are
allocated to the relevant Group cash generating unit to
which they relate.

(m) Inventories

Inventories are valued at the lower of cost and net realisable
value. Costs, including an appropriate portion of fixed and
variable overhead expenses, are assigned to inventory on
hand by the method most appropriate to each particular
class of inventory, with the majority being valued on a first in
first out basis. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs
to be incurred in marketing, selling and distribution.

(n) Leases

Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards of
ownership to the lessee. The company currently does not
have any finance leases. All other leases are classified as
operating leases.

(o) Financial Liabilities

Trade payables and other accounts payable are classified
as financial liabilities and are recognised when the company
becomes obliged to make future payments resulting from
the purchase of goods and services. Financial liabilities are
initially measured at fair value, net of transaction costs.

Financial liabilities are subsequently measured at amortised
cost using the effective interest rate method, with interest
expense recognised on an effective yield basis.

The effective interest rate method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the
financial liability, or where appropriate, a shorter period.

(p) Plant and equipment

Plant and equipment and leasehold improvements are stated
at cost less accumulated depreciation and impairment.
Cost includes expenditure that is directly attributable to the
acquisition of the item. In the event that settlement of all
or part of the purchase consideration is deferred, cost is
determined by discounting the amounts payable in the future
to their present value as at the date of the acquisition. Other
than the charge over the groups assets held in relation to the
bank bill loan, all other assets are not encumbered by any
additional charge or mortgage.

Depreciation

Depreciation is provided on plant and equipment and is
calculated on a straight-line basis so as to write off the cost
of each asset over its expected useful life to its estimated
residual value. Leasehold improvements are depreciated
over the period of the lease or estimated useful life,
whichever is the shorter, using the straight-line method.
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each annual reporting
period.

The following estimated useful lives are used in the
calculation of depreciation:

Leasehold improvements 5 years
Plant and equipment

4 -10 years

(q) Provisions

Provisions are recognised when the Group has a present
obligation, the future sacrifice of economic benefits is
probable, and the amount of the provision can be measured
reliably.

Operating lease payments are recognised as an expense
on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset
are consumed.

The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation
at reporting date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision
is measured using the cashflows estimated to settle the

Medical Developments International LimitedThe company applies the income tax approach for the
accounting and presentation of the R&D tax credit.
Accordingly, the tax benefit is presented as a reduction of
income tax expense in the Statement of Profit or loss and
other Comprehensive Income.

(u) Application of new and revised Accounting
Standards

In the current year, the Group has applied an amendment
to AASBs issued by the Australian Accounting Standards
Board (AASB) that are mandatorily effective for an
accounting period that begins on or after 1 July 2016, and
therefore relevant for the current year end:

• AASB 1057 Application of Australian Accounting

Standards and AASB 2015-9 Amendments to Australian
Accounting Standards - Scope and Application
Paragraphs;

• AASB 2014-4 Amendments to Australian Accounting
Standards - Clarification of Acceptable Methods of
Depreciation and Amortisation;

• AASB 2015-1 Amendments to Australian Accounting
Standards - Annual Improvements to Australian
Accounting Standards 2012-2014 Cycle; and

• AASB 2015-2 Amendments to Australian Accounting

Standards - Disclosure Initiative: Amendments to MSB
101.

The application of these amendment does not have
any material impact on the disclosures or the amounts
recognised in the Group’s consolidated financial statements.

Changes in accounting policy since the most recent
interim financial report

In accordance with AASB138 ‘Intangible Assets’, the Group
has voluntarily changed its account policy in relation to
capitalising deferred registration costs during the current
year. The Group now capitalises specific internal labour
time spent on select Regulatory and Clinical Development
projects, rather than expensing them to the income
statement which has been the historical practice. This
change in policy is being applied from 1 July 2016 and has
resulted in the capitalisation of approximately $431,823 of
time over the 12-month period. This includes $205,085 of
internal labour cost that was initially expensed in the interim
financial Report for the 6 months ended 31 December 2016
and has now been restated and capitalised for the full year.

present obligation, its carrying amount is the present value of
those cashflows.

When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognised as an asset if it is probable that
recovery will be received and the amount of the receivable
can be measured reliably.

Dividends

A liability is recognised for dividends when they have been
declared, determined or publicly recommended by the
directors on or before the reporting date.

(r) Revenue recognition

Sale of goods

Revenue from the sale of goods is recognised when the
company has transferred to the buyer the significant risks
and rewards of ownership of the goods. Settlement and
volume discounts granted to customers are accounted as
offsets against sales. Management is assessing the impact
on the above of the new AASB 15 ‘Revenue from Contracts
with customers’ accounting standard with no material
changes anticipated.

Interest income

Interest income is recognised on a time proportionate basis
that takes into account the effective yield on the financial
asset.

(s) Share based payments

Equity-settled share-based payments granted are measured
at fair value at the date of grant. Fair value is measured by
use of a Monte Carlo valuation model.

The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the company’s
estimate of options that will eventually vest. Details regarding
the fair value of equity-settle share based transactions are
set out in note 32.

The fair value determined at the grant date of the equity
settled share based payments is expensed on a straight
line based over the vesting period, based on the Group’s
estimated of equity instruments that will eventually vest,
with a corresponding increase in equity. At the end of
the reporting period, the Group revises its estimate of the
number of equity instruments expected to vest and the
impact of any revision on the original estimates is also
recognised in the profit and loss.

(t) Research and development recoveries

R&D tax credits receivable as compensation for expenses
or losses already incurred by the Company with no future
related costs are recognised in profit or loss in the period
in which they are quantified and become receivable.

Annual Financial Report 2017Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the Standards and Interpretations that were issued but not yet
effective are listed below. The Company does not expect that upon adoption that there will be any significant impact on the
financial statements.

Standard/Interpretation

Effective for annual reporting
periods beginning on or after

Expected to be initially
applied in the financial
year ending

AASB 9 ‘Financial Instruments’

1 January 2018

30 June 2019

AASB 15 ‘Revenue from Contracts with Customers’, AASB 2014-5
‘Amendments to Australian Accounting Standards arising from
AASB 15’, AASB 2015-8 ‘Amendments to Australian Accounting
Standards – Effective Date of AASB 15’, and AASB 2016-3
‘Amendments to Australian Accounting Standards – Clarifications to
AASB 15’

1 January 2018

30 June 2019

AASB Interpretation 22 ‘Foreign Currency Transactions and
Advance Consideration’

1 January 2018

30 June 2019

AASB 16 ‘Leases’

30 June 2020

AASB 2017-2 ‘Amendments to Australian Accounting Standards -
Further Annual Improvements 2014-2016 Cycle’

1 January 2018

30 June 2019

AASB 2016-1 ‘Amendments to Australian Accounting Standards –
Recognition of Deferred Tax Assets for Unrealised Losses’

1 January 2017

30 June 2018

AASB 2016-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107’

1 January 2017

30 June 2018

AASB 2015-10 ‘Amendments to Australian Accounting Standards –
Effective Date of Amendments to AASB 10 and AASB 128’

1 January 2018

30 June 2019

AASB 2016-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107’

1 January 2017

30 June 2018

Medical Developments International Limited2. Critical accounting

Going Concern

The FY17 Financial statements have been prepared on
a going concern basis. The going concern assumption
continues to apply to Medical Developments International
Ltd as at 30 June 2017 as the Group is profitable,
generates positive operating cash flows, has negotiated an
extension and increase to its external loan facility balance
and continues to be in a positive net asset position, which
enables the Group to meet its debts and obligations as and
when they fall due.

Share Based Payments

Refer note 1(s) for further discussion on judgements made
affecting share based payments.

3. Segment information

Products and services within each business
segment

For management purposes, the company is organised into
three business units – Pharmaceuticals, Medical Devices
and Veterinary products. These units are the basis on which
the company reports its primary segment information. The
principal products and services of each of these divisions are
as follows:

• Pharmaceuticals – the sale of Penthrox® primarily within
Australia and the UK and some sales in New, Zealand,
Eastern Europe, the Middle East, and South Africa.

•

Medical Devices – the sale of medical devices,
particularly the Space Chamber and Breath-Alert Peak-
Flow meters, primarily within Australia and New Zealand,
but with some sales in Asia, Europe, the Middle East and
North America.

•

Veterinary Products – the sale of veterinary products
within Australia, Europe, and Asia.

No operating segments have been aggregated in arriving at
the reportable segments of the group.

There have also been no sales between reportable
segments.

judgements and key
sources of estimation
uncertainty

The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty at
the balance sheet date, that have significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:

Impairment of goodwill

Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which goodwill has been allocated. The value in use
calculation requires the entity to estimate the future cash
flows expected to arise from the cash generating unit and a
suitable discount rate in order to calculate the present value.

The carrying amount of goodwill at the balance sheet
date was $8,874,000 (2016: $8,874,000). Details of the
impairment calculation are provided in note 13.

Useful life of capitalised registration costs

Capitalisation of other intangible assets requires judgement
by management to determine whether:

• Expenditure relates to development activity and not

research activity,

•

Expected future economic benefits attributable to the
intangible assets will flow to the Group,

The timing of the commencement of the amortisation of
the asset which should commence when revenue has
been generated, and

•

The useful lives assigned to each individual category are
appropriate.

Details of the other intangible assets are provided in Note 14.

Useful life of plant and equipment

Refer note 1(p) for further discussion on useful life
assessments relating to plant and equipment.

Deferred tax assets

The carrying amount of deferred tax assets are reviewed at
the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profits will
eventuate to enable recovery of the asset.

Annual Financial Report 2017Segment revenues and results

Pharmaceuticals Medical Equipment

Veterinary
Equipment

Unallocated

Total

2017
$’000

2016
$’000

2017
$’000

2016
$’000

2017
$’000

2016
$’000

2017
$’000

2016
$’000

2017
$’000

2016
$’000

Revenues

External revenue (gross)

11,029

10,043

Sales discounts and claims

Total external revenue (net)

11,029

10,043

7,195

(557)

6,638

4,967

(24)

4,943

680

485

18,904

15,495

(557)

(24)

18,347

15,471

5,288

4,782

712

589

244

186

6,244

5,557

Profit before interest, income tax
Depreciation & Amortisation

5,288

4,782

712

(868)

3,914

(143)

569

(1,086)

4,202

Results

Segment results

Unallocated

Depreciation & Amortisation

Profit before interest and tax

Net Interest

Profit before income tax
expense

Income tax expense

Net profit for the period from
continuing operations

Assets and Liabilities

Assets

Liabilities

Other Segment Information

(2,452)

(2,159)

(2,452)

(2,159)

589

(129)

460

244

(16)

228

186

(2,452)

(2,159)

3,792

3,398

(15)

171

(88)

(83)

(1,333)

(1,095)

(2,540)

(2,242)

2,459

2,303

(2)

(2,536)

(2,244)

2,463

2,301

(643)

(732)

(643)

(732)

(3,179)

(2,976)

1,820

1,569

26,415

22,319

9,813

9,736

1,063

1,064

4,473

8,120

41,764

41,239

20,164

22,214

20,164

22,214

Acquisition of segment assets

8,141

3,630

481

211

728

274

9,414

4,144

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 1.
This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment
of segment performance.

Liabilities are not disclosed per segment as it is not possible to track these on a segment basis.

Revenue from major products and services

Revenue from major products and services has not been presented as it is not considered practicable to do so.

Geographical information

The Group operates in two principal geographical areas: Australia (country of domicile); and ‘International’ comprising
predominately Europe, North America, Middle East, Asia and South Africa.

The Group’s revenue from continuing operations from external customers and information about its non-current assets by
location of assets are detailed below:

Geographical Information

Australia

International

Revenue from external
customers 2017
$’000

10,557

8,347

18,904

55.8

44.2

100.0

Revenue from external
customers 2016
$’000

9,147

6,348

15,495

59.0

41.0

100.0

Medical Developments International Limited
The Group’s non-current assets by location are detailed below:

Non-Current Segment Assets

Leasehold improvements at cost

Plant and equipment at cost

Goodwill at gross carrying amount

Other intangible assets at cost

Deferred tax asset

Australia
$’000

Overseas
$’000

200

6,159

8,874

15,092

1,195

31,520

278

365

Total
$’000

200

6,437

8,874

15,092

1,282

31,885

Information about major customers

The Group had no individual customers who contributed 10% or more to the Group’s total 2017 sales revenue.

4. Items included in profit and loss

(a) Revenue and other income

Gross revenue from sale of goods

Sales discounts and claims

Upfront and milestone income

Total Revenue (net)

Interest revenue - bank deposits

(b) Expense items included in profit and loss

Profit before income tax has been arrived at after charging the following expenses:

Depreciation of non-current assets

Amortisation of non-current assets

Research & development costs immediately expensed

Operating lease rental expenses - minimum lease payments

Share based payments (equity settled)

Loss on foreign currency transactions

Finance Expenses

Interest on bank loans

Interest on other loans/hire purchase arrangements

Employee benefit expense:

Short-term employee benefits

Superannuation contributions

2017
$’000

17,003

(557)

1,901

18,347

18,358

(330)

(1,004)

(111)

(321)

(13)

(196)

(7)

2016
$’000

14,397

(24)

1,098

15,471

15,493

(286)

(810)

(77)

(292)

(318)

(48)

(10)

(14)

(24)

(3,893)

(525)

(3,058)

(426)

Annual Financial Report 2017
5. Income Taxes

(a) Income tax recognised in profit or loss

Tax expense comprises:

Current tax expense

Adjustments recognised in the current year in relation to the current tax of prior year

Deferred tax expense relating to the origination and reversal of temporary differences

Total tax expense

2017
$’000

2016
$’000

589

643

685

732

The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statements as
follows:

Profit from operations

Income tax calculated at 30%

Research & development expense

Effect of expenses that are not deductible in determining taxable profit

Adjustments recognised in the current year in relation to the current tax of prior year

Effect of profit or loss items eliminated on consolidation

Effect of different tax rates of subsidiaries operating in other jurisdictions

Income tax expense recognised in the Statement of Profit or Loss and Other
Comprehensive Income

2,463

739

(133)

(11)

(12)

643

2,301

690

(82)

(11)

732

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits
under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

(b) Income tax recognised directly in equity

No current and deferred tax amounts have been charged directly to equity during the
period (2016: $nil)

Income tax receivable/(payable)

209

(4,124)

MVP has received substantial upfront payments during the current year and for tax purposes these are deemed as assessable on a cash
received basis or when unconditional entitlement arises. This has resulted in the recognition of a net deferred tax asset.

(d) Deferred tax asset (non-current)

Temporary differences

(e) Deferred tax liabilities

Temporary differences

1,282

1,928

Medical Developments International Limited2017

Opening
balance
$’000

Charged
to income
$’000

Closing
balance
$’000

Deferred tax assets/(liabilities):

Accrued expenses

Deferred revenue

Other assets

Other Intangibles

Property, Plant & Equipment

Provisions

Tax losses

Unrealised foreign exchange losses

135

4,417

(2,998)

209

1,928

(4)

531

(1,105)

(6)

(36)

(93)

(646)

131

4,948

(4,103)

276

(23)

1,282

2016

Opening
balance
$’000

Charged
to income
$’000

Closing
balance
$’000

Deferred tax assets/(liabilities):

Accrued expenses

Deferred revenue

Other assets

Other Intangibles

Property, Plant & Equipment

Provisions

Tax losses

Unrealised foreign exchange losses

192

(2)

(2,027)

142

(57)

4,322

(971)

(4)

(1,560)

3,488

135

4,417

(2,998)

209

1,928

6. Key management personnel compensation

The aggregate compensation of the key management personnel of the company and the Group is set out below:

Short-term employee benefits

Post employment benefits

Long term employee benefits

Share based payments

2017
$’000

867

987

2016
$’000

703

318

1,117

Annual Financial Report 20177. Remuneration
of auditors

Auditor of the parent entity

Audit or review of the financial
report

Taxation services

Other services

2017
$

2016
$

82,685

84,530

20,675

36,875

5,400

50,000

108,760

171,405

The auditor of the entity is Deloitte Touche Tohmatsu. The
other services relate to additional assurance services.

8. Current receivables

Trade receivables

Other debtors

Allowance for doubtful debts

GST recoverable

2017
$’000

5,122

110

2016
$’000

3,396

4,032

In determining the recoverability of trade receivables, the
Group considers any change in the credit quality of the
trade receivable from the date the credit was initially granted
up to the reporting date. The concentration of credit risk is
limited due to the fact that the customer base is large and
unrelated.

The directors believe that there is no further credit provision
required in excess of the allowance for doubtful debts.

9. Current inventories

Raw materials:

At cost

Work in progress:

At cost

Finished goods:

At cost

2017
$’000

2016
$’000

1,115

1,041

331

480

978

1,166

Provision for obsolesence

(20)

The provision for obsolescence at 30 June 2016 represented
predominantly obsolete packing materials.

2,424

2,667

5,232

7,520

10. Other current assets

The average credit period on sales of goods to domestic
customers is 30 days, international customers 60 days. No
interest is charged on trade receivables.

Included in the trade receivable balance are debtors with a
carrying amount of $109,640 (2016: $124,323) which are
past due at the reporting date for which the Group has not
provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The
Group does not hold any collateral over these balances.

Prepayments

Other receivables

2017
$’000

2016
$’000

319

323

244

Ageing of past due but
not impaired

2017
$’000

2016
$’000

60-90 days

> 90 days

Total

109

124

Medical Developments International Limited
11. Subsidiaries

Details of the Group’s subsidiaries at the end of the reporting period are as follows.

Name of Subsidiary

Principle activity

Place of incorporation
and operation

Medical Developments
UK Limited

Distribution of medical
devices

United Kingdom

Medical Developments
USA Inc.

Distribution of medical
devices

United States of
America

Proportion of ownership interest and voting
power held by the Group

30 June 2017

30 June 2016

100%

12. Property, plant & equipment

Gross carrying amount

Balance at 30 June 2015

Additions

Disposals

Balance at 30 June 2016

Additions

Transfers

Disposals

Balance at 30 June 2017

Accumulated depreciation

Balance at 30 June 2015

Depreciation expense

Disposals

Balance at 30 June 2016

Depreciation expense

Disposals

Balance at 30 June 2017

Net book value

As at 30 June 2016

As at 30 June 2017

Leasehold
improvements
at cost
$’000

Manufacturing
Facility

Plant and
equipment at
cost
$’000

619

(248)

415

3,818

495

3,818

3,437

1,376

(4)

4,809

4,273

(3,818)

5,264

Total
$’000

4,056

1,420

(252)

5,224

4,353

9,577

(368)

(75)

205

(238)

(57)

(295)

177

200

3,818

(2,166)

(2,534)

(210)

(2,372)

(273)

(285)

209

(2,610)

(330)

(2,645)

(2,940)

2,437

2,619

2,614

6,637

The manufacturing facility is in the final stages of validation as at 30 June 2017 and is therefore not yet being depreciated.

Annual Financial Report 2017
13. Goodwill

Gross carrying amount

2017
$’000

2016
$’000

The recoverable amount of all three cash-generating units
is based on a value in use calculation for each unit which
uses cash flow projections based on a five-year projection
period and terminal value. The Board of Directors approved
financial budget for the following year is used to determine
the cash flows for year 1.

Balance at beginning of financial year

8,874

7,368

Additions

1,506

Recoverable amount testing has been based on EBITDA
growth rates for years 2-5 of:

Balance at end of financial year

8,874

Pharmaceuticals:

Net book value

Medical devices:

12.5% based on expansion
into new markets

15% based on expansion
of existing markets

Balance at beginning of financial year

8,874

7,368

Balance at end of financial year

8,874

During the year, the company assessed the recoverable
amount of goodwill and determined that there was no
impairment (2016: $nil).

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes
to three individual cash-generating units: pharmaceutical
business, medical devices business and veterinary
equipment business. The carrying amount of goodwill
allocated to cash-generating units is as follows:

Pharmaceuticals

Medical devices

Veterinary equipment

2017
$’000

2016
$’000

3,808

4,485

581

8,874

Veterinary equipment: 7.5% based on expansion

of existing markets

A terminal value after 5 years based on a long-term growth
rate of 2.5%, and a pre-tax discount rate of 14.64% per
annum (2016: 12.24% per annum) have been used to
calculate the carrying value of the intangible assets.

The key assumptions used in the value in use calculations
for all units are:

• EBITDA growth – described above; and

• Gross margin – it is assumed that gross margin of the
Pharmaceutical & Medical Devices segments will be
maintained following investment and activities aimed
at improvement in the manufacturing process and
procedures.

Management believes that any reasonably possible change
in the key assumptions on which the recoverable amount
for each of the three units is based would not cause the
carrying amounts to exceed their recoverable amounts.

Medical Developments International Limited

14. Other intangible assets

2017

Development
$’000

Patents &
trademarks
$’000

Capitalised
registration
costs
$’000

Brandnames
$’000

Other
$’000

Total
$’000

Gross carrying amount

Balance at 30 June 2015

Additions

Balance at 30 June 2016

Additions

Balance at 30 June 2017

Accumulated amortisation

Balance at 30 June 2015

Amortisation expense

Balance at 30 June 2016

Amortisation expense

Balance at 30 June 2017

Net book value

As at 30 June 2016

As at 30 June 2017

1,593

381

1,974

2,021

(119)

(87)

(206)

(88)

(294)

1,768

1,727

448

118

566

189

755

(177)

(49)

(226)

(65)

(291)

340

464

7,642

1,644

9,286

3,865

13,151

(330)

(621)

(951)

(762)

(1,713)

738

8,335

11,438

738

581

644

223

867

(53)

(89)

(142)

591

725

9,746

3,462

13,208

4,324

17,532

(626)

(810)

(1,436)

(1,004)

(2,440)

11,772

15,092

The amortisation charge for the year of $1,004,000 (2016: $810,000) has been included in administration expenses. For an
explanation of amortisation periods refer Note 1(l).

15. Current trade

16. Borrowings

and other payables

Trade payables (i)

Accrued expenses

Employee benefits payable

PAYG witholding tax payable

2017
$’000

2016
$’000

1,785

1,989

899

491

2,737

2,518

Secured - at amortised cost

Hire Purchase (i)

Hire Purchase (ii)

Bank Bill (iii)

Other (iv)

(i) The average credit period on purchase of goods is
30 days. No interest is charged on trade payables. The
company has financial risk management policies in place to
ensure that all payables are paid within the credit timeframe.

Current

Non-current

2017
$’000

2016
$’000

373

429

146

283

429

362

481

143

338

481

Annual Financial Report 2017

Summary of borrowing arrangements

(i) On 1 March 2013 the Group entered into a commercial
loan agreement to fund the purchase of a new bottling
station. The current weighted-average effective interest
rate on the loan is 6.78% p.a. The agreement is secured
by a registered charge over the equipment.

18. Non-current
provisions

(ii) On 4 September 2013 the Group entered into a Hire

Employee benefits

2017
$’000

2016
$’000

159

114

Purchase Agreement in relation to plant and equipment.
The term is 5 years and the current weighted average
effective interest rate on the loan is 6.45%. The
agreement is secured by a registered charge over the
equipment financed.

(iii) The Bank Bill Facility with a variable interest rate and 90
day roll over period was renegotiated during the year. As
at 30 June 2017, the facility is unused. The Bank Bill is
secured by a registered charge over all of the Group’s
assets.

(iv) On 29 June 2012, the group entered into an

agreement with the Commonwealth Scientific and
Industrial Research Organisation (‘CSIRO’) to fund
the development of a new production process for the
pain relieving ingredient used in Penthrox®. Funding is
receivable at the commencement of each of three stages
of development and is payable over a three year term
upon the completion of the relevant stage. As at 30 June
2017, the stage 1a and 1b are complete. Should MDI
default on the loan, CSIRO has the option to convert the
debt into shares in MDI at fair market value. This funding
is interest-free until the first anniversary of the completion
of stages 1a and 2 and is then calculated at the Westpac
Bank Lending Rate at the date the relevant note was
issued, plus 2%. The funding for stage 2 is interest free.

(v) The Group has an overdraft facility of $200,000. As at 30

June 2017, this remains unused.

17. Current provisions

Employee benefits

2017
$’000

2016
$’000

346

254

The company has 53.00 full time equivalent employees at 30
June 2017 (2016: 42.35)

19. Other liabilities

Revenue received in advance

15,886

14,431

2017
$’000

2016
$’000

Unearned government grant
income

Current

Non-current

607

292

16,493

14,723

2,077

1,772

14,416

12,951

16,493

14,723

MVP has received additional upfront and milestone
payments during the current year. For accounting purposes
these non-refundable payments are deferred and amortised
into the income statement over the term of the agreement to
which the payments relate. As at 30 June 2017 $15.886m
remains unamortised.

Unearned government grant income represents funds
received through the Commercial Ready Programme
from the Federal Government and Futures Industries
Manufacturing Program of the Victorian State Government.

Medical Developments International Limited

20. Issued Capital

20(a) Fully paid ordinary shares

2017
No.

2017
$’000

2016
No.

2016
$’000

Fully paid ordinary shares

Balance at beginning of financial year

57,960,056

11,916

57,725,143

10,946

Shares Issued - Business Acquisition

Shares Issued - Dividends Reinvestment Plan

Share issued - Employee Share Scheme

Capital raising costs

215,120

800,000

1,107

2,000

(15)

117,894

117,019

440

534

(4)

Balance at end of financial year

58,975,176

15,008

57,960,056

11,916

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

20(b) Share options granted under the CEO Long
Term Incentive Plan

At 30 June 2017, there are no options over ordinary shares
of the Company. Share options granted to the CEO carry no
rights to dividends and no voting rights.

21. Reserves

(a) Foreign currency translation
reserve

Balance at beginning of year

Exchange differences arising on
translating the foreign operations

Balance at end of year

2017
$’000

2016
$’000

(61)

(6)

(67)

(82)

(61)

Exchange differences relating to the translation of the results
and net assets of the Group’s foreign operations from their
functional currencies to the Group’s presentation currency
(i.e. Australian dollars) are recognised directly in other
comprehensive income and accumulated in the foreign
currency translation reserve. Gains and losses on hedging
instruments that are designated as hedging instruments
for hedges of net investments in foreign operations are
included in the foreign currency translation reserve.
Exchange differences previously accumulated in the foreign
currency translation reserve (in respect of translating both
the net assets of foreign operations and hedges of foreign
operations) are reclassified to profit or loss on the disposal of
the foreign operation.

2017
$’000

2016
$’000

(b) Employee equity-settled benefits
reserve

Balance at beginning of year

Share-based payment recognised

Balance at end of year

318

331

318

The above equity settled employee benefits reserve related
to share options granted by the company to its CEO under
its employee share option plan. Further information about
share-based payments to employees is set out in note 32.

22. Retained earnings

2017
$’000

2016
$’000

Balance at beginning of financial year

6,852

6,440

Dividends paid

(2,344)

(1,157)

Net profit attributable to members

1,820

1,569

Balance at end of financial year

6,328

6,852

23. Earnings per share

Basic earnings per share

Diluted earnings per share

2017
Cents
per
share

3.1

2016
Cents
per
share

2.7

Annual Financial Report 2017

Basic earnings per share

Diluted earnings per share

The earnings and weighted average number of ordinary
shares used in the calculation of basic earnings per share
are as follows:

Earnings used in the basic earnings per share calculation
are identical to those used for the diluted earnings per
share calculation. There are no potentially dilutive options
outstanding as at 30 June 2017.

Earnings

2017
$’000

1,820

2017
No.

2016
$’000

1,569

2016
No.

Weighted average number of
ordinary shares used in the
calculation of basic EPS

2017
No.

2016
No.

58,711,471

57,798,709

Weighted average number
of ordinary shares

58,711,471

58,033,622

Shares deemed to be issued for
CEO LTIP - Tranche 1 and 2

340,844

Weighted average number of
ordinary shares for diluted EPS

58,711,471

58,139,553

24. Dividends

An interim dividend of 2 cents per share was declared and paid in the current year and a final dividend of 2 cents per share
was declared in respect of the full year ended 30 June 2017.

The interim dividend paid during the 30 June 2017 year resulted in the company paying dividends of $641,000 and the
balance of $536,000 issued as shares under the Dividend Reinvestment Plan.

The 2016 full year dividend paid during the 30 June 2017 year resulted in the company paying dividends of $596,000 and
the balance of $571,000 issued as shares under the Dividend Reinvestment Plan

2017

2016

cents per
share

$’000

cents per
share

$’000

2.0

4.0

2.0

1,167

1,177

2,344

1,180

2.0

2017
$’000

3,127

1,157

1,167

2016
$’000

4,134

Recognised amounts

Fully paid ordinary shares

Interim dividend - fully franked

2016 full year dividend - fully franked

Unrecognised amounts

Fully paid ordinary shares

Final dividend - fully franked

Adjusted franking account balance

Medical Developments International Limited
25. Operating leases

28. Subsequent events

In August 2017, the Company signed an unconditional Term
Sheet with its financiers to extend its Bank Bill Facility. The
initial facility for $5m was due to expire in October 2018. The
new facility will increase to $11m and will extend to August
2019.

On the 18th August 2017 the Board of Directors declared
a fully franked final dividend of 2 cents per share to the
holders of fully paid ordinary shares as at the record date of
1 September 2017, to be paid to the shareholders on the
6 October 2017. This dividend has not been included as a
liability in these financial statements.

There has not been no other matter or circumstance that
has arisen that has significantly affected, or may significantly
affect the operations of the company, the results of those
operations, or the state of affairs of the company in future
years.

Operating leases primarily relate to factory leases with
remaining lease terms ranging from 1.5 to 8.5 years. The
company does not have the option to purchase the leased
asset at the expiry of the lease period.

2017
$’000

2016
$’000

Non cancellable operating
lease payments:

Not longer than 1 year

373

108

Longer than 1 year and not
longer than 5 years

Greater than 5 years

1,348

1,203

2,924

1,331

1,540

2,979

26. Commitments for

expenditure

(a) Capital expenditure commitments

There were no capital expenditure commitments at 30 June
2017.

27. Related party
disclosures

There were no related party transactions during the 2017
financial year.

Balances and transactions between the Company and its
subsidiaries which are related parties of the company have
been eliminated on consolidation and are not disclosed in
this note.

Annual Financial Report 2017
29. Notes to the Consolidated Statement of Cash Flows

2017
$’000

2016
$’000

(a) Reconciliation of cash and cash equivalents

For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on
hand and in banks. Cash at the end of the financial year as shown in the Consolidated
Statement of Cash Flows is reconciled to the related item in the Statement of Financial
Position as follows:

Cash and cash equivalents

(b) Reconciliation of profit for the period to net cash flows from operating
activities

Profit for the period

Interest received

Depreciation and amortisation of non-current assets

Net unrealised foreign exchange (gain)/loss

Share based payments

Loss on disposal of property, plant and equipment

Increase/(decrease) in tax payable

Decrease/(increase) in deferred tax asset

Movements in working capital

Decrease/(increase) in assets:

Current receivables

Current inventories

Other current assets

Increase/(decrease) in liabilities:

Current payables

Current provisions

Other liabilities

Non-current provisions

Net cash from operating activities

Unsecured bank overdraft facility, reviewed annually and payable at call:

Amount unused

Bank bill facility with a 90 day roll over period:

Amount used

Amount unused

1,691

1,820

(11)

1,334

(53)

(4,333)

646

2,288

243

(79)

219

1,787

4,011

200

4,440

5,620

1,569

(22)

1,096

202

318

3,830

(3,488)

(5,701)

(780)

(69)

1,258

13,789

12,067

200

2,960

Medical Developments International Limited30. Financial Instruments

(a) Capital risk management

The Group manages its capital to ensure that it will be able
to continue as a going concern while maximising the return
to stakeholders. The Group does not enter into or trade
financial instruments, including derivatives, for speculative
purposes.

The capital structure of the Group consists of net debt
(borrowings as detailed in note 16) and equity of the Group
(comprising issued capital, reserves, retained earnings, and
cash and cash equivalents as detailed in notes 20, 21, 22,
and 29(a), respectively).

The Group’s Audit and Risk Committee reviews the capital
structure of the Group on a semi-annual basis. As part of
this review, the committee considers the cost of capital and
the risks associated with each class of capital. The gearing
ratio at 30 June 2017 is -6% (see below).

Debt (i)

2017
$’000

429

2016
$’000

481

Cash and bank balances

(1,691)

(5,620)

Net debt / (cash)

(1,262)

(5,139)

Equity (ii)

21,600

19,025

Net debt to equity ratio

-6%

-27%

(i) Debt is defined as long-term and short-term borrowings

as described in note 16.

(ii) Equity includes all capital and reserves of the group that

are managed as capital.

The bank bill facility includes financial covenants whereby
the operating leverage ratio must be no higher than 2.50
times. Monitoring of said covenants is performed monthly by
management and signed off bi-annually by management.

There have been no breaches in the current year and there
are no forecasted breaches for forthcoming periods.

(b) Significant accounting policies

Details of significant accounting policies and methods
adopted, including the criteria for recognition, the basis
of measurement and the basis on which revenues and
expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are
disclosed in note 1 to the financial statements.

These policies were consistent throughout the current year
and the prior year.

The Group’s finance function provides services to the
business, co-ordinates access to domestic and international
financial markets, monitors and manages financial risks
relating to the operations of the Group. These risks include
market risk (including currency risk, fair value interest rate
risk and price risk), credit risk, liquidity risk and cash flow
interest rate risk.

(d) Credit risk management

Credit risk refers to the risk that a counter party will default
on its contractual obligations resulting in financial loss
to the Group. The Group has adopted a policy of only
dealing with creditworthy counterparties. The Group’s
exposure is continually monitored and the aggregate value
of transactions concluded is spread amongst approved
counterparties.

Trade receivables consist of a large number of customers.
Ongoing credit evaluation is performed on the financial
condition of these accounts receivable and advance
payments are requested where deemed appropriate.

The carrying amount of financial assets recorded in the
financial statements, net of any allowance for losses,
represents the Group’s maximum exposure to credit risk
without taking account of the value of any collateral or other
security obtained.

Apart from the three largest customers of the Group (refer to
Notes 3 and 8), the Group does not have significant credit
risk exposure to any single counterparty or any group of
counterparties having similar characteristics. The Group
defines counterparties as having similar characteristics if
they are related entities. Concentration of credit risk to any
other counterparty did not exceed 5% of gross monetary
assets at any time during the year.

(e) Foreign currency risk management

The Group undertakes certain transactions denominated
in foreign currencies, hence exposures to exchange rate
fluctuations arise.

The carrying amount of the Group’s foreign currency
denominated monetary assets and monetary liabilities at the
reporting date is as follows:

Liabilities

Assets

2017
$’000

723

162

2016
$’000

2017
$’000

2016
$’000

1,160

1,765

5,872

524

1,271

1,249

253

148

885

1,690

3,455

7,297

USD

GBP

NZD

EUR

CND

Annual Financial Report 2017Amounts of exposure are not currently significant and as
such forward contracts and currency swap agreements are
not used.

Foreign currency sensitivity analysis

Profit or Loss

GBP Impact

2017
$’000

(111)

2016
$’000

(72)

The Group predominantly trades in Australian dollars (AUD),
but has limited exposure to the US dollar (USD) and Great
Britain Pound (GBP) based on a portion of its overseas sales
and purchases.

The following table details the Group’s sensitivity to a
10% increase and decrease in the Australian Dollar
against the USD and GBP. 10% is the sensitivity rate used
when assessing foreign currency risk internally by key
management and represents management’s assessment
of the possible change in foreign currency rates. The
sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation
at the period end for a 10% change in foreign currency
rates. A positive number indicates an increase in profit or
loss where the Australian Dollar strengthens against the
respective currency. For a weakening of the Australian Dollar
against the respective currency there would be an equal and
opposite impact on the profit.

USD Impact

2017
$’000

(104)

2016
$’000

(471)

Profit or Loss

This is attributable to the exposure outstanding on USD and
GBP receivables and payables at year end in the Group.
The exposure to movement in NZD, EUR, and CAD is not
deemed to be significant.

(f) Fair value of financial instruments

The Directors consider that the carrying amount of financial
assets and liabilities recorded at amortised cost in the
financial statements approximates their respective net fair
values, determined in accordance with the accounting
policies disclosed in note 1 to the financial statements.

The Group does not recognise any financial instruments that
are measured subsequent to initial recognition at fair value.

(g) Interest rate risk management

The Group is exposed to interest rate risk as it holds cash at
floating interest rates. The following table details the Group’s
exposure to interest rate risk as at 30 June 2017 and 30
June 2016.

Variable interest rate maturity

2017

Average
interest rate
%

Less than
1 year
$’000

1 to 5
years
$’000

Financial assets

Cash

Receivables

Financial liabilities

Payables

Borrowings

0.02%

1,691

5.04%

1,691

146

283

More than
5 years
$’000

Non-
interest
bearing
$’000

5,232

2,737

Total
$’000

1,691

5,232

6,923

2,737

429

3,166

Medical Developments International Limited

2016

Average
interest rate
%

Less than
1 year
$’000

1 to 5
years
$’000

More than
5 years
$’000

Variable interest rate maturity

Financial assets

Cash

Receivables

Financial liabilities

Payables

Borrowings

0.03%

5,620

5.43%

5,620

143

338

Non-
interest
bearing
$’000

7,520

2,518

Total
$’000

5,620

7,520

13,140

2,518

481

2,999

The following table details the Group’s sensitivity to a 50 basis point increase or decrease in interest rates.

Interest rate risk table

Profit or Loss

(h) Liquidity risk management

2017
$’000

2016
$’000

The Group manages liquidity risk by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Liquidity risk table

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes the principal cash flows.

2017

Payables

Borrowings

2016

Payables

Borrowings

Weighted
average
effective
interest rate
%

5.04%

5.43%

Less than
1 year
$’000

1 to 5
years
$’000

More than
5 years
$’000

2,737

146

2,883

2,518

143

2,661

283

338

Total
$’000

2,737

429

3,166

2,518

481

2,999

Annual Financial Report 2017
31. Parent Entity
Information

32. Employee share

option plan

The accounting policies of the parent entity, which have
been applied in determining the financial information shown
below, are the same as those applied in the consolidated
financial statements.

Refer to note 1 for a summary of the significant accounting
policies relating to the Group.

Financial Position

30 June 2017
$’000

30 June 2016
$’000

Assets

Current Assets

Non-Current Assets

Total Assets

Liabilities

10,003

31,828

41,831

Current Liabilities

3,090

Non-Current Liabilities

16,934

Total Liabilities

20,024

16,419

25,093

41,512

6,958

15,175

22,133

Equity

Issued capital

15,008

11,916

Reserves

Retained earnings

332

6,467

318

7,145

Total Equity

21,807

19,379

Financial Performance

2017
$’000

2016
$’000

Profit for the year

1,666

1,443

Dividends paid

(2,344)

(1,157)

Other comprehensive income

Total comprehesive income

(678)

286

The commitments of the parent are the same as those of the
overall consolidated group.

32.1 CEO share option plan

The following share-based payment arrangement was
introduced in the 30 June 2016 year and vested and
exercise or lapsed during the current reporting period.

On 18 January 2016 the company announced it has agreed
to a Long Term Incentive Plan “LTIP” with Mr. John Sharman,
the CEO of Medical Developments International Limited to
encourage his long term commitment to the business.

The key plan features are summarised as follows:

• A grant of 400,000 options with a strike price of $2.50
but vesting only when the MVP share price has been
above $4.50 at all times for 60 continuous ASX Trading
days. These options vested and were exercised on 10
August 2016.

•

A grant of 400,000 options with a strike price of $2.50
but vesting only when the MVP share price has been
above $5.50 for 60 continuous ASX Trading days. These
options vested and were exercised on 5 October 2016;
and

A grant of 200,000 options with a strike price of $2.50
but vesting only when reimbursement is approved for
Penthrox® in Germany or Registration is approved in
Germany (whichever occurs first). These options lapsed
and expired on 31 December 2016.

Each share option converts into one ordinarily share of
Medical Developments Limited on exercise. No amounts are
paid or payable by the recipient on the receipt of the option
nor are they tradeable at any time. The options carried
neither rights to dividends or voting rights.

Under the terms of the plan, all outstanding options will be
cancelled if Mr. Sharman leaves or is otherwise no longer
employed at MVP. When the LTIP delivers an entitlement to
an equity interest via the prevailing share price hurdle, Mr.
Sharman will have 3 months to exercise the relevant options,
after which the relevant options will lapse. In each case,
60% of the new shares issued by exercising options will be
escrowed for a period of 12 months from issue date.

There has been no alteration to the terms and conditions of
the above share based payment arrangement since grant
date.

Medical Developments International Limited

Inputs into the option pricing model were as follows:

Tranche 1

Tranche 2

Tranche 3

Grant date share price

$2.91

Exercise price

Option Fair Value

Expected volatility

$2.50

$0.42

56%

$2.91

$2.50

$0.52

50%

$2.91

$2.50

$0.00

56%

Option life

1.1 yrs

1.7 yrs

0.95 yrs

Dividend (Bi-annually)

Risk-free interest rate

1.94%

1.93%

1.94%

32.2 Fair value of share options
granted during the year

Options with share market price performance hurdles were
priced using a Monte Carlo valuation model. The Monte
Carlo model estimates the achievement of the vesting
hurdles and calculates the present value of the pay off on
vesting. It enables specific modelling of the hurdles specified
under the plan, in particular the requirement for a share price
minimum to be maintained for a specified time. Options
with other performance hurdles vesting conditions where
the outcome is binary, were priced using a Binomial option
pricing model. Where relevant, the expected useful life used
in the model has been adjusted based on management’s
best estimate for the effects of non-transferability and
exercise restrictions (including the probability of meeting
market conditions attached to the option). Expected volatility
is based on the historical share price volatility over the past
2 years.

32.3 Movement in share options during the year

2017 Balance

at 30 June
2016
No.

Granted as
remuneration
No.

Exercised
No.

Lapsed
No.

Balance
vested at
30 June
2017
but not
exercised
No.

Balance
not
vested at
30 June
2017
No.

Options
vested
during the
year
No.

Balance
at 30 June
2017
No.

J. Sharman

1,000,000

(800,000)

(200,000)

32.4 Share based payments expense

Share-based payments

2017
$’000

2016
$’000

318

33. Additional company information

Medical Developments International Limited is a listed public company, incorporated and domiciled in Australia.

Company Secretary

Mr. Mark Edwards

Registered office and principal place of business

4 Caribbean Drive
Scoresby VIC 3179

Tel: (03) 9547 1888

Web: www.medicaldev.com

A copy of our Corporate Governance Statement can be found at www.medicaldev.com/investors-media

Annual Financial Report 2017Additional Stock Exchange
Information as at 31 August 2017

Number of holders of equity securities

Distribution of holders of equity securities

Ordinary share capital

Fully paid ordinary shares

58,975,176 fully paid ordinary shares held by 3,320
individual shareholders. All issued ordinary shares carry
one vote per share.

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

Holding less than a marketable parcel

1,140

1,299

390

439

3,320

SUBSTANTIAL SHAREHOLDERS

MR DAVID JOHN WILLIAMS

TWENTY LARGEST HOLDERS OF EQUITY SECURITIES

MR DAVID JOHN WILLIAMS

HSBC CUSTODY NOMINEES

J P MORGAN NOMINEES AUSTRALIA

DR RUSSELL KAY HANCOCK

NATIONAL NOMINEES LIMITED

LUJETA PTY LTD

MR ALISTAIR DAVID STRONG

SANDHURST TRUSTEES

MR JOHN SHARMAN

HSBC CUSTODY NOMINEES

SANDHURST TRUSTEES

LONCETA PTY LTD

MULLACAM PTY LTD

IMAJ PTY LTD

MIRRABOOKA INVESTMENTS LIMITED

MR RAYMOND WILLIAM WALTER & MR ALEXANDER SCOTT HAGAN

BNP PARIBAS NOMS PTY LTD

MR MICHAEL GERARD SUGERMAN

HOLLYWIND PTY LTD

PNSF PTY LTD

Number

17,970,388

Number

17,970,388

6,158,271

1,674,490

1,614,214

1,567,101

891,256

630,000

532,423

510,312

417,905

416,014

396,410

384,671

375,000

370,000

357,000

346,677

300,000

270,000

255,157

30.47

10.44

2.84

2.74

2.66

1.51

1.07

0.90

0.87

0.71

0.67

0.65

0.64

0.63

0.61

0.59

0.51

0.46

0.43

Medical Developments International LimitedFull-Year Report 2017 Financial Year Ended 30 June 2017(Previous corresponding period: financial year ended 30 June 2016)