FULL
YEAR
REPORT
2020
Financial Year Ended
30 June 2020
(Previous corresponding period:
financial year ended 30 June 2019)
CHAIRMAN’S
& CEO’S REPORT
Key Achievements for FY20
Penthrox®
Æ In-market sales in the UK and Ireland
grew 23%
Æ Australian Penthrox® sales grew 3%,
with further growth into the GP &
Hospital market curtailed in the last
quarter due to COVID-19
Æ China IND approval
Æ Russian Marketing Authorisation
Application lodged
Æ Russian Milestone payment received
from partner
Æ New approvals in Thailand, Hungary,
Netherlands, Bosnia & Herzegovina
Respiratory Medical Devices
Æ Record year for our respiratory device
business that grew sales by 61%
Æ USA sales grew 98%
Other
Æ New 5-year agreement with CSIRO for
Continuous Flow technology
Æ Continued investment in clinical
development programs and trials
Æ Penthrox® launch in Italy
Æ 386 customers in France
Æ 182 customers across the rest of Europe
Æ 670 customers in the UK and Ireland
Æ Approved for use by UK Military and
given a NATO number
Æ Finalisation of the Post Authorisation
Safety Study Clinical Report
Æ Progressing USA IND
Æ Progressing South Korea approval
Æ Progressed the Paediatric Study in the
UK and Ireland
Æ UK and European sales grew 128%
Æ Australian sales grew 43%
Æ Received R&D Tax Incentive concession
of $431,000
Æ MVP was admitted to the ASX 300 for
the first time in June
Annual Financial Report 2020
1
COVID-19
mixed impact
on trading
Medical Developments International Limited
(“MVP”) (ASX: MVP) reported a 63%
decrease in Net Profit after Tax to $0.379m
(FY19 $1.037m) for the twelve months ended
30 June 2020. Revenue increased 11% to a
record $23.6 million (FY19 $21.4 million) and
Earnings Before Interest, Tax, Depreciation
and Amortisation decreased 22% to $2.695m
(FY19: $3.440m).
Respiratory sales were an all-time high
in FY20 growing by 61%. This was partly
attributed to COVID-19 related purchasing
but predominately related to new product
launches and new pharmacy channel success
in multiple markets. Respiratory sales in
Australia grew 43% and sales in North
America grew by 88%.
Penthrox® revenue declined for the full year
by 8%, after having increased 6% in the first
half. With decreased sporting and outdoor
activity, as well as reduced population
movements, demand decreased in the
last quarter within Emergency Services.
Despite this, domestic sales increased by
3%, whilst UK in-market sales increased by
23%. Penthrox® EU sales were the primary
contributing factor to the overall decline
even though actual in-market sales grew
15%. As announced on 19 August 2020, MVP
is taking back ownership of the Penthrox®
EU distribution rights and growing this
important market will be a primary focus in
FY21 with plans already well advanced.
Despite the immediate headwinds
experienced by Penthrox® during the
COVID-19 pandemic the convenience, utility
and safety of the product within Emergency
Services has been recognised whilst
operating under difficult circumstances and
we expect to emerge in a stronger position
within these services.
The internal and manufacturing operations
of MVP have not been adversely impacted
by COVID-19 shutdowns, given the company
is recognised as an essential business and
has been able to accommodate ongoing
production and work from home practices.
2
FY20 Full
Year Result
Revenue was a record $23.6 million and
gross margins decreased slightly reflective of
a higher weighting of generally lower margin
medical devices sales in FY20.
Expenses
Operating Expenses increased 15%. This
increase is due to:
• Increased ‘pharmacovigilance’ cost as a
result of expanding geographic sales for
Penthrox® and Medical Devices;
• Marketing expenses as a result of growth
in Penthrox® and Breath-A-Tech® sales in
Australia;
• ‘Non cash’ depreciation and interest
expenses (change of accounting standard
– AASB 16 Leases); and
• Increased investment in R&D
Cash flow
At 30 June 2020, the group had $15.5million
in cash. During the year MVP invested:
• $5.4 million in clinical trials for Penthrox®;
• $1.1 million in our manufacturing
development program with the CSIRO;
and
• $1.5 million in various manufacturing
equipment and leasehold improvements.
Penthrox®
United States of America
MVP is hoping to receive feedback on the
pre-clinical protocol shortly in order to
commence this study by Q4 2020.
Whilst awaiting FDA feedback, MVP has
continued to compile its clinical package
for the FDA which will be submitted in late
August 2020 in anticipation of coordinating
a Type C meeting with the FDA in late
2020. The completion of the Human Factors
study which involves subjects trialling and
administering the Penthrox® device, has been
Medical Developments International Limited Penthrox® in the USA
delayed as it requires the direct involvement of
USA health care professionals and participants
which is restricted during times of COVID.
MVP expects to be in a position to address in
full all the clinical hold issues during the third
quarter of CY21 with a view to filing the IND in
CY21.
MVP remains confident we will be able to
supply the FDA with the additional information
it requires. Our confidence is based on 40+
years of experience, the demonstrated safety
profile of Penthrox® over that time, the
additional clinical data we have to support
our IND including our Post Authorisation
Safety study, PK study, our ongoing clinical
development program and our recent
achievements in getting Penthrox® approved
for sale in more than 40 countries around
the world. The chart above represents the
envisaged USA regulatory timeline.
Europe
In October 2019, Penthrox® was included and
recommended as ‘first-line of treatment’ in
the European Society of Emergency Medicine
(“EUSEM”) guidelines for the ‘Management
of acute pain in emergency situations’. In
addition, the MEDITA clinical study was
published in Europe demonstrating Penthrox®
superiority over Standard of Care and IV
morphine for acute trauma pain treatments
in patients. These events should prove to be
pivotal moments for Penthrox® in Europe.
Europe in-market sales were up 15%, where
there are 568 customers buying Penthrox® in
Europe including 386 in France. We believe
that number will grow strongly under our
direct control as our focus is on achieving
reimbursement in key target markets, building
product awareness and demand within existing
markets and undertaking aggressive and
targeted new launches.
A number of significant markets in Europe
are yet to launch including Germany, the
Netherlands and Spain. We believe that
Penthrox® will become a mainstream analgesic
in the European market.
The regulatory reimbursement environment
for pharmaceuticals in Germany remains
unpredictable which has delayed the launch of
Penthrox®.
National Regulatory Applications are expected
to be filed with the relevant agencies in Greece,
Macedonia, Serbia, Albania, Liechtenstein,
Montenegro, Kosovo, San Marino, Vatican City,
Andorra and Monaco in due course.
France
In-market sales grew 15% in FY20 and
feedback from this market continues to be
very positive. France now has approval from
121 hospitals with 386 customers buying and
using Penthrox®.
UK and Ireland
In the UK and Ireland, Galen continues to
make good progress. In-market sales grew
23% in the current period. 145 hospitals have
now approved Penthrox® and 670 customers
are using the product. These include seven
of the eleven Major Trauma Centres in the
UK. Whilst Penthrox® is being used in all
Ambulance Services and major hospitals
3
Annual Financial Report 2020 in Ireland, the roll out into multiple UK
ambulance services continues. Evaluations
and assessments within the UK ambulance
setting continue and significant penetration
within the UK ambulance market is expected
during FY21. We are buoyed by the positive
in-market feedback that we received from the
Ambulance Services and Galen, who remain
confident Penthrox® will be a significant
success.
Penthrox® has been approved for use by the
UK Military and given a NATO number which
allows other NATO military organisations
access to Penthrox®
Australia
Australian sales grew 3% in the current period,
whilst in-market sales to non-ambulance
channels grew 25%. Growth may have been
curtailed in the last quarter due to COVID-19
related restrictions that impacted the
movements of the wider Australian population,
including our distribution partner’s General
Practitioner and Hospital channels. We
remain confident in our ability to drive future
sales growth, particularly within the General
Practitioner and Hospital channels.
Penthrox® is now sold into more than 200
hospitals and medical clinics in Australia.
Rest of World
Chinese regulatory approval is well underway.
The IND was approved during the year and
patient recruitment for the human trials is
targeted for late 2020. Whilst COVID-19 has
delayed the recruitment of patients in China
in recent months, MVP has used this time to
finalise protocol amendments and continue
with trial start up activities. The below chart
outlines the envisaged timeline for approval
in China:
Penthrox® in China
4
Medical Developments International Limited Future for Penthrox®
MVP continues to negotiate with interested parties from around the world in terms of registering
and selling Penthrox®, whilst concurrently pursuing other important international regulatory
submissions and preparations in countries including USA, China, Russia, Iran, Iraq and South Korea.
New launches to occur in H1 FY21 include Thailand and Mexico.
Respiratory
Our respiratory device business achieved sales
growth of 61%. Sales grew strongly in the
United States up 98%, Canada up 58% and UK
& Europe up 128%. Our Australian business
sales were up 43%, led by our premium brand
Breath-A-Tech® up 35%.
In the USA market we continue to build on
our growing reputation and awareness of the
product in that market via our presence in an
estimated 20,000 pharmacies. In August 2020,
Walmart will launch their ‘equate’ branded
spacer range, manufactured by MVP. This will
be Walmart’s first private label prescription
product under the ‘equate’ brand and will
be available in all Walmart pharmacies (circa
4,600 stores in the USA). We are targeting
further pharmacy chains in FY21 and expect to
deliver significant sales growth in the USA in
the years ahead.
Sales growth in the EU can be attributed to
COVID-19 related buying and also a launch via
a new EU based distributor PIKDARE into new
pharmacy channel markets within France and
Portugal and also a number of smaller Middle
Eastern countries.
Sales of our premium spacer brand, Breath-
A-Tech, grew 35% in Australia, on the back of
a spike in demand caused by COVID-19, sales
related to the launch of our new antistatic
spacer and growth in sales of our new
cardboard spacer.
Commercial
Continuous Flow
In October 2019, MVP signed a new 5 year
‘global exclusive’ agreement with the CSIRO
to further develop our continuous flow
manufacturing technologies currently used
at our Scoresby production site in Victoria.
This initiative has the potential to deliver large
commercial benefits over traditional ‘batch’
API manufacturing methods and in the process
revolutionise the way some pharmaceuticals
are made. This includes reducing the overall
cost of manufacturing APIs by reducing cost
of goods, capital expenditure, factory footprint
and energy consumption while delivering
significant improvements in process and
quality.
The program continues to progress well
with advancements being made in the
commercialisation of Lidocaine (analgesic) &
Diclofenac (anti-inflammatory) APIs. Several
5
Annual Financial Report 2020 new targets are under early investigation with
promising results being seen in translation
from batch to flow manufacture.
Veterinary
Sales in our Vet business declined 43% in FY20
to $0.351m.
Outlook
MVP’s ambition is to replicate the domestic
success in analgesia and respiratory
internationally, whilst capturing a greater share
of the full margin on sales. Taking back the EU
is a big step to achieving that.
Recent clinical evidence that Penthrox® offers
superior pain relief to IV morphine and other
Standard of Care therapies, together with
Penthrox®’s recommendation as a first line
therapy in Europe are significant steps forward
in achieving this ambition.
Our Respiratory Device business is growing
strongly.
Over the next 12 months we expect to:
• complete the handback of the Penthrox® EU
distribution rights and aggressively pursue
targeted country reimbursements, launches
and expansion activity via a direct in-market
presence in the EU;
Further Information:
• complete the roll-out of Penthrox® into
Mexico, Iraq, Jordan and Thailand;
• consolidate on our record year for
respiratory and further grow our device
sales in Australia, the USA, Europe and
elsewhere;
• resubmit our IND for Penthrox® in the USA;
• conclude additional distribution partnerships
for Penthrox® and Respiratory Devices for
new countries;
• advance our Continuous Flow intellectual
property and our new manufacturing
processes; and
• continue our clinical program to extend the
indications for use of Penthrox® globally.
Over the next few years our global market
approvals and ‘indication extensions’ for
Penthrox® are expected to deliver strong
growth, as will our respiratory device business.
We are also making good progress with our
continuous flow technology. This opportunity
is significant and we are optimistic we will
commercialise products from the technology.
We continue to innovate our iconic products
whilst developing new products and
technologies. Significant progress was made
this year in licensed areas with increased
market approvals, new geographic sales
territories and clinical evidence.
We look forward to reporting our progress and
successes.
DAVID WILLIAMS
CHAIRMAN
MAX JOHNSTON
ACTING CEO
+61 414 383 593
+61 412 041 298
6
Medical Developments International Limited Board of Directors
Mr David Williams
Non-Executive Chairman
Managing Director of Kidder Williams Ltd, with over 30 years experience in the investment
banking sector. He is also Chairman of PolyNovo Ltd and RMA Global Limited. Mr Williams is
Chairman of the MVP Remuneration and Nominations Committee.
Mr Max Johnston
Non-Executive Director and Acting CEO
Mr Johnston is a Non-executive Director of Polynovo Limited, Cannpal Animal Therapeutics
Limited, Bard1 Life Sciences Limited and is also a Non-executive Director and Chairman
of Auscann Group Holdings Ltd. Mr Johnston is also a former Non-executive Director and
Chairman of Probiotec Limited, a former Non-executive Director of Enero Group Limited and a
former Director of Prolife Foods Ltd. 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 MVP Audit & Risk Committee. Mr Johnston has
been acting CEO since the departure of the former CEO on 5 June 2020.
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. Mr Powell is also a Non-executive Director of PolyNovo Limited and RMA
Global Limited. Philip is Chairman of MDI’s Audit and Risk Committee.
Ms Christine Emmanuel
Non-Executive Director
Ms Emmanuel is an experienced patent and trademark attorney, and a business development
professional having more than 30 years experience locally and internationally. Ms Emmanuel
is a former Executive Manager of Business Development and Commercial at the CSIRO, where
she founded and led the management of CSIRO’s IP portfolio and managed the growth of
the CSIRO equity portfolio for over 5 years. Prior to this role, Ms Emmanuel was in-house IP
Counsel for Unilever in the UK and practised as a patent and trademark attorney for Wilson
Gunn (UK) and Davies Collison Cave and Griffith Hack in Melbourne. She is also currently
Non-executive Director of Polynovo Ltd, on the Council of Patent & Trademarks Attorneys of
Australia and on the Life Sciences Council of SPE Australia.
Mr Leon Hoare
Non-Executive Director
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, 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. 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).
The above-named directors held office during and since the end of the financial year.
Annual Financial Report 2020
7
7
Annual Financial Report 2020 Here for you
when every second
counts.
Product
portfolio
Pharmaceutical
Analgesia
• Penthrox®
Medical
Asthma
• Anti-Static Compact Space Chamber Plus®
• Anti-Static Space Chamber Plus®
• Breath-A-Tech Spacer
• Breath-A-Tech Hospital Spacer
• Breath-A-Tech Portable Nebuliser
• Breath-Alert® Peak Flow Meter
• Compact Space Chamber Plus®
• MyMDI™ Pulse Oximeter
• Space Chamber Plus®
• Space Chamber Plus® Autoclavable spacer
• Space Chamber Slim®
Face masks
• EZ-fit Silicone Face Mask
• MyMDI™ Anti-Static Silicone Face Mask
• MyMDI™ Silicone Face Mask
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-Vac™ suction system
Regulators
• KDK™ regulator/flow meter with oxygen flush
Veterinary
• Breath-Alert® breathing monitor
• LANA closed circuit anaesthetic machine
• Mini-KOM™ anaesthetic machine
• MK5 closed circuit anaesthetic machine
• Veterinary Spacers
9
Here for you
to manage the pain.
Pharmaceutical
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 located in Scoresby
and 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 a core medication for the treatment of pain
in trauma by all Ambulance Services in Australia
and New Zealand. MVP continues to focus on 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 and
general practice) domestically via our partnership
with Mundipharma Australia and globally with our
other Penthrox® distribution partners. FY21 will see
Penthrox® launched into multiple new countries.
Product Suite
MVP is continuing to develop additional
formulations of Penthrox® to improve convenience,
utility and value for its customers. This includes
investing in the product development of next
generation Penthrox® inhalers.
11
Here for you
when you least
expect it.
Medical devices
Building our product range
MVP’s focus in FY21 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
• Peak Flow Meters
• Portable Nebulisers
• Face Masks
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:
• The acquisition and subsequent expansion of the
Breath-A-Tech range
• Growing sales of our range of Asthma products
through established international partners and
development of new partnerships. Of note is
the ongoing growth in respiratory sales in the
USA with MVP products now in approximately
20,000 pharmacies across the USA. MVP will be
manufacturing spacers for Walmart under their
‘equate’ brand in FY21.
Product development
To assist in future growth MVP has developed
new and improved Space Chambers to assist with
product differentiation to increase domestic and
international penetration.
13
Here for you
anywhere, anytime.
Oxygen and
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-Vac™ suction system
The market
MVP’s oxygen equipment is purchased and
used by:
• Ambulance services
• Fire brigades
• Lifesaving clubs
• Military
15
Here for man’s
best friend.
Veterinary
MVP has a global
Veterinary presence
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 niche market in
Europe.
Whilst the majority of MDI’s veterinary
products continue to be sold into Europe
and China through our distributor, Kruuse,
MVP also manufactures the VetOne animal
spacer products for USA veterinary supplies
company, MWI.
17
Here for your
child when you
can’t be.
FULL
YEAR
REPORT
Financial Year
Ended 30 June
2020
(Previous corresponding
period: financial year ended
30 June 2019)
Contents
Directors’ Report
Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
20
31
32
36
38
39
Consolidated Statement of Changes in Equity 40
Consolidated Statement of Cash Flows
Notes to the Financial Statements
41
43
19
Directors’
Report
The directors of Medical Developments
International Limited (“MVP”) herewith submit
the annual financial report of the company
for the financial year ended 30 June 2020.
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 and RMA Global Limited. Mr
Williams is Chairman of the MVP Remuneration
and Nominations Committee.
Mr R M Johnston
Non-Executive Director and Acting CEO
(since 5 November 2012)
Mr Johnston is a Non-executive Director
of Polynovo Limited, Cannpal Animal
Therapeutics Limited, Bard1 Life Sciences
Limited and is also a Non-executive Director
and Chairman of Auscann Group Holdings Ltd.
Mr Johnston is also a former Non-executive
Director and Chairman of Probiotec Limited,
a former Non-executive Director of Enero
Group Limited and a former Director of Prolife
Foods Ltd. 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 MVP Audit &
Risk Committee. Mr Johnston has been acting
CEO since the departure of the former CEO on
5 June 2020.
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, 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. 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. Mr Hoare joined
the MVP Remuneration and Nominations
Committee post the departure of Mr McCallum.
Mr Hoare 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. Mr Powell is
also a Non-executive Director of PolyNovo
Limited, RMA Global Limited and BARD1 Life
Sciences Limited. Philip is Chairman of MVP’s
Audit and Risk Committee.
20
Medical Developments International Limited Ms C Emmanuel, B Sci (Hons), M. ENT,
FICPI, MAICD
Non-Executive Director
(since 26 May 2020)
Ms Emmanuel is an experienced patent
and trademark attorney, and a business
development professional having more than
30 years experience locally and internationally.
Ms Emmanuel is a former Executive Manager
of Business Development and Commercial
at the CSIRO, where she founded and led
the management of CSIRO’s IP portfolio and
managed the growth of the CSIRO equity
portfolio for over 5 years. Prior to this role,
Ms Emmanuel was in-house IP Counsel for
Unilever in the UK and practised as a patent
and trademark attorney for Wilson Gunn (UK)
and Davies Collison Cave and Griffith Hack in
Melbourne. She is also currently Non-executive
Director of Polynovo Ltd, on the Council of
Patent & Trademarks Attorneys of Australia
and on the Life Sciences Council of SPE
Australia.
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
Max Johnston
Philip Powell
Polynovo Limited
(Chairman)
Since 13 March
2014
RMA Global
Limited
(Chairman)
Since November
2014
Polynovo Limited Since 13 May 2014
CannPal Animal
Therapeutics
Limited
BARD1 Life
Sciences Limited
Since 21 April 2017
Since 17 June 2019
Auscann Group
Holdings Ltd
Since 20 December
2019
Polynovo Limited Since 13 May 2014
RMA Global
Limited
BARD1 Life
Sciences Limited
Since 5 April 2018
Since 17 June 2019
Leon Hoare
Polynovo Limited
Since 27 January
2016
Christine
Emmanuel
Polynovo Limited Since 13 May 2020
Company Secretary
Mr Mark Edwards, CA. Mr Edwards is also the
Chief Financial Officer 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
United States of America
MVP is hoping to receive feedback on the pre-
clinical protocol shortly in order to commence
this study by Q4 2020. Whilst awaiting FDA
feedback, MVP has continued to compile its
clinical package for the FDA which will be
submitted in late August 2020 in anticipation
of coordinating a Type C meeting with the FDA
in late 2020. The completion of the Human
Factors study which involves subjects trialling
and administering the Penthrox® device,
has been delayed as it requires the direct
involvement of USA health care professionals
and participants which is restricted during
times of COVID.
MVP expects to be in a position to address
in full, all the clinical hold issues during the
third quarter of CY21 with a view to filing the
Investigational New Drug (IND) application in
CY21.
MVP remains confident we will be able to supply
the FDA with the additional information it
requires. Our confidence is based on 40+ years
of experience, the demonstrated safety profile of
Penthrox® over that time, the additional clinical
data we have to support our IND including our
Post Authorisation Safety Study, PK study, our
ongoing clinical development program and
our recent achievements in getting Penthrox®
approved for sale in more than 40 countries
around the world.
21
Annual Financial Report 2020 Europe
In October 2019, Penthrox® was included and
recommended as ‘first-line of treatment’ in
the European Society of Emergency Medicine
(‘EUSEM’) guidelines for the ‘Management
of acute pain in emergency situations’. In
addition, the MEDITA clinical study was
published in Europe demonstrating Penthrox®
superiority over Standard of Care and IV
morphine for acute trauma pain treatments
in patients. These events should prove to be
pivotal moments for Penthrox® in Europe.
Europe in-market sales were up 15%, where
there are 568 customers buying Penthrox® in
Europe including 386 in France. We believe
that number will grow strongly under our
direct control as our focus is on achieving
reimbursement in key target markets, building
product awareness and demand within existing
markets and undertaking aggressive and
targeted new launches.
A number of significant markets in Europe
are yet to launch including Germany, the
Netherlands and Spain. We believe that
Penthrox® will become a mainstream analgesic
in the European market.
The regulatory reimbursement environment
for pharmaceuticals in Germany remains
unpredictable which has delayed the launch of
Penthrox®.
National Regulatory Applications are expected
to be filed with the relevant agencies
in Greece, Macedonia, Serbia, Albania,
Liechtenstein, Montenegro, Kosovo, San
Marino, Vatican City, Andorra and Monaco in
due course.
France
In-market sales grew 15% in FY20 and
feedback from this market continues to be
very positive. France now has approval from
121 hospitals with 386 customers buying and
using Penthrox®.
UK and Ireland
In the UK and Ireland, Galen continues to
make good progress. In-market sales grew
23% in the current period. 145 hospitals
have now approved Penthrox® and 670
customers are using the product. These
include seven of the eleven Major Trauma
Centres in the UK. Whilst Penthrox® is being
used in all Ambulance Services and major
hospitals in Ireland, the roll out into multiple
UK ambulance services continues. Evaluations
and assessments within the UK ambulance
setting continue and significant penetration
within the UK ambulance market is expected
during FY21. We are buoyed by the positive
in-market feedback that we received from the
Ambulance Services and Galen, who remain
confident Penthrox® will be a significant
success.
Penthrox® has been approved for use by the
UK Military and given a NATO number which
allows other NATO military organisations
access to Penthrox®
Australia
Australian sales grew 3% in the current period,
whilst in-market sales to non-ambulance
channels grew 25%. Growth may have been
curtailed in the last quarter due to COVID-19
related restrictions that impacted the
movements of the wider Australian population,
including our distribution partner’s General
Practitioner and Hospital channels. We
remain confident in our ability to drive future
sales growth, particularly within the General
Practitioner and Hospital channels.
Penthrox® is now sold into more than 200
hospitals and medical clinics in Australia.
Penthrox®: Rest of World
The Chinese regulatory approval is well
underway. The IND was approved during
the year and patient recruitment for the
human trials is targeted for late 2020. Whilst
COVID-19 has delayed the recruitment of
patients in China in recent months, MVP has
used this time to finalise protocol amendments
and continue with trial start up activities.
MVP continues to negotiate with interested
parties from around the world in terms of
registering and selling Penthrox®, whilst
concurrently pursuing other important
international regulatory submissions and
preparations in countries including USA,
China, Russia, Iran, Iraq and South Korea. New
launches to occur in H1 FY21 include Thailand
and Mexico.
Respiratory
Our respiratory device business achieved sales
growth of 61%. Sales grew strongly in the
22
Medical Developments International Limited United States up 98%, Canada up 58% and UK
& Europe up 128%. Our Australian business
sales were up 43%, led by our premium brand
Breath-A-Tech up 35%.
In the USA market we continue to build on
our growing reputation and awareness of the
product in that market via our presence in an
estimated 20,000 pharmacies. In August 2020,
Walmart will launch their ‘equate’ branded
spacer range, manufactured by MVP. This will
be Walmart’s first private label prescription
product under the ‘equate’ brand and will
be available in all Walmart pharmacies (circa
4,600 stores in the USA). We are targeting
further pharmacy chains in FY21 and expect to
deliver significant sales growth in the USA in
the years ahead.
Sales growth in the EU can be attributed to
COVID-19 related buying and also a launch via
a new EU based distributor PIKDARE into new
pharmacy channel markets within France and
Portugal and also a number of smaller Middle
Eastern countries.
Sales of our premium spacer brand, Breath-
A-Tech, grew 35% in Australia, on the back of
a spike in demand caused by COVID-19, sales
related to the launch of our new antistatic
spacer and growth in sales of our new
cardboard spacer.
Continuous Flow
In October 2019, MVP signed a new 5 year
‘global exclusive’ agreement with the CSIRO
to further develop our continuous flow
manufacturing technologies currently used
at our Scoresby production site in Victoria.
This initiative has the potential to deliver large
commercial benefits over traditional ‘batch’
API manufacturing methods and in the process
revolutionise the way some pharmaceuticals
are made. This includes reducing the overall
cost of manufacturing APIs by reducing cost
of goods, capital expenditure, factory footprint
and energy consumption while delivering
significant improvements in process and
quality.
The program continues to progress well
with advancements being made in the
commercialisation of Lidocaine (analgesic) &
Diclofenac (anti-inflammatory) APIs. Several
new targets are under early investigation with
promising results being seen in translation
from batch to flow manufacture.
Vet
Our Vet business declined 43% in FY20.
FY20 Full Year Financial
Result
Revenue was a record $23.6 million whilst
gross margin decreased slightly, reflective of
a higher weighting of revenue to lower margin
medical devices in FY20.
Operating Expenses increased 15%. This
increase is due to:
• Increased ‘pharmacovigilance’ costs as a
result of expanding geographic sales for
Penthrox® and Medical Devices;
• Marketing expenses as a result of growth
in Penthrox® and Breath-A-Tech sales in
Australia;
• ‘Non-cash’ depreciation and interest
expenses (change of accounting standard
– AASB 16 Leases - refer to note 1(u) for
further detail); and
• Increased investment in R&D.
Cash flow
At 30 June 2020, the group had $15.5m in cash
reserves. During the year MVP invested:
• $5.4 million in clinical trials and registrations
for Penthrox®;
• $1.1 million in our manufacturing
development program with the CSIRO; and
• $1.5 million in various manufacturing
equipment and leasehold improvements.
COVID-19
The internal and manufacturing operations
of MVP have not been adversely impacted
by COVID-19 shutdowns, given the company
is recognised as an essential business and
has been able to accommodate ongoing
production and work from home practices.
Refer above for impact of COVID-19 on the
Groups respective segments.
Financial Position
The capital structure of the group remained
stable during the period and the group has no
bank debt.
23
Annual Financial Report 2020 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
On 19 August 2020 the company announced
that it had reached an in-principle agreement
to take back the distribution rights for
Penthrox® in Europe from Mundipharma. This
transition is to take place over a 6-month
period from 1 September 2020 to 28 February
2021.
As the Group is a pharmaceutical and medical
device business, it has been considered an
essential business in Victoria and has not been
subject to COVID-19 Stage 4 related business
shutdown restrictions and has therefore been
able to continue with critical production and
selling activities from its Victorian based
locations.
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
No dividend was declared in relation to the full
year ended 30 June 2020.
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’ Shareholdings
The following table sets out each director’s
relevant interest in shares as at the date of this
report.
Fully paid shares
D.J. Williams
M. Johnston
L. Hoare
P.J. Powell
C. Emmanuel
9,650,782
39,868
14,129
264,565
-
Directors hold no options over shares as at 30
June 2020.
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, nine Board meetings, two
Audit and Risk Committee meetings and two
Remuneration and Nominations committee
meeting were held.
Board of Directors
Audit & Risk Committee
Remuneration &
Nominations Committee
Held
Attended
Held
Attended
Held
Attended
D.J. Williams
M. Johnston
L. Hoare
P.J. Powell
C. Emmanuel*
9
9
9
9
1
9
9
9
9
1
-
2
-
2
-
-
2
-
2
-
2
-
2
-
-
2
-
2
-
-
*Christine Emmanuel joined the Board on 26 May 2020 and was therefore only eligible to attend one meeting in the current year.
24
Medical Developments International Limited Audited Remuneration Report
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 2020. 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.
Key Management Personnel Details
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)
• R.M. Johnston (Non-executive)
• L. Hoare (Non-executive)
• P. Powell (Non-executive)
• C. Emmanuel (Non-executive appointed 26
May 2020)
The company executives during or since the
end of the financial year were:
• J. Sharman (Chief Executive Officer)
(resigned 5 June 2020)
• M. Edwards (Chief Financial Officer/
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.
Key management personnel equity holdings – fully paid ordinary shares
2020
D.J. Williams
M. Johnston
L. Hoare
P.J. Powell
C. Emmanuel
J. Sharman*
M. Edwards
Balance at
30 June
2019
No.
Issued
during the
year via DRP
No.
9,608,754
42,028
39,694
14,068
263,413
-
5,179
-
174
61
1,152
-
23
-
-
-
-
-
-
(5,202)
-
9,931,108
43,438
(5,202)
*John Sharman resigned on 5 June 2020
Disposals
No.
Acquired
No.
Net Other
Change
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
D.J. Williams
M. Johnston
L. Hoare
P.J. Powell
J. Sharman
M. Edwards
Balance at
30 June
2018
No.
Issued
during the
year via DRP
No.
9,459,584
99,924
30,576
10,191
256,936
5,125
-
368
127
2,727
54
-
9,762,412
103,200
Disposals
No.
Acquired
No.
Net Other
Change
No.
-
-
-
-
-
-
-
49,246
8,750
3,750
3,750
-
-
65,496
-
-
-
-
-
-
-
Balance at
30 June
2020
No.
9,650,782
39,868
14,129
264,565
-
-
-
9,969,344
Balance at
30 June
2019
No.
9,608,754
39,694
14,068
263,413
5,179
-
9,931,108
25
Annual Financial Report 2020 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 L. Hoare,
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 Revenue, EBITDA
(Earnings Before Interest, Tax, Depreciation
and Amortisation and NPAT (Net Profit after
Tax), used to directly link company earnings
and cash bonuses and other operational
measures and individual specific performance
measures, the achievement of which provides
the basis for future growth and profitability.
The long-term incentive scheme is centred
around the achievement of regulatory related
performance measures for key territories.
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 2013-2020
0
0
0
$
’
2,500
2,000
1,500
1,000
500
0
2013
2014
2015
2016
2017
2018
2019
2020
The following table shows the company’s share prices for the current financial year and the
previous seven financial years.
Share price - start ($)
Share price - end ($)
Interim Dividend (cps)*
Final Dividend (cps)*
Basic Earnings per Share (cps)
Diluted Earnings per Share (cps)
2013
2014
2015
2016
2017
2018
2019
2020
0.79
1.27
3.00
2.00
4.10
4.10
1.27
1.32
-
-
1.50
1.50
1.32
2.68
-
-
2.65
2.65
2.68
6.10
2.00
2.00
1.61
1.60
6.10
4.95
2.00
2.00
3.10
3.10
4.95
5.80
2.00
2.00
0.41
0.41
5.80
5.30
2.00
2.00
1.61
1.60
5.30
6.98
2.00
-
0.58
0.58
*Franked to 100% at 27.5% corporate income tax rate.
26
Medical Developments International Limited Dividends
No dividend 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 share options granted under the Long-Term Incentive Plan.
The following table discloses the remuneration of the directors of the company in 2020:
2020
Directors
D.J. Williams
M. Johnston
L. Hoare
P.J. Powell
C. Emmanuel
Short-Term
Employee Benefits
Post
Employment
Bonus
$
Superannuation
$
Long-
Term
Employee
Benefits
Share-
Based
Payments
Long
Service
Leave
$
Options
& Rights
$
-
-
-
-
-
-
8,242
5,205
5,205
5,205
434
24,291
-
-
-
-
-
-
-
-
-
-
-
-
Salary
& Fees
$
86,758
54,795
54,795
54,795
4,566
255,709
Total
$
95,000
60,000
60,000
60,000
5,000
280,000
The following table discloses the remuneration of the key executives of the company in 2020:
2020
Executives
J. Sharman
(Chief
Executive
Officer)
M. Edwards
(CFO/
Company
Secretary)
Short-Term
Employee Benefits
Post
Employment
Salary
& Fees
$
Bonus
$
Superannuation
$
Long-
Term
Employee
Benefits
Long
Service
Leave
$
Share-
Based
Payments
Remuneration
Linked to
performance
Total
Options
& Rights (i)
$
$
414,889
60,000
31,394
(7,700)
(234,095)
264,488
-66%
197,108
9,132
19,593
5,654
55,421
286,908
22%
611,997
69,132
50,987
(2,046)
(178,674)
551,396
(i) The value of the options granted to Mr Sharman and Mr Edwards as part of their
remuneration was calculated at grant date using a Black Scholes Option Pricing Model.
Additional details in relation to the valuation are outlined below and also within note 33 of
the Annual Report. John Sharman (former CEO) resigned on 5 June 2020. There were no
payouts on termination other than owing salary and leave accruals. As the CEO option plan
was forfeited, the previously accrued share-based payments recognised in relation to the plan
were reversed and the options subsequently cancelled.
27
Annual Financial Report 2020 Executive remuneration is principally fixed in nature, with a short-term incentive that is also
subject to a discretionary overlay to capture and reward individual performance. In FY20,
Mr Sharman and Mr Edwards remuneration comprised a performance related component of
$60,000 and $9,132 respectively. Director’s remuneration did not contain a performance related
component.
The following table discloses the remuneration of the directors of the company in 2019:
Short-Term
Employee Benefits
Post
Employment
Bonus
$
Superannuation
$
Long-Term
Employee
Benefits
Share-
Based
Payments
Long
Service
Leave
$
Options
& Rights
$
-
-
-
-
-
-
-
7,230
1,952
1,952
4,446
4,446
4,446
24,472
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
Directors
D.J. Williams
A.D. McCallum
H.F. Oxer
M. Johnston
L. Hoare
P.J. Powell
Salary
& Fees
$
76,104
20,548
20,548
46,804
46,804
46,804
257,612
Total
$
83,334
22,500
22,500
51,250
51,250
51,250
282,084
The following table discloses the remuneration of the key executives of the company in 2019:
2019
Executives
J. Sharman
(Chief Executive
Officer)
M. Edwards
(CFO/Company
Secretary)
Short-Term
Employee
Benefits
Post
Employment
Long-Term
Employee
Benefits
Share-
Based
Payments
Remuneration
Linked to
performance
Total
Salary
& Fees
$
Bonus
$
Superannuation
$
Long
Service
Leave
$
Options
& Rights
$
$
366,456
-
33,544
9,892
234,095 643,987
36%
177,078
4,566
17,256
5,654
44,821
249,375
19%
543,533
4,566
50,800
15,546
278,916 893,362
In FY19, Mr Edwards remuneration comprised
a short-term performance related component
of $4,566. Director’s remuneration did not
contain a performance related component.
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 regulatory approvals, 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 2020 financial year,
discretionary bonuses totalling $69,132 (2019:
$4,566) were determined and approved by the
Remuneration and Nominations Committee
28
Medical Developments International Limited in relation to key management personnel
in respect of their performance in the 2019
financial year.
Long-term incentives
Executive Option Plans
Under the Executive Option plan awards were
made to executives who have an impact on the
Group’s performance. LTI awards are delivered
in the form of options over shares which vest
on the achievement of specific performance
measures, being the approval of Penthrox® in
the USA.
The fair value of share options granted is
estimated at the date of grant using a Black
Scholes Option Pricing Model, taking into
account the terms and conditions upon which
the share options were granted including the
option price, the life of the option, the share
price of the underlying shares on grant date
and the expected share price volatility. It also
takes into account historical and expected
dividends. There are no cash settlement
alternatives for the employees and The
Group does not have a past practice of cash
settlement for these awards.
All outstanding options will be cancelled if
the employee leaves or is no longer employed
by MVP for any reason. When the Long-Term
Incentive Plan ‘LTIP’ has met its vesting criteria
and delivers an entitlement to an equity
interest, the employee 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. In the case of an unconditional
takeover, the escrow conditions will not apply.
Each share option converts 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
carry neither rights to dividends or voting
rights.
Executive share option plans
The following share-based payment
arrangements were in existence during the
current reporting period:
CEO Option Plan
On 18 July 2018 the company announced
it has agreed to a LTIP with Mr. John
Sharman, the CEO of Medical Developments
International Limited to encourage his long-
term commitment to the business. This plan
was forfeited on 5 June 2020 upon resignation
of the former CEO and therefore no vesting
occurred, and the options were subsequently
cancelled.
Senior Management Option Plan
In September 2018 the company announced
it has agreed to a LTIP with key Senior
Management Team members.
Under the plan the effected Senior
Management team members were granted
options with a strike price of $0.01. The
options will only vest on the earlier of FDA
approval of Penthrox® for sale in the USA
or the company receives an unconditional
takeover offer worth more than $350m.
A summary of the options granted during the year and outstanding as at 30 June 2020 is
outlined below:
Granted as
remuneration
No.
Exercised
No.
Lapsed/
forfeited
No.
Balance
vested at
30 June
2020
but not
exercised
No.
Balance
not
vested at
30 June
2020
No.
Options
vested
during
the
year
No.
Balance
at 30
June
2020
No.
Balance
at
30 June
2019
No.
300,000
100,000
2020
J. Sharman
(CEO)
M. Edwards
(CFO)
Senior
Management
-
-
225,000
75,000
-
-
-
(300,000)
-
-
-
100,000
300,000
-
-
-
-
100,000
300,000
-
-
-
29
Annual Financial Report 2020 The CEO option plan was forfeited on resignation on 5 June 2020. All outstanding options were
cancelled.
Issuing Entity
Personnel
Tranche
Number
of shares
under
option
Class of
shares
Exercise
price of
option
Expiry date
of options
Medical Developments
International Ltd
M. Edwards
100,000
Ordinary
$0.01
No expiry
Fair value of share options granted
during the year
There were no new options granted to Key
Management Personnel during the year.
The prior year option plan contains non-
market performance hurdles, that have been
valued using a ‘Black-Scholes’ 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.
Expected volatility is based on the historical
share price volatility over the past 2 years.
Inputs into the option pricing model were as
follows:
Grant date share price
Exercise price
Option Fair Value
Expected volatility
Expected option life
Dividend (Bi-annually)
Risk-free interest rate
CFO
$3.90
$0.01
$3.69
45%
5 years
2c
2.17%
For valuation purposes a probability of 75%
has been applied to the likelihood of achieving
FDA approval for Penthrox® in the USA.
Contracts for services
Mr 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
30
taxation services ($26,300). The directors do
not believe that the nature of these services
compromises the general principles relating
to auditor’s independence, as set out by the
Chartered Accountants Australia and New
Zealand.
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.
Corporate Governance Statement
A copy of the Company’s Corporate
Governance statement can be found at
www.medicaldev.com/investors-media
Auditor’s independence declaration
The auditor’s independence declaration is
included on page 31 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, 20 August 2020
Medical Developments International Limited Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne, VIC, 3000
Australia
Phone: +61 3 9671 7000
www.deloitte.com.au
The Board of Directors
Medical Developments International Limited
4 Caribbean Drive
Scoresby VIC 3179
20 August 2020
Dear Board Members
Medical Developments International Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Medical Developments International Limited.
As lead audit partner for the audit of the financial statements of Medical Developments International
Limited for the financial year ended 30 June 2020, I declare that to the best of my knowledge and
belief, there have been no contraventions of:
(i) The auditor independence requirements of the Corporations Act 2001 in relation to the
audit
(ii) Any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
31
31
Annual Financial Report 2020
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne, VIC, 3000
Australia
Phone: +61 3 9671 7000
www.deloitte.com.au
Independent Auditor’s Report to the members of Medical
Developments International Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Medical developments International Limited (the “Company”)
and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position
as at 30 June 2020, the consolidated statement of profit and loss and other comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, and notes to the financial statements, including a summary of significant accounting
policies including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
32
32
Medical Developments International Limited
Key Audit Matter
Recoverability of Goodwill
As at 30 June 2020 the Group’s Goodwill
balance totals $9.095m as disclosed in
Note 13.
Significant judgement is required by
management to determine assumptions
and estimates involved in preparing a
discounted cash flow model (‘value in
use’) for each of the Group’s Cash
Generating Units (‘CGU’s), including:
•
•
Forecast EBITDA and free cash
flow for each CGU,
EBITDA growth rates over the
forecast period and terminal
value of each CGU, and
• Discount rates appropriate to
the risk profile of each CGU.
Changes to these assumptions can
impact the valuation of the recoverable
amount determined for each CGU.
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, but were not limited to:
• Obtaining an understanding of the process
undertaken by management to prepare the
value in use model for each CGU and an
understanding of key controls supporting this
process,
In conjunction with our valuation specialists,
evaluating and testing the key assumptions used
in management’s value in use model including:
•
- Assessing the consistency and
appropriateness of forecast revenue,
EBITDA and free cash flows with
reference to expected sales by
geography and customer,
- Assessing the appropriateness of
EBITDA growth rates applied over the
forecast period and terminal value with
reference to management’s current
business plans,
- Assessing the historical accuracy of
forecasts of the Group’s operating
results,
-
- Comparing the expected discount rate
for each CGU to the rate calculated by
management,
Performing sensitivity analysis on the
impairment model by applying varied
discount rates and growth projections to
simulate alternative market conditions
and outcomes.
Capitalisation of intangible assets
Our procedures included, but were not limited to:
We have also assessed the appropriateness of the
disclosures in Note 13 to the financial statements.
As at 30 June 2020 the Group’s
Intangible assets total $35.820m as
disclosed in Note 14.
Capitalisation of other intangible assets
requires management judgement 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 amortisation of intangible
assets should commence, with
reference to when the asset is
available for use and when
revenue is generated, and
The useful lives assigned to
each individual category are
appropriate.
•
• Obtaining an understanding of the process
undertaken by management
to determine
whether expenditure should be capitalised as
intangible assets and to understand key controls
supporting the process,
Assessing the appropriateness of management’s
accounting policy,
Assessing all capitalised intangible assets not yet
available for use and a sample of capitalised
intangible assets available for use at balance date
to determine whether it is probable that expected
future economic benefits attributable to those
assets will flow to the Group, and
•
• Reviewing the listing of capitalised intangible
assets at balance date to verify that:
- Amortisation has commenced on
assets that are available for use, and
The useful lives assigned to each intangible asset
are appropriate.
intangible
-
We have also assessed the appropriateness of the
disclosures in Note 14 to the financial statements.
33
33
Annual Financial Report 2020
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2020, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
intentional omissions,
involve collusion,
fraud may
from error, as
misrepresentations, or the override of internal control.
forgery,
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
34
34
Medical Developments International Limited
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group’s audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 30 of the Directors’ Report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Medical Development International Limited, for the year
ended 30 June 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
Melbourne, 20 August 2020
35
35
Annual Financial Report 2020
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, 20 August 2020
36
Medical Developments International Limited
Here for your
convenience.
37
Annual Financial Report 2020 Consolidated Statement of Profit or Loss and Other
Comprehensive Income for the Financial Year Ended
30 June 2020
2020
$’000
23,640
(1,105)
22,535
(7,543)
14,992
336
(1,299)
(4,083)
(1,266)
(4,321)
(2,342)
(114)
(1,582)
321
58
379
(42)
337
379
337
0.58
0.58
2019
$’000
21,382
(506)
20,876
(6,692)
14,184
448
(1,197)
(3,072)
(1,269)
(4,135)
(1,999)
(71)
(1,338)
1,551
(513)
1,038
17
1,055
1,038
1,055
1.61
1.60
Gross revenue from sale of goods and contracts
Less discounts and claims
Net revenue from sale of goods and contracts
4(a)
Note
Cost of sales
Gross profit
Other income
Distribution expenses
Marketing expenses
Occupancy expenses
Administration expenses
Regulatory expenses
Finance expenses
Other expenses
Profit before income tax expense
Income tax expense
Profit for the year
Other Comprehensive Income
4(a)
5(a)
Items that may be reclassified subsequently to profit or loss,
net of income tax
Exchange differences on translating foreign operations
22
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the parent
Total comprehensive income for the year attributable to:
Owners of the parent
Earnings per share:
Basic (cents per share)
Diluted (cents per share)
24
24
Notes to the financial statements are included on pages 43-75
38
Medical Developments International Limited Consolidated Statement of Financial Position as at
30 June 2020
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
Lease liability
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Other
Lease liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Note
30(a)
8
9
5(c)
10
12
5(d)
13
14
15
16
17
5(c)
19
20
16
18
19
20
21
22
23
Notes to the financial statements are included on pages 43-75
2020
$’000
15,544
4,082
5,882
33
416
2019
$’000
25,620
6,384
3,049
-
301
25,957
35,354
11,781
2,106
9,095
35,820
58,802
84,759
5,001
91
401
-
2,394
326
8,213
-
269
30,000
2,939
33,208
41,421
43,338
40,954
1,957
427
43,338
8,558
2,129
9,095
29,665
49,447
84,801
3,406
91
357
2,020
2,521
-
8,395
91
302
31,425
-
31,818
40,213
44,588
40,410
1,508
2,670
44,588
39
Annual Financial Report 2020 Consolidated Statement of Changes in Equity
2020
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
Options issues as part of CSIRO
agreement
Dividends reinvested in the form of
shares
Equity raising costs
Closing balance
2019
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 issued - placement
Shares issued - share purchase plan
Options issues as part of CSIRO
agreement
Dividends reinvested in the form of
shares
Equity raising costs
Closing balance
Issued
capital
$’000
Retained
earnings
$’000
Employee
equity
settled
benefits
reserve
$’000
CSIRO
option
reserve
$’000
Foreign
currency
translation
reserve
$’000
Total
$’000
40,410
2,670
711
800
(3)
44,588
-
-
-
-
-
-
557
(13)
379
-
379
-
(2,622)
-
-
-
-
-
-
91
-
-
-
-
-
-
-
-
-
400
-
-
-
379
(42)
(42)
(42)
337
-
-
-
-
-
91
(2,622)
400
557
(13)
40,954
427
802
1,200
(45)
43,338
Issued
capital
$’000
Retained
earnings
$’000
Employee
equity
settled
benefits
reserve
$’000
CSIRO
option
reserve
$’000
Foreign
currency
translation
reserve
$’000
Total
$’000
16,121
4,209
331
400
(20)
21,041
-
-
-
-
-
17,000
7,475
-
860
(1,046)
1,038
-
1,038
-
-
-
-
380
(2,576)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
400
-
-
-
1,038
17
17
17
1,055
-
-
-
-
-
-
-
380
(2,576)
17,000
7,475
400
860
(1,046)
40,410
2,670
711
800
(3)
44,588
Notes to the financial statements are included on pages 43-75
40
Medical Developments International Limited Consolidated Statement of Cash Flows for the Financial
Year Ended 30 June 2020
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 - lease
Interest paid
Income tax received/(paid)
Net cash generated by operating activities
30(b)
Cash flows from investing activities
Interest received
Payments for plant and equipment
Payments for other intangible assets
Net cash used in investing activities
Cash flows from financing activities
2020
$’000
22,822
(20,896)
158
200
(119)
(20)
(1,973)
172
429
(1,492)
(7,409)
(8,472)
Dividends paid (net of DRP)
25
(2,065)
Proceeds from the issue of shares/options
Share issue transaction costs
Repayment of lease liability
Payments for hire purchase finance
Repayment of borrowings
Net cash generated by financing activities
Net decrease in cash and cash equivalents
16
16
400
(13)
(197)
-
(91)
(1,966)
(10,266)
2019
$’000
16,484
(16,595)
52
20,845
-
(71)
556
21,271
330
(1,487)
(8,378)
(9,535)
(1,717)
24,875
(1,045)
-
(11)
(9,059)
13,043
24,779
Cash and cash equivalents at the beginning of the financial year
25,620
794
Effects of exchange rate changes on the balance of cash held
in foreign currencies
190
47
Cash and cash equivalents at the end of the financial year
30(a)
15,544
25,620
Notes to the financial statements are included on pages 43-75
41
41
Annual Financial Report 2020 Here for
when you need
pain relief.
Notes to
the Financial
Statements
for the financial year
ended 30 June 2020
43
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 Group
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 20 August 2020.
Basis of preparation
The consolidated financial statements have
been prepared on the basis of historical cost,
except for certain financial instruments that
are measured at fair value, 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
44
that are within the scope of AASB 2, leasing
transactions that are within the scope of
AASB 16, and measurements that have some
similarities to fair value but are not fair value,
such as net realisable value in AASB 102 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 Corporations (rounding
in Financial/Director’s Reports) Instrument
2016/191 dated 24 March 2016, and in
accordance with that Corporations Instrument,
amounts in the financial statements are
rounded off to the nearest thousand dollars,
unless otherwise indicated.
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
to the non-controlling interests even if this
results in the non-controlling interests having a
deficit balance.
Medical Developments International Limited 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.
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.
(c) Employee benefits
A liability is recognised for benefits accruing
to employees in respect of wages and salaries,
annual leave and long service leave when it is
probable that settlement will be required and
they are capable of being measured reliably.
Liabilities recognised in respect of wages
and salaries and annual 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.
(d) Financial assets
Loans and receivables
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. 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.
In relation to the impairment of financial
assets, AASB 9 requires an expected credit
loss model as opposed to an incurred credit
loss model under AASB 139. The expected
credit loss model requires the Group to
account for expected credit losses and
changes in those expected credit losses at
each reporting date to reflect changes in credit
risk since initial recognition of the financial
assets. In other words, it is no longer necessary
for a credit even to have occurred before
credit losses are recognised.
The group continues to assess the risk of
non-recoverability or expected credit loss
on its receivables to be very low. Trade
receivables are typically collected within a
30-90-day period and despite the occasional
debtor being slow paying, empirical evidence
suggests there has been a very low level of
credit losses in recent years (losses over the
last 4 financial years total less than $25k).
There has been no observed increased credit
risk to date associated with COVID-19.
45
Annual Financial Report 2020 (e) Financial instruments issued by the
company
Debt and equity instruments
Instruments issued are classified as either debt
or as equity in accordance with the substance
of the contractual arrangement.
Transaction costs on the issue of equity
instruments
Transaction costs arising on the issue of equity
instruments are recognised directly in equity
as a reduction of the proceeds of the equity
instruments to which they relate. Transaction
costs are the costs that are incurred directly
in connection with the issue of those equity
instruments and would not have been incurred
had those instruments not been issued.
Interest and dividends
Interest and dividends are classified as
expenses or as distributions of profit
consistent with the balance sheet classification
of the related debt or equity instruments or
component parts of compound instruments.
(f) Foreign currency
The individual financial statements of each
group entity are presented in the currency of
the primary economic environment in which
the entity operates (its functional currency).
For the purpose of the consolidated financial
statements, the results and financial position of
each group entity are expressed in Australian
dollars (‘$’), 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 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.
46
Medical Developments International Limited 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. Wage subsidies such as JobKeeper
have been recognised as an offset against the
Employee Benefits expense to which it relates.
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 carrying amount of
the asset (or cash-generating unit) is reduced
to its recoverable amount. An impairment loss
is recognised in the Consolidated Statement
of Profit or Loss and Other Comprehensive
Income immediately.
Where an impairment loss (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.
47
Annual Financial Report 2020 (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
38.5%), 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,
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.
Deferred tax assets and liabilities are offset
when they relate to income taxes levied by
48
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.
Medical Developments International Limited Internally-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
5-10 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 - 10 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
Refer to note 1(u) for the impact of AASB 16
leases on the current year financial statements
and the treatment adopted in relation to the
current year financial statements.
Comparative Year treatment - Leases were
classified as finance leases whenever the terms
of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All
other leases are classified as operating leases.
Operating lease payments were 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.
(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.
49
Annual Financial Report 2020 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 - 10 years
Plant & equipment
and Right-Of-Use asset:
4 - 12 years
after sales service embedded or attached to
the underlying sale. Settlement and volume
discounts granted to customers are accounted
for as offsets against sales.
Upfront and Milestone income
Revenue from upfront and milestone payments
is amortised to the income statement over the
underlying contract term. As the performance
obligation continues to be the right of the
Group’s partners to exclusively sell product
in a specific market for a period of time, the
consumption of the right and benefit occurs
evenly over the contract period.
Interest income
Interest income is recognised on a time
proportionate basis that takes into account the
effective yield on the financial asset.
(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.
(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 Black
Scholes 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
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. The 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 Income and other
Comprehensive Income.
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 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 control
of the product to the buyer. The key and sole
performance milestone relates to the delivery
of the product related to the order with no
50
Medical Developments International Limited (u) Application of new and revised Accounting Standards
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Group has not applied the following
new and revised Australian Accounts Standards, Interpretations and amendments that have been
issued but are not yet effective:
Standard/Amendment/Interpretation
AASB 2018-6 Amendments to Australian Accounting
Standards – Definition of a Business
AASB 2018-7 Amendments to Australian Accounting
Standards – Definition of Material
AASB 2019-1 Amendments to Australian Accounting
Standards – References to the conceptual framework
AASB 2019-5 Amendments to Australian Accounting
Standards – Disclosure of the Effect of new IFRS Standards
Not Yet Issued in Australia
AASB 2020-1 Amendments to Australian Accounting
Standards – Classification of Liabilities as Current
or Non-Current
AASB 2020-3 Amendments to Australian Accounting
Standards – Annual Improvements 2018-20 and Other
Amendments
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
1 January 2020
30 June 2021
1 January 2020
30 June 2021
1 January 2020
30 June 2021
1 January 2020
30 June 2021
1 January 2022
30 June 2023
1 January 2022
30 June 2023
The adoption of the above Accounting
Standards and Interpretations may affect
the accounting for future transactions or
arrangements.
New and revised Standards and amendments
thereof and Interpretations effective for the
current year that are relevant to the Group
include:
• AASB 16 Leases (discussed below);
• AASB 2018-1 Amendments to Australian
Accounts Standards - Annual Improvements
2015-2017 Cycle (no impact on the financial
statements); and
• Interpretation 23 Uncertainty Over Income
Tax Treatments (no impact).
AASB 16 Leases
In the current year the Group has applied
AASB 16 Leases which is effective for annual
periods that begin on or after 1 January
2019 therefore the date of initial application
of AASB 16 for the Group was 1 July 2019.
The Group elected to transition to the new
standard using the modified retrospective
approach, whereby the lease liability and right
of use asset initially recorded on the date
of transition are matched. Consequently, no
restatement of comparative information was
required.
Right-of-use assets
The Group recognised a right-of-use asset and
a lease liability at the lease commencement
date. The right-of-use asset is initially
measured at cost, which comprises the initial
amount of the lease liability adjusted for
any lease payments made at or before the
commencement date, plus any initial direct
costs incurred and an estimate of costs to
dismantle and remove the underlying asset or
to restore the underlying asset, less any lease
incentives received.
The right-of-use asset is subsequently
depreciated using the straight-line method
from the commencement date to the earlier
of the end of the useful life of the right-of-use
asset or the end of the lease term. Where an
extension is available under the lease contract
to the initial lease term and it is probable the
Group will exercise that option, that additional
period is also taken into account. The
estimated useful lives of right-of-use assets
are determined on the same basis as those of
property, plant and equipment. In addition, the
right-of-use assets are periodically reduced
by impairment losses in accordance with
AASB 136 Impairment of Assets, if any, and
adjusted for certain remeasurement of the
lease liability. The right of use asset is included
with property, plant and equipment in the
consolidated statement of financial position.
51
Annual Financial Report 2020 The lease liability is presented as a separate
line in the consolidated statement of financial
position.
The lease liability is measured at amortised
cost using the effective interest method.
In circumstances where the lease liability is
remeasured, a corresponding adjustment is
made to the carrying amount of the right-of-
use asset or is recorded in profit or loss if the
carrying amount of the right-of-use asset has
been reduced to zero. The Group did not make
any such adjustment during the current period.
Short-term leases and leases of low-value
assets
The Group has elected not to recognise right-
of-use assets and lease liabilities for short-term
leases of office and IT equipment that have a
lease term of 12 months or less or for leases
of low-value assets. The Group recognises the
lease payments associated with these leases
as an expense on a straight-line basis over the
lease term.
Lease liabilities
The lease liability is initially measured at
present value of the lease payments that
are not paid at the commencement date,
discounted using the interest rate implicit
in the lease or, if that rate cannot be readily
determined, the Group’s incremental
borrowing rate as the discount rate. The
weighted average incremental borrowing rate
used to calculate the lease liabilities as of
1 July 2019 was 3.55%.
Lease payments included in the measurement
of the lease liability comprise the following:
• Fixed payments, including in substance
fixed payments less any lease incentives
receivables;
• Variable lease payments that depend on an
index or a rate, initially measured using the
index or rate as at the commencement rate;
• Amounts expected to be payable under a
residual value guarantee;
• The exercise price under a purchase option
that the Group is reasonably certain to
exercise, lease payments in an optional
renewal period if the Group is reasonably
certain to exercise an extension option; and
• Payment of penalties for early termination
of a lease unless the Group is reasonably
certain not to terminate early
52
Medical Developments International Limited Impact on financial statements
The effect on 1 July 2019 of the recognition of the new right-of-use assets and lease liabilities is
disclosed below.
Increase in right-of-use assets
Decrease in provisions due to reclassification of lease incentives to the right of-use-asset
Increase in lease liabilities -current
Increase in lease liabilities -non-current
Impact on retained earnings
Operating lease commitments disclosed as at 30 June 2019
Extension option included deemed reasonably certain of being exercised
Discount using incremental borrowing rate at 1 July 2019
Lease liability recognised as at 1 July 2019
Lease liabilities
Balance at 1 July 2019
Additions
Interest incurred
Payments on lease liability
Balance at 30 June 2020
Of which are:
Current lease liabilities
Non-current lease liabilities
Balance at 30 June 2020
1 July 2019
$’000
3,074
388
(316)
(3,146)
-
2,183
2,066
(787)
3,462
3,462
-
119
(316)
3,265
326
2,939
3,265
The recognised right-of-use assets relate to the following types of assets:
Right-of-use assets
Balance at 1 July 2019
Depreciation charge
Balance at 30 June 2020
Property
$’000
Equipment
$’000
3,074
(271)
2,803
-
-
-
Total
$’000
3,074
(271)
2,803
The below table highlights the impact on the income statement from the first-time application of
AASB 16
Impact on profit/(loss) for the year
Decrease in occupancy expenses
Increase in depreciation of right-of-use asset
Increase in finance costs
Increase/(decrease) in profit for the year
2020
$’000
283
(271)
(119)
(107)
53
Annual Financial Report 2020 2. Critical accounting
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 $9,095,000 (2019:
$9,095,000). Further details are provided in
note 13.
Measurement of lease term
The Group has a 5-year extension available
to it in relation to its right-of-use head office
site lease asset. It has been deemed that the
exercising of this first 5-year extension is likely
and was therefore factored into the first time
recognition of the right-of-use asset and lease
liability.
Impairment of intangible
assets not yet available for use
The Group has material capitalised registration
costs in relation to obtaining registration
of Penthrox® in a number of jurisdictions
(primarily the USA and China). Management
tests the intangible assets not yet available for
use using a fair value less costs to sell basis
each year.
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 and right of use
assets
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.
Going concern
The FY20 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 2020 as the Group is profitable,
generates positive operating cash flows, has
considerable cash reserves 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. Refer
to note 30 for a summary of the Groups’ cash
position and available facilities.
As the Group is a pharmaceutical and medical
device business, it has been considered an
essential business in Victoria and has not been
54
Medical Developments International Limited subject to COVID-19 related business lockdown
restrictions and has therefore been able to
continue with critical production and selling
activities from its Victorian based locations.
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, New Zealand,
Europe the UK and some sales in Canada,
the Middle East, Asia and South Africa.
• Medical Devices – the sale of medical
devices, particularly the Space Chamber and
Breath-Alert Peak-Flow meters, primarily
within Australia, UK/Europe and North
America, with some sales in Asia and New
Zealand.
• 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.
Segment revenues and results
Pharmaceuticals
Medical
Equipment
Veterinary
Equipment
Unallocated
Total
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Revenues:
External revenue (gross)
13,138
14,322
10,151
6,442
351
618
Sales discounts and claims
-
-
(1,105)
(506)
-
-
Total external revenue (net)
13,138
14,322
9,046
5,936
351
618
Results:
Segment results
4,007
5,334
1,446
573
117
184
-
-
-
-
-
-
23,640
21,382
(1,105)
(506)
-
22,535
20,876
-
5,570
6,091
(2,875)
(2,650)
(2,875)
(2,650)
Unallocated
Profit before interest,
income tax depreciation
& amortisation
4,007
5,334
1,446
573
117
184
(2,875)
(2,650)
2,695
3,441
Depreciation & Amortisation
(2,132)
(1,805)
(201)
(249)
(24)
(25)
(240)
(188)
(2,597)
(2,267)
Profit before interest and tax
1,875
3,529
1,245
324
93
159
(3,115)
(2,838)
98
1,174
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
Acquisition of segment
assets
223
377
223
377
(2,892)
(2,461)
321
1,551
58
(513)
58
(513)
(2,834)
(2,974)
379
1,038
52,832
44,236
11,474
9,973
976
1,108
19,444
29,484
84,726
84,801
-
-
-
-
-
-
41,421
40,213
41,421
40,213
8,378
8,994
338
291
33
13
153
567
8,902
9,865
55
Annual Financial Report 2020
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.
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.
Unallocated assets primarily include cash
reserves, deferred tax assets and prepayments.
Liabilities are not disclosed per segment as
it is not possible to track these on a segment
basis.
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 2020
$’000
12,109
11,531
23,640
Revenue
from
external
customers 2019
$’000
11,208
10,174
21,382
%
51.2%
48.8%
100.0%
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
113
11,126
9,095
35,820
2,056
58,210
-
542
-
-
50
592
%
52.4%
47.6%
100.0%
Total
$’000
113
11,668
9,095
35,820
2,106
58,802
Information about major customers
The Group’s only individual customers who contributed 10% or more to the Group’s total 2020
sales revenue was Mundipharma Australia whose 2020 revenue contribution was $7.985m
(2019: $1.113m).
56
Medical Developments International Limited 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
Share based payments (equity settled)
Gain/(loss) on foreign currency transactions
Finance Expenses
Interest on lease liability
Interest on bank loans
Interest on other loans/hire purchase arrangements
Employee benefit expense
Employee benefits
Government subsidies
Superannuation contributions
2020
$’000
21,175
(1,105)
2,465
22,535
336
22,871
(1,343)
(1,254)
(396)
(91)
192
(119)
-
5
(114)
(4,581)
396
(679)
2019
$’000
18,964
(506)
2,418
20,876
448
21,324
(1,003)
(1,263)
(253)
(380)
382
-
(46)
(25)
(71)
(4,559)
-
(594)
57
Annual Financial Report 2020 5. Income taxes
(a) Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense/(benefit)
Deferred tax expense/(benefit) relating to origination and reversal of
temporary differences
Adjustments recognised in the current year in relation to the current tax of
prior year
Total tax expense
2020
$’000
2019
$’000
1,924
(1,972)
(10)
(58)
(2,905)
3,371
47
513
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 27.5% (2019: 27.5%)
Research & development benefit
Non deductible expenses
Adjustments recognised in relation to the current tax of prior year
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
321
88
(163)
39
(10)
(12)
(58)
1,551
426
(127)
130
47
37
513
The tax rate used in the above reconciliation is the corporate tax rate of 27.5% payable by Australian corporate entities
on taxable profits under Australian tax law.
(b) Income tax recognised directly in equity
No current and deferred tax amounts have been charged directly to equity during the period (2019: $nil)
(c) Current tax assets/liabilities
Income tax (payable)/receivable
33
(2,020)
MVP has received upfront payments during the current and prior years and for tax purposes
these are deemed as assessable on a cash received basis or when unconditional entitlement
arises. This resulted in a significant tax payable in 2019. The group is in a tax loss position
in 2020 due to the lower profits of the group and the significantly reduced level of upfront
payments received in 2020.
(d) Deferred tax asset (current)
Temporary differences
Tax losses
(e) Deferred tax liabilities
Temporary differences
Net Deferred Tax Asset
58
10,182
2,016
12,198
(10,091)
2,106
9,849
67
9,916
(7,787)
2,129
Medical Developments International Limited Taxable/Deductible temporary differences arise from the following:
2020
Deferred tax assets/(liabilities):
Accrued expenses
Deferred revenue
Lease liability
Lease asset
Other Intangibles
Property, Plant & Equipment
Provisions
Brandnames
2019
Deferred tax assets/(liabilities):
Accrued expenses
Deferred revenue
Other Intangibles
Property, Plant & Equipment
Provisions
Brandnames
Opening
balance
$’000
Charged to
income
$’000
Closing
balance
$’000
186
9,335
952
(845)
(36)
(426)
(54)
75
150
8,909
898
(770)
(7,556)
(1,528)
(9,084)
(10)
221
(221)
2,062
(6)
4
-
(1,972)
(16)
225
(221)
90
Opening
balance
$’000
Charged to
income
$’000
Closing
balance
$’000
117
4,253
(5,728)
(4)
274
(221)
(1,309)
69
5,082
(1,828)
(6)
54
-
3,371
186
9,335
(7,556)
(10)
328
(221)
2,062
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
7. Remuneration of auditors
Audit or review of the financial report
Taxation services
Other audit services
The auditor of the entity is Deloitte Touche Tohmatsu.
2020
$’000
2019
$’000
937
806
75
(2)
(179)
832
75
16
279
1,176
2020
2019
104,000
90,000
26,300
26,300
-
10,675
130,300
126,975
59
Annual Financial Report 2020 8. Current receivables
2020
$’000
2019
$’000
Trade receivables
3,923
6,273
GST recoverable
159
111
4,082
6,384
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 $487,300
(2019: $647,906) which are past due at the
reporting date. The Group holds an allowance
for expected credit loss of $100,000 in respect
to aged debtors that are subject to collection
actions. The Group does not hold any collateral
over its trade receivable balances.
Ageing of past due but not impaired.
60 - 90 days
> 90 days
2020
$’000
2019
$’000
44
343
387
386
262
648
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.
9. Current inventories
Raw materials:
At cost
Work in progress:
At cost
Finished goods:
At cost
Provision for obsolesence
2020
$’000
2019
$’000
1,244
1,200
1,430
825
3,358
(150)
1,169
(145)
5,882
3,049
The provision for obsolescence at 30 June
2020 represented predominantly obsolete
materials.
10. Other current
assets
In determining the recoverability of trade
receivables, the Group considers any change in
the credit quality of the trade receivable from
Prepayments
2020
$’000
2019
$’000
416
301
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
Proportion of ownership interest
and voting power held by the
Group
Medical
Developments UK
Limited
Distribution of pharmaceutical
drug and medical and veterinary
equipment
United
Kingdom
2020
100%
2019
100%
Medical
Developments MD&P
Limited
Medical
Developments USA
Inc.
Holder of European Penthrox®
Marketing Authorisation
Ireland
100%
100%
Distribution of medical devices
United States
of America
100%
100%
Medical Flow
Technologies Pty Ltd
Non-operating
Australia
100%
N/A
60
Medical Developments International Limited 12. Property, plant & equipment and right of
use asset
Leasehold
improvements
at cost
$’000
Scoresby Right
of Use Asset
$’000
Manufacturing
Facility
$’000
Plant and
equipment
at cost
$’000
Total
$’000
Gross carrying amount
Balance at 30 June 2018
Additions
Balance at 30 June 2019
Additions
Balance at 30 June 2020
Accumulated depreciation
Balance at 30 June 2018
Depreciation expense
Balance at 30 June 2019
Depreciation expense
Balance at 30 June 2020
Net book value
As at 30 June 2019
As at 30 June 2020
13. Goodwill
563
22
585
7
592
(358)
(61)
(419)
(60)
(479)
166
113
Gross carrying amount
Balance at beginning
of financial year
2020
$’000
2019
$’000
9,095
9,095
Additions
-
-
Balance at end of financial
year
9,095
9,095
Net book value
Balance at beginning
of financial year
Pharmaceuticals
Medical devices
9,095
9,095
Veterinary equipment
Balance at end of financial
year
9,095
9,095
During the year, the company assessed
the recoverable amount of goodwill and
determined that there was no impairment
(2019: $nil).
-
-
-
3,074
3,074
-
-
-
(271)
(271)
-
2,803
4,087
6,984
11,634
-
1,465
4,087
8,449
1,487
13,121
-
1,485
4,566
4,087
9,934
17,687
(136)
(341)
(477)
(341)
(818)
(3,066)
(3,560)
(601)
(1,003)
(3,667)
(4,563)
(671)
(1,343)
(4,338)
(5,906)
3,610
3,269
4,782
8,558
5,596
11,781
Allocation of goodwill to
cash-generating units
Goodwill has been allocated for impairment
testing purposes to three 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:
2020
$’000
2019
$’000
3,808
4,706
581
3,808
4,706
581
9,095
9,095
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.
61
Annual Financial Report 2020 Recoverable amount testing has been based
on EBITDA growth rates for years 2-5 of:
economic conditions and expected future
performance.
Pharmaceuticals:
20% based on expansion of existing markets
(2019: 25%)
Medical Devices:
15% based on expansion of existing markets
(2019: 15%)
Veterinary Equipment:
2.5% based on expansion of existing markets
(2019: 2.5%)
A terminal value after 5 years based on a
long-term growth rate of 2.5%, and a post-tax
discount rate of 10.3% per annum (2019: 10.15%
per annum) have been used to calculate the
carrying value of the intangible assets.
As the global outbreak of COVID-19 continues
to progress and evolve, it is extremely
challenging to predict the full extent and
duration of its impact on the Group’s
business activities. The Group believes
that the assumptions adopted in the value
in use calculations reflect an appropriate
balance between the Group’s experience to
date, the uncertainty associated with the
COVID-19 pandemic and the long-term growth
expectations of its respective businesses, as
discussed in the Directors Report. Accordingly,
the Group has concluded that no impairment
is required based on current market and
• The recoverable amount for the
Pharmaceuticals business relies on
continued growth in the short to medium
term, particularly in Europe. We believe sales
will continue to grow strongly as we focus
on building product awareness and demand
within existing markets and undertaking
aggressive and targeted new launches. We
believe that Penthrox® will continue to grow
to become a mainstream analgesic in the
European market. Refer also to Note 29
Subsequent Events.
• The recoverable amount for the Medial
Devices business is expected to be
supported by growth opportunities,
particularly in the US market. In August
2020, Walmart will launch their ‘equate’
branded spacer range, manufactured by
MVP. This will be Walmart’s first private label
prescription product under the ‘equate’
brand and will be available in Walmart
pharmacies (circa 4,600 stores in the USA).
We are targeting further pharmacy chains in
FY21 and expect to deliver significant sales
growth in the USA in the years ahead.
• The recoverable amount of the Vet business
is reliant upon trading performance
stabilising at current levels.
14. Other intangible assets
2020
Gross carrying amount
Balance at 30 June 2018
Additions
Balance at 30 June 2019
Additions
Balance at 30 June 2020
Accumulated amortisation
Balance at 30 June 2018
Amortisation expense
Balance at 30 June 2019
Amortisation expense
Balance at 30 June 2020
Net book value
As at 30 June 2019
As at 30 June 2020
62
Development
$’000
Patents &
trademarks
$’000
Capitalised
registration
costs
$’000
Brandnames
$’000
Other
$’000
Total
$’000
3,083
1,455
4,538
1,547
6,085
(497)
(257)
(754)
(233)
(987)
1,043
94
1,137
180
1,317
(381)
(100)
(481)
(100)
(581)
20,421
6,829
27,250
5,672
32,922
(2,496)
(820)
(3,316)
(835)
(4,151)
738
-
738
-
738
-
-
-
-
-
867
-
867
10
877
(228)
(86)
(314)
(86)
(400)
26,152
8,378
34,530
7,409
41,939
(3,602)
(1,263)
(4,865)
(1,254)
(6,119)
3,784
5,098
657
736
23,934
28,771
738
738
553
477
29,665
35,820
Medical Developments International Limited
The amortisation charge for the year of
$1,254,000 (2019: $1,263,000) has been included
in administration expenses. For an explanation of
amortisation periods refer Note 1(l).
For the purposes of impairment testing,
intangible assets (except for those related to
approval of Penthrox® in the US and Chinese
markets) are allocated to relevant cash
generating units as discussed in Note 13. The
recoverable amount for intangibles assets
related to the approval of Penthrox® in the US
and Chinese markets has been based on an
estimate of fair value less costs to sell, which
uses cash flow projections based on a five-year
projection period and terminal value.
Key assumptions include:
• Expected costs to be incurred to achieve
approval in these markets;
• Expected sales, gross margin and operating
costs;
• Discount rate of 25% (2019: 25%)
• Long term growth rate of 3% (2019: 3%)
As highlighted in the Directors Report, MVP
remains confident of achieving approval in
these markets based on our 40+ years of
experience, the demonstrated safety profile
of Penthrox® over that time, our ongoing
clinical development program and our recent
achievements in getting Penthrox® approved
for sale in more than 40 countries around the
world.
15. Current trade and
other payables
Trade payables (i)
Accrued expenses
Employee benefits payable
PAYG witholding tax payable
2020
$’000
3,841
1,102
55
3
2019
$’000
2,030
1,319
53
4
5,001
3,406
16. Borrowings
Secured - at amortised cost
Other (i)
Current
Non-current
2020
$’000
2019
$’000
91
91
91
-
91
181
181
91
90
181
Summary of borrowing
arrangements
(i) 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 2020, Stage
1a, 1b and Stage 2 are complete. Should
MVP default on the loan, CSIRO has the
option to convert the debt into shares in
MVP at fair market value. This funding was
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%.
(ii) The Group has an overdraft facility of
$200,000. As at 30 June 2020, this
remains unused.
17. Current provisions
2020
$’000
2019
$’000
(i) The average credit period on purchase of
Employee benefits
401
357
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.
63
Annual Financial Report 2020 18. Non-current
provisions
Employee benefits
269
302
2020
$’000
2019
$’000
The company has 65 full time equivalent
employees at 30 June 2020 (2019: 58)
19. Other liabilities
2020
$’000
2019
$’000
Revenue received in advance
31,640
33,281
Unearned government grant
income
754
665
When MVP receives upfront payments
in relation to licensing and distribution
agreements for Penthrox®, 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
2020 $31.640m (2019: $33.281m) 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.
20. Lease liabilities
Current
Non-current
32,394
33,946
Lease liability
2,394
2,521
30,000
31,425
32,394
33,946
Current
Non-current
21. Issued capital
21(a) Fully paid ordinary shares
2020
$’000
2019
$’000
3,265
3,265
326
2,939
3,265
-
-
-
-
-
2020
2019
No.
$’000
No.
$’000
Fully paid ordinary shares
Balance at beginning of financial year
65,516,746
40,410
59,172,092
Shares Issued - Dividends Reinvestment Plan
106,745
557
225,951
Share issue - Placement
Share issue - Share Purchase Plan
Capital raising costs
-
-
-
-
-
(13)
4,250,000
1,868,703
-
Balance at end of financial year
65,623,491
40,954
65,516,746
16,121
860
17,000
7,475
(1,046)
40,410
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
64
Medical Developments International Limited 22. Reserves
23. Retained earnings
(a) Foreign currency translation reserve
Balance at beginning of financial
year
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2,670
4,209
Balance at beginning of year
(3)
(20)
Dividends paid
(2,622)
(2,576)
Exchange differences arising on
translating the foreign operations
(42)
17
Net profit attributable to members
379
1,038
Balance at end of financial year
427
2,670
Balance at end of year
(45)
(3)
Exchange differences relating to the
translation of the results and net assets of
the Group’s foreign operations (UK based)
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.
2020
$’000
2019
$’000
(b) Employee equity-settled benefits reserve
Balance at beginning of year
Share-based payments recognised
Balance at end of year
711
91
802
331
380
711
The above equity settled employee benefits
reserve related to share options granted by
the company to its Senior Management team
under its employee share option plan.
(c) CSIRO Option Reserve
Balance at beginning of year
Option issues for services provided
2020
$’000
2019
$’000
800
400
400
400
Balance at end of year
1,200
800
The above CSIRO option reserve at 30 June
2020, relates to 243,706 options (2019:
178,756) over ordinary shares of the Company.
These options are in relation to the MVP/
CSIRO Manufacturing Technologies Project
announced on 5 June 2017. Options are
exercisable for no consideration when a
developed technology has been proven to be
commercially viable. The share options granted
to the CSIRO carry no rights to dividends and
no voting rights.
24. Earnings per share
2020
cents per
share
2019
cents per
share
0.58
0.58
1.61
1.60
Basic earnings per share
Diluted earnings per
share
Basic 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
2020
$’000
2019
$’000
379
1,038
2020
No.
2019
No.
Weighted average
number of ordinary
shares
65,586,805
64,615,720
Diluted earnings per share
Earnings used in the basic earnings per share
calculation are identical to those used for the
diluted earnings per share calculation. Dilutive
options outstanding as at 30 June 2020
related to options to employees and also to
the CSIRO.
Weighted average number
of ordinary shares used in
the calculation of basic EPS
2020
No.
2019
No.
65,586,805
64,615,720
Shares deemed to be issued for no consideration in
respect of:
- Dilutive Options
321,957
344,166
Weighted average number
of ordinary shares for
diluted EPS
65,908,762
64,959,886
65
Annual Financial Report 2020 25. Dividends
Recognised amounts
Fully paid ordinary shares
Interim dividend - fully franked
Full year dividend paid during the year -
fully franked
Unrecognised amounts
Fully paid ordinary shares
Final dividend - fully franked
2020
2019
cents per
share
$’000
cents per
share
$’000
2.0
2.0
4.0
1,312
1,310
2,622
-
-
2.0
2.0
4.0
2.0
1,308
1,268
2,576
1,310
1,310
An interim dividend of 2 cents per share was
declared and paid in the current year. No final
dividend was declared for the full year ended
30 June 2020.
The interim dividend paid during the 30 June
2020 year resulted in the company paying
dividends of $1,170,000 and the balance of
$142,000 issued as shares under the Dividend
Reinvestment Plan.
The 2019 full year dividend paid during the
30 June 2020 year resulted in the company
paying dividends of $895,000 and the balance
of $415,000 issued as shares under the
Dividend Reinvestment Plan.
27. Commitments for
expenditure
(a) Capital expenditure
commitments
There were no capital expenditure
commitments at 30 June 2020.
28. Related party
disclosures
2020
$’000
2019
$’000
There were no related party transactions
during the 2020 financial year.
Adjusted franking account balance
1,469
490
26. Short term leases
2020
$’000
2019
$’000
Non cancellable operating lease payments:
Not longer than 1 year
Longer than 1 year and not longer
than 5 years
Greater than 5 years
59
25
-
84
76
84
-
160
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.
Please also refer to note 6 for details of Key
Management Personnel compensation.
29. Subsequent events
On 19 August 2020 the company announced
that it had reached an in-principle agreement
to take back the distribution rights for
Penthrox® in Europe from Mundipharma. This
transition is to take place over a 6-month
period from 1 September 2020 to 28 February
2021.
66
Medical Developments International Limited As the Group is a pharmaceutical and medical
device business, it has been considered an
essential business in Victoria and has not been
subject to COVID-19 Stage 4 related business
shutdown restrictions and has therefore been
able to continue with critical production and
selling activities from its Victorian based
locations.
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.
30. Notes to the Consolidated Statement
of Cash Flows
(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:
2020
$’000
2019
$’000
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
Increase/(decrease) in tax payable
Decrease/(increase) in deferred tax asset
Movements in working capital
Decrease/(increase) in assets:
Receivables
Inventories
Other assets
Increase/(decrease) in liabilities:
Payables
Provisions
Other liabilities
Non-current provisions
Net cash from operating activities
(c) Financing facilities
Unsecured bank overdraft facility, reviewed annually and payable at call:
Amount unused
15,544
15,544
379
(429)
2,597
(222)
91
(2,053)
23
2,302
(2,833)
(115)
1,974
44
(1,552)
(33)
172
25,620
25,620
1,038
(330)
2,266
(53)
380
2,116
(1,047)
(2,097)
148
72
202
1
18,480
96
21,271
200
200
200
200
67
Annual Financial Report 2020 31. 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 21,
22, 23, and 30(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 2020 is outlined
below:
Debt (i)
Cash and bank balances
Net debt / (cash)
Equity (ii)
2020
$’000
2019
$’000
91
182
(91)
(182)
-
-
43,338
44,588
Net debt to equity ratio
0%
0%
(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.
Cash has been included to the extent it
reduced the outstanding debt to nil.
(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.
68
(c) Financial risk
management objectives
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 largest customer of the Group
(refer to Note 3), 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 10% 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:
Medical Developments International Limited Liabilities
Assets
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2,705
903
2,012
5,841
139
15
69
2
59
25
-
-
1,282
415
125
533
733
343
-
6
2,930
987
4,367
6,923
USD
GBP
NZD
EUR
CND
Amounts of exposure (assets of $4.3m) are
not currently significant and as such forward
contracts and currency swap agreements are
not used.
Foreign currency sensitivity analysis
The Group predominantly trades in Australian
dollars (AUD), but has 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
Variable interest rate maturity
the Australian Dollar against the respective
currency there would be an equal and
opposite impact on the profit.
Profit or loss
2020
$’000
69
(114)
2019
$’000
(494)
(67)
USD Impact
GBP Impact
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 global
exposure to interest rate risk as at 30 June
2020 and 30 June 2019.
2020
Financial assets
Cash
Receivables
Financial liabilities
Payables
Lease liability
Borrowings
Average
interest
rate
%
Less than
1 year
$’000
1 to 5
years
$’000
More than
5 years
$’000
Non-
interest
bearing
$’000
Total
$’000
1.58%
15,544
-
-
3.55%
3.89%
-
15,544
-
215
91
-
-
-
-
-
-
-
-
1,056
1,994
-
-
-
15,544
4,082
4,082
5,001
-
-
4,082
19,626
5,001
3,265
91
306
1,056
1,994
5,001
8,357
69
Annual Financial Report 2020 2019
Financial assets
Cash
Receivables
Financial liabilities
Payables
Borrowings
Average
interest
rate
%
Less than
1 year
$’000
1 to 5
years
$’000
More than
5 years
$’000
Non-
interest
bearing
$’000
Total
$’000
1.99%
25,620
-
-
4.72%
-
25,620
-
91
91
-
-
-
-
91
91
-
-
-
-
-
-
-
25,620
6,384
6,384
6,384
32,004
3,406
3,406
-
182
3,406
3,588
The following table details the Group’s
sensitivity to a 50-basis point increase or
decrease in interest rates.
continuously monitoring forecast and actual
cash flows and matching the maturity profiles
of financial assets and liabilities.
Profit or Loss
2020
$’000
2019
$’000
77
127
(h) Liquidity risk
management
The Group manages liquidity risk by
maintaining adequate cash reserves, banking
facilities and reserve borrowing facilities by
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.
Weighted
average
effective
interest
rate
%
Less than
1 year
$’000
1 to 5
years
$’000
More than
5 years
$’000
Total
$’000
5,001
3,932
91
-
2,191
-
2,191
9,024
-
-
-
3,406
182
3,588
-
5,001
3.55%
3.89%
326
91
5,418
-
3,406
4.72%
91
3,497
-
1,415
-
1,415
-
91
91
2020
Payables
Lease Liability
Borrowings
2019
Payables
Borrowings
70
Medical Developments International Limited 32. Parent Entity
Information
33. Employee Share
Option Plans
Executive Option Plans
Under the Executive Option plan awards were
made to executives who have an impact on
the Group’s performance. Long Term Incentive
awards are delivered in the form of options
over shares which vest on the achievement of
specific performance measures.
The fair value of share options granted is
estimated at the date of grant using a Black
Scholes option pricing model, taking into
account the terms and conditions upon which
the share options were granted including the
option price, the life of the option, the share
price of the underlying shares on grant date
and the expected share price volatility. It also
takes into account historical and expected
dividends. There are no cash settlement
alternatives for the employees and The
Group does not have a past practice of cash
settlement for these awards.
All outstanding options will be cancelled if
the employee leaves or is no longer employed
by MVP for any reason. When the Long-Term
Incentive Plan ‘LTIP’ has met its vesting criteria
and delivers an entitlement to an equity
interest, the employee will have 3 months to
exercise the relevant options, after which the
relevant options will lapse.
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
carry neither rights to dividends or voting
rights.
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
2020
$’000
2019
$’000
Assets
Current Assets
26,230
35,848
Non-Current Assets
58,749
49,375
Total Assets
84,979
85,223
Liabilities
Current Liabilities
8,142
5,965
Non-Current Liabilities
33,208
34,338
Total Liabilities
41,350
40,303
Equity
Issued capital
Reserves
40,954
40,410
2,002
1,511
Retained earnings
673
2,999
Total Equity
43,629
44,920
Financial Performance
Profit for the year
Dividends paid
2020
$’000
2019
$’000
296
1,231
(2,622)
(2,576)
Other comprehensive income
-
-
Total comprehesive income
(2,326)
(1,345)
The commitments of the parent are the same
as those of the overall consolidated group.
71
Annual Financial Report 2020
33.1 Executive share option
plans
The following share-based payment
arrangements were in existence during the
current reporting period:
technologies project that creates revenue of
at least $1m p.a. In each case, 60% of the new
shares issued by exercising options will be
escrowed for a period of 12 months from issue
date. In the case of an unconditional takeover,
the escrow conditions will not apply.
CEO Option Plan
On 18 July 2018 the company announced it has
agreed to a LTIP with Mr. John Sharman, the
CEO of Medical Developments International
Limited to encourage his long-term
commitment to the business. This plan was
forfeited on 5 June 2020 upon resignation of
the former CEO.
Senior Management Option Plan –
Tranche 1
In September 2018 the company announced
it has agreed to a LTIP with key Senior
Management Team members.
Under the plan the effected Senior
Management team members were granted
375,000 options with a strike price of $0.01.
The options will only vest on the earlier of
FDA approval of Penthrox® for sale in the USA
or the company receives an unconditional
takeover offer worth more than $350m.
100,000 of options within this issue contain
a further vesting trigger being, the delivery
of a new API from the CSIRO manufacturing
Senior Management Option Plan –
Tranche 2
An additional Senior Management Option Plan
was granted and announced during the year
effective from 1 July 2019.
Under the plan the effected Senior
Management team member was granted
75,000 options with a strike price of $0.01.
The options will vest based upon certain
milestones as follows:
• 25,000 vest when the FDA approves the
opening of the USA IND for Penthrox®;
• 25,000 vest on 2 July 2022; and
• the balance vest in the event of NDA
approval in the USA or an unconditional
takeover offer for greater than $350m.
For tranche 2, where any of the vesting criteria
have been met and the options exercised,
the first 50% of the shares will be available
to sell immediately without restriction. The
remaining 50% of the shares will be subject to
an escrow period of 2 years. In the case of an
unconditional takeover, the escrow conditions
will not apply.
Summary of Unvested options
2020 Balance at
30 June
2019
No.
Granted as
remuneration
No.
Exercised
No.
Lapsed/
forfeited
No.
Balance
at
30 June
2020
No.
Balance
vested at
30 June 2020
but not
exercised
No.
Balance
not vested
at
30 June
2020
No.
Options
vested
during
the
year
J. Sharman
(CEO)
M. Edwards
(CFO)
Senior
Management
300,000
100,000
-
-
225,000
75,000
-
-
-
(300,000)
-
-
100,000
300,000
-
-
-
-
100,000
300,000
-
-
-
Issuing Entity
Personnel Tranche
Number of
shares under
option
Class of
shares
Exercise
price of
option
Expiry date
of options
Medical Developments
International Ltd
Medical Developments
International Ltd
M. Edwards
100,000
Ordinary
$0.01
No expiry
Senior
Management
1 & 2
300,000
Ordinary
$0.01
No expiry
400,000
72
Medical Developments International Limited 2019 Balance at
30 June
2018
No.
Granted as
remuneration
No.
Exercised
No.
Lapsed/
forfeited
No.
J. Sharman
(CEO)
M. Edwards
(CFO)
Senior
Management
300,000
300,000
100,000
100,000
275,000
275,000
-
-
-
Balance
at
30 June
2019
No.
300,000
100,000
-
-
Balance
vested at
30 June 2019
but not
exercised
No.
Balance
not vested
at
30 June
2019
No.
Options
vested
during
the
year
-
-
-
300,000
100,000
225,000
-
-
-
(50,000)
225,000
32.2 Fair value of share options granted during the year
As the options contain non-market performance hurdles, they have been valued using a ‘Black-
Scholes’ 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. Expected volatility is based on the historical share price volatility over the
past 2 years.
Inputs into the option pricing model were as follows:
Grant date share price
Exercise price
Option Fair Value
Expected volatility
Expected option life
Dividend (Bi-annually)
Risk-free interest rate
Senior
Management
(Tranche 1)
Senior
Management
(Tranche 2)
$3.90
$0.01
$3.69
45%
$5.30
$0.01
$5.13 - $5.24
45%
CFO
$3.90
$0.01
$3.69
45%
5 years
5 years
1.5 - 4.2 years
2c
2.17%
2c
2.17%
2c
0.98%
For valuation purposes a probability of 75% has been applied to the likelihood of achieving FDA
approval for Penthrox® in the USA.
33.3 Share Based Payments Expense
Current year expense
Reversal for forfeited options
Share-based payments
2020
$’000
2019
$’000
325
(234)
91
380
-
380
73
Annual Financial Report 2020
34. 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
Share registry
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford VIC 3067
Tel: 1300 850 505
74
Medical Developments International Limited Additional Stock Exchange Information as at
31 August 2020
Number of holders of equity securities
Ordinary share capital
65,623,491 fully paid ordinary shares held by 11,118 individual shareholders. All issued ordinary
shares carry one vote per share.
Distribution of holders of equity securities
Fully paid ordinary shares
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
Substantial Shareholders
MR DAVID JOHN WILLIAMS
6,620
3,211
707
531
49
11,118
653
Twenty largest holders of equity securities
MR DAVID JOHN WILLIAMS
HSBC CUSTODY NOMINEES
J P MORGAN NOMINEES AUSTRALIA
CITICORP NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
DR RUSSELL KAY HANCOCK
SANDHURST TRUSTEES
UBS NOMINEES
NATIONAL NOMINEES LIMITED
MR ALISTAIR DAVID STRONG
WARBONT NOMINEES PTY LTD
MRS VIRGINA CATHERINE HANCOCK
CS FOURTH NOMINEES
JJ OPPERMAN SUPERANNUATION PTY LIMITED
PNSF PTY LTD
MR MICHAEL CLIFFORD HICKLING & MRS GIOVANNA HICKLING
IMAJ PTY LTD
CAPRICORN INVESTMENT PARTNERS (NOMINEES) PTY LTD
BNP PARIBAS NOMINEES PTY LTD
HOLLYWIND PTY LTD
Number
9,650,782
Number
9,650,782
6,685,759
4,249,171
3,319,510
1,620,522
1,614,214
1,053,413
874,242
712,776
630,000
532,983
518,487
507,331
300,000
264,565
255,936
253,750
250,000
215,940
200,000
%
14.71
%
14.71
10.19
6.48
5.06
2.47
2.46
1.61
1.33
1.09
0.96
0.81
0.79
0.77
0.46
0.40
0.39
0.39
0.38
0.33
0.30
75
Annual Financial Report 2020 Here for you
for life.