pharmaceuticals
A N N U A L R E P O R T 2 0 1 9
N e u r e n P h a r m a c e u t i c a l s L i m i t e d
Neuren Pharmaceuticals is developing new
therapies for debilitating neurodevelopmental
disorders that emerge in early childhood and
are characterised by impaired connections
and signalling between brain cells. Incorporated
in New Zealand and based in Melbourne, Australia,
Neuren is listed on the ASX under the code NEU.
1
Why invest in Neuren?
2 Chairman’s Letter
3 Operating Review
18 Leadership Team
20 Corporate Governance
26 Directors’ Report
30 Consolidated Statement of Comprehensive Income
31 Consolidated Statement of Financial Position
32 Consolidated Statement of Changes in equity
33 Consolidated Statement of Cash Flows
34 Notes to the Consolidated Financial Statements
48
Independent Auditor’s Report
51 Additional Information
The Board of Directors is pleased to present
the Annual Report of Neuren Pharmaceuticals
Limited for the year ended 31 December 2019,
authorised on 29 April 2020.
For, and on behalf of, the Board
Dr Richard Treagus
Chairman
Dr Trevor Scott
Director
W H Y I N V E S T I N N E U R E N ?
Two novel drugs targeting broad impact on debilitating
childhood disorders with urgent unmet need
Trofinetide in Phase 3 for Rett syndrome, funded by
US commercial partner ACADIA
– Phase 3 results expected in 2021, potential marketing approval in 2022
– Neuren receives double digit percentage royalties on all sales in North
America plus payments of up to US$455 million on achievement of
development and annual sales milestones plus one third of market
value of Priority Review Voucher
Neuren retains 100% of value of trofinetide outside North America
– Neuren has free and full access to utilise the US regulatory package for
registration and will select the optimum commercial outcome after Rett
syndrome US Phase 3 results
Compelling data package for NNZ-2591 – moving to clinical trials
– FDA granted 3 Orphan Drug designations for Phelan-McDermid,
Angelman and Pitt Hopkins syndromes following positive results
in each animal model
– High blood-brain barrier penetration and clear dose response,
indicating optimum dose
– Phase 2 trials planned for all three disorders
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Neuren Pharmaceuticals Limited Annual Report 2019
C H A I R M A N ’ S L E T T E R
D R R I C H A R D T R E A G U S
Neuren closed 2019 in a very strong position having
achieved some highly significant milestones. Firstly,
our North American partner ACADIA commenced the
trofinetide Phase 3 trial for Rett syndrome in the US
on schedule at the end of October 2019. This had been
keenly anticipated by all stakeholders including the Rett
community. Secondly, after reviewing the positive results
in mouse models and the mechanism of action of NNZ-
2591, the FDA granted to Neuren Orphan Drug designation
in each of 3 new indications that have no approved
therapies. These indications represent large commercial
opportunities for Neuren.
Since the end of 2019 the world has been hit by the
Covid-19 pandemic, which has caused enrolment of
new patients into the Phase 3 trial to pause until ACADIA
believes it has the ability to collect data from new
patients while ensuring their safety. This modification
did not impact patients already enrolled. For patients,
their families and shareholders, we look forward to that
pause ending and enrolment continuing in this very
important trial.
The pandemic has had little impact on Neuren’s day-to-
day operations and we have continued to make good
progress on the manufacturing and non-clinical studies
for NNZ-2591, as we prepare for clinical trials. We recently
announced compelling results in the shank3 model of
Phelan-McDermid syndrome, which clearly indicated the
dose we should be targeting and confirmed our expectation
of improved efficacy with increased treatment duration.
The first clinical trial for NNZ-2591 will be another major step
forward in our plan to demonstrate the value of this therapy,
which we believe has the potential to make a real impact on
the treatment of three debilitating childhood disorders.
The impact of Covid-19 on financial markets has been stark.
Neuren’s share price was $3.00 in February, $1.00 in March
and is approximately $1.50 at the time of writing. However,
the underlying value of Neuren’s business has not changed.
There are three large value-drivers that we expect will
crystallise over the next two years:
– ACADIA’s Rett syndrome Phase 3 results and New Drug
Application for trofinetide in the US;
– Selecting the optimum commercial outcome for
trofinetide outside North America using the US
regulatory package; and
– Phase 2 clinical results for NNZ-2591 to confirm the
positive effects we have seen in the animal models
of all 3 indications.
The first of these unlocks the milestone payments, royalties
and share of the value of a Priority Review Voucher that
together represent Neuren’s significant share of trofinetide’s
value in the US. We retain full confidence in ACADIA’s
capabilities, capacity and commitment as our North
American partner. It also unlocks the second value-driver,
for which we believe there may be a number of different
options. Neuren’s preparations for the third value-driver
are on course and we intend to accelerate execution of the
Phase 2 trials as soon as we are able.
I would like to thank my fellow directors and the Neuren
team for their commitment and achievements over the
last year, always remaining focused in this challenging
environment and ready to pursue the great opportunities
ahead of us.
Dr Richard Treagus
Chairman
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
COMMERCIAL STR ATEGY
Neuren has two novel patented drugs, trofinetide and
NNZ-2591, which potentially have broad utility in the
treatment of neurological disorders. Each drug is currently
in development to treat debilitating neurodevelopmental
disorders that emerge in early childhood, for which there are
currently no approved drug therapies. The disorders stem
from problems in brain development which lead to a wide
range of serious issues, both physical and mental.
Neurodevelopmental disorders are caused by different
genetic mutations, but in many cases they share similar
symptoms and the common characteristic of impaired
connections and signalling between brain cells. Trofinetide
and NNZ-2591, which are synthetic analogues of important
molecules that occur naturally in the brain, induce
improvements in the impaired connections and signalling,
which means that the target is a broad improvement
in the underlying disorder rather than aiming to treat
one symptom.
Currently, there are no drugs approved for these conditions
and there are few drugs in late-stage clinical development.
Some drugs that are approved for other indications are
sometimes used to treat selected symptoms, but none
are more than modestly effective and none are disease-
modifying.
A critical feature of Neuren’s work to develop therapies
for these disorders is close collaboration with the leading
specialist physicians and with the well-organised patient
advocacy organisations.
Neuren’s strategy is to commercialise these therapies
in global pharmaceutical markets through partnerships
with established companies in those markets, leveraging
the expertise, infrastructure and financial capacity of
those companies. In August 2018, Neuren executed a
very important partnership with NASDAQ-listed ACADIA
Pharmaceuticals for trofinetide in North America, providing
the capabilities and funding required to bring trofinetide to
market in the United States.
ACADIA commenced the Phase 3 program for trofinetide to
treat Rett syndrome at the end of October 2019. A Phase 2
clinical trial has also been conducted by Neuren in Fragile X
syndrome. Neuren is now preparing for clinical trials of NNZ-
2591 for three disorders.
As these are serious medical conditions with unmet need,
drugs being developed to treat them qualify for favourable
regulatory pathways intended to expedite the development
and approval of therapeutically important drugs. The US
Food and Drug Administration (FDA) granted to Neuren:
– Orphan drug designation and Fast Track designation
for trofinetide in each of Rett syndrome and Fragile X
syndrome
– Orphan Drug designation for NNZ-2591 in each of
Phelan-McDermid syndrome, Angelman syndrome
and Pitt Hopkins syndrome
Orphan Drug designation is a special status that the FDA
may grant to a drug to treat a rare disease or condition.
Amongst other incentives, Orphan Drug designation
qualifies the sponsor of the drug for 7 years of marketing
exclusivity, plus 6 months if approved for paediatric use,
as well as waiver of the prescription drug user fee for a
marketing application.
A drug may be designated as a Fast Track product if it is
intended for the treatment of a serious or life-threatening
disease or condition and it demonstrates the potential
to address unmet medical needs for such a disease or
condition. Fast Track designation is intended to facilitate
development and expedite review of drugs to treat serious
and life-threatening conditions so that an approved product
can reach the market expeditiously.
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
The European Medicines Agency has also granted Orphan
Designation for trofinetide in both Rett syndrome and
Fragile X syndrome. Orphan Designation in the European
Union qualifies the sponsor of the drug for 10 years of
marketing exclusivity following marketing authorisation,
plus 2 years if authorised for paediatric use.
These marketing exclusivity periods are extremely valuable
for the commercialisation of Orphan Drugs. They provide
additional protection, along with patents, against generic
competitors and potentially can continue to provide
protection after patent expiry.
Neuren owns issued composition of matter patents for
trofinetide in the United States and Europe, which expire in
2022. Neuren also owns issued patents that expire in 2032
concerning the use of trofinetide to treat Rett syndrome and
Fragile X syndrome in the United States; autism spectrum
disorders in Europe; Rett syndrome, Fragile X syndrome and
autism in Japan and Israel; and autism spectrum disorders
in Australia. Patent applications for trofinetide in autism
spectrum disorders are still under examination in Canada
and Brazil.
For NNZ-2591, Neuren owns issued composition of matter
patents in the United States, Europe and Japan which
expire in 2024. Neuren also owns issued patents that
expire in 2034 concerning the use of NNZ-2591 to treat
neurodevelopmental disorders in the United States, Europe
and Japan.
For each of trofinetide and NNZ-2591, following the first
marketing authorisation one patent may potentially be
extended by up to 5 years in the United States, Europe
and Japan.
PRODUCT PIPELINE
ESTIMATES OF PATIENT POPUL ATIONS AGED <60
Disorder
Gene
mutation
Rett
MECP2
Fragile X
FMR1
Phelan-
McDermid
SHANK3
Angelman UBE3A
Pitt
Hopkins
TCF4
Published
prevalence
estimates
Potential
patients
US1
Potential
patients
EU/JP1
10,000
16,000
30,000
48,000
22,000
35,000
14,000
22,000
10,000
16,000
1/10,000 to
1/15,000
females
1/4,000
to 1/7,000
males
1/12,000 to
1/22,000
females
1/8,000 to
1/15,000
males and
females
1/12,000 to
1/24,000
males and
females
1/11,000
to 1/41,000
males and
females2
1 The estimates of potential patients are derived by applying the mid-point
of the prevalence estimate range to the populations under 60 years
2 The prevalence of chromosome 18q21 deletions was estimated as 1/34,000
to 1/41,000. If deletions are found in one third of individuals with Pitt Hopkins
syndrome, the frequency of the syndrome could be as high as 1:11,000
Commercial
Partner
(North America)
(North America)
Compound
Indication
Preclinical /Phase 1
Phase 2
Phase 3
Trofinetide
Rett syndrome1
Fragile X syndrome1
Phelan - McDermid
syndrome2
NNZ- 2591
Angelman
syndrome2
Pitt Hopkins
syndrome2
1 Orphan Drug designation in US and EU, Fast Track designation in US
2 Orphan Drug designation in US
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
AC ADIA PARTNERSHIP FOR TROFINETIDE
In August 2018 Neuren secured the considerable funding
and additional capabilities required to bring trofinetide to
the US market by entering into a partnership with ACADIA
Pharmaceuticals, under which ACADIA has exclusive rights
to trofinetide in all indications for the United States, Canada
and Mexico. Important factors for Neuren were the proven
capabilities within the ACADIA team in the development and
commercialisation of novel neurology therapies in the US,
their strong commitment to achieve a treatment option for
Rett syndrome patients, and the strategic importance that
ACADIA attaches to trofinetide.
A redacted version of the licence agreement with ACADIA
was filed with the US Securities and Exchange Commission
as a material contract exhibit to ACADIA’s 2018 Annual
Report on Form 10-K, which is available to view via the SEC
Filings section of ACADIA’s website.
As well as ACADIA fully funding the Phase 3 development
program and commercialisation, Neuren secured significant
participation in the future value of trofinetide in the US,
through the following payments from ACADIA:
– Double digit percentage royalties on sales of trofinetide
in all indications. The annual sales are recorded in
tiers and an escalating percentage is applied to each
successive tier. ACADIA has stated the peak annual sales
potential for Rett syndrome alone as being more than
US$500m.
– Payments of up to US$455 million on achievement
of development and annual sales milestones.
US$105million is to be paid on achievement of
development milestones, split between Rett and
Fragile X. The remaining US$350million, is to be paid
on achievement of a series of 4 thresholds of total
annual sales for all indications.
– One third of the market value of any Rare Pediatric
Disease Priority Review Voucher, if awarded to ACADIA
by the US Food and Drug Administration upon approval
of a New Drug Application for trofinetide. These
vouchers are tradeable and published sales in 2019
fetched between US$95 million and US$105 million.
ACADIA’s eligibility for a voucher was recently confirmed
by receiving Rare Pediatric Disease Designation from the
FDA for the Rett syndrome program.
In addition, under the agreement Neuren retained all rights
to trofinetide for countries outside North America with
free and full access to utilise the US regulatory package
for registration in those countries. Advised by Torreya,
a global investment bank specialising in life sciences,
Neuren conducted a thorough process to illicit and evaluate
proposals for further partnering transactions. After
considering a range of proposals and recognising the strong
progress made with both the trofinetide and NNZ-2591
programs, the Board concluded that selecting the optimum
commercial outcome after the Phase 3 results for Rett
syndrome in 2021 may capture substantially greater value.
Neuren is now moving forward with European regulatory
authority meetings in 2020 to discuss the Rett syndrome
development program.
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
TROFINETIDE FOR RETT SYNDROME
About Rett syndrome
Rett syndrome is a seriously debilitating and life-threatening neurological disorder, for which there are no approved medicines.
It is first recognized in infancy and seen predominantly in girls, but can occur very rarely in boys. At diagnosis, Rett syndrome
has often been misdiagnosed as autism, cerebral palsy, or non-specific developmental delay. Most cases of Rett syndrome
are caused by mutations on the X chromosome on a gene called MECP2. Rett syndrome strikes all racial and ethnic groups
and has been estimated to occur worldwide in 1 of every 10,000 to 15,000 female births, causing problems in brain function
that are responsible for cognitive, sensory, emotional, motor and autonomic function. These problems can include learning,
speech, sensory sensations, mood, movement, breathing, cardiac function, and even chewing, swallowing, and digestion.
Rett syndrome symptoms appear after an early period of apparently normal or near normal development until six to
eighteen months of life, when there is a slowing down or stagnation of skills. A period of regression then follows, with loss of
communication skills and purposeful hand use, loss or impairment of walking, and the onset of stereotypic hand movements.
Other problems frequently include seizures and erratic breathing patterns, an abnormal side-to-side curvature of the spine
(scoliosis), and sleep disturbances..
The Phase 3 program
The Phase 3 program was agreed with the FDA Division of Neurology Products. Recognising the urgent unmet need and the
small population, it involves a single trial rather than the standard 2 trials and provision for a smaller than standard safety
database. The program has continuing strong support from leading Rett syndrome physicians and the largest advocacy
group (rettsyndrome.org).
A randomised double-blind placebo-controlled study for 12 weeks (LAVENDER) is followed by an open label extension study
(LILAC) in which all participants, including those on placebo in LAVENDER, are eligible to receive trofinetide. In LILAC, all
participants will be followed to evaluate long term tolerability and safety of trofinetide. A continued access program (LILAC 2)
will enable participants to continue to receive trofinetide during the period before marketing approval.
Double-blind
LAVENDER
TROFINETIDE
PLACEBO
Open-label
LILAC
Continued Access
LILAC–2
TROFINETIDE
TROFINETIDE
Baseline
Week 12
Week 52
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
Approximately 180 females with Rett syndrome aged 5 to 20 years will be enrolled at US sites only, randomised into one active
group and a placebo group. Change after 12 weeks measured by each of the Rett Syndrome Behaviour Questionnaire (RSBQ)
and the Clinical Global Impression – Improvement scale (CGI-I) are the co-primary efficacy endpoints. RSBQ is an assessment
by the caregiver and CGI-I is an assessment by the physician.
ACADIA initiated the LAVENDER study at the end of October 2019 and the first patients have completed LAVENDER and
commenced LILAC. Results from LAVENDER are expected in 2021, with potential marketing approval in 2022. As an Orphan
Drug, the marketing application will qualify for an expedited Priority Review period of 6 months.
In March 2020, due to the COVID-19 pandemic, ACADIA temporarily paused the enrolment of new patients in the LAVENDER
study until it believes it has the ability to collect data from new patients while ensuring their safety. This modification did not
impact patients already enrolled in the LAVENDER study.
PLACEBO
DOUBLE-BLIND TREATMENT PERIOD
Follow-up
R
TROFINETIDE N≈90
PLACEBO N≈90
UP TO 3 WEEKS
12 WEEKS
30 DAYS
Baseline
Phase 2 paediatric trial published in Neurology®, the Medical Journal of the American Academy of Neurology
Neuren’s Phase 2 trial in paediatric Rett syndrome was published online with free access and appeared in the 16 April 2019
issue of Neurology (Glaze et al. 2019). This publication in the most widely read and highly cited peer-reviewed neurology
journal provides strong validation of the results from Neuren’s ground-breaking work in Rett syndrome. The publication was
also featured in an editorial titled “Turning the tide on targeted treatments for neurodevelopmental disorders” and in the “in-
focus” section of the journal.
A further article appeared in the March 2019 Rare Neurological Disease Special Report – a supplement to Neurology Reviews,
authored by Neuren, ACADIA and Rettsyndrome.org (Glass et al. 2019). The article “Pathophysiology of Rett Syndrome”
explained the biochemistry of Rett syndrome and the potential role of IGF-1 and trofinetide.
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
Results of Neuren’s Phase 2 paediatric trial highly relevant for Phase 3
Neuren’s Phase 2 trial was a double-blind, randomized, placebo-controlled study that tested three doses of trofinetide
compared with placebo in 82 girls with Rett syndrome aged 5 to 15. Trofinetide was well tolerated and had a good safety
profile in these younger subjects, with no dose-limiting effects observed. The highest dose achieved statistically significant
and clinically relevant benefit compared with placebo measured by each of RSBQ and CGI-I. The improvement increased
through to the time that treatment ceased after 6 weeks, suggesting that further benefit may be achieved with a longer
treatment duration.
These efficacy results are illustrated in the following charts, in which a downward movement represents an improvement from
day 14 baseline and study day 54 to 66 is the period after treatment ceased:
Clinical improvement measured by RSBQ
Clinical improvement measured by CGI-I
Change (LSmeans) from Treatment Baseline
CGI-I (LSmeans) Compared to Treatment Baseline
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0
-8.0
-9.0
4.0
3.5
3.0
Placebo
200mg/kg
p=0.042
Placebo
200mg/kg
p=0.029
0
14
28
Study Day
42
54
66
2.5
0
14
28
Study Day
42
54
66
The Phase 3 trial design builds on the Phase 2 trial:
– The Phase 3 co-primary endpoints were both positive in the Phase 2 trial
– In the Phase 2 trial clinical improvement continued increasing through to end of treatment - the Phase 3 trial at 12 weeks
is twice the duration of the Phase 2 trial
– The Phase 3 sample size at approx. 90 per group is more than 3 times the Phase 2 sample size and therefore has much
greater statistical power to detect a difference between active and placebo
– The dosing regimen in the active group for the Phase 3 trial is optimised, informed by the PK-PD analyses of the Phase 2
subjects
– The age range for the Phase 3 trial is 5 to 20 years, compared with 5 to 15 years in the Phase 2 trial
– Both trials are at US sites only, with most Phase 2 sites participating in Phase 3
TROFINETIDE FOR FR AGILE X SYNDROME
Trofinetide is in Phase 2 development for Fragile X syndrome, which is characterized by intellectual disability, hyperactivity and
attentional problems, autistic symptoms, anxiety, emotional lability and epilepsy. Currently, there are no medicines approved
for the treatment of Fragile X syndrome, which is the most common inherited cause of intellectual disability. It is caused by a
gene defect on the X chromosome that impacts the FMRP protein, which is responsible for regulating the synapses of nerve
cells. Generally, males are more severely affected than females, with approximately 50% of the females having features of the
syndrome. Neuren conducted a randomized, double-blind, placebo-controlled Phase 2 clinical trial in the United States in 70
males aged 12 to 45 years with Fragile X syndrome. The trial was overseen by leading clinical experts in Fragile X syndrome.
Trofinetide was well tolerated and the high dose demonstrated a consistent pattern of clinical improvement, observed in both
clinician and caregiver assessments. After a relatively short treatment period of 28 days, improvements were seen across core
symptoms, including higher sensory tolerance, reduced anxiety, better self-regulation and more social engagement.
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Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
NNZ-2591 FOR THREE NEURODEVELOPMENTAL DISORDERS WITH URGENT UNMET NEED
Neuren is developing NNZ-2591 for Phelan-McDermid, Angelman and Pitt Hopkins syndrome, each of which currently has
no approved therapy. Each is caused by a different genetic mutation, however they share the feature of impaired signalling
between neurons, with abnormal length and density of the dendritic spines that connect the neurons via synapses. In turn
this means that they share many common characteristics, as shown in the table below.
Gene mutation:
Characteristic:
Intellectual disability
Anxiety and hyperactivity
Speech impairment
Motor and balance problems
Sleep disturbance
Seizures
Breathing irregularities
Gastrointestinal issues
Autistic features
Phelan-McDermid
SHANK3
Angelman
UBE3A
Pitt Hopkins
TCF4
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Preparing for clinical development program
An extensive program of non-clinical toxicology and manufacturing studies required to open an Investigational New Drug (IND)
application in the United States and enable clinical trials for 12 weeks in pediatric patients is currently in progress. In addition
Neuren is nearing completion of preparations for a Phase 1 safety trial in healthy volunteers in Australia.
In designing and executing the NNZ-2591 development program, Neuren is able to leverage the extensive and highly relevant
experience gained from the trofinetide Rett syndrome and Fragile X syndrome programs across manufacturing, non-clinical,
clinical and regulatory. To date a compelling package of results has been achieved from pre-clinical studies.
Clear efficacy in mouse models reviewed by FDA to grant 3 Orphan Drug designations
During 2019, Neuren tested NNZ-2591 in mouse models of each of the three disorders. The studies in these models compared
normal mice (“wild type”) and mice with a disrupted gene (“knockout”). The knockout mice exhibit behavioural and
biochemical deficits that mimic each disorder in humans. The wild type mice and the knockout mice were each treated with
placebo and NNZ-2591. The performance of the mice on a series of behavioural tests, and the number of seizures, were then
measured. In each model treatment with NNZ-2591 for 6 weeks eliminated all the deficits so that the knockout mice were
indistinguishable from the wild type mice. Treatment had no impact on the wild type mice, which is important from a safety
point of view.
The study results were reviewed by the FDA before granting to Neuren in October 2019 Orphan Drug designation for each
of Phelan-McDermid, Angelman and Pitt Hopkins syndrome.
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Neuren Pharmaceuticals Limited Annual Report 2019
O P E R AT I N G R E V I E W
C O N T I N U E D
EFFICACY IN MOUSE MODEL OF ANGELMAN
The charts below show the results in Angelman syndrome and Pitt Hopkins syndrome models. The knockout mice treated with
placebo (the second bar) show clear deficits compared with the wild type mice treated with placebo (the first bar). However,
the knockout mice treated with NNZ-2591 (the fourth bar) are indistinguishable from the wild type mice. The wild type mice
treated with NNZ-2591 (the third bar) are also indistinguishable from the wild type mice treated with placebo. In the Angelman
model, treatment also eliminated seizures in the knockout mice.
Efficacy in mouse model of Angelman
Hypoactivity & anxiety
y
t
i
l
a
u
q
g
n
d
i
l
i
u
B
t
s
e
N
Daily living
)
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(
6
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)
n
(
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b
r
a
M
l
Daily living
20
15
10
5
0
W T-vehicle
U be3a
m
-/p+ + vehicle
m -/p+ + N N Z 2591
W T + N N Z 2591
U b e3a
Sociability
-/p+ + vehicle
W T-vehicle
U be3a
m
m -/p+ + N N Z 2591
W T + N N Z 2591
U b e3a
80
Motor
-/p+ + vehicle
W T-vehicle
U be3a
m
m -/p+ + N N Z 2591
W T + N N Z 2591
U b e3a
8
Cognition
80
60
40
20
0
200
150
l
EFFICACY IN MOUSE MODEL OF PITT HOPKINS
EFFICACY IN MOUSE MODEL OF PITT HOPKINS
e
m
100
40
4
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)
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l
20
0
-/p+ + vehicle
W T-vehicle
U be3a
m
m -/p+ + N N Z 2591
W T + N N Z 2591
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-/p+ + vehicle
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U be3a
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m -/p+ + N N Z 2591
W T + N N Z 2591
U b e3a
7
t
n
e
p
s
e
m
T
i
50
0
-/p+ + vehicle
W T-vehicle
U be3a
m
m -/p+ + N N Z 2591
W T + N N Z 2591
U b e3a
Efficacy in mouse model of Pitt Hopkins
150
150
)
m
c
(
Hypoactivity
Hypoactivity
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100
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50
t
s
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i
100
50
0
0
W T + V ehicle
W T + V ehicle
+/_ + V ehicle
+/_ + V ehicle
W T + N N Z 2591
W T + N N Z 2591
+/_ + N N Z 2591
+/_ + N N Z 2591
Tcf4
Tcf4
Tcf4
Tcf4
y
t
i
l
a
u
q
g
n
d
i
l
i
u
B
t
s
e
N
)
s
(
e
s
u
o
m
)
s
(
60
e
s
u
o
m
l
e
v
o
n
e
h
t
h
t
i
w
t
n
e
p
s
e
m
T
i
l
e
v
40
o
n
e
h
t
t
t
i
h
20
w
n
e
p
s
e
m
0
T
i
Sociability
Sociability
60
40
20
0
i
)
s
(
g
n
m
o
o
r
g
t
n
e
p
s
e
m
T
i
150
100
i
150
)
s
(
g
n
m
100
o
o
r
g
t
n
e
50
p
s
e
m
T
i
+/_ + V ehicle
+/_ + V ehicle
N _ W T + N N Z 2591
N _ W T + N N Z 2591
N _ W T + V ehicle
N _ W T + V ehicle
+/_ + N N Z 2591
+/_ + N N Z 2591
N _Tcf4
N _Tcf4
N _Tcf4
N _Tcf4
y
t
i
l
a
u
q
g
n
d
)
5
o
t
1
e
d
a
r
g
(
u
B
l
i
i
t
s
e
N
)
5
o
t
1
e
d
a
r
g
(
6
6
4
4
2
2
0
0
Daily living
Daily living
Learning & Memory
Learning & Memory
60
60
40
20
i
n
m
5
f
o
%
n
i
g
n
i
z
e
e
r
F
40
20
i
n
m
5
f
o
%
n
i
g
n
i
z
e
e
r
F
0
0
W T + V ehicle
W T + V ehicle
+/_ + V ehicle
+/_ + V ehicle
W T + N N Z 2591
W T + N N Z 2591
+/_ + N N Z 2591
+/_ + N N Z 2591
Tcf4
Tcf4
Tcf4
Tcf4
W T + V ehicle
W T + V ehicle
+/_ + V ehicle
+/_ + V ehicle
W T + N N Z 2591
W T + N N Z 2591
+/_ + N N Z 2591
+/_ + N N Z 2591
Tcf4
Tcf4
Tcf4
Tcf4
Repetitive behavior
Repetitive behavior
Motor performance
Motor performance
1.0
1.0
0.8
0.8
50
e
c
r
o
F
0
0
W T + V ehicle
W T + V ehicle
+/_ + V ehicle
+/_ + V ehicle
W T + N N Z 2591
W T + N N Z 2591
+/_ + N N Z 2591
+/_ + N N Z 2591
Tcf4
Tcf4
Tcf4
Tcf4
10
)
N
(
)
(
N
0.6
e
c
r
o
0.4
F
0.6
0.4
0.2
0.2
0.0
0.0
W T + V ehicle
W T + V ehicle
+/_ + V ehicle
+/_ + V ehicle
W T + N N Z 2591
W T + N N Z 2591
+/_ + N N Z 2591
+/_ + N N Z 2591
Tcf4
Tcf4
Tcf4
Tcf4
8
8
10
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
Motor function
Anxiety
Repetitive behavior
Daily living
Daily living
Neuren Pharmaceuticals Limited Annual Report 2019
O P E R AT I N G R E V I E W
C O N T I N U E D
MCDERMID
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
Optimum dose identified and biochemical effects confirmed
In the Phelan-McDermid syndrome model, additional studies were undertaken to investigate the effective of four escalating dose
levels and the biochemical effects of treatment.
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
The clear and consistent results of the dose ranging study are shown in the charts below. They were consistent across all 8
behavioural tests and the incidence of seizures, showing that the lowest dose (“x” mg/kg) was not effective, the 2x mg/kg dose
was partially effective, the 4x mg/kg dose was fully effective and indistinguishable from the highest dose of 8x mg/kg. This clearly
demonstrated that the 4x mg/kg dose was the optimum dose level in the mouse model. Comparison with human pk data from a
planned Phase 1 clinical trial will inform the equivalent human dose for the Phase 2 trials in patients.
A further observation was that the 4x mg/kg dose in the 6 weeks study showed better efficacy than the same dose in an earlier 3
weeks study, indicating that efficacy increases with treatment duration. Neuren plans to test treatment with NNZ-2591 for 12 weeks
in the Phase 2 trials. The 4x mg/kg dose level was also shown to be an effective dose in the Angelman and Pitt Hopkins models.
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
Memory
Memory
Motor function
Learning
Motor function
Learning
Anxiety
Sociability
Repetitive behavior
Sociability
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
Repetitive behavior
Anxiety
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
Motor function
Motor function
Incidence of seizures
WT + vehicle
0%
KO + vehicle
60%
KO + x mg/kg
50%
WT + vehicle
0%
KO + 2x mg/kg
30%
Anxiety
Anxiety
Incidence of seizures
Memory
KO + 2x mg/kg
30%
KO + x mg/kg
50%
KO + 8x mg/kg
10%
Daily living
KO + vehicle
60%
KO + 4x mg/kg
Daily living
10%
Repetitive behavior
Daily living
KO + 4x mg/kg
10%
Daily living
KO + 8x mg/kg
10%
Repetitive behavior
Learning
Sociability
9
Daily living
Daily living
Daily living
Daily living
Incidence of seizures
WT + vehicle
0%
KO + vehicle
60%
KO + x mg/kg
WT +
50%
vehicle
KO +
vehicle
KO + 2x mg/kg
KO + x
30%
mg/kg
0%
60%
50%
KO + 2x
mg/kg
KO + 4x
mg/kg
KO + 8x
mg/kg
30%
10%
10%
9
10
10
KO + 4x mg/kg
10%
KO + 8x mg/kg
10%
9
11
10
10
Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
In the Phelan-McDermid syndrome model, compared with normal mice the shank3 knockout mice have abnormally long
dendritic spines between brain cells, an excess of activated ERK protein (pERK) and a depressed level of IGF-1, all of which
are thought to contribute to abnormal signalling between the brain cells. Treatment with NNZ-2591 normalised each of these
features, as shown in the charts below.
Blood-brain barrier penetration confirmed
Very good penetration of the blood-brain barrier by NNZ-2591 was demonstrated in a rodent study. A single dose was
administered at 2 dose levels, with the high dose twice the low dose. The concentration of NNZ-2591 in the blood and
cerebrospinal fluid after 1.5 hours and again after 4 hours. The amount in the brain was also measured after 4 hours. In each
case the amount was approximately proportional to the dose and after 4 hours the concentration in blood and brain tissue
was approximately equivalent.
Dose
1.5 hours post-dose:
Cerebrospinal fluid (µg/ml)
Blood (µg/ml)
4 hours post-dose:
Cerebrospinal fluid (µg/ml)
Blood (µg/ml)
Brain (µg/g)
Mean exposure to NNZ-2591
“A”mg/kg
2A mg/kg
Ratio of 2A mg/
kg: A mg/kg
40.4
58.5
11.0
15.6
22.6
82.2
116.0
24.7
34.2
37.0
2.03 : 1
1.98 : 1
2.25 : 1
2.19 : 1
1.63 : 1
12
Neuren Pharmaceuticals Limited Annual Report 2019
O P E R AT I N G R E V I E W
C O N T I N U E D
THE SCIENCE BEHIND NEUREN’S PRODUCTS
Trofinetide (also known as NNZ-2566) and NNZ-2591 are synthetic analogues of glypromate (“GPE”) and cyclic glycine-proline
(“cGP”) respectively, each of which occurs naturally in the brain and is related to IGF-1, which is a growth factor stimulated
by growth hormone. In the central nervous system, IGF-1 is produced by both of the major types of brain cells – neurons and
glia. IGF-1 in the brain is critical both for normal development and to maintain or restore the biological balance required for
normal functioning. In the brain, IGF-1 is rapidly broken down by an enzyme into two separate molecules, GPE and Des(1-3)
IGF-1 (“truncated IGF-1”). GPE is further metabolised to cGP. All three are biologically active neuropeptides with a wide range
of effects. GPE, which comprises the last three peptides of IGF-1, primarily affects glial cells (astrocytes and microglia) while
truncated IGF-1 mostly affects neurons. During development, the brain and the cells that comprise it change rapidly and in
complex ways. IGF-1 and its metabolism play a significant role in regulating these changes. In the mature brain, it plays an
important role in responding to disease, stress and injury.
Neurons and Neuroglial Cells
Produce essential
growth factor
IGF-1
Enzyme
cleavage
Truncated
IGF-1
Reversible binding regulates
IGF-1
bioavailability
IGF
Binding
Protein-3
Regulates binding
Enzyme cleavage
cGP
GPE
Activates PI3K–Akt–mTOR and Ras–MAPK-ERK
signalling pathways in neurons, regulating
formation of new synapses
IGF-1 receptor
on cell surface
Regulates microglia, which
maintain and prune synapses
Trofinetide and NNZ-2591 mimic the natural function of GPE and cGP in the brain. Small modifications result in the drugs
having an increased half-life in the circulation, better stability for longer and easier storage and shipping, and suitability for use
as an oral medication, whereas the naturally occurring molecules and IGF-1 itself can only be administered by injection.
Whereas most drugs typically exert a specific effect on a specific target, trofinetide and NNZ-2591 exert diverse effects which
can help to control or normalise abnormal biological processes in the brain.
Although different conditions – brain injury, neurodevelopmental disorders and neurodegenerative diseases – can result in
very different symptoms and outcomes, many share common, underlying pathological features. These include inflammation,
over-activation of microglia, dysfunction of synapses (the connections between neurons through which information is
transmitted) and reduced levels of IGF-1. In other words, diseases and conditions that manifest differently are considered to
arise from similar pathology at the cellular and molecular level.
In models of the genetic mutations that cause neurodevelopmental disorders, including Rett syndrome (MeCP2), Fragile X
syndrome (Fmr1) and Phelan-McDermid syndrome (Shank3), treatment with GPE and cGP or their analogues trofinetide and
NNZ-2591 has fully or partially corrected the following four hallmark pathological features restoring the natural balance of
brain function:
13
Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
1. Inflammation
Inflammation in the brain (neuroinflammation) is perhaps the most common pathological feature of neurological disorders.
Much of it is the result of excess production of molecules called inflammatory cytokines. These are prominent in brain injuries,
neurodevelopmental disorders such as Rett and Fragile X syndromes as well as autism, neurodegenerative diseases like
Alzheimer’s and Parkinson’s and even so-called “normal” aging.
Neuroinflammation places significant stress on brain cells. Stress can disrupt normal cellular processes such as information
signalling, increase energy requirements beyond the ability of the cells to meet their metabolic needs, disturb electrical
functions which can lead to seizures and other abnormalities and even result in premature cell death.
In animal models ranging from brain injury and stroke to Fragile X syndrome to age-associated cognitive impairment,
trofinetide and NNZ-2591 have shown an ability to significantly reduce the levels of inflammatory cytokines. This has
resulted in improvement in a wide range of symptoms including post-traumatic seizures, anxiety, memory impairment
and hyperactivity.
2. Over-activation of microglia
Microglia are the resident immune cells in the brain. Once thought to serve primarily a sentinel function – responding to
infection and damaged cells by surrounding and removing them – it is now known that they play a central role in maintaining
synapses during development and in mature brains by pruning dendrites, the many small extensions of neurons that form
synapses. Microglia are also a key source of IGF-1. Due to this wide-ranging maintenance function, they have appropriately
been referred to as the “constant gardeners” of the brain.
Microglia are not only activated in response to infection and injury. They also are activated by inflammation that accompanies
acute brain injury and chronic conditions. In this activated state, they not only lose their ability to effectively perform their
normal function in synaptic maintenance but also produce more inflammatory cytokines which can further compound the
damage to neurons and other brain cells.
Trofinetide and NNZ-2591 have been shown to normalize microglial biology and function in both acute and chronic conditions.
Restoring normal microglial activity has resulted in improved synaptic structure as well as correction of imbalance in
synaptic signalling and cell-to-cell communication. This has led to reversal of symptoms such as impaired memory, anxiety,
hyperactivity and compromised social behaviour.
Resting Microglial Cells
Activated Microglial Cells
14
Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
CORRECTING IMPAIRED SIGNALING IN NEURONS
3. Dysfunction of synapses
Neurons communicate with each other by chemical and electrical signals transmitted via synapses. Normal synaptic function
is essential for healthy brain function and underlies memory, cognition, behaviour and other brain activities. Normal synaptic
function requires that the dendrites (the branches on the neurons) which form synapses are appropriately formed as well as
that excitatory and inhibitory signals are kept in balance.
When dendritic structure and synaptic signalling are abnormal, virtually all brain activities can be negatively
impacted. Synaptic dysfunction has been identified as a core feature of many conditions including acute brain injury,
neurodevelopmental disorders and neurodegenerative diseases.
For example, in Rett syndrome dendrites are sparse and immature while in Fragile X syndrome, dendritic branching is excessive
although the dendrites are also immature. Trofinetide increases the length and branching of dendrites in a model of Rett
syndrome while increasing pruning of excess branching in a model of Fragile X syndrome.
In models of Fragile X syndrome and Phelan-McDermid syndrome, NNZ-2591 normalised an excessive level of activated ERK
enzyme (pERK), which has been implicated in abnormal synaptic signalling.
Correction of abnormal dendritic
spines in mouse models:
Left - Phelan-McDermid syndrome
(shank3)
Right - Fragile X syndrome (fmr1)
Abnormal dendrites in
shank3 knockout mice
Normalisation after
treatment with NNZ-2591
Correction in fmr1 knockout mice after
treatment with trofinetide (NNZ-2566)
4. Reduced levels of IGF-1
IGF-1 levels in the brain have been reported to be depressed in a number of conditions, particularly in Rett and Fragile X
syndromes and brain injury. In these conditions, the critical role of IGF-1 in maintaining and repairing brain cells and synapses
is impaired.
12
In the Fragile X model, in which the IGF-1 level is depressed, trofinetide increased the amount of IGF-1 to normal levels. This
was accompanied by normalized synaptic signalling and complete reversal of cognitive and behavioural abnormalities.
In a model of Rett syndrome, increasing IGF-1 levels has been reported to correct deficits in dendritic spines and, in isolated
cells from human Rett syndrome patients, both IGF-1 and GPE are able to partially reverse the deficits in cellular function.
15
Neuren Pharmaceuticals Limited Annual Report 2019 O P E R AT I N G R E V I E W
C O N T I N U E D
FINANCE
Revenue from ACADIA agreement
R&D Tax Incentive
Interest income
Foreign exchange gain
Total income
Research & Development
Corporate & Administration
Loss in fair value of Lanstead settlements
(Loss) / Profit after tax
Cash flow from operations
Cash flow from financing
Effect of exchange rates on cash balances
Cash at 31 December
2019
$’m
–
0.5
0.4
0.1
1.0
(9.8)
(1.7)
(0.3)
(10.8)
(11.7)
1.9
0.1
13.8
2018
$’m
13.5
0.5
0.2
1.0
15.2
(6.1)
(2.1)
(3.9)
3.1
6.4
11.7
0.7
23.6
The loss after tax for 2019 was $10.8 million compared with profit after tax of $3.1 million in 2018, mainly due to revenue
of $13.5 million received in 2018 under the licence agreement with ACADIA. In addition, foreign exchange gains decreased
by $0.8 million and research and development costs increased by $3.8 million, resulting from higher expenditure on
manufacturing scale-up and non-clinical toxicity studies. These were offset by a decrease in the loss of $0.3 million (2018:
$3.9 million) on the fair value of the remaining settlements from Lanstead Capital under the Sharing Agreement that was
entered into as part of the capital raising in July 2017. Prudent control of expenditure continues to be an important principle
in the Group’s operations and financing.
The Sharing Agreement with Lanstead Capital concluded in June 2019 with the final settlement received in July 2019.
The aggregate amount received from Lanstead Capital throughout the course of the arrangement was $12.2 million. This
delivered to Neuren additional cash funding of $2.2 million, with no additional shares issued to Lanstead Capital.
Cash reserves at 31 December 2019 were $13.8 million (2018: $23.6 million). Net cash used in operating activities was
$11.7 million, compared with cash inflow of $6.4 million in 2018. Financing provided cash of $1.9 million, received from
the Lanstead Capital settlements, compared with $11.7 million in 2018 from the issue of shares in May 2018 under the
exclusivity deed with ACADIA and the settlements from Lanstead Capital.
16
Neuren Pharmaceuticals Limited Annual Report 2019
O P E R AT I N G R E V I E W
C O N T I N U E D
17
Neuren Pharmaceuticals Limited Annual Report 2019 L E A D E R S H I P T E A M
B O A R D
1
2
3
4
5
1. DR RICHARD TRE AGUS
Executive Chairman
BScMed, MBChB,
MPharmMed, MBA
Richard joined the Neuren Board as
Executive Chairman in January 2013.
He is a physician, with more than 20
years’ experience in all aspects of the
international biopharmaceutical industry.
He has held senior executive roles with
pharmaceutical organisations in South
Africa and Australia and has successfully
established numerous pharmaceutical
business partnerships in the US, Europe
and Asia. Richard served as Chief
Executive of the ASX-listed company
Acrux Limited from 2006 to 2012. Under
his leadership Acrux gained FDA approval
for three drug products, concluded a
product licensing transaction with Eli
Lilly worth US$335m plus royalties and
became profitable. In 2010 Richard
was awarded the Ernst and Young
Entrepreneur-of-the-Year (Southern
Region) in the Listed Company Category
and in subsequent years has served on
the judging panel. Richard is Chairman
of BTC Health Limited, which is listed
on the ASX.
2. DR TREVOR SCOT T
Non-Executive Director
MNZM, LLD (Hon), BCom, FCA, FNZIM, DF Inst D
Trevor joined the Neuren Board in March
2002. He is the founder of T.D. Scott and
Co., an accountancy and consulting
firm, which he formed in 1988. He is an
experienced advisor to companies across
a variety of industries. Trevor serves
on numerous corporate boards and
is chairman of several.
3. DIANNE ANGUS
Non-Executive Director
BSc (Hons), Master of Biotechnology, IPTA
Dianne joined the Neuren Board
in July 2018. She has worked as a
senior executive and non-executive
director within the biotechnology,
biopharmaceutical and agritech
industries for over twenty-five years.
She has created numerous global
industry partnerships which include
Prana Biotechnology, Gerolymatos
International, Florigene, Suntory &
Monsanto to yield novel and competitive
medical, pharmaceutical and agricultural
products. Dianne has successfully forged
strong partnerships with key medical
opinion leaders to create innovative
clinical research programs and driven the
development path for novel neurological
pre-clinical agents to late-stage clinical
assets before the FDA and European
regulators. With over fifteen years’
experience in an ASX and NASDAQ
listed company, she has expertise in
business development, capital raising,
investor relations, regulatory affairs
and intellectual property, together with
corporate governance and compliance
capabilities. Dianne holds a Masters
degree in biotechnology and is a
registered patent attorney.
4. DR JENNY HARRY
Non-Executive Director
BSc (Hons), PhD
Jenny joined the Neuren Board in
2018. She has 20 years’ experience
in executive management of
companies in the biotechnology
and biopharmaceutical sectors.
As CEO and Managing Director of Tyrian
Diagnostics, Jenny transformed the
company from an R&D business to a
diagnostics company and oversaw
development of the company’s first
products through to commercialisation
and early revenue generation. She is a
graduate of the Harvard Business School
General Manager Program and the
Australian Institute of Company Directors.
Jenny is currently Chair of QUT Enterprise
Holdings and a non-executive director on
the boards of Ondek Pty Ltd, QUTbluebox
and Creative Enterprise Australia.
5. PATRICK DAVIES
Non-Executive Director
B EC, MBA
Patrick joined the Neuren Board in July
2018. He has held executive management
roles in the Australian and New Zealand
healthcare industry for over twenty five
years having performed successfully in
senior roles across many industry sectors
including pharmacy, primary care,
pharmaceutical and consumer products.
During his ten year period as Chief
Executive Officer of EBOS Group Limited
(and previously Symbion), the enterprise
value of the group achieved compound
annual growth in enterprise value of +20%
(from circa $450M to in excess of $3.1B).
He is a director on other corporate boards
and provides strategic advice to a range
of healthcare businesses and investors.
18
Neuren Pharmaceuticals Limited Annual Report 2019 L E A D E R S H I P T E A M
M A N A G E M E N T
1
2
3
4
5
1. L ARRY GL A SS
Chief Science Officer
BA (Biology)
Larry joined Neuren in 2004 and was an
Executive Director from 2012 to 2018.
He has more than 30 years’ experience
in the life sciences industry, including
clinical trials, basic and applied research,
epidemiologic studies, diagnostics and
pharmaceutical product development.
Before he joined Neuren, he worked as
an independent consultant for a number
of biotech companies in the US and
internationally providing management,
strategic and business development
services. Prior to that, he was CEO of a
contract research organisation (“CRO”)
that provided preclinical research
and clinical trials support for major
pharmaceutical and biotechnology
companies and the US government. For
a number of years, the CRO operated as
a subsidiary of a NYSE-listed company
and was subsequently sold to a European
biopharmaceutical enterprise which was
then acquired by Johnson & Johnson.
Larry is a biologist with additional
graduate training in epidemiology
and biostatistics.
2. JON PILCHER
Chief Financial Officer
and Company Secretary
BSc (Hons), FCA
Jon joined Neuren in August 2013
from Acrux (ASX: ACR) where, as
CFO & Company Secretary, he was a
member of the leadership team for
eleven years. That period included
Acrux’s IPO and listing on the ASX, the
development and FDA approval of three
novel pharmaceutical products and a
transforming licensing deal with Eli Lilly
in 2010. Jon is a Chartered Accountant
and holds a degree in Biotechnology
from the University of Reading in the UK.
He formerly spent seven years in a series
of senior financial positions in the R&D
and corporate functions of international
pharmaceutical groups Medeva and
Celltech (now part of UCB). Jon is a non-
executive director of BTC Health Limited.
3. DR CLIVE BLOWER
Vice President,
Product Development
and Technical Affairs
BSc (Hons), PhD
Clive joined Neuren in August 2014 from
Acrux, bringing over twenty years of
global drug development experience.
Clive was at Acrux for seven years as
Director of Product Development and
Technical Affairs and then Chief Operating
Officer. During this period he led the
CMC (Chemistry, Manufacturing and
Controls) development of the company’s
lead product through Phase 3 clinical
trials, FDA approval and commercial
launch. Clive formerly served in senior
management positions at Hospira Inc.
(previously Faulding Pharmaceuticals,
then Mayne Pharma), including leading
the Injectable Drug Development
Group. He earned a Doctorate in
Chemistry from Monash University in
1992 and has experience in all stages
of drug development, from concept to
commercialisation, having contributed
to the development and launch of more
than 25 pharmaceutical products.
4. DR NANC Y JONES
Vice President, Clinical Development
PhD
Nancy joined Neuren in January 2013.
Prior to joining Neuren, she held
a senior position at Autism Speaks,
the largest science and advocacy
organisation in the US focused on
autism spectrum and related disorders.
19
Nancy was at Autism Speaks for 6 years,
directing the overall operations of the
Autism Treatment Network, a network of
hospitals and medical centers dedicated
to improving access to comprehensive,
coordinated medical care for individuals
with ASD. She also oversaw the Autism
Clinical Trials Network, a network
developed to promote and expedite
clinical trials in ASD, and played a lead
role in an initiative to enhance the
development of syndrome-specific
outcome measures for treatment trials
in ASD. Nancy received her Ph.D. in
Applied Linguistics from the University of
California, Los Angeles where she focused
on the neurobiology of language and
developmental disorders.
5. JAMES SHAW
Vice President, Clinical Operations
BSc (Hons), MBA
James joined Neuren in August 2013
and brings twenty years of development
and commercialisation experience in
the pharmaceutical industry, having
worked for both large Pharma and
Clinical Research Organisations.
Before joining Neuren, he was CEO of a
Clinical Research and Site Management
Organisation providing full service
clinical trial support in Australia and New
Zealand. Prior to that he spent 7 years
with Quintiles in Sydney and Singapore
working across Business Development
and Operational leadership roles.
James brings a global focus to drug
development, having led product teams
from Phase II through to FDA submission
and commercialisation during six
years with AstraZeneca at their global
headquarters in the UK.
Neuren Pharmaceuticals Limited Annual Report 2019 CO R P O R AT E G O V E R N A N C E
Neuren’s board of directors (“Board”) aims to ensure that
the Company and its subsidiaries (the “Group”) operates
with a corporate governance framework and practices that
promote an appropriate governance culture throughout
the organisation and that are relevant, practical and cost-
effective for the current size and stage of development of
the business.
This Statement provides a description of the framework
and practices, laid out under the structure of the
ASX Listing Rules and the Corporate Governance
Principles (the “Principles”) and Recommendations
(the “Recommendations”) 3rd Edition.
PRINCIPLE 1. L AY SOLID FOUNDATIONS
FOR MANAGEMENT AND OVERSIGHT
The Board is responsible for the overall corporate
governance of the Group. The Board acts on behalf of and
is accountable to the shareholders. The Board seeks to
identify the expectations of shareholders as well as other
regulatory and ethical expectations and obligations. The
Board is responsible for identifying areas of significant
business risk and ensuring mechanisms are in place to
manage those risks adequately. In addition, the Board sets
the overall strategic goals and objectives, and monitors
achievement of goals.
The Board appoints the principal executive officer, currently
the Executive Chairman. The Board has delegated the
responsibility for the operation and administration of the
Group to the Executive Chairman and senior management.
The Board ensures that the management team is
appropriately qualified to discharge its responsibilities.
The Board ensures management’s objectives and activities
are aligned with the expectations and risks identified by
the Board through a number of mechanisms including
the following:
– establishment of the overall strategic direction and
leadership of the Group;
– approving and monitoring the implementation by
management of the Group’s strategic plan to achieve
those objectives;
– reviewing performance against its stated objectives,
by receiving regular management reports on business
situation, opportunities and risks;
– monitoring and review of the Group’s controls and
systems including those concerned with regulatory
matters to ensure statutory compliance and the highest
ethical standards; and
– review and adoption of budgets and forecasts and
monitoring the results against stated targets.
The Board sets the corporate strategy and financial targets
with the aim of creating long-term value for shareholders.
In accordance with Recommendation 1.2, the Board
undertakes appropriate checks before appointing a new
director, or putting forward to shareholders a candidate
for election and provides shareholders with all material
information in its possession relevant to a decision on
whether or not to elect or re-elect a director.
The Group has a written agreement with each director and
senior executive, setting out the terms of their appointment,
in accordance with Recommendation 1.3. The Company
Secretary is accountable directly to the Board on all
matters to do with the proper functioning of the Board,
in accordance with Recommendation 1.4.
At this stage of the Group’s development, considering the
very small size of the workforce and the specialist nature
of most positions, the Board has chosen not to establish
a formal diversity policy or formal objectives for gender
diversity, as recommended in Recommendation 1.5. The
Group does not discriminate on the basis of age, ethnicity,
religion, gender or sexuality and when a position becomes
vacant the Group seeks to employ the best candidate
available for the position. Currently there are three male
and two female directors. One of the six senior executives
is female. The Group currently has eight employees and
consultants, from different cultural backgrounds, of which
three are female.
In accordance with Recommendation 1.6, there is a process
to evaluate periodically the performance of the Board,
its committees and individual directors. Each director
completes a quantitative evaluation questionnaire and
is able to provide qualitative comments. The Company
Secretary collates the responses and reports back to the
board for discussion. A formal performance evaluation was
not undertaken during 2019.
In accordance with Recommendation 1.7, there is a process
for the Board to evaluate periodically the performance of
the Executive Chairman and for the Executive Chairman to
evaluate periodically the performance of senior executives.
The evaluation of the Executive Chairman is part of the
board performance evaluation process. For the evaluation
of senior executives, an individual discussion is held after
each senior executive complete a qualitative questionnaire,
covering past individual and team achievements and
challenges, as well as forward-looking outcomes and areas
of personal focus. Formal performance evaluations were
not undertaken during 2019.
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PRINCIPLE 2. STRUCTURE THE BOARD TO ADD VALUE
The Board has not considered it necessary or value-adding to establish a separate Nomination Committee (Recommendation
2.1). The selection, appointment and retirement of directors is considered by the full Board, within the framework of the skills
matrix described below. The Board may also engage an external consultant where appropriate to identify and assess suitable
candidates who meet the Board’s specifications. The composition of the board is discussed regularly and each director may
propose changes for discussion.
In accordance with Recommendation 2.2, the Company has a skills matrix setting out the mix of skills that the Board is looking
to achieve in its membership. The matrix is summarised in the table below.
Skill
Requirements Overview
Professional Director Skills
Risk & Compliance
Financial & Audit
Strategy
Policy Development
Executive Management
Previous Board Experience
Industry Specific Skills
Pharmaceutical product development
International pharmaceutical
commercialisation
Pharmaceutical partnering
Risk capital management
Intellectual property
Interpersonal Skills
Leadership
Ethics and Integrity
Contribution
Crisis Management
Identify key risks to the organisation related to each key area of operations.
Ability to monitor risk and compliance and knowledge of legal and
regulatory requirements.
Experience in accounting and finance to analyze statements, assess
financial viability, contribute to financial planning, oversee budgets and
oversee funding arrangements.
Ability to identify and critically assess strategic opportunities and threats
to the organization. Develop strategies in context to our policies and
business objectives.
Ability to identify key issues for the organisation and develop appropriate
policy parameters within which the organization should operate.
Experience in evaluating performance of senior management, and oversee
strategic human capital planning.
The board's directors should have director experience and have completed
formal training in governance and risk.
Experience in and/or understanding of the issues in clinical development,
interactions with international regulators and/or CMC development.
Experience in and/or understanding of the issues in entering international
pharmaceutical markets, including pricing, distribution and exclusivity.
Experience in and/or understanding of the issues in partnering transactions
and/or relevant contacts in international pharma companies.
Experience in raising funding from equity markets and/or relevant contacts
in relevant funds and/or investment banks.
Understanding of the importance and value of market exclusivity and
the various ways of protecting it across different jurisdictions, including
patents and data exclusivity.
Make decisions and take necessary actions in the best interest of the
organisation, and represent the organisation favorably. Analyze issues
and contribute at board level to solutions. Recognise the role of the board
versus the role of management.
Understand role as director and continue to self educate on legal
responsibility, ability to maintain board confidentiality, declare any
conflicts.
Ability to constructively contribute to board discussions and communicate
effectively with management and other directors.
Ability to constructively manage crises, provide leadership around
solutions and contribute to communications strategy with stakeholders.
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The Board is highly engaged in the oversight and direction of the business. Five members served during the year to
31 December 2019, as set out in the table below. Details of the relevant skills, experience and expertise of each Board
member are set out on page 27 of this report.
Appointment
Retirement
Role
Independent
Committees
Richard Treagus
Trevor Scott
2013
2002
Executive Chairman
Non-executive director
Dianne Angus
2018
Non-executive director
Patrick Davies
2018
Non-executive director
Jenny Harry
2018
Non-executive director
No1
Yes
Yes
Yes
Yes
Chair of Audit Committee and
Remuneration Committee
Member of Audit Committee
and Remuneration Committee
Member of Audit Committee
and Remuneration Committee
Member of Audit Committee
and Remuneration Committee
1 Richard Treagus is not considered independent due to his executive role.
There is a majority of independent directors in accordance with Recommendation 2.4. The chair is not independent
(Recommendation 2.5) and the chair and principal executive officer roles are not separate (Recommendation 2.5). The
directors believe that the structure and membership profile of the Board has provided and continues to provide the maximum
value to the business at its stage of its development.
In accordance with Recommendation 2.6, the Company has a program for inducting new directors and provides appropriate
professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform
their role as directors effectively.
PRINCIPLE 3. PROMOTE ETHIC AL AND RESPONSIBLE DECISION-MAKING
The Board has established a Code of Conduct, which requires that Board members and executives:
– will act honestly, in good faith and in the best interests of the whole Company
– owe a fiduciary duty to the Company as a whole
– have a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that
office
– will undertake diligent analysis of all proposals placed before the Board
– will act with a level of skill expected from Directors and key executives of a publicly listed Company
– will use the powers of office for a proper purpose, in the best interests of the Company as a whole
– will demonstrate commercial reasonableness in decision-making
– will not make improper use of information acquired as Directors and key executives
– will not disclose non-public information except where disclosure is authorised or legally mandated
– will keep confidential information received in the course of the exercise of their duties and such information remains the
property of the Company from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless that
disclosure has been authorised by the person from whom the information is provided, or required by law
– will not take improper advantage of the position of Director or use the position for personal gain or to compete with the
Company
– will not take advantage of Company property or use such property for personal gain or to compete with the Company
– will protect and ensure the efficient use of the Company’s assets for legitimate business purposes
– will not allow personal interests, or the interest of any associated person, to conflict with the interests of the Company
– have an obligation to be independent in judgement and actions and Directors will take all reasonable steps to be satisfied
as to the soundness of all decisions of the Board
– will make reasonable enquiries to ensure that the Company is operating efficiently, effectively and legally, towards
achieving its goals
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In undertaking these tasks the Audit Committee meets
separately with management and external auditors where
required.
Notwithstanding that the New Zealand Companies Act 1993
does not require it, in accordance with Recommendation
4.2, the Board also seeks assurances in writing from the
Executive Chairman and the Chief Financial Officer that the
annual financial statements present a true and fair view, in
all material respects, of the Group’s financial condition and
operational results and are in accordance with New Zealand
Equivalents to International Financial Reporting Standards
(NZ FRS) and that this is founded on a sound system of
risk management and internal control that is operating
effectively in all material respects with regard to financial
reporting risks. The Board received those assurances on 25
February 2020.
Since Neuren is incorporated in New Zealand and applies
New Zealand financial reporting standards, its auditor
is located in New Zealand. The Board has considered it
impractical and an unnecessary expense for the auditor to
travel to Australia to attend the annual general meeting,
as suggested in Recommendation 4.3. The Company’s
constitution has been amended to enable the Board in
future to convene virtual shareholder meetings, with
participation by electronic means.
PRINCIPLE 5. MAKE TIMELY AND BAL ANCED
DISCLOSURE
Neuren is required to comply with the continuous disclosure
requirements as set out in the ASX Listing Rules, disclosing
to the ASX any information that a reasonable person would
expect to have a material effect on the price or value of
Neuren’s securities, unless certain exemptions from the
obligation to disclose apply.
In accordance with Recommendation 5.1, the Board has
approved policies and procedures to ensure that it complies
with its disclosure obligations and that disclosure is timely,
factual, clear and objective. The Board has designated the
company secretary as the person primarily responsible
for implementing and monitoring those policies and
procedures. A summary of the policies and procedures is
available on the Neuren website. All information disclosed
to the ASX is placed on the Neuren website after it has been
published by the ASX.
– will not engage in conduct likely to bring discredit upon
the Company
– will encourage fair dealing by all employees with the
Company’s customers, suppliers, competitors and other
employees
– will encourage the reporting of unlawful/unethical
behaviour and actively promote ethical behaviour and
protection for those who report violations in good faith
– will give their specific expertise generously to the
Company
– have an obligation, at all times, to comply with the spirit,
as well as the letter of the law and with the principles of
this Code of Conduct
PRINCIPLE 4. SAFEGUARD INTEGRIT Y
IN FINANCIAL REPORTING
The Board has an Audit Committee, which consists of
only independent non-executive directors, has at least
3 members and is chaired by an independent director
as suggested in Recommendation 4.1. The relevant
qualifications and experience of the members are set
out on page 27 of this report. The Committee met twice
during 2019, attended by all members.
The Committee operates under a charter approved by
the Board, a summary of which is available on the Neuren
website. It is responsible for undertaking a broad review of,
ensuring compliance with, and making recommendations in
respect of, the Group’s internal financial controls and legal
compliance obligations. In respect of financial reporting,
it is also responsible for:
– review of audit assessment of the adequacy and
effectiveness of internal controls over the Company’s
accounting and financial reporting systems, including
controls over computerised systems;
– review of the audit plans and recommendations of the
external auditors;
– evaluating the extent to which the planned scope of
the audit can be relied upon to detect weaknesses in
internal control, fraud and other illegal acts;
– review of the results of audits, any changes in
accounting practices or policies and subsequent effects
on the financial statements and make recommendations
to management where necessary and appropriate;
– review of the performance and fees of the external
auditor;
– audit of legal compliance including trade practices,
corporations law, occupational health and safety and
environmental statutory compliance , and compliance
with the Listing Rules of the ASX;
– supervision of special investigations when requested
by the Board;
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Neuren Pharmaceuticals Limited Annual Report 2019 CO R P O R AT E G O V E R N A N C E
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PRINCIPLE 6. RESPECT THE RIGHTS
OF SHAREHOLDERS
The Board strives to communicate effectively with
shareholders, give them ready access to balanced and
understandable information about the business and make
it easy for them to participate in shareholder meetings.
In accordance with Recommendation 6.1, comprehensive
information about the Company and its governance
is provided via the website www.neurenpharma.com.
This includes information about the Board and senior
executives, as well as corporate governance policies.
All announcements, presentations, financial information
and meetings materials disclosed to the ASX are placed
on the website, so that current and historical information
can be accessed readily.
The Company’s investor relations program facilitates
effective two-way communication with investors
(Recommendation 6.2). The Executive Chairman and the
Chief Financial Officer interact with institutional investors,
private investors, analysts and media on an ad hoc basis,
conducting meetings in person or by teleconference and
responding personally to enquiries.
The Board seeks practical and cost-effective ways to
promote informed participation at shareholder meetings
(Recommendation 6.3). This includes providing access
to clear and comprehensive meeting materials and
electronic proxy voting. The Company’s constitution has
been amended to enable the Board in future to convene
virtual shareholder meetings, with participation by
electronic means.
In accordance with Recommendation 6.4, shareholders are
provided with and encouraged to use electronic methods to
communicate with the Company and with the share registry.
PRINCIPLE 7. RECOGNISE AND MANAGE RISK
The Board has established policies for the oversight and
management of material business risks, a summary of which
is available on the Neuren website. The Board does not have
a separate committee to oversee risk, judging that the whole
Board is better able to conduct that function efficiently
and effectively, given the small size of the Board and the
specialised nature of the business (Recommendation 7.1).
In accordance with Recommendation 7.2, the Board reviews
the Group’s risk management framework at least annually
to satisfy itself that it continues to be sound. A review was
conducted in 2019.
The size and complexity of the Group’s business is
not sufficient to warrant an internal audit function
(Recommendation 7.3). The risk management policy
is designed to involve the entire organisation in risk
management and to ensure that the effectiveness of
the risk management and internal control processes
are continually improved.
The Group does not have a material exposure to
economic, environmental or social sustainability risks
(Recommendation 7.4).
PRINCIPLE 8. REMUNER ATE FAIRLY
AND RESPONSIBLY
Neuren believes having highly skilled and motivated people
will allow the organisation to best pursue its mission
and achieve its goals for the benefit of shareholders and
stakeholders more broadly. The ability to attract and retain
the best people is critical to the Company’s future success.
The Board believes remuneration policies are a key part of
ensuring this success.
The Board has a Remuneration Committee, which consists
of only independent non-executive directors, has at least
three members and is chaired by an independent director
as suggested in Recommendation 8.1. The Committee met
once in 2019, attended by all members.
The Committee operates under a charter approved by
the Board, a summary of which is available on the Neuren
website. It is responsible for undertaking a broad review of,
ensuring compliance with, and making recommendations
in respect of, the Group’s remuneration policies. It is also
responsible for:
– setting and reviewing compensation policies and
practices of the Company;
– setting and reviewing all elements of remuneration of
the directors and members of the executive team; and
– setting and reviewing long term incentive plans for
employees and/or directors.
In undertaking these tasks the Remuneration Committee
meets separately with management where required.
The Group’s remuneration policies and practices
are summarised below, in accordance with
Recommendation 8.2.
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Neuren Pharmaceuticals Limited Annual Report 2019 CO R P O R AT E G O V E R N A N C E
C O N T I N U E D
The Remuneration Committee assesses the
appropriateness of the nature and amount of remuneration
of executive directors and senior executives on a regular
basis by reference to relevant employment market
conditions, with the overall objective of ensuring maximum
shareholder benefit from the retention of a high quality
executive team. To assist in achieving these objectives, the
nature and amount of executive remuneration is linked to
the Company’s performance. Remuneration consists of fixed
cash remuneration, including superannuation contributions
required by law, and equity-based remuneration. Fixed cash
remuneration takes into account labour market conditions,
as well as the scale and nature of the Group’s business.
Equity-based remuneration is provided by participation in
a share option plan, a loan funded share plan and equity
performance rights. These are designed to ensure that
key executives are aligned with shareholders through an
interest in the long-term growth and value of the Company.
Senior executive service agreements generally include a
requirement for 3 months’ notice of termination by the
executive or the Group. There are no other termination
payments. Termination for misconduct does not require
notice or payment.
Remuneration of non-executive directors comprises fixed
cash fees only. The fees are determined by the Board
within the aggregate limit for directors’ fees approved by
shareholders. Non-executive directors on payroll receive
retirement benefits as part of their fixed fee. All other non-
executive directors receive no retirement benefits.
Participants in equity based remuneration schemes
are not permitted to enter into transactions which
limit the economic risk of participating in the scheme
(Recommendation 8.3).
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Neuren Pharmaceuticals Limited Annual Report 2019 D I R E C TO R S’ R E P O R T
PRINCIPAL ACTIVITIES
Neuren Pharmaceuticals Limited (Neuren or the Company,
and its subsidiaries, or the Group) is a publicly listed
biopharmaceutical company developing drugs for
neurological disorders.
REVIEW OF OPER ATIONS
Neuren is developing new therapies for five
neurodevelopmental disorders with high un-met need,
utilizing synthetic analogs of peptides that occur naturally in
the brain. Neuren has granted an exclusive license to ACADIA
Pharmaceuticals Inc. (ACADIA) for the development and
commercialization of trofinetide in North America, whilst
retaining all rights outside North America. Trofinetide is in a
Phase 3 clinical trial in the United States for Rett syndrome
and has completed a Phase 2 clinical trial in Fragile X
syndrome. The programs in Rett syndrome and Fragile X
syndrome have each received Fast Track designation by the
US Food and Drug Administration (FDA) and Orphan Drug
designation in both the United States and the European
Union. Neuren is advancing the development of its second
drug candidate NNZ-2591 for Phelan-McDermid syndrome,
Angelman syndrome and Pitt Hopkins syndrome.
Neuren’s new product pipeline expanded and advanced
substantially during 2019, with the Rett syndrome program
moving into the final stage (Phase 3) and development
commencing in three new indications. Neuren ended the
year in a strong position, advancing 2 valuable drugs to treat
5 debilitating childhood disorders which currently have no
approved therapies. The lead program is in Phase 3 in the
US, fully funded and executed by ACADIA.
ACADIA commenced the Rett syndrome Phase 3 program
in October 2019. The program involves treatment of
approximately 180 females aged 5 to 20 with trofinetide or
placebo for 12 weeks to evaluate efficacy and safety (the
“LAVENDER” study), following which patients are eligible to
continue treatment with trofinetide for 40 weeks to provide
longer-term safety data (the “LILAC” study). Results from
the LAVENDER study are expected in 2021. Positive results
potentially will enable a New Drug Application, which should
be eligible for “Priority Review” by the FDA in an abbreviated
period of 6 months. ACADIA has also established “LILAC-2”
under which eligible patients who complete LAVENDER and
LILAC will be able to continue to receive trofinetide during
the period before marketing approval.
In March 2019 the results of Neuren’s Phase 2 study of
trofinetide in pediatric Rett syndrome were published in
Neurology®, the highly regarded peer-reviewed medical
journal of the American Academy of Neurology. The
publication was also the basis for an editorial in the
journal titled “Turning the tide on targeted treatments
for neurodevelopmental disorders”.
In February and May 2019, Neuren announced positive
results for NNZ-2591 in separate mouse models of Phelan-
McDermid syndrome, Angelman syndrome and Pitt Hopkins
syndrome. These are three debilitating neurodevelopmental
disorders with no approved drug therapy. The cause of
each disorder is a mutation or deletion in a different gene
or chromosomal region, however they share an underlying
impairment in the connections and signalling between
brain cells. The aim of treatment with NNZ-2591 is to restore
normal functional connectivity and signalling.
In October 2019, Neuren received three Orphan Drug
designations from the FDA for NNZ-2591 in each of Phelan-
McDermid syndrome, Angelman syndrome and Pitt Hopkins
syndrome. Orphan Drug designation is a special status
that the FDA may grant to a drug to treat a rare disease or
condition. Orphan Drug designation qualifies the sponsor
of the drug for incentives including 7 years of marketing
exclusivity, plus 6 additional months if approved for
pediatric use, as well as waiver of the prescription drug
user fee for a marketing application.
Neuren is continuing the manufacturing development
and non-clinical studies required before submitting an
Investigational New Drug (IND) Application for NNZ-2591
in the United States. Neuren aims to commence clinical
trials in the second half of 2020. The NNZ-2591 program is
benefiting from the extensive experience gained by Neuren
during the development of trofinetide for Rett syndrome
and Fragile X syndrome.
During the year, Neuren’s patent portfolio for trofinetide and
NNZ-2591 was enhanced further by the grant of new patents
in the key markets of the United States, Europe and Japan.
Additional patent applications are under examination.
Assisted by Torreya, a global investment bank specialising
in life sciences, Neuren is conducting a process to evaluate
proposals for potential corporate transactions, engaging
with third parties in the US, Europe and Japan.
The consolidated financial statements are presented on
pages 30 to 47. All amounts in the Financial Statements are
shown in Australian dollars unless otherwise stated.
The Group’s loss after tax attributable to equity holders
of the Company for the year ended 31 December 2019
was $10.8 million compared with the Group’s profit after
tax of $3.1 million in 2018, mainly due to revenue of $13.5
million received in 2018 under the licence agreement with
ACADIA. In addition, foreign exchange gains decreased
by $0.8 million and research and development costs
were higher by by $3.8 million, resulting from increased
expenditure on manufacturing scale-up and non-clinical
toxicity studies. These were offset by a decrease in the loss
of $0.3 million (2018: $3.9 million) on the fair value of the
remaining settlements from Lanstead Capital under the
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Neuren Pharmaceuticals Limited Annual Report 2019 D I R E C TO R S’ R E P O R T
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Sharing Agreement that was entered into as part of the
capital raising in July 2017. Prudent control of expenditure
continues to be an important principle in the Group’s
operations and financing.
The Sharing Agreement with Lanstead Capital concluded
in June 2019 with the final settlement received in July
2019. The aggregate amount received from Lanstead
Capital throughout the course of the arrangement was
$12.2 million. This delivered to Neuren additional cash
funding of $2.2 million, with no additional shares issued
to Lanstead Capital.
The basic loss per share for 2019 was $0.108 (2018: earnings
of $0.031 per share), based on a weighted average number
of shares outstanding of 100,168,413 (2018: 99,038,854).
Cash reserves at 31 December 2019 were $13.8 million
(2018: $23.6 million). Net cash used in operating activities
was $11.7 million, compared with cash inflow of $6.4 million
in 2018. Financing provided cash of $1.9 million, received
from the settlements from the Sharing Agreement with
Lanstead Capital, compared with $11.7 million in 2018 from
the issue of shares in May 2018 under the exclusivity deed
with ACADIA and settlements from the Lanstead Sharing
Agreement.
No dividends were paid in the year, or in the prior year
and the Directors recommend none for the year.
DIRECTORS
Dr Richard Treagus, BScMed, MBChB, MPharmMed,
MBA (Executive Chairman)
Richard joined the Neuren Board as Executive Chairman
in January 2013. He is a physician, with more than 20
years’ experience in all aspects of the international
biopharmaceutical industry. He has held senior executive
roles with pharmaceutical organisations in South Africa
and Australia and has successfully established numerous
pharmaceutical business partnerships in the US, Europe
and Asia. Richard served as Chief Executive of the ASX-
listed company Acrux Limited from 2006 to 2012. Under
his leadership Acrux gained FDA approval for three drug
products, concluded a product licensing transaction
with Eli Lilly worth US$335m plus royalties and became
profitable. In 2010 Richard was awarded the Ernst and Young
Entrepreneur-of-the-Year (Southern Region) in the Listed
Company Category and in subsequent years has served
on the judging panel. Richard is Chairman of BTC Health
Limited, which is listed on the ASX.
Dr Trevor Scott, MNZM, LLD (Hon), BCom, FCA, FNZIM,
DF Inst D (Non-Executive Director)
Trevor joined the Neuren Board in March 2002. He is
the founder of T.D. Scott and Co., an accountancy and
consulting firm, which he formed in 1988. He is an
experienced advisor to companies across a variety of
industries. Trevor serves on numerous corporate boards
and is chairman of several.
Dianne Angus BSc (Hons), Master of Biotechnology,
IPTA (Non-Executive Director)
Dianne joined the Neuren Board in July 2018. She has
worked as a senior executive and non-executive director
within the biotechnology, biopharmaceutical and agritech
industries for over twenty-five years. She has created
numerous global industry partnerships which include
Prana Biotechnology, Gerolymatos International, Florigene,
Suntory & Monsanto to yield novel and competitive
medical, pharmaceutical and agricultural products.
Dianne has successfully forged strong partnerships with
key medical opinion leaders to create innovative clinical
research programs and driven the development path for
novel neurological pre-clinical agents to late-stage clinical
assets before the FDA and European regulators. With over
fifteen years’ experience in an ASX and NASDAQ listed
company, she has expertise in business development,
capital raising, investor relations, regulatory affairs and
intellectual property, together with corporate governance
and compliance capabilities. Dianne holds a Masters degree
in biotechnology and is a registered patent attorney.
Patrick Davies B EC, MBA (Non-Executive Director)
Patrick joined the Neuren Board in July 2018. He has held
executive management roles in the Australian and New
Zealand healthcare industry for over twenty five years
having performed successfully in senior roles across
many industry sectors including pharmacy, primary care,
pharmaceutical and consumer products. During his ten year
period as Chief Executive Officer of EBOS Group Limited
(and previously Symbion), the enterprise value of the group
achieved compound annual growth in enterprise value
of +20% (from circa $450M to in excess of $3.1B). He is a
director on other corporate boards and provides strategic
advice to a range of healthcare businesses and investors.
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Neuren Pharmaceuticals Limited Annual Report 2019 D I R E C TO R S’ R E P O R T
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Dr Jenny Harry BSc (Hons), PhD (Non-Executive Director)
Jenny joined the Neuren Board in 2018. She has 20 years’ experience in executive management of companies in the
biotechnology and biopharmaceutical sectors. As CEO and Managing Director of Tyrian Diagnostics, Jenny transformed the
company from an R&D business to a diagnostics company and oversaw development of the company’s first products through
to commercialisation and early revenue generation. She is a graduate of the Harvard Business School General Manager
Program and the Australian Institute of Company Directors. Jenny is currently Chair of QUT Enterprise Holdings and a non-
executive director on the boards of Ondek Pty Ltd, QUTbluebox and Creative Enterprise Australia.
INTERESTS REGISTER
The Company is required to maintain an interests register in which particulars of certain transactions and matters involving
Directors must be recorded. There were no entries during or since the end of 2019.
INFORMATION USED BY DIRECTORS
During the year the Board received no notices from Directors of the Company requesting to use Company information received
in their capacity as Directors, which would not otherwise have been available to them.
INDEMNIFIC ATION AND INSUR ANCE OF DIRECTORS AND OFFICERS
Neuren has entered into a deed of indemnity, insurance and access with Directors and Officers, which provides that Directors
and Officers generally will incur no monetary loss as a result of actions undertaken by them as Directors and Officers. The
indemnity does not cover criminal liability or liability in respect of a breach of a director’s duty to act in good faith and in
what the director believes to be the best interests of the Company or a breach of any fiduciary duty owed to the Company
or a subsidiary.
DONATIONS
No donations were made by the Company or its subsidiary companies during the year (2018: $nil).
REMUNER ATION OF DIRECTORS
Remuneration of the Directors is shown in the table below.
Remuneration of Directors
Dr Richard Treagus
Larry Glass
Dr Trevor Scott
Dianne Angus
Patrick Davies
Dr Jenny Harry
2019
$’000
360
–
72
60
60
60
2018
$’000
536
310
72
30
30
30
28
Neuren Pharmaceuticals Limited Annual Report 2019
D I R E C TO R S’ R E P O R T
C O N T I N U E D
EXECUTIVE REMUNER ATION
The number of employees, not being directors of the Company, who received remuneration and benefits above NZ $100,000,
shown in bands denominated in Australian dollars, was as follows:
Excluding shared based payments
$240,000 - $249,999
$270,000 - $279,999
$280,000 - $289,999
$410,000 - $419,999
Including shared based payments
$240,000 - $249,999
$270,000 - $279,999
$290,000 - $299,999
$410,000 - $419,999
2019
$’000
2018
$’000
1
1
1
–
1
1
–
1
2019
$’000
2018
$’000
1
1
–
1
–
–
1
–
AUDITORS
Grant Thornton New Zealand Audit Partnership (‘Grant Thornton’) is the independent auditor of the Company. Audit fees in
relation to the annual and interim financial statements were $59,649 (2018: $58,538). Grant Thornton did not receive any other
fees in relation to other financial advice and services. Grant Thornton Australia (member firm) received $15,000 fees in relation
to other financial advice and services in 2018. No amounts were payable to an auditor by subsidiary companies in 2019 or 2018.
For and on behalf of the Board of Directors who authorised the issue of these consolidated financial statements on
25 February 2020.
Dr Richard Treagus
Chairman
Dr Trevor Scott
Director
29
Neuren Pharmaceuticals Limited Annual Report 2019
C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 9
Interest
Revenue from licence agreement
Foreign exchange gain
Australian R&D Tax Incentive
Total income
Research and development costs
Corporate and administrative costs
Losses on financial assets measured at fair value through profit or loss
(Loss)/Profit before income tax
Income tax
(Loss)/Profit after income tax
Other comprehensive loss, net of tax
Amounts which may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations
Total comprehensive (loss)/income for the year
(Loss)/Profit after tax attributable to Equity holders of the Company:
Total comprehensive (loss)/profit attributable to Equity holders of the
Company:
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
The notes on pages 34 to 47 form part of these consolidated financial statements
Note
9
5
6
6
2019
$’000
389
–
132
495
1,016
(9,858)
(1,713)
(261)
(10,816)
–
(10,816)
(6)
(10,822)
(10,816)
(10,822)
($0.108)
($0.108)
2018
$’000
218
13,544
961
446
15,169
(6,101)
(2,074)
(3,921)
3,073
–
3,073
(58)
3,015
3,073
3,015
$0.031
$0.031
30
Neuren Pharmaceuticals Limited Annual Report 2019 C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N
A S AT 3 1 D E C E M B E R 2 0 1 9
ASSETS
Current Assets:
Cash and cash equivalents
Trade and other receivables
Financial assets measured at fair value through profit or loss
Total current assets
Non-current assets:
Property, plant and equipment
Intangible assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables
Total current liabilities
Total liabilities
EQUITY
Share capital
Other reserves
Accumulated deficit
Total equity attributable to equity holders
TOTAL LIABILITIES AND EQUITY
The notes on pages 34 to 47 form part of these consolidated financial statements
Note
2019
$’000
2018
$’000
7
8
9
10
11
13,844
552
–
14,396
10
–
10
23,576
942
2,121
26,639
2
1
3
14,406
26,642
559
559
559
126,426
(8,503)
(104,076)
13,847
14,406
1,973
1,973
1,973
126,426
(8,497)
(93,260)
24,669
26,642
31
Neuren Pharmaceuticals Limited Annual Report 2019 C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 9
Share
Capital
$’000
Share
Option
Reserve
$’000
Currency
Translation
Reserve
$’000
Accumulated
Deficit
$’000
Total
Equity
$’000
121,136
3,293
(10,625)
(97,440)
16,364
5,306
(16)
5,290
(1,107)
(1,107)
1,107
1,107
3,073
3,073
(58)
(58)
5,306
(16)
–
5,290
3,073
(58)
3,015
24,669
(10,816)
(6)
(10,822)
13,847
Equity as at 1 January 2018
Shares issued in private placement
Share issue costs expensed
Transfer on exercise of options
Transactions with owners
Profit after income tax
Other comprehensive loss
Total Comprehensive income for the year
Equity as at 31 December 2018
126,426
2,186
(10,683)
(93,260)
Loss after income tax
Other comprehensive loss
Total Comprehensive loss for the year
Equity as at 31 December 2019
(10,816)
(10,816)
(6)
(6)
126,426
2,186
(10,689)
(104,076)
The notes on pages 34 to 47 form part of these consolidated financial statements
32
Neuren Pharmaceuticals Limited Annual Report 2019 C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 9
Cash flows from operating activities:
Receipts from licence agreement
Receipts from Australian R&D Tax Incentive
Interest received
GST refunded
Payments for employees and directors
Payments to other suppliers
Net cash flow (to)/from operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from the issue of shares
Payment of share issue expenses
Net cash provided from financing activities
Net (decrease)/increase in cash
Effect of exchange rate changes on cash balances
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Reconciliation with (loss)/profit after income tax:
(Loss)/Profit after income tax
Non-cash items requiring adjustment:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Foreign exchange gain
Loss on financial assets
Changes in working capital:
Trade and other receivables
Trade and other payables
Net cash flow from operating activities
The notes on pages 34 to 47 form part of these consolidated financial statements
Note
2019
$’000
2018
$’000
9
–
450
413
102
(1,742)
(10,942)
(11,719)
(12)
(12)
1,860
–
1,860
(9,871)
141
23,576
13,846
13,544
631
165
95
(1,909)
(6,118)
6,408
–
–
11,730
(16)
11,714
18,122
748
4,706
23,576
(10,816)
3,073
4
–
(144)
261
390
(1,414)
(11,719)
5
72
(806)
3,921
(250)
393
6,408
33
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 9
1. NATURE OF BUSINESS
Neuren Pharmaceuticals Limited (Neuren or the Company,
and its subsidiaries, or the Group) is a publicly listed
biopharmaceutical company developing drugs for
neurological disorders.
The Company is a limited liability company incorporated
in New Zealand. The address of its registered office in New
Zealand is at the offices of Lowndes Jordan, Level 15 PWC
Tower, 188 Quay Street, Auckland 1141. Neuren ordinary
shares are listed on the Australian Securities Exchange
(ASX code: NEU).
These consolidated financial statements have been
approved for issue by the Board of Directors on
25 February 2020.
Inherent Uncertainties
– The Group’s research and development activities involve
inherent risks. These risks include, among others:
dependence on, and the Group’s ability to retain key
personnel; the Group’s ability to protect its intellectual
property and prevent other companies from using the
technology; the Group’s business is based on novel
and yet to be proven technology; the Group’s ability
to sufficiently complete the clinical trials process; and
technological developments by the Group’s competitors
could render its products obsolete.
– The Group’s revenue from licence agreements is
contingent on future events and will be intermittent
until product sales commence. The business plan
therefore may require expenditure in excess of revenue
and in the future the Group may need to raise further
financing through other public or private equity
financings, collaborations or other arrangements with
corporate sources, or other sources of financing to
fund operations. There can be no assurance that such
additional financing, if available, can be obtained on
terms reasonable to the Group.
2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES
These general-purpose consolidated financial statements
of the Group are for the year ended 31 December 2019
and have been prepared in accordance with and comply
with generally accepted accounting practice in New
Zealand (GAAP), New Zealand equivalents to International
Financial Reporting Standards (NZ IFRS) issued by the
New Zealand Accounting Standards Board which comply
with International Financial Reporting Standards, the
requirements of the Financial Markets Conduct Act 2013,
and other applicable Financial Reporting Standards as
appropriate for profit-oriented entities that fall into Tier 1 as
determined by the New Zealand External Reporting Board.
(a) Basis of preparation
Entities Reporting
The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of the Group as at
31 December 2019 and the results of all subsidiaries for
the year then ended. Neuren Pharmaceuticals Limited and
its subsidiaries, which are designated as profit-oriented
entities for financial reporting purposes, together are
referred to in these financial statements as the Group.
Statutory Base
Neuren is registered under the New Zealand Companies
Act 1993. Neuren is also registered as a foreign company
under the Australian Corporations Act 2001.
Historical cost convention
These consolidated financial statements have been
prepared under the historical cost convention as modified
by certain policies below. Amounts are expressed in
Australian Dollars and are rounded to the nearest thousand,
except for earnings per share.
Critical accounting estimates
The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires the
Group to exercise its judgement in the process of applying
the Group’s accounting policies. Actual results may differ
from those estimates. The areas involving a higher degree
of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements
are disclosed in Note 17.
Going concern basis
The directors monitor the Group’s cash position and
initiatives to ensure that adequate funding continues to
be available for the Group to meet its business objectives.
The Group recorded a loss after tax of $10.8 million for the
year ending 31 December 2019 and had negative operating
cash flows of $11.7 million for the year ended 31 December
2019. The Group had net assets at 31 December 2019 of
$13.8 million, including cash balances of $13.8 million.
It is the considered view of the Directors that the Group
will have access to adequate resources to meet its ongoing
obligations for at least a period of 12 months from the
date of signing these financial statements. On this basis,
the Directors have assessed it is appropriate to adopt the
going concern basis in preparing its consolidated financial
statements. The consolidated financial statements do not
include any adjustments that would result if the Group
was unable to continue as a going concern.
34
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
Changes in accounting policies
There is no significant impact of changes in accounting
policies for the year ended 31 December 2019. The Group
adopted NZ IFRS 16 ‘Leases’ as at 1 January 2019. The Group
does not have any qualifying lease agreements, therefore
there is no impact on the consolidated financial statements
for the current year.
Standards, interpretations and amendments to published
standards that are not yet effective
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory
for later periods and which the Group has not adopted early.
None are expected to impact the Group.
(b) Principles of Consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the group has control. The group controls
an entity when the group is exposed to, or has rights to,
variable returns from its involvement with the entity and
has the ability to affect those returns through its power
over the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the group. They are deconsolidated
from the date that control ceases.
Inter-company transactions, balances and unrealised gains
on transactions between group companies are eliminated.
Unrealised losses are also eliminated. When necessary,
amounts reported by subsidiaries have been adjusted
to conform with the group’s accounting policies.
(c) Foreign Currency Translation
(i) Functional and Presentation Currency
The functional currency of the Company and the
presentation currency of Group is Australian Dollars.
(ii) Transactions and Balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the Statement
of Comprehensive Income, except when deferred in
equity as qualifying cash flow hedges and qualifying
net investment hedges.
(iii) Foreign Operations
The results and financial position of foreign entities
(none of which has the currency of a hyperinflationary
economy) that have a functional currency different
from the presentation currency are translated into the
presentation currency as follows:
– assets and liabilities for each statement of financial
position presented are translated at the closing rate
at the date of that statement of financial position;
– revenue and expenses for each Statement of
Comprehensive Income are translated at average
exchange rates; and
– all resulting exchange differences are recognised as
a separate component of equity.
Exchange differences arising from the translation of any
net investment in foreign entities, and of borrowings and
other currency instruments designated as hedges of such
investments, are taken to shareholders’ equity.
Goodwill and fair value adjustments arising on the
acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at
the closing rate.
(d) Revenue
Revenue arises mainly from grants received and interest.
In the prior reporting period revenue from licence
agreements was recognised in relation to the partnering
agreement signed with ACADIA Pharmaceuticals Inc
(“ACADIA”).
Revenue is recognised either at a point in time or over time,
when (or as) the Group satisfies performance obligations
by transferring the promised goods or services to its
customers.
Grants
Grants received are recognised in profit or loss within the
Statement of Comprehensive Income over the periods in
which the related costs for which the grants are intended
to compensate are recognised as expenses and when the
requirements under the grant agreement have been met.
Any grants received for which the requirements under the
grant agreement have not been completed are carried as
liabilities until all the conditions have been fulfilled.
Interest income
Interest income is recognised on a time-proportion basis
using the effective interest method.
Revenue from licence agreements
The revenue from the ACADIA license agreement recognised
in the prior year was a Phase II reimbursement fee and was
recognised as a separate performance obligation as it is
distinct from all the other obligations within the Acadia
licence agreement. The revenue from this performance
obligation was recognised at a point in time when Neuren
had transferred its intellectual property to ACADIA and
Neuren had an enforceable right to receive payment.
35
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
(e) Research and development
Research costs include direct and directly attributable
overhead expenses for drug discovery, research and pre-
clinical and clinical trials. Research costs are expensed as
incurred.
When a project reaches the stage where it is reasonably
certain that future expenditure can be recovered
through the process or products produced, development
expenditure is recognised as a development asset using the
following criteria:
– a product or process is clearly defined and the costs
attributable to the product or process can be identified
separately and measured reliably;
– the technical feasibility of the product or process can
be demonstrated;
– the existence of a market for the product or process can
be demonstrated and the Group intends to produce and
market the product or process;
– adequate resources exist, or their availability can be
reasonably demonstrated to complete the project and
market the product or process.
In such cases the asset is amortised from the
commencement of commercial production of the product
to which it relates on a straight-line basis over the years
of expected benefit. Research and development costs are
otherwise expensed as incurred.
(f) Income tax
The income tax expense for the period is the tax payable on
the period’s taxable income or loss using tax rates enacted
or substantively enacted at the reporting date and adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled,
based on those tax rates which are enacted or substantively
enacted at the reporting date. The relevant tax rates are
applied to the cumulative amounts of deductible and
taxable temporary differences to measure the deferred tax
asset or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset
or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in
a transaction, other than a business combination, that at
the time of the transaction did not affect either accounting
profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly
in equity.
(g) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. All
non-financial assets are also reviewed whenever events or
changes in circumstances indicate that the carrying amount
of the assets may not be recoverable. The carrying amount
of a long-lived asset is considered impaired when the
recoverable amount from such asset is less than its carrying
value. In that event, a loss is recognised in the Statement of
Comprehensive Income based on the amount by which the
carrying amount exceeds the fair value less costs of disposal
and value in use of the long-lived asset. Fair market value is
determined using the anticipated cash flows discounted at
a rate commensurate with the risk involved.
(h) Goods and services tax (GST)
The financial statements have been prepared so that all
components are presented exclusive of GST. All items in
the statement of financial position are presented net of
GST, with the exception of receivables and payables, which
include GST invoiced.
(i) Cash and cash equivalents
Cash and cash equivalents comprises cash and demand
deposits held with established financial institutions and
highly liquid investments, which have maturities of three
months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value.
(j) Trade and other receivables
The Group makes use of a simplified approach in accounting
for trade and other receivables and records the loss
allowance as lifetime expected credit losses. These are the
expected shortfalls in contractual cash flows, considering
the potential for default at any point during the life of the
financial instrument. In calculating, the Group assesses
trade receivables on an individual basis, and uses its
historical experience, external indicators and forward-
looking information to calculate the expected credit losses.
(k) Property, plant and equipment
Property, plant and equipment are stated at historical cost
less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the Group and
the cost of the item can be measured reliably. All other
repairs and maintenance are charged to the Statement
of Comprehensive Income during the financial period in
which they are incurred.
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Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
Depreciation is determined principally using the straight-
line method to allocate their cost, net of their residual
values, over their estimated useful lives, as follows:
Scientific equipment
Computer equipment
Office furniture, fixtures & fittings
(l) Intangible assets
4 years
2-10 years
3-4 years
Intellectual property
Costs in relation to protection and maintenance of
intellectual property are expensed as incurred unless the
project has yet to be recognised as commenced, in which
case the expense is deferred and recognised as contract
work in progress until the revenues and costs associated
with the project are recognised.
Acquired patents, trademarks and licences have finite useful
lives and are carried at cost less accumulated amortisation
and impairment losses. Amortisation is calculated using the
straight line method to allocate the cost over the anticipated
useful lives, which are aligned with the unexpired patent
term or agreement over trademarks and licences.
Acquired software
Acquired software licences are capitalised on the basis of
the costs incurred to acquire and bring to use the specific
software. These costs are amortised over their estimated
useful lives.
(m) Employee benefits
Wages and salaries, annual leave, long service leave and
superannuation
Liabilities for wages and salaries, bonuses, annual leave,
long service leave and superannuation expected to
be settled within 12 months of the reporting date are
recognised in accrued liabilities in respect of employees’
services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are
settled. Liabilities for non-accumulating personal leave are
recognised when the leave is taken and measured at the
rates paid or payable.
Contributions are made by the Group to employee
superannuation funds and are charged as expenses when
the obligation to pay them arises.
Share-based payments
Neuren has operated a loan funded share plan and equity
performance rights plan. Both plans are accounted for as
share options. The fair value of the services received in
exchange for the grant of the options or shares is recognised
as an expense with a corresponding increase in other reserve
equity over the vesting period. The total amount to be
expensed over the vesting period is determined by reference
to the fair value of the options or shares at grant date.
At each reporting date, except for options that are subject
to a market condition for vesting, the Company revises its
estimates of the number of options that are expected to
vest and become exercisable. It recognises the impact of
the revision of original estimates, if any, in the Statement of
Comprehensive Income, and a corresponding adjustment to
equity over the remaining vesting period.
When options are exercised, the proceeds received net of
any directly attributable transaction costs are credited to
share capital.
(n) Share issue costs
Costs associated with the issue of shares which are
recognised in shareholders’ equity are treated as a
reduction of the amount collected per share.
(o) Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of
the financial instrument.
Financial assets are derecognised when the contractual
rights to the cash flows from the financial asset expire, or
when the financial asset and substantially all the risks and
rewards are transferred.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the
transaction price in accordance with NZ IFRS 15 ‘Revenue
from contracts with customers’, all financial assets are
initially measured at fair value adjusted for transaction
costs (where applicable).
Financial assets, other than those designated and effective
as hedging instruments, are classified into the following
categories:
– amortised cost
– fair value through profit or loss (FVTPL)
– fair value through other comprehensive income (FVOCI).
In the periods presented the corporation does not have any
financial assets categorised as FVOCI.
The classification is determined by both:
– the entity’s business model for managing the financial
asset
– the contractual cash flow characteristics of the financial
asset.
All income and expenses relating to financial assets that
are recognised in profit or loss are presented within finance
costs, finance income or other financial items, except for
impairment of trade receivables which is presented within
other expenses.
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Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
(p) Financial liabilities
The Group’s financial liabilities include trade and other
payables. Financial liabilities are initially measured at fair
value, and, where applicable, adjusted for transaction costs.
Subsequently, financial liabilities are measured at
amortised cost using the effective interest method.
(q) Earnings per share
Basic and diluted earnings per share are calculated by
dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary
shares outstanding during the period.
3. SEGMENT INFORMATION
The Group operates as a single operating segment and
internal management reporting systems present financial
information as a single segment. The segment derives its
revenue and incurs expenses through the development
of pharmaceutical products. Grant income arises from
the Australian R&D Tax Incentive and revenue from
licence agreements is derived from the United States.
The Board of the Company has been identified as the
chief operating decision maker. The Board assesses the
financial performance and position of the group, and
makes strategic decisions.
2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if
the assets meet the following conditions (and are not
designated as FVTPL):
– they are held within a business model whose objective
is to hold the financial assets and collect its contractual
cash flows
– the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal and
interest on the principal amount outstanding
After initial recognition, these are measured at amortised
cost using the effective interest method.
Discounting is omitted where the effect of discounting
is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category of
financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business
model other than ‘hold to collect’ or ‘hold to collect and sell’
are categorised at fair value through profit and loss. Further,
irrespective of business model financial assets whose
contractual cash flows are not solely payments of principal
and interest are accounted for at FVTPL. All derivative
financial instruments fall into this category, except for those
designated and effective as hedging instruments, for which
the hedge accounting requirements apply.
Assets in this category are measured at fair value with gains
or losses recognised in profit or loss within the Statement of
Comprehensive Income. The fair values of financial assets in
this category are determined by reference to active market
transactions or using a valuation technique where no active
market exists.
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Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
4. EXPENSES
Loss/(Profit) before income tax includes the following expenses:
Depreciation – property, plant and equipment
Computer equipment
Fixtures and fittings
Total depreciation
Amortisation – intangible assets
Intellectual property
Total amortisation
Remuneration of auditors
Audit and review of financial statements (Grant Thornton NZ)
Advisory services (Grant Thornton Australia – member firm)
Audit and review of financial statements (PwC)
Total remuneration of auditors
Employee benefits expense
Short-term benefits
Post-employment benefits
Other employee benefits expenses
Total employee benefits expense
Directors’ compensation
Short-term benefits
Post-employment benefits
Total Directors’ compensation
2019
$’000
2018
$’000
4
–
4
–
–
60
–
–
60
754
70
75
899
602
10
612
4
1
5
73
73
59
15
67
141
1,031
73
–
1,104
1,003
5
1,008
39
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
5. INCOME TA X
Income tax
Current tax
Deferred tax
Numerical reconciliation of income tax to prima facie tax receivable:
(Loss)/Profit before income tax
Tax at applicable rates 27.5% (2018: 27.5%)
Non-taxable Australian R&D Tax Incentive income
Non deductible expenses for R&D incentive
Non-taxable loss in fair value of equity derivative
Taxable (loss)/gain on settlement of equity derivative
Utilisation of previously unrecognised tax losses
Deductible temporary differences and tax losses for which no deferred tax asset was recognised
Income tax benefit
2019
$’000
2018
$’000
–
–
–
(10,816)
(2,974)
(136)
310
72
(268)
–
2,996
–
–
–
–
3,073
845
(123)
282
1,078
728
(2,710)
(100)
–
Gross tax losses for which no deferred tax asset has been recognised(a)
100,883
88,914
(a) Of these gross tax losses, $64.6 million relates to New Zealand tax losses, which are unlikely to be utilised unless future
taxable income is generated in New Zealand.
6. E ARNINGS PER SHARE
The Group has potentially dilutive ordinary shares in the form of loan funded shares. A calculation is performed to determine
the number of shares that could have been acquired at fair value (determined as the average annual market share price of
the Company’s shares) based on the monetary value of the exercise price attached to the outstanding loan funded shares.
The number of loan funded shares calculated as above is compared with the number of shares that would have been issued
assuming the exercise of the loan funded shares. In 2019, the loan funded shares are excluded from the diluted weighted
average shares outstanding as they are anti-dilutive.
(Loss)/Profit after income tax attributable to equity holders (basic) ($’000)
Weighted average shares outstanding (basic) (No.)
Basic (loss)/earnings per share
(Loss)/Profit after income tax attributable to equity holders (diluted) ($’000)
Weighted average shares outstanding (diluted) (No.)
Diluted (loss)/earnings per share
7. C A SH AND C A SH EQUIVALENTS
Cash
Demand and short-term deposits
40
2019
2018
(10,816)
100,168,413
3,073
99,038,854
($0.108)
$0.031
(10,816)
100,168,413
3,073
99,751,382
($0.108)
$0.031
2019
$’000
820
13,024
13,844
2018
$’000
3,738
19,838
23,576
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
8. TR ADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Interest receivables
Australian R&D tax incentive
2019
$’000
2018
$’000
13
15
33
491
552
423
16
57
446
942
The Group applies the simplified model of recognising lifetime expected credit losses for all trade receivables as these items
do not have a significant financing component.
In measuring the expected credit losses, the trade receivables have been assessed on an individual basis due to the limited
number of receivables.
The expected loss rates are based on the payment profile of the individual receivable and other transactions with that debtor
over the past 12 months before 31 December 2019 as well as the corresponding historical credit losses during that period.
Trade receivables are written off (i.e. de-recognised) when there is no reasonable expectation of recovery. Failure to make
payments within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangements
amongst others are considered indicators of no reasonable expectation of recovery. No credit losses have been determined
for the current year (2018: nil).
9. FINANCIAL A SSETS ME A SURED AT FAIR VALUE THROUGH PROFIT OR LOSS
Current
Equity derivative
Reconciliation of the fair values at the end of the current financial year are set out below:
Opening fair value
Cash settlements received
Net loss through profit or loss
Closing fair value
2019
$’000
2018
$’000
–
2,121
2019
$’000
2,121
(1,860)
(261)
–
2018
$’000
12,466
(6,424)
(3,921)
2,121
Financial instruments classified under the equity derivative were measured at fair value using a fair value hierarchy reflecting
the significance of the inputs used in making the measurements. These financial assets were classified as level 2. Fair value
calculations were based on a discounted cash flow model.
In July 2017, Neuren completed a placement of new ordinary shares, the subscribers for which included Lanstead Capital.
Neuren entered into a Sharing Agreement with Lanstead Capital, under which Neuren’s economic interest was an equity
derivative, determined and payable in 18 cash settlements commencing in September 2017. The arrangement concluded in
June 2019 with the final settlement received in July 2019.
The aggregate amount received from Lanstead Capital throughout the course of the arrangement was $12.2 million, compared
with the commitment of $10.0 million in the placement. This delivered to Neuren additional cash funding of $2.2 million, with
no additional shares issued to Lanstead Capital.
The calculation of each monthly settlement was dependent upon the volume weighted average price at which Neuren’s
shares were traded during the 20 days prior to settlement (VWAP). If the VWAP for each settlement was equal to $1.77 per
share (Benchmark Price), Neuren received $472,222 (one eighteenth of $8.5 million). For each settlement, if the VWAP was
higher than the Benchmark Price, Neuren received proportionately more than $472,222 and if the VWAP was lower than the
Benchmark Price, Neuren received proportionately less than $472,222.
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Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
9. FINANCIAL A SSETS ME A SURED AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The key assumption for the calculation of the fair value of the equity derivative was the estimated VWAP applicable to each
settlement. For the fair value at 31 December 2018, the VWAP was assumed to be $1.40 per share which was the closing price
on 31 December 2018. The fair value calculations were adjusted to reflect the time value of money and the estimated credit risk
associated with the counterparty.
10. TR ADE AND OTHER PAYABLES
Trade payables
Accruals
Employee Benefits
2019
$’000
340
26
193
559
2018
$’000
1,335
83
555
1,973
Trade payables and accruals relate to operating expenses, primarily research and development expenses. Trade payables
comprise amounts invoiced prior to the reporting date and accruals comprise the value of work done but not invoiced at each
reporting date.
11. SHARE C APITAL
Issued Share Capital
Ordinary shares on issue at beginning of year
Shares bought back under Loan Funded Share Plan
Shares issued in private placement
Share issue expenses - cash issue costs
2019
Shares
2018
Shares
2019
$’000
2018
$’000
102,668,413
–
–
–
101,840,020
(501,607)
1,330,000
–
102,668,413
102,668,413
126,426
–
–
–
126,426
121,136
–
5,306
(16)
126,426
In May 2018 Neuren issued 1,330,000 ordinary shares at A$4.00 per share, which was a premium of approximately 33% over the
10-day volume-weighted average share price, under the terms of an Exclusivity Deed that provided for exclusive negotiations
with ACADIA for a period of 3 months.
At 31 December 2019 and 31 December 2018, 2.5 million ordinary shares were held as treasury stock in respect of the Loan
Funded Share Plan described in section (a) below.
Ordinary Shares
The ordinary shares have no par value and all ordinary shares are fully paid-up and rank equally as to dividends and
liquidation, with one vote attached to each fully paid ordinary share.
Share based payments
No securities were issued under any share based payment plans in 2019 or 2018. At 31 December 2019 and 2018, all services
required for instruments issued under share based payment plans had been received. There were no equity-settled share
based payments expensed in the Statement of Comprehensive Income in 2019 or 2018.
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Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
11. SHARE C APITAL (CONTINUED)
Loan funded shares
The Company has a Loan Funded Share Plan to support the achievement of the Company’s business strategy by linking
executive reward to improvements in the financial performance of the Company and aligning the interests of executives
with shareholders. Under the Loan Funded Share Plan, loan funded shares may be offered to employees or consultant
(“Participants”) by the Remuneration and Audit Committee. The Company issues new ordinary shares, which are placed in a
trust to hold the shares on behalf of the Participant. The trustee issues a limited-recourse, interest-free loan to the participant,
which is equal to the number of shares multiplied by the issue price. A limited-recourse loan means that the repayment amount
will be the lesser of the outstanding loan and the market value of the shares that are subject to the loan. The trustee continues
to hold the shares on behalf of the Participant until all vesting conditions have been satisfied and the Participant chooses to
settle the loan, at which point ownership of the shares is transferred from the trust to the Participant. Any dividends paid by
the Company while the shares are held by the trust are applied as repayment of the loan at the after-tax value of the dividend.
On request by the participant, the Company may dispose of, or buy back, vested shares and utilise the proceeds to settle
the outstanding loan. The directors may apply vesting conditions to be satisfied before the shares can be transferred to the
Participant. Before the loan can be given, the New Zealand Companies Act requires the Company to disclose to shareholders
the provision of financial assistance to the Participant. The maximum loan term is 5 years.
All shares issued under the plan were issued subject to the following vesting conditions:
a.
The Participant is continuously a director or employee of the Company for a period of three years commencing on the day
on which the directors resolved to issue the Loan Funded Shares (“Issue Date”) and finishing on the third anniversary of the
issue date (or such other date on which the directors make a determination as to whether the vesting conditions have been
met) (the “Vesting Period”); and
b. 50% of the Loan Funded Shares shall each vest where the following performance conditions are met:
i. The Total Shareholder Return (TSR) on the Company’s ASX-listed ordinary shares equals or exceeds 75% over the
Vesting Period. The TSR is calculated using the average closing share price over the period of 30 consecutive trading
days concluding on the Issue Date and the average closing share price over the period of 30 consecutive trading days
concluding on the date on which the Vesting Period ends; and
ii. Within the Vesting Period, either:
1.
The Company determines to progress a product candidate to a Phase 2b or Phase 3 clinical trial following a positive
Phase 2 clinical trial outcome and a national regulatory authority approves the initiation of such trial, or
2. A material partnering or licensing transaction is concluded.
Movements in the number of Loan Funded Shares were as follows:
Issued shares at 1 January 2018
Exercised
Issued shares at 31 December 2018 and 31 December 2019
Forfeited at 31 December 2019
Unvested at 31 December 2019
Loan Funded
Shares
Weighted
Average
Exercise Price
4,500,000
(2,000,000)
2,500,000
(1,500,000)
1,000,000
$1.320
$0.780
$1.76
$1.84
$1.64
Exercisable
2,000,000
(2,000,000)
Weighted
Average
Exercise Price
$0.78
$0.78
–
The loans in respect of 1.5 million Loan Funded Shares expired in May 2019, with the share price at that time below the exercise
price of $1.84. The Loan Funded Shares were therefore forfeited and are to be bought back by the Company at the amount of
the loans and cancelled.
The exercise price for 1.0 million unvested Loan Funded Shares is $1.64 per share. The directors deferred making a
determination on the vesting conditions until the loan expiry date in April 2020, or an earlier date as determined by
the directors.
On 30 May 2018 the Company bought back 501,607 ordinary shares from Neuren Trustee Limited at the volume weighted
average price for the 5 days ended 29 May 2018 in order to settle the outstanding loan of $1,560,000 relating to 2,000,000
vested Loan Funded Shares held in trust pending repayment of the loan. The remaining 1,498,393 shares were transferred
from Neuren Trustee Limited to the participant.
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Neuren Pharmaceuticals Limited Annual Report 2019
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
12. SUBSIDIARIES
(a) Investment in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in Note 2(b).
Name of entity
Neuren Pharmaceuticals Inc.
Neuren Pharmaceuticals (Australia) Pty Ltd
Date of
incorporation
20-Aug-02
9-Nov-06
Principle activities
Interest
held
Domicile
Development services
Dormant
100%
100%
100%
USA
AUS
NZ
Neuren Trustee Limited
29-May-13
Holds loan funded shares
All subsidiaries have a reporting date of 31 December.
13. COMMITMENTS AND CONTINGENCIES
(a) Operating leases
There were no aggregate future non-cancellable minimum lease payments for premises committed to by the Group, but not
recognised in the consolidated financial statements as at 31 December 2019 or 31 December 2018.
(b) Legal claims
The Group had no significant legal matter contingencies as at 31 December 2019 or at 31 December 2018.
(c) Commitments
The Group was not committed to the purchase of any property, plant or equipment or intangible assets as at 31 December 2019
(2018: nil).
At 31 December 2019, the Group had commitments under product development contracts amounting to approximately
$6.6 million, comprising approximately US$4.0 million and approximately GBP 0.5 million. At 31 December 2018, the Group
had commitments under product development contracts amounting to approximately $12.4 million.
(d) Contingent liabilities
The Group had no contingent liabilities at 31 December 2019 or at 31 December 2018 that require disclosure.
14. REL ATED PART Y TR ANSAC TIONS
(a) Key Management Personnel
The Key Management Personnel of the Group (KMP) include the directors of the Company and direct reports to the Executive
Chairman. Compensation for KMP was as follows:
Short-term benefits
Post-employment benefits
Other long-term benefits
2019
$’000
1,345
62
71
1,478
2018
$’000
1,867
60
–
1,927
In 2018 the Company bought back 501,607 ordinary shares from Neuren Trustee Limited at the volume weighted average price
for the 5 days ended 29 May 2018 in order to settle the outstanding loan of $1,560,000 relating to 2,000,000 vested Loan Funded
Shares held in trust for KMP pending repayment of the loan. The remaining 1,498,393 shares were transferred from Neuren
Trustee Limited to KMP.
(b) Subsidiaries
The ultimate parent company in the Group is Neuren Pharmaceuticals Limited (“Parent”). The Parent funds the activities of the
subsidiaries throughout the year as needed. Interests in and amounts due from subsidiaries are set out in Note 12. All amounts
due between entities in the Group are payable on demand and bear no interest.
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Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
15. EVENTS AFTER REPORTING DATE
As at the date of these consolidated financial statements authorised for issue, there are no events arising since 31 December
2019 that require disclosure.
16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Categories of financial instruments
Financial assets
2019
Cash and cash equivalents
Trade and other receivables
Total financial assets
2018
Cash and cash equivalents
Trade and other receivables
Equity derivative
Total financial assets
Financial liabilities
Amortised cost – Non-Interest Bearing:
Trade and other payables
Total financial liabilities
At amortised cost
At fair value through
profit or loss
Floating
Interest Rate
$’000
Non-Interest
Bearing
$’000
Non-Interest
Bearing
$’000
7
8
7
8
9
13,844
–
13,844
23,576
–
–
23,576
–
552
552
–
942
–
942
10
–
–
–
–
–
2,121
2,121
2019
$’000
559
559
Total
$’000
13,844
552
14,397
23,576
942
2,121
26,639
2018
$’000
1,973
1,973
At 31 December 2019, the reporting value of all financial instruments approximated to the fair value.
(b) Risk management
The Group is subject to a number of financial risks which arise as a result of its activities.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
Currency risk
During the normal course of business the Group enters into contracts with overseas customers or suppliers or consultants that
are denominated in foreign currency. As a result of these transactions there is exposure to fluctuations in foreign exchange
rates. The Company also has a net investment in a foreign operation, whose net assets are exposed to foreign currency
translation risk.
The principle currency risk faced by the business is the exchange rate between the Australian dollar and the US dollar. The
Group holds cash denominated in US dollars and Australian dollars and has material expenditure in each of these currencies.
Where possible, the Group matches foreign currency income and foreign currency expenditure as a natural hedge, holding
foreign currency cash to facilitate this natural hedge. When foreign currency expenditure exceeds foreign currency revenue
and foreign currency cash, the group purchases foreign currency to meet anticipated requirements under spot and forward
contracts. The Group does not designate formal hedges. At 31 December 2019, there were no forward contracts outstanding
(2018: None).
45
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
During the year, the US dollar fluctuated against the Australian dollar. A foreign exchange gain of $132,000 is included in results
for the year ended 31 December 2019 (2018: gain $961,000). The majority of the gain relates to gains on the translation for
reporting purposes of the Group’s US dollar cash reserves into Australian dollars.
The carrying amounts of US dollar denominated financial assets and liabilities are as follows:
Assets
US dollars
Liabilities
US dollars
2019
$’000
2018
$’000
8,084
15,818
180
572
An increase of 10% in the cross rate of the US dollar against the Australian dollar as at the reporting date would have increased
the consolidated loss after income tax by $719,000. A decrease of 10% in the cross rate of the US dollar against the Australian
dollar as at the reporting date would have decreased the consolidated loss after income tax by $878,000.
Interest rate risk
The Group is exposed to interest rate risk as entities in the Group hold cash and cash equivalents.
The effective interest rates on financial assets are as follows:
Financial Assets
Cash and cash equivalents
Australian dollar cash deposits
Australian dollar interest rate
US dollar cash deposits
US dollar interest rate
2019
$’000
2018
$’000
5,773
1.54%
8,071
1.73%
5,625
2.46%
15,800
2.32%
The Company and Group do not have any interest bearing financial liabilities. Trade and other receivables and payables do not
bear interest and are not interest rate sensitive.
A 10% change in average market interest rates would have changed reported loss after tax by approximately $39,000 and in
2018 changed reported profit after tax by approximately $22,000.
Credit risk
The Group incurs credit risk from transactions with financial institutions. The total credit risk on cash and cash equivalents,
which have been recognised in the statement of financial position, is the carrying amount. The Company and its subsidiaries
do not retain any collateral or security to support transactions with financial institutions. Cash and cash equivalents are held
and transacted with National Australia Bank, Western Union and Sonabank.
Liquidity risk
The Group’s financial liabilities, comprising trade and other payables, are generally repayable within 1 – 2 months. The
maturity and availability of financial assets, comprising cash and cash equivalents, receivables and monthly cash settlements
from the equity derivative up to June 2019, are monitored and managed to ensure financial liabilities can be repaid when due.
Capital risk
The Group manages its capital, which is its equity, to ensure that the Group entities are able to meet their estimated
commitments as they fall due. In this regard, the Company raised additional equity capital during 2018, as described in
Note 11. Capital risk is impacted by the inherent uncertainties described in Note 1.
46
Neuren Pharmaceuticals Limited Annual Report 2019 N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
17. CRITIC AL ACCOUNTING ESTIMATES AND A SSUMPTIONS
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities within the next financial year are as discussed below.
The Group’s research and development activities are eligible under the Australian R&D Tax Incentive. The Group has assessed
these activities and expenditure to determine which are likely to be eligible under the incentive scheme. For the period to
31 December 2019 the Group has recorded other revenue of $0.5 million (2018: $0.4 million).
The Group has assessed that all research and development expenditure to date does not meet the requirements for
capitalisation as an intangible asset because it is not yet probable that the expected future economic benefits that are
attributable to the asset will flow. The Group’s current assessment is that future expenditure will not meet that requirement
prior to the approval of a New Drug Application by the US Food and Drug Administration.
The Group is subject to income taxes in Australia because it is domiciled in that country. There are transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination may be uncertain.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the current and deferred tax provisions in the period in which such determination is made.
47
Neuren Pharmaceuticals Limited Annual Report 2019 I N D E P E N D E N T A U D I T O R ’ S R E P O R T
Independent Auditor’s Report
Grant Thornton New Zealand Audit
Partnership
L4, Grant Thornton House
152 Fanshawe Street
PO Box 1961
Auckland 1140
T +64 (0)9 308 2570
F +64 (0)9 309 4892
www.grantthornton.co.nz
To the Shareholders of Neuren Pharmaceuticals Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Neuren Pharmaceuticals Limited (the
“Company”) and its subsidiaries (the “Group”) on pages 30 to 47 which comprise the consolidated
statement of financial position as at 31 December 2019, and the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Group as at 31 December 2019 and of its financial performance and cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (“NZ IFRS”) issued by the New Zealand Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs
(NZ)”) issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with
Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners issued by the
New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Other than in our capacity as auditor we have no relationship with, or interests in, the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd
48
Neuren Pharmaceuticals Limited Annual Report 2019 Why matter is significant
How our audit addressed the key audit matter
Going concern
The financial statements have been prepared on
a going concern basis, refer to note 2 in the
financial statements.
The Group made a loss of $10.8m for the year
ended 31 December 2019 and it has not forecast
to receive any revenue in the next 12 months as
research and development continues.
We included the going concern assumption as a
key audit matter as the Group is reliant on the
existing cash reserves of $13.8m to cover
necessary expenditure.
In obtaining sufficient appropriate audit evidence
to assess the appropriateness of the going
concern assumption used in preparing the
consolidated financial statements we:
Assessed the cash flow requirements of the
Group over 14 months from 31 December
2019 based on approved budgets and
forecasts.
Evaluated what forecast expenditure is
committed and what could be considered
discretionary.
Performed a sensitivity analysis on forecast
cash flows and the impact of this on
available funds.
Other Information
The Directors are responsible for the other information. The other information comprises the information
included in the directors’ report and additional information (but does not include the consolidated
financial statements and our auditor’s report thereon), which we obtained prior to the date of this
auditor’s report and the annual report which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we will
not express any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements 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.
Directors’ responsibilities for the Consolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with New Zealand equivalents to International Financial
Reporting Standards issued by the New Zealand Accounting Standards Board, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the Group
for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are 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 ISAs (NZ) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
26
49
Neuren Pharmaceuticals Limited Annual Report 2019
individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the consolidated financial statements
is located on the External Reporting Board’s website at https://www.xrb.govt.nz/assurance-
standards/auditors-responsibilities/audit-report-1/
Restriction on use of our report
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state to the Company’s shareholders, as a body those matters which we
are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and its
shareholders, as a body, for our audit work, for this report or for the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Ryan Campbell
Partner
Auckland
25 February 2020
27
50
Neuren Pharmaceuticals Limited Annual Report 2019
A D D I T I O N A L I N F O R M AT I O N
DIREC TORS’ INTERESTS IN EQUIT Y SECURITIES A S AT 24 FEBRUARY 2020
Director
Richard Treagus
Trevor Scott
Dianne Angus
Patrick Davies
Jenny Harry
DIREC TORS OF SUBSIDIARY COMPANIES AT 31 DECEMBER 2019
Neuren Pharmaceuticals Inc.
Neuren Pharmaceuticals (Australia) Pty Ltd
Neuren Trustee Limited
Interests in
Ordinary Shares
Direct
Indirect
1,979,163
105,517
1,000,000
2,989,784
–
–
–
–
69,646
14,084
Richard
Treagus
Larry
Glass
Trevor
Scott
√
√
√
√
√
AUSTR ALIAN STOCK EXCHANGE DISCLOSURES
Neuren Pharmaceuticals Limited is incorporated in New Zealand under the Companies Act 1993.
The Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act, Australia, dealing with the acquisition of
shares (such as substantial holdings and takeovers).
Limitations on the acquisition of shares are imposed under New Zealand law are as follows:
(a) In general, securities in the Company are freely transferable and the only significant restrictions or limitations in relation to
the acquisition of securities are those imposed by New Zealand laws relating to takeovers and overseas investment.
(b) The New Zealand Takeovers Code creates a general rule under which the acquisition of 20% or more of the voting rights
in the Company or the increase of an existing holding of 20% or more of the voting rights of the Company can only occur
in certain permitted ways. These include a full takeover offer in accordance with the Takeovers Code, a partial takeover
in accordance with the Takeovers Code, an acquisition approved by an ordinary resolution, an allotment approved by an
ordinary resolution, a creeping acquisition (in certain circumstances), or compulsory acquisition of a shareholder holding
90% or more of the shares.
(c) The New Zealand Overseas Investment Act 2005 and Overseas Investment Regulations 2005 (New Zealand) regulate certain
investments in New Zealand by overseas interests. In general terms, the consent of the New Zealand Overseas Investment
Office may be required where an ‘overseas person’ acquires shares in the Company that amount to 25% or more of the
shares issued by the Company, or if the overseas person already holds 25% or more, the acquisition increases that holding.
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Neuren Pharmaceuticals Limited Annual Report 2019 A D D I T I O N A L I N F O R M AT I O N
C O N T I N U E D
EQUIT Y SECURITIES INFORMATION
The Company has only one class of shares, being ordinary shares. Each ordinary share is entitled to one vote when a poll is
called; otherwise on a show of hands at a shareholder meeting every member present in person or by proxy has one vote.
There are no securities subject to escrow and there is no current on-market buy-back of securities.
The following information is based on share registry information processed up to and including 1 April 2020.
The number of ordinary shareholdings held in less than marketable parcels at 1 April 2020 was 993, holding 196,613 ordinary
shares.
DISTRIBUTION OF SECURIT Y HOLDERS
Ordinary shares
Size of holding
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
ordinary shares
68,136,023
22,938,177
4,144,916
4,158,985
790,312
%
68.02
22.90
4.14
4.15
0.79
100,168,413
100.00
Number
of holders
114
767
530
1,517
1,805
4,733
%
2.41
16.21
11.20
32.05
38.14
100.00
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Neuren Pharmaceuticals Limited Annual Report 2019 A D D I T I O N A L I N F O R M AT I O N
C O N T I N U E D
Twenty largest holders of ordinary shares
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
Number of
ordinary shares
% of issued
share capital
14,276,172
14.25
CAMERON RICHARD PTY LTD
CITICORP NOMINEES PTY LIMITED
ESSEX CASTLE LIMITED
STUART ANDREW PTY LTD
LINWIERIK SUPER PTY LTD
SMITHLEY SUPER PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DR RICHARD SPENCER TREAGUS
INVESTMENT CUSTODIAL SERVICES LIMITED
MXB INVESTMENTS LLC
BRISPOT NOMINEES PTY LTD
DR TREVOR SCOTT
DR ROBIN LANCE CONGREVE
UBS NOMINEES PTY LTD
CS FOURTH NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
FIRST COLBYCO PTY LTD
NAMARONG INVESTMENTS PTY LTD
ROXTRUS PTY LIMITED
Total
Balance of share register
Total ordinary shares quoted on ASX
Unquoted loan funded shares held by Neuren Trustee Limited1
Total issued ordinary shares
1
Loan Funded Share Plan described in Note 11 to the Financial Statements.
5,815,830
5,091,305
2,769,251
2,633,586
2,535,000
2,121,000
2,108,470
1,979,163
1,480,587
1,330,000
1,163,357
1,000,000
991,637
839,021
755,507
732,175
624,649
555,556
545,000
49,347,266
50,821,147
100,168,413
2,500,000
102,668,413
5.81
5.08
2.76
2.63
2.53
2.12
2.10
1.98
1.48
1.33
1.16
1.00
0.99
0.84
0.75
0.73
0.62
0.55
0.54
49.26
50.74
100.00
53
Neuren Pharmaceuticals Limited Annual Report 2019 pharmaceuticals
NEUREN PHARMACEUTIC ALS LIMITED
Suite 201, 697 Burke Rd
Camberwell
Victoria 3124
Australia
Tel: +61 3 9092 0480
ABN: 72 111 496 130
ASX code: NEU
New Zealand Registered Office:
At the offices of Lowndes Jordan
Level 15 PWC Tower
188 Quay Street
Auckland 1141
New Zealand
Share Registry:
Link Market Services Limited
Tower 4, 727 Collins Street
Docklands
Victoria 3008
Australia
Postal address:
Locked Bag A14
Sydney South NSW 1235
Tel: +61 1300 554 474
Fax: +61 2 9287 0303
www.neurenpharma.com