pharmaceuticals
Fighting neurodevelopmental disorders
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
A N N U A L R E P O R T 2 0 2 0
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.
Contents
1 Neuren’s value proposition
2
Chairman and CEO message
3 Operating Review
18 Management Team
20 Board
21 Corporate Governance
28 Directors’ Report
32 Consolidated Statement of Comprehensive Income
33 Consolidated Statement of Financial Position
34 Consolidated Statement of Changes in equity
35 Consolidated Statement of Cash Flows
36 Notes to the Consolidated Financial Statements
50
Independent Auditor’s Report
53 Additional Information
N E U R E N ’ S V A LU E P R O P O S I T I O N
Compound
Indication
Preclinical
Phase 1
Phase 2
Phase 3
Commercial Partner
Pipeline
Trofinetide
NNZ-2591
Rett syndrome1
Fragile X
syndrome1
Phelan-McDermid
syndrome2
Angelman
syndrome2
Pitt Hopkins
syndrome2
Prader-Willi
syndrome
Results
Q4 2021
(North America)
(North America)
Commence
2021
Commence
2021
Commence
2021
TBA
1 Orphan Drug designation in US and EU, Fast Track designation in US
2 Orphan Drug designation in US and EU
Three key drivers of future value
1
2
Realise Neuren’s share of
trofinetide value in the US
through ACADIA’s Phase 3 results
and New Drug Application
Implement commercial
strategy for trofinetide ex-
North America, using US
data for registration
3
Confirm efficacy of
NNZ-2591 in Phase 2
trials for 3 valuable
indications
– Phase 3 results Q4 2021
– Potential US approval 2022
– EMA interactions 2021
– Execute commercial strategy in
Europe and Asia 2021/22
– Submit IND H1 2021
– Start Phase 2 2021
– Phase 2 results 2022
2021 Milestones
– EU Orphan designations for Phelan-McDermid, Angelman, and Pitt Hopkins
– Successful Phase 1 trial results for NNZ-2591
– Prader-Willi syndrome added to NNZ-2591 pipeline
– Complete drug substance manufacturing for NNZ-2591 Phase 2
– Submit NNZ-2591 INDs to FDA
– Complete enrolment in trofinetide Rett syndrome Phase 3
– Commence NNZ-2591 Phase 2 trials
– Orphan designation in US and EU for Prader-Willi syndrome
– Trofinetide Rett syndrome Phase 3 results
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Neuren Pharmaceuticals Limited Annual Report 2020
C H A I R M A N A N D C E O M E S S A G E
PAT R I C K D A V I E S & J O N P I L C H E R
Despite the many challenges of
covid-19 in the United States, our US
partner Acadia has done a very good
job keeping the Rett syndrome Phase
3 trial on track to report top-line
results in Q4 2021. This also reflects
the support and determination of the
Rett community. We look forward to
the completion of enrolment into the
trial in the near term. Acadia is fully
funding the Phase 3 program and its
very substantial commitment to our
partnership is illustrated by its recent
10k Annual Report, which detailed
expenditure to date on trofinetide
of approximately A$100 million for
external service providers only.
In parallel with the Rett syndrome
trial, Neuren’s rapid advancement
of NNZ-2591 into Phase 2 trials in
multiple indications has transformed
the potential upside in the value of our
business, as well as improving the risk
profile. The Neuren team has achieved
this in a remarkably short time
frame, leveraging all the knowledge
and experience they have gained
from the Rett syndrome program.
We believe that the breadth and late
stage of Neuren’s pipeline now places
us in a world-leading position in the
fight against neurodevelopmental
disorders.
The United States and Europe remain
key markets for trofinetide and NNZ-
2591. However, Asia has emerged as a
third commercial opportunity that may
rival the other two, with potentially a
higher number of patients. Established
Orphan Drug markets such as Japan
and Korea are now joined by large
markets such as China and Russia
in which rare disease therapies are
increasingly being made available.
Asia has not been factored into any
published valuations of Neuren, so it
represents very significant upside.
The capital raising that we executed
in June 2020 was important to enable
our ambitions for NNZ-2591 and we are
grateful to all who participated. We are
fully funded to execute the currently
planned NNZ-2591 Phase 2 trials,
while Acadia continues to fund the
trofinetide program.
The Neuren management and board
are determined and highly motivated
to improve the lives of so many
families impacted by these debilitating
disorders, whilst appropriately
rewarding our shareholders for
participating in that mission. We would
like to thank all stakeholders for their
support and look forward to providing
further updates as we achieve the
important approaching milestones.
Dear Shareholders,
2021 is potentially a transforming
year for Neuren. We ended 2020 in a
very strong position, having achieved
all our targeted milestones. The
further announcements since the
end of the year of a successful Phase
1 trial and addition of Prader-Willi
syndrome to the pipeline each added
significantly to the underlying value
of NNZ-2591, both from risk reduction
and increasing the upside. For the
remainder of 2021 we are focused on
the results of the trofinetide Phase
3 trial in Rett syndrome in Q4 2021,
obtaining FDA clearance before
commencing the NNZ-2591 Phase 2
trials and progressing the optimum
commercial strategy for our products
in Europe and Asia. These approaching
events have the potential to transform
Neuren’s corporate profile.
We are passionate about making a difference
to the lives of patients and their families
We aim to earn the respect of everyone we
deal with
Patrick Davies
Chairman
Neuren’s
Values
We are determined and creative to break
through barriers
We harness the power of collaboration and
different perspectives
We recognise the importance of all stakeholders
and endeavour to use financial resources efficiently
Jon Pilcher
CEO
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Neuren Pharmaceuticals Limited Annual Report 2020 O P E R AT I N G R E V I E W
NEUREN’S NOVEL THER APIES FIGHTING
NEURODEVELOPMENTAL DISORDERS
Neuren has two novel patented drugs, trofinetide and NNZ-
2591, which potentially have broad utility in the treatment
of neurological disorders. Both drugs can be administered
orally in a patient-friendly liquid dose. Each drug is in clinical
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, which place a severe life-long
burden on the patients and their families.
Each neurodevelopmental disorder is caused by a different
genetic mutation, but in many cases they share similar
symptoms and the common characteristic of impaired
connections and signalling between brain cells. Neuren’s
drugs, 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 impact on the
disorder rather than aiming to treat one symptom.
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.
THE IMPORTANCE OF ORPHAN DRUG
DESIGNATION
Neuren has received Orphan Drug designation from both the
US Food and Drug Administration (FDA) and the European
Medicines Agency (EMA) for trofinetide to treat Rett
syndrome and Fragile X syndrome and for NNZ-2591 to treat
Phelan-McDermid syndrome, Angelman syndrome and Pitt
Hopkins syndrome. Applications for Prader-Willi syndrome
will be submitted in the near term.
Orphan Drug designation is a special status that the
regulators 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 exclusivity
periods during which the regulators will not approve a
generic competitor product. 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.
The exclusivity periods after marketing authorisation of
products approved for pediatric use are 7.5 years in the
US and 12 years in the EU.
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Neuren Pharmaceuticals Limited Annual Report 2020 O P E R AT I N G R E V I E W
C O N T I N U E D
As well as the exclusivity periods, Orphan Drugs have many other commercial advantages compared with existing markets
that have apparently attractive large sales in which established products and companies have to be displaced. Orphan Drugs
typically secure significantly higher pricing. The serious and urgent unmet need results in a more supportive regulatory
environment and strong support from patient community and leading physicians. Historical data indicates a higher probability
of achieving regulatory approval and the potential for immediate access to known patients means that a large sales
organisation is less important.
In short, the Orphan Drug business model targets a leadership position in markets with urgent need, at a favourable price with
little competition, and with a higher probability of getting to market.
TARGET MARKETS
The neurodevelopmental disorders that Neuren is aiming to treat are technically “rare diseases”, however they are not “ultra-
rare” and in each there are tens of thousands of potential patients. Estimates of potential patient numbers in the US, Europe
and Asia are shown in the table below. Asia has emerged as an important market for Neuren. There are established Orphan
Drug programs in Japan, Korea, Taiwan and Israel, whilst in China and Russia increasing numbers of rare disease treatments
are being introduced. To date published analyst valuations of Neuren’s business have not included Asia, which means that it
represents very significant upside.
Estimates of target patient populations
Disorder
Gene mutation Published prevalence estimates
Trofinetide:
Potential
patients
US1
Potential
patients
Europe1
Potential
patients
Asia1, 2
Rett
MECP2
1/10,000 to 1/15,000 females
10,000
13,000
37,000
Fragile X
FMR1
1/4,000 to 1/7,000 males
1/12,000 to 1/22,000 females
30,000
38,000
112,000
NNZ-2591:
Phelan-McDermid
SHANK3
1/8,000 to 1/15,000 males and females
22,000
28,000
81,000
Angelman
UBE3A
1/12,000 to 1/24,000 males and females
14,000
18,000
52,000
Pitt Hopkins
TCF4
1/34,000 to 1/41,000 males and females
7,000
9,000
25,000
Prader-Willi
15q11-q13
1/10,000 to 1/30,000 males and females
13,000
16,000
47,000
1 Estimates derived by applying the mid-point of the prevalence estimate range to the populations under 60 years
2 Asia comprises Japan, Korea, Taiwan, Israel and urban populations of China and Russia
COMMERCIAL EXCLUSIVIT Y
In addition to the primary protection of the important exclusivity periods from Orphan Drug designation explained above,
Neuren has additional commercial protection from issued patents, which extend as far as 2032 for trofinetide and 2034 for
NNZ-2591. Further international patent applications have been filed for both drugs, which if granted will extend to 2040. Since
trofinetide and NNZ-2591 are new chemical entities, following the first marketing authorisation for each drug, one patent may
potentially be extended by up to 5 years in the United States, Europe and Japan.
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Neuren Pharmaceuticals Limited Annual Report 2020 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
Neuren’s lead program for Rett syndrome is approaching the
end of the development journey, with top-line results from
the Phase 3 clinical trial (“LAVENDER”) in the US expected in
Q4 2021. As an Orphan Drug, the marketing application will
qualify for an expedited Priority Review period of 6 months,
which means that there is the potential for marketing
approval in 2022.
The Phase 3 program is being executed and fully funded
by Neuren’s US partner Acadia Pharmaceuticals (Nasdaq:
ACAD). Acadia has exclusive rights to trofinetide in all
indications for the United States, Canada and Mexico.
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.
Important factors for Neuren when partnering with Acadia
in 2018 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.
Acadia’s substantial commitment to trofinetide is illustrated
by its 2020 10-K Annual Report, which detailed expenditure
to date of US$78 million (approximately A$100 million) on
external service providers only.
A redacted version of the licence agreement between
Neuren and Acadia was filed with the US Securities and
Exchange Commission as a material contract exhibit to
Acadia’s 2018 10-K Annual Report, 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 will receive
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 in the US as being
more than US$500m.
– Payments of up to US$455 million (approximately
A$760 million) on achievement of development and
annual sales milestones. US$105 million is to be paid on
achievement of development milestones, split between
Rett and Fragile X. The remaining US$350 million, 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 confirmed by receiving Rare
Pediatric Disease Designation from the FDA for the Rett
syndrome program.
i
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.
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Neuren Pharmaceuticals Limited Annual Report 2020
O P E R AT I N G R E V I E W
C O N T I N U E D
The Phase 3 program
The Phase 3 program was agreed with the FDA Division of Neurology. Recognising the urgent unmet need and the small
population, it involves a single trial rather than the standard two 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).
Double-blind
LAVENDER
TROFINETIDE
PLACEBO
Open-label
LILAC
Continued Access
LILAC–2
TROFINETIDE
TROFINETIDE
Baseline
Week 12
Week 52
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 are be followed to evaluate long term tolerability and safety of trofinetide. A continued access program (LILAC 2)
enables participants to continue to receive trofinetide during the period before marketing approval.
Approximately 180 females with Rett syndrome aged 5 to 20 years are being enrolled at US sites, 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 is nearing the end of enrolment into the LAVENDER study. The first subjects enrolled have now completed LAVENDER
and LILAC and commenced LILAC 2.
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.
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Neuren Pharmaceuticals Limited Annual Report 2020 O P E R AT I N G R E V I E W
C O N T I N U E D
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
In 2019 the Phase 2 trial was published in Neurology®, the Medical Journal of the American Academy of Neurology, which is the
most widely read and highly cited peer-reviewed neurology journal providing strong validation of the results from Neuren’s
ground-breaking work in Rett syndrome.
The Phase 3 trial design maximises the probability of success:
– 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 treatment 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
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Neuren Pharmaceuticals Limited Annual Report 2020 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 MULTIPLE NEURODEVELOPMENTAL DISORDERS
Neuren is preparing to start Phase 2 clinical trials of NNZ-2591 for Phelan-McDermid, Angelman and Pitt Hopkins syndromes,
each of which currently has no approved therapy. A fourth disorder, Prader-Willi syndrome was also recently added to the
development pipeline. Each syndrome 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 clinical characteristics.
In designing and executing the NNZ-2591 development program, Neuren has been 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. Neuren has spent the last two years meticulously building strong foundations in each of these
areas to enable Phase 2 trials in multiple indications.
NNZ-2591 FOUNDATIONS IN PLACE TO REALISE VALUE
NNZ-2591 Foundations in place to realise value
2022
Phase 2 data in multiple indications
2021
Prader-Willi
positive
animal model
INDs approval by FDA
Phase 2 trials in
multiple indications
2020
Identify
optimum
dose
Develop and
scale-up
manufacturing
GMP
manufacturing
for Phase 2
Non-clinical
safety studies
Phase 1
trial
3 EU Orphan
designations
2019
Confirm
blood brain
barrier
penetration
3 positive
animal
models
3 US Orphan
designations
New patents
in Europe
and Japan
Clear and consistent efficacy in mouse models of all four disorders
5
The studies in these models compared normal mice (“wild type” or “WT”) 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 (vehicle) and NNZ-2591. In all four models 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.
8
Neuren Pharmaceuticals Limited Annual Report 2020 EFFICACY IN MOUSE MODEL OF ANGELMAN
C O N T I N U E D
O P E R AT I N G R E V I E W
The charts below show the results in the Angelman syndrome, Pitt Hopkins and Prader-Willi syndrome models. In the
Angelman model, treatment also eliminated seizures in the knockout mice.
Efficacy in mouse model of Angelman (Ube3a)
Hypoactivity & anxiety
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W T + N N Z 2591
U b e3a
Sociability
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W T-vehicle
U be3a
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W T-vehicle
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80
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EFFICACY IN MOUSE MODEL OF PITT HOPKINS
EFFICACY IN MOUSE MODEL OF PITT HOPKINS
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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
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
)
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
9
8
8
Neuren Pharmaceuticals Limited Annual Report 2020
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 Prader-Willi (Magel2-null)
Prader-Willi is caused by mutations in the 15q11-q13 region of chromosome 15. In the Magel2-null mouse model, which
exhibits features of Prader-Willi in humans, wild type mice and knockout mice were treated with placebo (vehicle) or NNZ-2591
for 6 weeks. Treatment with NNZ-2591 normalized fat mass (obesity) insulin levels, IGF-1 levels and all the behavioral deficits in
the knockout mice and had no effect on the wild type mice.
Insulin levels (pM)
WT plus
vehicle
110
Magel2-null
plus vehicle
WT plus
NNZ-2591 low dose
Magel2-null plus
NNZ-2591 low dose
WT plus
NNZ-2591 high dose
Magel2-null plus
NNZ-2591 high dose
173
112
143
115
119
Obesity
Obesity
Circulating IGF-1 levels
Circulating IGF-1 levels
Cognition
Cognition
)
g
(
s
s
a
m
t
a
F
30
20
10
0
)
l
/
m
g
n
(
1
-
F
G
I
150
100
50
0
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
Hypoactivity
Hypoactivity
Hypoactivity (Open Field time spent active)
(Open Field distance travelled)
Hypoactivity (Open Field distance travelled)
(Open Field time spent active)
10000
8000
6000
4000
2000
0
)
S
(
e
m
T
i
800
600
400
200
0
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
Social preference
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
Social Interaction
Social preference
Social interaction
)
m
c
(
d
e
l
l
e
v
a
r
t
e
c
n
a
t
s
D
i
e
h
t
h
t
i
w
t
n
e
p
s
e
m
T
i
)
S
(
t
c
e
j
b
o
l
e
v
o
n
10
8
6
4
2
0
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
Daily Living
Daily living
)
5
o
t
1
e
d
a
r
g
(
6
4
2
0
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
Anxiety
Anxiety
y
t
i
l
a
u
q
g
n
d
i
l
i
u
B
t
s
e
N
e
h
t
h
t
i
w
t
n
e
p
s
e
m
T
i
)
S
(
e
s
u
o
m
150
100
50
0
)
n
(
s
t
n
e
v
e
g
n
i
f
f
i
n
S
100
80
60
40
20
0
)
S
(
e
m
T
i
200
150
100
50
0
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
10
W T + V ehicle
M a g el2-n ull + V e hicle
W T + N N Z 2591 (lo w d o se)
W T + N N Z 2591 (hig h d o se)
M ag el2-n ull + N N Z 2591 (lo w d o se)
M ag el2-n ull + N N Z 2591 (hig h d o se)
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
Motor function
Anxiety
Repetitive behavior
Daily living
Daily living
10
Neuren Pharmaceuticals Limited Annual Report 2020
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 IN MOUSE MODEL OF PHELAN-
MCDERMID
Optimum dose identified
In the Phelan-McDermid syndrome model, the effect of four escalating dose levels was investigated. The results of this dose
ranging study are shown in the charts below. They were consistent across all eight behavioral tests and the incidence of
seizures, demonstrating that the second highest dose was the optimum dose level in the mouse model. Comparison with
human pharmacokinetic data from the Phase 1 clinical trial has informed the equivalent human dose for the Phase 2 trials in
patients.
A further observation was that the optimum dose in this 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.
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
OPTIMUM DOSE IN MOUSE MODEL OF PHELAN-
MCDERMID
Repetitive behavior
Repetitive behavior
Sociability
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
Memory
Incidence of seizures
Repetitive behavior
Repetitive behavior
Learning
Sociability
Daily living
KO + vehicle
60%
KO + 4x mg/kg
Daily living
10%
KO + x mg/kg
50%
KO + 8x mg/kg
10%
KO + 2x mg/kg
30%
Daily living
KO + 4x mg/kg
10%
Daily living
KO + 8x mg/kg
10%
9
Daily living
Daily living
Daily living
Daily living
Incidence of seizures
9
10
KO + 4x mg/kg
10
10%
KO + 8x mg/kg
10%
WT + vehicle
0%
KO + vehicle
60%
11
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%
10
10
9
Neuren Pharmaceuticals Limited Annual Report 2020 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
Effects on biochemistry and brain cell structure confirmed
Biochemical testing in the Phelan-McDermid mouse model showed that the abnormal length of dendritic spines between brain
cells, the excess activated ERK protein (pERK) and the depressed level of IGF-1 in the knockout mice were all normalised after
treatment with NNZ-2591, as shown in the charts below.
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
Blood-brain barrier penetration confirmed
Correction in fmr1 knockout mice after
treatment with trofinetide (NNZ-2566)
As well as high oral bioavailability, very good penetration of the blood-brain barrier by NNZ-2591 has been demonstrated in a
rodent study. A single dose was administered at two dose levels, with the high dose twice the low dose. The concentration of
NNZ-2591 was measured 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.
12
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 2020 O P E R AT I N G R E V I E W
C O N T I N U E D
Large scale manufacturing process developed
Neuren recently announced that manufacturing of the drug substance for Phase 2 trials of NNZ-2591 had been completed on
schedule. This confirmed the successful development of a proprietary process for large scale manufacturing with exceptional
purity and high yield. As well as supplying the planned trials in Phelan-McDermid, Angelman and Pitt Hopkins syndromes, the
manufacturing campaign produced enough drug substance at no extra cost to supply a Phase 2 trial in Prader-Willi syndrome.
Positive Phase 1 clinical trial results
Neuren recently completed a Phase 1 clinical trial in Australia, in which twice daily oral dosing of NNZ-2591 for seven days
was safe and well tolerated in healthy volunteers at doses expected to be within the effective therapeutic range. This was an
important milestone for NNZ-2591 to be able to move forward to Phase 2 clinical trials in patients.
The primary objective was to evaluate safety and tolerability, with a secondary objective to evaluate pharmacokinetic
parameters. Two double-blind placebo-controlled cohorts of eight healthy adult volunteers were dosed orally twice per day
for seven days. Each cohort was titrated up to the target dose, with the target dose in the second cohort double the target
dose in the first cohort. These two cohorts were preceded by preliminary testing of single doses of NNZ-2591, which enabled
modelling of potential multiple dosing regimens.
No Serious Adverse Events (SAEs) were reported. All reported Adverse Events (AEs) were mild or moderate and resolved
during the trial. There were no clinically significant findings from safety laboratory tests, vital signs, or cardiac tests. In
the seven days’ dosing cohorts, the most common AE reported was drowsiness. In the higher dose cohort only one of the
reported AEs was moderate, the remainder were mild. All subjects completed the scheduled dosing, apart from one of
the eight subjects in the lower dose cohort, who ceased dosing after receiving the first starting dose following moderate
drowsiness and incoordination.
Preparing for Investigational New Drug (IND) applications to commence Phase 2 trials
An extensive program of non-clinical toxicology and manufacturing studies required to open an IND in the United States and
enable clinical trials for 12 weeks in pediatric patients has been completed. Neuren plans to submit IND applications to the
FDA by 30 June 2021 and commence the Phase 2 trials as soon as possible after receiving clearance.
To find out more about these disorders:
www.pmsf.org
www.angelman.org
www.cureangelman.org
www.pitthopkins.org
www.fpwr.org
13
Neuren Pharmaceuticals Limited Annual Report 2020 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. 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.
Trofinetide and NNZ-2591 mimic the function of the natural molecules in the brain, however each drug is designed to have a
longer half-life in the circulation, be suitable for use as an oral medication, more readily cross the blood brain barrier and have
better stability for longer and easier storage and shipping.
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.
Many neurological conditions share four common, underlying pathological features. The aim of treatment with Neuren’s drugs
is to restore the natural balance of brain function by:
– reducing inflammation
– restoring the normal functioning of microglia
– improving the dendritic structure of synapses
– normalising the levels of IGF-1 in the brain
14
Neuren Pharmaceuticals Limited Annual Report 2020 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 syndrome, neurodegenerative diseases like Alzheimer’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 and disturb electrical
functions which can lead to seizures and other abnormalities and even result in premature cell death.
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. In this activated
state, they lose their ability to effectively perform their normal function in synaptic maintenance and also produce more
inflammatory cytokines which can further compound the damage to neurons and other brain cells.
Resting Microglial Cells
Activated Microglial Cells
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.
4. Reduced levels of IGF-1
IGF-1 levels in the brain have been reported to be depressed in a number of conditions, which means that the critical role
of IGF-1 in maintaining and repairing brain cells and synapses is impaired.
15
Neuren Pharmaceuticals Limited Annual Report 2020
O P E R AT I N G R E V I E W
C O N T I N U E D
FINANCE
R&D Tax Incentive
Interest income
Other income (Government cash-flow boost)
Foreign exchange gain
Total income
Research & Development
Corporate & Administration
Foreign exchange loss
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
2020
$’m
0.7
0.1
0.1
–
0.9
(7.8)
(1.7)
(0.6)
–
(9.2)
(8.1)
19.1
(0.7)
2019
$’m
0.5
0.4
–
0.1
1.0
(9.9)
(1.7)
–
(0.2)
(10.8)
(11.7)
1.9
0.1
24.2
13.8
The loss after tax for 2020 was $9.2 million compared with $10.8 million in 2019. Research and development costs were
$2.1 million lower, due to lower expenditure relating to the Rett syndrome Phase 3 trial, partially offset by an increase in
expenditure for the NNZ-2591 non-clinical studies, Phase 1 trial and manufacture of the required drug for these and for the
planned Phase 2 clinical trials. In addition, foreign exchange losses were $0.6 million compared with a foreign exchange gain
of $0.1 million in 2019. This is due to the carrying value in AUD of USD cash held to eliminate exchange risk for USD expenditure
falling, as a result of the weakening of the USD against the AUD.
Cash reserves at 31 December 2020 were $24.2 million (2019: $13.8 million), funding Neuren through to achieving Phase 2
results for NNZ-2591 in three indications, while ACADIA fully funds the trofinetide Phase 3 program. Net cash used in operating
activities was $8.1 million, compared with $11.7 million in 2019. The decrease of $3.6 million was mainly in payments to other
suppliers, due to lower research and development expenditure. Financing provided cash of $19.1 million, received for the
issue of new ordinary shares in the capital raise, compared with $1.9 million in 2019 received in the final settlements from
the Sharing Agreement with Lanstead Capital.
16
Neuren Pharmaceuticals Limited Annual Report 2020
17
Neuren Pharmaceuticals Limited Annual Report 2020 M A N A G E M E N T T E A M
Neuren’s management team has been together since 2013/14, designing
and executing all Neuren’s product development programs for Orphan
neurodevelopmental disorders, commencing with Rett syndrome.
1
2
3
3. DR CLIVE BLOWER
Vice President,
Product Development
BSc (Hons), PhD
Clive joined Neuren in August 2014,
bringing over twenty years of global
drug development experience. He
has led all aspects of CMC (Chemistry,
Manufacturing and Controls)
development of both trofinetide and
NNZ-2591. Before joining Neuren, Clive
was at Acrux (ASX: ACR) for seven years
as Director of Product Development and
Technical Affairs and then Chief Operating
Officer. During this period he led the
CMC 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.
1. JON PILCHER
Chief Executive Officer
BSc (Hons), FCA
2. L ARRY GL A SS
Chief Science Officer
BA (Biology)
Jon joined Neuren in August 2013 as CFO
and was appointed CEO in May 2020. He
has played a central role in all aspects of
Neuren’s R&D, commercial and corporate
activities. Before joining Neuren he was a
member of the leadership team at Acrux
(ASX: ACR) throughout a period that
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. He formerly spent seven
years in a series of executive positions
in the R&D and corporate functions of
international pharmaceutical groups
Medeva and Celltech, which are now part
of UCB. Jon is a Chartered Accountant
and holds a degree in Biotechnology from
the University of Reading in the UK. He is
a non-executive director of BTC Health
Limited (ASX: BTC).
Larry joined Neuren in 2004 and was
an Executive Director from 2012 to
2018. He directs Neuren’s scientific
and non-clinical development, as well
as playing a leading role in clinical and
regulatory strategy. Larry 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
provided management, strategic and
business development services. Prior to
that, he was CEO of a contract research
organisation 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.
18
Neuren Pharmaceuticals Limited Annual Report 2020 M A N A G E M E N T T E A M
C O N T I N U E D
4
5
6
4. DR NANC Y JONES
Vice President,
Clinical Development
PhD
5. JAMES SHAW
Vice President, Clinical
& Regulatory Operations
BSc (Hons), MBA
6. L AUREN FR A ZER
Chief Financial Officer
& Company Secretary
BBus (Acc), CA
Lauren joined Neuren in March 2020 and
brings over fifteen years of experience in
accounting and finance. Prior to joining
Neuren, Lauren was at Boundary Bend,
one of Australia’s leading agribusinesses
and owner of Australian olive oil brands
Cobram Estate and Red Island. Lauren
was at Boundary Bend for ten years as
Financial Controller and then Senior
Manager of Accounting & Tax. Lauren is
a Chartered Accountant and began her
career with Pitcher Partners.
Nancy joined Neuren in January 2013.
She leads the design and implementation
of Neuren’s clinical studies in
neurodevelopmental disorders. Prior
to joining Neuren, Nancy held a senior
position at Autism Speaks, the largest
science and advocacy organization in
the US focused on autism spectrum and
related disorders. She 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.
James joined Neuren in August 2013,
bringing twenty years of development
and commercialisation experience in
the Pharmaceutical Industry, having
worked for both large Pharma and
Clinical Research Organisations.
He leads the clinical and regulatory
execution of Neuren’s programs. Before
joining Neuren, James was CEO of a
Clinical Research and Site Management
Organisation providing full service clinical
trial support in ANZ. Prior to that he spent
seven 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 2 through to FDA
submission and commercialisation during
six years with AstraZeneca at their Global
headquarters in the UK.
19
Neuren Pharmaceuticals Limited Annual Report 2020 B O A R D
1
2
3
4
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.
1. PATRICK DAVIES
Non-Executive Chair
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.
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 a Non-Executive
Director on the boards of Aeris
Environmental Ltd (ASX:AEI)
and Ondek Pty Ltd.
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.
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Neuren Pharmaceuticals Limited Annual Report 2020 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”) 4th Edition. This edition takes
effect for the Group’s full financial year commencing
on 1 January 2020.
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 Chief Executive Officer. The Board has
delegated the responsibility for the operation and
administration of the Group to the Chief Executive Officer
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 two male
and two female directors. Two of the six senior executives
are female. The Group currently has seven employees and
consultants, 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 performance evaluation was
undertaken during 2020.
In accordance with Recommendation 1.7, there is a process
for the Board to evaluate periodically the performance of the
Chief Executive Officer and for the Chief Executive Officer to
evaluate periodically the performance of senior executives.
The evaluation of the Non-Executive Chair 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. Performance evaluations were not
undertaken during 2020, however have been undertaken
since the end of the financial year.
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Neuren Pharmaceuticals Limited Annual Report 2020 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
PRINCIPLE 2. STRUCTURE THE BOARD TO BE EFFECTIVE AND 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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Neuren Pharmaceuticals Limited Annual Report 2020 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 Board is highly engaged in the oversight and direction of the business. Five members served during the year to
31 December 2020, as set out in the table below. Details of the relevant skills, experience and expertise of each Board
member are set out on page 20 of this report.
Appointment
Retirement
Role
Independent
Committees
Patrick Davies
Appointment
as director:
2018
Appointment
as Chair:
26 May 2020
Non-executive chair
Yes
Member of Audit Committee
and Remuneration Committee
Trevor Scott1
2002
Non-executive director
Yes
Dianne Angus
2018
Non-executive director
Jenny Harry1
2018
Non-executive director
Richard Treagus
2013
26 May 2020
Executive Chairman
Yes
Yes
No2
Chair of Audit Committee and
member of Remuneration
Committee
Member of Audit Committee
and Remuneration Committee
Member of Audit Committee
and Chair of Remuneration
Committee
1 Jenny Harry replaced Trevor Scott as Chair of Remuneration Committee effective 1 December 2020.
2 Richard Treagus was not considered independent due to his executive role.
There is a majority of independent directors in accordance with Recommendation 2.4. The chair has been independent and
the chair and chief executive officer roles have been separate (Recommendation 2.5) since the appointment of Patrick Davies
as Non-Executive Chair and Jon Pilcher as CEO on 26 May 2020 following Richard Treagus’ retirement from the Board. 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.
In accordance with Recommendation 3.1, the Group has articulated its values, which are disclosed on the Company website
INSTIL A CULTURE OF ACTING L AWFULLY, ETHIC ALLY AND RESPONSIBLYG
– We are passionate about making a difference to the lives of patients and their families
– We aim to earn the respect of everyone we deal with
– We are determined and creative to break through barriers
– We harness the power of collaboration and different perspectives
– We recognise the importance of all stakeholders and endeavour to use financial resources efficiently
The Board has established a Code of Conduct (Recommendation 3.2), 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
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Neuren Pharmaceuticals Limited Annual Report 2020 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
PRINCIPLE 4. SAFEGUARD INTEGRIT Y OF
CORPOR ATE REPORTS
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 Committee met
twice during 2020, 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;
In undertaking these tasks the Audit Committee meets
separately with management and external auditors where
required.
In accordance with Recommendation 4.2, the Board also,
before it approves the entity’s financial statements for a
financial period, receives a declaration in writing from the
Chief Executive Officer and the Chief Financial Officer that
the financial records of the company have been properly
maintained and that the financial statements are in
accordance with New Zealand Equivalents to International
– 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
– 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
Neuren is committed to the highest standards of conduct
and ethical behaviour in all business activities. The
Group’s Whistleblower Policy was approved by the Board
in October 2020, and is available on the Company webiste
(Recommendation 3.3). Any material breaches of the
Whistleblower Policy are to be reported to the Board.
The Group’s Anti-bribery and Corruption Policy was
approved by the Board in October 2020, and is available on
the Company website (Recommendation 3.4). Any material
breaches of the Anti-bribery and Corruption Policy are to
be reported to the Board.
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Neuren Pharmaceuticals Limited Annual Report 2020 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
Financial Reporting Standards (NZ FRS) and present a
true and fair view, in all material respects, of the Group’s
financial position and performance and that this opinion
is founded on a sound system of risk management and
internal control that is operating effectively in all material
respects with regard to business and financial reporting
risks. The Board received those assurances for the annual
financial statements on 23 February 2021.
For other periodic corporate reports released to the
market that are not audited or reviewed by an external
auditor, processes are in place to ensure that the reports
are materially accurate, balanced and provide investors
with appropriate information to make informed investment
decisions (Recommendation 4.3). Reports are prepared
by the Chief Financial Officer and reviewed by the Chief
Executive Officer, or are prepared by the Chief Executive
Officer and reviewed by the Board. The Board receives
a declaration in writing from the Chief Financial Officer
and Chief Executive Officer regarding the quarterly cash
flow reports.
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, and the Board receives copies of all
material market announcements promptly after they have
been made (Recommendation 5.2).
All substantive investor or analyst presentation are released
on the ASX Market Announcements Platform ahead of such
presentations, in accordance with Recommendation 5.3.
PRINCIPLE 6. RESPECT THE RIGHTS
OF SECURIT Y HOLDERS
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). Supported by the Non-Executive
Chair, the Chief Executive Officer interacts 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 Annual Shareholders’ Meeting in 2020
was conducted as a virtual meeting, with participation
by electronic means.
All resolutions at the Company’s Annual Shareholders’
Meeting in 2020 were decided by a poll (Recommendation
6.4)
In accordance with Recommendation 6.5, 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).
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Neuren Pharmaceuticals Limited Annual Report 2020 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
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 2020.
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 during 2020.
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.
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).
PRINCIPLE 9. ADDITIONAL RECOMMENDATIONS
Neuren is incorporated in New Zealand and ensures
meetings of security holders are held at a reasonable place
and time (Recommendation 9.2).
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 9.3. The
Company’s constitution enables the Board to convene
virtual shareholder meetings, with participation by
electronic means.
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Neuren Pharmaceuticals Limited Annual Report 2020 F I N A N C I A L R E P O R T
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 2 0
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Neuren Pharmaceuticals Limited Annual Report 2020 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 two new therapies to treat multiple
neurodevelopmental disorders that emerge in early
childhood and are characterized by impaired connection
and signalling between brain cells. No approved therapies
are currently available for these seriously debilitating
disorders. Neuren’s potential therapies utilize synthetic
analogs of peptides that occur naturally in the brain.
Trofinetide is currently 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 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 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. ACADIA is a NASDAQ listed company
(ACAD) that specialises in commercialising and developing
breakthroughs in neuroscience.
Neuren is preparing for Phase 2 clinical trials of its second
drug candidate NNZ-2591 for Phelan-McDermid syndrome,
Angelman syndrome and Pitt Hopkins syndrome. Based
on its mechanism of action and positive results in animal
models, NNZ-2591 has received Orphan Drug designation
in both the United States and the European Union for each
of these disorders. Neuren also recently announced that
Prader-Willi syndrome has been added to the NNZ-2591
development pipeline following highly encouraging results
in a pre-clinical model of the syndrome.
During the year ended 31 December 2020, significant
progress was made in the development programs.
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). Top-line results
from the LAVENDER study are expected in the second half
of 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. Enrolment of new patients in LAVENDER was
paused temporarily from March 2020 to June 2020, due to
the initial measures taken in the US to combat the COVID-19
pandemic.
In March 2020, the FDA granted Rare Pediatric Disease
(RPD) designation to trofinetide for the treatment of Rett
syndrome. Upon FDA approval of a product with RPD
designation, the sponsor may be eligible to receive a
Priority Review Voucher, which can be used to obtain FDA
review of a New Drug Application for another product in an
expedited period of six months. The voucher may also be
sold for use by another company. Under the terms of the
Licence Agreement between Neuren and ACADIA, Neuren
will receive from ACADIA one third of the market value of
a Priority Review Voucher. In January 2021, a voucher was
sold for US$100 million.
In April 2020 a new patent was granted by the Israel Patent
Office covering trofinetide to treat Rett syndrome, Fragile
X syndrome and autism. This first patent for trofinetide in
Israel expires in 2032, with the potential for patent term
extension of up to 5 years.
Neuren commenced its first clinical trial of NNZ-2591 in May
2020. The Phase 1 trial, conducted in Australia, generated
information on the safety, tolerability and pharmacokinetics
in healthy adult volunteers to inform the safety and efficacy
assessment in patients for the Phase 2 trials. Twice daily
oral dosing for 7 days was safe and well tolerated at all
dose levels tested. There were no Serious Adverse Events
or clinically significant findings from safety lab tests, vital
signs or cardiac tests.
In parallel with completing the Phase 1 trial, Neuren
initiated the manufacture of NNZ-2591 to supply the planned
Phase 2 clinical trials, whilst also completing a program of
non-clinical studies for NNZ-2591. Neuren is preparing to
meet with the US Food and Drug Administration (FDA) and
then submit Investigational New Drug (IND) applications in
the first half of 2021. The IND’s will incorporate data from
manufacturing, non-clinical studies and the Phase 1 clinical
trial, as well as the Phase 2 trial protocols.
In December 2020, Neuren received notice from the
European Medicines Agency (EMA) of positive opinions
for all three Orphan designation applications that were
submitted for NNZ-2591 in Phelan-McDermid syndrome,
Angelman syndrome and Pitt Hopkins syndrome. Orphan
designation in the EU enables sponsors to benefit from
incentives including free protocol assistance, fee reductions
and 10 years of market exclusivity plus two additional years
if approved for paediatric use.
In May 2020 Neuren announced the appointment of Jon
Pilcher and Patrick Davies as Chief Executive Officer and
non-executive Chair respectively, with Richard Treagus
standing down after more than 7 years as Executive
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Neuren Pharmaceuticals Limited Annual Report 2020 D I R E C TO R S’ R E P O R T
C O N T I N U E D
Chairman to enable him to focus on his other business
interests.
There are three large value-drivers for Neuren that may
potentially crystallise in 2021 and 2022:
– ACADIA’s Rett syndrome Phase 3 results and New Drug
Application for trofinetide in the US;
– Selecting the optimum commercial outcome for
trofinetide in Europe and Asia using the US regulatory
package; and
– Phase 2 clinical results for NNZ-2591 to confirm the
positive effects seen in the animal models of all three
indications.
The consolidated financial statements are presented on
pages 32 to 35. 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 2020 was
$9.2 million compared with the Group’s loss after tax of
$10.8 million in 2019. This was mainly due to research and
development costs which were $2.1 million lower, due
to lower expenditure for manufacturing and non-clinical
activities relating to the Rett Phase 3 trial, partially offset
by an increase in expenditure in 2020 for the NNZ-2591
non-clinical studies, Phase 1 trial and manufacture of the
required drug for these and for the planned Phase 2 clinical
trials. In addition, foreign exchange losses were $0.6 million
compared with a foreign exchange gain of $0.1 million
in 2019. This is due to the carrying value in AUD of USD
cash held to eliminate exchange risk for USD expenditure
falling, as a result of the weakening of the USD against the
AUD. Prudent control of expenditure continues to be an
important principle in the Group’s operations and financing.
The basic loss per share for 2020 was $0.086 (2019: earnings
of $0.108 per share), based on a weighted average number
of shares outstanding of 107,057,317 (2019: 100,168,413).
Cash reserves at 31 December 2020 were $24.2 million
(2019: $13.8 million). Net cash used in operating activities
was $8.1 million (2019: $11.7 million). The decrease of
$3.6 million was mainly in payments to other suppliers, due
to lower research and development expenditure. Financing
provided cash of $19.1 million, received for the issue of
new ordinary shares in the capital raise, compared with
$1.9 million in 2019 received in the final settlements from
the Sharing Agreement with Lanstead Capital.
On 29 June 2020, the Group announced the successful
completion of a capital raise of $20 million, with $19
million net of costs received after 30 June 2020. On 6 July
2020, the Group issued 14,285,723 fully paid ordinary
shares at an issue price of $1.40 per share to institutional
and sophisticated investors in Australia, New Zealand,
Hong Kong and the United Kingdom. The funds raised
enabled the Group to fund plans to generate valuable
Phase 2 clinical trial data for NNZ-2591.
No dividends were paid in the year, or in the prior year
and the Directors recommend none for the year.
DIRECTORS
Patrick Davies B EC, MBA (Non-Executive Chair)
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.
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.
29
Neuren Pharmaceuticals Limited Annual Report 2020 D I R E C TO R S’ R E P O R T
C O N T I N U E D
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. Details of the entries in this register for each of the Directors during and since the end of 2020 are
as follows:
Director
Dr Trevor Scott
Patrick Davies
Patrick Davies
Patrick Davies
Patrick Davies
Patrick Davies
Dr Jenny Harry
Ordinary Shares
Purchased/(Sold)
Consideration
Paid/(Received)
Date of
Transaction
(400,000)1
Nil
11 Aug 2020
5,911
45,455
28,655
21,428
35,211
5,823
$6,560
$52,046
$50,719
$30,000
$50,175
$9,955
19 Mar 2020
25 Mar 2020
28 May 2020
07 Aug 2020
17 Feb 2021
29 May 2020
1 Off-market distribution of shares from family trust at nil consideration to adult beneficiaries of the trust, who still hold those shares.
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 (2019: $nil).
REMUNER ATION OF DIRECTORS
Remuneration of the Directors is shown in the table below.
Remuneration of Directors
Patrick Davies
Dr Richard Treagus (resigned May 2020)
Dr Trevor Scott
Dianne Angus
Dr Jenny Harry
30
2020
$’000
95
146
72
60
60
2019
$’000
60
360
72
60
60
Neuren Pharmaceuticals Limited Annual Report 2020
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 in their capacity as
employees totalling NZ $100,000 or more during the year, shown in bands denominated in Australian dollars, was as follows:
Excluding shared based payments
$100,000 – $109,999
$240,000 – $249,999
$250,000 – $259,999
$270,000 – $279,999
$280,000 – $289,999
$340,000 – $349,999
Including shared based payments
$100,000 – $109,999
$240,000 – $249,999
$270,000 – $279,999
$280,000 – $289,999
$350,000 – $359,999
$380,000 – $389,999
$540,000 – $549,999
2020
$’000
2019
$’000
1
–
1
–
1
1
–
1
–
1
1
–
2020
$’000
2019
$’000
1
–
–
–
1
1
1
–
1
1
1
–
–
–
AUDITORS
Grant Thornton New Zealand Audit Limited (‘Grant Thornton’) is the independent auditor of the Company. Audit fees in relation
to the annual and interim financial statements were $57,759 (2019: $59,649). Grant Thornton did not receive any other fees
in relation to other financial advice and services. No amounts were payable to an auditor by subsidiary companies in 2020
or 2019.
For and on behalf of the Board of Directors who authorised the issue of these consolidated financial statements on
23 February 2021.
Patrick Davies
Non-Executive Chair
Dr Trevor Scott
Director
31
Neuren Pharmaceuticals Limited Annual Report 2020
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 2 0
Interest
Foreign exchange gain
Australian R&D Tax Incentive
Other income
Total income
Research and development costs
Corporate and administrative costs
Foreign exchange loss
Losses on financial assets measured at fair value through profit or loss
Loss before income tax
Income tax
Loss 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 for the year
Loss after tax attributable to Equity holders of the Company:
Total comprehensive loss attributable to Equity holders of the Company:
Basic loss per share
Diluted loss per share
The notes on pages 36 to 49 form part of these consolidated financial statements
Note
2020
$’000
147
–
717
100
964
(7,763)
(1,763)
(631)
–
2019
$’000
389
132
495
–
1,016
(9,858)
(1,713)
–
(261)
(9,193)
(10,816)
5
–
–
(9,193)
(10,816)
11
(9,182)
(9,193)
(9,182)
($0.086)
($0.086)
(6)
(10,822)
(10,816)
(10,822)
($0.108)
($0.108)
6
6
32
Neuren Pharmaceuticals Limited Annual Report 2020 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 2 0
ASSETS
Current Assets:
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets:
Property, plant and equipment
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 36 to 49 form part of these consolidated financial statements
Note
2020
$’000
2019
$’000
7
8
9
24,188
755
24,943
10
10
13,844
552
14,396
10
10
24,953
14,406
753
753
753
559
559
559
10
145,567
(10,284)
126,426
(8,503)
(111,083)
(104,076)
24,200
24,953
13,847
14,406
33
Neuren Pharmaceuticals Limited Annual Report 2020 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 2 0
Share
Capital
$’000
Share
Option
Reserve
$’000
Currency
Translation
Reserve
$’000
Accumulated
Deficit
$’000
Total
Equity
$’000
126,426
2,186
(10,683)
(93,260)
24,669
(10,816)
(10,816)
(6)
(10,816)
(10,822)
(6)
(6)
Equity as at 1 January 2019
Loss after income tax
Other comprehensive loss
Total Comprehensive income for the year
–
–
Equity as at 31 December 2019
126,426
2,186
(10,689)
(104,076)
13,847
Shares issued in capital raising
Shares issued in share purchase plan
Share issue costs expensed
Transfer on expiry of options
Share based payments
Transactions with owners
Loss after income tax
Other comprehensive loss
Total Comprehensive loss for the year
Equity as at 31 December 2020
20,000
216
(1,075)
19,141
(2,186)
394
(1,792)
–
11
11
20,000
216
(1,075)
–
394
2,186
2,186
19,535
(9,193)
(9,193)
(9,193)
11
(9,182)
24,200
145,567
394
(10,678)
(111,083)
The notes on pages 36 to 49 form part of these consolidated financial statements
34
Neuren Pharmaceuticals Limited Annual Report 2020 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 2 0
Cash flows from operating activities:
Receipts from Australian R&D Tax Incentive
Interest received
GST refunded
Receipts from government cash flow boost
Payments for employees and directors
Payments to other suppliers
Net cash flow used in 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 increase / (decrease) 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 after income tax:
(Loss) / Profit after income tax
Non-cash items requiring adjustment:
Depreciation of property, plant and equipment
Share based payments expense
Foreign exchange loss/(gain)
Loss on financial assets
Changes in working capital:
Trade and other receivables
Trade and other payables
Net cash used in operating activities
The notes on pages 36 to 49 form part of these consolidated financial statements
Note
2020
$’000
2019
$’000
10
491
164
283
100
(1,480)
(7,636)
(8,078)
450
413
102
–
(1,742)
(10,942)
(11,719)
(6)
(6)
(12)
(12)
20,216
(1,075)
19,141
11,057
(713)
13,844
24,188
1,860
–
1,860
(9,871)
139
23,576
13,844
(9,193)
(10,816)
6
394
724
–
4
–
(144)
261
(203)
194
(8,078)
390
(1,414)
(11,719)
35
Neuren Pharmaceuticals Limited Annual Report 2020 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 2 0
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
23 February 2021.
Material 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 2020
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 2020 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 16.
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 $9.2 million for the
year ending 31 December 2020 and had negative operating
cash flows of $8.1 million for the year ended 31 December
2020. The Group had net assets at 31 December 2020 of
$24.2 million, including cash balances and receivables of
$24.9 million.
On 29 June 2020, the Group announced the successful
completion of a capital raise of $20 million, with $19 million
net of costs received. On 6 July 2020, the Group issued
14,285,723 fully paid ordinary shares at an issue price of
$1.40 per share to institutional and sophisticated investors
in Australia, New Zealand, Hong Kong and the United
Kingdom. The funds raised will enable the Group to fund
plans to generate Phase 2 clinical trial data for NNZ-2591.
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.
36
Neuren Pharmaceuticals Limited Annual Report 2020 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
(c) Foreign Currency Translation
POLICIES (CONTINUED)
Impact of COVID-19 on our business
On March 11, 2020 the World Health Organization declared
a pandemic resulting from the disease known as COVID-19
caused by a novel strain of coronavirus, SARS-CoV-2. In an
effort to contain COVID-19 or slow its spread, state or federal
governments around the world have enacted various
measures, including orders to close businesses not deemed
“essential”, isolate residents to their homes or places of
residence, and practice social distancing when engaging
in essential activities. In certain jurisdictions, such orders
have been lifted, although subsequent trends in COVID-19
infections have led to the reinstatement of such orders in
various jurisdictions.
To date there has been no financial impact of COVID-19
on the Group. In the United States, enrolment of new
patients in the trofinetide Phase 3 LAVENDER study was
re-initiated in June 2020 after it was temporarily paused
by ACADIA in March 2020 due to COVID-19 restrictions and
risks. It is possible that clinical trials or other research and
development activities for trofinetide or NNZ-2591 could
be impacted in the future by COVID-19 restrictions or risks.
The Group is continuing to monitor the situation and may
take further actions affecting its business operations as
are deemed necessary.
Changes in accounting policies
There is no significant impact of changes in accounting
policies for the year ended 31 December 2020.
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 materially 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.
(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.
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.
37
Neuren Pharmaceuticals Limited Annual Report 2020 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
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.
2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
Interest income
Interest income is recognised on a time-proportion basis
using the effective interest method.
(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.
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2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
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.
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).
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Neuren Pharmaceuticals Limited Annual Report 2020 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
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2. SUMMARY OF SIGNIFIC ANT ACCOUNTING
POLICIES (CONTINUED)
In the periods presented the corporation does not have any
financial assets categorised as FVTPL or FVOCI.
(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.
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.
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.
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4. EXPENSES
Loss / (Profit) before income tax includes the following expenses:
Depreciation – property, plant and equipment
Computer equipment
Total depreciation
Remuneration of auditors
Audit and review of financial statements (Grant Thornton NZ)
Total remuneration of auditors
Employee benefits expense
Short-term benefits
Post-employment benefits
Other employee benefits
Share based payments
Total employee benefits expenses
Directors’ compensation
Short-term benefits
Post-employment benefits
Total Directors’ compensation
2020
$’000
2019
$’000
6
6
58
58
974
76
35
394
1,479
423
10
433
4
4
60
60
754
70
75
–
899
602
10
612
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Neuren Pharmaceuticals Limited Annual Report 2020 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% (2019: 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
2020
$’000
2019
$’000
–
–
–
–
–
–
(9,193)
(2,528)
(10,816)
(2,974)
(197)
454
–
–
–
2,271
–
(136)
310
72
(268)
–
2,996
–
Gross tax losses for which no deferred tax asset has been recognised(a)
107,065
100,883
(a) Of these gross tax losses, $62.9 million (2019: $64.6 million) relates to New Zealand tax losses, which are unlikely to be
utilised unless future taxable income is generated in New Zealand. The movement is due to the New Zealand tax losses
being translated at the closing foreign exchange rate at each reporting date.
6. E ARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit for the year attributable to the equity holders of the company by
the weighted average number of ordinary shares on issue during the year excluding shares held as treasury stock.
Diluted earnings per share is calculated by dividing the profit for the year attributable to the equity holders of the company by
the weighted average number of shares outstanding during the year plus the weighted average number of ordinary shares that
would be issued on conversion of any dilutive potential ordinary shares into ordinary shares.
The dilutive impact of loan funded shares has not been included in the weighted average number of ordinary shares for the
purposes of calculating diluted earnings per share, as it does not meet the requirements for inclusion in NZ IAS 33.
Loss after income tax attributable to equity holders (basic) - ($’000)
Weighted average shares outstanding (basic) - (No.)
Basic loss per share
Loss after income tax attributable to equity holders (diluted) - ($’000)
Weighted average shares outstanding (diluted) - (No.)
Diluted loss per share
7. C A SH AND C A SH EQUIVALENTS
Cash
Demand and short-term deposits
42
2020
2019
(9,193)
107,057,317
(10,816)
100,168,413
($0.086)
($0.108)
(9,193)
107,057,317
(10,816)
100,168,413
($0.086)
($0.108)
2020
$’000
229
23,959
24,188
2019
$’000
820
13,024
13,844
Neuren Pharmaceuticals Limited Annual Report 2020 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
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8. TR ADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Interest receivables
Australian R&D tax incentive
2020
$’000
2019
$’000
–
22
16
717
755
13
15
33
491
552
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 2020 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 (2019: nil).
9. TR ADE AND OTHER PAYABLES
Trade payables
Accruals
Employee Benefits
2020
$’000
2019
$’000
167
323
263
753
340
26
193
559
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.
10. SHARE C APITAL
Issued Share Capital
Ordinary shares on issue at beginning of year
Shares issued under Loan Funded Share Plan
Shares bought back under Loan Funded Share Plan
Shares issued in private placement
Share issued in Share Purchase Plan
Share issue expenses - Cash issue costs
2020
Shares
2019
Shares
2020
$’000
2019
$’000
102,668,413
3,000,000
(2,500,000)
14,285,723
153,972
–
102,668,413
–
–
–
–
–
117,608,108
102,668,413
126,426
–
–
20,000
216
(1,075)
145,567
126,426
–
–
–
–
126,426
In July 2020, the Group issued 14,285,723 fully paid ordinary shares at an issue price of $1.40 per share in a placement to
institutional and sophisticated investors in Australia, New Zealand, Hong Kong and the United Kingdom. In August 2020, the
Group issued 153,972 fully paid ordinary shares at an issue price of $1.40 in the Share Purchase Plan (SPP). The issue price of
$1.40 per share for the placement and the SPP represented a discount of 10% to the 10-day volume weighted average price of
$1.56 and 15% to the last closing price of $1.64.
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10. SHARE C APITAL (CONTINUED)
At 31 December 2020 3.0 million ordinary shares (31 December 2019: 2.5 million ordinary shares) were held as treasury stock in
respect of the Loan Funded Share Plan described 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 2020 or 2019. There were no equity-settled share based
payments expensed in the Statement of Comprehensive Income in 2020 or 2019.
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 loan funded shares under the plan during the year ended 31 December 2020 were issued subject to the following vesting
conditions:
i.
ii.
40% of the Loan Funded Shares shall vest on acceptance by the US Food and Drug Administration of the filing of a New Drug
Application for Trofinetide; and
40% of the Loan Funded Shares shall vest when the Company determines to progress NNZ-2591 to a Phase 2b or Phase 3
clinical trial following a positive Phase 2 clinical trial outcome, or executes a partnering transaction for NNZ-2591;
iii. 20% of the Loan Funded Shares shall vest when the Company executes a partnering transaction for trofinetide outside
North America, or submits a Marketing Authorisation Application for trofinetide in the European Union, the United
Kingdom, or Japan.
Each of these Vesting Conditions shall be tested separately from the other Vesting Conditions.
The estimated fair value of the shares has been determined using the Black-Scholes valuation model. The significant inputs
into the model were the share price on date of valuation, the estimated future volatility of the share price, a dividend yield of
0%, an expected life of 5 years, and an annual risk-free interest rate of 0.4%. The estimated future volatility of the share price
was derived by analysing the historic volatility of the share price during a relevant period.
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10. SHARE C APITAL (CONTINUED)
Details of the shares issued during the year ended 31 December 2020, the estimated fair value and variable inputs into the
valuation model are shown in the following table:
Number of shares
Issue date
Exercise price per share
Share price on date of valuation
Fair value per share
Estimated future volatility
3 million
13 July 2020
$1.84
$1.28
$0.70
77.25%
The impact of changes to inputs to the model, holding other assumptions constant, would have affected the fair value of the
shares by the amounts below.
Expected life
Increase/(decrease) in the share based payments expense
Share price volatility
Increase/(decrease) in the share based payments expense
Movements in the number of Loan Funded Shares were as follows:
2020
$’000
Decrease to
3 years
$’000
Decrease to
4 years
(523)
(236)
Decrease to
67.25%
Increase to
87.25%
(287)
262
Outstanding at 1 January 2019
Expired and bought back
Outstanding at 31 December 2019
Expired and bought back
Issued
Outstanding at 31 December 2020
Loan Funded
Shares
Weighted
Average
Exercise Price
Exercisable
Weighted
Average
Exercise Price
2,500,000
(1,500,000)
1,000,000
(1,000,000)
3,000,000
3,000,000
$1.76
$1.84
$1.76
$1.76
$1.84
$1.84
–
–
–
–
–
–
–
–
–
–
–
–
The exercise price for 3.0 million unvested Loan Funded Shares is $1.84 per share.
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 loans in respect of 1.0 million Loan Funded Share expired in May 2020, with the share price at that time
below the exercise price of $1.76. The Loan Funded Shares were therefore forfeited. On 14 July 2020 the Company bought back
2.5 million ordinary shares from Neuren Trustee Limited. In accordance with the terms of the Loan Funded Share Plan, the
consideration for the shares bought back was equal to the outstanding loan balances.
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Neuren Pharmaceuticals Limited Annual Report 2020 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
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11. 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.
12. COMMITMENTS AND CONTINGENCIES
(a) Legal claims
The Group had no significant legal matter contingencies as at 31 December 2020 or at 31 December 2019.
(b) Commitments
The Group was not committed to the purchase of any property, plant or equipment or intangible assets as at 31 December 2020
(2019: nil).
At 31 December 2020, the Group had commitments under product development contracts amounting to approximately
$5.0 million, comprising approximately US$2.6 million, GBP 0.4 million and AU$0.9 million. 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.
(c) Contingent liabilities
The Group had no contingent liabilities at 31 December 2020 or at 31 December 2019 that require disclosure.
13. 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 until 26 May 2020, and reporting to the Chief Executive Officer after that date. Compensation for KMP was as follows:
Short-term benefits
Post-employment benefits
Other long-term benefits
Share based payment compensation
2020
$’000
1,349
73
35
394
1,851
2019
$’000
1,345
62
71
–
1,478
(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 11. All amounts
due between entities in the Group are payable on demand and bear no interest.
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14. EVENTS AFTER REPORTING DATE
As at the date of these consolidated financial statements authorised for issue, there are no events arising since 31 December
2020 that require disclosure.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Categories of financial instruments
Financial assets
2020
Cash and cash equivalents
Trade and other receivables
Total financial assets
2019
Cash and cash equivalents
Trade and other receivables
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
24,188
–
24,188
13,844
–
13,844
–
37
37
–
61
61
9
Total
$’000
24,188
37
24,226
13,844
61
13,906
–
–
–
–
–
–
2020
$’000
2019
$’000
490
490
366
366
At 31 December 2020, 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 2020, there were no forward contracts outstanding
(2019: None).
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Neuren Pharmaceuticals Limited Annual Report 2020 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
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15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
During the year, the US dollar fluctuated against the Australian dollar. A foreign exchange loss of $631,000 is included in results
for the year ended 31 December 2020 (2019: gain $132,000). The majority of the loss relates to losses 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
2020
$’000
2019
$’000
8,686
8,084
46
180
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 $785,000 (2019: $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 $960,000
(2019: $878,000).
Interest rate risk
The Group is exposed to changes in market interest rates 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
2020
$’000
2019
$’000
15,502
0.48%
8,686
0.07%
5,773
1.54%
8,071
1.73%
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 $8,000
(2019: $39,000).
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 and, 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 2020, as described in
Note 10. Capital risk is impacted by the material uncertainties described in Note 1.
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16. 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 2020 the Group has recorded other revenue of $0.7 million (2019: $0.5 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.
Loan Funded Shares
The Group measures the fair value of loan funded shares with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The estimated fair value of the shares is determined using the Black-Scholes
valuation model, taking into account the terms and conditions upon which the instruments were granted. Some judgements
are made on the inputs into the valuation model, including the expected life and volatility.
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Neuren Pharmaceuticals Limited Annual Report 2020 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
Limited
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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 6 to 22 which comprise the consolidated
statement of financial position as at 31 December 2020, 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
32 to 49
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Group as at 31 December 2020 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
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Neuren Pharmaceuticals Limited Annual Report 2020
25
Why matter is significant
How our audit addressed the key audit matter
Loan Funded Shares
During the period the entity issued Loan Funded
Shares to key employees. The fair value was
determined using the Grant-Date Method via a
Black-Scholes Model as described in Note 10 in
the financial statements.
The valuation involved significant judgements
and estimates from management, including the
estimated future volatility of the share price, an
expected life of 5 years and annual risk-free
interest rate.
We included the valuation of loan funded shares
as a key audit matter, due to the high estimation
uncertainty within the assumptions and the
impact these have on the fair value of the shares.
Our procedures in relation to management’s
valuation include:
Reviewed the signed contracts to confirm
the key inputs used in the valuation were
accurate.
Assessed key assumptions for
reasonableness and obtained support for
assumptions from independent sources
where appropriate.
Performed a sensitivity analysis on key
inputs to the model and reviewed the impact
on the fair value.
Based on the audit procedures performed, we
obtained sufficient audit evidence to assess that
the assumptions made by management in
relation to the fair value of the loan funded
shares were appropriate.
Other Information
The Directors are responsible for the other information. The other information comprises the information
included in the directors’ report (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,
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.
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Neuren Pharmaceuticals Limited Annual Report 2020
26
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 Limited
Ryan Campbell
Partner
Auckland
23 February 2021
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Neuren Pharmaceuticals Limited Annual Report 2020
A D D I T I O N A L I N F O R M AT I O N
EQUIT Y SECURITIES HELD BY DIREC TORS A S AT 23 FEBRUARY 2021
Director
Trevor Scott
Dianne Angus
Patrick Davies
Jenny Harry
Interests in
Ordinary Shares
Direct
Indirect
1,000,000
2,589,784
–
–
–
–
206,306
19,907
CEO Jon Pilcher and his Related Parties held 371,851 Ordinary Shares. He also had an interest in 1.5 million Loan Funded
Shares held by Neuren Trustee Limited. As detailed in Note 10 to the Financial Statements, the Loan Funded Shares are subject
to vesting conditions and repayment of a loan amounting to $1.84 per share before they can be transferred to Jon.
DIREC TORS OF SUBSIDIARY COMPANIES AT 31 DECEMBER 2020
Neuren Pharmaceuticals Inc.
Neuren Pharmaceuticals (Australia) Pty Ltd
Neuren Trustee Limited
Jon
Pilcher
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 2020 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 16 April 2021.
The number of ordinary shareholdings held in less than marketable parcels at 26 April 2021 was 829, holding 128,795
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
78,822,914
25,953,932
4,307,622
4,648,248
875,392
%
68.78
22.65
3.76
4.06
0.76
114,608,108
100.00
Number
of holders
137
880
556
1,697
1,929
5,199
%
2.64
16.93
10.69
32.64
37.10
100.00
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Neuren Pharmaceuticals Limited Annual Report 2020 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
CAMERON RICHARD PTY LTD
CITICORP NOMINEES PTY LIMITED
STUART ANDREW PTY LTD
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
LINWIERIK SUPER PTY LTD
BRISPOT NOMINEES PTY LTD
ESSEX CASTLE LIMITED
SMITHLEY SUPER PTY LTD
HOBSON WEALTH CUSTODIANS LTD
MXB INVESTMENTS LLC
CS FOURTH NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
FIRST COLBYCO PTY LTD
DR TREVOR SCOTT
DR ROBIN LANCE CONGREVE
DR RICHARD SPENCER TREAGUS
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
NAMARONG INVESTMENTS PTY LTD
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 10 to the Financial Statements.
Number of
ordinary shares
% of issued
share capital
14,321,650
12.50
5,865,240
4,811,785
2,951,929
2,951,041
2,948,200
2,642,143
2,482,733
2,369,251
2,140,000
1,580,145
1,330,000
1,234,490
1,207,722
1,028,520
1,000,000
991,637
903,500
735,859
555,556
54,051,401
60,556,707
114,608,108
3,000,000
117,608,108
5.12
4.20
2.58
2.57
2.57
2.31
2.17
2.07
1.87
1.38
1.16
1.08
1.05
0.90
0.87
0.87
0.79
0.64
0.48
47.16
52.84
100.00
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Neuren Pharmaceuticals Limited Annual Report 2020 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