ASX Announcement
29 August 2016
Appendix 4E
Preliminary final report
Opthea Limited
ABN: 32 006 340 567
Year ended 30 June 2016
Results for announcement
to the market
Results
Revenues from ordinary activities
765,274
939,008
down
18.5%
30 June 2016
$
30 June 2015
$
% Movement
Loss from ordinary activities after tax
attributable to members
(6,507,420)
(5,312,079)
Loss has increased
22.5%
Loss for the year attributable to members
(6,507,420)
(5,312,079)
Loss has increased
22.5%
NTA Backing
Net tangible asset backing per ordinary security
0.10
0.15
Dividend distribution
No dividends have been paid or declared by the entity since the beginning of the current reporting period.
This report is based on the attached audited consolidated financial report.
Suite 0403, Level 4 650 Chapel Street
South Yarra, Vic 3141, Australia
www.opthea.com
+61 (3) 9826 0399
Annual Report
2015–2016
Contents
4 Chairman and CEO Overview
10 Directors’ Report
30 Management Team
36
Financial Report
37 Auditor’s Independence Declaration
38 Consolidated Statement of Profit and Loss
and Other Comprehensive Income
39 Consolidated Statement of Financial Position
40 Consolidated Statement of Changes in Equity
42 Consolidated Statement of Cash Flows
43 Notes to the Consolidated Financial Statements
74 Directors’ Declaration
75
Independent Auditor’s Report
77 ASX Additional Information
78 Corporate Information
Half the cases
of vision loss
are attributable
to AMD
Chairman and
CEO Overview
Opthea is dedicated to helping patients with inadequately
treated wet age-related macular degeneration
(wet AMD) with its novel therapeutic OPT-302.
Wet AMD is a progressive disease of the eye that
affects the centre of the visual field needed for detailed,
sharp vision such as for reading, recognising faces and
driving a car. The disease gets worse with time and if
left untreated results in blindness. It affects millions of
individuals world-wide.
Existing approved treatments have achieved combined
sales in excess of US$7 billion per annum. Despite these
treatments many patients respond sub-optimally, some
not at all, or continue to deteriorate over time. As the
leading cause of blindness in the western world and
increasing in prevalence as populations age, improved
treatments for wet AMD are an increasingly urgent
unmet medical need.
Wet AMD is caused by abnormal growth of vessels at
the back of the eye, and the leakage of fluid and protein
from those vessels lead to severe and rapid loss of vision.
The proliferation of these vessels can be inhibited by
agents that block the signals involved in their growth.
These signals are called vascular endothelial growth
factors (VEGFs), of which there are several forms
including VEGF-A, VEGF-C and VEGF-D. The existing
approved treatments for wet AMD target VEGF-A,
but not VEGF-C and VEGF-D.
Opthea’s OPT-302 has been specifically developed to
target VEGF-C and VEGF-D, for which there are no
other similar agents in development. We have growing
evidence that OPT-302 can reduce the processes
involved in wet AMD.
The Company’s business strategy is to develop
OPT-302 as a combination therapy to be used together
with existing approved inhibitors. This is because about
half of the people receiving the existing approved
therapies do not experience a significant gain in vision
and/or have persistent fluid at the back of the eye.
We are delighted to report on the
considerable progress made over
the past 12 months.
04
Opthea LimitedAnnual Report Combination therapy with OPT-302 and a VEGF-A
inhibitor achieves a more complete blockade of the
VEGF pathways involved in vessel growth and leakage.
OPT-302 may also block mechanisms that are associated
with incomplete clinical responses to the currently
approved therapies for the disease.
The opportunity for combining OPT-302
(targeting VEGF-C/D) with existing therapies
(targeting VEGF-A) is to:
• Increase the number of patients who experience
a significant gain in vision
• Increase the magnitude of the vision gain
• Prolong response to therapy and prevent
visual decline.
Opthea’s Phase 1/2A clinical trial was initiated in
July 2015 following US Food & Drug Administration
(FDA) approval of our Investigational New Drug (IND)
application. In just over 12 months we have reported
primary and secondary outcomes from the Phase 1
study of 20 patients and continue to recruit patients
into the Phase 2A cohorts. We were pleased to report
in April 2016 that the primary safety objective of
the Phase 1 study had been met with OPT-302
demonstrating a safe and well tolerated profile in
wet AMD patients when administered via intravitreal
(ocular) injection on its own (as a monotherapy)
and in combination with the VEGF-A inhibitor Lucentis®.
In July 2016 we achieved another important milestone
for Opthea reporting positive data in respect of clinical
activity outcomes in the Phase 1 clinical study. Evaluation
of changes in visual acuity and retinal thickness in
patients treated over a 3 month period with OPT-302
alone and in combination with Lucentis® indicated early
evidence of clinical activity, demonstrating the potential
of OPT-302 to improve outcomes for wet AMD sufferers.
The early evidence of an additive benefit of OPT-302
observed in the Phase 1 study is very promising and
warrants further investigation of OPT-302 in a large
randomised controlled study in wet AMD patients.
The Company’s business
strategy is to develop
OPT-302 as a combination
therapy to be used
together with existing
approved therapies.
Over the next 12 months Opthea will continue to
progress the OPT-302 program. Near term clinical
milestones are anticipated in the first quarter of 2017
with the reporting of outcomes from the Phase 2A
patient cohorts, to be followed by the initiation of a
larger Phase 2B wet AMD clinical trial. We will continue
to raise the profile of the Company both locally and
internationally with presentation of clinical data at
ophthalmology and investment meetings including
involvement by our clinical advisory board.
On behalf of the Opthea team including our fellow
director Michael Sistenich, we thank-you for your
support. It is a compelling program and a privilege to be
part of a clinical stage company with a novel therapeutic
in development for the treatment of the leading cause of
blindness in older adults. We look forward to executing
our strategy as outlined in this Annual Report.
Geoffrey Kempler
Megan Baldwin, PhD
Chairman
Opthea Limited
CEO & Managing Director
Opthea Limited
05
Overview2015–2016 Age-related macular
degeneration is the
leading cause of
irreversible vision
loss in Australia
OPT-302 blocks signals
that are important for
blood vessel growth
and vascular leakage,
two of the hallmarks of
wet AMD progression
OPT-302 blocks signals
that are important for
blood vessel growth
and vascular leakage,
two of the hallmarks of
wet AMD progression
Wet Age-Related
Macular Degeneration
The prevalence
of wet AMD is
increasing as the
population ages
Wet AMD results in
a loss of vision in the
centre of the visual field
The centre of the visual field
is required for fine vision for
daily tasks such as reading,
recognising faces and driving
08
Up to
90%
The wet form of
age-related macular
degeneration accounts
for approximately 10% of
all cases of late age-related
macular degeneration, but
it is responsible for up to
90% of cases of severe
visual loss
The major risk factors
associated with late
age-related macular
degeneration are
advancing age,
smoking and a family
history of age-related
macular degeneration
Opthea LimitedAnnual Report 1 million
It is estimated that there are over 1 million
Australians with age-related macular degeneration,
which is 1/7 people over the age of 50
Vision loss is the
leading cause
of age-related
disability
40 and older
Among Australians aged 40 and
older in 2009, the major causes of
vision impairment were age-related
macular degeneration (AMD),
cataracts, diabetic retinopathy
and glaucoma
In choroidal
neovascularisation
a network of abnormal
blood vessels breaks
through the retinal layers
from the underlying choroid.
This leads to haemorrhage,
oedema and exudate beneath
and within the retina, often
resulting in a rapid and
profound loss of central vision
167,000
330,000
In the absence of treatment
and prevention efforts, the
number of Australians with late
stage macular degeneration
(with vision loss) could double
from 167,000 to 330,000 by
the year 2030
09
Overview2015–2016 Directors’
Report
The Board of Directors of Opthea Limited submits
its report for the year ended 30 June 2016 for
Opthea and its subsidiaries.
Information about the Directors
The names of the Opthea Limited’s (the Company or
Opthea) Directors in office during the financial year and
until the date of this report are as follows:
Geoffrey Kempler
Non-executive director and chairman
(appointed on 30 November 2015)
Michael Sistenich
Non-executive director
(appointed on 30 November 2015)
Megan Baldwin
Managing Director and Chief Executive Officer
Dominique Fisher
Non-executive director
(resigned on 30 November 2015)
Tina McMeckan
Non-executive director
(resigned on 30 November 2015)
Russell Howard
Non-executive director
(resigned on 30 November 2015)
The qualifications, experience and special responsibilities
of the Company’s Directors are as follows:
Changes to the board of directors
At the conclusion of the Company’s AGM on
30 November 2015, Opthea welcomed the appointments
of Geoffrey Kempler as Chairman and Michael Sistenich
as Non-Executive Director. The appointments coincided
with shareholder approval of the change of name of
the company from Circadian Technologies Limited to
Opthea Limited and reflect the company’s commitment
to restructure and position Opthea as a leading
biotechnology company in the ophthalmology space.
Concurrent with the appointment of the new directors,
Opthea accepted the resignation of three non-executive
directors, including Dominique Fisher who resigned as
Chairman after ten years of service to the Company,
and Tina McMeckan and Russell Howard who had each
served as non-executive directors for eight and three
years respectively. The Company thanks the retiring
directors for their dedicated and professional service
and wishes them well in their future endeavours.
Geoffrey Kempler and Michael Sistenich are two widely
respected members of the biotech industry who bring
broad and complementary experience to Opthea’s board
of directors. Both have international capital market
and industry connections and a deep understanding
of biotechnology and drug development.
10
Opthea LimitedAnnual Report
Geoffrey Kempler, B.Sc. Grad.
Dipp. App. Soc. Psych
Michael Sistenich, MSc.
Geoffrey Kempler is currently CEO and executive
Chairman of Prana Biotechnology, and brings extensive
experience in investment, business development and
the biotechnology industry. As a founder of Prana
Biotechnology, he has held both operational roles and
been at the forefront of devising and implementing
Prana’s strategic and commercialization plans. Geoffrey
Kempler’s experience as Chairman of a dual-ASX-
NASDAQ listed biotechnology company, as well as his
operational and strategic planning expertise will be
particularly beneficial to Opthea as we advance
OPT-302 through clinical development.
Michael Sistenich has advised a wide range of global
institutions, high net worth individuals and companies
on healthcare investments over the past 20 years.
He is a healthcare specialist in international investment
management and investment banking, and led the
Bell Potter team which advised the Company through
the $17.4M capital raising in November 2014. Michael
Sistenich is currently Chief Executive Officer of Nohla
Therapeutics, and previously served as Director of
International Equities and Head of Global Healthcare
Investments at DWS Investments, Deutsche Bank
Frankfurt. Michael Sistenich has long standing capital
market connections and experience in the global
healthcare investment community.
Worldwide market
opportunity for wet AMD
therapies estimated to be
USD10 Billion per annum
11
Directors’ Report2015–2016 Megan Baldwin, PhD, MAICD
Company Secretary
Mike Tonroe, BSc(Hons) ACA MAICD
Mike Tonroe, a Chartered Accountant and member
of the Australian Institute of Company Directors,
was appointed as Chief Financial Officer and Company
Secretary on 19 May 2014. Mike previously held CFO
and senior executive and general management positions
in a number of international and Australian companies.
Mike is also the Company Secretary for all Opthea
subsidiary companies.
Dr Megan Baldwin was appointed CEO and Managing
Director in February 2014. Dr Baldwin brings over 19 years
of experience focussing on angiogenesis and therapeutic
strategies for cancer and ophthalmic indications.
Dr Baldwin joined Opthea in 2008 and since then has
held various positions, including Head of Preclinical R&D
and Chief Executive Officer of Opthea Pty Ltd, the
100% owned subsidiary of Opthea, developing OPT-302
(formerly VGX-300) for the treatment of wet age-
related macular degeneration. Prior to joining Opthea,
she was employed at Genentech (now Roche), the
world leader in the field of angiogenesis-based therapies
for cancer and other diseases. Her experience included
several years as a researcher in the group of leading
angiogenesis expert Napoleone Ferrara, before moving to
Genentech’s commercial division and having responsibility
for corporate competitive intelligence activities. In these
roles, she developed extensive commercial and scientific
knowledge in the field of anti-angiogenic and oncology
drug development. She holds a PhD in Medicine from the
University of Melbourne, having conducted her doctoral
studies at the Ludwig Institute for Cancer Research
and is a member of the Australian Institute of
Company Directors.
12
Opthea LimitedAnnual Report Directorships of other listed companies
Share Options
Directorships of other listed companies held by directors
in the three years immediately before the end of the
financial year are as follows:
As at 30 June 2016 and the date of this report, details
of Opthea’s unissued ordinary shares and interests
under option are as follows:
Director
Company
Geoffrey
Kempler
Prana Biotechnology
Limited
Period of
directorship
Since 2000
Directors’ Interests
At the date of this report, the relevant interests of each
director of the Company in the contributed equity of
the Company are as follows:
Fully paid
ordinary
shares
Quoted
options
Options granted
under LTIP and NED
Plans
Megan
Baldwin1
Geoffrey
Kempler
Michael
Sistenich
1,533,674
11,500
4,000,000
574,429
285,714
2,000,000
320,000
-
1,000,000
1 Holding of ordinary shares includes 1,500,000 ordinary shares issued
on 1 July 2015 subject to a holding lock that expired on 1 July 2016.
Unissued ordinary shares
At the date of this report the company had on issue
49,707,097 quoted options to purchase ordinary shares
with an exercise price of $0.27 and expiry date of
25 November 2018. During the year, 15,600 options
(2015: 3,975) were exercised, none have been
exercised since the end of the financial year.
No quoted options expired during or since the end of
the financial year.
Long Term Incentive and Non-Executive Director
Share and Option Plans
During the financial year ended the Company granted
9,725,000 options to purchase ordinary shares to
directors and employees under the Long Term Incentive
(LTIP) and Non-Executive Director Share and Option
(NED) Plans. The company also had on issue options
granted to Bell Potter Securities Limited:
Grant
date
Expiry
date
Granted
to
Exercise
price
Number
of options
granted
7 March
2016
7 March
2021
31 March
2016
1 January
2022
13 January
2015
13 January
2018
Directors
under the
LTIP and
NED plan
Employees
under the
LTIP
Bell Potter
Securities
Limited
$0.48
7,000,000
$0.48
2,725,000
$0.2625 1,000,000
10,725,000
The Remuneration Report section of this report contains
details on the terms and conditions of the options
granted under the Company’s LTIP and NED Plans.
Dividends
No cash dividends have been paid, declared or
recommended during or since the end of the
financial year by the Company.
13
Directors’ Report2015–2016 14
Opthea LimitedAnnual Report Principal Activities
Financial position
Opthea Limited’s principal activity is to develop and
commercialise therapies primarily for eye disease.
These development activities are based on the extensive
intellectual property portfolio covering key targets
(Vascular Endothelial Growth Factors [VEGF]-C, -D
and VEGF Receptor-3) for the treatment of diseases
associated with blood and lymphatic vessel growth
(angiogenesis and lymphangiogenesis respectively),
as well as vascular leakage.
The therapeutic applications for Opthea’s VEGF
technology are substantial and broad. Opthea is
developing its lead molecule, a soluble form of VEGFR-3
referred to as OPT-302, for the treatment of wet age-
related macular degeneration (wet AMD), the leading
cause of blindness in the western world in people
aged over 55 years.
Operating and Financial Review
Financial performance
The consolidated results of Opthea and its subsidiaries
(the Group) for the year reflect the Group’s investment
in advancing its OPT-302 ophthalmology program.
A summary of the results is as follows:
• The major expenditure of the Group has been in
relation to R&D, in particular costs associated with
the Phase 1/2A clinical trial of OPT-302 for wet AMD,
conduct of pre-clinical safety toxicology studies and
manufacture of clinical grade OPT-302 drug product;
• Direct R&D expenditure (excluding personnel costs)
amounted to $3,581,295 (2015: $5,585,692). Including
personnel costs and other R&D support costs which
are recognised through the administrative cost centre,
total expenditure in R&D amounted to $5,874,562
(2015: $7,210,267);
• Opthea received an R&D tax incentive payment during
the year of $3,094,502 (2015: $2,297,679);
• Royalty income received during the financial year was
$329,304 (2015: $515,859);
• Patent costs incurred during the financial year were
$254,298 (2015: $259,176);
• The consolidated net loss of the Group for the
year was $6,531,774 after an income tax benefit of
$1,569,204 (2015: loss of $5,400,994 after an income
tax benefit of $2,720,260).
The Group statement of financial position includes
the following key balances:
• Consolidated cash balances as at 30 June 2016
amounted to $14,486,403 (2015: $18,435,637);
• Receivables of $1,808,000 (2015: $3,345,420) include
the Opthea Group’s expected refund of R&D tax
incentives for the year to June 2016 of $1,586,990
(2015: $3,110,530);
• The Group has a net current asset surplus of
$14,633,354 (2015: $19,673,480);
• The value of the investment portfolio (available for
sale financial assets) decreased by a net $1,725,077
to $315,910 during the year. This was due to the fair
value decrease in investments;
• During the year, Syngene Limited, a 52% owned
subsidiary entered into a solvent members’ voluntary
liquidation. As a result, the Company ceased to have
control over the activities of Syngene and ceased
to consolidate it into its financial statements from
27 November 2015. At 30 June 2015, the net
assets attributed to Syngene Limited in the
Group’s consolidated statement of financial
position was $728,563;
• The net tangible asset backing per share as at
30 June 2016 was $0.10 (2015: $0.15) whereas
Opthea’s share price was $0.50 (2015: $0.19).
Opthea Limited’s principal
activity is to develop and
commercialise therapies
primarily for eye disease
15
Directors’ Report2015–2016 Change of Company’s name and ASX ‘Ticker’ Code
At the Company’s 2015 Annual General Meeting on
30 November 2015, the Company changed its name
from Circadian Technologies Limited to Opthea Limited
(ASX: OPT). This is consistent with the Group’s strategic
focus to develop novel therapies for the treatment
of eye diseases, including OPT-302 for wet AMD.
The name more closely aligns the principal activities
of the Company with its corporate identity.
On 14 December 2015, Opthea’s ticker code, the
unique code identifying the company on the Australian
Securities Exchange, was changed from ‘CIR’ to
‘OPT’. This new code is now quoted on all securities
transactions and in company communications.
Corporate restructuring
Opthea’s corporate structure is currently being
simplified through deregistration or liquidation of
several of our wholly-owned subsidiaries. This process
is critical to the articulation of a clear corporate strategy
and provides greater efficiencies in our accounting
and reporting processes.
Our ophthalmology program/s are conducted under
the public ASX listed entity Opthea Limited. At the
completion of the corporate restructure, two wholly-
owned subsidiaries of Opthea will remain. Concurrently,
Syngene Limited, a 52% owned subsidiary of Opthea
is currently in member’s voluntary liquidation which
further simplifies Opthea’s corporate structure
(for more information regarding Syngene, see
note 15 to the financial statements).
OPT-302: A potent inhibitor of VEGF-C and VEGF-D
for the treatment of wet AMD
Opthea has continued to execute its strategy to focus
on the development of its lead molecule OPT-302 as
an eye disease therapy.
OPT-302 is a soluble form of VEGFR-3 that acts as
a VEGF-C/VEGF-D ‘trap’. Blockade of VEGF-C and
VEGF-D by OPT-302 inhibits blood and lymphatic vessel
development, as well as vessel leakage, which are
characteristic hallmarks of several eye diseases, including
neovascular (‘wet’) age-related macular degeneration
(wet AMD).
Wet AMD is a disease characterised by loss of vision in
the middle of the visual field caused by degeneration of
the central portion of the retina (the macula). Abnormal
growth of blood vessels below and within the retina, and
the leakage of fluid and protein from the vessels, cause
retinal degeneration and lead to severe and rapid loss of
vision if left untreated.
Approved therapies for wet AMD include Eylea® and
Lucentis® which block the activity of VEGF-A, the first
member of the VEGF family of proteins to be discovered
and a signal that causes blood vessels to grow and leak.
The approved therapies target VEGF-A but not VEGF-C
or VEGF-D which are alternate members of the same
family of molecules. VEGF-C and VEGF-D can stimulate
blood vessel growth and leakage through the same
pathway as VEGF-A, as well as through pathways that
are independent of VEGF-A.
Opthea’s strategy is to address the unmet medical
need that remains for wet AMD patients. Approximately
half of the people receiving the existing therapies do
not experience a significant gain in vision and/or have
persistent fluid at the back of the eye. As the leading
cause of blindness in the developed world, and one
which is increasing in prevalence as the population
ages, wet AMD represents a multi-billion dollar
market opportunity.
OPT-302 is being developed to be used in combination
with existing approved inhibitors of VEGF-A (Lucentis®/
Eylea®). Combined administration of OPT-302 with a
VEGF-A inhibitor achieves a more complete blockade of
the VEGF pathway and may block mechanisms that are
associated with incomplete clinical responses to VEGF-A
inhibitors. Combined inhibition of VEGF-A, together with
VEGF-C and VEGF-D, may more effectively control
aberrant blood vessel development and leakage in
patients that exhibit sub-optimal vision gains despite
ongoing therapy with the currently approved therapies
for the disease.
16
Opthea LimitedAnnual Report Operational update
In July 2016, we announced positive data from Opthea’s
ongoing first-in-human clinical trial of OPT-302 for wet
AMD. The phase 1/2A clinical trial of OPT-302 in patients
with wet AMD is currently in progress under an FDA
approved IND at 14 clinical sites in the USA. The study
comprises two parts, a Phase 1 dose-escalation trial of
20 patients and a Phase 2A dose-expansion study in wet
AMD patients who have either not been treated previously
(treatment naïve patients) or who have demonstrated
a sub-optimal response to prior anti-VEGF-A therapy.
The trial is investigating OPT-302 administered alone
or in combination with Lucentis® on a monthly basis
for three months.
The Phase 1 dose escalation study met the primary
objective, demonstrating OPT-302 safety and tolerability
as a monotherapy and in combination with standard of
care Lucentis®, a VEGF-A inhibitor.
Secondary endpoints of the trial including evaluation of
visual acuity using eye charts as well as changes in wet
AMD lesions, retinal thickness and fluid, demonstrated
clinical activity of OPT-302 in both treatment naïve
patients and prior-treated patients.
Overall, a majority of patients (16/19), maintained or gained
vision by week 12 of the study compared to their baseline
visual acuity. By week 12, in patients treated with OPT-
302 + Lucentis® therapy, mean gains in visual acuity and
reductions in retinal thickness were observed suggesting
that combined inhibition of VEGF-C, VEGF-D and VEGF-A
may lead to improved outcomes over Lucentis® alone.
These results represent an important milestone for Opthea.
The early evidence of an additive benefit of OPT-302
when combined with a VEGF-A inhibitor in this study,
demonstrates the potential of OPT-302 to improve clinical
outcomes in wet AMD patients.
Recruitment of an additional ~30 patients in the Phase
2A cohorts of the clinical study is ongoing, with reporting
of the primary analysis of the Phase 2A trial expected
by March 2017. In conjunction with the world-renown
members of our clinical advisory board and investigators,
Opthea is also planning for initiation of a randomized
controlled Phase 2B clinical study in wet AMD patients
in 2017.
2015—2016
17
Directors’ Report There is a large unmet
medical need that remains
for wet AMD patients
To further raise Opthea’s profile in the US investment and
ophthalmology community, the OPT-302 development
program was presented at three key international
events over recent months. In November 2015, Opthea
was chosen to present at the BioPharma Company
Showcase of the Ophthalmology Innovation Summit
(OIS) in Las Vegas. The OIS was attended by over 800
professionals from the investor, pharmaceutical and
clinical ophthalmology community and held in conjunction
with the annual meeting of the American Association for
Ophthalmology (AAO). AAO attracts more than 24,000
attendees annually and is the largest clinical ophthalmology
conference in the US. Opthea was also selected to
present at the OIS in August 2016, an event which was
held in conjunction with the American Society of Retinal
Specialists (ASRS) meeting in San Francisco.
In addition, in January 2016, Opthea presented at
the Biotech Showcase, an investor and partnering
conference held in parallel with the 34th Annual J.P.
Morgan Conference in San Francisco. The Showcase
and J.P. Morgan conference attracts investors as well
as pharmaceutical and biotechnology executives from
around the world and is one of the industry’s largest
healthcare investment conferences.
Concurrent with the Phase 1/2A clinical trials, we have
an ongoing collaboration with Schepens Eye Research
Institute (Harvard Medical School, Massachusetts Eye
& Ear Infirmary, Boston) who continue to investigate the
biological role of VEGF-C and VEGF-D in wet AMD and
other eye diseases and study the activity of OPT-302
in preclinical animal models of wet AMD.
Intellectual property
In October 2015, Eli Lilly discontinued development of
their VEGFR-3 antibody IMC-3C5 (LY3022856) and also
terminated its exclusive license to Opthea’s intellectual
property (IP) covering therapeutic use of antibodies
to VEGFR-3. This strengthens Opthea’s IP position,
particularly in relation to our OPT-302 program for the
treatment of wet AMD. Reversion of the IP provides
Opthea with greater flexibility for negotiation of any
future IP licenses that are more aligned with our
strategy to focus on ophthalmology indications. Eli Lilly
had an exclusive license to Opthea’s IP to develop a
VEGFR-3 antibody, in return for an annual license fee
payable to Opthea. Termination of the license agreement
does not have any material impact on Opthea’s financial
projections as the Company’s forecasts do not include
annual license income from Eli Lilly.
Syngene Limited
Syngene Limited, a 52% owned subsidiary of Opthea
and a public unlisted company, had been involved in
the development of alternatives forms of insulin for the
treatment of diabetes. To continue this development
to a commercially viable stage, Syngene would require
resources that could not be supported further by Opthea
and were beyond the means of Syngene standing
alone. The Syngene board of directors unanimously
recommended, in the best interests of its shareholders,
that the company cease its operations. At its AGM on
27th November 2015, Syngene shareholders passed a
special resolution to place the company into voluntary
members’ liquidation. Syngene is solvent and debt free
and is likely to distribute a dividend of its remaining net
assets to its shareholders.
It is anticipated that this will return approximately
$160,000 to Opthea, including the pro-rata value
(reflecting Opthea’s 52% ownership) of the listed
investments held within Syngene Limited. The formal
process of concluding Syngene’s activities is now managed
by its liquidators PCI Partners Pty Ltd in Melbourne with
the liquidation expected to be finalised by 31 March 2017.
18
Opthea LimitedAnnual Report 19
Directors’ Report2015–2016 Significant changes in the state of affairs
Significant events after balance date
During the year, Syngene Limited entered into members
voluntary liquidation and ceased to be consolidated into
the Group’s accounts on 27 November 2015. Except for
this change, in the opinion of the directors, there were
no significant changes in the state of affairs of the Group
that occurred during the financial year under review.
Future developments
Opthea will continue to focus the Company’s capital
and resources on the significant opportunity represented
in the OPT-302 program.
The key objectives of the Company over the next
12 months are to:
• Complete patient enrolment in the Phase 2A
dose-expansion cohorts of the Phase 1/2A clinical
trial of OPT-302 in wet AMD patients;
• Report primary data from the Phase 2A cohorts
by the end of March 2017;
• Publish the outcomes of the Phase 1/2A clinical
trial of OPT-302 in wet AMD patients in a
peer-reviewed journal;
• Progress preclinical safety/toxicology studies to
support a Phase 2B clinical trial of OPT-302 in
wet AMD patients;
• Initiate a randomized controlled Phase 2B clinical
study of OPT-302 in wet AMD patients;
• Continue to raise Opthea’s profile through awareness
of the unmet medical need for wet AMD, rationale for
OPT-302 use in this setting and presentation of clinical
data at international ophthalmology conferences;
• Complete the legal-entity simplification process
through the deregistration of wholly owned
subsidiaries no longer required by the Group.
On 26 July 2016 the Company announced positive
Phase 1 clinical trial data for its ‘first-in-human’
OPT-302 study in wet AMD patients. The results
showed OPT-302 was safe and well tolerated. Secondary
outcome measures of the trial, including changes in visual
acuity and retinal thickness, demonstrated early evidence
of clinical activity and warrant further investigation of
OPT-302 in a randomized controlled Phase 2B clinical
trial in wet AMD patients. With the exception of the
reporting of data from the Phase 1 clinical trial, no
matters or circumstances have arisen since the end
of the reporting period, not otherwise disclosed in this
report, which significantly affected, or may significantly
affect, the operations of the Group, the results of those
operations, or the state of affairs of the Group in future
financial years.
Environmental regulations
The Group is not subject to significant
environmental regulations.
Indemnification and Insurance
During the financial year ended 30 June 2016, the
Company indemnified its directors, the company
secretary and executive officers in respect of any acts
or omissions giving rise to a liability to another person
(other than the Company or a related party) unless
the liability arose out of conduct involving a lack of
good faith. In addition, the Company indemnified the
directors, the company secretary and executive officers
against any liability incurred by them in their capacity
as directors, company secretary or executive officers in
successfully defending civil or criminal proceedings in
relation to the Company. No monetary restriction was
placed on this indemnity.
The Company has insured its directors, the company
secretary and executive officers for the financial year
ended 30 June 2016. Under the Company’s Directors’
and Officers’ Liabilities Insurance Policy, the Company
shall not release to any third party or otherwise publish
details of the nature of the liabilities insured by the
policy or the amount of the premium. Accordingly, the
Company relies on section 300(9) of the Corporations
Act 2001 to exempt it from the requirement to disclose
the nature of the liability insured against and the
premium amount of the relevant policy.
20
Opthea LimitedAnnual Report Directors’ Meetings
The number of meetings of directors and meetings of
committees of the board held during the year are set out
below. Attendance by the directors at these meetings as
relevant to each of them is as shown. It is the Company’s
practice to invite all directors to committee meetings
irrespective of whether they are members.
Directors’ meetings
Meetings of committees
Audit & Risk
Nomination
Remuneration
Number of meetings held:
Number of meetings attended:
Geoffrey Kempler
Michael Sistenich
Megan Baldwin
Dominique Fisher
Tina McMeckan
Russell Howard
8
4
4
8
4
4
4
Committee membership
During the year, the Company had Audit and Risk,
Remuneration and Nomination committees.
Members acting on the committees of the board
during the year were:
2
1
1
2
1
1
1
5
2
2
5
3
3
3
1
1
1
1
-
-
-
Audit & Risk
Nomination
Remuneration
Michael Sistenich (Chairman)
Michael Sistenich (Chairman)
Michael Sistenich (Chairman)
Geoffrey Kempler
Tina McMeckan
Dominique Fisher
Russell Howard
Geoffrey Kempler
Geoffrey Kempler
Dominique Fisher
Tina McMeckan
Russell Howard
21
Directors’ Report2015–2016
Auditor’s Independence declaration
Remuneration Report - Audited
The directors have obtained a declaration of
independence from Deloitte Touche Tohmatsu,
the Group’s auditors, which is set out on page 37
and forms part of the directors’ report for the
financial year ended 30 June 2016.
Principles of compensation
Compensation packages include a mix of fixed and
variable compensation and long-term performance
based incentives.
Non-Audit Services
Advice in respect of potential options for restructuring
the Group was also provided by the entity’s auditor,
Deloitte Touche Tohmatsu. The Company is satisfied
that while providing this advice the auditor maintained
its independence.
Proceedings on behalf of the company
There were no persons applying for leave under section
237 of the Corporations Act 2001 to bring, or intervene
in, proceedings on behalf of the Company.
Corporate Governance
The board aims to achieve and show the highest
standards of corporate governance. The Group has
adopted the third edition of the Corporate Governance
Principles and Recommendations. These were
released by the ASX Corporate Governance Council
on 27 March 2014. They became effective for
financial years beginning on or after 1 July 2014.
The board approved the 2016 Corporate Governance
Statement on 29 August 2016. The Corporate
Governance Statement is available on Opthea Limited’s
web site at http://www.opthea.com/pub/pdf/Opthea_
CorporateGovernanceStatement2016.pdf
Fixed compensation
The level of fixed remuneration is set so as to provide
a base level of compensation which is both appropriate
to the position and is competitive in the market.
The remuneration committee accesses external
advice independent of management if required.
Fixed compensation comprises salary and
superannuation and is reviewed every 12 months
by the remuneration committee.
Performance linked compensation
Short Term Incentives (STI): The objective of STI
is to link the achievement of the Group’s operational
targets with the remuneration received by the executives
charged with meeting those targets. The total potential
STI available is set at a level that provides sufficient
incentive to the executive to achieve the operational
targets at a cost to the Group that is reasonable in
the circumstances.
Actual STI payments in the form of cash bonuses to
KMP depend on the extent to which specific targets
set at the beginning of the financial year (or shortly
thereafter) are met. The targets consist of a number
of Key Performance Indicators (KPIs) covering corporate
objectives and individual measures of performance.
Individual KPIs are linked to the Company’s
development plans.
On an annual basis, after consideration of performance
against KPIs, the remuneration committee determines
the amount, if any, of the STI to be paid to key
management personnel (KMP). Payments of the
STI bonus are made in the following reporting period.
Current therapies for
wet AMD target VEGF-A.
Opthea’s OPT-302 is a novel
therapy targeting VEGF-C
and VEGF-D
22
Opthea LimitedAnnual Report The remuneration committee considered the STI
payment for the 2016 financial year in July 2016.
Based on the achievement of operational objectives
in the financial year, the remuneration committee has
determined there will be $233,750 STI bonus paid to
KMP for the 2016 financial year (2015: $213,863).
Long term incentive plan (LTIP): The objective of
the LTIP is to reward KMP in a manner that aligns
this element of compensation with the creation of
shareholder wealth. LTIP grants are made to KMP and
employees who are able to influence the generation
of shareholder wealth and have a direct impact on the
Company’s performance and development. Option
vesting conditions are based on continued service to
the Company by the KMP.
The Company implemented an LTIP to attract, retain and
motivate eligible employees, essential to the continued
growth and development of the Company. The LTIP was
approved by shareholders at the Company’s 2014 AGM.
The limit of the Company’s share capital to be granted
under the LTIP was increased to 10% at the 2016 EGM.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for
shareholder wealth, the remuneration committee have
regard to the following indices in respect of the current
and previous four financial years.
Revenue
Loss before tax
Tax benefit
Loss after tax
2016
$
2015
$
2014
$
2013
$
2012
$
765,274
939,008
878,083
1,153,687
1,485,832
(8,100,978)
(8,121,254)
(6,849,021)
(6,562,515)
(7,308,526)
1,569,204
2,720,260
2,859,403
1,558,009
2,402,070
(6,531,774)
(5,400,994)
(3,989,618)
(5,004,506)
(4,906,456)
Basic loss per share
NTA backing per share @ 30 June
Opthea share price @ 30 June
2016
$
(0.04)
0.10
0.50
2015
$
(0.05)
0.15
0.19
2014
$
(0.08)
0.22
0.19
2013
$
(0.10)
0.33
0.23
2012
$
(0.10)
0.41
0.35
Change in share price is one of the financial performance
targets considered in setting STI.
23
Directors’ Report2015–2016 Service contracts
Non-executive directors
Dr Megan Baldwin, CEO and Managing Director, is
employed under an ongoing contract that commenced
on 24 February 2014. Under the terms of the present
contract (including any subsequent board approvals
relating to fixed remuneration) Megan:
• Receives fixed remuneration of $350,000 per annum
from 1 July 2015.
• May resign from her position and thus terminate this
contract by giving three months’ notice.
On resignation, any unvested LTI options or conditional
rights will be forfeited. The Company may terminate this
employment agreement by providing:
Total compensation for all non-executive directors, last
voted on at the 2005 AGM, is not to exceed $500,000
per annum. Currently, non-executive directors are
compensated to an aggregate of $457,133 per annum
(2015: $300,420), inclusive of superannuation. The 2016
director fees are 91% (2015: 61%) of the aggregate
maximum sum approved by shareholders.
The base fee for Chairman is $90,405 per annum and
$60,000 per annum for other non-executive directors.
Base fees cover all main board activities and membership
of all board committees.
Non-executive directors are not provided with retirement
benefits apart from statutory superannuation.
• 3 months’ notice; or
• Payment in lieu of the notice period (as detailed
above) based on the fixed component of
Megan’s remuneration.
On termination notice by the Company, any LTIP options
that have vested or that will vest during the notice
period will be released. Options granted that have not
yet vested will be forfeited.
The Company may terminate the contract at any time
without notice if serious misconduct has occurred.
Where termination with cause occurs, Megan is only
entitled to that portion of remuneration that is fixed, and
only up to the date of termination. On termination with
cause, any unvested options will immediately be forfeited.
During the financial year, Megan was granted options to
4,000,000 ordinary shares under the LTIP. These options
vested during the financial year and were exercised on
1 July 2015 subject to a holding lock expiring on
1 July 2016.
The company implemented a non-executive director
share and option plan (NED Plan) following its approval
at the 2014 AGM. Under the NED Plan, present and
future non-executive directors may:
• elect to receive newly issued ordinary shares (Shares)
or options to acquire newly issued Shares in lieu of
receiving some or all of their entitlement to their
director’s existing cash remuneration (in accordance
with article 61.8 of the Company’s constitution);
• be awarded newly issued Shares or options to
acquire newly issued Shares in lieu of additional cash
remuneration in respect of services provided to the
Company which in the opinion of the Board are outside
the scope of the ordinary duties of the relevant
director (in accordance with article 61.5
of the Company’s constitution); and/or
• otherwise be awarded newly issued Shares or
options to acquire newly issued Shares as part of the
directors’ remuneration in addition to any existing cash
remuneration paid to directors (if any).
The CFO and Company Secretary has an ongoing
contract. The Company may terminate the employment
agreement by providing three months’ notice or providing
payment in lieu of the notice period (based on the fixed
component of remuneration).
The Company may terminate Mike Tonroe’s contract
at any time without notice if serious misconduct has
occurred. Where termination with cause occurs the
executive is only entitled to that portion of remuneration
that is fixed and only up to the date of termination.
Advantages of the NED Plan are that it:
• assists the Company in preserving its cash for use
towards advancing the Company’s lead molecule,
OPT-302, for wet AMD through Phase 1/2A and
2B clinical studies;
• gives non-executive directors an opportunity to
demonstrate their commitment and support for the
Company through sacrificing some or all of their
director’s fees for Shares or options in Opthea; and
• provides the Company with further flexibility in the
design of the directors’ remuneration packages and
in turn assists the Company with retaining existing
directors and attracting new additional directors with
the relevant experience and expertise, in both cases
to further advance the prospects of the Company.
24
Opthea LimitedAnnual Report Directors’ and executive officers remuneration
Details of the nature and amount of each major element of remuneration of each director and key management personnel of the
Company are:
Short Term Post Employment
Long
Term
Termination
benefits
Salary
& Fees
Cash
bonus 3
Superannuation
Long
Service
Leave
Termination
Pay
Share-
based
payment
Options
Total
Total
performance
related
$
$
$
$
$
$
$
%
Non-Executive directors:
Geoffrey Kempler 1
Michael Sistenich 1
Dominique Fisher 2
Russell Howard 2
Tina McMeckan 2
Sub-total
Non-executive
directors
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
52,738
-
35,000
-
33,335
80,004
21,250
51,000
21,250
51,000
2016
163,573
2015
182,004
-
-
-
-
-
-
-
-
-
-
-
-
Executive directors:
Megan Baldwin
2016 350,004
175,000
2015 300,000
150,000
Other Key Management Personnel:
Mike Tonroe
2016
234,996
58,750
2015
201,372
45,309
Totals
2016
748,573 233,750
2015
683,376
195,309
5,010
-
3,325
-
3,167
7,600
2,019
4,845
2,019
4,845
15,540
17,290
47,500
42,750
26,629
23,434
89,669
83,474
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
185,346
243,094
76.24%
-
-
-
92,673
130,998
70.74%
-
-
-
36,502
101,126
188,730
-
-
-
-
23,269
55,845
23,269
55,845
-
278,020
457,133
101,126
300,420
-
-
-
-
-
-
-
-
-
370,693
943,197
261,806
754,556
57.86%
54.58%
35,771
356,146
-
270,115
- 684,483 1,756,475
-
362,932
1,325,091
26.54%
16.77%
52.28%
42.13%
1. Appointed on 30 November 2015: remuneration in the year is for 7 months of service.
2. Resigned on 30 November 2015: remuneration in the year is for 5 months of service.
3. Bonuses are paid in the financial year following the year in which they are earned.
Change in share price is one of the financial performance targets considered in setting STI.
Equity instruments
All options refer to options over ordinary shares of Opthea Limited which are exercisable on a one-for-one basis under the
Long Term Incentive (LTIP) and Non-executive share and options (NED) plans.
25
Directors’ Report2015–2016
Options over equity instruments granted as compensation
Details of options over ordinary shares in the Company that were granted as compensation to KMP during
the reporting period and details of options that vested during the reporting period are as follows:
Name
Number
of options
granted
Fair value
per option at
grant date
Exercise
price per
option $
Grant date
During the financial year
Megan Baldwin
4,000,000
7 March 2016
Geoffrey Kempler
2,000,000
7 March 2016
Michael Sistenich
1,000,000
7 March 2016
Mike Tonroe
800,000 31 March 2016
0.19
0.19
0.19
0.24
Expiry date
Number of
options vested
7 March 2021
1,320,000
0.48
0.48
0.48
7 March 2021
7 March 2021
0.48
31 March 2022
660,000
330,000
-
All options expire on the earlier of their expiry date or termination of the individual’s employment.
Option vesting is conditional on the individual being employed or in office. The options are exercisable
up to three years after they vest.
Exercise of options granted as compensation
During the reporting period the following shares were issued on the exercise of options previously
granted as compensation:
Megan Baldwin
Dominique Fisher
Number of shares
Amount paid $/share
1,500,000
600,000
-
-
Details of options affecting current and future remuneration
Details of vesting profiles of the options held by each KMP of the Group are:
Number of
options
Grant date
%vested in
the year
%forfeited
in year (1)
Financial years in
which grant vests
Megan Baldwin
1,320,000
7 March 2016
100%
1,320,000
7 March 2016
1,360,000
7 March 2016
0%
0%
Geoffrey Kempler
660,000
7 March 2016
100%
660,000
7 March 2016
680,000
7 March 2016
0%
0%
Michael Sistenich
330,000
7 March 2016
100%
330,000
7 March 2016
340,000
7 March 2016
Mike Tonroe
264,000
31 March 2016
264,000
31 March 2016
272,000
31 March 2016
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
1 July 2015
1 July 2016
1 July 2017
1 July 2015
1 July 2016
1 July 2017
1 July 2015
1 July 2016
1 July 2017
1 July 2016
1 July 2017
1 July 2018
Vesting
Conditions
Continued
service
Continued
service
Continued
service
Continued
service
(1) The percentage forfeited in the year represents the reduction from the maximum number of options available to vest due to vesting
criteria not being achieved.
26
Opthea LimitedAnnual Report
Analysis of movements in equity instruments
The value of options over ordinary shares in the Company granted and exercised by each KMP during the reporting period is
detailed below:
Geoffrey Kempler
Michael Sistenich
Megan Baldwin
Dominique Fisher
Mike Tonroe
Granted in year
$ (1)
Value of options
exercised in year $ (2)
380,171
190,086
760,342
-
191,381
-
-
285,000
114,000
-
(1) The value of options granted in the year is the fair value of the options at the grant date. This amount is allocated to remuneration over the vesting period.
(2) The value of options exercised during the year is calculated as the market price of shares of the Company at the close of trading on the date the
options were exercised.
Options over equity instruments
The movement during the reporting period by number of rights and options over ordinary shares in Opthea Limited held directly,
indirectly or beneficially, by each KMP, including their related parties, is as follows:
Number of options:
Held at 1
July
Granted as
compensation
Options
exercised
Lapsed Forfeited
Held at 30
June
Vested
during the
year
Vested and
exercisable
Megan Baldwin
2016
1,500,000
4,000,000
(1,500,000)
-
- 4,000,000
1,320,000
1,320,000
2015
200,000
1,500,000
Geoffrey Kempler
2016
2015
Michael Sistenich
2016
Dominique Fisher
Other executives
Mike Tonroe
2015
2016
2015
2016
2015
-
-
-
-
600,000
-
-
-
2,000,000
-
1,000,000
-
-
600,000
800,000
-
-
-
-
-
-
(600,000)
-
-
-
Total
2016 2,100,000
7,800,000 (2,100,000)
(200,000)
-
1,500,000
1,500,000
1,500,000
-
-
-
-
-
-
-
-
-
- 2,000,000
660,000
660,000
-
-
-
-
-
-
-
-
-
-
1,000,000
330,000
330,000
-
-
-
-
-
-
600,000
600,000
600,000
800,000
-
-
-
-
-
- 7,800,000 2,310,000
2,310,000
2015
200,000
2,100,000
-
(200,000)
- 2,100,000
2,100,000
27
Directors’ Report2015–2016
Key management personnel transactions
Movements in shares
The movement during the reporting period in the number of ordinary shares in Opthea Limited held, directly, indirectly
or beneficially, by each KMP including their related parties is as follows:
Number of
Ordinary Shares:
Non-executive directors
Geoffrey Kempler
2016
Michael Sistenich
Dominique Fisher
Tina McMeckan
Russell Howard
Executives
Megan Baldwin
Mike Tonroe
Total
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Balance at
beginning of
period 1 July
Granted as
remuneration
On Exercise
of Options
Purchased
in the year
Appointed/
(resigned)
during the year
Balance
at end
of period
30 June
-
-
-
-
234,500
167,500
140,000
100,000
187,517
-
33,674
10,674
-
-
595,691
278,174
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
-
-
-
-
-
1,500,000
-
-
-
2,100,000
-
-
-
-
-
574,429
574,429
-
-
320,000
320,000
-
(834,500)
-
-
67,000
-
234,500
-
(140,000)
-
40,000
-
140,000
-
(187,517)
187,517
-
23,000
-
-
-
-
-
-
-
-
-
187,517
1,533,674
33,674
-
-
2,695,691
595,691
-
317,517
This report has been signed in accordance with a resolution of the directors made pursuant to S.298 (2) of the
Corporations Act 2001 on 29 August 2016.
For and on behalf of the board:
Megan Baldwin
Director
Geoffrey Kempler
Director
Melbourne
29 August 2016
28
Opthea LimitedAnnual Report
Directors’ Report
“ Because wet AMD is such
a complex disease with
multiple pathways, it is
likely that a combination
of drugs will be able to
provide better outcomes.”
— Macular Disease Foundation Australia,
Macular Degeneration Research Update December 2015
2015—2016
29
Opthea Limited
Management
Team
30
Annual Report
Opthea LimitedAnnual Report Management Team
Megan Baldwin, Phd, MAICD
Chief Executive Officer
and Managing Director
Mike Tonroe, BSc(Hons), ACA, MAICD
Chief Financial Officer
and Company Secretary
Mike Tonroe is a Chartered Accountant and was
appointed Chief Financial Officer and Company Secretary
in May 2014 and is accountable directly to the board,
through the chair, on all matters to do with the proper
functioning of Opthea’s board. Prior to joining Opthea,
Mike was the Chief Financial Officer and Company
Secretary at the Australian Synchrotron in Melbourne.
Mike has over 20 years’ experience of financial
management in board-level positions for private and
listed companies in Australia, UK, the US and Canada.
Mike holds a Graduate Degree in Business Studies from
Buckingham University and is a member of the Australian
Institute of Company Directors. Mike is also the
Company Secretary for all of the Group’s subsidiaries.
Dr Megan Baldwin has been appointed CEO and
Managing Director effective 24 February 2014.
Dr Baldwin brings over 20 years of experience
focusing on angiogenesis and therapeutic strategies
for ophthalmic and cancer indications. Since joining
Opthea in 2008, she has held various positions, including
Head of Preclinical R&D and Chief Executive Officer of
Opthea Pty Ltd, the 100% owned subsidiary of Opthea,
developing OPT-302 for the treatment of wet age-
related macular degeneration. Prior to joining Opthea,
Dr Baldwin was employed at Genentech (now Roche),
the world leader in the field of angiogenesis-based
therapies for cancer and other diseases. Her experience
included several years as a researcher in the group
of leading angiogenesis expert Napoleone Ferrara,
before moving to Genentech’s commercial division
and having responsibility for corporate competitive
intelligence activities. In these roles, she developed
extensive commercial and scientific knowledge in the
field of anti-angiogenic and oncology drug development.
Megan holds a PhD in Medicine from the University of
Melbourne, having conducted her doctoral studies at the
Ludwig Institute for Cancer Research and is a member
of the Australian Institute of Company Directors.
2015—2016
31
31
Management Team2015–2016 Richard Chadwick, Phd
Head of Intellectual Property
Mike Gerometta, Phd
Head of CMC Development
Richard Chadwick, who joined Opthea in February 2008,
is qualified as both a European and Australian patent
attorney. Richard joined Opthea from FB Rice & Co,
where he had been working for five years in
the Biotechnology Group. Prior to that, Richard had
10 years’ experience in intellectual property in the UK.
This included working as an in-house attorney at Dow
Corning Limited and five years working as an in-house
attorney at Unilever.
Mike Gerometta has been with Opthea since December
2008 and is principally responsible for the outsourcing of
Opthea’s research and cGMP manufacturing activities.
Mike has over 20 years’ experience in the Australian
biotechnology industry, most recently as Chief Operating
Officer of Q-Gen, QIMR’s translational research,
manufacturing arm. He has also spent 19 years at Agen
Biomedical, occupying a variety of positions and roles,
most recently as Research and Product Development
Director. In this role he was responsible for the chemistry,
manufacturing and controls (CMC), pre-clinical program
and patent management for Agen’s ThromboView®
project, a blood clot imaging agent. Previously, he has
worked at Biotech Australia, Sydney, and together with
earlier positions at Agen, developed numerous successful
immunodiagnostic assays for the medical, veterinary and
food industries across various diagnostic platforms for
the laboratory and point-of-care. He was awarded his
PhD in biotechnology from the Queensland University
of Technology and has a degree in chemistry from the
University of Technology in Sydney.
32
Opthea LimitedAnnual Report Ian Leitch, Phd
Director – Clinical Research
Clare Price
Director – Clinical Research
Ian Leitch has been Director of Clinical Research of
Opthea Technologies Ltd since September 2011. He has
over 15 years of research and management experience
from drug discovery through clinical development in
biotechnology/pharmaceutical companies. For the five
years prior to joining Opthea, he was a member of the
Medical Sciences group at Amgen Inc in Thousand
Oaks, California, involved in the development of novel
therapeutics in Amgen’s oncology pipeline. In his role
as Senior Manager in the Early Development Oncology
Therapeutic Area, he had responsibility for the oversight,
design, management and execution of Phase 1–2 clinical
studies in oncology. Prior to joining Amgen, he spent
eight years at Miravant Medical Technologies in Santa
Barbara, California. He held positions of increasing
responsibility, including Senior Program Manager for
Cardiovascular Research and Clinical Study Director
for Ophthalmology. At Miravant, he managed pre-
clinical efficacy studies, developed relationships with
Key Opinion Leaders and designed Phase 1–2 clinical
studies in a collaboration with the cardiovascular device
company Guidant Inc. He previously held the position
of NHMRC Senior Research Officer at the University of
Newcastle, and was based at the John Hunter Hospital
in Australia. He received his PhD from the Department
of Pharmacology, Faculty of Medicine, at Monash
University in 1993 and completed part of the degree at
the University of California, Santa Barbara, as part of
an Education Abroad Program Scholarship.
Clare Price was appointed Director of Clinical Research
at Opthea in July 2016, and brings over 20 years
of clinical and drug development experience to the
company. Clare started her career in the main R&D
function of SmithKline Beecham in Harlow, UK. She
spent over 8 years in various clinical roles within the
company with responsibility for the design, management
and execution of clinical studies from phase 1 to 3 across
a number a therapeutic areas. For the remaining three
years Clare formed part of the project management
group of the newly merged GlaxoSmithKline, responsible
for the project management of full drug development
programmes from molecule inception through non-
clinical and clinical studies, regulatory aspects and
commercialisation. She then moved to Melbourne,
where she has held senior clinical roles in two
ASX-listed biotechnology companies, firstly Acrux,
and then Starpharma. Over the nine years that Clare
spent at Starpharma she successfully built, implemented
and delivered phase 2 and 3 clinical programmes,
including extensive regulatory interaction and negotiation,
which led to the successful commercialisation of the
lead candidate product. Clare is a registered pharmacist,
with a degree in Pharmacy, from the University of Bath
in the UK.
33
Management Team2015–2016 In 2010, the total
economic cost of
vision loss associated
with AMD was in
excess of $5 billion.
This includes health
system costs, other
costs to individuals
and community and
loss of well being.
Opthea Limited
Annual Financial
Report
ABN 32 006 340 567
Opthea Limited (formerly Circadian Technologies Limited)
Year ended 30 June 2016
37 Auditor’s Independence Declaration
38 Consolidated Statement of Profit and Loss
and Other Comprehensive Income
39 Consolidated Statement of Financial Position
40 Consolidated Statement of Changes in Equity
42 Consolidated Statement of Cash Flows
43 Notes to the Consolidated Financial Statements
74 Directors’ Declaration
75
Independent Auditor’s Report
77 ASX Additional Information
78 Corporate Information
36
Annual Report
37
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Deloitte Touche Tohmatsu ABN. 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au 29 August 2016 Dear Board Members Opthea Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Opthea Limited. As lead audit partner for the audit of the financial statements of Opthea Limited for the financial year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU Samuel Vorwerg Partner Chartered Accountants The Board of Directors Opthea Limited Suite 0403, Level 4, 650 Chapel Street SOUTH YARRA VIC 3141 Financial Report2015–2016 Consolidated statement of profit or loss and other
comprehensive income for the year ended 30 June 2016
Finance revenue
Other revenue
Revenue
Other income
Research and development expenses
Patent expenses
Intellectual property costs
Administrative expenses
Occupancy expenses
Impairment losses on available-for-sale financial assets
Gain on disposal of subsidiary
Net foreign exchange (loss)/gain
Loss before income tax
Income tax benefit
Loss for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Unrealised losses on available for sale assets
Income tax on items of other comprehensive income
Impairment of available for sale assets
Disposal of available for sale assets
Other comprehensive loss for the period, net of tax
Total comprehensive loss for the period
Loss for the period is attributable to:
Non-controlling interests
Owners of the parent
Total comprehensive loss for the period is attributable to:
Non-controlling interests
Owners of the parent
Note
7
8
9
10
10
11
11
28
22
2016
$
435,970
329,304
765,274
2015
$
423,149
515,859
939,008
15,443
82,882
(3,581,295)
(5,585,692)
(254,298)
(94,114)
(259,176)
(85,568)
(4,048,778)
(3,349,850)
(106,470)
(895,808)
168,082
(69,014)
(8,100,978)
1,569,204
(104,218)
-
-
241,360
(8,121,254)
2,720,260
(6,531,774)
(5,400,994)
(1,405,115)
(215,064)
-
64,519
895,808
198,451
-
-
(310,856)
(150,545)
(6,842,630)
(5,551,539)
(24,354)
(88,915)
(6,507,420)
(5,312,079)
(6,531,774)
(5,400,994)
(101,631)
(125,985)
(6,740,999)
(5,425,554)
(6,842,630)
(5,551,539)
Earnings per share for loss attributable to the ordinary equity holders of the
parent:
- Basic and diluted loss per share (cents)
12
(4.33)
(4.87)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
38
Opthea LimitedAnnual Report Consolidated statement of
financial position at 30 June 2016
Assets
Current assets
Cash and cash equivalents
Current tax assets
Investment in subsidiary
Receivables
Prepayments
Total current assets
Non-current assets
Available-for-sale financial assets
Plant and equipment
Total non-current assets
Total assets
Liabilities
Current liabilities
Payables
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Reserves
Equity attributable to owners of the company
Non-controlling interests
Total equity
Note
2016
$
2015
$
13
11
15
14
16
17
18
19
20
21
22
22
28
14,486,403
18,435,637
1,586,990
3,110,530
169,101
221,010
182,036
-
234,890
140,595
16,645,540
21,921,652
315,910
91,150
407,060
2,040,987
110,216
2,151,203
17,052,600
24,072,855
1,629,976
361,206
21,004
2,012,186
16,826
45,434
62,260
2,074,446
14,978,154
1,970,810
277,362
-
2,248,172
41,143
61,928
103,071
2,351,243
21,721,612
53,844,979
53,840,767
(42,054,863)
(28,375,300)
3,188,038
14,978,154
-
14,978,154
(4,561,457)
20,904,010
817,602
21,721,612
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
39
Financial Report2015–2016 Consolidated statement of changes
in equity for the year ended 30 June 2016
As at 1 July 2014
Unrealised losses on available for sale assets*
Loss for the year*
Total comprehensive income and expense for the year
Recognition of share-based payment
Transfer of share-based payments reserve to retained earnings
Issue of ordinary shares and share options
Balance at 30 June 2015
As at 1 July 2015
Unrealised losses on available for sale assets*
Impairment of available for sale assets
Disposal of available for sale assets
Loss for the year*
Total comprehensive income and expense for the period
Transfer of equity reserve to accumulated losses reserve
Change in interest in subsidiary
Recognition of share-based payment
Issue of ordinary shares and share options
Balance at 30 June 2016
* Amounts are after tax
Note
Contributed
equity
$
39,453,733
-
-
-
-
-
Options
reserve
$
-
-
-
-
-
-
Share-based
payments
reserve
$
Equity
reserve-
parent
$
Unrealised
gains
Accumulated
losses
reserve
$
Attributable
to owners of
the parent
$
Non-
controlling
interests
$
Total
equity
$
146,246
(7,172,143)
347,054
(23,239,721)
9,535,169
944,087
10,479,256
(113,475)
(113,475)
(5,312,079)
(5,312,079)
(37,070)
(88,915)
(150,545)
(5,400,994)
(113,475)
(5,312,079)
(5,425,554)
(125,985)
(5,551,539)
176,500
418,294
-
418,294
-
16,376,101
(500)
16,375,601
-
-
-
-
-
-
-
-
-
-
-
-
418,294
(176,500)
810,931
1,198,971
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,327,838)
895,808
198,451
(1,327,838)
(77,277)
(1,405,115)
(6,507,420)
(6,507,420)
(233,579)
(6,507,420)
(6,740,999)
(24,354)
(101,631)
(6,531,774)
(6,842,630)
7,172,143
(7,172,143)
(715,971)
(715,971)
895,808
198,451
-
-
810,931
4,212
-
-
-
-
-
-
-
-
895,808
198,451
-
810,931
4,212
14,978,154
$
-
-
-
-
-
-
-
-
-
14,387,034
53,840,767
1,989,067
1,989,067
388,040
(7,172,143)
233,579
(28,375,300)
20,904,010
817,602
21,721,612
53,840,767
1,989,067
388,040
(7,172,143)
233,579
(28,375,300)
20,904,010
817,602
21,721,612
-
-
-
-
-
-
-
-
4,212
-
-
-
-
-
-
-
-
-
53,844,979
1,989,067
(42,054,863)
14,978,154
22
22
22
22
22
21
The above statement of changes in equity should be read in conjunction with the accompanying notes.
40
Opthea LimitedAnnual Report As at 1 July 2014
Loss for the year*
Unrealised losses on available for sale assets*
Total comprehensive income and expense for the year
Recognition of share-based payment
Transfer of share-based payments reserve to retained earnings
Issue of ordinary shares and share options
Balance at 30 June 2015
As at 1 July 2015
Unrealised losses on available for sale assets*
Impairment of available for sale assets
Disposal of available for sale assets
Loss for the year*
Total comprehensive income and expense for the period
Transfer of equity reserve to accumulated losses reserve
Change in interest in subsidiary
Recognition of share-based payment
Issue of ordinary shares and share options
Balance at 30 June 2016
* Amounts are after tax
Note
Contributed
equity
$
39,453,733
Options
reserve
14,387,034
53,840,767
1,989,067
1,989,067
22
22
22
22
22
21
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,212
53,844,979
1,989,067
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Share-based
payments
reserve
$
Equity
reserve-
parent
$
Unrealised
gains
reserve
$
Accumulated
losses
$
Attributable
to owners of
the parent
$
Non-
controlling
interests
$
Total
equity
$
146,246
(7,172,143)
347,054
(23,239,721)
9,535,169
944,087
10,479,256
-
-
-
418,294
(176,500)
-
-
-
-
-
-
-
(113,475)
-
(113,475)
-
(5,312,079)
(5,312,079)
(37,070)
(88,915)
(150,545)
(5,400,994)
(113,475)
(5,312,079)
(5,425,554)
(125,985)
(5,551,539)
-
-
-
-
418,294
176,500
-
-
-
418,294
-
-
16,376,101
(500)
16,375,601
388,040
(7,172,143)
233,579
(28,375,300)
20,904,010
817,602
21,721,612
53,840,767
1,989,067
388,040
(7,172,143)
233,579
(28,375,300)
20,904,010
817,602
21,721,612
(1,327,838)
(77,277)
(1,405,115)
-
-
-
-
-
-
-
810,931
-
1,198,971
-
-
-
-
-
7,172,143
-
-
-
-
(1,327,838)
895,808
198,451
-
-
-
895,808
198,451
-
(6,507,420)
(6,507,420)
(233,579)
(6,507,420)
(6,740,999)
-
-
-
-
-
(7,172,143)
-
-
-
-
-
810,931
4,212
(42,054,863)
14,978,154
-
-
(24,354)
(101,631)
-
895,808
198,451
(6,531,774)
(6,842,630)
-
(715,971)
(715,971)
-
-
-
810,931
4,212
14,978,154
41
Financial Report2015–2016 Consolidated statement of Cash Flows
for the year ended 30 June 2016
Cash flows from operating activities
Interest received
Royalty and licence income received
Grant income
Sales of reagents
Payments to suppliers, employees and for research & development
and intellectual property costs (inclusive of GST)
Income tax refund
Note
2016
$
471,615
324,876
-
8,338
2015
$
370,567
527,982
215,396
1,315
(7,580,567)
(8,433,956)
3,094,502
2,292,040
Net cash flows used in operating activities
25
(3,681,236)
(5,026,656)
Cash flows from investing activities
Proceeds from sale of investments
Cash outflow on disposal of subsidiary
Purchase of plant and equipment
Net cash flows provided by investing activities
Cash flows from financing activities
Proceeds from issues of equity instruments of the Company
Ordinary shares and options issued by rights issue
Ordinary shares and options issued through a new placement
Payment of share issue costs
Net cash flows provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Effects of exchange rate changes on the balance of cash held
in foreign currencies
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of the year
13
13,440
(204,911)
(11,725)
(203,196)
39,185
-
-
39,185
4,212
-
-
-
-
3,406,106
14,000,000
(1,355,270)
4,212
16,050,836
(3,880,220)
11,063,365
(69,014)
18,435,637
14,486,403
210,252
7,162,020
18,435,637
42
Opthea LimitedAnnual Report Notes to the Consolidated
Financial Statements
1. Reporting entity
Opthea Limited (the Company) is a listed public company
incorporated in Australia. The address of its registered
office and principal place of business is: Suite 0403,
Level 4, 650 Chapel Street, South Yarra, VIC 3141,
Australia. These consolidated financial statements
comprise the Company and its subsidiaries
(together referred to as the Group).
The Company’s principal activity is the development
of new drugs for the treatment of eye diseases.
2. Basis of accounting
These financial statements are general purpose financial
statements which have been prepared in accordance
with the Corporations Act 2001, Accounting Standards
and Interpretations, and comply with other requirements
of the law.
The financial statements comprise the consolidated
financial statements of the Group. For the purposes
of preparing the consolidated financial statements, the
Company is a for-profit entity. Accounting Standards
include Australian Accounting Standards.
Compliance with Australian Accounting Standards
ensures that the financial statements and notes of the
Company and the Group comply with International
Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue
by the directors on 29 August 2016.
3. Summary of accounting policies
The consolidated financial statements have been
prepared using the significant accounting policies
and measurement bases summarised below.
Basis of measurement
The consolidated financial statements have been
prepared on a historical cost basis, except for the
investments classified as available-for-sale, which
have been measured at fair value. All amounts are
presented in Australian dollars.
Basis of consolidation
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there
are changes to one or more of the three elements of
control listed above.
When the Company has less than a majority of the
voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it
the practical ability to direct the relevant activities of the
investee unilaterally. The Company considers all relevant
facts and circumstances in assessing whether or not the
Company’s voting rights in an investee are sufficient to
give it power, including:
• The size of the Company’s holding of voting rights
relative to the size and dispersion of holdings of the
other vote holders;
• Potential voting rights held by the Company, other
vote holders or other parties;
• Rights arising from other contractual arrangements; and
• Any additional facts and circumstances that indicate
that the Company has, or does not have, the current
ability to direct the relevant activities at the time that
decisions need to be made, including voting patterns
at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases
when the Company loses control of the subsidiary.
Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other
comprehensive income from the date the Company
gains control until the date when the Company ceases
to control the subsidiary.
Profit or loss and each component of other
comprehensive income are attributed to the owners
of the Company and to the non-controlling interests.
Total comprehensive income of subsidiaries is attributed
to the owners of the Company and to the non-controlling
interests even if this results in the non-controlling
interests having a deficit balance.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies.
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company and its subsidiaries.
Control is achieved when the Company:
All intragroup assets and liabilities, equity, income,
expenses and cash flows relating to transactions
between members of the Group are eliminated in
full on consolidation.
• Has power over the investee;
• Is exposed, or has rights, to variable returns from
its involvement with the investee; and
• Has the ability to use its power to affect its returns.
43
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
Foreign currency translation
(i) Functional and presentation currency
Both the functional and presentation currency of
Opthea Limited and its Australian subsidiaries is
Australian dollars ($).
(ii) Transactions and balances
Transactions in foreign currencies are initially
recorded in the functional currency by applying the
exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of
exchange ruling at the reporting date.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial
transaction. Non-monetary items measured at fair
value in a foreign currency are translated using
the exchange rates at the date when the fair
value was determined.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial
position comprise cash at bank and in hand and short-
term deposits with an original maturity 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.
For the purposes of the statement of cash flows,
cash and cash equivalents consist of cash and cash
equivalents as defined above.
Current receivables
Receivables generally comprise bank interest receivable,
other receivable from external parties and GST credits
receivable, and are recognised and carried at original
invoice amount less an allowance for any uncollectible
amounts. The amounts are usually received within
30-60 days of recognition.
Collectability of receivables is reviewed on an ongoing
basis. Debts that are known to be uncollectible are
written off when identified. An impairment provision is
recognised when there is objective evidence that the
Group will not be able to collect the receivable.
Investments and other financial assets
Investments and financial assets are classified as
available-for-sale investments, or loans and receivables
as appropriate, in accordance with AASB 139 Financial
Instruments: Recognition and Measurement. The
classification depends on the purpose for which the
investments were acquired or originated. Designation
is re-evaluated at each reporting date, but there are
restrictions on reclassifying to other categories.
When financial assets are recognised initially, they are
measured at fair value, plus, in the case of assets not
at fair value through profit or loss, directly attributable
transaction costs.
Recognition and derecognition
Purchases and sales of financial assets that require
delivery of assets within the time frame generally
established by regulation or convention in the market
place are recognised on the trade date i.e. the date that
the Group commits to purchase the asset. Financial
assets are derecognised when the right to receive cash
flows from the financial assets has expired or when the
entity transfers substantially all the risks and rewards
of the financial assets. If the entity neither retains nor
transfers substantially all of the risks and rewards, it
derecognises the asset if it has transferred control
of the assets.
Subsequent measurement
(i) Available-for-sale investments
Available-for-sale investments comprise of
the Group’s non-current investments in listed
companies. After initial recognition, available-for-sale
investments are measured at fair value with gains or
losses being recognised as a separate component
of equity until the investment is sold, collected
or otherwise disposed of, or until the investment
is determined to be impaired, at which time the
cumulative gain or loss previously reported in
equity is recognised in profit or loss.
The fair values of available-for-sale investments that
are actively traded in organised financial markets is
determined by reference to quoted market bid prices
at the close of business on the reporting date.
(ii) Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that
are not quoted in an active market. Such assets are
carried at amortised cost using the effective interest
method and have been calculated by discounting
the principal amounts over the relevant term using
the relevant LIBOR rate which matches that term as
closely as possible. Gains and losses are recognised
in the statement of comprehensive income when
the loans and receivables are derecognised or
impaired. These are included in current assets,
except for those with maturities greater than
12 months after balance date, which are classified
as non-current.
44
Opthea LimitedAnnual Report Non-current receivables comprise loans receivable
from subsidiaries which are not interest bearing.
The parent has agreed that the loans with its
subsidiaries will not be recalled for a period of
12 months from the date the directors adopt the
relevant annual financial statements of the Group,
parent and subsidiaries.
Impairment of financial assets
If, in a subsequent period, the amount of the
cumulative impairment loss decreases and the
decreases can be related objectively to an event
occurring after the impairment was recognised, the
previously recognised impairment loss is reversed.
Any subsequent reversal of an impairment loss is
recognised in profit or loss, to the extent that the
carrying value of the asset does not exceed its
amortised cost at the reversal date.
The Group assesses at each reporting date whether a
financial asset or group of financial assets is impaired.
Investments in subsidiaries
Investments in subsidiaries are carried at cost. If there
is objective evidence that an impairment loss has been
incurred on investments in subsidiaries, the amount
of the loss is measured as the difference between
the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the current
market rate of return for a similar financial asset. Any
subsequent reversal of an impairment loss is recognised
in profit or loss.
Plant and equipment
Plant and equipment is stated at historical cost less
accumulated depreciation and any accumulated
impairment losses. Depreciation is calculated on a
straight-line basis over their useful economic lives
as follows:
• Equipment and furniture - 3 to 10 years
• Leasehold improvements - 8 years
The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate,
at each financial year end.
Derecognition
An item of plant and equipment is derecognised upon
disposal or when no further economic benefits are
expected from its use or disposal.
(i) Available-for-sale investments
If there is objective evidence (i.e. significant or
prolonged decline in quoted market bid prices) that
an available-for-sale investment is impaired, an
amount comprising of the difference between its
cost and its current fair value, less any impairment
loss previously recognised in profit or loss is
transferred from equity to profit or loss. Reversals
of impairment losses for equity instruments
classified as available-for-sale are not recognised.
(ii) Financial assets carried at amortised cost
Loans receivable from subsidiaries in the parent’s
accounts are financial assets carried at amortised
cost. If there is objective evidence that an
impairment loss on intercompany loans receivable
carried at amortised cost has been incurred, the
amount of the loss is measured as the difference
between the asset’s carrying amount and the
present value of estimated future cash flows
(excluding future credit losses that have not been
incurred) discounted at the financial asset’s original
effective interest rate (i.e. the effective interest
rate computed at initial recognition). The carrying
amount of the asset is reduced either directly or
through use of an allowance account. The amount
of the loss is recognised in the statement of
comprehensive income.
The Group firstly assesses whether objective
evidence of impairment exists individually for
financial assets that are individually significant, and
secondly individually or collectively for financial
assets that are not individually significant. If
it is determined that no objective evidence of
impairment exists for an individually assessed
financial asset, whether significant or not, the asset
is included in a group financial assets with similar
credit risk characteristics and that group of financial
assets is collectively assessed for impairment.
Assets that are individually assessed for impairment
and for which an impairment loss is or continues
to be recognised are not included in a collective
assessment of impairment.
45
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
Leases
The determination of whether an arrangement is or
contains a lease is based on the substance of the
arrangement and requires an assessment of whether the
fulfilment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys
a right to use the asset, even if that right is not explicitly
specified in an arrangement.
Operating lease payments are recognised as an expense
in profit or loss on a straight-line basis over the lease
term. Operating lease incentives are recognised in the
statement of comprehensive income as an integral part
of the total lease expense.
The Group held no finance leases during the 2016 and
2015 financial years.
Impairment of non-financial assets other than
goodwill
Non-financial assets are tested for impairment whenever
events or changes in circumstances indicate that
the carrying amount may not be recoverable. For the
policy relating to impairment regarding investments in
associates, see note above.
Opthea Limited conducts an annual internal review of
asset values, which is used as a source of information to
assess for any indicators of impairment. External factors,
such as changes in technology and economic conditions,
are also monitored to assess for indicators of impairment.
If any indication of impairment exists, an estimate of the
asset’s recoverable amount is calculated.
An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its
recoverable amount. Recoverable amount is the higher
of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are
separately identifiable cash inflows that are largely
independent of the cash inflow from other assets or
groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered impairment are
tested for possible reversal of the impairment whenever
events or changes in circumstances indicate that the
impairment may have reversed.
Intangible assets
Internally generated intangible assets, excluding
capitalised development costs, are not capitalised and
expenditure is charged against profits in the year in
which the expenditure is incurred.
Intellectual property costs
Amounts incurred for rights to or for acquisition
of intellectual property are expensed in the year
in which they are incurred to the extent that
such intellectual property is used for research
and development activities.
Research and development costs
Research costs are expensed as incurred. An intangible
asset arising from the development expenditure on an
internal project will only be recognised when the Group
can demonstrate the technical feasibility of completing
the intangible asset so that it will be available for use or
sale, its intention to complete and its ability to use or sell
the asset, how the asset will generate future economic
benefits, the availability of resources to complete the
development and the ability to measure reliably the
expenditure attributable to the intangible asset during
its development. Following the initial recognition of the
development expenditure, the cost model is applied
requiring the asset to be carried at cost less any
accumulated amortisation and accumulated impairment
losses. Any expenditure so capitalised is amortised over
the period of expected benefits from the related project.
The carrying value of an intangible asset arising from
development expenditure is tested for impairment
annually when the asset is not yet available for use or
more frequently when an indication of impairment arises
during the reporting period.
Payables
Payables are carried at amortised cost and due to
their short term nature, they are not discounted. They
represent liabilities for goods and services provided to
the Group prior to the end of the financial year that are
unpaid and arise when the Group becomes obliged to
make future payments in respect of the purchase of
these goods and services. The amounts are unsecured
and are usually paid within 30 days of recognition.
Loans and borrowings
All loans and borrowings are initially recognised at cost,
being the fair value of the consideration received net of
issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost
using the effective interest method. Amortised cost is
calculated by taking into account any issue costs, and
any discount or premium on settlement.
The parent’s non-current payables include loans from
subsidiaries which are not interest bearing. The relevant
subsidiaries have agreed that the loans to the parent will
not be recalled for a period of 12 months from the date
the directors adopt the annual financial statements of
the parent. Loans payable to subsidiaries in the parent’s
accounts are financial liabilities carried at amortised cost.
46
Opthea LimitedAnnual Report Loans are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
Provisions and employee benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-
monetary benefits and annual leave expected to
be settled within 12 months of the reporting date
are recognised in current provisions in respect of
employees’ services up to the reporting date. They
are measured at the amounts expected to be paid
when the liabilities are settled. Expenses for non-
accumulating sick leave are recognised when the leave
is taken and are measured at the rate paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in
the provision for employee benefits and measured
as the present value of expected future payments
to be made in respect of services provided by
employees up to the reporting date. Consideration
is given to expected future wage and salary levels,
experience of employee departures, and periods of
service. Expected future payments are discounted
using market yields at the reporting date on national
government bonds with terms to maturity that
match, as closely as possible, the estimated future
cash outflows.
The charge to profit or loss for the period is the
cumulative amount as calculated above less the
amounts already charged in previous periods.
There is a corresponding credit to equity.
Until an award has vested, any amounts recorded are
contingent and will be adjusted if more or fewer awards
vest than were originally anticipated to do so. Any award
subject to a market condition is considered to vest
irrespective of whether or not that market condition is
fulfilled, provided that all other conditions are met.
Where the terms of the equity-settled award are
modified, as a minimum an expense is recognised as if
the terms had not been modified. An additional expense
is recognised for any modification that increases the total
fair value of the share-based payment arrangement, or is
otherwise beneficial to the employee, as measured at the
date of modification.
The dilutive effect, if any, of outstanding options is
reflected as additional share dilution in the computation
of earnings per share. There is, however no dilutive effect
when there is a loss per share.
Contributed equity
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax,
from the proceeds.
Share-based payment transactions
Revenue recognition
Equity settled transactions:
The Group provides benefits to directors and employees
(including key management personnel) of the Group in
the form of share based payments, whereby employees
render services in exchange for shares or rights over
shares (equity-settled transactions).
Revenue is recognised and measured at the fair value
of the consideration received or receivable to the extent
that it is probable that the economic benefits will flow
to the Group and the revenue can be reliably measured.
The following specific recognition criteria must also be
met before revenue is recognised:
(i) Interest revenue
Almost all of the Group’s interest revenue is earned
on short-term bank deposits and as such interest
revenue is recognised when the Group’s right to
receive the payment is established.
(ii) Royalty fee and licence fee revenue
Royalty fee and licence fee revenue is recognised
when earned.
(iii) Dividends
Revenue is recognised when the Group’s right
to receive the payment is established.
The cost of these equity-settled transactions with
employees is measured by reference to the fair value at the
date at which they are granted. Binomial and Monte Carlo
simulation models are used to value the options issued.
The cost of the equity-settled transactions is recognised,
together with a corresponding increase in equity, over
the period in which the performance conditions are
fulfilled (the vesting period), ending on the date on
which the relevant employees become fully entitled to
the award (the vesting date).
At each subsequent report date until vesting, the
cumulative charge to profit or loss is the product of:
(i) the grant date fair value of the award;
(ii) the current best estimate of the number of awards
that will vest, taking into account such factors
as the likelihood of employee turnover during the
vesting period; and
(iii) the expired portion of the vesting period.
47
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
Income tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based
on the current period’s taxable income. The tax rates and
tax laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary
differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences except:
• when the deferred income tax liability arises from the
initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and
that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
• when the taxable temporary difference is associated
with investments in subsidiaries, associate or interests
in joint ventures, and the timing of the reversal of
the temporary difference can be controlled and it is
probable that the temporary difference will not reverse
in the foreseeable future.
Deferred income tax assets are recognised for all
deductible temporary differences, carry forward of
unused tax assets (or credits) and unused tax losses,
to the extent that it is probable that taxable profit will
be available against which the deductible temporary
differences, and the carry forward of unused tax credits
and unused tax losses can be utilised, except:
• when the deferred income tax asset relating to the
deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit or
taxable profit or loss; or
• when the deductible temporary difference is
associated with investments in subsidiaries, associates
or interests in joint ventures, in which case a deferred
tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse
in the foreseeable future and taxable profit will be
available against which the temporary differences
can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed
at each reporting date and are recognised to the extent
that it has become probable that future taxable profit will
allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at balance date.
Income taxes relating to items recognised directly
in equity are recognised directly in equity and not in
profit or loss.
Tax consolidation legislation
The head entity, Opthea Limited, and the controlled
entities in the tax consolidated group account for their
own current and deferred tax amounts. Members
of the tax consolidated group have adopted the
“separate taxpayer within group” method to allocate
the current and deferred tax amounts to each entity
within the Group. This method requires adjustments
for transactions and events occurring within the
tax consolidated group that do not give rise to a tax
consequence for the Group or that have a different tax
consequence at the level of the Group.
In addition to its own current and deferred tax amounts,
Opthea Limited also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from
unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
The head entity, which is the parent entity, in assuming
the net unused tax losses and unused relevant tax
credits, has recognised reductions to investments in
subsidiaries and where the amount of tax losses assumed
is in excess of the carrying value of the investment, the
parent has recognised the difference as a distribution
from subsidiary in profit or loss.
48
Opthea LimitedAnnual Report Other taxes
Revenues, expenses, assets and liabilities are recognised
net of the amount of GST except:
• when the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the
cost of acquisition of the asset or as part of the
expense item as applicable; and
• receivables and payables are stated with the amount
of GST included.
The net amount of GST recoverable from, or payable
to the taxation authority is included as part of receivables
or payables in the statement of financial position.
Cash flows are included in the statement of cash flows
on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority
is classified as part of operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to,
the taxation authority.
Government grants
Government grants are recognised when there is
reasonable assurance that the grant will be received
and all attaching conditions will be complied with.
When the grant relates to an expense item, it is
recognised as income over the periods necessary to
match the grant on a systematic basis to the costs
that it is intended to compensate. They are not
credited directly to shareholders equity.
Earnings per share
Diluted earnings per share is calculated as net profit/
loss divided by the weighted average number of ordinary
shares and dilutive potential ordinary shares. Whilst
the deferred shares would generally be included in the
calculation as their conditions of issuance are known to
be satisfied, due to there being a loss for the current
year, these instruments would be anti-dilutive (decrease
the loss per share). Accordingly they have been excluded
from the calculation, resulting in basic earnings/(loss) per
share being the same as the diluted value per share.
Comparatives
Where necessary, comparatives have been reclassified
and repositioned for consistency with current
year disclosure.
4. Critical accounting judgements and key
sources of estimation uncertainty
In applying the Group’s accounting policies, management
continually evaluates judgements, estimates and
assumptions based on experience and other factors,
including expectations of future events that may have
an impact on the Group. All judgements, estimates and
assumptions made are believed to be reasonable based
on the most current set of circumstances available
to management. Actual results may differ from the
judgements, estimates and assumptions. Significant
judgements, estimates and assumptions made by
management in the preparation of these financial
statements are outlined below:
4.1 Critical judgements in applying accounting policies
Capitalised development costs
Development costs are only capitalised by the Group
when it can be demonstrated that the technical
feasibility of completing the intangible asset is valid
so that the asset will be available for use or sale.
No development costs were capitalised during the
current year.
Impairment of available-for-sale assets
The Group holds available-for-sale financial assets
and follows the requirements of AASB 139 Financial
Instruments: Recognition and Measurement in
determining when an available-for-sale asset is impaired.
For the year ended 30 June 2016, losses of $895,808
(2015: $Nil) have been booked for available-for-sale
financial assets.
Taxation
The Group’s accounting policy for taxation requires
management judgements as to the types of
arrangements considered to be a tax on income in
contrast to an operating cost. Judgement is also required
in assessing whether deferred tax assets and certain
deferred tax liabilities are recognised in the statement
of financial position. Deferred tax assets, including
those arising from unrecouped tax losses, capital losses
and temporary differences, are recognised only where
it is considered more likely than not that they will be
recovered, which is dependent on the generation of
sufficient future taxation profits.
Assumptions about the generation of future taxable
profits depend on management’s estimates of future
cash flows. These depend on estimates of future
operating costs, capital expenditure and the possible
timing of realising capital gains taxes/losses.
49
Financial Report2015–2016 5. Application of new and revised
Accounting Standards
Amendments to AASBs and the new interpretation
that are mandatorily effective for the current year
In the current year, the Group has applied amendments
to AASBs issued by the Australian Accounting Standards
Board (AASB) that are mandatorily effective for an
accounting period that begins on or after 1 July 2015,
and therefore relevant for the current year end.
The amendment relevant to the Group was:
AASB 2015-3: ‘Amendments to Australian Accounting
Standards arising from the Withdrawal of AASB 1031
Materiality’.
This amendment completes the withdrawal of references
to AASB 1031 in all Australian Accounting Standards and
Interpretations, allowing that Standard to effectively
be withdrawn.
The application of this amendment does not have
any material impact on the disclosures or the
amounts recognised in the Group’s consolidated
financial statements.
Notes to the Consolidated
Financial Statements
Judgements are also required about the application
of income tax legislation. These judgements and
assumptions are subject to risk and uncertainty, hence
there is a possibility that changes in circumstances will
alter expectations, which may impact the amount of
deferred tax assets and deferred tax liabilities recognised
in the statement of financial position and the amount
of other tax losses and temporary differences not yet
recognised. In such circumstances, some or all of the
carrying amounts of recognised deferred tax assets
and liabilities may require adjustment, resulting in a
corresponding credit or charge to profit or loss.
Carrying value of investment in subsidiary
The Company recognised certain adjustments in the
accounts of the parent entity that were made as a result
of the simplification of the group’s legal structure at
30 June 2015 (refer to note 34).
4.2 Key sources of estimation uncertainty
Valuation of investments
The Group has classified investments in listed securities
as ‘available-for-sale’ investments and movements in fair
value are recognised directly in equity, unless considered
impaired. The fair value of listed shares has been
determined by reference to published price quotations
in an active market.
Share-based payment transactions
The Group measures the cost of equity-settled
transactions with employees by reference to the fair
value of the equity instruments at the date at which
they are granted. Fair values are determined internally
using Monte Carlo and Binomial models. The related
assumptions are detailed in note 30. The accounting
estimates and assumptions relating to equity-settled
share-based payments would have no impact on the
carrying amounts of assets and liabilities within the
next annual reporting period but may impact expenses
and equity.
50
Opthea LimitedAnnual Report Standards and interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue
but not yet effective and relevant to the Group.
Standard/Interpretation
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied
in the financial
year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
30 June 2019
AASB 15 ‘Revenue from Contracts with Customers’
AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’,
AASB 2015-8‘ Amendments to Australian Accounting Standards
– Effective date of AASB 15’
AASB 16 ‘Leases’
AASB 2014-4 ‘Amendments to Australian Accounting Standards
– Clarification of Acceptable Methods of Depreciation and Amortisation’
AASB 2014-9 ‘Amendments to Australian Accounting Standards
– Equity Method in Separate Financial Statements’
AASB 2015-1 ‘Amendments to Australian Accounting Standards
– Annual Improvements to Australian Accounting Standards 2012-2014 Cycle’
AASB 2015-2 ‘Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 101’
AASB 2016-1 ‘Amendments to Australian Accounting Standards
– Recognition of Deferred Tax Assets for Unrealised Losses’
AASB 2016-2 ‘Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 107’
1 January 2017
30 June 2019
1 January 2019
30 June 2020
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2017
30 June 2018
1 January 2017
30 June 2018
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations
(for which Australian equivalent Standards and Interpretations have not yet been issued) were in issue but
not yet effective:
Standard/Interpretation
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied
in the financial
year ending
Clarifications to IFRS 15 ‘Revenue from Contracts with Customers
1 January 2018
30 June 2019
6. Segment information
The Group operates in one industry and one geographical segment, those being the medical technology and
healthcare industry and Australia respectively.
The Group is a biologics drug developer building on its significant intellectual property portfolio around Vascular
Endothelial Growth Factor (VEGF) C and D (angiogenic molecules) and R3. The Group is focused primarily on
developing biological therapeutics for eye diseases.
The chief executive officer regularly reviews entity wide information that is compliant with Australian Accounting
Standards. There is only one segment for segment reporting purposes and the information reviewed by the chief
executive officer is the same as the information presented in the financial statements.
51
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
7. Revenue
(a) Finance revenue
Interest from:
- Bank
- Other unrelated persons
(b) Other revenue
Royalties and licence fees
Total Revenue
8. Other income
Net gain on disposal of available-for-sale investments
Government grant income (i)
Other
2016
$
2015
$
435,970
-
417,510
5,639
435,970
423,149
329,304
515,859
765,274
939,008
2016
$
7,105
-
8,338
15,443
2015
$
20,302
61,265
1,315
82,882
(i) Government grants during the financial year were paid directly to suppliers by the awarding agency as a contribution towards the Group’s research
and development costs.
9. Research and development expenses
Research project costs (i)
2016
$
2015
$
3,581,295
5,585,692
3,581,295
5,585,692
(i) The research project costs relate to the development programs in respect to the Vascular Endothelial Growth Factors (VEGF) based therapeutics.
52
Opthea LimitedAnnual Report
10. Expenses
(a) Impairment losses
Listed financial investments
(b) Occupancy expenses
Operating lease rentals
Outgoings
Total occupancy expense
(c) Administrative expenses
Depreciation of:
Equipment and furniture
Leasehold improvements
Total depreciation expense
Employee benefits expenses:
Salaries and fees
Cash bonuses
Superannuation
Share-based payments expense
Total employee benefits expense
Other expenses:
Travel expenses
Insurance
Consultancy fees
Legal fees
Payroll tax
Investor relations costs
Audit and accounting
Other expenses
Total other expenses
Total administrative expenses
2016
$
2015
$
895,808
-
78,339
28,131
77,855
26,363
106,470
104,218
17,597
13,194
30,791
25,368
13,194
38,562
1,722,489
1,643,096
335,440
335,440
189,287
180,773
770,557
383,864
3,017,773
2,543,173
44,361
90,255
82,978
61,071
97,112
331,222
137,751
155,464
1,000,214
108,929
89,434
39,841
-
72,300
171,828
147,630
138,153
768,115
4,048,778
3,349,850
53
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
11. Income tax
(a) Income tax benefit
The major components of income tax benefit are:
Statement of Comprehensive Income
Current tax
Current income tax credit
Under recognition of prior year benefit
Deferred tax
In respect of the current year
2016
$
2015
$
1,586,990
3,110,530
(17,786)
-
1,569,204
3,110,530
-
(390,270)
Total income tax benefit recognised in the statement of comprehensive income
1,569,204
2,720,260
(b) Amounts charged or credited directly to equity
Deferred income tax related to items credited/(charged) directly to equity
Net unrealised gain/(loss) on listed investments
Share issue expenses deductible over 5 years
Income tax benefit/(expense) reported in equity
(c) Current tax assets
-
-
-
64,519
325,265
389,784
Research and Development Tax incentive credit receivable
1,586,990
3,110,530
(d) Numerical reconciliation between aggregate tax expense recognised in the statement of
comprehensive income and expense calculated per the statutory income tax rate
A reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Group’s
applicable income tax rate is as follows:
Accounting loss before tax
At the parent entity’s statutory income tax rate of 30% (2015: 30%)
Research and development tax credit refundable
Write off of temporary differences and tax losses not recovered
Adjustments recognised in current year in relation to the current tax of prior year
Income tax benefit reported in the statement of comprehensive income
2016
$
2015
$
(8,100,978)
(8,121,254)
2,430,293
2,436,376
1,586,990
3,110,530
(2,442,743)
(2,880,739)
(5,336)
54,093
1,569,204
2,720,260
54
Opthea LimitedAnnual Report
(e) Recognised deferred tax assets and liabilities in statement of financial position
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities:
Revaluation of listed investments to fair value
Interest and royalty income receivable (future assessable income)
Deferred tax assets:
Other timing differences including income received in advance
Employee provisions
Temporary differences:
Associated with intellectual property
Associated with other miscellaneous items
Less: temporary differences not recognised
Net deferred tax recognised in the statement of financial position
2016
$
2015
$
-
(133,806)
(11,499)
(57,179)
(133,806)
(68,678)
51,979
113,410
117,076
95,551
1,771,563
2,488,932
277,099
395,669
2,214,051
3,097,228
(2,080,245)
(3,028,550)
-
-
(f) Unrecognised temporary differences
Temporary differences with respect to deferred tax assets associated with intellectual property and other miscellaneous
items which have a low probability of realisation are unrecognised. These amounted to $2,080,245 at year end
(2015: $3,028,550).
55
Financial Report2015–2016 (g) Tax consolidation
(i) Members of the tax consolidated group
Opthea Limited and its 100% owned subsidiaries formed a tax consolidated group effective 1 July 2003.
Opthea Limited is the head entity of the tax consolidated group.
(ii) Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have adopted the “separate taxpayer within group” method to allocate
the current and deferred tax amounts to each entity within the group.
(h) Carry forward unrecognised tax losses
The Group had income tax losses of $13,973,706 and capital losses of $877,704 at year end (2015: income tax losses of
$12,857,080 and capital losses of $877,704) for which no deferred tax asset is recognised on the statement of financial
position as they are currently not considered probable of realisation. These tax losses are available indefinitely for offset
against future assessable income subject to continuing to meet relevant statutory tests.
(i) Franking credit balance
The franking account balance at the end of the financial year at 30% is $330,630 (2015: $330,630), which represents
the amount of franking credits available for the subsequent financial year.
12. Earnings per share
The following reflects the income used in the basic and diluted earnings per share computations:
(a) Earnings used in calculating earnings per share
Net loss attributable to ordinary equity holders of the parent
(6,507,420)
(5,312,079)
(b) Weighted average number of shares
Weighted average number of ordinary shares on issue for basic earnings per share
150,197,213
109,093,292
2016
$
2015
$
Effect of dilution:
Conditional rights
Share options
-
-
-
-
Weighted average number of ordinary shares adjusted for the effect of dilution
150,197,213
109,093,292
There have been no other transactions involving ordinary shares or potential ordinary shares that would significantly
change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date
of completion of this financial report.
Diluted earnings per share is calculated as net profit/(loss) divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares. Although the options granted under the LTIP and NED Plan would generally be included
in the calculation due to the conditions of the issuance being satisfied, because there is a loss in the current year, these
instruments would be anti-dilutive (decrease the loss per share) and therefore have been excluded from the calculation.
Therefore, the basic loss per share is the same as the diluted value per share.
56
Opthea LimitedAnnual ReportNotes to the Consolidated Financial Statements 13. Current assets - cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2016
$
2015
$
2,986,403
2,285,637
11,500,000
16,150,000
14,486,403
18,435,637
Cash at bank earns interest at floating rates based on daily bank deposit rates. The carrying amounts of cash and cash
equivalents represent fair value.
Short term-deposits are with a major bank and are made for varying periods of between 30 days and 90 days, depending
on the immediate cash requirements of the Group, and earn interest at a fixed rate for the respective short-term deposit
periods. At year end, the average rate was 2.87% (2015: 2.93%).
14. Current assets - receivables
Interest receivable
GST receivable (i)
Other (i)
Total current receivables
2016
$
19,215
80,091
121,704
2015
$
54,860
60,746
119,284
221,010
234,890
(i) These receivables are non-interest bearing, most of which have repayment terms between 30 and 60 days. There are no receivables past due or
considered impaired.
57
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
15. Investment in subsidiary
During the year Syngene Limited, a 51.6% owned subsidiary, entered into a solvent members’ voluntary liquidation.
As a result, Opthea ceased to have control over the activities of Syngene and to consolidate it into its financial
statements from 27 November 2015. This has also led to the elimination of the non-controlling interest in the
consolidated reserves of the Group at 30 June 2016.
Analysis of assets and liabilities over which control was lost:
Cash and cash equivalents
Available-for-sale financial assets
Gain on disposal of subsidiary:
Distribution receivable
Net assets disposed of
Non-controlling interests
Cumulative gain/loss on available-for-sale financial assets reclassified from equity on loss of
control of subsidiary
Gain on disposal
16. Non-current assets - available-for-sale financial assets
2016
$
204,911
313,628
518,539
169,101
(518,539)
715,971
(198,451)
168,082
2015
$
-
-
-
-
-
-
-
-
2016
$
2015
$
315,910
2,040,987
Listed Australian shares - at fair value
Details of listed Australian shares
Listed investments
Non-current investments (2):
Antisense Therapeutics Ltd (3)
Optiscan Imaging Limited
Total listed investments
Ownership Interest
Fair value (1)
Cost of investment
2016
%
2015
%
2016
$
2015
$
2016
$
2015
$
5.77%
2.66%
8.14%
4.00%
315,910
1,651,584
3,106,944
3,548,269
-
389,403
786,131
786,131
315,910
2,040,987
3,893,075
4,334,400
(1) The fair value represents the share (bid) price at year end, and does not include any capital gains tax or selling costs that may be applicable on the
disposal of these investments.
Non-current investments in listed shares (which are not associates) are designated and accounted for as “available-for-sale” financial assets
pursuant to AASB 139 Financial Instruments: Recognition and Measurement.
These non-current investments in listed shares consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.
All available-for-sale investments listed above are level 1 financial assets in the fair value hierarchy. The valuation technique used to determine fair
value is the reference to quoted bid prices in an open market.
(2) An impairment of investments of $895,808 has been made through profit or loss in the year due to a prolonged and sustained period of their
market value being below their original cost.
(3) The carrying amount was also reduced in the period following the de-consolidation of Syngene Limited and its market value holding of $313,628 in
Antisense Therapeutics Ltd (see also note 15 above).
Details of the investments in subsidiaries are shown in note 24.
58
Opthea LimitedAnnual Report
17. Non-current assets - plant and equipment
Equipment and furniture at cost
Opening balance
Additions
Disposals
Closing balance
Accumulated depreciation
Opening balance
Depreciation for the year
Disposals
Closing balance
Net carrying amount
Leasehold improvements at cost
Opening balance
Additions
Disposals
Closing balance
Accumulated depreciation
Opening balance
Depreciation for the year
Disposals
Closing balance
Net carrying amount
Total plant and equipment, net
2016
$
2015
$
175,865
175,865
11,725
(12,133)
-
-
175,457
175,865
(118,939)
(93,571)
(17,597)
(25,368)
12,133
-
(124,403)
(118,939)
51,054
56,926
79,165
79,165
-
-
-
-
79,165
79,165
(25,875)
(12,681)
(13,194)
(13,194)
-
-
(39,069)
(25,875)
40,096
91,150
53,290
110,216
59
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
18. Current liabilities - payables
Creditors (unsecured) (i)
Income received in advance
PAYG tax liability
(i) Creditors are non-interest bearing and are normally settled on 30 day terms.
19. Current liabilities - provisions
Annual leave
Long service leave
20. Non-current liabilities - provisions
Long service leave
2016
$
2015
$
1,584,034
1,714,440
-
212,602
45,942
43,768
1,629,976
1,970,810
2016
$
2015
$
209,083
180,182
152,123
97,180
361,206
277,362
2016
$
16,826
2015
$
41,143
60
Opthea LimitedAnnual Report
21. Contributed equity
(a) Ordinary shares
Issued and fully paid at 30 June
Movement in ordinary shares:
Opening balance
Issue of shares
Share issue costs
Income tax relating to share issue costs
Transfer to option reserve
Ordinary shares on issue:
Opening balance
Issue of shares on exercise of LTIP and NED plan options
Issue of shares
2016
$
2015
$
53,844,979
53,840,767
53,840,767
39,453,733
4,212
17,406,106
-
-
-
(1,355,270)
325,265
(1,989,067)
53,844,979
53,840,767
No:
No:
148,090,303
48,633,015
2,100,000
-
15,600
99,457,288
150,205,903
148,090,303
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Issued capital at 30 June 2016 amounted to $53,844,979 (150,205,903 fully paid ordinary shares) net of share issue costs,
tax and amounts taken to the options reserve. During the year, the company converted 15,600 options to ordinary fully paid
shares for $4,212. The company had on issue quoted options to purchase 49,707,097 ordinary shares with an exercise price
of $0.27 expiring on 25 November 2018. The fair value of the options at their issue date of $1,989,067 has been recognised
in the options reserve (note 22).
Share options
The company has two share based-payment schemes, the Long Term Incentive Plan and Non-Executive Director Share
and Option Plan, under which options to subscribe for the Company’s shares have been granted to certain employees and
directors. The company issued 9,725,000 (2015: 2,100,000) share options over ordinary shares under these plans during the
year. These share options had a weighted average fair value at their grant date of $0.20 (2015: $0.17) per share option.
(b) Capital management
The Group is not subject to any externally imposed capital requirements.
When managing share capital, management’s objective is to ensure the entity continues as a going concern as well as to
provide benefits to shareholders and for other stakeholders. In order to maintain or achieve an appropriate capital structure,
the Company may issue new shares or reduce its share capital, subject to the provisions of the Company’s constitution.
61
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
22. Retaining earnings and reserves
(a) Movements in retained earnings were as follows:
Balance at 1 July
Net loss for the period
Transferred from Equity Reserve
Release of amortised share based payments
Balance at 30 June
(b) Reserves
Net unrealised gains reserve (i)
Share-based payments reserve (ii)
Option reserve (iii)
Equity reserve attributable to parent (iv)
Total reserves
(i) Movement in net unrealised gains reserve:
Opening balance
Unrealised losses on available for sale assets
Tax effect on above net losses (note 11)
NCI share of revaluation of listed investments net of tax
Unrealised losses on available for sale assets after tax and NCI
Impairment of available for sale assets
Disposal of available for sale assets
Closing balance
(ii) Movement in share-based payments reserve:
Opening balance
Share based payments expense
Transferred to retained earnings
Closing balance
(iii) Movement in option reserve:
Opening balance
Fair value of quoted options issued
Closing balance
(iv) Movement in equity reserve attributable to parent:
Opening balance
Transferred to Retained Earnings
Closing balance
62
2016
$
2015
$
(28,375,300)
(23,239,721)
(6,507,420)
(5,312,079)
(7,172,143)
-
176,500
(42,054,863) (28,375,300)
-
233,579
1,198,971
388,040
1,989,067
1,989,067
-
(7,172,143)
3,188,038
(4,561,457)
233,579
347,054
(1,405,115)
(215,064)
-
77,277
64,519
37,070
(1,327,838)
(113,475)
895,808
198,451
-
-
-
233,579
388,040
810,931
146,246
418,294
-
(176,500)
1,198,971
388,040
1,989,067
-
-
1,989,067
1,989,067
1,989,067
(7,172,143)
(7,172,143)
7,172,143
-
-
(7,172,143)
Opthea LimitedAnnual Report (c) Nature and purpose of reserves
23. Financial risk management objectives
Net unrealised gains reserve
This reserve records fair value changes on listed investments
(other than investments in listed associates) and the Group’s
equity share of its associate’s listed investments.
Share-based payment reserve
This reserve is used to record the value of equity benefits
provided to executives and employees as part of their
remuneration and includes the value of options granted
to the company’s corporate advisors.
and policies
The Group’s principal financial assets comprise cash,
receivables, short-term deposits and financial investments.
The Group (including the Parent) manages its exposure
to key financial risks, including interest rate and currency
risk in accordance with the Group’s financial risk
management practices. The objective is to support
the delivery of the Group’s financial targets whilst
protecting future financial security.
Equity reserve attributable to parent
The premium paid by Opthea on acquisition of the balance
of Vegenics’ non-controlling interests was recognised in
this account. The balance of the reserve was transferred
to retained earnings during the year.
The Group’s other various financial assets and liabilities,
such as receivables and payables, arise directly from its
operations. The main risks arising from the Group’s financial
assets and liabilities are interest rate risk, foreign currency
risk, equity securities price risk and liquidity risk.
Option reserve
On 25 November 2014 the company issued options to
purchase 49,726,672 ordinary shares with an exercise price
of $0.27 expiring on 25 November 2018. The fair value
of the options at their issue date of $1,989,067 has been
recognised in the option reserve.
The Group uses different methods to measure and manage
different types of risks to which it is exposed. These include
monitoring levels of exposure to interest rate and foreign
exchange risk and assessments of market forecasts for
interest rates and foreign exchange rates. Liquidity risk
is monitored through future rolling cash flow forecasts.
The board reviews and agrees policies for managing each
of these risks as summarised below.
Risk exposures and responses
The Group has investigated the main financial risk areas
which could impact on its financial assets and determined
the impact on post tax (losses) or profits for a range of
sensitivities. These can be seen in the post tax (loss)/profit
impact for each risk area.
For each risk area, the equity impact relates solely to reserve
movements and excludes retained earnings movements
as the impact of these can be seen within the post tax
(loss)/profit impact.
(i) Interest rate risk
The Group’s exposure to market interest rates relates
primarily to the short-term deposits. The deposits are
held with one of Australia’s largest banks.
The objective of managing interest rate risk is to minimise
the Group’s exposure to fluctuations in interest rates that
might impact its interest revenue and cash flow. To manage
interest rate risk, the Group invests the majority of its cash
in short-term deposits for varying periods of between 30
days and 90 days, depending on the short and long-term
cash requirements of the Group which is determined based
on the Group’s cash flow forecast. This consideration also
takes into account the costs associated with recalling a term
deposit should early access to cash and cash equivalents be
required. Cash is not locked into long-term deposits at fixed
rates so as to mitigate the risk of earning interest below the
current floating rate.
The Group does not have any borrowings.
63
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
The following sensitivity analysis (an annual effect) is based on the interest rate risk exposures in existence at balance date.
As at 30 June 2016, given that the interest risk associated with the Group and parent relates solely to interest income
(the Group has no third party borrowings), if interest rates moved, with all variables held constant, post tax (loss)/profit
and equity would have been affected as illustrated in the following table:
Judgements of reasonably possible movements
Post tax (loss)/profit impact
Cost of investment
Consolidated
+ 0.50% (50 basis points) (2015: + 0.50%)
- 0.50% (50 basis points) (2015: - 0.50%)
57,719
(57,719)
80,750
(80,750)
2016
$
2015
$
2016
$
-
-
2015
$
-
-
Given the amount of unrecognised tax losses in existence, the post tax figures include an offset of these tax losses
(bringing the tax effect to nil) for the year ended 30 June 2016 (2015: Nil).
Significant assumptions used in the interest rate sensitivity analysis include:
•
•
The reasonably possible movement of 0.5% was calculated by taking the interest rates as at balance date,
moving these by plus and minus 0.5% and then re-calculating the interest on term deposits with the
‘new-interest-rate’.
The net exposure at balance date is representative of what the Group was and is expecting to be exposed
to in the next twelve months from balance date.
(ii) Price risk
The Group’s investment in listed shares is exposed to equity securities price risk and as such their fair values are exposed
to fluctuations as a result of changes in market prices.
Equity price risk is the risk that the fair value of equities will decrease as a result of share price movements. The Group’s
equity investments are publicly traded on the ASX and are designated and accounted for as “available-for-sale” financial
assets.
The investments in listed shares are not held for short-term trading. Their values are reviewed regularly by management and
the board. The strategy for realising any part of these investments is determined based on the liquidity of the respective
stocks, potential off-market acquirers and likely developments in their values based on publicly available information.
At 30 June 2016, had the share price moved with all other variables held constant, post tax (loss)/profit and equity would
have been affected as illustrated in the table below:
Judgements of reasonably possible movements
Consolidated
Change in variables
10% increase in listed share price
10% decrease in listed share price
Impact
of loss
after tax
2016
$
Impact
on equity
after tax
2016
$
Impact
on loss
after tax
2015
$
Impact
on equity
after tax
2015
$
33,713
(33,713)
33,713
(33,713)
-
-
142,869
(142,869)
64
Opthea LimitedAnnual Report
(iii) Foreign currency risk
As a result of services provided by non-related entities in the United States, Canada, United Kingdom and Europe,
part of the Group’s financial assets and liabilities are affected by movements in the exchange rate.
The Group does not enter into any hedging transactions.
At the reporting date, the Group has the following exposure to foreign currencies:
2016
Consolidated
USD
2016
$
2,321,862
75,071
(727,395)
1,669,538
USD
2015
$
1,007,768
70,440
EURO
2016
$
-
1,492
(32)
1,460
EURO
2015
$
-
1,449
GBP
2016
$
-
-
CAD
2016
$
-
-
(2,134)
(2,134)
(115,923)
(115,923)
Consolidated
GBP
2015
$
-
-
CAD
2015
$
-
-
CHF
2016
$
JPY
2016
$
-
-
-
-
CHF
2015
$
-
-
-
-
-
-
JPY
2015
$
-
-
(338,056)
740,152
(8,853)
(7,404)
(18,849)
(18,849)
(313,860)
(313,860)
(55,905)
(55,905)
(6,124)
(6,124)
Financial assets
Cash
Receivables
Financial liabilities
Payables
Net exposure
2015
Financial assets
Cash
Receivables
Financial liabilities
Payables
Net exposure
The following sensitivity is based on the foreign currency risk exposures in existence at balance date.
At 30 June 2016, had the Australian dollar moved with all other variables held constant, post tax (loss) profit and equity
would have been affected as illustrated in the table below:
Judgements of reasonably possible movements
Post tax (loss)/profit impact
Cost of investment
Consolidated
AUD/USD +5%
AUD/USD -10%
AUD/Euro +5%
AUD/Euro-10%
AUD/GBP +5%
AUD/GBP -10%
2016
$
2015
$
2016
$
2015
$
(79,502)
185,504
(70)
162
102
(237)
(35,245)
82,239
353
(823)
898
(2,094)
-
-
-
-
-
-
-
-
-
-
-
-
65
Financial Report2015–2016 Notes to the Consolidated
Financial Statements
The reasonably possible movements at 30 June 2016
are higher than at 30 June 2015 due to the higher
net exposure to the US dollar. There was minimum or
insignificant exposure to the GBP and Euro during the
current financial year.
Significant assumptions used in the foreign currency
exposure sensitivity analysis include:
The reasonably possible movement of 5% was calculated by
taking the currency spot rates as at balance date, moving
these by 5% and 10% and then re-converting the currencies
into AUD with the ‘new-spot-rate’. This methodology reflects
the translation methodology undertaken by the Group.
The net exposure at balance date is representative of
what the Group was and is expecting to be exposed to in
the next twelve months from balance date.
Management believes the balance date risk exposures
are representative of the risk exposure inherent in the
financial instruments.
(iv) Credit risk
Credit risk is associated with those financial assets of the
Group which comprise cash and cash equivalents and listed
investments. The Group’s exposure to credit risk arises from
default of the counter party, with a maximum exposure equal
to the carrying amount of these investments. Credit risk is
considered minimal as the Group transacts with reputable
recognised Australian banks.
(v) Liquidity risk
Liquidity risk arises from the financial liabilities of the Group
and the Group’s subsequent ability to meet their obligations
to repay their financial liabilities as and when they fall due.
The Group has minimal liquidity risk because of the high
balances of cash and cash equivalents; however the Group
manages liquidity risk by maintaining adequate reserves
and by continuously monitoring forecast and actual cash
flows and by matching the maturity profiles of financial
assets and liabilities.
The Group’s objective is to maintain an appropriate cash
asset balance to fund its operations.
(vi) Fair value
The Group has investments in listed equities which are
calculated using the quoted prices in an active market.
These investments are classified as falling into level 1
hierarchy per AASB 13 ‘Fair Value Measurement’. The Group
does not have any derivative investments (level 2 hierarchy)
where the fair value is estimated using inputs other than
quoted prices included in level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly
(i.e. derived from prices). The Group also does not hold
any financial instruments that fall into level 3. Level 3 fair
value measurement uses observable inputs that require
significant adjustments based on observable inputs to
estimate its value.
Details of the fair value of the available-for-sale financial
assets are disclosed in note 16 of the financial statements.
The fair value of current assets and liabilities in the
consolidated statement of financial position at
30 June 2016 is the same as their carrying amounts.
The methods for estimating fair value are also outlined
in the relevant notes to the financial statements.
66
Opthea LimitedAnnual Report 24. Related party disclosures
(a) Subsidiaries
The consolidated financial statements include the financial statements of Opthea Limited and the subsidiaries listed in the
following table:
Name of company
Vegenics Pty Ltd
Polychip Pharmaceuticals Pty Ltd
A.C.N 160 199 977 Pty Ltd (formerly Opthea Pty Ltd, dormant)1
Ceres Oncology Pty Ltd (dormant)1
Precision Diagnostics Pty Ltd (dormant)1
Circadian Shareholdings Pty Ltd (dormant)1
Syngene Limited (in liquidation)
Parent entity % equity interest
2016
%
2015
%
100
100
100
100
100
100
-
100
100
100
100
100
100
52
1 The Company passed a resolution in August 2016 to voluntarily deregister these subsidiaries and for a form 6010 for each to be lodged with ASIC.
Opthea Limited is the ultimate parent entity.
All subsidiaries were incorporated in Australia and have the same financial year as Opthea Limited. During the year there was a cross guarantee
in place in favour of all of the subsidiaries listed above.
(b) Transactions with related parties
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. Refer to note 29(b) for director related party transactions.
67
Financial Report2015–2016 25. Cash flow statement reconciliation
(a) Reconciliation to cash at the end of the year
Cash at bank and in hand (note 13)
(b) Reconciliation of net loss after tax to net cash flows from operations
Net loss for the year
Adjustments for:
Income tax benefit recognised in profit or loss
Depreciation of non-current assets
Net loss on disposal of non-current assets
Net profit on disposal of investments
Share-based payments - directors and employees
Share-based payments - corporate advisory services
Impairment losses on non-current financial investments
Impairment loss recognised on trade receivables
Net exchange differences
Movements in working capital:
Increase in prepayments
Decrease in interest and other receivables
(Decrease)/increase in payables
Increase in employee provisions
Net cash used in operating activities
Income tax refund
Net cash generated by operating activities
2016
$
2015
$
14,486,403
18,435,637
14,486,403
18,435,637
(6,531,774)
(5,400,994)
(1,569,204)
(2,720,260)
30,791
38,562
(168,082)
-
(7,105)
(20,302)
770,557
383,864
40,374
34,430
895,808
-
-
18,544
69,014
(210,252)
62,153
(2,475,414)
(41,441)
(27,474)
12,121
160,387
(336,324)
352,789
59,527
72,010
(6,775,738)
(7,318,696)
3,094,502
2,292,040
(3,681,236)
(5,026,656)
26. Commitments
(i) Operating lease commitments - Group as lessee
The Group has a commercial lease for its office premises for a period of 6 years from 15 July 2013. The Group also leases
laboratory facilities on an annual basis.
Within one year
After one year but not more than five years
2016
$
2015
$
147,517
146,056
225,908
318,133
373,425
464,189
68
Opthea LimitedAnnual ReportNotes to the Consolidated Financial Statements
(ii) Research projects and license commitments
The Group has entered into research and development and intellectual property license agreements with various parties.
Expenditure commitments relating to these are payable as follows:
Within one year
After one year but not more than five years
After more than five years
27. Contingencies
2016
$
2015
$
3,869,199
2,088,372
325,726
831,280
235,120
254,636
4,430,045
3,174,288
Opthea and its subsidiaries are party to various research agreements with respect to which a commitment to pay is
contingent on the achievement of research milestones. Assuming all milestones are achieved within the timeframes
stipulated in the contracts, those which could become payable in less than one year total $NIL (2015: $NIL) and those
which could become payable in more than one year total $15,778,838 (2015: $15,412,932). These expenditure
commitments would have an offsetting revenue stream from royalties and other income.
Further, under license/collaboration agreements with three third parties, payments are to be made only if certain research
and clinical development milestones are achieved and royalties may become payable on any eventual sales of products
developed under these agreements.
The group had a bank guarantee outstanding at 30 June 2016 in respect of a rental deposit for its office premises of
$43,841 (2015: $43,841).
28. Non-controlling interest
Balance at beginning of year
Share of (loss)/profit for the period
Share of other comprehensive income for the period
Additional non-controlling interest arising due to share buy back
Change in interest in subsidiary
Balance at end of year
29. Key management personnel
(a) Compensation of Key Management Personnel
Short-term employee benefits
Post employment benefits
Share-based payments expense
Total compensation
2016
$
2015
$
817,602
944,087
(24,354)
(77,277)
(88,915)
(37,070)
-
(500)
(715,971)
-
-
817,602
2016
$
982,323
89,669
2015
$
878,685
83,474
684,483
362,932
1,756,475
1,325,091
Details of the key management personnel are included within the Remuneration Report section of the Directors’ Report.
(b) Other transactions and balances with key management personnel and their related parties
Director related party transactions:
Purchases
Website expenses totalling $Nil (2015: $4,883) were incurred during the year by the Group for services provided by Helix
Digital Pty Ltd of which Dominique Fisher, former chairman of the Company, was the managing director. These fees were
charged at a discount to the company’s commercial rates.
69
Financial Report2015–2016
Notes to the Consolidated
Financial Statements
30. Share-based payments
(a) Recognised share based payment expenses
The expense recognised for share-based payments during the year is shown in the table below:
Expense arising from equity-settled share-based payment transactions:
Director and employee services received
Corporate advisory services
2016
$
2015
$
770,557
383,864
40,374
34,430
810,931
418,294
(b) Non-executive director and employee share option plans
During the 2015 financial year, the Group introduced an ownership-based compensation scheme for non-executive directors,
executives and senior employees. In accordance with the terms of the plans, as approved by shareholders at the 2014 annual
general meeting, eligible non-executive directors, executives and senior employees with the Group may be granted options
to purchase ordinary shares.
Each employee share option converts into one ordinary share of Opthea Limited on exercise. No amounts are paid or payable
by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be
exercised at any time from the date of vesting to the date of their expiry.
The number of options granted is subject to approval by the board and rewards executives and senior employees to
the extent of the Group’s and the individual’s achievement judged against both qualitative and quantitative criteria as
determined by the board on a case by case basis.
All rights granted and vested under the Conditional Rights Scheme established on 4 March 2011 lapsed during the 2015
financial year. No rights are eligible to be exercised by any of the recipients under this scheme. The vesting condition of
options granted under the LTIP and NED Plan is continuous service.
Options/Rights series
Grant date
Grant date
fair value
Exercise
price
Expiry date
Vesting date
Conditional rights scheme
– March ‘11
Conditional rights scheme
– May ‘12
Long term incentive
plan (LTIP)
Non-executive director
share and option plan
(NED Plan)
LTIP - director
LTIP - employees
NED Plan
22 March 2011
$0.25
$0.00
31 March 2015
4 September 2012
16 May 2012
$0.11
$0.00
31 March 2015
4 September 2012
18 November 2014
$0.17
$0.00
25 May 2018
25 May 2015
18 November 2014
7 March 2016
31 March 2016
7 March 2016
$0.17
$0.19
$0.24
$0.19
$0.00
$0.48
$0.48
$0.48
25 May 2018
25 May 2015
7 March 2021
30 June 2016
1 January 2022
1 January 2017
7 March 2021
30 June 2016
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant
date.
70
Opthea LimitedAnnual Report
(c) Share-based payment to corporate advisor
In January 2015, the company issued 1,000,000 options to purchase ordinary shares to Bell Potter Securities in consideration
for services to be provided under a Corporate Advisory Agreement. The options were exercisable from 13 January 2016 at
an exercise price of $0.2625 and expire on 13 January 2018. The issue of the options was approved by members at the 2014
annual general meeting. The fair value of the options is $0.075 per option.
(d) Fair value of share options granted in the year
Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects
of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option),
and behavioural considerations. Expected volatility is based on the historical share price volatility over the past 5 years.
Grant date share price
Exercise price
Fair value per option
Expected volatility
Option life
Dividend yield
Risk free interest rate
Model used
LTIP - Director
NED Plan
LTIP - employees
$0.38
$0.48
$0.19
65%
5 years
0%
2.09%
Binomial
$0.38
$0.48
$0.19
65%
5 years
0%
2.09%
Binomial
$0.43
$0.48
$0.24
65%
5 years
0%
2.09%
Binomial
(e) Movements in share options during the period
The following reconciles the share options outstanding at the beginning and end of the year:
30 June 2016
30 June 2015
Balance at beginning of year
Granted during the year:
To directors under the LTIP and NED Plan
To employees under the LTIP
Corporate advisory
Exercised during the year
Expired during the year
Balance at end of year
Exercisable at end of year
Weighted
average
exercise
price
$
-
-
-
Number of
options and
rights
Weighted
average
exercise
price
$
Number of
options and
rights
3,100,000
$0.085
805,000
7,000,000
2,725,000
-
(2,100,000)
-
10,725,000
3,310,000
$0.48
$0.48
-
-
-
$0.46
$0.41
2,100,000
-
1,000,000
$0.26
-
(805,000)
3,100,000
2,100,000
-
-
$0.085
-
The share options outstanding at the end of the year had a weighted average exercise price of $0.46 (2015: $0.085) and
a weighted average remaining contractual life of 1,680 days (2015: 1,017 days).
71
Financial Report2015–2016
Notes to the Consolidated
Financial Statements
31. Net tangible asset backing
Net tangible asset backing per ordinary security
32. Auditors’ remuneration
The auditor of Opthea Limited is Deloitte Touche Tohmatsu.
2016
$
0.10
2015
$
0.15
2016
$
2015
$
Amounts received or due and receivable by Deloitte (Australia) for:
Audit or review of the financial report of the entity and any other entity in the consolidated group
84,565
92,700
Other services in relation to the entity and any other entity in the consolidated group
6,500
91,065
-
92,700
33. Events after the balance sheet date
No matters or circumstances have arisen since the end of the reporting period, not otherwise disclosed in this report, which
significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state
of affairs of the Group in future financial years.
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Opthea LimitedAnnual Report
34. Parent entity information
The accounting policies of the parent entity, which have been applied in determining the financial information shown below,
are the same as those applied in the consolidated financial statements. Refer to note 3 for significant accounting policies
relating to the Group.
(a) Financial position
Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Option reserve
Employee equity benefits reserve
Net unrealised gains reserve
Total shareholders’ equity
(b) Financial performance
Loss of the parent entity
Other comprehensive income/(expense)
Total comprehensive loss of the parent entity
2016
$
2015
$
15,357,368
20,257,261
751,956
2,059,563
16,109,324
22,316,824
(1,908,827)
(1,103,386)
(252,999)
(148,747)
(2,161,826)
(1,252,133)
13,947,498
21,064,691
53,844,979
53,840,767
(43,085,518)
(35,181,787)
1,989,067
1,989,067
1,198,970
388,040
-
28,604
13,947,498
21,064,691
Year ended
30 June
2016
Year ended
30 June
2015
(7,903,731)
(27,616,726)
(28,604)
98,594
(7,932,335)
(27,518,132)
(c) Parent entity contractual commitments for acquisition of property, plant and equipment
The parent entity does not have any contractual commitments for the acquisition of property, plant and equipment for
the year ended 30 June 2016 (2015: Nil).
(d) Parent entity contingent liabilities
The parent entity had a bank guarantee outstanding at 30 June 2016 in respect of a rental deposit for its office premises
of $43,841 (2015: $43,841).
(e) Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has provided a written guarantee to all its controlled entities that it will continue to provide sufficient funds
to enable them to meet their commitments and contingencies for the next twelve months. These controlled entities are
disclosed in note 24.
(f) Legal entity simplification
Consistent with the strategic focus of the Group in developing the OPT-302 asset and to prepare for the simplification of
the legal entity structure, the parent entity has forgiven loans and receivables to wholly owned subsidiaries during the period
ended 30 June 2016. The elimination of these intercompany balances has resulted in a reduction of non-current assets
totalling $1.3 million (2015: $48.7 million) and non-current liabilities totalling $112,523 (2015: $27.3 million). This treatment also
resulted in an impairment of the investments in the subsidiaries of the Company totalling $1.1 million (2015: $6 million). The
net effect of these adjustments on the parent entity’s loss for the year was $2.3 million (2015: $27.4 million). The net assets
of the parent entity are now aligned with those of the consolidated group.
73
Financial Report2015–2016 Directors Declaration
for the year ended 30 June 2016
In accordance with a resolution of the directors of Opthea Limited, we state that:
1.
In the opinion of the directors:
(a) the financial report and the notes thereto are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards, Corporations Regulations 2001, and International Financial
Reporting Standards (IFRS) as disclosed in note 3 of the financial statements; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016.
Signed in accordance with a resolution of the directors made pursuant to S.295(5) of the Corporations Act 2001.
On behalf of the directors:
Megan Baldwin
Director
Geoffrey Kempler
Director
Melbourne
29 August 2016
74
Opthea LimitedAnnual Report 75
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Independent Auditor’s Report to the Members of Opthea Limited Report on the Financial Report We have audited the accompanying financial report of Opthea Limited, which comprises the statement of financial position as at 30 June 2016, the statement profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity, comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 38 to 74. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 3, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the company’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Deloitte Touche Tohmatsu ABN. 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au Financial Report2015–2016 76
Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Opthea Limited would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Opthea Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 3. Report on the Remuneration Report We have audited the Remuneration Report included in pages 22 to 28 of the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of Opthea Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001. DELOITTE TOUCHE TOHMATSU Samuel Vorwerg Partner Chartered Accountants Melbourne, 29 August 2016 Opthea LimitedAnnual Report ASX Additional Information
1. Distribution of equity securities
The number of shareholders, by size of holding, of quoted fully paid ordinary shares as at 9 August 2016 is as follows:
Category
1 - 500
501 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Total
Number of shareholders holding less than a marketable parcel of shares
Fully paid ordinary shares
No. of holders
No. of shares
92
357
1,051
352
434
77
2,363
125
23,991
340,821
2,822,343
2,764,866
14,283,084
129,970,798
150,205,903
45,204
2. Twenty largest shareholders
The names of the 20 largest holders of quoted fully paid ordinary shares and their respective holdings at
9 August 2016 are:
Rank
Name
No. of shares
% interest
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
National Nominees Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
J P Morgan Nominees Australia Limited
Jagen Pty Ltd
Armada Trading Pty Limited
Ludwig Institute For Cancer Research Ltd
Brispot Nominees Pty Ltd
Capital Macquarie Pty Limited
Megan Baldwin
Octavian Services Pty Ltd
Chemical Trustee Limited
CS Fourth Nominees Pty Limited
Mr Graeme Southwick + Mrs Suzanne Southwick
Capita Trustees Limited
Traders Macquarie Pty Limited
Montoya Pty Ltd
JFF Steven Pty Ltd
Top 20 holders of ordinary fully paid shares
Total remaining holders balance
23,039,342
15,316,036
13,915,370
12,838,520
12,824,221
7,921,273
7,116,022
6,714,286
3,122,090
2,003,012
1,928,304
1,533,674
1,200,000
1,158,108
1,037,059
1,000,000
946,462
907,161
742,858
714,867
115,978,665
34,227,238
15.34
10.20
9.26
8.55
8.54
5.27
4.74
4.47
2.08
1.33
1.28
1.02
0.80
0.77
0.69
0.67
0.63
0.60
0.49
0.48
77.21
22.79
77
Financial Report2015–2016
ASX Additional Information
3. Substantial shareholders
The following information is current at 1 August 2016 based on information extracted from the substantial
shareholding notices given to the Company by shareholders who hold relevant interests in more than 5 per cent
of the Company’s voting shares:
Name
BVF Partners LP
Baker Brothers Life Sciences LP
Packer and Co Limited
4. Voting rights
No. of shares
26,816,436
13,537,758
12,700,488
Clauses 44 to 53 of the Company’s Constitution stipulate the voting rights of members. In summary, but without
prejudice to the provisions of the Constitution, every member present in person or by representative, proxy or
attorney shall have one vote on a show of hands and on a poll have one vote for each ordinary share held by
the member.
The Company’s shares are quoted on the Australian Securities Exchange Limited (ASX code: OPT) and
the OTC Markets Group Inc. (OTCQX code: CKDXY).
Corporate Information
Company
Directors
Opthea Limited ABN 32 006 340 567
Geoffrey Kempler B.Sc. Grad. Dipp. App. Soc. Psych (Chairman)
Megan Baldwin PhD MAICD (Managing Director and Chief Executive Officer)
Michael Sistenich MSc.
Company Secretary
Mike Tonroe BSc(Hons) ACA MAICD
Registered Office
Level 4,650 Chapel Street, South Yarra, Victoria 3141
Principal Administrative
Level 4,650 Chapel Street, South Yarra, Victoria 3141
Office
Bankers
Auditors
Solicitors
Telephone: +61 (3) 9826 0399 Facsimile: +61 (3) 9824 0083
Commonwealth Bank of Australia, Melbourne, Victoria
Deloitte Touche Tohmatsu, 550 Bourke Street, Melbourne, Victoria 3000
Gilbert and Tobin, 101 Collins Street, Melbourne, Victoria 3000
Share Register
Computershare Investor Services Pty Ltd, Yarra Falls, 452 Johnston Street, Abbotsford,
Victoria 3067 | Telephone: +61 (3) 9415 4000 or 1300 850 505 (within Australia)
Stock Exchange Listing
Opthea Limited’s shares are quoted on the Australian Securities Exchange Limited ASX
(code: OPT). Opthea also operates an American Depositary Receipt (ADR) program where
One ADR is the equivalent of 5 shares. ADRs are publicly traded on the OTC QX in the
United States of America (code: CKDXY).
78
Opthea LimitedAnnual Report Opthea Limited
ABN 32 006 340 567
Level 4,650 Chapel Street, South
Yarra, Victoria 3141
Telephone: +61 (3) 9826 0399
Facsimile: +61 (3) 9824 0083
www.opthea.com