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Soleno Therapeutics, Inc.ASX Announcement
30 August 2017
A P P E N D I X 4 E
P R E L I M I N A R Y F I N A L R E P O R T
O P T H E A L I M I T E D
A B N : 3 2 0 0 6 3 4 0 5 6 7
Year ended 30 Jun e 2 017
Res ults for announ cem ent to t h e m a r ket
Results
Revenues from ordinary activities
573,421
765,274
down 25.1%
30 June 2017
$
30 June 2016
$
% Movement
Loss from ordinary activities after tax attributable to members
(6,192,896)
(6,507,420)
Loss has decreased 4.8%
Loss for the year attributable to members
(6,192,896)
(6,507,420)
Loss has decreased 4.8%
NTA Backing
Net tangible asset backing per ordinary security
0.27
0.10
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, Victoria 3141, Australia
www.opthea.com
+61 (3) 9826 0399
2 0 1 6 – 1 7
A N N U A L
R E P O R T
N
O
I
S
N
A
P
X
E
O P T H E A
H A S T A K E N A
G I A N T
S T E P
in terms of creating a globally relevant
program with the release of positive data
from its 12-week, 51-patient phase1/2a
study that evaluated OPT-302 as a novel
therapy for wet AMD.
$ 4 5 M
G
R
O W T
H
The successful outcomes from the
Phase 1/2a trial in patients who
received OPT-302 monotherapy
and combination therapy allowed
Opthea to consummate an
overscribed A$45 million fi nancing.
The funds see the company fully
funded through 2020 and allow
Opthea to expand and diversify
its clinical development program.
As a fusion protein with
a ‘trap’ mechanism of action,
T
R
A
N
S
I
T
I
O
N
O P T - 3 0 2
targets VEGF-C and VEGF-D
that are novel members of the
VEGF family.
A major part of the appeal of
intravitreally injected OPT-302
is that it is diff erent to the
existing wet AMD therapies
that target VEGF-A.
Used in combination with
one of the currently approved
anti-VEGF-A drugs, we can
inhibit VEGF-A, -C and -D,
in what clinical investigator
Pravin U. Dugel, MD, calls
a “pan-VEGF” approach.
N
O
I
T
A
D
N
U
O
F
D
I
L
O
S
We know that reducing fl uid is key to combating DME,
which presents an opportunity for OPT-302 for that
indication. We are also interested in other indications
beyond wet AMD and DME for which our technology
may improve patient outcomes.
Overall, we have
S O U N D
S C I E N C E
and think that OPT-302 has the
potential to be a game changer.
O P T H E A ’ S P R I N C I P A L
A C T I V I T Y I S T O D E V E L O P
A N D C O M M E R C I A L I S E
T H E R A P I E S P R I M A R I L Y
F O R E Y E D I S E A S E
“ B E C A U S E W E T A M D I S
S U C H A C O M P L E X D I S E A S E
W I T H M U L T I P L E P A T H W A Y S ,
I T I S L I K E L Y T H A T A
C O M B I N A T I O N O F D R U G S
W I L L B E A B L E T O P R O V I D E
B E T T E R O U T C O M E S . ”
— M A C U L A R D I S E A S E F O U N D A T I O N A U S T R A L I A ,
M A C U L A R D E G E N E R A T I O N R E S E A R C H
U P D A T E D E C E M B E R 2 0 1 5
C O N T E N T S
6 Chairman and CEO Overview
10 Directors’ Report
28 Auditor’s Independence Declaration
30 Management Team
36 Financial Report
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
76 Directors’ Declaration
77
Independent Auditor’s Report
81 ASX Additional Information
82 Corporate Information
O P T H E A ’ S S T R A T E G Y I S
T O D E V E L O P O P T - 3 0 2 A S
A C O M B I N A T I O N T H E R A P Y
T O B E U S E D T O G E T H E R
W I T H O T H E R E X I S T I N G
A P P R O V E D T H E R A P I E S .
06
C H A I R M A N A N D
C E O O V E R V I E W
W E W I L L E X P A N D
O U R P R O G R A M
I N T O A N O T H E R E Y E
D I S E A S E I N D I C A T I O N
We also received positive feedback from European
regulatory agencies for the OPT-302 clinical program
in wet AMD. Scientific advice was received from two
key European regulatory agencies in support of Opthea’s
Phase 2B wet AMD clinical trial with OPT-302 that will
enrol patients in both the US and European Union (EU).
Now well-funded and with such promising results and
regulatory feedback, we are expanding clinical studies
with OPT-302. In the second half of calendar 2017
we will initiate two new trials in wet AMD patients.
As well as a ~350 patient Phase 2B trial, we’ll also
initiate a Phase 2A study of approximately 100 patients
previously treated with the current standard of care
who experienced sub-optimal response.
In another exciting clinical initiative, we will expand
our program into another eye disease indication by
conducting a Phase 2A study in diabetic macular edema
(DME) patients. Initiating a DME study is an important
milestone for Opthea: it diversifies our program to
investigate OPT-302 in more than one eye disease.
Dear fellow shareholders
We’re delighted to report on a successful, in fact a
transitional year, for Opthea. The progress we have
made this year significantly advanced our lead drug
candidate, OPT-302, along the drug development
pathway for the treatment of wet AMD. OPT-302
improved visual acuity and reduced the effects of wet
AMD on its own and in combination with the current
approved drug, Lucentis®. OPT-302, a VEGF-C/-D
inhibitor, carries the potential to meaningfully improve
visual outcomes for patients treated in combination
with current standard-of-care therapies, which
selectively block VEGF-A.
On the back of the successful Phase 1/2A clinical trial
of OPT-302 in wet AMD, that met its safety end points
and showed promising efficacy, the company completed
a well over-subscribed A$45 million equity capital raising.
This year we met with the US FDA and they provided
thorough and positive feedback to us, and indicated its
continued support to advance the OPT-302 program
for back of the eye diseases (including wet AMD and
DME). The outcomes from this meeting provided
a clear path forward to execute plans to initiate the
larger, randomised and controlled Phase 2B study
in wet AMD patients in 2017.
O P T H E A
2 0 1 6 – 1 7
07
T H A N K Y O U T O O U R
S H A R E H O L D E R S F O R
Y O U R C O N T I N U E D
S U P P O R T
Existing approved treatments, including Lucentis®,
are achieving combined annual sales of more than
US$8 billion. There is still however a significant unmet
medical need. Despite treatments being available,
many patients don’t respond well to them or continue
to deteriorate over time. OPT-302’s trial results indicate
it could improve treatment outcomes for wet AMD
and DME patients.
The $45 million capital raising completed in May 2017
came from new and existing shareholders: $42 million
from Australian, US and EU based institutional investors
and $3 million from Australian and New Zealand retail
shareholders. The raising strengthens our balance sheet
and provides sufficient funds for Opthea to carry out
an expanded OPT-302 clinical trial program and build
the required infrastructure around this.
We are looking forward to achieving important
milestones in the coming year including:
• Publication of phase 1/2A trial results in
a peer-reviewed journal;
• Patient recruitment into the Phase 2B wet AMD,
Phase 2A studies in DME and prior treated
wet AMD patients;
• Building our professional team to ensure continued
success in our expanded clinical trial program.
Thank you to our shareholders for your continued
support, particularly in such strong support for
this year’s capital raising.
We also thank our fellow director Michael Sistenich
for his continued hard work during the year.
Thanks also go to our loyal and professional
team at Opthea for another successful year:
we continue to operate at a high standard.
Geoffrey Kempler
Megan Baldwin, PhD
Chairman
Opthea Limited
CEO & Managing Director
Opthea Limited
A N N U A L
R E P O R T
W E H A V E T H E
P L A T F O R M T O
E XP
T H E O P T - 3 0 2
C L I N I C A L
D E V E L O P M E N T
P R O G R A M
A N D
E XP
A N D
10
D I R E C T O R ’ S
R E P O R T
T H E B O A R D O F D I R E C T O R S O F
O P T H E A L I M I T E D S U B M I T S I T S R E P O R T
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 7
F O R O P T H E A A N D I T S S U B S I D I A R I E S .
I N F O R M A T I O N A B O U T T H E
D I R E C T O R S
The names of Opthea Limited’s (the Company or
Opthea) directors in office during the financial year
and until the date of this report are as follows:
Geof frey Kemp le r
Non-executive director and chairman
Michael Siste n ich
Non-executive director
Megan Baldwi n
Managing Director and Chief Executive Officer
The qualifications, experience and special
responsibilities of the Company’s Directors
are as follows.
OPTHEA2016–17 11
Geoff rey Ke mp le r, B.Sc. G ra d .
Dipp. App. So c. Psych
M ic ha el Sistenich, M Sc.
Geoffrey Kempler was appointed as Opthea’s
chairman in November 2015 and is currently CEO
and executive Chairman of Prana Biotechnology.
Geoffrey 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’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 was appointed non-executive
director of Opthea in November 2015 and is
Chairman of the remuneration and audit committees.
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
a director of Nohla Therapeutics, and previously
served as Director of International Equities and
Head of Global Healthcare Investments at DWS
Investments, Deutsche Bank Frankfurt. Michael
has long standing capital market connections
and experience in the global healthcare
investment community.
A N N U A L
R E P O R T
12
Megan Baldw in, Ph D, MAI CD
Com pany Se cretar y
M ike Tonroe, BS c(H ons) ACA M AIC D
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
20 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.
O P T H E A
2 0 1 6 – 1 7
13
Dire ctorsh ip s of oth er l iste d c o m p an ie s
S H A R E O P T I O N S
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 2017 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
D I R E C T O R S ’ I N T E R E S T S
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
1,643,223
11,500
4,000,000
615,246
285,714
2,000,000
520,178
-
1,000,000
Megan
Baldwin1
Geoffrey
Kempler
Michael
Sistenich
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.
U nissued ordin ary sh are s
At the date of this report the company had on issue
48,136,842 quoted options to purchase ordinary
shares with an exercise price of $0.27 and expiry date
of 25 November 2018. During the year, 1,570,255
options (2016: 15,600) 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 Inc entive an d Non - Exec utive
Director Share and Optio n P lan s
During the 2016 financial year 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
Granted to
date
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
Exercise
price
Number
of options
granted
$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.
D I V I D E N D S
No cash dividends have been paid, declared
or recommended during or since the end of
the financial year by the Company.
ANNUALREPORT O P T H E A R A I S E D
A $ 4 5 M I N E Q U I T Y
I N A P R I L 2 0 1 7 .
T H E C O M P A N Y I S
N O W F U L L Y F U N D E D
T H R O U G H 2 0 2 0 .
15
• Opthea received an R&D tax incentive payment
during the year of $2,643,533 (2016: $3,094,502);
• Royalty income received during the financial
year was $73,259 (2016: $329,304);
• Patent costs incurred during the financial
year were $171,617 (2016: $254,298);
• The consolidated net loss of the Group for the
year was $6,192,896 after an income tax benefit
of $3,167,912 (2016: loss of $6,531,774 after
an income tax benefit of $1,569,204).
F I N A N C I A L P O S I T I O N
The Group statement of financial position includes
the following key balances:
• Consolidated cash balances as at 30 June 2017
amounted to $51,959,906 (2016: $14,486,403);
• Receivables of $3,218,731 (2016: $1,808,000)
include the Opthea Group’s expected refund
of R&D tax incentives for the year to June 2017
of $2,709,765 (2016: $1,586,990);
• The Group has a net current asset surplus
of $53,329,849 (2016: $14,633,354);
• The net tangible asset backing per share as
at 30 June 2017 was $0.27 (2016: $0.10);
Opthea’s share price was $0.75 (2016: $0.50).
P R I N C I P A L A C T I V I T I E S
The principal activity of Opthea Limited is to develop
and commercialise therapies primarily for eye disease.
Opthea’s lead asset, OPT-302, is a soluble form of
VEGFR-3 in clinical development as a novel therapy
for wet age-related macular degeneration (wet AMD)
and diabetic macular edema (DME). Wet AMD and
DME are leading causes of blindness in the elderly
and diabetic populations respectively, and are
increasing in prevalence worldwide.
Opthea’s principal activities in 2016-2017 included
advancing OPT-302 through a Phase 1/2A clinical trial
in wet AMD patients and the conduct of non-clinical
and manufacturing activities to support further clinical
investigation of OPT-302.
Opthea’s development activities are based on an
extensive intellectual property portfolio covering key
targets (Vascular Endothelial Growth Factors [VEGF]-C,
VEGF-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. Angiogenesis
and vascular leakage are key hallmarks of several eye
diseases, including wet AMD and DME.
O P E R A T I N G A N D F I N A N C I A L R E V I E W
Financ ia l p erform a nce
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 $4,838,300 (2016: $3,581,295).
Including personnel costs and other R&D support
costs which are recognised as administrative expenses,
total expenditure in R&D amounted to $6,229,346
(2016: $5,874,562);
ANNUALREPORT 16
Opthe a’s Te chno lo gy
Vessel growth and vascular leakage is primarily driven
by members of the Vascular Endothelial Growth Factor
family that bind to receptors that are present on vessel
walls. Opthea’s lead drug development candidate
OPT302, blocks the activity of two members
of this family, namely VEGF-C and VEGF-D.
Approved therapies for wet AMD include the blockbuster
drugs Lucentis® and Eylea®. These agents block the
activity of VEGF-A, but not VEGF-C or VEGF-D.
OPT302 is therefore a novel and differentiated
approach for the treatment of eye diseases.
Opthea initially investigated the potential of OPT-302
to reduce disease burden in a mouse model of wet AMD.
In this model, OPT-302 effectively reduced disease
burden by inhibiting the size of wet AMD lesions and
vessel leakage. Furthermore, combined administration
of OPT302 with the VEGF-A inhibitor Eylea, was
more effective than either agent alone. These results
demonstrated that more complete blockade of members
of the VEGF family may result in more effective inhibition
of vascular growth and leakage in wet AMD lesions.
Other studies, published by independent research
groups from around the world, have also demonstrated
that levels of VEGF-C and/or VEGF-D are upregulated
in response to VEGF-A inhibition, suggesting that sub
optimal clinical responses to Eylea® or Lucentis® may
be mediated by VEGF-C and VEGF-D. In one such study,
the level of VEGF-C in the eye was significantly elevated
in patients with wet AMD who received anti-VEGF-A
therapy on a monthly basis after only two months of
therapy (Cabral et al. 2016).
The opportunity: OP T-30 2 fo r
wet AMD and DM E
Age-related macular degeneration (AMD) is a progressive
chronic disease that affects the back of the eye in a
region of the central retina (the macula). The disease
is caused by the abnormal growth of blood vessels that
leak fluid, lipids and blood under and within the retina.
If left untreated, wet AMD leads to severe and often
rapid vision loss in the centre of the visual field,
affecting the vision that is required to drive, read,
recognise faces and perform daily tasks. Wet AMD
is the leading cause of vision loss in both men and
women aged 50 years or older, and is increasing
in prevalence as the population ages.
Diabetic macular edema (DME) is the most common
cause of vision loss in diabetics, typically affecting
the working age population in developed countries.
Diabetes triggers multiple pathways, including
inflammation and vascular changes that lead to
vascular leakage (edema). The build-up of fluid
and protein in the retina leads to vision loss.
With the prevalence of diabetes rising, DME represents
a growing market opportunity for new therapies
that address the underlying causes of the disease.
Approved therapies for wet AMD and DME include the
blockbuster drugs Lucentis® and Eylea®. These agents
block the activity of VEGF-A, a key mediator of blood
vessel growth and vascular leakage. In 2016, Lucentis®
and Eylea® generated revenues in excess of USD 8.5
billion. However, for both wet AMD and DME patients,
there remains an unmet medical need for new therapies
which may improve vision outcomes for patients. At least
45% of wet AMD patients experience some degree of
resistance to treatment, with sub-optimal vision gain
and persistent retinal fluid despite receiving regular
anti- VEGF-A therapy. In addition, a substantial proportion
of patients with DME have persistent macular edema
and suboptimal vision gain following anti-VEGF-A therapy.
Opthea is developing OPT-302, a ‘trap’ for VEGF-C
and VEGF-D, for use in combination with existing
approved inhibitors of VEGF-A (Lucentis®/Eylea®).
Combination therapy achieves a more complete
blockade of the VEGF family, blocks mechanisms
of ‘escape’ from VEGF-A inhibition and has the
potential to improve vision outcomes for wet AMD
and DME patients.
OPT-302 is a novel approach for the treatment of
eye diseases that severely impact the quality of life
of patients and one that is distinct in its mechanism
from the existing approved therapies and other
agents in development.
OPTHEA2016–17 17
Following the successful completion of the
Phase 1/2A study, we have expanded our clinical
development program to explore the therapeutic
potential of OPT-302 in both wet AMD and
DME patients. We are currently initiating a larger,
randomized and controlled Phase 2B clinical trial
to investigate OPT-302 + Lucentis® vs Lucentis®
alone in approximately 350 treatment-naïve wet AMD
patients; and planning Phase 2A studies in patients
with DME and wet AMD. Opthea anticipates initiating
recruitment in those studies by the end of 2017.
Operational activities to support the further clinical
development of OPT-302 were also conducted over
the past 12 months. Preclinical safety/toxicology
studies to support dosing of OPT-302 on a monthly
basis for six months in the Phase 2B wet AMD trial
were completed, and manufacture of an additional
batch of clinical grade OPT-302 commenced. To
obtain input on the design and our approach for the
Phase 2B trial, we also concluded positive European
scientific advice meetings with regulatory bodies
in the UK and Sweden, as well as a Type C meeting
with the US Food and Drug Administration (FDA).
Capital raising
In April 2017, Opthea announced a capital raising
through the issue of new shares in an entitlement
offer and a placement to institutional and professional
investors. Proceeds from the $45.3 million financing
will be used to advance OPT-302 through the
expanded clinical development program in two eye
diseases, wet AMD and diabetic macular edema
(DME). The capital raising attracted strong demand
from specialist healthcare investors from Australia,
the US and the UK and positions the company
to execute a more diversified and robust clinical
development program for OPT-302.
Operationa l u pdate
Clinical progress
In April 2017, Opthea announced positive results
from our Phase 1/2A clinical trial of OPT-302 in
51 patients with wet AMD. The trial was conducted
under an FDA approved Investigational New Drug
Application at 14 clinical sites in the USA and was
Opthea’s first clinical trial with OPT-302. The
trial investigated OPT-302 administered alone
(as ‘monotherapy’) or in combination with Lucentis®
administered on a monthly basis for three months.
The primary endpoint of the study was the
assessment of the safety of OPT-302 administered
via ocular (intravitreal) injection as a monotherapy
and in combination with Lucentis®. Secondary
endpoints of the trial included preliminary measures
of clinical activity, including evaluation of visual
acuity using eye charts as well as changes in wet
AMD lesions, such as measurement of fluid and
thickness of the tissue at the back of the eye,
using advance imaging techniques.
The trial enrolled patients who had never received
treatment for wet AMD before, so called ‘treatment
naïve patients’, as well as patients who have
demonstrated a sub-optimal response to prior
anti-VEGF-A therapy.
The Phase 1/2A trial met the primary safety
endpoint, with no treatment related serious adverse
events, systemic adverse events or dose limiting
toxicities observed.
We were pleased to report that OPT-302
demonstrated clinical activity in all patient groups
investigated, including naïve and prior-treated patients
in both the monotheraphy and OPT-302 + Lucentis®
groups. Improvements in visual acuity and reductions
in retinal fluid were also observed suggesting
additional clinical benefit with complete suppression
of VEGF-A and VEGF-C/D. OPT-302 clinical activity
was also observed in the monotherapy treatment
groups, with a number of patients who did not receive
standard of care Lucentis® therapy demonstrating
gains in visual acuity.
The completion of the Phase 1/2A trial represents
an important milestone for Opthea. The data is
a testament to OPT-302’s potential to improve
outcomes for patients with wet AMD and other eye
diseases for which existing standard of care therapies
are associated with sub optimal clinical response.
ANNUALREPORT 18
Corporate presentations
To raise Opthea’s profile in the international investment
and clinical ophthalmology community, the Company
presented data from the first 20 patients enrolled in
the Phase 1/2A wet AMD trial at several prominent
conferences. In August 2016, Dr Megan Baldwin, CEO
presented in the “Emerging approaches to combination
therapies in AMD and Diabetic Macular Edema” session
of the Ophthalmology Innovation Summit (OIS) in
San Francisco.
Phase 1 data was also presented at European Society
of Retina Specialists (EURETINA) congress held in
Copenhagen, Denmark in September 2016. The
EURETINA congress is the largest gathering of specialist
retinal ophthalmologists and associated healthcare
professionals in Europe.
In addition, in January 2017, Opthea attended the
35th Annual J.P. Morgan Conference in San Francisco.
The 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.
Intelle ctual property
In July 2017, the Company received a Notice of
Allowance from the United States Patent and Trade
Mark Office for the Company’s patent application for
its OPT-302 molecule. Opthea anticipates the patent
will be granted by 31 December 2017. The term of
the resulting U.S. patent will extend to February 2034
and will cover OPT-302 and its use to treat disorders
involving neovascularisation, including eye diseases
such as wet AMD and DME.
Corresponding patent applications are pending in
17 other countries, with the patent having already been
granted in South Africa. Allowance of the OPT-302
patent builds on Opthea’s extensive intellectual property
(IP) portfolio covering soluble forms of VEGFR-3.
The Company’s existing IP portfolio includes granted
composition of matter patents in the U.S. extending
to 2026, and corresponding granted patents in Europe,
Canada, Japan and Australia extending to 2022. In
addition, a method of use patent covering sVEGFR-3
has been granted in the U.S. which extends to 2023.
S I G N I F I C A N T C H A N G E S
I N T H E S T A T E O F A F F A I R S
Except for the capital raising completed in May 2017
referred to in this report, in the opinion of the directors,
there were no significant changes in the state of affairs
of the Company that occurred during the financial year
under review.
F U T U R E D E V E L O P M E N T S
Opthea will continue to pursue the significant commercial
opportunity in OPT-302 by advancing and diversifying
the clinical development program for the asset.
The key objectives of the Company over the next
12 months are to:
• Continue to evaluate and report data analyses from
the Phase 1/2A trial of OPT-302 in wet AMD patients;
• Publish the outcomes of the Phase 1/2A study
in a peer-reviewed journal;
• Initiate patient recruitment in the US and Europe
for the Phase 2B clinical trial in treatment naïve
wet AMD patients;
• Initiate patient recruitment in the US and Australia
for the Phase 2A clinical trial in DME;
• Finalise the design of and initiate a Phase 2A
clinical trial in prior-treated wet AMD patients;
• Continue to liaise with and obtain advice from key
opinion leaders in ophthalmology to ensure our
clinical program is optimally designed and executed;
• Raise Opthea’s profile and an understanding of the
company’s technology to the international investment
and clinical ophthalmology community.
S I G N I F I C A N T E V E N T S A F T E R
B A L A N C E D A T E
There were no significant events after 30 June 2017
to report.
OPTHEA2016–17 T H E R E I S A
L A R G E U N M E T
M E D I C A L N E E D
T H A T R E M A I N S
F O R W E T A M D
P A T I E N T S .
20
E N V I R O N M E N T A L R E G U L A T I O N S
The Company is not subject to significant
environmental regulations.
I N D E M N I F I C A T I O N A N D I N S U R A N C E
During the financial year ended 30 June 2017, 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 2017. 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.
D I R E C T O R S ’ M E E T I N G S
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
Number of meetings held:
Number of meetings attended:
Geoffrey Kempler
Michael Sistenich
Megan Baldwin
8
8
8
8
Audit & Risk
Nomination
Remuneration
3
3
3
3
1
1
1
1
2
2
2
2
Committee membershi p
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:
Audit & Risk
Nomination
Remuneration
Michael Sistenich (Chairman)
Michael Sistenich (Chairman)
Michael Sistenich (Chairman)
Geoffrey Kempler
Geoffrey Kempler
Geoffrey Kempler
OPTHEA2016–17
21
A U D I T O R ’ S I N D E P E N D E N C E
D E C L A R A T I O N
The directors have obtained a declaration of
independence from Deloitte Touche Tohmatsu,
the Company’s auditors, which is set out on page 28
and forms part of the directors’ report for the
financial year ended 30 June 2017.
P R O C E E D I N G S O N B E H A L F O F T H E
C O M P A N Y
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.
C O R P O R A T E G O V E R N A N C E
The board aims to achieve and show the highest
standards of corporate governance. The Company 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 2017 Corporate Governance
Statement on 30 August 2017. The Corporate
Governance Statement is available on Opthea Limited’s
web site at http://www.opthea.com/pub/pdf/Opthea_
CorporateGovernanceStatement2017.pdf
C U R R E N T T H E R A P I E S
F O R W E T A M D T A R G E T
V E G F - A O N L Y .
O P T H E A ’ S O P T - 3 0 2
I S A N O V E L T H E R A P Y
T A R G E T I N G V E G F - C
A N D V E G F - D
R E M U N E R A T I O N R E P O R T - A U D I T E D
P rinc iples of co mpen satio n
Compensation packages include a mix of fixed and
variable compensation and long-term performance
based incentives.
Fixed com pensatio n
The level of fixed remuneration is set 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.
Perfor man ce linked compen sation
Short Term Incentives (STI): The objective of STI
is to link the achievement of the Company’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 Company that is reasonable
in the circumstances.
Actual STI payments in the form of cash bonuses to key
management personnel (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 KMP. Payments of
the STI bonus are made in the following reporting period.
The remuneration committee considered the STI payment
for the 2017 financial year in June 2017. Based on the
achievement of operational objectives in the financial
year, the remuneration committee has determined
there will be $383,750 STI bonus paid to KMP for
the 2017 financial year (2016: $233,750).
ANNUALREPORT 22
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.
Conse quences of p erfo rman c e
on shareholder wealth
In considering the Company’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
Basic loss per share
NTA backing per share @ 30 June
Opthea share price @ 30 June
2017
$
2016
$
2015
$
2014
$
2013
$
573,421
765,274
939,008
878,083
1,153,687
(9,360,808)
(8,100,978)
(8,121,254)
(6,849,021)
(6,562,515)
3,167,912
1,569,204
2,720,260
2,859,403
1,558,009
(6,192,896)
(6,531,774)
(5,400,994)
(3,989,618)
(5,004,506)
2017
$
(0.04)
0.27
0.75
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
Change in share price is one of the financial performance
targets considered in setting STI.
OPTHEA2016–17
23
Serv ice co ntracts
No n- exe cut ive 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:
• 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.
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.
The base non-executive director 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.
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).
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, through Phase 2 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.
ANNUALREPORT 24
Directors’ and exe cu ti ve offi ce rs re m u nerat ion
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
2017
90,405
2016
52,738
Michael Sistenich 1 2017
60,000
2016
35,000
Dominique Fisher 2
2017
-
2016
33,335
Russell Howard 2
2017
-
2016
21,250
Tina McMeckan 2
2017
-
2016
21,250
2017 150,405
2016 163,573
Sub-total
Non-executive
directors
Executive directors:
$
-
-
-
-
-
-
-
-
-
-
-
-
Megan Baldwin
2017 350,000 325,000
2016 350,000
175,000
Other Key Management Personnel:
Mike Tonroe
2017 235,000
58,750
2016 235,000
58,750
Totals
2017
735,405 383,750
2016 748,573
233,750
$
8,589
5,010
5,700
3,325
-
3,167
-
2,019
-
2,019
14,289
15,540
49,875
47,500
27,906
26,629
92,070
89,669
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 Appointed on 30 November 2015: remuneration in 2016 is for seven months of service.
2 Resigned on 30 November 2015: remuneration in 2016 is for five months of service.
3 Bonuses are paid in the financial year following the year in which they are earned.
$
-
-
-
-
-
-
-
-
-
-
$
$
150,558
249,552
185,346
243,094
75,279
140,979
92,673
130,998
-
-
-
-
-
-
-
36,502
-
23,269
-
23,269
-
225,837
390,531
-
278,019
457,132
-
301,116
1,025,991
-
370,693
943,193
-
101,908
423,564
-
-
-
35,771
356,150
628,861 1,840,086
684,483
1,756,475
%
60%
76%
53%
71%
-
-
-
-
-
-
58%
61%
61%
58%
38%
27%
55%
52%
OPTHEA2016–17
25
Equity ins tru ments
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.
Opti ons over eq u ity in stru me nts grante d as c om pe nsati on
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:
During the financial year
Name
Number
of options
granted
Fair value
per option at
grant date
Exercise
price per
option $
Grant date
Expiry date
Number of
options vested
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
0.48
0.48
0.48
0.48
7 March 2021
2,640,000
7 March 2021
1,320,000
7 March 2021
31 March 2022
660,000
264,000
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.
Exerci se of opti on s g ra nted a s c o m pe n sation
During the reporting period the following shares were issued on the exercise of options previously
granted as compensation:
Megan Baldwin
Number of shares
Amount paid $/share
2017
2016
-
1,500,000
-
-
Deta ils of opti on s affe cti ng c u r rent an d f uture re m uneratio n
Details of vesting profiles of the options held by each KMP of the Company 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
1,320,000
7 March 2016
1,360,000
7 March 2016
Geoffrey Kempler
660,000
7 March 2016
660,000
7 March 2016
680,000
7 March 2016
Michael Sistenich
330,000
7 March 2016
Mike Tonroe
330,000
7 March 2016
340,000
7 March 2016
264,000
31 March 2016
264,000
31 March 2016
272,000
31 March 2016
100%
100%
0%
100%
100%
0%
100%
100%
0%
100%
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.
ANNUALREPORT
26
Anal ysis of movem e nts i n eq u i t y i n s t ru m ents
The value of options over ordinary shares in the Company granted and exercised by each KMP during
the reporting period is detailed below:
Granted in year $ 1
Value of options
exercised in year $ 2
2017
2016
2017
2016
-
-
-
-
380,171
190,086
760,342
191,381
-
-
-
-
-
-
285,000
-
Geoffrey Kempler
Michael Sistenich
Megan Baldwin
Mike Tonroe
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 e quity in stru me nts
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
2017
4,000,000
-
-
2016
1,500,000
4,000,000
(1,500,000)
Geoffrey Kempler 2017
2,000,000
-
2016
-
2,000,000
Michael Sistenich 2017
1,000,000
-
2016
Dominique Fisher 2017
-
-
2016
600,000
Other executives
Mike Tonroe
2017
2016
800,000
-
800,000
Total
2017
7,800,000
-
1,000,000
-
-
-
-
-
-
-
-
(600,000)
-
-
-
2016
2,100,000
7,800,000
(2,100,000)
-
-
-
-
-
-
-
-
-
-
-
-
- 4,000,000 1,320,000 2,640,000
- 4,000,000 1,320,000 1,320,000
- 2,000,000
660,000 1,320,000
- 2,000,000
660,000
660,000
- 1,000,000
330,000
660,000
- 1,000,000
330,000
330,000
-
-
-
-
-
-
-
-
-
-
800,000
264,000
264,000
800,000
-
-
- 7,800,000 2,574,000 4,884,000
- 7,800,000 2,310,000 2,310,000
OPTHEA2016–17
27
Balance
at end
of period
30 June
615,246
574,429
520,178
320,000
-
-
-
-
-
-
K E Y M A N A G E M E N T P E R S O N N E L T R A N S A C T I O N S
Movements i n sha res
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
Balance at
beginning of
period 1 July
Granted as
remuneration
On Exercise
of Options
Purchased in
the year
Appointed/
(resigned)
during the
year
Geoffrey Kempler 2017
574,429
2016
-
Michael Sistenich 2017
320,000
2016
Dominique Fisher 2017
-
-
2016
234,500
Tina McMeckan
2017
Russell Howard
Executives
Megan Baldwin
Mike Tonroe
Total
2016
2017
2016
2017
2016
2017
2016
2017
2016
-
140,000
-
187,517
1,533,674
33,674
-
-
2,428,103
595,691
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
-
-
-
-
-
1,500,000
-
-
-
40,817
-
-
574,429
200,178
-
-
-
-
-
-
-
-
320,000
-
(834,500)
-
(140,000)
-
(187,517)
109,549
-
-
-
350,544
-
-
-
-
-
1,643,223
1,533,674
-
-
2,778,647
2,100,000
-
(267,588)
2,428,103
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 30 August 2017.
For and on behalf of the board:
Megan Baldwin
CEO & Managing Director
Opthea Limited
Melbourne
30 August 2017
ANNUALREPORT
28
The Board of Directors
Opthea Limited
Suite 0403, Level 4,
650 Chapel Street
SOUTH YARRA VIC 3141
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
30 August 2017
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 2017, 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
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
OPTHEA2016–17
W E ’ R E L O O K I N G F O R W A R D
T O E X E C U T I N G O N O U R
S T R A T E G Y T O D E V E L O P
O P T - 3 0 2 A S A N O V E L
T H E R A P Y F O R W E T
A M D A N D I N I T I A T I N G
A C L I N I C A L T R I A L I N
D I A B E T I C M A C U L A R
E D E M A P A T I E N T S .
30
M A N A G E M E N T
T E A M
Meg an Baldwin, PhD, MAI CD
Chief Executive Of fi cer
an d Managing Dire ctor
M ike Tonroe, BS c(H ons), ACA, MAI CD
Chief Fin ancial O ff icer
and Com pa ny 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 Company’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.
O P T H E A
2 0 1 6 – 1 7
31
Richard C ha dwic k , Ph D
Head of Intelle ctu al Pro per t y
M ike Gero metta, P hD
Hea d of CMC Deve lo pm ent
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.
A N N U A L
R E P O R T
32
Ian Leitc h, PhD
Director – Cli nical Res earch
Clare Pr ice
Di rector – Cl ini cal Rese arch
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 programs
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.
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.
O P T H E A
2 0 1 6 – 1 7
O P T H E A A T T E N D E D
T H E 3 5 T H A N N U A L
J . P . M O R G A N C O N F E R E N C E
I N S A N F R A N C I S C O ,
J A N U A R Y 2 0 1 7 .
T H E C O N F E R E N C E
A T T R A C T S I N V E S T O R S A S
W E L L A S P H A R M A C E U T I C A L
A N D B I O T E C H N O L O G Y
E X E C U T I V E S F R O M A R O U N D
T H E W O R L D A N D I S O N E O F
T H E I N D U S T R Y ’ S L A R G E S T
H E A L T H C A R E I N V E S T M E N T
C O N F E R E N C E S .
I N 2 0 1 0 , T H E T O T A L
E C O N O M I C C O S T O F
V I S I O N L O S S A S S O C I A T E D
W I T H A M D W A S I N
E X C E S S O F $ 5 B I L L I O N .
T H I S I N C L U D E S H E A L T H
S Y S T E M C O S T S , O T H E R
C O S T S T O I N D I V I D U A L S
A N D C O M M U N I T Y A N D
L O S S O F W E L L B E I N G .
2 0 1 6 — 1 7
O P T H E A
2 0 1 6 – 1 7
37
F I N A N C I A L
R E P O R T
ABN 32 0 06 340 5 67
Opthea Limite d
Ye ar en de d 30 J une 2 017
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
76 Directors’ Declaration
77
Independent Auditor’s Report
81 ASX Additional Information
82 Corporate Information
ANNUALREPORT 38
Consolidated statement of profit or loss and other
comprehensive income for the year ended 30 June 2017
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
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 gains/(losses) on available for sale assets
Impairment of available for sale assets
Disposal of available for sale assets
Other comprehensive income/(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
2017
$
500,162
73,259
573,421
2016
$
435,970
329,304
765,274
1,601
15,443
(4,838,300)
(3,581,295)
(171,617)
(254,298)
(85,847)
(94,114)
(4,695,962)
(4,048,778)
(107,921)
(106,470)
-
(895,808)
2,521
(38,704)
168,082
(69,014)
(9,360,808)
(8,100,978)
11
3,167,912
1,569,204
(6,192,896)
(6,531,774)
832,326
(1,405,115)
-
-
895,808
198,451
832,326
(310,856)
(5,360,570)
(6,842,630)
28
22
-
(24,354)
(6,192,896)
(6,507,420)
(6,192,896)
(6,531,774)
-
(101,631)
(5,360,570)
(6,740,999)
(5,360,570)
(6,842,630)
Earnings per share for loss attributable to the ordinary equity holders of the parent:
- Basic and diluted loss per share (cents)
12
(3.84)
(4.33)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
OPTHEA2016–17
Consolidated statement of
financial position at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Current tax receivable
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
Total equity
39
Note
2017
$
2016
$
13
11
15
14
16
17
18
19
20
21
22
22
51,959,906
14,486,403
2,709,765
1,586,990
-
508,966
153,957
169,101
221,010
182,036
55,332,594
16,645,540
1,148,236
63,837
1,212,073
315,910
91,150
407,060
56,544,667
17,052,600
1,603,075
1,629,976
399,670
-
361,206
21,004
2,002,745
2,012,186
24,804
25,154
49,958
16,826
45,434
62,260
2,052,703
2,074,446
54,491,964
14,978,154
97,853,499
53,844,979
(48,247,759)
(42,054,863)
4,886,224
3,188,038
54,491,964
14,978,154
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
ANNUALREPORT
40
Consolidated statement of changes
in equity for the year ended 30 June 2017
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
As at 1 July 2016
Unrealised gains on available for sale assets*
Loss for the year*
Total comprehensive income and expense for the period
Recognition of share-based payment
Issue of ordinary shares and share options net of share issue costs and tax
Balance at 30 June 2017
* Amounts are after tax
Contributed
equity
$
Options
reserve
$
53,840,767
1,989,067
-
-
-
-
-
-
-
-
4,212
-
-
-
-
-
-
-
-
-
53,844,979
1,989,067
53,844,979
1,989,067
-
-
-
-
44,008,520
-
-
-
-
-
Note
22
22
21
22
22
21
97,853,499
1,989,067
2,064,831
832,326
(48,247,759)
54,491,964
Share-based
payments
reserve
$
Equity
reserve-
parent
$
Unrealised
gains
reserve
$
Accumulated
losses
$
Attributable
to owners of
the parent
$
Non-
controlling
interests
$
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)
(6,507,420)
(6,507,420)
(24,354)
(6,531,774)
(233,579)
(6,507,420)
(6,740,999)
(101,631)
(6,842,630)
7,172,143
(7,172,143)
(715,971)
(715,971)
-
-
-
-
-
-
-
-
-
-
-
-
810,931
1,198,971
1,198,971
865,860
895,808
198,451
-
-
810,931
4,212
-
-
-
-
-
-
-
-
-
(42,054,863)
14,978,154
(42,054,863)
14,978,154
832,326
832,326
(6,192,896)
(6,192,896)
832,326
(6,192,896)
(5,360,570)
865,860
44,008,520
(1,327,838)
895,808
198,451
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
equity
$
895,808
198,451
-
810,931
4,212
14,978,154
14,978,154
832,326
(6,192,896)
(5,360,570)
865,860
44,008,520
54,491,964
-
-
-
-
-
-
-
-
-
-
-
-
-
The above statement of changes in equity should be read in conjunction with the accompanying notes.
OPTHEA2016–17 41
Share-based
payments
reserve
$
Equity
reserve-
parent
$
Unrealised
gains
reserve
$
Accumulated
losses
$
Attributable
to owners of
the parent
$
Non-
controlling
interests
$
Total
equity
$
388,040
(7,172,143)
233,579
(28,375,300)
20,904,010
817,602
21,721,612
-
-
-
-
-
-
-
810,931
-
1,198,971
1,198,971
-
-
-
865,860
-
2,064,831
-
-
-
-
-
(1,327,838)
895,808
198,451
-
-
-
(1,327,838)
(77,277)
(1,405,115)
895,808
198,451
-
-
895,808
198,451
-
(6,507,420)
(6,507,420)
(24,354)
(6,531,774)
(233,579)
(6,507,420)
(6,740,999)
(101,631)
(6,842,630)
7,172,143
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,172,143)
-
-
-
-
-
810,931
4,212
(42,054,863)
14,978,154
(42,054,863)
14,978,154
832,326
-
832,326
-
(6,192,896)
(6,192,896)
832,326
(6,192,896)
(5,360,570)
-
-
-
-
865,860
44,008,520
832,326
(48,247,759)
54,491,964
-
-
(715,971)
(715,971)
-
-
-
-
-
-
-
-
-
-
810,931
4,212
14,978,154
14,978,154
832,326
(6,192,896)
(5,360,570)
865,860
44,008,520
54,491,964
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
As at 1 July 2016
Loss for the year*
Unrealised gains on available for sale assets*
Total comprehensive income and expense for the period
Recognition of share-based payment
Balance at 30 June 2017
* Amounts are after tax
Contributed
equity
$
Options
reserve
$
53,840,767
1,989,067
4,212
53,844,979
1,989,067
53,844,979
1,989,067
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note
22
22
21
22
22
21
Issue of ordinary shares and share options net of share issue costs and tax
44,008,520
97,853,499
1,989,067
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUALREPORT 42
Consolidated statement of cash flows
for the year ended 30 June 2017
Cash flows from operating activities
Interest received
Royalty and licence income received
Sales of reagents
Payments to suppliers, employees and for research & development and intellectual
property costs (inclusive of GST)
Income tax refund
Note
2017
$
273,259
85,655
1,601
2016
$
471,615
324,876
8,338
(9,049,506)
(7,580,567)
2,643,553
3,094,502
Net cash flows used in operating activities
25
(6,045,438)
(3,681,236)
Cash flows from investing activities
Proceeds from sale of investments
Cash received/(outflow) on disposal of subsidiary
Purchase of plant and equipment
Net cash flows provided by/(used in) investing activities
Cash flows from financing activities
Ordinary shares issued through an entitlement offer
Ordinary shares issued through a new placement
Ordinary shares issued on exercise of options
Payment of share issue costs
Net cash flows provided by financing activities
Net increase/(decrease) in cash and cash equivalents
-
13,440
171,622
(204,911)
(3,077)
(11,725)
168,545
(203,196)
10,075,479
35,260,371
447,969
(2,373,715)
43,410,104
-
-
4,212
-
4,212
37,533,211
(3,880,220)
Effects of exchange rate changes on the balance of cash held in foreign currencies
(59,708)
(69,014)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of the year
14,486,403
18,435,637
13
51,959,906
14,486,403
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
OPTHEA2016–17 43
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.
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.
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 30 August 2017.
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 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:
• 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.
ANNUALREPORT 44
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.
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.
OPTHEA2016–17 45
Impairment of financial assets
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.
The Group assesses at each reporting date whether
a financial asset or group of financial assets is impaired.
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.
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.
ANNUALREPORT 46
Notes to the Consolidated
Financial Statements
Leases
Research and development costs
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 2017
and 2016 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 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 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.
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.
OPTHEA2016–17 47
Share-based payment transactions
Contributed equity
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).
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.
ii.
the grant date fair value of the award;
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.
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.
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.
Revenue recognition
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.
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.
ANNUALREPORT 48
Notes to the Consolidated
Financial Statements
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.
OPTHEA2016–17 49
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.
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
Research and development costs
The majority of Opthea’s expenditure is incurred as a
result of clinical trials for OPT-302. In April 2017, Opthea
successfully completed a Phase 1/2A clinical trial and
commenced planning activities for a Phase 2B wet AMD
and a Phase 2A DME study. A key measure of Opthea’s
performance is the level of expenditure incurred on the
research of OPT-302. The authorisation and classification
of expenses requires judgement as the cash assets of the
Group are primarily expended in the research of OPT-302.
The Company has controls in place to ensure expenses are:
· correctly classified and disclosed, and
· appropriately approved.
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 2017, no impairments (2016: $895,808) have
been recognised for available-for-sale financial assets.
Comparatives
Taxation
Where necessary, comparatives have been reclassified and
repositioned for consistency with current year disclosure.
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.
ANNUALREPORT 50
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.
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 Binomial models.
The related assumptions are detailed in note 30. The
accounting estimates and assumptions relating to
equity-settled share-based payments have no impact
on the carrying amounts of assets and liabilities in future
reporting periods but may impact expenses and equity.
5.
Application of new and revised
Accounting Standards
Amendments to AASBs and the new interpretation
that are mandatorily effective for the current year
The Group has adopted all of the new and revised Standards
and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to their
operations and effective for the current year.
New and revised Standards and amendments thereof
and Interpretations effective for the current year that
are relevant to the Group include:
• AASB 2014-4 Amendments to Australian Accounting
Standards – Clarification of Acceptable Methods
of Depreciation and Amortisation
• AASB 2015-1 Amendments to Australian Accounting
Standards – Annual Improvements to Australian
Accounting Standards 2012-2014 Cycle
• AASB 2015-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments
to AASB 101
Impact of the application of AASB 2014-4 ‘Amendments
to Australian Accounting Standards – Clarification of
Acceptable Methods of Depreciation and Amortisation’:
The amendments to AASB 116 Property, Plant and
Equipment prohibit entities from using a revenue-based
depreciation method for items of property, plant and
equipment. As the Group already uses the straight-line
method for depreciation of its property, plant and equipment,
the application of these amendments has had no impact
on the Group’s consolidated financial statements.
Impacts of the Amendments to Australian Accounting
Standards – Annual Improvements to Australian Accounting
Standards 2012-2014 Cycle include a number of
amendments to various Accounting Standards. Those
that are relevant to the Group are summarised below:
• The amendments to AASB 119 Employee Benefits clarify
that the rate used to discount post-employment benefit
obligations should be determined by reference to market
yields at the end of the reporting period on high quality
corporate bonds. The assessment of the depth of
a market for high qualify corporate bonds should be
at the currency level (i.e. the same currency as the
benefits are to be paid).
OPTHEA2016–17 51
Disclosure Initiative (Amendments to IAS 7)
The amendments require disclosures that enable users of
financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising
from cash flow and non-cash changes.
The amendments are effective for annual periods
beginning on or after 1 January 2017, with early adoption
permitted. The Group is assessing the potential impact
on its consolidated financial statements resulting from
the amendments. So far, the Group does not expect any
significant impact.
Recognition of Deferred Tax Assets for Unrealised Losses
(Amendments to IAS 12)
The amendments clarify the accounting for deferred tax
assets for unrealised losses on debt instruments measured
at fair value. The amendments are effective for annual
periods beginning on or after 1 January 2017, with early
adoption permitted.
The Group is assessing the potential impact on its
consolidated financial statements resulting from the
amendments. So far, the Group does not expect any
significant impact.
• The amendments to AASB 134 Interim Financial Reporting
make provision for disclosures required by the Standard
to be given either in the interim financial statements or
incorporated by cross-reference from the interim financial
statements to some other statement that is available to
users of the financial statements on the same terms as
the interim financial statements and at the same time.
The application of these amendments has had no effect
on the Group’s consolidated financial statements.
Impact of the application of AASB 2015-2 ‘Amendments
to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101’: The Group has applied these
amendments for the first time in the current year. The
amendments clarify that an entity need not provide a
specific disclosure required by an AASB if the information
resulting from that disclosure is not material, and give
guidance on the bases of aggregating and disaggregating
information for disclosure purposes. However, the
amendments reiterate that an entity should consider
providing additional disclosures when compliance with
the specific requirements in AASB is insufficient to enable
users of financial statements to understand the impact
of particular transactions, events and conditions on the
entity’s financial position and financial performance.
As regards to the structure of the financial statements,
the amendments provide examples of systematic ordering or
grouping of the notes. The application of these amendments
has not had a material presentation impact on the financial
performance or financial position of the Group.
Standards and interpretations in issue not yet adopted
A number of new standards and amendments to standards
are effective for annual periods beginning after 1 July 2016
and earlier application is permitted; however, the Group has
not early adopted the following new or amended standards
in preparing these consolidated financial statements.
ANNUALREPORT 52
Notes to the Consolidated
Financial Statements
IFRS 15 Revenue from Contracts with Customers
Classification – Financial assets
IFRS 15 establishes a comprehensive framework for
determining whether, how much and when revenue
is recognised. It replaces existing revenue recognition
guidance, including IAS 18 Revenue. IFRS 15 is effective
for annual periods beginning on or after 1 January 2018,
with early adoption permitted.
The Group has completed an initial assessment of
the potential impact of the adoption of IFRS 15 on its
consolidated financial statements. The Group earned
royalties and licence fees from its intellectual property
portfolio during the year. The amount disclosed in the
accounts would not be materially affected if IFRS 15
were applied in the 2017 financial year.
The Group plans to adopt IFRS 15 in its consolidated
financial statements for the year ending 30 June 2018,
using the retrospective approach. As a result, the Group
will apply all of the requirements of IFRS 15 to each
comparative period presented and adjust its consolidated
financial statements. The Group is currently performing
a detailed assessment of the impact resulting from the
application of IFRS 15.
IFRS 9 Financial Instruments
In July 2014, the International Accounting Standards Board
issued the final version of IFRS 9 Financial Instruments.
IFRS 9 is effective for annual periods beginning on or after
1 January 2018, with early adoption permitted. The Group
currently plans to apply IFRS 9 on 1 July 2018.
The Group has performed a preliminary assessment
of the potential impact of the adoption of IFRS 9 based
on its positions at 30 June 2017.
IFRS 9 contains a new classification and measurement
approach for financial assets that reflects the business
model in which assets are managed and their cash
flow characteristics.
IFRS 9 contains three principal classification categories
for financial assets: measured at amortised cost, fair value
through other comprehensive income (FVOCI) and fair
value through profit or loss (FVTPL). The standard
eliminates the existing IAS 39 categories of held to
maturity, loans and receivables and available for sale.
Based on its preliminary assessment, the Group does not
believe that the new classification requirements, if applied
at 30 June 2017, would have had a material impact on
its accounting for receivables and investments in equity
securities that are managed on a fair value basis.
At 30 June 2017, the Group had equity investments
classified as available-for-sale with a fair value of
$1,148,236 that are held for long-term strategic purposes.
If these investments continue to be held for the same
purpose at initial application of IFRS 9, the Group
may elect then to classify them as FVOCI or FVTPL.
The Group has not yet made a decision in this regard.
Transition
The Group plans to take advantage of the exemption
allowing it not to restate comparative information for prior
periods with respect to classification and measurement
(including impairment) changes. Differences in the carrying
amounts of financial assets and financial liabilities resulting
from the adoption of IFRS 9 generally will be recognised
in retained earnings and reserves as at 1 July 2018.
OPTHEA2016–17 53
IFRS 16 Leases
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.
IFRS 16 introduces a single, on-balance lease sheet
accounting model for lessees. A lessee recognises a right-of-
use asset representing its right to use the underlying asset
and a lease liability representing its obligation to make lease
payments. There are optional exemptions for short-term
leases and leases of low value items.
The standard is effective for annual periods beginning on
or after 1 January 2019. The Group currently plans to apply
IFRS 16 initially on 1 July 2019. The Group has started an
initial assessment of the potential impact on its consolidated
financial statements. The amounts disclosed in the accounts
would not be materially different if IFRS 16 were applied
in the 2017 financial year.
The most significant impact identified is that the Group
will recognise new assets and liabilities for its operating
leases of office facilities. In addition, the nature of expenses
related to those leases will now change as IFRS 16 replaces
the straight-line operating lease expense with a depreciation
charge for right-of-use assets and interest expense on
lease liabilities.
Transition
As a lessee, the Group can either apply the standard using a:
• Retrospective approach; or
• Modified retrospective approach with optional
practical expedients.
The Group has not yet determined which transition
approach to apply.
Other amendments
The following new or amended standards are not expected
to have a significant impact on the Group’s consolidated
financial statements.
• Classification and Measurement of Share-based Payment
Transactions (Amendments to IFRS 2).
• Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture (Amendments to IFRS 10
and IAS 28).
ANNUALREPORT 54
Notes to the Consolidated
Financial Statements
7. Revenue
(a) Finance revenue
Interest from:
- Bank
(b) Other revenue
Royalties and licence fees
Total revenue
8. Other income
Net gain on disposal of available-for-sale investments
Other
Total other income
9. Research and development expenses
Research project costs 1
Total research and development expenses
1 The research project costs relate to the development programs in respect to the treatment of eye diseases by OPT-302.
2017
$
2016
$
500,162
435,970
500,162
435,970
73,259
329,304
573,421
765,274
2017
$
-
1,601
1,601
2016
$
7,105
8,338
15,443
2017
$
2016
$
4,838,300 3,581,295
4,838,300 3,581,295
OPTHEA2016–17
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
Loss on disposal of non-current assets
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
55
2017
$
2016
$
-
895,808
78,199
78,339
29,722
28,131
107,921
106,470
13,420
17,597
13,194
13,194
26,614
30,791
3,776
-
1,788,441 1,722,489
545,946
335,440
199,953
189,287
865,860
770,557
3,400,200 3,017,773
85,046
44,361
158,892
90,255
11,250
82,978
78,810
61,071
92,225
97,112
401,673
331,222
137,425
137,751
300,051
155,464
1,265,372 1,000,214
4,695,962 4,048,778
ANNUALREPORT 56
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 1
Deferred tax
In respect of the current year
Total income tax benefit recognised in the statement of comprehensive income
2017
$
2016
$
2,709,765
1,586,990
1,056,563
(17,786)
3,766,328
1,569,204
(598,416)
-
3,167,912
1,569,204
1 Relates to under recognition of R&D Tax incentive for the 2016 financial year. The Company received ATO acceptance of its advance finding application
during the 2017 financial year which then allowed it to include overseas expenditure in its 2016 claim.
(b) Amounts charged or credited directly to equity
Deferred income tax related to items credited directly to equity
Share issue expenses deductible over 5 years
Income tax benefit reported in equity
(c) Current tax receivable
598,416
598,416
-
-
Research and Development Tax Incentive Credit receivable
2,709,765
1,586,990
(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% (2016: 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
2017
$
2016
$
(9,360,808)
(8,100,978)
2,808,242
2,430,293
2,709,765
1,586,990
(1,293,532)
(2,442,743)
(1,056,563)
(5,336)
3,167,912
1,569,204
OPTHEA2016–17
57
2017
$
2016
$
(160,927)
(133,806)
(160,927)
(133,806)
196,078
51,979
127,342
113,410
-
1,771,563
777,757
277,099
1,101,177
2,214,051
(940,251)
(2,080,245)
-
-
(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:
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
(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 $940,251 at year end (2016: $2,080,245).
ANNUALREPORT 58
Notes to the Consolidated
Financial Statements
(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 $14,427,258 and capital losses of $877,704 at year end (2016: income tax losses
of $13,973,706 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 (2016: $330,630),
which represents the amount of franking credits available for the subsequent financial year.
12. Earnings per share
2017
$
2016
$
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
(6,192,896)
(6,507,420)
(b) Weighted average number of shares
Weighted average number of ordinary shares on issue for basic earnings per share
161,229,036 150,197,213
Effect of dilution:
Share options
-
-
Weighted average number of ordinary shares adjusted for the effect of dilution
161,229,036
150,197,213
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.
OPTHEA2016–17 13. Current assets - cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Total cash and cash equivalents
59
2017
$
2016
$
2,459,906
2,986,403
49,500,000
11,500,000
51,959,906
14,486,403
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 2.54% (2016: 2.87%).
14. Current assets - receivables
Interest receivable
GST receivable (i)
Other (i)
Total current receivables
(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.
2017
$
246,118
199,319
63,529
508,966
2016
$
19,215
80,091
121,704
221,010
ANNUALREPORT 60
Notes to the Consolidated
Financial Statements
15. Investment in subsidiary
During the 2016 financial 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 received/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
2017
$
2016
$
-
-
-
204,911
313,628
518,539
2,521
169,101
-
-
-
(518,539)
715,971
(198,451)
2,521
168,082
2017
$
2016
$
1,148,236
315,910
Listed Australian shares - at fair value
Details of listed Australian shares
Listed investments
Non-current investments 2:
Antisense Therapeutics Ltd
Optiscan Imaging Limited
Total listed investments
Ownership Interest
Fair value 1
Cost of investment
2017
%
2016
%
2017
$
2016
$
2017
$
2016
$
6.31%
2.20%
5.77%
2.66%
336,291
315,910
3,106,944
3,106,944
811,945
-
786,131
786,131
1,148,236
315,910
3,893,075
3,893,075
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 A fair value increase of $832,326 in the carrying value of investments (2016: impairment of investments of $895,808)
has been made through other comprehensive income in the year due to an increase in their market value in the year.
Details of the investments in subsidiaries are shown in note 24.
OPTHEA2016–17
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
Closing balance
Accumulated depreciation
Opening balance
Depreciation for the year
Disposals
Closing balance
Net carrying amount
Total plant and equipment, net
61
2017
$
2016
$
175,457 175,865
3,077
11,725
(104,080)
(12,133)
74,454 175,457
(124,403) (118,939)
(13,420)
(17,597)
100,304
12,133
(37,519) (124,403)
36,935
51,054
79,165
79,165
79,165
79,165
(39,069)
(25,875)
(13,194)
(13,194)
-
-
(52,263)
(39,069)
26,902
40,096
63,837
91,150
ANNUALREPORT 62
Notes to the Consolidated
Financial Statements
18. Current liabilities - payables
Creditors (unsecured) 1
PAYG tax liability
Total current payables
1 Creditors are non-interest bearing and are normally settled on 30 day terms.
19. Current liabilities - provisions
Annual leave
Long service leave
Total current provisions
20. Non-current liabilities - provisions
Long service leave
2017
$
2016
$
1,555,773
1,584,034
47,302
45,942
1,603,075
1,629,976
2017
$
253,559
146,111
399,670
2016
$
209,083
152,123
361,206
2017
$
2016
$
24,804
16,826
OPTHEA2016–17
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
63
2017
$
2016
$
97,853,499
53,844,979
53,844,979
53,840,767
45,783,819
(2,373,715)
598,416
-
4,212
-
-
-
97,853,499
53,844,979
No:
No:
150,205,903 148,090,303
50,000
2,100,000
50,318,467
15,600
200,574,370
150,205,903
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Issued capital at 30 June 2017 amounted to $97,853,499 (200,574,370 fully paid ordinary shares) net of share issue costs,
tax and amounts taken to the options reserve. During the year, the company converted 1,620,255 options to ordinary fully
paid shares for $447,969. At 30 June 2017, the company had on issue quoted options to purchase 48,136,842 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. Options to subscribe for the Company’s shares have been granted under these plans to certain employees and directors.
The company issued 9,725,000 share options over ordinary shares under these plans during 2016: none were issued during the
current year. These share options had a weighted average fair value at their grant date of $0.20 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.
ANNUALREPORT 64
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
Balance at 30 June
(b) Reserves
Net unrealised gains reserve (i)
Share-based payments reserve (ii)
Option reserve
Equity reserve attributable to parent (iii)
Total reserves
(i) Movement in net unrealised gains reserve:
Opening balance
Unrealised gains/(losses) on available for sale assets
NCI share of revaluation of listed investments net of tax
Unrealised gains/(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
Closing balance
(iii) Movement in equity reserve attributable to parent:
Opening balance
Transferred to Retained Earnings
Closing balance
(c) Nature and purpose of reserves
Net unrealised gains reserve
2017
$
2016
$
(42,054,863)
(28,375,300)
(6,192,896)
(6,507,420)
-
(7,172,143)
(48,247,759)
(42,054,863)
832,326
-
2,064,831
1,198,971
1,989,067
1,989,067
-
-
4,886,224
3,188,038
-
233,579
832,326
(1,405,115)
-
77,277
832,326
(1,327,838)
-
-
895,808
198,451
832,326
-
1,198,971
865,860
388,040
810,931
2,064,831
1,198,971
-
-
-
(7,172,143)
7,172,143
-
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.
OPTHEA2016–17 65
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 prior year.
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.
23. Financial risk management
objectives 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.
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.
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.
ANNUALREPORT 66
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 2017, 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
+ 0.50% (50 basis points) (2016: + 0.50%)
2017
$
173,403
2016
$
57,719
- 0.50% (50 basis points) (2016: - 0.50%)
(173,403)
(57,719)
2017
$
-
-
2016
$
-
-
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 2017 (2016: 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 2017, 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
Change in variables
10% increase in listed share price
10% decrease in listed share price
Impact
of loss
after tax
2017
$
Impact
on equity
after tax
2017
$
Impact
on loss
after tax
2016
$
Impact
on equity
after tax
2016
$
80,377
80,377
33,713
33,713
(80,377)
(80,377)
(33,713)
(33,713)
OPTHEA2016–17
67
(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:
2017
Financial assets
Cash
Receivables
Financial liabilities
Payables
Net exposure
2016
Financial assets
Cash
Receivables
Financial liabilities
Payables
Net exposure
Consolidated
USD
2017
$
EURO
2017
$
930,586
63,529
-
-
GBP
2017
$
-
-
CAD
2017
$
-
-
(400,509)
(128,466)
593,606
(128,466)
(7,572)
(7,572)
(1,202)
(1,202)
Consolidated
USD
2016
$
EURO
2016
$
2,321,862
-
75,071
1,492
GBP
2016
$
-
-
CAD
2016
$
-
-
(727,395)
1,669,538
(32)
1,460
(2,134)
(115,923)
(2,134)
(115,923)
The following sensitivity is based on the foreign currency risk exposures in existence at balance date.
At 30 June 2017, 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 +10% (2016: +5%)
AUD/USD -10%
AUD/Euro +10% (2016: +5%)
AUD/Euro-10%
AUD/GBP +10% (2016: +5%)
AUD/GBP -10%
AUD/CAD +10% (2016: +5%)
AUD/CAD -10%
2017
$
2016
$
2017
$
2016
$
(37,775)
(79,502)
46,169
185,504
8,175
(9,992)
482
(589)
77
(94)
(70)
162
102
(237)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ANNUALREPORT 68
Notes to the Consolidated
Financial Statements
The reasonably possible movements at 30 June 2017
are lower than at 30 June 2016 due to the lower net exposure
to the US dollar. There was minimum or insignificant exposure
to the GBP, Euro and CAD 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 2017 is the same
as their carrying amounts.
The methods for estimating fair value are also outlined
in the relevant notes to the financial statements.
OPTHEA2016–17 69
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 1
Polychip Pharmaceuticals Pty Ltd (deregistered)2
A.C.N 160 199 977 Pty Ltd (formerly Opthea Pty Ltd, deregistered)3
Ceres Oncology Pty Ltd (deregistered)3
Precision Diagnostics Pty Ltd (deregistered)3
Circadian Shareholdings Pty Ltd (deregistered)3
1 Opthea Limited is the ultimate parent entity
2 Formally deregistered on 3rd April 2017
3 Formally deregistered on 23rd October 2016
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.
Parent entity % equity interest
2017
%
100
-
-
-
-
-
2016
%
100
100
100
100
100
100
(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.
ANNUALREPORT 70
Notes to the Consolidated
Financial Statements
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 gain on disposal of subsidiary
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
Net exchange differences
Movements in working capital:
Decrease/(increase) in prepayments
(Increase)/decrease in interest and other receivables
Decrease in payables
Increase in employee provisions
Net cash used in operating activities
Income tax refund
Net cash generated by operating activities
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
2017
$
2016
$
51,959,906
14,486,403
51,959,906
14,486,403
(6,192,896)
(6,531,774)
(3,167,912)
(1,569,204)
26,614
3,776
30,791
-
(2,521)
(168,082)
-
(7,105)
865,860
770,557
-
-
38,704
(2,235,479)
40,374
895,808
69,014
62,153
28,079
(41,441)
(287,956)
12,121
(47,181)
(336,324)
46,442
59,527
(8,688,991)
(6,775,738)
2,643,553
3,094,502
(6,045,438)
(3,681,236)
2017
$
53,084
172,824
2016
$
147,517
225,908
225,908
373,425
OPTHEA2016–17
71
(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
2017
$
2016
$
1,251,372
3,869,199
373,411
325,726
201,642
235,120
1,826,425
4,430,045
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 (2016: $NIL) and those which could become payable in more
than one year total $15,313,461 (2016: $15,778,838). 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 2017 in respect of a rental deposit for its office premises
of $43,841 (2016: $43,841).
28. Non-controlling interest
Balance at beginning of year
Share of loss for the period
Share of other comprehensive income for the period
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
2017
$
2016
$
-
-
-
-
-
817,602
(24,354)
(77,277)
(715,971)
-
2017
$
2016
$
1,119,155
982,323
92,070
89,669
628,861
684,483
1,840,086
1,756,475
Details of the key management personnel are included within the Remuneration Report section of the Directors’ Report.
(b) Other transactions and balances with director and key management personnel and their related parties
There were no director and key management personnel related party transactions during the current or prior financial year.
ANNUALREPORT
72
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
2017
$
2016
$
865,860
770,557
-
40,374
865,860
810,931
(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, the Long Term Incentive Plan (LTIP) and Non-Executive Directors Share and Option Plan
(NED Plan). 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.
The vesting condition of options granted under the LTIP and NED Plan is continuous service.
Options/Rights series
Grant date
LTIP - director
LTIP - employees
NED Plan
7 March 2016
31 March 2016
7 March 2016
Grant date
fair value
$0.19
$0.24
$0.19
Exercise price
Expiry date
Vesting date
$0.48
7 March 2021
30 June 2016
$0.48
1 January 2022
1 January 2017
$0.48
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.
OPTHEA2016–17
73
(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
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
NED Plan
LTIP - Director
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 year
The following reconciles the share options outstanding at the beginning and end of the year:
Balance at beginning of year
Granted during the year:
To directors under the LTIP and NED Plan
To employees under the LTIP
Exercised during the year
Expired during the year
Balance at end of year
Exercisable at end of year
Number of
options and
rights
30 June 2017
30 June 2016
Weighted
average
exercise
price
$
Number of
options and
rights
Weighted
average
exercise
price
$
10,725,000
0.46
3,100,000
0.085
-
-
-
-
7,000,000
2,725,000
(50,000)
(100,000)
10,575,000
6,436,250
0.48
0.48
0.46
0.45
(2,100,000)
-
10,725,000
3,310,000
0.48
0.48
-
-
0.46
0.41
The share options outstanding at the end of the year had a weighted average exercise price of $0.46 (2016: $0.46)
and a weighted average remaining contractual life of 1,310 days (2016: 1,680 days).
ANNUALREPORT
74
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.
2017
$
0.27
2016
$
0.10
2017
$
2016
$
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
84,565
Other services in relation to the consolidated group
-
6,500
84,565
91,065
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.
OPTHEA2016–17
75
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
2017
$
2016
$
55,709,767
15,357,368
224,764
751,956
55,934,531
16,109,324
(1,891,304)
(1,908,827)
(267,817)
(252,999)
(2,159,121)
(2,161,826)
53,775,410
13,947,498
97,853,499
53,844,979
(48,964,312)
(43,085,518)
1,989,067
1,989,067
2,064,830
1,198,970
832,326
-
53,775,410
13,947,498
Year ended
30 June 2017
$
Year ended
30 June 2016
$
(5,878,794)
(7,903,731)
832,326
(28,604)
(5,046,468)
(7,932,335)
(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 2017 (2016: Nil).
(d) Parent entity contingent liabilities
The parent entity had a bank guarantee outstanding at 30 June 2017 in respect of a rental deposit for its office premises
of $43,841 (2016: $43,841).
(e) Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has provided a written guarantee to 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.
ANNUALREPORT
76
Directors Declaration
for the year ended 30 June 2017
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 2017
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 2017.
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
Geoffrey Kempler
CEO & Managing Director
Opthea Limited
Chairman
Opthea Limited
Melbourne
30 August 2017
OPTHEA2016–17 77
Auditor report
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Independent Auditor’s Report to the Directors of Opthea Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Opthea Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion the accompanying financial report of Opthea Limited, is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX 111 Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au ANNUALREPORT 78
Key Audit Matter How the scope of our audit responded to the Key Audit Matter Authorisation and classification of expenses Opthea Limited operates in the biotechnology market and is in the clinical research stage of developing a molecule asset, OPT-302, for eye diseases, as disclosed in note 4.1. The majority of Opthea’s expenditure is incurred as a result of clinical trials for OPT-302. In 2017, Opthea successfully completed a Phase 1/2A clinical trial and commenced planning activities for a Phase 2B wet AMD and a Phase 2A DME study. A key measure of Opthea’s performance is the level of expenditure incurred on the research of OPT-302. The authorisation and classification of expenses requires judgement as the cash assets of the Group are primarily expended in the research of OPT-302 and therefore there is a risk that: Expenses may be incorrectly classified and disclosed, and Expenses may not be appropriately approved. Our procedures included, amongst others: Obtained an understanding of the process undertaken by management to account for expenditure, with a focus on research expenditure, Identified and tested key controls in respect of the expenditure process, Assessed the appropriateness of management’s accounting policy for research expenditure, Tested a sample of research expenses to determine whether they were authorised in accordance with the Group’s Delegation of Authority, and Assessed documentation for a sample of research expenses to assess whether they were correctly classified. We also assessed the appropriateness of the related disclosures in notes 9 and 10 to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. Directors’ Responsibilities for the Financial Report The directors are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. OPTHEA2016–17 79
Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. ANNUALREPORT 80
Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 21 to 27 of the Directors’ Report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Opthea Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of Opthea Limited are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Samuel Vorwerg Partner Chartered Accountants Melbourne, 30 August 2017 OPTHEA2016–17 81
ASX Additional Information
1. Distribution of equity securities
The number of shareholders, by size of holding, of quoted fully paid ordinary shares as at 28 July 2017 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
102
342
1,102
400
560
87
2,593
135
23,964
317,953
2,879,752
3,062,080
17,035,307
177,255,314
200,574,370
43,224
2. Twenty largest shareholders
The names of the 20 largest holders of quoted fully paid ordinary shares and their respective holdings at 28 July 2017 are:
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited-Gsco Eca
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Armada Trading Pty Limited
Jagen Pty Ltd
BNP Paribas Noms Pty Ltd
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