ASX RELEASE 27th AUGUST 2021
2021 Annual Report and Appendix 4E
Paradigm Biopharmaceuticals Ltd (ASX: PAR) (“Paradigm” or “the Company”), is pleased to
present to shareholders the 2021 Annual Report.
As approved by the Board of Paradigm Biopharmaceuticals Ltd, and in accordance with ASX
Listing Rule 4.3A, please find attached Appendix 4E and 2021 Annual Report.
To accompany the Chief Executive Officer’s report, Mr Paul Rennie has provided a video detailing
key operational highlights achieved by the Company in financial year 2021.
The video can be accessed through the Paradigm website via the following link:
https://paradigmbiopharma.com/investors/annual-reports/
Authorised for lodgement by:
Paul Rennie
Interim Chair
To learn more please visit: www.paradigmbiopharma.com
FOR FURTHER INFORMATION PLEASE CONTACT:
Simon White
Director of Investor Relations
Tel: +61 (0) 404 216 467
Paradigm Biopharmaceuticals Ltd
ABN: 94 169 346 963
Level 15, 500 Collins St, Melbourne, VIC, 3000, AUSTRALIA
Email: investorrelations@paradigmbiopharma.com
APPENDIX 4E
Preliminary Final Report to the Australian Stock Exchange
Name of Entity
ABN
Year Ended
Paradigm Biopharmaceuticals Limited
(ABN 94 169 346 963)
30 June 2021
Previous Corresponding Reporting
Period
01 July 2019 to 30 June 2020
1. Results for Announcement to the Market
$
Revenue from continuing activities
8,941,647
$ and %
increase/(decrease)
over previous
corresponding period
4,246,153 90.43%
(Loss) from continuing activities after tax attributable
to members
(34,297,184)
21,998,297 178.86%
Net (loss) for the period attributable to members
(34,297,184)
21,998,297 178.86%
Dividends (distributions)
Amount per security
Franked amount per security
Final Dividend
Interim Dividend
N/A
N/A
Record date for determining entitlements to the
dividends (if any)
N/A
N/A
N/A
Brief explanation of any of the figures reported above necessary to enable the figures to be
understood: N/A
2. Key ratios
Basic earnings per ordinary security (cents
per share)
Diluted earnings per ordinary security (cents
per share)
Net tangible asset backing per ordinary
security (cents per share)
Current Period
Previous corresponding
period
(16.74) cents
(6.12) cents
(16.74) cents
(6.12) cents
32.76 cents
46.82 cents
3. Control Gained Over Entities Having Material Effect
Name of entity (or group of entities)
Date control gained
Profit / (loss) from ordinary activities after tax of the
controlled entity since the date in the current period on
which control was acquired.
Profit / (loss) from ordinary activities after tax of the
controlled entity (or group of entities) for the whole of
the previous corresponding period.
4. Audit/Review Status
N/A
N/A
N/A
N/A
This report is based on accounts to which one of the following applies:
(Tick one)
The accounts have been audited
The accounts are in the process of being
audited
If the accounts are subject to audit dispute or qualification, a description of the dispute or
qualification: N/A
5. Attachments Forming Part of Appendix 4E
The Annual Report of Paradigm Biopharmaceuticals Limited for the year ended 30 June 2021 is
attached.
6. Signed
Signed in accordance with a resolution of the Directors.
Signed ______________________________
Date: 26 August 2021
Paul Rennie
Interim Chair
Unlocking
new
potential
Annual Report
2021
ABN 94 169 346 963
General Information
The Financial Statements cover
Paradigm Biopharmaceuticals Limited
as a Consolidated Entity consisting
of Paradigm Biopharmaceuticals
Limited and the entities it controlled
at the end of, or during the year. The
Financial Statements are presented in
Australian dollars, which is Paradigm
Biopharmaceuticals Limited’s
functional and presentation currency.
Paradigm Biopharmaceuticals
Limited is a listed public company
limited by shares, incorporated and
domiciled in Australia. A description
of the nature of the Consolidated
Entity’s operations and its principal
activities are included as part of the
Financial Statements.
The Financial Statements were
authorised for issue, in accordance
with a resolution of Directors, on
26 August 2021. The Directors have
the power to amend and reissue
the Financial Statements.
Contents
01
Highlights
02
Chairman’s
Report
04
Chief Executive’s
Report
06
Osteoarthritis
Overview
11
Directors’
Report
15
Remuneration
Report
21
22
Consolidated Financial
Statements
26
Notes to the Consolidated
Financial Statements
49
Directors’
Declaration
50
Independent
Audit Report
53
Shareholder
Information
55
Corporate Governance
Statement
56
Auditor’s Independence
Declaration
Corporate Directory
Paradigm Biopharmaceuticals Limited
Annual Report 2021
01
Highlights
We take an existing
approved drug, which has
demonstrated safety in its
approved indications
We repurpose that drug in
a new patented therapeutic
application with high
unmet need
We reduce the time, cost
and risk associated with
drug development
Paradigm Biopharmaceuticals
is a drug repurposing company.
Our approach to market is
driven by core competencies
and experience at both board
and executive level in clinical
and commercial pharmaceutical
development.
Repurposing pentosan polysulfate sodium (PPS) for OA
FDA: Pre-IND meeting
EMA Scientific Advice
FDA: Type C meeting
FEB
20
Conducted
26 additional
non-clinical
evaluations.
SEP
20
Feedback from
EMA confirms
clinical trial
design is
acceptable.
DEC
20
Confirmed FDA’s
view on Primary
Endpoint,
patient pop,
SAP, and safety
population.
Submit IND
Q1
21
Studies
30+
Studies completed or commenced across
the preclinical and clinical program for
PPS development pipeline in FY21
PPS Indications
7
Number of potential PPS indications
currently being explored for development
02
Annual Report 2021
Chairman’s Report
Paul Rennie
Interim Chair
We engaged key opinion leaders
and industry experts to work
alongside our in-house teams to
enhance success in advancing
the programs.
Paradigm Biopharmaceuticals Limited
03
40%
Female representation
on the Board
Q1 21
IND submission for global
pivotal trial
During FY21 Paradigm welcomed
Non-Executive Directors Ms. Helen
Fisher and Mr. Amos Meltzer and
Executive Director Dr Donna Skerrett
to the Board. Ms. Fisher, previously
a Tax Partner at Deloitte, Mr. Meltzer
who has a background in science and
commercialisation and is an intellectual
property lawyer, and Dr Skerrett, who
has three decades of experience in
clinical research and development,
bring a wealth of experience to Paradigm.
These appointments improve the
composition of the board in terms of
independence, gender diversity and
will contribute to the success of
Paradigm into the future.
I would like to thank our shareholders for
their continued support of Paradigm and
the journey we are undertaking. I would
also like to thank the staff at Paradigm
for their dedication, contributions, and
achievements in FY21.
On behalf of the Directors,
Paul Rennie
Interim Chair
Melbourne, Victoria
26 August 2021
Dear Shareholders,
I am pleased to present the 2021
Annual Report for Paradigm
Biopharmaceuticals Limited.
Paradigm Biopharmaceuticals is a
global Australian-based pharmaceutical
company focused on repurposing
existing molecules to meet high unmet
medical needs. Paradigm’s purpose
is to develop and commercialise
pentosan polysulfate sodium (PPS)
for the treatment of arthralgia driven by
injury, inflammation, aging, degenerative
disease, infection, or genetics.
The immediate commercial focus is
the repurposing of the historic drug
pentosan polysulfate sodium (PPS or
brand name Zilosul®) for the treatment
of pain associated with osteoarthritis
(OA). This is a global unmet need and
Paradigm has advanced towards phase
3 trials for this indication. There is strong
scientific evidence that the drug PPS
addresses all aspects of the disease:
inflammation, pain, and cartilage
preservation, suggesting PPS has
OA disease modifying potential.
Other indications include the treatment
of pain and arthropathy and other disease
complications in patients with the rare
genetic disorder mucopolysaccharidoses
(MPS); treating alphavirus induced
arthralgia (in patients with Ross River virus
and Chikungunya); chronic heart failure
(CHF) and potentially acute respiratory
distress syndrome (ARDS).
I am pleased to report that the
company has continued to progress the
development of Zilosul® for the treatment
of pain associated with osteoarthritis
by submitting an IND (Investigational
New Drug) application with the US FDA
in March 2021. The IND submission was
the result of many years of substantial
work by the entire Paradigm team as well
as several meetings with key regulatory
agencies the FDA, EMA and TGA to
develop a clinical protocol acceptable
for registration by these regulators.
As at the date of this annual report the
FDA has reviewed the IND submission
and has one remaining question of the
6 that it initially raised in response to the
Company’s IND submission. Paradigm
will respond to the FDA by the end of
August 2021 and intends to commence
the global pivotal trial before the end
of CY2021.
In addition to pursuing the phase 3 trial,
we continue to progress development
of Zilosul® with the commencement of
the PARA_OA_008 study in Australia.
This study seeks to evaluate molecular
biomarkers in the synovial fluid of the
knee joint to demonstrate the mechanism
of action and OA disease modifying
potential of Zilosul® on the diseased joint.
The biomarker analysis aims to provide
key scientific evidence about the local
activity of Zilosul® in the knee joint of
OA subjects. The biomarkers analysis
will include an analysis of inflammatory
cytokines, pain mediator nerve growth
factor (NGF), cartilage degrading
enzymes, and products of cartilage
degradation. Additionally, clinical,
and radiographic assessments will
be obtained.
In addition to the progress being made
in the clinical development program for
osteoarthritis, development of PPS for
MPS (where Paradigm has orphan status
for MPS I and MPS VI) continues with two
major milestones achieved in FY21.
In November 2020 we announced that,
the first patient was dosed in a Phase
II study in Adelaide, South Australia
evaluating the safety and efficacy of
PPS on pain and functional symptoms in
MPS type I patients who have received
ERT and/or haemopoietic stem cell
transplantation (HSCT).
In June 2021, the company announced
it had received approval from the
ANVISA, the Brazilian regulator, to
commence a Phase II study in Brazil
to evaluate the safety, tolerability, and
effect of PPS on pain, function, and
glycosaminoglycan (GAG) levels in
patients with MPS type VI. Brazil has the
highest concentration of MPS type VI
sufferers globally.
Much of the investment in FY21 was
focused on identifying and then meeting
the requirements of the regulatory
pathways for clinical development
for the lead programs. Infrastructure
and organisational support were
strengthened for current and upcoming
clinical trial activities. We engaged key
opinion leaders and industry experts
to work alongside our in-house teams
to enhance success in advancing the
programs. Investment will continue
as we progress with both the global
clinical pivotal program, and projects
to optimise commercial and partnering
attractiveness for Zilosul®.
Paradigm Biopharmaceuticals LimitedAnnual Report 2021 04
Chief Executive’s Report
Dear Shareholders,
I am pleased to report on the progress
made by Paradigm Biopharmaceuticals
Limited and its controlled entities
(Paradigm) during the past 12 months.
Paradigm’s business plan is centred
around repurposing PPS for new
indications with unmet medical needs.
We believe repurposing existing
molecules provides a competitive
advantage in the drug development
process, because it leads to a shorter
and less capital-intensive development
cycle, compared to new chemical
entities, which will benefit patients and
shareholders alike. In addition to efforts
to repurpose PPS, Paradigm has begun
evaluating other repurposing candidates
to include in its development pipeline.
During FY21 Paradigm has made great
progress in building the organisation to
support a successful clinical program
for our lead candidate Zilosul® for
the treatment of pain associated with
osteoarthritis in knee and hip joints, as
well as MPS types I and VI. Paradigm has
negotiated several strategic agreements
throughout the year with a large range
of service providers to help drive our
clinical program.
Paradigm’s strategic relationship with
bene pharmaChem (bene, the only
FDA approved manufacturer of PPS)
was further strengthened during the
year in two principal respects. First,
under an updated supply agreement
Paradigm’s exclusive supply of PPS
from bene has been extended for
25 years post marketing approval.
Paradigm has secured supply for all
major pharmaceutical markets (except
Japan). Second, under a collaboration
agreement, Paradigm and bene are to
jointly explore new formulations and
indications where PPS may provide
a solution for unmet medical needs,
further strengthening our new product
development opportunities. These
updated agreements are strategically
important for strengthening Paradigm’s
ability to commercialise PPS.
During the year we took several steps
to continue to build our organisation
to support commercialising Zilosul®,
these include:
• Incorporating a US entity. This was an
important step for the company in our
journey to support a clinical program for
Zilosul®. Several strategic roles in our
Clinical and Safety functions now reside
in the US and we plan to add further
resources as we progress our clinical
efforts to commercialisation of PPS.
Dr. Donna Skerrett, Paradigm’s Chief
Medical Officer, heads the clinical team;
newly appointed Dr. Mukesh Ahuja is
in the role of Global Clinical Head of
OA and Dr. Michael Imperiale is Global
Head of Drug Safety and MPS.
• Development of a Commercial function
– with the company approaching a
Phase 3 trial for Zilosul® it is important
for the organisation to begin executing
on its strategy for commercialisation.
We are pursuing several key initiatives
including conducting research
developing a delivery mechanism
to improve patient convenience,
and conducting global positioning,
patient convenience, pricing, and
reimbursement research to inform
our path to commercialisation and
partnership for PPS.
• Submitted the IND application with
the US FDA. The IND submission
is proceeding, and the Company is
planning to submit its full response
to the final FDA question within the
current month (August 2021).
• Conducted 26 preclinical studies,
focusing primarily on the toxicological
effects of injectable PPS, to support
the osteoarthritis IND submission with
GLP studies applicable to the Zilosul®
route of administration.
• Ethics Approval for Pivotal Phase 3
clinical trial (PARA_OA_002) has been
put in place. Paradigm has ethics
approval from the institutional ethics
committee in the US and is finalising
approval with the Australian ethics
committee for its pivotal study in
knee osteoarthritis. Subject to ethics
approval the pivotal phase 3 clinical
trial is planned to commence in
Australia in Q4 CY 2021.
• Commenced the synovial fluid
biomarker clinical trial (PARA_OA_008).
The study is designed to generate
clinical and biomarker data to assist
the Company’s discussion with the
TGA and to support the application
for provisional approval of Zilosul®
in Australia.
• Orphan drug indication for
Mucopolysaccharidosis type VI
(MPS VI): Regulatory approval was
received from Brazil’s National Health
Surveillance Agency (Agência Nacional
de Vigilância Sanitária (ANVISA)) and
ethics approval from the National
Research Ethics Commission
(Comissão Nacional de Ética em
Pesquisa (CONEP)) for a Phase 2
clinical trial evaluating safety and
tolerability of PPS versus placebo in
subjects with MPS VI. This will be the
largest clinical trial conducted using
PPS in any MPS subjects. During the
past year Paradigm also initiated a
Phase 2 clinical trial in MPS I subjects
in Australia. Paradigm’s MPS program
has received Orphan Drug Designation
status in the US and EU for MPS I
and MPS VI.
• Ongoing research and development
– The Company has made preclinical
progress with PPS in two new
indications, heart failure and acute
respiratory distress syndrome
(ARDS). Top line results of that
research are expected to be available
in Q4 CY2021.
• First Company Revenue – Paradigm
was able to achieve its first
revenue from the sale of Zilosul® by
implementing pay-for-use provision
of product via the Therapeutic Good
Administration (TGA) Special Access
Scheme (SAS). This was a great
achievement for the company and
represents a collaborative approach
to support the provision of Zilosul® to
patients who have exhausted other
options for the treatment of arthralgia.
Product sales are expected to be
modest because Paradigm is rationing
product available for SAS to prioritise
product supply for the pivotal clinical
trial program. However, SAS does
provide an option for patients who are
not eligible to participate in Paradigm’s
clinical trials to access therapy under
the guidance of their physician.
Paradigm Biopharmaceuticals LimitedAnnual Report 2021 • Company Rebranding – In January
- Collaboration – We multiply our
2021 Paradigm successfully rebranded
at the JP Morgan Healthcare
conference. Central to this rebrand
is the focus on repurposing or re-
pioneering molecules. PPS is our
lead candidate, however, under the
updated strategy, Paradigm is seeking
to broaden its focus to other molecules
with potential to treat patients suffering
from diseases with high unmet need.
• Integration of internal People and
Culture, Safety and Finance functions
to ensure the organisation is suitably
structured to support our short- and
long- term goals. Establishing a
People and Culture function supported
the creation of a leadership team
and reporting structures, review of
policies and procedures, optimised
resourcing and developing culture
and values. A dedicated Global Safety
function demonstrates patient safety
is important as we progress the
clinical program for Zilosul®. Finally,
an in-house Finance team will help
to improve delivery on strategy within
budgets and ensures a renewed focus
on controls and back-office processes.
• Establishing Company values –
Over our journey at Paradigm, our
focus has been on scientific endeavors.
This year we reflected on who we are,
how we work together and how we will
continue to build the organisation into
the future. This led to our company
values being created:
-
Innovation – We challenge
conventional wisdom and pursue
continuous improvement.
- Accountability – Our people
take individual ownership and
accountability for their actions,
accept responsibility for them
and disclose their results in a
transparent manner.
- Transparency – Our people are
honest open and direct in all
conversations.
contribution through collaboration.
As a team, we are stronger and
accomplish more than what is
possible individually.
- Respect – We treat any people we
engage with dignity and respect.
We respect the thoughts and
contributions of our people and
respect each other as individuals.
We recognise and reward efforts
and contributions.
- Adaptable – We are flexible and
adaptable to changing situations
within or outside of our control.
The achievements of FY21 are important
in our journey as a company and help set
a strong foundation for Paradigm to grow.
There have been many achievements
during FY21, and we look forward to
continuing to achieve significant progress
over the next 18 – 24 months, a pivotal
period for Paradigm. We remain focused
on progressing our Phase 3 OA clinical
program and other pipeline indications
to bring PPS to market to improve pain
and mobility for the millions of people
who suffer from arthralgia driven by
injury, inflammation, aging, degenerative
disease, infection, or genetic
predisposition. In what has been at times
a challenging year with the interruptions
that COVID-19 has presented to all the
Company’s programs, I’d like to thank
our dedicated staff for the progress
and achievements they have made
throughout FY21. The Company is well
placed to continue the development
of PPS for treatment of osteoarthritis
and other conditions.
Paul Rennie
Chief Executive Officer
Annual Report 2021
05
During FY21
Paradigm has
made great
progress in
building the
organisation
to support a
successful
clinical program
for our leading
candidate
Zilosul®.
Paradigm Biopharmaceuticals Limited 06
Paradigm Biopharmaceuticals Limited
Osteoarthritis Overview
PPS Mode of Action in Osteoarthritis
Pentosan polysulfate sodium (PPS) has a mode of action that
indicates activity on multiple disease pathways in osteoarthritis
including inflammation, pain, cartilage erosion and impaired blood
flow in tissues beneath the cartilage.
Literature suggests that PPS may be
a potential treatment for OA as it has
been shown to exert anti-inflammatory
activity by blocking the effects of
proinflammatory cytokines, such as
TNF- and IL-1 associated with OA1;
inhibit the expression of NGF, a pain
mediator, in osteocytes in subchondral
bone2; and inhibit cartilage degrading
enzymes known to play a key role in OA
disease progression3; and mild anti-
thrombotic effects which act to improve
blood flow in subchondral bone4 which is
thought to help reduce the size of bone
marrow lesions (PARA_005). Paradigm
is working with bene pharmaChem to
further understand and describe the
mechanisms of action of PPS.
Paradigm Pharmaceuticals | JP Morgan Presentation
08
Confident
of clinical
success
• Multiple modes of action
• Previous Phase IIb, SAS
and EAP experience
• Global harmonised clinical
trial consultation
PPS
NF-KB
(cid:30)
Inflammation
(cid:30)
Pain
TNF-α, IL-1β, IL-6
NGF, Prostanoids
Immune
Cells
Sensory
Nerve Cells
Cartilage Protection
ADAMTS -4 & -5,
(cid:30)
MMPs
Improved blood flow
Cell-adhesion molecules
(cid:31)
HA
Cartilage
Cells
Capillary
Endothelial
Cells
1. Sunaga T, Oh N, Hosoya K, et al. Inhibitory Effects of Pentosan Polysulfate Sodium on MAP-Kinase Pathway and NF-κB Nuclear Translocation
in Canine Chondrocytes In Vitro. Journal of Veterinary Medical Science. 2012;74:707–711.
2. Stapledon CJM, Tsangari H, Solomon LB, et al. Human osteocyte expression of Nerve Growth Factor: The effect of Pentosan Polysulphate
Sodium (PPS) and implications for pain associated with knee osteoarthritis. Heymann D, editor. PLoS ONE [Internet]. 2019;14:e0222602.
doi:10.1371/journal.pone.0222602.
3. Troeberg L, Mulloy B, Ghosh P, et al. Pentosan polysulfate increases affinity between ADAMTS-5 and TIMP-3 through formation of an
electrostatically driven trimolecular complex. Biochem J [Internet]. 2012;443:307–315. doi:10.1042/BJ20112159.
4. Kutlar A, Ataga KI, McMahon L, et al. A potent oral P-selectin blocking agent improves microcirculatory blood flow and a marker of endothelial
cell injury in patients with sickle cell disease. Am J Hematol [Internet]. 2012;87:536–539. doi:10.1002/ajh.23147.
Annual Report 2021 Paradigm Biopharmaceuticals Limited
Annual Report 2021
07
Proposed effects of PPS on OA – currently under investigation
Paradigm is partnered with bene
pharmaChem to further understand and
describe the mechanisms of action of PPS.
08
Osteoarthritis Overview
continued
Market Potential
Osteoarthritis (OA) is the most prevalent
form of joint disease, affecting up to 16%
of the population in the developed world,
with more than 72 million people in the
US, EU5, Canada and Australia suffering
from osteoarthritis.1
OA has a significant impact on day-to-
day functioning and, although the levels
of pain and disability may fluctuate, it has
no known cure or spontaneous remission
and is associated with irreversible
structural damage and progression
over time. Presently there are no drugs
approved that can prevent, stop, or even
restrain progression of OA.
Moreover, the available medications that
claim to mitigate the pain of OA have
numerous risk/benefit considerations and
market research indicates that only 19%
of knee OA patients are satisfied with
currently available treatments.2, 3
The prevalence of OA is increasing in
line with the ageing population and
increasing rates of obesity. By 2030
the number of people suffering from
OA in the US is predicted to increase
by 86% to 67 million.2 If we assume
a similar increase across the other
markets defined above, even allowing
for lower rates of obesity in non-US
markets, it is plausible that more than
120 million people will be suffering from
osteoarthritis by 2030.
Prevalence of OA is predicted to grow by 86% by 2030
2020
2030
72m
In 2020, more than
72 million people were
affected by OA.*
120mBy 2030, more than
120 million people will
be affected by OA.*
* Markets: US, EU5, Canada and Australia.
1. Global Health Data Exchange, Institute for Health and Metrics Evaluation, University of Washington. Accessed June 2021
ghdx.healthdata.org/gbd-results-tool.
2. OARSI. Osteoarthritis: A Serious Disease, Submitted to the U.S. Food and Drug Administration December 1, 2016.
3. Matthews GL, Hunter DJ. Emerging drugs for osteoarthritis. Expert Opin Emerg Drugs. 2011;16(3):479-491.
doi:10.1517/14728214.2011.576670.
Paradigm Biopharmaceuticals LimitedAnnual Report 2021 09
Treatment Pathways –
Knee OA
Zilosul® will likely be adopted for use as
a second line (2L) treatment after NSAIDs
and analgesics like paracetamol have
failed either through lack of efficacy
or due to unacceptable side effects.
Other treatments used in second line (2L)
are products containing opioids and intra-
articular injections.
Concerns over the use of opioids have
been well documented and it is thought
that Zilosul® has potential to reduce
opioid use in this indication.
Dr Scott Gottlieb, M.D., ex-Commissioner
of the U.S. Food and Drug Administration
said on 14 May 2018, “The biggest
public health crisis facing FDA is opioid
addiction. Not a day goes by in my role
at FDA without hearing stories of the
emotional, physical, and financial toll this
epidemic is taking on Americans”.
https://blogs.fda.gov/fdavoice/index.
php/2018/05/addressing-needs-of-
patients-while-stemming-the-tide-of-the-
opioidcrisis/
Therein lies the unmet medical need for
people suffering from osteoarthritis: a
-treatment for the chronic pain and joint
stiffness of osteoarthritis which is both
safe and effective. Zilosul® is a drug
which, to date, has a tolerable safety
profile in clinical trials, and has potential
to disrupt the pharmaceutical market
for the treatment for chronic pain arising
from osteoarthritis.
Diagnosis
Drug treated (Rx)
Topical NSAIDs
Pain persists
Topical Capsaicin
Analgesics e.g. paracetamol/
acetaminophen
No coexisting conditions
Oral NSAIDs
(e.g. diclofenac, naproxen)
GI coexisting conditions
Oral NSAIDs+PPI
(e.g. esomeprazole)
CV coexisting conditions
COX-2-selective NSAIDs
(e.g. celecoxib)
Pain persists
Add dual-acting
opioids and/or opioid
paracetamol combs
Intra-articular injections
Zilosul
1L
2L
Pain persists
Add opioid analgesics (oxycodone, morphine)
Surgical intervention (i.e. total knee replacement)
Main Tx
Alternative Tx
Anticipated place in the treatment paradigm for Zilosul
Source: April 2021. Market Research prepared by Decision Resources Group, a part of Clarivate.
1. www.blogs.fda.gov/fdavoice/index.php/2018/05/addressing-needs-of-patients-while-stemming-the-tide-of-the-opioidcrisis
2. www.fda.gov/news-events/fda-voices/fdas-budget-advancing-goal-ending-opioid-crisis
Paradigm Biopharmaceuticals LimitedAnnual Report 2021 10
Financial Statements
Paradigm Biopharmaceuticals LimitedAnnual Report 2021 Directors’ Report
11
Directors present their report together with the Financial Report of Paradigm Biopharmaceuticals Limited (referred to hereafter as
the ‘company’) and the entities it controlled at the end of, or during, the year ended 30 June 2021 (referred to hereafter as the
‘Consolidated Entity’).
Directors
Information on Directors
The Directors of Paradigm at any time during or since the end of the financial year are:
Paul Rennie, Managing and Executive Director (Appointed on 2 May 2014)
Paul Rennie BSc, MBM, Grad Dip Commercial Law, MSTC, has sales, marketing, business development, operational and IP
commercialisation experience in the biopharmaceutical sector. Paul’s experience includes working for Boehringer Mannheim
(now Roche Diagnostics), Merck KGGA as National Sales and Marketing Manager and Soltec (FH Faulding Ltd) as their Director of
business development. Paul also led the commercialisation of Recaldent® a novel biopharmaceutical arising from research at the dental
school, University of Melbourne. Paul took an R&D project from the laboratory bench to a commercial product now marketed globally
as an additive to oral care products. More recently Paul worked in a number of positions with Mesoblast Ltd. Paul was the inaugural
COO and moved into Executive Vice President New Product Development for the adult stem cell company. For the past 4 years,
Paul has worked full time at Paradigm Biopharmaceuticals Limited. Since June 23 2020, Paul has also served as Interim Chair of
Paradigm, following the resignation of the previous Chair in June 2020.
Dr Donna Skerrett, Executive Director (Appointed on 3 July 2020)
Dr Donna Skerrett, has more than 30 years’ experience in transfusion medicine, cellular therapy, and transplantation. She brings a wealth
of experience in medical, clinical, and regulatory affairs. Donna served previously as Chief Medical Officer at Mesoblast. She was
Director of Transfusion Medicine and Cellular Therapy at Weill Cornell Medical Center in New York (2004 – 2011), and prior to that was
Associate Director of Transfusion Medicine and Director of Stem Cell Facilities at Columbia University’s New York-Presbyterian Hospital.
She has previously chaired the New York State Council on Blood and Transfusion Services, and served on the Board of Directors of
the Fox Chase Cancer Center in Philadelphia, and is currently a member of the Board of Visitors of Lewis Katz School of Medicine at
Temple University.
Christopher Fullerton, Non-Executive Director (Resigned on 19 November 2020)
Christopher Fullerton, BEc, has extensive experience in investment, management and investment banking and is a qualified chartered
accountant. He is an investor in listed equities and private equity and his current unlisted company directorships cover companies
in the property investment and agriculture sectors. Christopher’s exposure to and experience in the fields of biotechnology and
health care technology was gained through his Non-Executive chairmanships of Bionomics Limited, Cordlife Limited and Health
Communication Network Limited. At the time of resignation from the Paradigm Board, Christopher was a Non-Executive Director
of XTEK Ltd.
John Gaffney, Non-Executive Director (Appointed on 30 September 2014)
John Gaffney LL.M is a lawyer with over 30 years’ experience and has undertaken the AICD Company Directors qualification. He brings
to the Board a compliance and corporate governance background and is experienced in financial services compliance. John also has
corporate and commercial experience having worked with a major national law firm as a senior lawyer and also practised as a barrister
at the Victorian Bar. Previously John has been a Non-Executive Director of a US based biotechnology company and SelfWealth Ltd
(ASX:SWF).
Amos Meltzer, Non-Executive Director (Appointed on 9 December 2020)
Amos Meltzer is a scientist and an intellectual property lawyer with over 25 years of experience in international trade and in
commercialising technologies principally in the life sciences sector. He has presided over life science research and product
development projects clinical trials as well as the commercialisation of life sciences assets through both licensing and the sale
and marketing of a pharmaceutical product. Previously Amos has served as in house counsel and IP director at two Nasdaq-
listed companies Compugen and Gilat, as a non-executive director of a biotechnology company Evogene and as VP of Business
Development and then CEO of an ASX-listed biopharmaceutical company Immuron. Amos currently serves as Chief Operating Officer
of neuro-medical device company Synchron, chairman of the board of surgeons’ education services company Vasculab and as a
legal advisor to a number of ASX listed and private life science companies.
Helen Fisher, Non-Executive Director (Appointed on 23 February 2021)
Helen is Chief Executive Officer and managing director of Bio Capital Impact Fund (BCIF) and Non-Executive Director (NED) and Chair
of the Audit and Risk Management Committee of Calix Limited (ASX: CXL), a company with a platform technology with applications in
climate change, water management, biotech, and pharmaceutical areas. Prior to establishing BCIF, Helen was a partner of Deloitte and
led Deloitte’s life science practice in Australia for 5 years, having had many years’ experience in the life sciences and health care sector.
Annual Report 2021Paradigm Biopharmaceuticals Limited 12
Directors’ Report
continued
Company Secretary
Kevin Hollingsworth, Company Secretary (Appointed on 2 May 2014)
Kevin Hollingsworth, FCPA, FCMA, CGMA, in addition to his duties at Paradigm, serves as Principal of Hollingsworth Financial Services.
Prior to that he served as Chief Financial Officer and Company Secretary of Mesoblast Limited (ASX: MSB). At Alpha Technologies
Corporation Limited (ASX: ASU), Kevin served as a Non-Executive Director. He has served as National President of CIMA Australia,
State Councillor for CPA Australia and Chairman of the National and Victorian Industry and Commerce Accountants Committees.
He is a Chartered Global Management Accountant and Fellow of CPA Australia and Chartered Management Accountants.
Directorships in Other Listed Entities
Directorships of other listed entities held by Directors of Paradigm during the last 3 years immediately before the end of the financial
year are as follows:
Director
John Gaffney
Paul Rennie
Helen Fisher
Company
SelfWealth Ltd
NeuroScientific Biopharmaceuticals Ltd
Calix Limited
Sienna Cancer Diagnostics Limited
BARD1 Life Sciences Limited
Period of directorship
From
23-Nov-17
22-Jun-21
22-Sep-20
28-Mar-18
28-Jul-20
To
30-Sep-19
Current
Current
28-Jul-20
25-Nov-20
Directors’ Meetings
The number of Directors’ meetings (including meetings of committees of Directors) and the number of meetings attended by each
of the Directors of Paradigm during the financial year are:
Director
Paul Rennie
Christopher Fullerton
John Gaffney
Donna Skerrett
Amos Meltzer
Helen Fisher
Board
Attended
8
4
8
7
4
3
Held
8
4
8
8
4
3
Nomination &
Remuneration Committee
Attended
-
1
1
-
-
-
Held
-
1
1
-
-
-
Audit & Risk
Committee
Held
-
1
2
-
1
1
Attended
-
1
2
-
1
1
Committee Membership
As at the date of the report, Paradigm had a Remuneration and Nomination Committee and an Audit and Risk Committee of the Board
of Directors. Members acting on the committees of the Board during the financial year were:
Nomination & Remuneration Committee
John Gaffney (Chair)
Amos Meltzer
Helen Fisher
Audit & Risk Committee
Helen Fisher (Chair)
John Gaffney
Amos Meltzer
Principal Activities
The principal activities of Paradigm are researching and developing therapeutic products for human use. It is a drug repurposing
company which seeks to find new uses for old drugs, thereby reducing the cost and time to bring therapeutics to market.
Operating Review
Paradigm made a loss for the financial year ended 30 June 2021 of $34,297,184 (2020: $12,298,887) an increase of $21,998,297 on
prior year. Given Paradigm is a late-stage clinical development company that is pre revenue, it is likely in the absence of partnering/
material product revenue, that NPAT losses can be expected in future years as the clinical development of Zilosul® increases, leading
to commercialisation.
Annual Report 2021Paradigm Biopharmaceuticals Limited 13
Much of the increased loss was driven by increased R&D expenditure, in particular, for Clinical Development costs reflecting progress
within the Clinical program. This was primarily driven by costs associated with preparation for a Phase III trial for our leading indication
for iPPS, Zilosul, a treatment for osteoarthritis in knee and hip. In addition to osteoarthritis, spend increased in development costs
supporting Mucopolysaccharidoses (MPS).
General and administration costs increased mainly due to establishment or expansion of administrative functions:
• FY21 being the first full year of expense for Paradigm’s Investor Relations function.
• Increasing the scope of the Finance department in terms of resource, but also cost of establishing and supporting a newly
incorporated US entity.
• Share Based Payment expense, there has been an increase in employee share plan due to the scope of the program now including
employees who were previously not included, in addition to impact of higher share price in the valuation compared to prior year.
• Establishment of a People and Culture Function.
Commercial costs were incurred for the first time in FY21 with the Commercial function being established throughout the year.
Other Income of $8,921,097 increased by $4,225,603 compared to FY20, due to increased R&D Tax Incentive Rebate Claim (linked
with increased R&D expenditure) of $8,348,705 (increase of $4,700,858 In FY20). Interest received decreased due to less cash on term
deposit and lower interest rates on term deposits in FY21.
Pleasingly Paradigm was able to achieve first time revenue under the Therapeutic Goods Administration (TGA) Special Access Scheme
(SAS) which was initiated in May 2021. Revenue from SAS is expected to continue in FY22 and is expected to remain modest as
product allocation is limited for this program.
Under the SAS program Zilosul has been made available to selected physicians with SAS approval to treat patients experiencing chronic
arthralgia from Ross River Virus (RRV) Infection, previous SAS patients seeking re-treatment and other subjects that would not qualify
for recruitment for the PARA_OA_002 and PARA_OA_008 clinical trials. Due to the SAS program being designed for a small number
of patients (to prioritise supply of product to the PARA_OA_002 and PARA_OA_008 clinical trials) Paradigm has not obtained scale
benefits that we would expect with commercial production volumes, this, combined with patient monitoring standards consistent with
those of clinical trials, means this is an expensive program for Paradigm to support, leading to a loss in gross profit of $78,588. The SAS
program is open and will continue into FY22 where similar margin structures are likely to be observed associated with this program.
The impairment loss during the period was Nil (2020: Nil).
Basic and diluted net loss per share decreased to 16.74 cents (2020: 6.12 cents) due to the increased number of shares.
Environmental Regulation
Paradigm’s operations are not regulated by any significant environmental law of the Commonwealth or of a state or territory of Australia.
Significant Changes in the State of Affairs
There have been no other significant changes in the state of affairs of the entities in Paradigm during the year.
Dividends
No dividends were declared or paid since the start of the financial year. No recommendation for payment of dividends has been made.
Matters Subsequent to the End of the Financial Year
The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact, positive
or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic
stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.
Corporate Governance
The Corporate Governance Statement appears on Paradigm’s website at:
www.paradigmbiopharma.com/investors/corporate-governance
Annual Report 2021Paradigm Biopharmaceuticals Limited 14
Directors’ Report
continued
Directors’ Interests
The relevant interest of each Director in the shares and options issued by Paradigm at the date of this report is as follows:
Director
Paul Rennie
John Gaffney
Donna Skerrett
Amos Meltzer
Helen Fisher
Ordinary shares
20,109,222
587,555
719,284
-
-
Indemnification and Insurance of Officers
Indemnification
Paradigm has agreed to indemnify the current Directors of Paradigm against all liabilities to another person (other than Paradigm or
a related body corporate) that may arise from their position as Directors of Paradigm, except where the liability arises out of conduct
involving a lack of good faith.
The agreement stipulates that Paradigm will meet to the maximum extent permitted by law, the full amount of any such liabilities,
including costs and expenses.
Insurance Premiums
Paradigm paid a premium during the year in respect of a Director and officer liability insurance policy, insuring the Directors of
Paradigm, the Company Secretary, and all Executive Officers of Paradigm against a liability incurred as such a Director, Secretary
or Executive Officer to the extent permitted by the Corporations Act 2001. The Directors have not included details of the nature of the
liabilities covered or the amount of the premium paid in respect of the Directors’ and Officers’ liability and legal expenses insurance
contracts, as such disclosure is prohibited under the terms of the contract.
Proceedings on Behalf of Paradigm
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of Paradigm,
or to intervene in any proceedings to which Paradigm is a party for the purpose of taking responsibility on behalf of Paradigm for all or
part of those proceedings.
Non-audit Services
Paradigm’s auditor, RSM Australia, was appointed in July 2014 for audit services and also provided taxation services during FY21.
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined
in Note 29 to the Financial Statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm
on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 29 to the Financial Statements do not compromise the external
auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor;
and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for Paradigm, acting as advocate for Paradigm or jointly
sharing economic risks and rewards.
Officers of Paradigm Who Are Former Partners of RSM Australia
There are no Officers of Paradigm who are former partners of RSM Australia.
Auditor’s Independence Declaration
The Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 21 of the
annual report.
Annual Report 2021Paradigm Biopharmaceuticals Limited Remuneration Report
15
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
Audited Remuneration Report
This Remuneration Report outlines the Director and Executive Remuneration arrangements of Paradigm in accordance with the
requirements of the Corporations Act 2001 and the Corporations Regulations 2001.
For the purposes of this report, Key Management Personnel (KMP) of Paradigm are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of Paradigm, directly or indirectly, including any Director
(whether Executive or otherwise) of Paradigm. Paradigm does not presently employ any Executives, other than the Executive Director.
Key Management Personnel
The following were Key Management Personnel of Paradigm at any time during the year and unless otherwise indicated were
Key Management Personnel for the entire year:
Name
Paul Rennie
Christopher Fullerton
John Gaffney
Donna Skerrett
Amos Meltzer
Helen Fisher
Position held
Managing & Executive Director
Non-Executive Director
Non-Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
Date appointed
2 May 2014
30 September 2014
30 September 2014
3 July 2020
9 December 2020
23 February 2021
Date ceased
19 November 2020
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is comprised of 3 Independent Non-Executive Directors and advises the Board on
remuneration policies and practices, consistent with those of a late-stage development, Pre-Commercial Revenue Pharma Company.
The Remuneration and Nomination Committee proposes candidates for Director appointment for the Board’s consideration, reviews the
fees payable to both Executive and Non-Executive Directors and reviews and advises the Board in relation to succession planning for
the Board. The Remuneration and Nomination Committee has the authority to consult any independent professional adviser it considers
appropriate to assist it in meeting its responsibilities.
The Remuneration and Nomination Committee is a committee of the Board and is established in accordance with the authority provided
in Paradigm’s constitution.
The Board is responsible to shareholders for ensuring that Paradigm:
• has coherent remuneration policies and practices which are observed, and which enable it to attract and retain Executives
and Directors who will create value for shareholders;
• fairly and responsibly rewards Executives having regard to the performance of Paradigm, the performance of the Executive
and the general pay environment;
• provides disclosure in relation to Paradigm’s remuneration policies to enable investors to understand the costs and benefits
of those policies and the link between remuneration paid to Directors and key Executives and corporate performance; and
• complies with the provisions of the ASX Listing Rules and the Corporations Act 2001.
Annual Report 2021Paradigm Biopharmaceuticals Limited 16
Remuneration Report
continued
Principles of Remuneration
Paradigm has developed a remuneration philosophy that seeks to combine elements of Fixed Remuneration, Short-Term Incentive
(STI) and Long-Term Incentive (LTI) that aims to ensure its remuneration strategy successfully aligns the interests of its Executives
and employees with those of its shareholders. Paradigm is a late-stage development, Pre-Commercial Revenue Pharma Company,
with less than 50 employees across the US and Australia. The Board maintains a simple remuneration structure and performance
review process that comprises:
• Fixed remuneration, that allows the organisation to attract and retain individuals with the necessary skills and experience to execute
on the Company’s strategy.
• STI that is linked to individual and Company performance, payable upon execution of the Company’s strategy that will grow
shareholder value.
• LTI structure that is aimed at long term retention of staff and rewards staff in a manner that is aligned with the growth in
shareholder value.
Remuneration Structure
In accordance with best practice Corporate Governance, the structure of Non-Executive Directors’ Remuneration is clearly distinguished
from that of Executives.
Non-Executive Director Remuneration
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined
from time to time by a general meeting. Remuneration of Non-Executive Directors is determined in maximum aggregate amount
of $500,000 by the shareholders and is allocated by the Board on the recommendation of the Remuneration Committee.
The Remuneration Committee will take independent advice in respect to Directors’ fees on an as needed basis.
There is no separate payment made for attendance at Board committee meetings or for other attendances to Consolidated Entity
or Board activities.
Directors are not required to hold shares in Paradigm as part of their appointment.
There is to be no plan to provide remuneration, reward or other benefits to Non-Executive Directors upon the cessation of them holding
office as a Director.
Executive Remuneration Governance
Executive Directors receive no extra remuneration for their service on the Board beyond their Executive salary package.
KMP remuneration is compared against similar positions across the ASX300 and Industry peers to ensure that remuneration levels
and structures remain consistent with roles of comparable skill, experience and responsibility levels.
During FY21 Paradigm revised its STI and LTI incentive programs, the level of incentive available to Key Management Personnel (KMP)
under both programs consists of the following:
• A review was conducted of the CEO’s remuneration, including a comparison against other ASX-listed companies of comparable
market capitalisation. Based on that review, the Board determined that Mr Rennie’s total remuneration package was significantly
below the median for a CEO of a company of similar market capitalisation. It was resolved to revise Mr Rennie’s base salary and
at risk component (including STI and LTI) so that it was more in line with the median remuneration for such a position. Accordingly,
Mr Rennie’s base salary was increased by 10% in FY21 and the potential maximum available STI was increased to up to 40% of
base salary.
• The CEO is eligible to receive an LTI award of up to 600,000 ordinary shares. The actual award is linked to the STI performance
outcome. i.e., If 75% of the STI is achieved (30%) then the LTI award is 75% of 600,000 shares. The LTI award will vest equally over
a 3-year period i.e. 75% of 600,000 shares equates to an award of 450,000 shares. These shares will vest equally at 150,000 shares
per year for 3 years. The award price for the shares will be based on the 30 day VWAP with a 25% premium applied to this price, to
provide greater alignment to increase total shareholder returns (TSR). The shares will be supported by a non-recourse loan, meaning
that for the shares to be fully “exercised” (i.e. by repaying the loan), the share price at the point of “exercising” the shares will need to
be greater than the offer price of the share award. The shares must be “exercised” within 5 years of the offer date.
• The Executive Director and Chief Medical Officer (CMO) is eligible to earn an STI of up to 30% of their base salary, pending
achievement of Board approved performance objectives, which are linked to the Board approved strategic plan.
Annual Report 2021Paradigm Biopharmaceuticals Limited 17
• The Executive Director and CMO is eligible to receive an LTI award of up to 500,000 ordinary shares. The actual award is linked to
the STI performance outcome. That is, if 75% of the STI is achieved (22.5%) then the LTI award is 75% of 500,000 shares. The LTI
award will vest equally over a 3-year period i.e., 75% of 500,000 shares equates to an award of 375,000 shares. These shares will
vest equally at 125,000 shares per year for 3 years. The award price for the shares will be based on the 30 day VWAP with a 25%
premium applied to this price, to provide greater alignment to increase TSR.
• The shares will be supported by a non-recourse loan, meaning that for the shares to be fully “exercised” (I.e. by repaying the loan),
the share price at the point of “exercising” the shares will need to be greater than the offer price of the share award. The shares must
be “exercised” within 5 years of the offer date.
Following Board approval of the annual strategic plan update, the Board approves the current year, in this case FY21, performance
objectives against which KMP STI and LTI will be reviewed and assessed.
A formal review process by the Remuneration and Nomination Committee of KMP performance is undertaken annually to assess the
delivery of the agreed objectives. The outcome of this review process delivers any STI and LTI award, which are fully at risk.
In addition to governing KMP remuneration, the Remuneration and Nomination Committee sets the aggregate fee pool for Non-
Executive Directors and Non-Executive director fee’s (subject to shareholder approval).
Issue of Shares
Details of shares issued to Directors and other Key Management Personnel as part of the ESP compensation:
Name
Paul Rennie
John Gaffney
Donna Skerrett
Date
29 May 2015
30 November 2016
13 November 2017
26 November 2018
7 November 2019
19 November 2020
29 May 2015
7 November 2019
19 November 2020
Shares
600,000
140,000
210,000
300,000
197,355
600,000
600,000
219,284
500,000
Issue price
$0.35
$0.33
$0.63
$1.15
$2.93
$3.05
$0.35
$2.93
$3.05
Fair value of
issued shares
$0.208
$0.268
$0.198
$0.623
$1.540
$1.185
$0.208
$1.540
$1.185
$
124,800
37,553
41,580
186,900
303,927
711,000
124,800
337,697
592,500
Movement in Shares
The movement during the reporting period in the number of ordinary shares in Paradigm Biopharmaceuticals Limited held directly,
indirectly or beneficially by each Director and Key Management Personnel, including their related entities is as follows:
Directors & Key
Management Persons
Paul Rennie
John Gaffney
Donna Skerrett
Amos Meltzer
Helen Fisher
Held at
year opening
19,509,222
587,555
219,284
-
-
Purchases
Disposals
-
-
-
-
-
-
Issued via ESP
600,000
-
500,000
-
-
Held at
year end
20,109,222
587,555
719,284
-
-
Annual Report 2021Paradigm Biopharmaceuticals Limited 18
Remuneration Report
continued
Employment Agreements
The Board has reviewed the remuneration package for the Chief Executive Officer on 29 July 2021. The Remuneration and other terms
of employment for the Chief Executive Officer is formalised in a service agreement. Details of this agreement are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Paul Rennie
Managing Director and Chief Executive Officer
7 November 2020
3 years
Base annual package *, Short-term incentives (STI) ** and discretionary share based Long-term
incentives (LTI) ***, subject to annual performance review, 6-month termination notice by either party,
3-12-month non-solicitation clause after termination depending on the area. Paradigm may terminate
the agreement with cause in certain circumstances such as gross misconduct.
* Base annual package for financial year 2021/22 – $525,300 per annum plus statutory Superannuation, to be reviewed annually by the Remuneration
and Nomination Committee.
** STI to be paid in cash up to a maximum of 40% of the Base Salary, provided KPIs agreed with the Board have been met. For financial year 2020/21,
Mr. Rennie has been awarded STI of 30% of base salary ($153,000), which is 75% of the maximum available STI for reasons outlined below.
*** LTI via invitation to participate in Paradigm’s Employee Share Plan. 600,000 Ordinary Shares were granted as at 19 November 2020 at an exercise
price of $3.05 based on meeting agreed performance KPIs for the 2020 financial year. These shares were issued on vesting conditions outlined
above. Each tranche of shares will vest in 12 months, 24 months and 36 months. This issue was funded by a limited recourse loan from Paradigm.
For the financial year 2020/21, MR. Rennie has been awarded LTI of 450,000 ESP shares, which represent 75% of the maximum available LTI.
The Board has reviewed the remuneration package for the Chief Medical Officer on 29 July 2021. The Remuneration and other terms
of employment for the Chief Medical Officer is formalised in a service agreement. Details of this agreement are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Donna Skerrett
Chief Medical Officer
1 September 2019
Role is ongoing
Base annual package *, STI ** and discretionary share based LTI ***, subject to annual performance
review, 3-month termination notice by either party, 3-12-month non-solicitation clause after termination
depending on the area. Paradigm may terminate the agreement with cause in certain circumstances
such as gross misconduct.
* Base annual package for financial year 2021/22 – US$651,372 per annum plus 401K contribution of 6% , to be reviewed annually by the
Remuneration and Nomination Committee.
** STI to be paid in cash up to a maximum of 30% of the Base Salary, provided KPIs agreed with the Board have been met. For financial year 2020/21,
Dr. Skerrett has been awarded an STI of 22.5% of the base salary ($184,409), which is 75% of the maximum available STI, for reasons outlined below.
*** LTI via invitation to participate in Paradigm’s Employee Share Plan. 500,000 Ordinary Shares were granted on 19 November 2020 at an exercise price
of $3.05 based on meeting agreed performance KPIs for the 2020 financial year. These shares were issued on vesting conditions outlined above.
Each tranche of shares will vest in 12 months, 24 months and 36 months. This issue was funded by a limited recourse loan from Paradigm.
For financial year 2020/21, Dr. Skerrett has been awarded LTI of 375,000ESP shares, which represent 75% of the maximum available LTI.
Remuneration of Key Management Personnel
Details of the nature and amount of each major element of the remuneration of each Key Management Personnel of Paradigm for the
year ended 30 June 2021 are:
Short-term
Post-
employment
Salary
& fees
$
Annual
Leave
$
Cash
Bonus
$
Superannuation
and benefits
Long-
term
Long
service
leave
$
Share-
based
payments1
Options
$
Total
$
Proportion of
remuneration
performance
related
%
Value of
options as
proportion of
remuneration
%
22,917
67,500
44,583
33,333
-
-
-
-
-
-
-
-
2,177
6,413
4,235
3,167
-
-
-
-
-
-
-
-
25,094
73,913
48,818
36,500
0.0%
0.0%
0.0%
0.0%
0.00%
0.00%
0.00%
0.00%
510,000
851,256
38,784 153,000
30,262 184,409
67,628
42,268
18,089 397,114
330,929
-
1,184,615
1,439,123
12.92%
12.81%
33.52%
23.00%
Directors &
Key Management
Personnel
Non-Executive
Christopher Fullerton
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie
Donna Skerrett2
Total 2021
1,529,589 69,046 337,409
125,888
18,089 728,043
2,808,064
12.02%
25.93%
1. Share Based Payments represents valuation of shares awarded in November 2020 in line with the Company’s accounting policy for accounting
for share based payments.
2. Dr. Donna Skerrett is paid in USD, remuneration figures have been translated to AUD at a conversion rate of 0.7716.
Annual Report 2021Paradigm Biopharmaceuticals Limited
19
Remuneration and Awards for Financial Year Ended 30 June 2021
Board of Directors’ Remuneration
Throughout FY21 there were no Chair fee’s paid as Mr. Paul Rennie who fulfilled the roles of Interim Chair and CEO and Managing Director
of Paradigm Biopharmaceuticals. Non-Executive Directors remuneration increased from $60,000 to $80,000 per year, effective from
01/01/2021. The fees were increased to attract and retain Board members with the necessary skills and expertise to continue to support
the progress of the company. This increase is the first increase in non-executive director fees since Paradigm was listed on the ASX on
19th August 2015 and is consistent with ASX300 NED fees.
KMP Remuneration
Following performance review of both KMP. Members the Remuneration and Nominations Committee has resolved there will be an
increase of 3% applied to KMP gross salaries in FY22. Performance outcomes for KMP are as follows:
• During the FY 2021, the Company achieved many milestones, including those which are critical for the commercialisation of Zilosul,
including conducting 26 non-clinical studies. The opening of the phase 3 IND with the US FDA was the key Company milestone for
the year. Even though the IND application was submitted on time, as communicated to the market, due to the FDA questions and
regulatory timeframes, at the time of this report, this milestone has not been achieved, which in turn adversely affected the share
price of the Company.
• The Remuneration Committee had undertaken a review of the remuneration framework during the year and considered that, in
addition to the function of the LTI being to align KMP’s interests with shareholder return, to date the LTIs had also been considered
by the Company as a reward for performance and to further align the performance of the KMP with the TSR. Based on these
considerations, the Remuneration Committee recommended to the Company Board that the KMP receive only 75% of their possible
maximum LTI. The Company Board accepted the recommendation of the Remuneration Committee and resolved to award the KMP
75% of their possible maximum LTI. Mr Rennie and Dr Skerrett received 75% of the potential maximum LTI this will be subject to
shareholder approval at the Company AGM in November 2021.
• The Remuneration Committee further recommended to the Company Board that KMP should also receive only 75% of the possible
maximum STI and this recommendation was accepted by the Company Board. The Remuneration Committee recommended this
25% reduction in the maximum available STI on the basis that the key company milestone of the opening of the US FDA IND was
not achieved as at 30 June 2021 and this was one of the KPIs for the assessment of the STIs to be granted to Mr Rennie and
Dr Skerrett. The Company Board accepted the recommendation of the Remuneration Committee outlined above and resolved
to award the STI in line with that recommendation.
Details of the nature and amount of each major element of the remuneration of each Key Management Personnel of Paradigm for the
year ended 30 June 2020 are:
Short-term
Annual
leave
$
Cash
bonus
$
Post-employment Long-term
Long
service
leave
$
Superannuation
benefits
$
Share-
based
payments
Options
$
Total
$
Proportion of
remuneration
performance
related
%
Value of
options as
proportion of
remuneration
%
Salary
& fees
$
Directors &
Key Management
Personnel
Non-Executive
Graeme Kaufman
110,000
Christopher Fullerton 55,000
55,000
John Gaffney
-
-
-
-
-
-
10,450
5,225
5,225
-
-
-
-
-
-
-
120,450
60,225
60,225
0.0%
0.0%
0.0%
0.00%
0.00%
0.00%
685,671
16.84%
0.00%
Executive
Paul Rennie
462,000 36,948 115,500
58,373
12,850
Total 2020
682,000 36,948 115,500
79,273
12,850
- 926,571
12.47%
0.00%
Annual Report 2021Paradigm Biopharmaceuticals Limited 20
Remuneration Report
continued
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive
Christopher Fullerton
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie
Donna Skerrett
Fixed remuneration
2021
2020
At risk – STI
2021
2020
At risk – LTI
2021
2020
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
-
-
-
-
-
-
-
-
53.56%
64.19%
83.16%
-
12.92%
12.81%
16.84%
-
33.52%
23.00%
-
-
-
-
-
-
Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined having regard to
the satisfaction of performance measures. The maximum bonus values are established at the start of each financial year and amounts
payable are determined in the final month of the financial year by the Nomination and Remuneration Committee.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Non-Executive
Christopher Fullerton
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie
Donna Skerrett
STI paid/payable
2021
2020
STI forfeited
2021
2020
-
-
-
-
75%
75%
-
-
-
-
100%
N/A
-
-
-
-
25%
25%
-
-
-
-
-
N/A
Additional Information
The earnings of Paradigm for the five years to 30 June 2021 are summarised below:
Income
Loss after income tax
2021
$
8,941,647
(34,297,184)
2020
$
4,695,494
(12,298,887)
2019
$
3,245,628
(15,627,544)
2018
$
2,736,400
(6,190,232)
2017
$
1,848,924
(4,275,446)
2016
$
1,394,161
(2,924,425)
The factors that are considered to affect total shareholders return (TSR) are summarised below:
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
2021
2.10
-
(16.74)
2020
3.15
-
(6.12)
2019
1.40
-
(10.93)
2018
0.65
-
(5.46)
2017
0.29
-
(4.42)
2016
0.35
-
(3.60)
This is the End of the Audited Remuneration Report.
Dated at Melbourne, Victoria this 26th day of August 2021.
Signed in accordance with a resolution of the Directors, pursuant to section 298(2)(a) of the Corporations Act:
Paul Rennie
Interim Chairman
Annual Report 2021Paradigm Biopharmaceuticals Limited Auditor’s Independence Declaration
21
AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Paradigm Biopharmaceuticals Limited for the year ended 30 June 2021, 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. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 26 August 2021 Melbourne, Victoria Annual Report 2021Paradigm Biopharmaceuticals Limited 22
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 30 June 2021
Revenue from continuing operations
Cost of sales
Other income
Research and development expenses
General and administration expenses
Commercial expenses
Finance costs
Loss before income tax
Income tax expense/(benefit)
Loss for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Notes
2
Period from
1-Jul-20 to
30-Jun-21
$
20,550
(99,138)
8,921,097
(33,516,918)
(8,748,174)
(836,879)
(37,722)
Period from
1-Jul-19 to
30-Jun-20
$
-
-
4,695,494
(14,020,225)
(2,939,988)
-
(34,168)
(34,297,184)
(12,298,887)
29
-
-
(34,297,184)
(12,298,887)
58,034
58,034
-
-
Total comprehensive (loss) attributable to members of the Consolidated Entity
(34,239,150)
(12,298,887)
Earnings per share – Loss (cents)
Basic and diluted earnings (Loss) per share
19
(16.74) cents
(6.12) cents
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
Annual Report 2021Paradigm Biopharmaceuticals Limited Consolidated Statement of Financial Position
as at 30 June 2021
23
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Financial assets held at amortised cost
Total current assets
Non-current assets
Intangible assets
Plant and equipment
Right-of-use assets
Security deposits receivable
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
Lease liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Share-based payments reserve
Currency translation reserve
Accumulated losses
Total equity
Notes
2021
$
2020
$
3
4
5
6
7
8
9
10
11
12
13
14
15
16
71,034,983
8,507,640
1,388,748
46,200
103,922,241
3,509,777
192,380
746,200
80,977,571
108,370,598
2,947,588
92,696
671,709
102,616
2,947,588
109,913
832,917
102,616
3,814,609
3,993,034
84,792,180
112,363,632
4,986,440
672,404
134,616
2,784,324
455,510
124,731
5,793,460
3,364,565
108,209
617,225
68,390
748,958
725,434
817,348
6,518,894
4,181,913
78,273,286
108,181,719
146,989,484
6,453,995
58,034
(75,228,227)
145,865,076
3,585,189
-
(41,268,546)
78,273,286
108,181,719
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
Annual Report 2021Paradigm Biopharmaceuticals Limited 24
Consolidated Statement of Cash Flows
for the year ended 30 June 2021
Cash flows from operating activities
Research and development and other tax incentive received
Payments to suppliers and employees (Inclusive of GST)
Interest received
Interest repayment of lease liabilities
Notes
Period from
1-Jul-20 to
30-Jun-21
$
3,370,557
(38,522,281)
259,961
(37,722)
Period from
1-Jul-19 to
30-Jun-20
$
3,621,355
(14,797,407)
1,120,163
(34,168)
Net cash outflow from operating activities
23
(34,929,485)
(10,090,057)
Cash flows from investing activities
Payments for intangible assets
Payments for plant and equipment
Proceeds for financial assets held at amortised cost
Net cash inflow from investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Proceeds from exercise of share options
Limited recourse loan repaid under ESP
Payments of share issue costs
Principal repayment of lease liabilities
6
7
14
14
(850)
(30,782)
700,000
(3,353)
(127,537)
5,753,800
668,368
5,622,910
-
1,020,733
103,675
-
(121,848)
35,000,000
1,839,328
1,895,907
(2,588,451)
(93,569)
Net cash inflow from financing activities
1,002,560
36,053,215
Net (decrease)/increase in cash and cash equivalents
(33,258,557)
31,586,068
Cash at the beginning of the financial period
Net effect of cash flows on foreign exchange
103,922,241
371,299
72,336,173
-
Cash at the end of the financial period
71,034,983
103,922,241
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
Annual Report 2021Paradigm Biopharmaceuticals Limited Consolidated Statement of Changes in Equity
for the year ended 30 June 2021
Issued
Capital
$
Share
Option
Reserve
$
Accumulated
Losses
$
Currency
Translation
Reserve
$
Balance at 30 June 2019
109,468,292
4,072,844
(30,734,818)
Loss for the period
Shares issued (Note 14)
Costs in relation to shares issued
Fair value of shares issued to eligible employees
under the plan (Note 15)
Fair values of options issued to third party under
the share-based payment arrangement (Note 15)
Transfer from share reserve
Shares issued relating to repayment of limited
recourse loan for ESP
Exercise of options
-
35,000,000
(2,338,451)
-
-
-
(12,298,887)
-
-
-
-
-
490,936
-
786,568
(1,765,159)
-
1,765,159
1,895,907
1,839,328
-
-
-
-
-
-
-
-
-
-
-
-
-
25
Total
$
82,806,318
(12,298,887)
35,000,000
(2,338,451)
490,936
786,568
-
1,895,907
1,839,328
Balance at 30 June 2020
145,865,076
3,585,189
(41,268,546)
- 108,181,719
Loss for the period
Fair value of shares issued to eligible employees
under the plan (Note 15)
Transfer from share-based payments reserve
on exercise of options
Shares issued relating to repayment of limited
recourse loan for ESP
Exercise of options
Currency translation movements
-
-
-
-
(34,297,184)
3,206,309
-
(337,503)
337,503
-
-
-
(34,297,184)
3,206,309
-
103,675
1,020,733
-
-
-
-
-
-
-
-
-
58,034
103,675
1,020,733
58,034
Balance at 30 June 2021
146,989,484
6,453,995
(75,228,227)
58,034
78,273,286
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
Annual Report 2021Paradigm Biopharmaceuticals Limited 26
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
(a) Reporting Entity
Paradigm Biopharmaceuticals Limited (the ‘Consolidated Entity’) is a company incorporated and domiciled in Australia. Paradigm
Biopharmaceuticals Limited is a company limited by shares which are publicly traded on the Australian Securities Exchange from
19 August 2015. The Consolidated Financial Report of the Consolidated Entity for the year ended 30 June 2021 comprises the
Company and controlled entities (together referred to as the ‘Consolidated Entity’).
The nature of the operations and principal activities of the Consolidated Entity are described in the Directors’ Report.
For the purposes of preparing the Financial Statements the Consolidated Entity is a for-profit entity.
(b) Basis of Preparation
Statement of Compliance
This Financial Report is a general-purpose Financial Report prepared in accordance with the Australian Accounting Standards (‘AASs’)
(including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board and the Corporations Act 2001.
This Consolidated Financial Report complies with the International Financial Reporting Standards (‘IFRSs’) and interpretations adopted
by the International Accounting Standards Board (IASB).
Basis of Measurement
Historical Cost Convention
The Financial Statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of
available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes
of plant and equipment and derivative financial instruments.
Critical Accounting Estimates
The preparation of the Financial Statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Consolidated Entity’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed
in Note 1 (c).
Restatement of comparatives
Financial comparatives in the income statement have been amended from prior year. In FY21 the organisation has adopted a functional
view of expenditure, which has meant the prior year disclosures were re-mapped to align with the new functional format.
Significant Accounting Policies
The accounting policies set out below have been applied consistently by the Consolidated Entity to all periods presented in these
Financial Statements.
New, Revised or Amending Accounting Standards and Interpretations Adopted
The Consolidated Entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Consolidated Entity:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The Consolidated Entity has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework contains new
definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards, but it has not
had a material impact on the Consolidated Entity’s Financial Statements.
Foreign Currency Translation
The Financial Statements are presented in Australian dollars, which is Paradigm Biopharmaceutical Limited’s functional and
presentation currency.
Annual Report 2021Paradigm Biopharmaceuticals Limited 27
Foreign Currency Transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign Operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which
approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised
in other comprehensive income through the foreign currency reserve in equity.
(c) Significant Accounting Estimates, Assumptions and Judgements
The preparation of the Financial Statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the Financial Statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on
other various factors it believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom
equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based Payment Transactions
The Consolidated Entity 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. The fair value is determined by using either the Binomial or Black-Scholes model
taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next
annual reporting period but may impact profit or loss and equity.
Estimation of Useful Lives of Assets
The Consolidated Entity determines the estimated useful lives and related depreciation and amortisation charges for its plant and
equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some
other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives,
or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Impairment of Non-financial Assets Other Than Goodwill and Other Indefinite Life Intangible Assets
The Consolidated Entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at
each reporting date by evaluating conditions specific to the Consolidated Entity and to the particular asset that may lead to impairment.
If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or
value-in-use calculations, which incorporate a number of key estimates and assumptions.
Other Indefinite Life Intangible Assets
The Consolidated Entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in Note 1.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the
estimated future cash flows. Refer to Note 7 for further information.
Employee Benefits Provision
As discussed in Note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are
recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the
reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion
and inflation have been considered.
Coronavirus (COVID-19) Pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on
the Consolidated Entity based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the Consolidated Entity operates. Other than as addressed in
specific notes, there does not currently appear to be either any significant impact upon the Financial Statements or any significant
uncertainties with respect to events or conditions which may impact the Consolidated Entity unfavourably as at the reporting date
or subsequently as a result of the Coronavirus (COVID-19) pandemic.
Annual Report 2021Paradigm Biopharmaceuticals Limited 28
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
1. Summary of Significant Accounting Policies continued
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised
in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be
exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In
determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to
exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the
asset to the consolidated entity’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant
penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity
reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant
event or significant change in circumstances.
Incremental Borrowing Rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future
lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the
Consolidated Entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to
the right-of-use asset, with similar terms, security and economic environment.
Lease make good provision
A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes
future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as
application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on
the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of
financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will
be recognised in profit or loss.
(d) Summary of Significant Accounting Policies
(i) Basis of Consolidation
Parent Entity
In accordance with the Corporations Act 2001, these Financial Statements present the results of the Consolidated Entity only.
Supplementary information about the Parent Entity is disclosed in Note 23.
Subsidiaries
The consolidated Financial Statements comprise those of the Consolidated Entity, and the entities it controlled at the end of, or during,
the financial year. The balances and effects of transactions between entities in the Consolidated Entity included in the Financial
Statements have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only
from the date control commenced or up to the date control ceased.
Subsidiaries are entities controlled by the Consolidated Entity. Control exists when the Consolidated Entity is exposed to or has rights
to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities
of the entity. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date control is
transferred to the Consolidated Entity until the date that control ceases.
Transactions Eliminated on Consolidation
Intra-company balances and all gains and losses or income and expenses arising from intra-company transactions are eliminated in
preparing the consolidated Financial Statements.
(ii) 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 purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above but
also include as a component of cash and cash equivalents bank overdrafts (if any), which are included as borrowings on the statement
of financial position.
(iii) Trade and Other Receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method,
less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
Annual Report 2021Paradigm Biopharmaceuticals Limited 29
The Consolidated Entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any provision for impairment.
(iv) Investments
Investments are initially measured at cost. Transaction costs are included as part of the initial measurement. They are subsequently
measured at either amortised cost or fair value depending on their classification. Classification is determined based on the purpose
of the acquisition and subsequent reclassification to other categories is restricted.
(v) Intangible Assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of
the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised
and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less
amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets
are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful
lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted
for prospectively by changing the amortisation method or period.
(a) Patents and Trademarks
Patents have a finite useful life and are carried at cost less accumulated amortisation and impairment losses once the patents are
considered held ready for use. Intellectual property and licences are amortised on a systematic basis matched to the future economic
benefits over the useful life of the project once the patents are considered held ready for use.
Significant costs associated with trademarks are capitalised and amortised on a straight-line basis over the period of their expected
benefit, being their finite life of 10 years.
(b) Research and Development
Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised
only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be
measured reliably.
(vi) Impairment
At the end of each reporting period, the Consolidated Entity assesses whether there is any indication that an asset may be impaired.
The assessment will include considering external sources of information and internal sources of information. If such an indication exists,
an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair
value less costs to sell and value-in-use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable
amount is expensed to the statement of comprehensive income.
Where it is not possible to estimate the recoverable amount of an individual asset, the Consolidated Entity estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of the money and risks specific to the asset. In determining fair value less costs
of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other
available fair value indicators.
The Consolidated Entity bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately
for each of the Consolidated Entity’s projects to which the individual assets are allocated. These budgets and forecast calculations
generally cover a period of five years.
Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the
function of the impaired asset.
(vii) Plant and Equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Annual Report 2021Paradigm Biopharmaceuticals Limited 30
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
1. Summary of Significant Accounting Policies continued
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their expected useful
lives of 2–15 years.
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated
useful life of the assets, whichever is shorter.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Consolidated Entity.
Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve
relating to the item disposed of is transferred directly to retained profits.
(viii) Right-of-use-assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net
of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of
costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the
asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease
term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement
of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
(ix) Trade and Other Payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the
entity during the reporting period which remain unpaid. The balance is recognised as a current liability with the amounts normally paid
within the requisite terms specified by the supplier.
(x) Share Capital
Ordinary and preference shares are classified as equity.
Any incremental costs directly attributable to the issue of new shares or options are recognised in equity as a deduction, net of tax,
from the proceeds.
(xi) Provisions
Provisions are recognised when the Consolidated Entity has a present (legal or constructive) obligation as a result of a past event,
it is probable the Consolidated Entity will be required to settle the obligation, and a reliable estimate can be made of the amount of
the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material,
provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage
of time is recognised as a finance cost.
(xii) Revenue
Interest Income
Interest income is recognised on a time proportion basis using the effective interest rate method.
Other Revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Government Grants
Grants that compensate the Consolidated Entity for expenditures incurred are recognised in profit or loss on a systematic basis in the
periods in which the expenditures are recognised. R&D tax offset receivables will be recognised in profit before tax (in EBIT) over the
periods necessary to match the benefit of the credit with the costs for which it is intended to compensate. Such periods will depend
on whether the R&D costs are capitalised or expensed as incurred.
Annual Report 2021Paradigm Biopharmaceuticals Limited
31
(xiii) Employee Benefits
Wages and salaries, cash bonus, annual leave and long service leave
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is
probable that settlement will be required, and they are capable of being measured reliably. Provisions made in respect of employee
benefits are measured based on an assessment of the existing benefits to determine the appropriate classification under the definition
of short-term and long-term benefits, placing emphasis on when the benefit is expected to be settled.
Short-term benefits provisions that are expected to be settled within 12 months are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Long term benefits provisions that are not expected to be settled within 12 months and are measured as the present value of the
estimated future cash outflows to be made by the Consolidated Entity in respect of services provided by employees up to reporting
date. Consideration is given to the 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 to estimate the future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money.
Regardless of the expected timing of settlement, provisions made in respect of employee benefits are classified as a current liability
unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case
it would be classified as a non-current liability. Provisions made for annual leave and unconditional long service leave are classified
as a current liability where the employee has a present entitlement to the benefit. Provisions for conditional long service are classified
as non-current liability.
Share-based Payments
The Consolidated Entity operates an incentive scheme to provide these benefits, known as the Paradigm Biopharmaceuticals Limited
Employee Share Plan (‘ESP’) approved on 22 October 2014. Issues of shares to employees with limited recourse loans under the ESP
are share-based payments in the form of options.
The fair value of options granted under the ESP is recognised as an employee benefit expense with a corresponding increase in equity.
The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled
to the options. The fair value at grant date is determined using a Binomial pricing model that takes into account the exercise price, the
term of the option, the vesting and performance criteria, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk-free interest rate for the term of the limited recourse loan. In valuing share-based
payment transactions, no account is taken of any non-market performance conditions.
The Consolidated Entity provides benefits to employees (including Directors) of the Consolidated Entity in the form of share-based
payment transactions, whereby employees render services in exchange for shares or rights over shares.
The cost of share-based payment transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent
to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of the Consolidated Entity, will
ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood
of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification,
as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated
as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
(xiv) Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the
lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Consolidated Entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value
guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated
termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they
are incurred.
Annual Report 2021Paradigm Biopharmaceuticals Limited 32
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
1. Summary of Significant Accounting Policies continued
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there
is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
(xv) Income Tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income
tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused
tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets
are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• when the deferred income tax asset or liability arises from the initial recognition of goodwill or 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 nor taxable profits; or
• when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to
be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable
profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax
liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle simultaneously.
The Consolidated Entity and its wholly-owned Australian resident entities are part of a tax-consolidated entity. As a consequence,
all members of the tax-consolidated entity are taxed as a single entity. The head entity within the tax-consolidated entity is Paradigm
Biopharmaceuticals Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the
tax-consolidated entity are recognised in the separate Financial Statements of the members of the tax-consolidated entity using the
‘separate taxpayer within Consolidated Entity’ approach by reference to the carrying amount of assets and liabilities in the separate
Financial Statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the
head entity in the tax-consolidated entity. Any difference between these amounts is recognised by the Consolidated Entity as an equity
contribution or distribution.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the
probability of recoverability is recognised by the head entity only.
Assets or liabilities arising under tax funding agreements with the tax-consolidated entities are recognised as amounts receivable from
or payable to other entities in the tax-consolidated group. The tax funding arrangement ensures that the intercompany charge equals
the current tax liability or benefit of each tax-consolidated group member, resulting in neither a contribution by the head entity to the
subsidiaries nor a distribution by the subsidiaries to the head entity.
(xvi) Current and Non-current Classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Consolidated
Entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are classified as non-current.
Annual Report 2021Paradigm Biopharmaceuticals Limited 33
A liability is classified as current when: it is either expected to be settled in the Consolidated Entity’s normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right
to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
(xvii) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST
incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of
financial position.
Cash flows are included in the statement of cash flows at their nominal value inclusive of GST.
(xviii) Earnings (Loss) Per Share
The Consolidated Entity presents basic and, when applicable, diluted earnings per share (‘EPS’) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Consolidated Entity by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by adjusting basic earnings for the impact of the after-tax effect of costs associated with dilutive ordinary
shares and the weighted average number of additional ordinary shares that would be outstanding assuming the conversion of all
dilutive potential ordinary shares. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the
computation of earnings per share.
(xix) Fair Value Measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act
in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels
are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available
or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where
there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes
a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.
There are no assets held at fair value on a recurring or non-recurring basis.
There are no assets held at fair value on a recurring or non-recurring basis.
(xx) Operating Segment
Identification of Reportable Operating Segments
The Consolidated Entity is organised into one operating segment based on the research and development of pharmaceutical drugs.
The operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as
the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal
reporting to the CODM are consistent with those adopted in the Financial Statements.
The information reported to the CODM is on a monthly basis.
Annual Report 2021Paradigm Biopharmaceuticals Limited 34
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
1. Summary of Significant Accounting Policies continued
New Standards and Interpretations Not Yet Effective or Early Adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the Consolidated Entity for the annual reporting period ended 30 June 2021. The Consolidated Entity’s
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Consolidated
Entity, are set out below:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption
is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement
that affects several Accounting Standards. Where the Consolidated Entity has relied on the existing framework in determining its
accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards,
the Consolidated Entity may need to review such policies under the revised framework. At this time, the application of the Conceptual
Framework is not expected to have a material impact on the Consolidated Entity’s Financial Statements.
2. Other Income
R&D tax incentive
Interest received
ATO cash flow boost payment
Unrealised currency gains
3. Cash and Cash Equivalents
Cash at bank and in hand
4. Trade and Other Receivables
GST receivable
Interest receivable
R&D tax incentive receivable
Trade receivables
2021
$
8,348,705
209,126
50,000
313,266
8,921,097
2020
$
3,647,847
997,647
50,000
-
4,695,494
2021
$
71,034,983
71,034,983
2020
$
103,922,241
103,922,241
2021
$
94,290
678
8,392,122
20,550
8,507,640
2020
$
34,070
51,513
3,424,194
-
3,509,777
On the 20th July 2021 Paradigm received $1,314,282 relating to an amended R&D Tax Incentive Claim for FY20. The amendment,
lodged in June 2020, was made to reflect the impact of recently approved overseas finding from AusIndustry.
Annual Report 2021Paradigm Biopharmaceuticals Limited 5. Prepaid Expenses
Prepaid insurance
Other prepaid expenses
6. Intangible Assets
Patents
Less: Accumulated amortisation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Amortisation expense
Impairment loss
Balance at the end of the financial year
35
2020
$
25,554
166,826
192,380
2020
$
9,925,516
(6,977,928)
2,947,588
2,981,359
3,353
-
(37,124)
-
2,947,588
2021
$
93,855
1,294,893
1,388,748
2021
$
9,926,366
(6,978,778)
2,947,588
2,947,588
850
-
(850)
-
2,947,588
The Consolidated Entity performed its annual impairment test in June 2021. The Consolidated Entity remains committed to its
respiratory intangible asset. Investigating the use of iPPS as a potential therapy for Hay Fever, Asthma or Chronic Obstructive
Pulmonary Disease (COPD) remains part of the Company’s development pipeline. Further consideration is being given around delivery
mechanism and developing the formulation to effectively deliver the therapy to treat patients suffering from these illnesses before further
development costs are committed.
Respiratory Patent
The respiratory patent covers the use of PPS for treating Allergic Rhinitis, Allergic Asthma and COPD. The Respiratory patent is now
granted in Australia, New Zealand, China, Canada and Europe.
The recoverable amount of the respiratory patent as at 30 June 2021 has been determined based on a value-in-use calculation using
a 5-year cash flow projection approved by senior management. The after-tax discount rate applied to cash flow projections is in the
range of 20-25%. It was concluded that the risk adjusted value-in-use exceeds the carrying amount of the cash generating unit by
$10,853,989. As a result of this analysis, management has not recognised an impairment charge.
Key Assumptions Used in Value-in-use Calculations and Sensitivity to Changes in Assumptions
The calculation of value-in-use for both respiratory and anti-inflammatory/autoimmune patents is most sensitive to the following
assumptions:
• Projected milestone revenue
• Projected development costs
• Discount rate
Projected revenue has been forecast based on projected partnering income associated with the development of the respiratory asset.
The milestone income assumptions in the value in use calculation are comparable to other Global Partnering arrangements. The value
in use calculation does not include royalty from product sales, as this is seen to be outside of the 5 year period of the calculation. In
terms of development costs used in the value in use calculation, there are broad assumptions made, which as Paradigm continues
to refine its approach to this asset, may see development costs reduce (i.e. once Paradigm determines the delivery mechanism,
formulation of therapy and dose regimen, development costs will become clearer and will be reflected in the model.
An after-tax discount rate of between 20-25% has been applied to the projected free cash flow of the cash generating unit. The discount
rate reflects the Consolidated Entity’s estimated cost of capital based on the risk-free rate, market risk premium, volatility of the share
price relative to market movements, company specific risk factors and some allowance for probability of success adjustment in the
interest rate. In terms of sensitivity in the calculation, if the model reduced revenue by $29M, the DCF would break even with the
carrying value. Likewise if WACC were to increase to 75%, the DCF would breakeven.
Annual Report 2021Paradigm Biopharmaceuticals Limited 36
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
7. Plant and Equipment
Computer equipment
Less: Accumulated depreciation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Depreciation expense
Balance at the end of the financial year
Clinical trial equipment
Less: Accumulated depreciation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Depreciation expense
Balance at the end of the financial year
Office equipment
Less: Accumulated depreciation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Depreciation expense
Balance at the end of the financial year
Leasehold improvements
Less: Accumulated amortisation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Amortisation expense
Balance at the end of the financial year
2021
$
104,522
(70,528)
33,994
30,399
30,782
-
(27,187)
33,994
9,419
(8,342)
1,077
1,669
-
-
(592)
1,077
2021
$
78,038
(29,741)
48,297
63,853
-
-
(15,556)
48,297
20,431
(11,103)
9,328
13,992
-
-
(4,664)
9,328
2020
$
73,740
(43,341)
30,399
17,663
33,458
-
(20,722)
30,399
9,419
(7,750)
1,669
2,613
-
-
(944)
1,669
2020
$
78,038
(14,185)
63,853
3,753
73,648
-
(13,548)
63,853
20,431
(6,439)
13,992
-
20,431
-
(6,439)
13,992
92,696
109,913
Annual Report 2021Paradigm Biopharmaceuticals Limited 8. Right-of-use Assets
Land and buildings – right-of-use
Less: Accumulated depreciation
37
2021
$
967,258
(295,549)
671,709
2020
$
967,258
(134,341)
832,917
The Consolidated Entity leases land and buildings for its office under agreement of 3 years with option to extend (an additional 2 years).
On renewal, the extension will be on the same conditions as this lease subject to the terms applicable to extension.
The Consolidated Entity has a sub-tenancy agreement for one year. This is short-term and has been expensed as incurred and not
capitalised as the right-of-use asset.
There has been no additions to right-of-use assets in the current financial year.
9. Trade and Other Payables
Trade and other payables
Shareholder loans
10. Employee Benefits
Annual leave and on-costs
2021
$
4,986,440
-
4,986,440
2020
$
2,747,735
36,589
2,784,324
2021
$
672,404
672,404
2020
$
455,510
455,510
The current provision for employee benefits includes all unconditional entitlements where employees have completed the required
period of service and also those where employees are entitled to pro-rate payments in certain circumstances. The entire amount is
presented as current since the Consolidated Entity does not have an unconditional right to defer settlement.
11. Current Liabilities – Lease Liabilities
Lease liabilities
12. Non-current Liability – Employee Benefits
Long service leave provision
2021
$
134,616
134,616
2021
$
108,209
108,209
2020
$
124,731
124,731
2020
$
68,390
68,390
Annual Report 2021Paradigm Biopharmaceuticals Limited 38
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
13. Non-current Liability – Lease Liabilities
Lease liabilities
Make good provision
2021
$
525,372
91,853
617,225
2020
$
660,730
88,228
748,958
Make Good Provision
The provision represents the present value of the estimated costs to make good the premises leased by the Consolidated Entity at the
end of the respective lease terms.
Movements in Provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated
Carrying amount at the start of the year
Additional provisions recognised
Unwinding of discount
Carrying amount at the end of the year
Lease
make good
2021
$
Lease
make good
2020
$
88,228
-
3,625
91,853
-
87,463
765
88,228
Annual Report 2021Paradigm Biopharmaceuticals Limited 39
14. Issued Capital
Ordinary shares fully paid
2021
Number
of Shares
229,905,798
2020
Number
of Shares
224,747,176
2021
$
146,989,484
2020
$
145,865,076
The following movements in issued capital occurred during the year:
Ordinary Shares
Balance as at the beginning of the period
Ordinary shares issued
Ordinary shares issue costs (Net of GST)
Shares issued under ESP
Shares forfeited
Limited recourse loan repaid under ESP
Exercise of unlisted options
Balance as at the end of the period
2021
Number
of Shares
2020
Number
of Shares
2021
$
2020
$
224,747,176
-
-
3,315,000
(52,628)
-
1,896,250
229,905,798
192,207,761
26,923,077
-
1,320,088
145,865,076
-
-
-
109,468,292
35,000,000
(2,338,451)
-
-
4,296,250
224,747,176
103,675
1,020,733
146,989,484
1,895,907
1,839,328
145,865,076
Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Consolidated Entity in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Consolidated Entity does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
Capital Risk Management
The Consolidated Entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total
borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Consolidated Entity may adjust the number of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Consolidated Entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current Consolidated Entity’s share price at the time of the investment. The Consolidated Entity is not actively pursuing
additional investments in the short-term as it continues to integrate and grow its existing businesses in order to maximise synergies.
The Consolidated Entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
The capital risk management policy remains unchanged from the 30 June 2020 Annual Report.
Annual Report 2021Paradigm Biopharmaceuticals Limited 40
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
15. Share-based Payment Reserve
Balance as at the beginning of the period
Fair values of shares issued/to be issued to eligible employees under the ESP
Fair values of options issued to third party under the share-based payment arrangement
Transfer from share reserve on exercise of options
2021
$
3,585,189
3,206,309
-
(337,503)
6,453,995
2020
$
4,072,844
490,936
786,568
(1,765,159)
3,585,189
Once approved by the Board, monies are loaned by the Consolidated Entity interest free and on a non-recourse basis to participants
to finance the purchase of shares in the Company. The ESP shares are registered in the name of participants but are subject to a
restriction on disposal for a period of five years (from date of issue) and for further periods whilst they remain financed. On cessation
of employment, the entitlement to any shares held for less than three years is pro-rated.
On 10 July 2020, an invitation of ESP shares of 2,215,000 based on 2020 performance was approved and issued on at a price of
$3.24 per share. On 19 November 2020, a further invitation of ESP shares of 1,100,000 based on 2020 performance was approved and
issued at a price of $3.05 per share. These shares were issued on vesting conditions. Each tranche of shares will vest in 12 months,
24 months and 36 months.
Fair values at loan date are determined using a Binomial Hedley pricing model that takes into account the issue price, the term of the
loan, the share price at loan date and expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the loan.
The weighted average share price during the financial year was $2.68.
Set out below are summaries of options granted under the Employee Share Plan:
ESP Shares
Grant date
Jul-20
10/07/2020
Nov-20
19/11/2020
Vesting condition
738,331 shares are vested on 10 July 2021, 738,332 shares are vested on
10 July 2022 and 738,337 shares are vested on 10 July 2023
366,666 shares are vested on 19 November 2021, 366,667 shares are vested
on 19 November 2022 and 366,667 shares are vested on 19 November 2023
Number
2,215,000
1,100,000
30-Jun-21
Grant date
7/11/2019
10/07/2020
19/11/2020
30-Jun-20
Expiry date
7/11/2024
10/07/2025
19/11/2025
Grant date
7/11/2019
Expiry date
7/11/2024
Exercise
price
$2.93
$3.24
$3.05
Exercise
price
$2.93
Balance at
the start of
the year
2,913,518
-
-
2,913,518
Balance at
the start of
the year
5,805,000
5,805,000
Granted
-
2,215,000
1,100,000
3,315,000
Exercised
(175,000)
-
-
(175,000)
Granted
1,320,088
1,320,088
Exercised
(4,211,570)
(4,211,570)
Expired/
forfeited
52,628
-
-
52,628
Balance at
the end of
the year
2,791,146
2,215,000
1,100,000
6,106,146
Expired/
forfeited
-
-
Balance at
the end of
the year
2,913,518
2,913,518
Annual Report 2021Paradigm Biopharmaceuticals Limited 41
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date,
are as follow:
Grant date
10/07/2020
19/11/2020
Expiry date
10/07/2025
19/11/2025
Share price
at grant date
$3.24
$3.05
Exercise
price
$3.24
$3.05
Expected
volatility
85.00%
85.00%
Dividend
yield
0.00%
0.00%
Risk free
rate
0.40%
0.30%
Fair value at
grant date
$1.91
$1.81
In addition, the Consolidated Entity has the following unlisted options as at 30 June 2021:
(i) 275,000 unlisted options exercisable at $1.75 each on or before 28 February 2023 in accordance with existing corporate services
mandate the weighted average remaining contractual life of options outstanding at the end of the financial year was 1.67 years; and
(ii) 550,000 unlisted options exercisable at $1.75 each on or before 24 March 2023 in accordance with existing corporate services
mandate the weighted average remaining contractual life of options outstanding at the end of the financial year was 1.73 years.
Unlisted Options
30-Jun-21
Grant date
07/09/2019
07/09/2019
18/05/2018
16/11/2017
27/09/2017
30-Jun-20
Grant date
07/09/2019
07/09/2019
18/05/2018
7/05/2018
16/11/2017
27/09/2017
19/01/2017
Expiry date
24/03/2023
28/02/2023
18/05/2021
15/11/2020
27/09/2020
Expiry date
24/03/2023
28/02/2023
18/05/2021
7/05/2021
11/15/2020
27/09/2020
19/01/2020
Exercise price
$1.75
$1.75
$0.65
$0.31
$0.45
Exercise price
$1.75
$1.75
$0.65
$0.45
$0.31
$0.45
$0.40
Balance at the
start of the year
550,000
275,000
861,250
35,000
1,000,000
2,721,250
Balance at the
start of the year
-
-
1,000,000
1,000,000
192,500
2,000,000
2,000,000
6,192,500
Granted
-
-
-
-
-
-
Granted
550,000
275,000
-
-
-
-
-
825,000
16. Accumulated Losses
Balance as at the beginning of the period
Loss for the accounting period
Transfer from share reserve on exercise of options
Exercised
-
-
(861,250)
(35,000)
(1,000,000)
(1,896,250)
Balance at the
end of the year
550,000
275,000
-
-
-
825,000
Exercised
-
-
(138,750)
(1,000,000)
(157,500)
(1,000,000)
(2,000,000)
(4,296,250)
Balance at the
end of the year
550,000
275,000
861,250
-
35,000
1,000,000
-
2,721,250
2021
$
(41,268,546)
(34,297,184)
337,503
(75,228,227)
2020
$
(30,734,818)
(12,298,887)
1,765,159
(41,268,546)
Annual Report 2021Paradigm Biopharmaceuticals Limited 42
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
17. Commitments
The Consolidated Entity had no capital commitments as at 30 June 2021 and 30 June 2020.
18. Contingencies
The Consolidated Entity had no contingent liabilities as at 30 June 2021 and 30 June 2020.
19. Loss Per Share
Net loss for the year attributable to ordinary shareholders
Weighted average number of ordinary shares used in calculating basic loss per share
Adjustments for calculation of diluted loss per share:
Options over ordinary shares
2021
$
(34,297,184)
2020
$
(12,298,887)
Number
204,897,772
Number
201,106,450
825,000
2,721,250
Weighted average number of ordinary shares used in calculating diluted loss per share
205,722,772
203,827,700
Basic loss per share
Diluted loss per share
Cents
(0.1674)
(0.1674)
Cents
(0.0612)
(0.0612)
20. Financial Instruments Disclosure
The Consolidated Entity’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable
and accounts payable.
The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies
of these Financial Statements, are as follows:
Financial assets
Current
Cash and cash equivalents
Trade and other receivables
Term deposits
Financial liabilities
Current
Trade and other payables at amortised cost
Lease liabilities
Non-current
Lease liabilities
2021
$
2020
$
71,034,983
8,507,640
46,200
79,588,823
103,922,241
3,509,777
746,200
108,178,218
3,770,534
134,616
3,905,150
2,784,324
124,731
2,909,055
617,225
617,225
748,958
748,958
Annual Report 2021Paradigm Biopharmaceuticals Limited 43
Financial Risk Management Objectives
The Consolidated Entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk), credit risk and
liquidity risk. The Consolidated Entity’s overall risk management program focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the financial performance of the Consolidated Entity. The Consolidated Entity uses different
methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate,
foreign exchange and other price risks, ageing analysis for credit risk.
Risk management is carried out by Senior Finance Executives (‘finance’) under policies approved by the Board of Directors (‘the
Board’). These policies include identification and analysis of the risk exposure of the Consolidated Entity and appropriate procedures,
controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Consolidated Entity’s operating units. Finance
reports to the Board on a monthly basis.
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the Consolidated Entity’s income and expenses or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Equity Price Risk
The Consolidated Entity is currently not subject to equity price risk movement.
Interest Rate Risk
Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to
changes in market interest rates. Interest rate risk arises from fluctuations in interest-bearing financial assets and liabilities that the
Consolidated Entity uses. Interest-bearing assets comprise cash and cash equivalents which are considered to be short-term liquid
assets and investment decisions are governed by the monetary policy.
During the year, the Consolidated Entity had no variable rate interest-bearing liability.
It is the Consolidated Entity’s policy to settle trade payables within the credit terms allowed and therefore not incur interest on
overdue balances.
Credit Risk
Credit risk is the risk of financial loss to the Consolidated Entity if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Consolidated Entity’s receivables from customers and investment securities.
The Consolidated Entity does not presently have customers and consequently does not have credit exposure to outstanding
receivables. Trade and other receivables represent GST refundable from the Australian Taxation Office and R&D Tax incentive claims.
Trade and other receivables are neither past due nor impaired.
Liquidity Risk
Liquidity risk is the risk that the Consolidated Entity will not be able to meet its financial obligations as they fall due. The Consolidated
Entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Consolidated
Entity’s reputation.
The Consolidated Entity’s objective is to maintain a balance between continuity of funding and flexibility. The Consolidated Entity’s
exposure to financial obligations relating to corporate administration and projects expenditure, are subject to budgeting and reporting
controls, to ensure that such obligations do not exceed cash held and known cash inflows for a period of at least 1 year.
Annual Report 2021Paradigm Biopharmaceuticals Limited 44
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
20. Financial Instruments Disclosure continued
Remaining Contractual Maturities
The following tables detail the Consolidated Entity’s remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities
are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and
therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated – 2021
Non-derivatives
Non-interest-bearing
Trade payables
Other payables
Interest-bearing – fixed rate
Lease liability
Total non-derivatives
Consolidated – 2020
Non-derivatives
Non-interest-bearing
Trade payables
Other payables
Interest-bearing – fixed rate
Lease liability
Total non-derivatives
Weighted
average
interest rate
%
1 year
or less
$
Between
1 and 2 years
$
Between
2 and 5 years
$
Over
5 years
$
-
-
3,770,534
-
-
-
-
-
4.70%
134,661
3,905,195
147,732
147,732
469,448
469,448
-
-
-
-
Weighted
average
interest rate
%
1 year
or less
$
Between
1 and 2 years
$
Between
2 and 5 years
$
Over
5 years
$
Remaining
contractual
maturities
$
3,770,534
-
751,841
4,522,375
Remaining
contractual
maturities
$
-
-
2,747,735
36,589
-
-
-
-
4.70%
124,731
2,909,055
124,731
124,731
624,227
624,227
-
-
-
-
2,747,735
36,589
873,689
3,658,013
Fair Value of Financial Assets and Liabilities
The fair value of cash and cash equivalents and non-interest-bearing financial assets and financial liabilities of the Consolidated Entity
is equal to their carrying value.
Foreign Currency Risk
The carrying amount of the Consolidated Entity’s foreign currency denominated financial assets and financial liabilities at
the reporting date were as follows:
Consolidated
US dollars
Assets
2021
$
5,327,662
5,327,662
2020
$
-
-
Liabilities
2021
$
929,761
929,761
2020
$
346,249
346,249
The Consolidated Entity’s exposure to currency risk has increased in FY21 mainly associated with clinical development costs for
osteoarthritis. To help manage AUD:USD exposure management has implemented a forward contract process where forecasted USD
expenditure is covered by forward contracts. The forward period is up to 6 months at 75% cover of forecasted expenditure. As at
30 June 2021 US$6M of forward contracts are in place, with settlement between August 2021 and October 2021. Average rate for
these contracts is 0.7844.
Annual Report 2021Paradigm Biopharmaceuticals Limited 45
The consolidated entity had net assets denominated in foreign currencies of US$4.3m as at 30 June 2021 (2020: US$346K). Based
on this exposure, had the Australian dollar weakened by 10% / strengthened by 10% against these foreign currencies with all other
variables held constant, the Consolidated Entity’s profit before tax for the year would have been $430k lower/$430k higher (2020: $34K
lower / higher). The percentage change is the expected overall volatility of the significant currencies, which is based on management’s
assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot
rate at each reporting date. The actual unrealised foreign exchange gain for the year ended 30 June 2021 was $313K (2020: loss of nil).
Commodity Price Risk
The Consolidated Entity’s exposure to price risk is minimal at this stage of the operations.
21. Related Parties
Receivable from and payable to related parties
The following transactions occurred with related parties:
Payments for legal services provided by Biomeltzer, which Amos Meltzer is also a director of.
Current payables:
Trade Payables – BioMeltzer
Loans to or from related parties:
There were no loans to or from related parties at the time of current and previous reporting dates.
Terms and conditions:
All transactions were made on normal commercial terms and conditions and at market rates.
Parent Entity
The Parent Entity is Paradigm Biopharmaceuticals Limited.
Controlled Entities
Interests in controlled entities are outlined in note 22.
Consolidated
2021
$
$20,998
Consolidated
2021
$
$3,762
2020
$
Nil
2020
$
Nil
In the Financial Statements of the Consolidated Entity, investments in subsidiaries are measured at cost. All entity interests held are fully
paid ordinary shares or units.
The consolidated Financial Statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in
accordance with the accounting policy described in Note 1:
22. Controlled Entities
Name
Paradigm Health Sciences Pty Ltd
Xosoma Pty Ltd
C4M Pharmaceuticals Pty Ltd
Paradigm Biopharmaceuticals (Ireland) Limited
Paradigm Biopharmaceuticals (USA) Inc.
Principal place of
business
Australia
Australia
Australia
Ireland
USA
Ownership interest
2021
%
100.00%
100.00%
100.00%
100.00%
100.00%
2020
%
100.00%
100.00%
100.00%
100.00%
100.00%
Subsidiaries
An inter-company loan exists between Paradigm Biopharmaceuticals Limited (Parent) and Paradigm Health Sciences (Subsidiary) of
amounts owing to Paradigm Biopharmaceuticals Limited $334,061 (2020: $334,061). An inter-company loan has been advanced by
Paradigm Biopharmaceuticals Limited (Parent) to Paradigm Biopharmaceuticals (USA) Inc.(Subsidiary) in the amount of $13,867,445
(2020: Nil).
Annual Report 2021Paradigm Biopharmaceuticals Limited 46
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
23. Parent Entity Disclosures
In accordance with the Corporations Act 2001, these Financial Statements present the results of the Consolidated Entity only.
Supplementary information about the parent entity is disclosed in Note 22.
Set out below is the supplementary information about the Parent Entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Statement of financial position
Total current assets
Total Assets
Total current liabilities
Total Liabilities
Total Equity
There are no guarantees entered into by the Parent Entity in relation to the debts of its subsidiaries.
Contingent Liabilities
The Parent Entity had no contingent liabilities as at 30 June 2021 and 30 June 2020.
Capital Commitments
The Parent Entity had no capital commitments as at 30 June 2021 and 30 June 2020.
Significant Accounting Policies
The accounting policies of the Parent Entity are consistent with those of the Consolidated Entity.
24. Reconciliation of Cash Flows Provided by Operating Activities
Loss for the year
Depreciation and amortisation
Foreign exchange unrealised losses
Share-based payment
Change in operating assets and liabilities
(Increase)/decrease in trade receivables
(Increase)/decrease in other receivables
(Increase)/decrease in other assets
(Increase)/decrease in payables
(Increase)/decrease in provisions
Net cash used in operating activities
2021
$
2020
$
(23,516,376)
(12,298,887)
77,519,751
108,807,266
94,702,604
112,573,536
4,734,618
3,396,366
5,460,052
4,145,324
89,242,552
108,428,212
2021
$
(34,297,184)
2020
$
(12,298,887)
210,059
(313,266)
3,206,309
213,118
-
1,277,504
(5,048,698)
50,835
(1,196,368)
2,202,116
256,712
(34,929,485)
22,450
-
(55,267)
751,025
-
(10,090,057)
Annual Report 2021Paradigm Biopharmaceuticals Limited 25. Non-cash Investing and Financing Activities
Additions to the right-of-use assets
Leasehold improvements – lease make good
Shares issued/to be issued under Employee Share Plan
Options issued to third party under the share-based payment arrangement
26. Changes in Liabilities Arising from Financing Activities
Consolidated
Balance at the beginning of the period
Net cash used in financing activities
Acquisition of leases
Balance at at the end of the financial year
47
2021
$
-
3,625
3,206,309
-
3,209,934
2021
$
873,688
(121,847)
-
751,841
2020
$
967,258
88,228
490,936
786,568
2,332,990
2020
$
-
(93,569)
967,257
873,688
27. Events Subsequent to Reporting Date
The impact of the Coronavirus (COVID-19) pandemic is ongoing, and it is not practicable to estimate the potential impact, positive
or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic
stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.
28. Key Management Personnel Remuneration Disclosures
The aggregate remuneration made to Directors and other members of Key Management Personnel of the Consolidated Entity is set
out below:
Short-term employee benefits
Post-employment benefits
Long-term employee benefits
Share-based payments
2021
$
1,936,044
125,888
18,089
728,043
2,808,064
2020
$
834,448
79,273
12,850
-
926,571
In FY21 KMP include Mr. Paul Rennie and Dr. Donna Skerrett. KMP for FY20 included Mr. Rennie only.
29. Auditor’s Remuneration Note
During the financial year the following fees were paid or payable for services provided by RSM Australia Partners, the auditor of
the Company.
Audit services – RSM Australia Partners
Audit or review of the Financial Statements
Other services – RSM Australia Partners
Preparation of the tax return and other tax matters
R&D Tax incentive claim
2021
$
67,500
67,500
14,350
164,608
178,958
246,458
2020
$
64,162
64,162
21,821
104,437
126,258
190,420
Annual Report 2021Paradigm Biopharmaceuticals Limited 48
Notes to the Consolidated Financial Statements
for the year ended 30 June 2021
continued
The Audit and Risk Management Committee (comprising of 3 Independent Non-Executive Directors) oversee the management of
spend on audit services and non-audit services provided by RSM. Non audit fee’s incurred with RSM relate to the preparation of the
Company’s annual tax return and the Company’s R&D Tax Incentive Claim.
Over the past number of years, as Paradigm’s R&D portfolio increased with projects in research, pre-clinical and clinical development,
the R&D spend has increased, including spend on projects in Australia and overseas. This has added some complexity to the R&D Tax
Incentive Claim that is reflected by an increase in fees.
Fees for R&D Tax Incentive Claim preparation are on a time and materials basis they are not linked to the value of the claim. Despite the
fee increase in FY21 by $60K or 57%, the Audit and Risk Management Committee, having taken Into account the Increase In complexity
of the claim, the fact that the professional services were calculated on a time and cost basis and the timing and the changing of the
service providers, was comfortable with continued independence of RSM as auditors of the Consolidated Group.
Notwithstanding this, the Audit and Risk Management Committee has reviewed the provision of non-audit services for FY22 decided
to appoint PricewaterhouseCoopers (PwC) as the Paradigm’s Global Tax provider for FY22 and for ongoing income tax compliance,
transfer pricing advice and other tax advice that may be required from time to time. In FY21 Paradigm incurred costs of $24K with
PwC for provision of tax advice on transfer price. Once the R&D Tax Incentive Claim is lodged for FY21 (for which work has mostly been
completed), the Audit and Risk Management Committee will then consider which non-audit service provider to engage for
R&D services.
30. Income Tax Expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 26%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Depreciation and amortisation
Entertainment expenses
Share-based payment
Employee benefits
Foreign exchange gains
Loss from US subsidiary
2021
$
2020
$
(34,297,184)
(12,298,887)
(8,917,268)
(3,382,194)
54,615
1,638
833,640
66,745
(24,013)
(540,870)
58,607
250
351,314
37,210
(3,125)
Current year tax losses not recognised
(8,525,513)
(2,937,938)
Income tax expense
-
-
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
25,764,675
17,239,163
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can only
be utilised against future taxable income if the continuity of ownership test is passed, or failing that, the same business test is passed.
Annual Report 2021Paradigm Biopharmaceuticals Limited Directors’ Declaration
49
In the Directors’ opinion
(a) the Financial Statements and notes thereto and the Remuneration Report contained in the Directors’ Report are in accordance
with the Corporations Act 2001 and other mandatory professional reporting requirements:
(b) the attached Financial Statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in Note 1 to the Financial Statements;
(c) the attached Financial Statements and notes give a true and fair view of the Consolidated Entity’s financial position as at
30 June 2021 and of its performance for the financial year ended on that date; and
(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 for the financial year ended on
30 June 2021.
Signed in accordance with a resolution of the Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
Paul Rennie
Interim Chairman
Dated at Melbourne, Victoria this 26th day of August 2021.
Annual Report 2021Paradigm Biopharmaceuticals Limited 50
Independent Audit Report
INDEPENDENT AUDITOR’S REPORT To the Members of Paradigm Biopharmaceuticals Limited Opinion We have audited the financial report of Paradigm Biopharmaceuticals Limited (the Company), and its subsidiaries (the Consolidated entity), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion the accompanying financial report of the Consolidated entity is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Consolidated entity's financial position as at 30 June 2021 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 Consolidated entity 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 the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report 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. Annual Report 2021Paradigm Biopharmaceuticals Limited 51
Page 2 of 3 Key Audit Matters (continued) Key Audit Matter How our audit addressed this matter Impairment of Intangible Assets Refer to Note 6 in the financial statements The Consolidated entity has intangible assets of $2,947,588 relating to Patent costs for ongoing respiratory projects in the development of numerous biopharmaceutical drugs. These are subject to an annual impairment test, as they are not yet available for use. We identified this area as a key audit matter due to the size of the intangible assets balance and because the directors’ assessment of the ‘value in use’ of the cash generating unit (“CGU”) involves judgements about the future underlying cash flows of the business and the discount rates applied to them. For the year ended 30 June 2021 management have performed an impairment assessment over the intangible assets balance by: • Assessing for each related project the success to date in line with agreed milestones including any clinical trial data; and other statistical test results; • Assessing additional funding to be spent on the projects and the plan going forward including the use of the Patent for other purposes; and • Calculating the value in use for the respiratory project using a discounted cash flow model. The model used cash flows (revenues and expenses) for the project for 5 years, with a terminal growth rate applied to the 5th year. These cash flows were then discounted to net present value using the Consolidated entity’s weighted average cost of capital (WACC). Our audit procedures in relation to management’s assessment of impairment included: • Assessing management’s determination that the respiratory asset should be allocated to a single CGU based on the nature of the Consolidated entity’s business and the manner in which results are monitored and reported; • Assessing the overall valuation methodology used to determine the value in use; • Challenging the reasonableness of key assumptions, including the cash flow projections, revenue growth rates, discount rates, and sensitives used; • Checking the mathematical accuracy of the cash flow model, and reconciling input data to supporting evidence and considering the reasonableness the supporting documentation; • Reviewing the accuracy of disclosures of critical estimates and assumptions in the financial statements in relation to the valuation methodologies; and • Reviewing announcements to date in relation to the details of current developments and results of the respiratory projects. Other Information The directors are responsible for the other information. The other information comprises the information included in the Consolidated entity's annual report for the year ended 30 June 2021, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly 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. Annual Report 2021Paradigm Biopharmaceuticals Limited 52
Independent Audit Report
continued
Page 3 of 3 Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Consolidated entity's 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 Consolidated entity's or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Paradigm Biopharmaceuticals Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 26 August 2021 Melbourne, Victoria Annual Report 2021Paradigm Biopharmaceuticals Limited Shareholder Information
Details of shares and options as at 11 August 2021:
Top Holders
The 20 largest holders of each class of equity security as at 11 August 2021 were:
Fully Paid Ordinary Shares
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
KZEE PTY LTD
PAUL JOHN RENNIE
CS THIRD NOMINEES PTY LIMITED
NANCY EDITH WILSON-GHOSH
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MR EVAN PHILIP CLUCAS + MS LEANNE JANE WESTON
V REDFORD PTY LTD
MR BRETT LANGAN
MJGD NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
JGM INVESTMENT GROUP PTY LTD
MS LENNA YU LING TYE
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
TEN LUXTON PTY LTD
VIEW 26 PTY LTD
HOT SPRINGS SUPERANNUATION PTY LIMITED
Number
of Shares
20,484,777
10,781,467
8,230,400
4,349,240
3,860,835
3,852,323
3,594,952
3,571,937
2,627,913
2,423,500
2,303,432
1,983,849
1,871,447
1,737,408
1,521,631
1,512,100
1,285,072
1,200,000
1,150,050
1,132,910
53
%
8.92%
4.70%
3.58%
1.89%
1.68%
1.68%
1.57%
1.56%
1.14%
1.06%
1.00%
0.86%
0.82%
0.76%
0.66%
0.66%
0.56%
0.52%
0.50%
0.49%
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES
Total Remaining Holders Balance
79,475,243
150,130,555
34.61%
65.39%
Distribution Schedules
A distribution of each class of equity security as at 17 August 2020:
Fully Paid Ordinary Shares
Range
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 500,000
500,001 - 1,000,000
1,000,001 - 20,000,000
20,000,001 Over
Total
Total holders
5,385
7,331
2,131
176
28
22
1
Units
2,836,054
28,783,825
60,187,234
35,339,154
20,617,642
61,357,112
20,484,777
% of Issued
Capital
1.24
12.54
26.21
15.39
8.98
26.72
8.92
15,074
229,605,798
100.00
Annual Report 2021Paradigm Biopharmaceuticals Limited 54
Shareholder Information
continued
Substantial Shareholders
The names of substantial shareholders and the number of shares to which each substantial shareholder and their associates have a
relevant interest, as disclosed in substantial shareholding notices given to the Consolidated Entity, are set out below:
Substantial shareholder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
PAUL RENNIE AND RELATED COMPANIES
CS THIRD NOMINEES PTY LIMITED
NANCY EDITH WILSON-GHOSH
CITICORP NOMINEES PTY LIMITED
Unmarketable Parcels
Holdings less than a marketable parcel of ordinary shares (being 269 shares at 11 August 2021):
Holders
1,226
Voting Rights
The voting rights attaching to ordinary shares are:
Number
of Shares
20,484,777
20,109,222
4,349,240
3,860,835
3,852,323
Units
216,745
• On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote.
• Options do not carry any voting rights.
On-market Buy-back
There is no current on-market buy-back.
Annual Report 2021Paradigm Biopharmaceuticals Limited Corporate Governance Statement
55
The Board and management of Paradigm Biopharmaceuticals Limited (Consolidated Entity) are committed to conducting the
business of the Consolidated Entity in an ethical manner and in accordance with the highest standards of corporate governance.
The Consolidated Entity has adopted and has substantially complied with the ASX Corporate Governance Principles and
Recommendations (Third Edition) to the extent appropriate to the size and nature of the Consolidated Entity’s operations.
This Corporate Governance Statement is accurate and up to date as at 30 June 2021 and has been approved by the Board
on 26 August 2021.
The Corporate Governance Statement is available on the Consolidated Entity’s website at:
www.paradigmbiopharma.com/investors/corporate-governance
Annual Report 2021Paradigm Biopharmaceuticals Limited 56
Corporate Directory
Directors
Mr Paul Rennie
Managing & Executive Director
Dr Donna Skerrett
Executive Director
(Appointed on 3 July 2020)
Mr Christopher Fullerton
Non-Executive Director
(Resigned on 19 November 2020)
Mr John Gaffney
Non-Executive Director
Mr Amos Meltzer
Non-Executive Director
(Appointed on 9 December 2020)
Ms Helen Fisher
Non-Executive Director
(Appointed on 23 February 2021)
Company Secretary
Mr Kevin Hollingsworth
Principal Place of Business
Level 15, 500 Collins Street
Melbourne VIC 3000
Registered Office
Level 15, 500 Collins Street
Melbourne VIC 3000
Auditor
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne VIC 3000
Solicitors
K&L Gates
Level 25, South Tower
525 Collins Street
Melbourne VIC 3000
Share Registry
Computershare Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Telephone: (61-3) 1300 137 328
Bankers
Commonwealth Bank
Level 20, Tower One
Collins Square
727 Collins Street
Melbourne VIC 3008
Stock Exchange
ASX Limited
Level 4, North Tower
525 Collins Street
Melbourne VIC 3000
ASX Code: PAR
Website
www.paradigmbiopharma.com
Annual Report 2021Paradigm Biopharmaceuticals Limited